PROSPECTUS
August 15, 1997
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
MONEY MARKET FUND
The Money Market Fund (the "Fund"), a separate series of Countrywide
Investment Trust, seeks high current income, consistent with liquidity and
stability of principal. The Fund invests primarily in high-quality U.S.
dollar-denominated money market instruments.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS.
FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT
OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997, the
Fund, on or about August 29, 1997, will succeed to the assets and liabilities of
another mutual fund of the same name (the "Predecessor Fund"), which is an
investment series of Trans Adviser Funds, Inc. The investment objective,
policies and restrictions of the Fund and the Predecessor Fund are substantially
identical and the financial data and information in this Prospectus relates to
the Predecessor Fund.
This Prospectus sets forth concisely the information about the Fund that
you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated August 15, 1997 has
been filed with the Securities and Exchange Commission (the "Commission")
and is hereby incorporated by reference in its entirety. A copy of the
Statement of Additional Information can be obtained at no charge by
calling one of the numbers listed below.
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For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free)............................................800-543-0407
Cincinnati........................................................513-629-2050
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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EXPENSE INFORMATION
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Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None*
Check Redemption Processing Fee (per check):
First six checks per month None
Additional checks per month $0.25
* A wire transfer fee is charged by the Fund's Custodian in the
case of redemptions made by wire. Such fee is subject to change
and is currently $8. See "How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
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Management Fees .48%
12b-1 Fees .17%(A)
Other Expenses .15%
----
Total Fund Operating Expenses .80%
====
(A) The Fund may incur 12b-1 fees in an amount up to .35% of its average
net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on estimated amounts for the current fiscal year. The Adviser will, until at
least August 31, 1999, waive fees and reimburse expenses to the extent necessary
to limit total operating expenses to .80% of the Fund's average net assets. THE
EXAMPLE BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$ 8 $ 26 $ 44 $ 99
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FINANCIAL HIGHLIGHTS
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The following audited financial information for the Predecessor Fund for
the fiscal year ended August 31, 1996 has been audited by KPMG Peat Marwick LLP,
independent auditors, and should be read in conjunction with the financial
statements. The following unaudited financial information for the period ended
February 28, 1997 should be read in conjunction with the financial statements.
The annual financial statements as of August 31, 1996 and the independent
auditors' report thereon and the semiannual financial statements as of February
28, 1997 appear in the Statement of Additional Information of the Fund, which
can be obtained by shareholders at no charge by calling the Fund.
Selected Per Share Data and Ratios for a Share Outstanding for the Predecessor
Fund Throughout Each Period
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING FOR
THE PREDECESSOR FUND THROUGHOUT THE PERIODS
SIX MONTHS YEAR
ENDED ENDED
2/28/97 8/31/96(a)
(Unaudited)
----------- -----------
Net Asset Value, Beginning of
Period...................... $ 1.00 $ 1.00
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Investment Operations
Net Investment Income.. 0.03 0.05(b)
Net Realized and Unrealized
Gain on
Investments............... -- --
----------- --------
Total from Investment
Operations.................. 0.03 0.05
----------- ---------
Distributions from
Net Investment Income....... (0.03) (0.05)
Net Realized Gain on
Investments............... -- --
----------- ---------
Total Distributions........... (0.03) (0.05)
----------- ----------
Net Asset Value, End of
Period...................... $ 1.00 $ 1.00
============ ===========
Total Return............... 5.11%(c) 4.70%
Ratio/Supplementary Data:
Net Assets at End of Period
(000's omitted)............. $ 97,690 $ 76,363
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver
(c)....................... 0.65% 0.65%
Expenses excluding
reimbursement/waiver
(c)....................... 0.82% 0.99%
Net investment income
including
reimbursement/waiver
(c)....................... 4.99% 4.94%
(a) Date of commencement of operations was September 29, 1995.
(b) Using weighted average shares outstanding for the period.
(c) Annualized.
.
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INVESTMENT OBJECTIVE AND POLICIES
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The Fund is a series of Countrywide Investment Trust (the "Trust"). The
Fund seeks high current income, consistent with liquidity and stability of
principal. The Fund is not intended to be a complete investment program, and
there is no assurance that its investment objective can be achieved. The
investment objective of the Fund is fundamental and as such may not be changed
without the affirmative vote of a majority of the outstanding shares of the
Fund. The term "majority" of the outstanding shares means the lesser of (1) 67%
or more of the outstanding shares of the Fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented at such meeting or (2) more than 50% of the outstanding shares of
the Fund.
The Fund seeks to achieve its investment objective by investing in
securities determined by the Board of Trustees to be of high quality and to
present minimal credit risks, maturing within thirteen months or less with a
dollar-weighted average portfolio maturity of 90 days or less. Unless otherwise
indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval. The Fund invests in the following securities:
o obligations of domestic financial institutions including
certificates of deposit, bankers' acceptances and time
deposits.
o obligations of foreign branches of U.S. banks (Eurodollars)
consisting of certificates of deposit, bankers' acceptances
and time deposits.
o obligations of the U.S. Government or any of its agencies or
instrumentalities which may be backed by the creditworthiness
of the issuing agency.
o short-term corporate obligations, consisting of commercial paper, notes,
and bonds, with remaining maturities of 397 days or less.
o repurchase agreements with member banks of the Federal Reserve System and
primary dealers in U.S. Government securities with respect to any security
in which the Fund is authorized to invest.
o other short-term debt obligations of domestic issuers
discussed in this Prospectus.
The Fund may invest in obligations of foreign branches of
U.S. banks (Eurodollars). Payment of interest and principal upon
these obligations may also be affected by governmental action in
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the country of domicile of the branch (generally referred to as sovereign risk).
In addition, evidences of ownership of portfolio securities may be held outside
of the U.S. and the Fund may be subject to the risks associated with the holding
of such property overseas. Various provisions of federal law governing the
establishment and operation of domestic branches do not apply to foreign
branches of domestic banks. The Adviser, subject to the overall supervision of
the Board of Trustees, carefully considers these factors when making
investments. The Fund does not limit the amount of its assets which can be
invested in any one type of instrument or in any foreign country in which a
branch of a U.S. bank or the parent of a U.S. branch is located. Investments in
obligations of foreign banks are subject to the overall limit of 25% of total
assets which may be invested in a single industry.
Available cash invested in the Fund earns income at current money
market rates while remaining conveniently liquid. In order to provide full
liquidity, the Fund will seek to maintain a stable $1.00 share price; limit
portfolio average maturity to 90 days or less; buy U.S. dollar-denominated
securities which mature in 397 days or less; and buy only high quality
securities with minimal credit risks. As required by Rule 2a-7 under the
Investment Company Act of 1940 ("Rule 2a-7"), the Board of Trustees will monitor
the quality of the Fund's investments.
Of course, a $1.00 share price cannot be guaranteed, but these
practices help to minimize any price fluctuations that might result from rising
or declining interest rates. Accordingly, while the Fund invests in high quality
securities, investors should be aware that an investment is not without risk
even if all securities are paid in full at maturity. All money market
instruments, including U.S. Government securities, can change in value when
interest rates change or an issuer's creditworthiness changes.
The Fund's yield will fluctuate due to changes in interest rates,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. The portfolio securities held by the Fund are subject to price
fluctuations based upon changes in the level of interest rates, which will
generally result in all those securities changing in the same way, i.e., all
those securities experiencing appreciation when interest rates decline and
depreciation when interest rates rise. In addition, the financial condition of
an issuer or adverse changes in general economic conditions, or both, may impair
the issuer's ability to make payments of interest and principal.
LIMITING INVESTMENT RISKS. The Fund follows specific guidelines
in buying portfolio securities:
The Fund will only purchase obligations that (i) are rated high quality
by any two of the following four nationally
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recognized rating services: Duff & Phelps Inc. ("Duff"), Fitch Investors
Service, Inc. ("Fitch"), Moody's Investors Service, Inc. ("Moody's"), and
Standard & Poor's Ratings Group ("S&P"), if rated by two or more of such
services; (ii) are rated high quality by any one rating service if rated
by only one rating service; or (iii) if unrated, are determined to be of
equivalent quality pursuant to procedures reviewed by the Board of Trustees.
Obligations that are not rated are not necessarily of lower quality than
those which are rated, but may be less marketable and therefore may provide
higher yields.
Currently, only obligations in the top two categories are considered to
be rated high quality for commercial paper. The two highest rating categories of
Duff, Fitch, Moody's and S&P are Duff 1 and Duff 2, Fitch-1 and Fitch-2, Prime-1
and Prime-2, and A-1 and A-2, respectively. Under Rule 2a-7, the Fund is not
permitted to invest more than 5% of its total assets in securities that would be
considered to be in the second highest rating category, and, subject to this
limitation, the Fund may not invest more than the greater of 1% of its total
assets or $1 million in such securities of any one issuer. The Fund may purchase
an instrument rated below highest quality by a rating service if two other
services have given that instrument a highest quality rating ("split rated"
obligation), and if the Adviser considers that the instrument is of highest
quality and presents minimal credit risks.
For other corporate obligations, the two highest rating categories are
AAA and AA by Duff, AAA and AA by Fitch, Aaa and Aa by Moody's and AAA and AA by
S&P. For a more complete description of these ratings see the Statement of
Additional Information.
The Fund will commit no more than 10% of its net assets to illiquid
securities, including repurchase agreements maturing in more than seven days.
In addition, the Fund has certain other limitations. As a matter of
nonfundamental policy, the Fund will limit the percentage allocation of its
investments so as to comply with Rule 2a-7, which generally limits to 5% of
total assets the amount which may be invested in the securities of any one
issuer and to no more than 25% of total assets the amount which would be
invested in a particular industry, except that the Fund may invest more than 25%
of total assets in the securities of banks.
Currently, the Commission defines the term "bank" to include U.S.
banks and their foreign branches if, in the case of foreign branches, the
parent U.S. bank is unconditionally liable for such obligations. These
limitations do not apply to obligations of the U.S. Government or any of
its agencies or instrumentalities. The Fund does not consider utilities
or companies engaged in finance
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generally to be one industry. Finance companies will be considered a part of the
industry they finance (e.g., GMAC-auto; VISA-credit cards). Utilities will be
divided according to the types of services they provide; for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry.
The Fund may borrow money from banks or from other lenders, but not in
an amount equal to or exceeding 33 1/3% of the current value of its total
assets.
As a matter of operating policy, the Fund does not intend to purchase
securities for investment during periods when the sum of temporary bank
borrowings entered into to facilitate redemptions exceeds 5% of its total
assets. This operating policy is not fundamental and may be changed without
shareholder notification.
OTHER INVESTMENT PRACTICES
--------------------------
SECURITIES LENDING. In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. While the lending of securities may
subject the Fund to certain risks, such as delays or the inability to regain the
securities in the event the borrower were to default on its lending agreement or
enter into bankruptcy, the Fund will receive at least 100% collateral in the
form of cash or U.S. Government securities. This collateral will be valued daily
by the Adviser and should the market value of the loaned securities increase,
the borrower will furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination by the Fund
or the borrower at any time. While the Fund does not have the right to vote
securities on loan, the Fund intends to terminate the loan and regain the right
to vote if that is considered important with respect to the investment. The Fund
will only enter into loan arrangements with broker-dealers, banks or other
institutions which the Adviser has determined are creditworthy under guidelines
established by the Board of Trustees.
BORROWING. The Fund may borrow money from banks (including its custodian bank)
or from other lenders to the extent permitted under applicable law, for
temporary or emergency purposes and to meet redemptions and may pledge its
assets to secure such borrowings. Borrowing for investment increases both
investment opportunity and investment risk. This is the speculative factor known
as leverage. Such borrowings in no way affect the federal tax status of the Fund
or its dividends.
The Investment Company Act of 1940 (the "1940 Act") requires the Fund
to maintain asset coverage of at least 300% for all such borrowings, and should
such asset coverage at any time fall below
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300%, the Fund would be required to reduce its borrowings within three days to
the extent necessary to meet the requirements of the 1940 Act. To reduce its
borrowings, the Fund might be required to sell securities at a time when it
would be disadvantageous to do so.
In addition, because interest on money borrowed is a Fund expense that
it would not otherwise incur, the Fund may have less net investment income
during periods when its borrowings are substantial. The interest paid by the
Fund on borrowings may be more or less than the yield on the securities
purchased with borrowed funds, depending on prevailing market conditions.
WHEN-ISSUED SECURITIES. The Fund may also purchase securities on a "when-issued"
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield and thereby involve a risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. The Fund will generally not pay for such
securities or start earning interest on them until they are received. When the
Fund agrees to purchase securities on a "when-issued" basis, its custodian will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a segregated account. Securities purchased on a "when-issued"
basis are recorded as an asset and are subject to changes in value based upon
changes in the general level of interest rates. The Fund expects that
commitments to purchase "when-issued" securities will not exceed 25% of the
value of its total assets under normal market conditions and that a commitment
to purchase "when-issued" securities will not exceed 60 days. In the event its
commitment to purchase "when-issued" securities ever exceeded 25% of the value
of its assets, the Fund's liquidity and the Adviser's ability to manage it might
be adversely affected. The Fund does not intend to purchase "when- issued"
securities for speculative purposes, but only for the purpose of acquiring
portfolio securities.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may acquire variable and
floating rate securities, subject to the Fund's investment objective, policies
and restrictions. A variable rate security is one whose terms provide for the
readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate security is one whose terms provide
for the readjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under a
repurchase agreement, the Fund acquires a debt instrument for a relatively
short period (usually not more than one week), subject to the obligation of
the seller to
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purchase and the Fund to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price in that it reflects an
agreed-upon market interest rate effective for the period of time during which
the Fund's money is invested. The Fund's repurchase agreements will at all times
be fully collateralized in an amount at least equal to 100% of the purchase
price including accrued interest earned on the underlying securities. The
instruments held as collateral are valued daily by the Adviser and as the value
of instruments declines, the Fund will require additional collateral. If the
seller defaults and the value of the collateral securing the repurchase
agreement declines, the Fund may incur a loss. If such a defaulting seller were
to become insolvent and subject to liquidation or reorganization under
applicable bankruptcy or other laws, disposition of the underlying securities
could involve certain costs or delays pending court action. Finally, it is not
certain whether the Fund would be entitled, as against a claim of the seller or
its receiver, trustee in bankruptcy or creditors, to retain the underlying
securities. Repurchase agreements are considered by the staff of the Commission
to be loans by the Fund.
INVESTMENT COMPANY SECURITIES. The Fund may invest in the securities of other
investment companies to the extent permissible under the applicable regulations
and interpretations of the 1940 Act or an exemptive order.
ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES. The Fund may invest up to 10% of
its net assets in illiquid investments (investments that cannot be readily sold
within seven days), including restricted securities which do not meet the
criteria for liquidity established by the Board of Trustees. The Adviser, under
the supervision of the Board of Trustees, determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses. Restricted Securities are
securities which cannot be sold to the public without registration under the
Securities Act of 1933. Unless registered for sale, these securities can only be
sold in privately negotiated transactions or pursuant to an exemption from
registration.
PRIVATE PLACEMENT INVESTMENTS. The Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities laws and is generally sold to institutional
investors who agree that they are purchasing the paper for investment purposes
and not with a view to public distribution. Any resale by the purchaser must be
in an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors through or with the assistance of the
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issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Adviser believes that Section 4(2) commercial
paper and possibly certain other restricted securities which meet the criteria
for liquidity established by the Trustees are quite liquid. The Fund intends
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Fund does not intend to subject such paper to
the limitation applicable to restricted securities.
The ability of the Board of Trustees to determine the liquidity of
certain restricted securities is permitted under a position of the staff of the
Commission set forth in the adopting release for Rule 144A under the Securities
Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor for certain
secondary market transactions involving securities subject to restrictions on
resale under federal securities laws. The Rule provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further enhance the liquidity of
the secondary market for securities eligible for resale under Rule 144A. The
staff of the Commission has left the question of determining the liquidity of
all restricted securities to the Trustees. The Trustees consider the following
criteria in determining the liquidity of certain restricted securities
(including Section 4(2) commercial paper): the frequency of trades and quotes
for the security; the number of dealers willing to purchase or sell the security
and the number of other potential buyers; dealer undertakings to make a market
in the security; and the nature of the security and the nature of the
marketplace trades. The Trustees have delegated to the Adviser the daily
function of determining and monitoring the liquidity of restricted securities
pursuant to the above criteria and guidelines adopted by the Board of Trustees.
The Trustees will continue to monitor and periodically review the Adviser's
selection of Rule 144A and Section 4(2) commercial paper as well as any
determinations as to its liquidity.
HOW TO PURCHASE SHARES
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Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals is $50. Shares of the Fund are sold on a continuous
basis at the net asset value next determined after receipt of a purchase order
by the Trust.
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INITIAL INVESTMENTS BY MAIL. You may open an account and make an
initial investment in the Fund by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Money Market Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month
a written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund
by wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629- 2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided
you have given notice of your intention to make such investment to the Transfer
Agent by 12:30 p.m., Eastern time, on that day. Your investment will be made at
the net asset value next determined after your wire is received together with
the account information indicated above. If the Trust does not receive timely
and complete account information, there may be a delay in the investment of your
money and any accrual of dividends. To make your initial wire purchase, you are
required to mail a completed account application to the Transfer Agent. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
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ADDITIONAL INVESTMENTS. You may purchase and add shares to your account
by mail or by bank wire. Checks should be sent to Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the "Money Market Fund." Bank wires should be sent as outlined above. You may
also make additional investments at the Trust's offices at 312 Walnut Street,
21st Floor, Cincinnati, Ohio 45202. Each additional purchase request must
contain the name of your account and your account number to permit proper
crediting to your account. While there is no minimum amount required for
subsequent investments, the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
SHAREHOLDER SERVICES
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Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
--------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
Tax-Deferred Retirement Plans
-----------------------------
Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
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-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
Direct Deposit Plans
--------------------
Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
Automatic Investment Plan
--------------------------
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.
HOW TO REDEEM SHARES
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You may redeem shares of the Fund on each day that the Trust is open
for business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
check will be effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this delay, you may
purchase shares of the Fund by certified check or wire.
A contingent deferred sales load may be imposed on a redemption of shares
of the Fund if such shares had previously been acquired in connection with an
exchange from another fund of Countrywide Investments which imposes a contingent
deferred sales load, as described in the Prospectus of such other fund.
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BY TELEPHONE. You may redeem shares by telephone. The proceeds will be
sent by mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call the Transfer
Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050). The
redemption proceeds will normally be sent by mail or by wire within one business
day (but not later than three business days) after receipt of your telephone
instructions. Any redemption requests by telephone must be received in proper
form prior to 12:30 p.m., Eastern time, on any business day in order for payment
by wire to be made that day. IRA accounts are not redeemable by telephone.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to the Transfer Agent
with your signature guaranteed by any eligible guarantor institution (including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
or by completing a supplemental telephone redemption authorization form. Contact
the Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation, fiduciary
or other organization.
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
- 14 -
<PAGE>
signature must be guaranteed by any of the eligible guarantor institutions
outlined above.
Written redemption requests may also direct that the proceeds be
deposited directly in the bank account or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are mailed within three business days following receipt of instructions
in proper form.
BY CHECK. You may establish a special checking account with
the Fund for the purpose of redeeming shares by check. Checks
may be made payable to anyone for any amount, but checks may not
be certified.
When a check is presented to the Custodian for payment, the Transfer
Agent, as your agent, will cause the Fund to redeem a sufficient number of full
and fractional shares in your account to cover the amount of the check. Checks
will be processed at the net asset value on the day the check is presented to
the Custodian for payment.
If the amount of a check is greater than the value of the shares held
in your account, the check will be returned. A check representing a redemption
request will take precedence over any other redemption instructions issued by a
shareholder.
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in
a month, the Transfer Agent will charge you $.25 for each additional check
redemption effected that month. However, there is no charge for any check
redemptions effected by employees, shareholders and customers of Countrywide
Credit Industries, Inc. or any affiliated company, including members of the
immediate family of such individuals. The Transfer Agent charges shareholders
its costs for each stop payment and each check returned for insufficient funds.
In addition, the Transfer Agent reserves the right to make additional charges to
recover the costs of providing the check redemption service. All charges will be
deducted from your account by redemption of shares in your account. The check
redemption procedure may be suspended or terminated at any time upon written
notice by the Trust or the Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar
program with a financial institution are not eligible for the checkwriting
privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee by the Fund's
Custodian. The Trust reserves the right, upon thirty days' written notice, to
change the processing fee. All charges will be deducted from your account by
- 15 -
<PAGE>
redemption of shares in your account. Your bank or brokerage firm may also
impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested unaffected by market fluctuations),
or such other minimum amount as the Trust may determine from time to time.
After notification to you of the Trust's intention to close your account, you
will be given thirty days to increase the value of your account to the minimum
amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other. A sales load will be imposed equal to the excess,
if any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
- 16 -
<PAGE>
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term *Growth/Value Fund
Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund Countrywide Investment Trust
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
You may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. If you
are unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202. An exchange will be effected at the next determined net asset value (or
offering price, if sales load is applicable) after receipt of a request by the
Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions
of any net realized short-term capital gains. Although the Fund does not expect
to realize any long-term capital gains, if the Fund does realize such gains it
will distribute them at least once each year.
Dividends are automatically reinvested in additional shares of the
Fund (the Share Option) unless cash payments are specified on your application
or are otherwise requested by contacting the Transfer Agent. If you elect
- 17 -
<PAGE>
to receive dividends in cash and the U.S. Postal Service cannot deliver
your checks or if your checks remain uncashed for six months, your dividends
may be reinvested in your account at the then-current net asset value and
your account will be converted to the Share Option. No interest will accrue
on amounts represented by uncashed distribution checks.
TAXES
- -----
The Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. Distributions of
net investment income as well as from net realized short-term capital gains, if
any, are taxable as ordinary income. Since the Fund's investment income is
derived from interest rather than dividends, no portion of such distributions is
eligible for the dividends received deduction available to corporations.
Distributions of net realized long-term capital gains are taxable as long-term
capital gains regardless of how long you have held your Fund shares.
The Fund will mail to its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the year.
In addition to federal taxes, shareholders of the Fund may be subject to state
and local taxes on distributions. The tax consequences described in this section
apply whether distributions are taken in cash or reinvested in additional
shares.
- 18 -
<PAGE>
OPERATION OF THE FUND
- ---------------------
The Fund is a diversified series of Countrywide Investment Trust, an
open-end management investment company organized as a Massachusetts business
trust on December 7, 1980. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, seven series of Countrywide Tax-Free
Trust and five series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $50 million; .45% of such
assets from $50 million to $150 million; .4% of such assets from $150 million to
$250 million; and .375% of such assets in excess of $250 million.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and
- 19 -
<PAGE>
maintaining such books and records as are necessary to enable it to perform its
duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Commission and state securities authorities. The Adviser (not the Fund) pays the
Transfer Agent a fee for these administrative services equal to the annual
rate of .1% of the average value of the Fund's daily net assets.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. Angelo R.
Mozilo, Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of
both the Adviser and the Trust.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to sales
of shares of the Fund as a factor in the selection of brokers and dealers to
execute portfolio transactions of the Fund. Subject to the requirements of the
1940 Act and procedures adopted by the Board of Trustees, the Fund may execute
portfolio transactions through any broker or dealer and pay brokerage
commissions to a broker (i) which is an affiliated person of the Trust, or (ii)
which is an affiliated person of such person, or (iii) an affiliated person of
which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the 1940 Act or otherwise. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each
full share owned and fractional votes for fractional shares owned. The
Trust does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the 1940 Act in order to
facilitate communications among shareholders.
- 20 -
<PAGE>
DISTRIBUTION PLAN
- -----------------
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a plan of
distribution (the "Plan") under which the Fund may directly incur or reimburse
the Adviser for certain distribution-related expenses, including payments to
securities dealers and others who are engaged in the sale of shares of the Fund
and who may be advising investors regarding the purchase, sale or retention of
Fund shares; expenses of maintaining personnel who engage in or support
distribution of shares or who render shareholder support services not otherwise
provided by the Transfer Agent; expenses of formulating and implementing
marketing and promotional activities, including direct mail promotions and
mass media advertising; expenses of preparing, printing and distributing sales
literature and prospectuses and statements of additional information and reports
for recipients other than existing shareholders of the Fund; expenses of
obtaining such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable; and
any other expenses related to the distribution of the Fund's shares.
The annual limitation for payment of expenses pursuant to the Plan is
.35% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which
- 21 -
<PAGE>
provide such services; however, in selecting investments for the Fund, no
preference will be shown for such securities.
CALCULATION OF SHARE PRICE
- --------------------------
On each day that the Trust is open for business, the share price (net
asset value) of the Fund's shares is determined as of 12:30 p.m. and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis.
In connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities determined
by the Board of Trustees to meet the Fund's quality standards and to present
minimal credit risks. Other assets of the Fund are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. It is
anticipated, but there is no assurance, that the use of the amortized cost
method of valuation will enable the Fund to maintain a stable net asset value
per share of $1.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its "current yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "current yield" of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment.
- 22 -
<PAGE>
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any.
- 23 -
<PAGE>
<TABLE>
ACCOUNT NO. 96-_____________________
Account Application (For Fund Use Only)
<S> <C> <C> <C>
Money Market Fund FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________
Home Office Address: ___________________
Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
========================================================================================================================
Initial Investment of $_______________________
[] Check or draft enclosed payable to the Fund.
[] Bank Wire From:
______________________________________________________________________________________________________________
[] Exchange From:
______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial
account please list
minor's S.S.#)
___________________________________________________________________________________________________ Citizenship:[] U.S.
Name of Joint Tenant, Partner, Custodian []Other
Address Phone
___________________________________________________________________________________________________ ( )_______________
Street or P.O. Box Business Phone
___________________________________________________________________________________________________ ( )_______________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer
Name/Address______________________________________________________________________________________________
Are you an associated person of an NASD member? [] Yes [] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
=======================================================================================================================
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
[ ] Reinvest all distributions
[ ] Pay all distributions in cash
[ ] By Check [ ] By ACH to my bank checking or savings account. PLEASE ATTACH A VOIDED CHECK.
====================================================================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon
receipt of and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Bank Account Number _____________________________________ Bank Routing Transit Number _______________________________
Name of Account Holder _______________________________________________________________________________________________
Bank Name _________________________________________________________ Bank Address ______________________________________
City State
[ ]CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA)
or otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons
whose signatures appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our)
shares of the Trust. I (we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time.
===========================================================================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself and
his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Investment Trust, Countrywide Investment
Trust, Countrywide Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in
the performance of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide
Fund Services, Inc., or both will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust
and/or Countrywide Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring forms of personal identification prior to acting
upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions.
are genuine.
___________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Signature of Joint Owner, if Any
Trustee, etc.
________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
========================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Investment Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________ per month in the Money Market Fund.
ABA Routing Number______________________________
FI Account Number________________________________
[] Checking Account [] Savings Account
- ----------------------------------------------------------------------
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
______________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X_____________________________________________________________________ X_______________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[] Monthly -- Withdrawals will be made on the last business day of each month.
[] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[] Exchange: Please exchange the withdrawal proceeds into another Countywide account number:_ _-- _ _ _ _--_
[] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided
check for ACH or bank wire____________________________________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of
payee___________________________________________________________________________________________________________________
Please send
to:____________________________________________________________________________________________________________________
Street address City State Zip
========================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Investment Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of
the
_______________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of__________________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
at which a quorum was present and acting throughout, and that the same are now in full force and effect. I further certify that
the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
___________________________________________________ _________________________________________________________
___________________________________________________ _________________________________________________________
___________________________________________________ _______________________________________________________
Witness my hand and seal of the corporation or organization this_______________________day
of_______________________________________, 19_______
___________________________________________________ _________________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be
signed by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
- 24 -
<PAGE>
TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies. . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund . . . . . . . . . . . . . . . . . . .
Distribution Plan . . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . . . .
- -----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 25 -
<PAGE>
PROSPECTUS
August 15, 1997
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
INTERMEDIATE BOND FUND
The Intermediate Bond Fund (the "Fund"), a separate series of
Countrywide Investment Trust, seeks to provide as high a level of current income
as is consistent with the preservation of capital. The Fund invests in
marketable corporate debt securities, U.S. Government securities,
mortgage-related securities, other asset-backed securities and cash or money
market instruments.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MUTUAL FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
Pursuant to an Agreement and Plan of Reorganization dated May 31,
1997, the Fund, on or about August 29, 1997, will succeed to the assets and
liabilities of another mutual fund of the same name (the "Predecessor Fund"),
which is an investment series of Trans Adviser Funds, Inc. The investment
objective, policies and restrictions of the Fund and the Predecessor Fund are
substantially identical and the financial data and information in this
Prospectus relates to the Predecessor Fund.
This Prospectus sets forth concisely the information about the Fund
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated August 15, 1997 has been
filed with the Securities and Exchange Commission (the "Commission") and is
hereby incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling one of the
numbers listed below.
- -------------------------------------------------------------------------------
For Information or Assistance in Opening an Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . 800-543-0407
Cincinnati . . . . . . . . . . . . . . . . . . . 513-629-2050
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
- -------------------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . 2%
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price). . . . None*
Sales Load Imposed on Reinvested Dividends. . . . . None
Exchange Fee. . . . . . . . . . . . . . . . . . . . None
Redemption Fee. . . . . . . . . . . . . . . . . . . None**
Check Redemption Processing Fee (per check):
First Six Checks per Month . . . . . . . . . . . None
Additional Checks per Month. . . . . . . . . . . $0.25
* Purchases at net asset value of amounts totaling $1 million or more may
be subject to a contingent deferred sales load of .75% if a redemption
occurred within 12 months of purchase and a commission was paid by the
Adviser to a participating unaffiliated dealer.
** A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is
currently $8. See "How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
- ------------------------------
Management Fees After Waivers .25%(A)
12b-1 Fees .00%(B)
Other Expenses .70%
----
Total Fund Operating Expenses After Waivers .95%(C)
====
(A) Absent waivers, management fees would be .50%.
(B) The Fund may incur 12b-1 fees in an amount up to .35% of its average
net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
(C) Absent waivers of management fees, total operating expenses would be
1.20%. The Fund will, until at least August 31, 1999, waive fees and
reimburse expenses to the extent necessary to limit total operating
expenses to .95% of the Fund's average net assets.
- 2 -
<PAGE>
The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The percentages expressing annual fund operating expenses are
based on estimated amounts for the current fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year $ 30
3 Years $ 50
5 Years $ 72
10 Years $134
- 3 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following audited financial information for the Predecessor Fund
for the fiscal year ended August 31, 1996 has been audited by KPMG Peat Marwick
LLP, independent auditors, and should be read in conjunction with the financial
statements. The following unaudited financial information for the period ended
February 28, 1997 should be read in conjunction with the financial statements.
The annual financial statements as of August 31, 1996 and the independent
auditors' report thereon and the semiannual financial statements as of February
28, 1997 appear in the Statement of Additional Information of the Fund, which
can be obtained by shareholders at no charge by calling the Fund.
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING FOR THE PREDECESSOR
FUND THROUGHOUT EACH PERIOD
SIX MONTHS YEAR
ENDED ENDED
2/28/97 8/31/96(a)
(Unaudited)
----------- -----------
Net Asset Value, Beginning of
Period...................... $ 9.75 $ 10.00
----------- -----------
Investment Operations
Net Investment Income...... 0.31 0.57(c)
Net Realized and Unrealized
Gain (Loss) on
Investments............... 0.11 (0.25)
----------- -----------
Total from Investment
Operations.................. 0.42 0.32
----------- -----------
Distributions from
Net Investment Income....... (0.31) (0.57)
Net Realized Gain on
Investments............... -- --
----------- -----------
Total Distributions........... (0.31) (0.57)
----------- -----------
Net Asset Value, End of
Period...................... $ 9.86 $ 9.75
============ =============
Total Return(b)............ 8.79%(d) 3.23%
Ratio/Supplementary Data:
Net Assets at End of Period
(000's omitted)............. $ 16,028 $ 13,357
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver
(d)....................... 0.85% 0.68%
Expenses excluding
reimbursement/waiver
(d)....................... 1.65% 2.04%
Net investment income (loss)
including
reimbursement/waiver
(d)....................... 6.22% 6.31%
Portfolio Turnover Rate....... 26.77% 12.38%
(a) Date of commencement of operations was October 3, 1995.
(b) Total return calculation does not include sales charges.
(c) Using weighted average shares outstanding for the period.
(d) Annualized.
- 4 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Investment Trust (the "Trust"). The
Fund seeks to provide as high a level of current income as is consistent with
the preservation of capital. The Fund invests substantially all of its assets in
marketable corporate debt securities, U.S. Government securities,
mortgage-related securities, other asset-backed securities and cash or money
market instruments. Normally, at least 65% of the Fund's assets will be invested
in bonds (debt securities of the types listed below).
The Fund is not intended to be a complete investment program, and there
is no assurance that its investment objective can be achieved. The Fund's
investment objective is fundamental and as such may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. The term
"majority" of the outstanding shares means the lesser of (1) 67% or more of the
outstanding shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented at such
meeting or (2) more than 50% of the outstanding shares of the Fund. Unless
otherwise indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.
Under normal circumstances, at least 60% of the Fund's total assets
will be invested, measured at the time of any purchase, in the following
categories of securities:
o marketable corporate debt securities, such as
bonds, rated at the time of purchase within the
three highest investment grade ratings (A or
better) assigned by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Ratings
Group ("S&P") (all ratings discussed below refer
to those assigned by these two rating agencies)
or, if not rated by either of these rating
agencies, determined by the Adviser as being of
investment quality equivalent to securities rated
A or better;
o U.S. Government securities including (1) direct
obligations of the U.S. Treasury (such as Treasury
bills, notes and bonds), (2) obligations
guaranteed as to principal and interest by the
U.S. Treasury such as Government National Mortgage
Association certificates (described below) and
Federal Housing Administration debentures, and (3)
securities issued by U.S. Government
instrumentalities and certain federal agencies
that are neither direct obligations of, nor
guaranteed by, the U.S. Treasury;
- 5 -
<PAGE>
o mortgage-related securities rated A or better, or
unrated securities that are determined to be of
equivalent quality of (1) governmental issuers,
including Government National Mortgage Association
certificates, which are securities representing
part ownership of a pool of mortgage loans on
which timely payment of interest and principal is
guaranteed by the U.S. Government, and securities
issued and guaranteed as to the payment of
interest and principal by the Federal National
Mortgage Association or the Federal Home Loan
Mortgage Corporation (but not backed by the U.S.
Government); (2) private issuers, including
mortgage pass-through certificates or mortgage-
backed bonds; and (3) the governmental issuers
mentioned above or private issuers, including
collateralized mortgage obligations and real
estate mortgage investment conduits which are
issued in portions or tranches with varying
maturities and characteristics; some tranches may
only receive the interest paid on the underlying
mortgages (IOs) and others may only receive the
principal payments (POs); the values of IOs and
POs are extremely sensitive to interest rate
fluctuations and prepayment rates, and IOs are
also subject to the risk of early prepayment of
the underlying mortgages which will substantially
reduce or eliminate interest payments (see the
Statement of Additional Information for more about
these securities);
o other asset-backed securities rated A or better or
unrated securities that are determined by the
Adviser to be of equivalent quality (unrelated to
mortgage loans) such as securities whose assets
consist of a pool of motor vehicle retail
installment sales contracts and security interests
in the vehicles securing the contracts or a pool
of credit card loan receivables (see the Statement
of Additional Information for more about these
securities); and
o cash or money market instruments, including
commercial bank obligations (certificates of
deposit, which are interest-bearing time deposits;
bankers' acceptances, which are time drafts on a
commercial bank where the bank accepts an
irrevocable obligation to pay at maturity and
demand or time deposits) and commercial paper
(short-term notes with maturities of up to nine
months issued by corporations or government
bodies).
- 6 -
<PAGE>
The remaining 40% of the Fund's assets, measured at the time of
purchase, may be invested in debt securities rated below A or unrated securities
that are determined to be of equivalent quality, including marketable corporate
debt securities, mortgage-related securities and other asset-backed securities.
Securities rated within the fourth highest category (BBB, Baa) may have
speculative characteristics and display a weakened ability to pay interest and
repay principal under adverse economic conditions or changing circumstances.
However, securities rated lower than BBB or Baa or unrated securities that are
determined to be of equivalent quality (commonly known as "junk" or "high-yield,
high-risk" bonds) will represent less than 20% of the Fund's net assets and are
subject to independent investment analysis by the Adviser before purchase. The
Fund may from time to time invest in fixed-income securities of corporations
outside the U.S. or governmental entities, and the Fund may purchase or sell
various currencies on either a spot or forward basis in connection with these
investments.
MATURITY. The maturity composition of the Fund's portfolio of
fixed-income securities will be adjusted in response to market conditions and
expectations. There are no restrictions on the maturity composition of the
portfolio, although it is anticipated that the Fund normally will be invested
substantially in intermediate-term (3 to 10 years to maturity) and long-term
(over 10 years to maturity) securities and have a dollar-weighted average
portfolio maturity between 3 and 10 years.
LOAN PARTICIPATIONS. The Fund may invest, subject to an overall 10%
limit on loans, in loan participations, typically made by a syndicate of banks
to U.S. and non-U.S. corporate or governmental borrowers for a variety or
purposes. The underlying loans may be secured or unsecured, and will vary in
term and legal structure. When purchasing such instruments the Fund may assume
the credit risks associated with the original bank lender as well as the credit
risks associated with the borrower. Investments in loan participations present
the possibility that the Fund could be held liable as a co- lender under
emerging legal theories of lender liability. In addition, if the loan is
foreclosed, the Fund could be part owner of any collateral, and could bear the
costs and liabilities of owning and disposing of the collateral. Loan
participations are generally not rated by major rating agencies and may not be
protected by the securities laws. Also, loan participations are generally
considered to be illiquid and are therefore subject to the Fund's overall 15%
limitation on illiquid securities.
The market value of investments available to the Fund, and therefore
the Fund's yield and net asset value, will fluctuate due to changes in interest
rates, economic conditions, quality ratings and other factors beyond the control
of the Adviser. Mortgage-related securities and other debt securities are
subject to price fluctuations based upon changes in the level of interest rates,
which will generally result in all those securities changing in price in the
same way, i.e., all those securities experiencing appreciation when
- 7 -
<PAGE>
interest rates decline and depreciation when interest rates rise. In addition,
the prepayment experience of the mortgages underlying mortgage-related U.S.
Government securities may affect the value of, and the return on an investment
in, such securities.
OTHER INVESTMENT PRACTICES
SECURITIES LENDING. In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. While the lending of securities may
subject the Fund to certain risks, such as delays or the inability to regain the
securities in the event the borrower were to default on its lending agreement or
enter into bankruptcy, the Fund will receive at least 100% collateral in the
form of cash or U.S. Government securities. This collateral will be valued daily
by the Adviser and should the market value of the loaned securities increase,
the borrower will furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination by the Fund
or the borrower at any time. While the Fund does not have the right to vote
securities on loan, the Fund intends to terminate the loan and regain the right
to vote if that is considered important with respect to the investment. The Fund
will only enter into loan arrangements with broker-dealers, banks or other
institutions which the Adviser has determined are creditworthy under guidelines
established by the Board of Trustees.
BORROWING. The Fund may borrow money from banks (including its custodian bank)
or from other lenders to the extent permitted under applicable law, for
temporary or emergency purposes and to meet redemptions and may pledge its
assets to secure such borrowings. Borrowing for investment increases both
investment opportunity and investment risk. This is the speculative factor known
as leverage. Such borrowings in no way affect the federal tax status of the Fund
or its dividends.
The Investment Company Act of 1940 (the "1940 Act") requires the Fund
to maintain asset coverage of at least 300% for all such borrowings, and should
such asset coverage at any time fall below 300%, the Fund would be required to
reduce its borrowings within three days to the extent necessary to meet the
requirements of the 1940 Act. To reduce its borrowings, the Fund might be
required to sell securities at a time when it would be disadvantageous to do so.
In addition, because interest on money borrowed is a Fund expense that
it would not otherwise incur, the Fund may have less net investment income
during periods when its borrowings are substantial. The interest paid by the
Fund on borrowings may be more or less than the yield on the securities
purchased with borrowed funds, depending on prevailing market conditions.
- 8 -
<PAGE>
WHEN-ISSUED SECURITIES. The Fund may also purchase securities on a "when-issued"
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield and thereby involve a risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. The Fund will generally not pay for such
securities or start earning interest on them until they are received. When the
Fund agrees to purchase securities on a "when-issued" basis, its custodian will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a segregated account. Securities purchased on a "when-issued"
basis are recorded as an asset and are subject to changes in value based upon
changes in the general level of interest rates. The Fund expects that
commitments to purchase "when-issued" securities will not exceed 25% of the
value of its total assets under normal market conditions and that a commitment
to purchase "when-issued" securities will not exceed 60 days. In the event its
commitment to purchase "when-issued" securities ever exceeded 25% of the value
of its assets, the Fund's liquidity and the Adviser's ability to manage it might
be adversely affected. The Fund does not intend to purchase "when- issued"
securities for speculative purposes, but only for the purpose of acquiring
portfolio securities.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may acquire variable and
floating rate securities, subject to the Fund's investment objective, policies
and restrictions. A variable rate security is one whose terms provide for the
readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate security is one whose terms provide
for the readjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under a
repurchase agreement, the Fund acquires a debt instrument for a relatively short
period (usually not more than one week), subject to the obligation of the seller
to purchase and the Fund to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price in that it reflects an
agreed-upon market interest rate effective for the period of time during which
the Fund's money is invested. The Fund's repurchase agreements will at all times
be fully collateralized in an amount at least equal to 100% of the purchase
price including accrued interest earned on the underlying securities. The
instruments held as collateral are valued daily by the Adviser and as the value
of instruments
- 9 -
<PAGE>
declines, the Fund will require additional collateral. If the seller defaults
and the value of the collateral securing the repurchase agreement declines, the
Fund may incur a loss. If such a defaulting seller were to become insolvent and
subject to liquidation or reorganization under applicable bankruptcy or other
laws, disposition of the underlying securities could involve certain costs or
delays pending court action. Finally, it is not certain whether the Fund would
be entitled, as against a claim of the seller or its receiver, trustee in
bankruptcy or creditors, to retain the underlying securities. Repurchase
agreements are considered by the staff of the Commission to be loans by the
Fund.
LOWER-RATED SECURITIES. The Fund may invest up to 30% of its assets in higher
yielding (and, therefore, higher risk), lower rated fixed-income securities,
including debt securities, convertible securities and preferred stocks and
unrated fixed-income securities. Lower rated fixed-income securities, commonly
referred to as "junk bonds", are considered speculative and involve greater risk
of default or price changes due to changes in the issuer's creditworthiness than
higher rated fixed-income securities. See "Risk Factors-Lower Rated
Fixed-Income Securities" below for a discussion of certain risks.
Differing yields on fixed-income securities of the same maturity are a function
of several factors, including the relative financial strength of the issuers.
Higher yields are generally available from securities in the lower categories of
recognized rating agencies, i.e. Ba or lower by Moody's or BB or lower by S&P.
The Fund may invest in any security which is rated by Moody's or by S&P, or in
any unrated security which the Adviser determines is of suitable quality.
Securities in the rating categories below Baa as determined by Moody's and BBB
as determined by S&P are considered to be of poor standing and predominantly
speculative. The rating agencies' descriptions of these rating categories,
including the speculative characteristics of the lower categories, are set forth
in the Statement of Additional Information.
Securities ratings are based largely on the issuer's historical financial
information and the rating agencies' investment analysis at the time of rating.
Consequently, the rating assigned to any particular security is not necessarily
a reflection of the issuer's current financial condition, which may be better or
worse than the rating would indicate. Although the Adviser will consider
security ratings when making investment decisions in the high yield market, it
will perform its own investment analysis and will not rely principally on the
ratings assigned by the rating agencies. The Adviser's analysis generally may
include, among other things, consideration of the
- 10 -
<PAGE>
issuer's experience and managerial strength, changing financial conditions,
borrowing requirements or debt maturity schedules, and its responsiveness to
changes in business conditions and interest rates. It also considers relative
values based on anticipated cash flow, interest or dividend coverage, asset
coverage and earnings prospects.
SHORT-TERM OBLIGATIONS. There may be times when, in the opinion of the Adviser,
adverse market conditions exist, including any period during which it believes
that the return on certain money market type instruments would be more favorable
than that obtainable through the Fund's normal investment programs. Accordingly,
for temporary defensive purposes, the Fund may hold up to 100% of its total
assets in cash and/or short-term obligations. To the extent that the Fund's
assets are so invested, they will not be invested so as to meet its investment
objective. The instruments may include high-grade liquid debt securities such as
variable amount master demand notes, commercial paper, certificates of deposit,
bankers' acceptances, repurchase agreements which mature in less than seven days
and obligations issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. Bankers' acceptances are instruments of United States banks
which are drafts or bills of exchange "accepted" by a bank or trust company as
an obligation to pay on maturity.
ZERO COUPON BONDS. The Fund is permitted to purchase zero coupon securities
("zero coupon bonds"). Zero coupon bonds are purchased at a discount from the
face amount because the buyer receives only the right to receive a fixed payment
on a certain date in the future and does not receive any periodic interest
payments. The effect of owning instruments which do not make current interest
payments is that a fixed yield is earned not only on the original investment but
also, in effect, on all discount accretion during the life of the obligations.
This implicit reinvestment of earnings at the same rate eliminates the risk of
being unable to reinvest distributions at a rate as high as the implicit yields
on the zero coupon bond, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds are
subject to substantially greater price fluctuations during periods of changing
market interest rates than are comparable securities which pay interest
currently, which fluctuation increases the longer the period to maturity.
Although zero coupon bonds do not pay interest to holders prior to maturity,
federal income tax law requires the Fund to recognize as interest income a
portion of the bond's discount each year and this income must then be
distributed to shareholders along with other income earned by the Fund. To the
extent that any shareholders in the Fund elect to receive their dividends in
cash rather than reinvest such
- 11 -
<PAGE>
dividends in additional shares, cash to make these distributions will have to be
provided from the assets of the Fund or other sources such as proceeds of sales
of Fund shares and/or sale of portfolio securities. In such cases, the Fund will
not be able to purchase additional income-producing securities with cash used to
make such distributions and its current income may ultimately be reduced as a
result.
RECEIPTS. The Fund may also purchase separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book entry system, known as Separately Traded Registered Interest and Principal
Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES"). These
instruments are issued by banks and brokerage firms and are created by
depositing Treasury notes and Treasury bonds into a special account at a
custodian bank; the custodian holds the interest and principal payments for the
benefit of the registered owner of the certificates or receipts. The custodian
arranges for the issuance of the certificates or receipts evidencing ownership
and maintains the register. Receipts include Treasury Receipts ("TRs"), Treasury
Investment Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury
Securities ("CATS"). STRIPS, CUBES, TRs, TIGRs and CATS are sold as zero coupon
securities, which means that they are sold at a substantial discount and
redeemed at face value at their maturity date without interim cash payments of
interest or principal. This discount is amortized over the life of the security,
and such amortization will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, these securities may be
subject to greater interest rate volatility than interest-paying U.S. Treasury
obligations. The Fund will limit its investment in such instruments to 20% of
its net assets.
INVESTMENT COMPANY SECURITIES. The Fund may invest in the securities of other
investment companies to the extent permissible under the applicable regulations
and interpretations of the 1940 Act or an exemptive order.
ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES. The Fund may invest up to 15% of
its net assets in illiquid investments (investments that cannot be readily sold
within seven days), including restricted securities which do not meet the
criteria for liquidity established by the Board of Trustees. The Adviser, under
the supervision of the Board of Trustees, determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses. Restricted securities are
securities which cannot be sold to the
- 12 -
<PAGE>
public without registration under the Securities Act of 1933. Unless registered
for sale, these securities can only be sold in privately negotiated transactions
or pursuant to an exemption from registration.
RISK FACTORS OF LOWER RATED FIXED-INCOME SECURITIES. Lower quality fixed-income
securities generally produce a higher current yield than do fixed-income
securities of higher ratings. However, these fixed-income securities are
considered speculative because they involve greater price volatility and risk
than do higher rated fixed-income securities and yields on these fixed-income
securities will tend to fluctuate over time. Although the market value of all
fixed-income securities varies as a result of changes in prevailing interest
rates (e.g., when interest rates rise, the market value of fixed-income
securities can be expected to decline), values of lower rated fixed-income
securities tend to react differently than the values of higher rated fixed-
income securities. The prices of lower rated fixed-income securities are less
sensitive to changes in interest rates than higher rated fixed-income
securities. Conversely, lower rated fixed-income securities also involve a
greater risk of default by the issuer in the payment of principal and income and
are more sensitive to economic downturns and recessions than higher rated fixed-
income securities. The financial stress resulting from an economic
downturn could have a greater negative effect on the ability of issuers of
lower rated fixed-income securities to service their principal and interest
payments, to meet projected business goals and to obtain additional financing
than on more creditworthy issuers. In the event of an issuer's default in
payment of principal or interest on such securities, or any other fixed-
income securities in the Fund's portfolio, the net asset value of the Fund
will be negatively affected. Moreover, as the market for lower rated fixed-
income securities is a relatively new one, a severe economic downturn might
increase the number of defaults, thereby adversely affecting the value of all
outstanding lower rated fixed-income securities and disrupting the market for
such securities. Fixed-income securities purchased by the Fund as part of an
initial underwriting present an additional risk due to their lack of market
history. These risks are exacerbated with respect to fixed-income
securities rated Caa or lower by Moody's or CCC or lower by S&P. Unrated
fixed-income securities generally carry the same risks as do lower rated
fixed-income securities.
Lower rated fixed-income securities are typically traded among a smaller number
of broker-dealers rather than in a broad secondary market. Purchasers of lower
rated fixed-income securities tend to be institutions, rather than individuals,
a factor that
- 13 -
<PAGE>
further limits the secondary market. To the extent that no established retail
secondary market exists, many lower rated fixed-income securities may not be as
liquid as Treasury and investment grade bonds. The ability of the Fund to sell
lower rated fixed-income securities will be adversely affected to the extent
that such securities are thinly traded or illiquid. Moreover, the ability of the
Fund to value lower rated fixed-income securities becomes more difficult, and
judgment plays a greater role in valuation, as there is less reliable, objective
data available with respect to such securities that are thinly traded or
illiquid.
Because investors may perceive that there are greater risks associated with the
lower rated fixed-income securities of the type in which the Fund may invest,
the yields and prices of such securities may tend to fluctuate more than those
for fixed-income securities with a higher rating. Changes in perception of
issuer's creditworthiness tend to occur more frequently and in a more pronounced
manner in the lower quality segments of the fixed-income securities market than
do changes in higher quality segments of the fixed-income securities market,
resulting in greater yield and price volatility. The speculative characteristics
of lower rated fixed-income securities are set forth in the Statement of
Additional Information.
The Adviser believes that the risks of investing in such high yielding,
fixed-income securities may be minimized through careful analysis of prospective
issuers. Although the opinion of ratings services such as Moody's and S&P is
considered in selecting portfolio securities, they evaluate the safety of the
principal and the interest payments of the security, not their market value
risk. Additionally, credit rating agencies may experience slight delays in
updating ratings to reflect current events. The Adviser relies, primarily, on
its own credit analysis. This may suggest, however, that the achievement of the
Fund's investment objective is more dependent on the Adviser's proprietary
credit analysis, than is otherwise the case for a fund that invests exclusively
in higher quality fixed-income securities.
Once the rating of a portfolio security or the quality determination ascribed by
the Adviser to an unrated, fixed-income security has been downgraded, the
Adviser will consider all circumstances deemed relevant in determining whether
to continue to hold the security, but in no event will the Fund retain such
securities if it would cause the Fund to have 20% or more of the value of its
net assets invested in fixed-income securities rated lower than Baa by Moody's
or BBB by S&P, or if unrated, are judged by the Adviser to be of comparable
quality.
- 14 -
<PAGE>
The Fund may also invest in unrated fixed-income securities. Unrated
fixed-income securities are not necessarily of lower quality than rated
fixed-income securities, but they may not be attractive to as many buyers.
There is no minimum rating standard for the Fund's investments in the high yield
market; therefore, the Fund may at times invest in fixed-income securities not
currently paying interest or in default. The Fund will invest in such
fixed-income securities where the Adviser perceives a substantial opportunity to
realize the Fund's objective based on its analysis of the underlying financial
condition of the issuer. It is not, however, the current intention of the Fund
to make such investments.
These limitations and the policies discussed in this Prospectus are considered
and applied by the Adviser at the time of purchase of an investment; the sale of
securities by the Fund is not required in the event of a subsequent change in
circumstances.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. You may purchase additional shares through
the Open Account Program described below. You may open an account and make an
initial investment through securities dealers having a sales agreement with the
Trust's principal underwriter, Countrywide Investments, Inc. (the "Adviser").
You may also make a direct initial investment by sending a check and a completed
account application form to Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made
payable to the "Intermediate Bond Fund." An account application is included in
this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone
- 15 -
<PAGE>
redemptions and exchanges and check redemptions) made available
to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning
the services described in this section to the Transfer Agent at
the address or numbers listed below.
After an initial investment, all investors are considered participants
in the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Fund over a period of years and permits the automatic
reinvestment of dividends and distributions of the Fund in additional shares
without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
The check should be made payable to the "Intermediate Bond Fund."
Under the Open Account Program, you may also purchase shares of the
Fund by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629- 2050) for instructions. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Fund to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
Shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to
- 16 -
<PAGE>
the Adviser by 5:00 p.m., Eastern time, that day are confirmed at the public
offering price determined as of the close of the regular session of trading on
the New York Stock Exchange on that day. It is the responsibility of dealers to
transmit properly completed orders so that they will be received by the Adviser
by 5:00 p.m., Eastern time. Dealers may charge a fee for effecting purchase
orders. Direct purchase orders received by the Transfer Agent by 4:00 p.m.,
Eastern time, are confirmed at that day's public offering price. Direct
investments received by the Transfer Agent after 4:00 p.m., Eastern time, and
orders received from dealers after 5:00 p.m., Eastern time, are confirmed at the
public offering price next determined on the following business day.
The public offering price of shares is the next determined net asset
value per share plus a sales load as shown in the following table.
Dealer
Reallowance
Sales Load as % of: as % of
------------------- -----------
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50 1.52 1.35
$250,000 but less than $500,000 1.00 1.01 .90
$500,000 but less than $1,000,000 .75 .76 .65
$1,000,000 or more None* None*
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .75% may apply if a commission was paid
by the Adviser to a participating unaffiliated dealer and the shares are
redeemed within twelve months from the date of purchase.
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of $1,000,000 or more and subsequent purchases
further increasing the size of the account, a dealer's commission of .75% of the
purchase amount may be paid by the Adviser to participating unaffiliated dealers
through whom such purchases are effected. In determining a dealer's eligibility
for such commission, purchases of shares of the Fund may be aggregated with
concurrent purchases of shares of other funds of Countrywide Investments.
Dealers should contact the Adviser concerning the applicability and calculation
of the dealer's commission in the case of combined purchases. An exchange from
- 17 -
<PAGE>
other funds of Countrywide Investments will not qualify for payment of the
dealer's commission, unless such exchange is from a Countrywide fund with assets
as to which a dealer's commission or similar payment has not been previously
paid. Redemptions of shares may result in the imposition of a contingent
deferred sales load if the dealer's commission described in this paragraph was
paid in connection with the purchase of such shares. See "Contingent Deferred
Sales Load for Certain Purchases of Shares" below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing shares of the load funds distributed by the Adviser with
the amount of his current purchases in order to take advantage of the reduced
sales loads set forth in the table above. Purchases made in any load fund
distributed by the Adviser pursuant to a Letter of Intent may also be eligible
for the reduced sales loads. The minimum initial investment under a Letter of
Intent is $10,000. The load funds currently distributed by the Adviser are
listed in the Exchange Privilege section of this Prospectus. Shareholders should
contact the Transfer Agent for information about the Right of Accumulation and
Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase shares of the Fund at
net asset value when the payment for your investment represents the proceeds
from the redemption of shares of any other mutual fund which has a front-end
sales load and is not distributed by the Adviser. Your investment will qualify
for this provision if the purchase price of the shares of the other fund
included a sales load and the redemption occurred within one year of the
purchase of such shares and no more than sixty days prior to your purchase of
shares of the Fund. To make a purchase at net asset value pursuant to this
provision, you must submit photocopies of the confirmations (or similar
evidence) showing the purchase and redemption of shares of the other fund. Your
payment may be made with the redemption check representing the proceeds of the
shares redeemed, endorsed to the order of the "Intermediate Bond Fund." The
redemption of shares of the other fund is, for federal income tax purposes, a
sale on which you may realize a gain or loss. These provisions may be modified
or terminated at any time. Contact your securities dealer or the Trust for
further information.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase shares of
the Fund at net asset value. To the extent permitted by regulatory authorities,
a bank trust department may charge fees to clients for whose account it
purchases shares at net asset value. Federal and state credit
- 18 -
<PAGE>
unions may also purchase shares at net asset value.
In addition, shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Adviser, and their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees.
Clients of investment advisers and financial planners may also purchase
shares of the Fund at net asset value if their investment adviser or financial
planner has made arrangements to permit them to do so with the Trust and the
Adviser. The investment adviser or financial planner must notify the Transfer
Agent that an investment qualifies as a purchase at net asset value.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals and employee benefit plans established by such entities, may
also purchase shares of the Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF SHARES. A
contingent deferred sales load is imposed upon certain redemptions of shares of
the Fund (or shares into which such shares were exchanged) purchased at net
asset value in amounts totaling $1 million or more, if the dealer's commission
described above was paid by the Adviser and the shares are redeemed within
twelve months from the date of purchase. The contingent deferred sales load will
be paid to the Adviser and will be equal to .75% of the lesser of (1) the net
asset value at the time of purchase of the shares being redeemed or (2) the net
asset value of such shares at the time of redemption. In determining whether the
contingent deferred sales load is payable, it is assumed that shares not subject
to the contingent deferred sales load are the first redeemed followed by other
shares held for the longest period of time. The contingent deferred sales load
will not be imposed upon shares representing reinvested dividends or capital
gains distributions, or upon amounts representing share appreciation. If a
purchase of shares is subject to the contingent deferred sales load, the
investor will be so notified on the confirmation for such purchase.
Redemptions of such shares of the Fund held for at least 12 months will
not be subject to the contingent deferred sales load and an exchange of such
shares into another fund of Countrywide Investments is not treated as a
redemption and will not trigger the imposition of the contingent deferred sales
load at the time of such exchange. A fund will "tack" the period for which such
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent
- 19 -
<PAGE>
deferred sales load is applicable in the event that the acquired shares are
redeemed following the exchange; however, the period of time that the
redemption proceeds of such shares are held in a money market fund will not
count toward the holding period for determining whether a contingent deferred
sales load is applicable. See "Exchange Privilege."
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986) of a shareholder (including one who owns the shares with
his or her spouse as a joint tenant with rights of survivorship) from an account
in which the deceased or disabled is named. The Adviser may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21, purchasing shares
for his or their own account; or a trustee or other fiduciary purchasing shares
for a single fiduciary account although more than one beneficiary is involved;
or employees of a common employer, provided that economies of scale are realized
through remittances from a single source and quarterly confirmation of such
purchases; or an organized group, provided that the purchases are made through a
central administration, or a single dealer, or by other means which result in
economy of sales effort or expense. Contact the Transfer Agent for additional
information concerning purchases at net asset value or at reduced sales loads.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
--------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional shares of the Fund while the
plan is in effect are generally undesirable because a sales load is incurred
whenever purchases are made.
- 20 -
<PAGE>
Tax-Deferred Retirement Plans
------------------------------
Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
Direct Deposit Plans
--------------------
Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.
Reinvestment Privilege
- ----------------------
If you have redeemed shares of the Fund, you may reinvest all or part
of the proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of the Fund on each day that the Trust is open
for business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of a
- 21 -
<PAGE>
proper redemption request in the form described below, less any applicable
contingent deferred sales load. Payment is normally made within three business
days after tender in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been collected,
which may take up to fifteen days from the purchase date. To eliminate this
delay, you may purchase shares of the Fund by certified check or wire.
A contingent deferred sales load may apply to a redemption of certain
shares of the Fund purchased at net asset value. See "How to Purchase Shares."
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be
sent by mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call the Transfer
Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050). The
redemption proceeds from your account will be sent by mail or by wire within
three business days after receipt of your telephone instructions. IRA accounts
are not redeemable by telephone.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to the Transfer Agent
with your signature guaranteed by any eligible guarantor institution (including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
or by completing a supplemental telephone redemption authorization form. Contact
the Transfer Agent to obtain this form. Further documentation will be required
to change the designated account if shares are held by a corporation, fiduciary
or other organization.
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
- 22 -
<PAGE>
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above.
Written redemption requests may also direct that the proceeds be
deposited directly in the bank account or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are mailed within three business days following receipt of instructions
in proper form.
BY CHECK. You may establish a special checking account with the Fund
for the purpose of redeeming shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer
Agent, as your agent, will cause the Fund to redeem a sufficient number of full
and fractional shares in your account to cover the amount of the check. Checks
will be processed at the net asset value on the day the check is presented to
the Custodian for payment.
If the amount of a check is greater than the value of the shares held
in your account, the check will be returned. Shareholders should consider
potential fluctuations in the net asset value of the Fund's shares when writing
checks. A check representing a redemption request will take precedence over any
other redemption instructions issued by a shareholder.
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in
a month, the Transfer Agent will charge you $.25 for each additional check
redemption effected that month. However, there is no charge for any check
redemptions effected by employees, shareholders and customers of Countrywide
Credit Industries, Inc. or any affiliated company, including members of the
immediate family of such individuals. The Transfer Agent charges shareholders
its costs for each stop payment and each check returned for insufficient funds.
In addition, the Transfer Agent reserves the right to make additional charges to
recover the costs of providing the check redemption service. All charges will be
deducted from your account by redemption of shares in your account. The check
redemption procedure may be suspended or terminated at any time upon written
notice by the Trust or the Transfer Agent.
- 23 -
<PAGE>
Shareholders should be aware that writing a check (a redemption of
shares) is a taxable event.
THROUGH BROKER-DEALERS. You may also redeem shares by placing a wire
redemption request through a securities broker or dealer. Unaffiliated
broker-dealers may impose a fee on the shareholder for this service. You will
receive the net asset value per share next determined after receipt by the Trust
or its agent of your wire redemption request. It is the responsibility of
broker-dealers to properly transmit wire redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee by the Fund's
Custodian. The Trust reserves the right, upon thirty days' written notice, to
change the processing fee. All charges will be deducted from your account by
redemption of shares in your account. Your bank or brokerage firm may also
impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust (based on
actual amounts invested including any sales load paid, unaffected by market
fluctuations), or such other minimum amount as the Trust may determine from time
to time. After notification to you of the Trust's intention to close your
account, you will be given thirty days to increase the value of your account to
the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide
- 24 -
<PAGE>
Investments may be exchanged for each other.
Shares of the Fund which are not subject to a contingent deferred sales
load may be exchanged for Class A shares of any other fund and for shares of any
other fund which offers only one class of shares (provided such shares are not
subject to a contingent deferred sales load). A sales load will be imposed equal
to the excess, if any, of the sales load rate applicable to the shares being
acquired over the sales load rate, if any, previously paid on the shares being
exchanged.
Shares of the Fund subject to a contingent deferred sales load may be
exchanged, on the basis of relative net asset value per share, for shares of any
other fund which imposes a contingent deferred sales load and for shares of any
fund which is a money market fund. A fund will "tack" the period for which the
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange. The
period of time that shares are held in a money market fund will not count toward
the holding period for determining whether a contingent deferred sales load is
applicable.
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
Tax-Free Money Fund *Government Mortgage Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund *Growth/Value Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
You may request an exchange by sending a written request to
- 25 -
<PAGE>
the Transfer Agent. The request must be signed exactly as your name appears on
the Trust's account records. Exchanges may also be requested by telephone. If
you are unable to execute your transaction by telephone (for example during
times of unusual market activity) consider requesting your exchange by mail or
by visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati,
Ohio 45202. An exchange will be effected at the next determined net asset value
(or offering price, if sales load is applicable) after receipt of a request by
the Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
The Fund expects to distribute any net realized long-term capital gains at least
once each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
- 26 -
<PAGE>
You should indicate your choice of option on your application. If no
option is specified on your application, distributions will automatically be
reinvested in additional shares. All distributions will be based on the net
asset value in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed distribution checks.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty days of the
distribution date to the Transfer Agent for reinvestment at the net asset value
next determined after its return. The investor or his dealer must notify the
Transfer Agent that a distribution is being reinvested pursuant to this
provision.
TAXES
- -----
The Fund intends to qualify for the special tax treatment afforded
a "regulated investment company" under Subchapter M of the Internal Revenue
Code so that it does not pay federal taxes on income and capital gains
distributed to shareholders.
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains to its shareholders. Distributions of
net investment income as well as from net realized short-term capital gains, if
any, are taxable as ordinary income. Since the Fund's investment income is
derived from interest rather than dividends, no portion of such distributions is
eligible for the dividends received deduction available to corporations.
Distributions of net realized long-term capital gains are taxable as long-term
capital gains regardless of how long you have held your Fund shares. Redemptions
and exchanges of shares of the Fund are taxable events on which a shareholder
may realize a gain or loss.
The Fund will mail to each of its shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Fund may be subject to
state and local taxes on distributions. Shareholders should consult their tax
advisors about the tax effect of distributions and withdrawals from the Fund and
the use of the Automatic Withdrawal Plan and the Exchange Privilege. The tax
consequences described in this section apply whether distributions are taken in
cash or reinvested in additional shares.
- 27 -
<PAGE>
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Investment Trust,
an open-end management investment company organized as a Massachusetts business
trust on December 7, 1980. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to six other series of the Trust, seven series of Countrywide Investment
Trust and five series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $50 million; .45% of such
assets from $50 million to $150 million; .4% of such assets from $150 million to
$250 million; and .375% of such assets in excess of $250 million.
Scott Weston, Assistant Vice President-Investments of the Adviser, is
primarily responsible for managing the portfolio of the Fund. Mr. Weston has
been employed by the Adviser since 1992 and will begin managing the Fund's
portfolio in September 1997.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect
- 28 -
<PAGE>
wholly-owned subsidiary of Countrywide Credit Industries, Inc., to serve as the
Fund's transfer agent, dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Commission and state securities authorities. The Adviser (not the Fund) pays
the Transfer Agent a fee for these administrative services equal to the
annual rate of .1% of the average value of the Fund's daily net assets.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. Angelo R.
Mozilo, Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of
both the Trust and the Adviser.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to sales
of shares of the Fund as a factor in the selection of brokers and dealers to
execute portfolio transactions of the Fund. Subject to the requirements of the
1940 Act and procedures adopted by the Board of Trustees, the Fund may execute
portfolio transactions through any broker or dealer and pay brokerage
commissions to a broker (i) which is an affiliated person of the Trust,
or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the 1940 Act or otherwise. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each
full share owned and fractional votes for fractional shares owned. The Trust
does not normally hold annual meetings of shareholders. The Trustees shall
- 29 -
<PAGE>
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 1940 Act in order to
facilitate communications among shareholders.
DISTRIBUTION PLAN
- -----------------
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a plan
of distribution (the "Plan") under which the Fund may directly incur or
reimburse the Adviser for certain distribution-related expenses, including
payments to securities dealers and others who are engaged in the sale of shares
of the Fund and who may be advising investors regarding the purchase, sale or
retention of Fund shares; expenses of maintaining personnel who engage in or
support distribution of shares or who render shareholder support services
not otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing
and distributing sales literature and prospectuses and statements of
additional information and reports for recipients other than existing
shareholders of the Fund; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable; and any other expenses related to the
distribution of the Fund's shares.
The annual limitation for payment of expenses pursuant to the Plan is
.35% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management
- 30 -
<PAGE>
of the Trust believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of mutual
funds. These Rules require fund-level accounting in which all sales charges -
front-end load, 12b-1 fees or contingent deferred load - terminate when a
percentage of gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (net asset value plus applicable sales load) of the shares of the Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange, currently 4:00 p.m., Eastern time. The Trust is open for
business on each day the New York Stock Exchange is open for business and on any
other day when there is sufficient trading in the Fund's investments that its
net asset value might be materially affected. The net asset value per share of
the Fund is calculated by dividing the sum of the value of the securities held
by the Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund, rounded
to the nearest cent.
The Fund's portfolio securities 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. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its "average annual total
return." The Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future
- 31 -
<PAGE>
performance.
The "average annual total return" of the Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which periods will be stated in the advertisement) that would equate
an initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and the
deduction of the current maximum sales load from the initial investment. The
Fund may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. A nonstandardized quotation of total return may
also indicate average annual compounded rates of return over periods other than
those specified for "average annual total return." These nonstandardized returns
do not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation of total return will always be
accompanied by the Fund's "average annual total return" as described above.
The "yield" of the Fund is computed by dividing the net investment
income per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within its category as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Fund may also present its
- 32 -
<PAGE>
performance and other investment characteristics, such as volatility or a
temporary defense posture, in light of the Adviser's view of current or past
market conditions or historical trends.
Further information about the Predecessor Fund's performance is
contained in its annual report which can be obtained by shareholders at no
charge by calling the Transfer Agent (Nationwide call toll-free 800-543-0407;
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
- 33 -
<PAGE>
<TABLE>
ACCOUNT NO. 93-_____________________
Account Application (For Fund Use Only)
<S> <C> <C> <C>
Intermediate Bond Fund FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________
Home Office Address: ___________________
Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
========================================================================================================================
Initial Investment of $_______________________
[] Check or draft enclosed payable to the Fund.
[] Bank Wire From:
______________________________________________________________________________________________________________
[] Exchange From:
______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial
account please list
minor's S.S.#)
___________________________________________________________________________________________________ Citizenship:[] U.S.
Name of Joint Tenant, Partner, Custodian []Other
Address Phone
___________________________________________________________________________________________________ ( )_______________
Street or P.O. Box Business Phone
___________________________________________________________________________________________________ ( )_______________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer
Name/Address______________________________________________________________________________________________
Are you an associated person of an NASD member? [] Yes [] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
=======================================================================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[] Share Option -- Income distributions and capital gains distributions automatically reinvested in additional
shares.
[] Income Option -- Income distributions and short term capital gains distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
[] Cash Option -- Income distributions and capital gains distributions paid in cash.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
========================================================================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon
receipt of and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Bank Account Number _____________________________________ Bank Routing Transit Number _______________________________
Name of Account Holder _______________________________________________________________________________________________
Bank Name _________________________________________________________ Bank Address ______________________________________
City State
[ ]CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA)
or otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons
whose signatures appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our)
shares of the Trust. I (we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time.
===========================================================================================================================
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of
eligible load funds of Countrywide Investments.
Account Number/Name Account Number/Name
_______________________________________________________ ______________________________________________________
_______________________________________________________ ______________________________________________________
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your Letter of Intent.)
[] I agree to the Letter of Intent in the current Prospectus of Countrywide Investment Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning ____________________ 19
(Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of Countrywide Investments
at least equal to (check appropriate box):
[] $100,000 [] $250,000 [] $500,000 [] $1,000,000
========================================================================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself and
his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Investment Trust, Countrywide Investment
Trust, Countrywide Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in
the performance of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide
Fund Services, Inc., or both will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust
and/or Countrywide Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring forms of personal identification prior to acting
upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions.
are genuine.
___________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Signature of Joint Owner, if Any
Trustee, etc.
________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
========================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Investment Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________ per month in the Intermediate Bond Fund.
ABA Routing Number______________________________
FI Account Number________________________________
[] Checking Account [] Savings Account
- ----------------------------------------------------------------------
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
______________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X_____________________________________________________________________ X_______________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[] Monthly -- Withdrawals will be made on the last business day of each month.
[] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[] Exchange: Please exchange the withdrawal proceeds into another Countywide account number:_ _-- _ _ _ _--_
[] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided
check for ACH or bank wire____________________________________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of
payee___________________________________________________________________________________________________________________
Please send
to:____________________________________________________________________________________________________________________
Street address City State Zip
========================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Investment Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of
the
_______________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of__________________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
at which a quorum was present and acting throughout, and that the same are now in full force and effect. I further certify that
the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
___________________________________________________ _________________________________________________________
___________________________________________________ _________________________________________________________
___________________________________________________ _______________________________________________________
Witness my hand and seal of the corporation or organization this_______________________day
of_______________________________________, 19_______
___________________________________________________ _________________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be
signed by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L.Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
- 34 -
<PAGE>
TABLE OF CONTENTS
Expense Information...............................................
Financial Highlights..............................................
Investment Objective and Policies.................................
How to Purchase Shares............................................
Shareholder Services..............................................
How to Redeem Shares..............................................
Exchange Privilege................................................
Dividends and Distributions.......................................
Taxes.............................................................
Operation of the Fund.............................................
Distribution Plan . . . ..........................................
Calculation of Share Price and Public Offering Price..............
Performance Information...........................................
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 35 -
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 15, 1997
Money Market Fund
Intermediate Bond Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the applicable Fund of Countrywide
Investment Trust dated August 15, 1997. A copy of a Fund's Prospectus can be
obtained by writing the Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202-4094, or by calling the Trust nationwide toll-free 800-543-0407, in
Cincinnati 629-2050.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS
PAGE
THE TRUST......................................................... 3
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS....................... 4
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS ................. 9
INVESTMENT LIMITATIONS............................................14
TRUSTEES AND OFFICERS.............................................16
THE INVESTMENT ADVISER AND UNDERWRITER............................19
DISTRIBUTION PLAN . . . . . ......................................21
SECURITIES TRANSACTIONS...........................................22
PORTFOLIO TURNOVER................................................24
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE..............24
OTHER PURCHASE INFORMATION........................................26
TAXES.............................................................27
REDEMPTION IN KIND................................................29
HISTORICAL PERFORMANCE INFORMATION................................29
CUSTODIAN.........................................................31
AUDITORS..........................................................32
TRANSFER AGENT. ..................................................32
FINANCIAL STATEMENTS..............................................33
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THE TRUST
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Countrywide Investment Trust (the "Trust"), formerly Midwest Trust, was
organized as a Massachusetts business trust on December 7, 1980. The Trust
currently offers six series of shares to investors: the Short Term Government
Income Fund (formerly the Short Term Government Fund), the Intermediate Term
Government Income Fund (formerly the Intermediate Term Government Fund), the
Institutional Government Income Fund (formerly the Institutional Government
Fund), the Adjustable Rate U.S. Government Securities Fund, the Global Bond
Fund, the Money Market Fund and the Intermediate Bond Fund. This Statement of
Additional Information provides information relating to the Money Market Fund
and the Intermediate Bond Fund (referred to individually as a "Fund" and
collectively as the "Funds"). Information relating to the Short Term Government
Income Fund, the Intermediate Term Government Income Fund, the Institutional
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund and
the Global Bond Fund is contained in a separate Statement of Additional
Information. Each Fund has its own investment objective and policies.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997, each
Fund, on or about August 29, 1997, will succeed to the assets and liabilities of
another mutual fund of the same name (the "Predecessor Fund"), which is an
investment series of Trans Adviser Funds, Inc. The investment objective,
policies and restrictions of each Fund and its Predecessor Fund are
substantially identical and the financial data and information in this
Prospectus relates to the Predecessor Funds.
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 either 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 either 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.
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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.
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS
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CORPORATE BONDS.
MOODY'S INVESTORS SERVICE, INC. PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE BOND RATINGS:
Aaa - "Bonds which are rated Aaa are judged 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 issues."
Aa - "Bonds which are 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. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities."
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A - "Bonds which are rated A possess many favorable investment
attributes and are considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future."
Baa - "Bonds which are rated 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."
Ba - "Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterize bonds in this class."
B - "Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small."
Caa - "Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest."
Ca - "Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings."
C - "Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing."
STANDARD & POOR'S RATINGS GROUP PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE BOND RATINGS:
AAA - "Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong."
AA - "Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree."
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A - "Debt rated A has strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories."
BBB - "Debt rated BBB is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
BB - "Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating."
B - "Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating."
CCC - "Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial or economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest or repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating."
CC - "The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating."
C - "The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy has been filed but debt service
payments are continued."
CI - "The rating CI is reserved for income bonds on which no interest is
being paid."
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D - "Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition and debt service payments are jeopardized.
DUFF AND PHELPS INC. PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS CORPORATE BOND
RATINGS:
AAA - "Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S.
Treasury debt."
AA+, AA, AA- - "High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions."
A+, A, A- - "Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress."
Fitch Investors Service, Inc. provides the following descriptions
of its corporate bond ratings:
AAA - "Rated bonds are considered to be investment grade and are of the
highest quality. The obligor has an extraordinary ability to pay interest and
principal, which is unlikely to be affected by foreseeable events."
AA - "Rated bonds are considered to be investment grade and of high
quality. The obligor's ability to pay interest and repay principal, while very
strong, is somewhat less than for AAA rated securities or more subject to change
over the term of the issue."
CORPORATE NOTES.
MOODY'S INVESTORS SERVICE, INC. PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE NOTE RATINGS:
MIG-1 "Notes which are rated MIG-1 are judged to be of the best
quality. There is present strong protection by established
cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing."
MIG-2 "Notes which are rated MIG-2 are judged to be of high
quality. Margins of protection are ample although not
so large as in the preceding group."
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STANDARD & POOR'S RATINGS GROUP PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE NOTE RATINGS:
SP-1 "Debt rated SP-1 has very strong or strong capacity to pay
principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+)
designation."
SP-2 "Debt rated SP-2 has satisfactory capacity to pay
principal and interest."
COMMERCIAL PAPER.
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF MOODY'S INVESTORS
SERVICE, INC.:
Prime-1 "Superior capacity for repayment of short-term
promissory obligations."
Prime-2 "Strong capacity for repayment of short-term promissory
obligations."
Prime-3 "Acceptable ability for repayment of short-term
promissory obligations."
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF STANDARD & POOR'S
RATINGS GROUP:
A-1 "This designation indicates that the degree of safety
regarding timely payment is very strong."
A-2 "Capacity for timely payment on issues with this
designation is strong. However, the relative degree of
safety is not as overwhelming as for issues designated
A-1."
A-3 "Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations."
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF DUFF & PHELPS, INC.:
DUFF-1 - "Very high certainty of timely payment. Liquidity
factors are excellent and supported by strong fundamental
protection factors. Risk factors are minor."
DUFF-2 - "Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing internal
funds needs may enlarge total financing requirements,
access to capital markets is good. Risk factors are
small."
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DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
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A more detailed discussion of some of the terms used and investment
policies described in the Prospectuses (see "Investment Objective and Policies")
appears below:
VARIABLE RATE DEMAND INSTRUMENTS. The Funds may purchase variable rate
demand instruments. Variable rate demand instruments that the Funds will
purchase are variable amount master demand notes that provide for a periodic
adjustment in the interest rate paid on the instrument and permit the holder to
demand payment of the unpaid principal balance plus accrued interest at
specified intervals upon a specific number of days' notice either from the
issuer upon a specified number of days' notice either from the issuer or by
drawing on a bank letter of credit, a guarantee, insurance or other credit
facility issued with respect to such instrument.
The variable rate demand instruments in which the Funds may invest are
payable on not more than thirty calendar days' notice either on demand or at
specified intervals not exceeding thirteen months depending upon the terms of
the instrument. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to thirteen months and their
adjustments are based upon the prime rate of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. In
order to minimize credit risks, the Adviser will decide which variable rate
demand instruments it will purchase in accordance with procedures prescribed by
the Board of Trustees. Each Fund may only purchase variable rate demand
instruments which have received a short-term rating meeting that Fund's quality
standards from an NRSRO or unrated variable rate demand instruments determined
by the Adviser, under the direction of the Board of Trustees, to be of
comparable quality. If such an instrument does not have a demand feature
exercisable by a Fund in the event of default in the payment of principal or
interest on the underlying securities, then the Fund will also require that the
instrument have a rating as long-term debt in on of the top two categories by
any NRSRO. The Adviser may determine, under the direction of the Board of
Trustees, that an unrated variable rate demand instrument meets a Fund's quality
criteria if it is backed by a letter of credit or guarantee or insurance or
other credit facility that meets the quality criteria for the Fund or on the
basis of a credit evaluation of the underlying obligor. If an instrument is ever
deemed to not meet a Fund's quality standards, such Fund either will sell it in
the market or exercise the demand feature as soon as practicable.
The Money Market Fund will not invest more than 10% of its net assets and
the Intermediate Bond Fund will not invest more than 15% of its net assets in
variable rate demand instruments as
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to which it cannot exercise the demand feature on not more than seven days'
notice if the Board of Trustees determines that there is no secondary market
available for these obligations and all other illiquid securities. The Funds
intend to exercise the demand repurchase feature only (1) upon a default under
the terms of the bond documents, (2) as needed to provide liquidity to a Fund in
order to make redemptions of its shares, or (3) to maintain the quality
standards of a Fund's investment portfolio.
While the value of the underlying variable rate demand instruments may
change with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital depreciation is less than would be the case with a
portfolio of fixed income securities. Each Fund may hold variable rate demand
instrument on which stated minimum or maximum rates, or maximum rates set by
state law limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent it does, increases or decreases in
value may be somewhat greater than would be the case without such limits.
Because the adjustment of interest rates on the variable rate demand instruments
is made in relation to movements of the applicable banks' "prime rate," or other
interest rate adjustment index, the variable rate demand instruments are not
comparable to long-term fixed rate securities. Accordingly, interest rates on
the variable rate demand instruments may be higher or lower than current market
rates for fixed rate obligations or obligations of comparable quality with
similar maturities.
WHEN-ISSUED SECURITIES. The Funds will only make commitments to purchase
securities on a when-issued basis with the intention of actually acquiring the
securities. In addition, the Funds may purchase securities on a when-issued
basis only if delivery and payment for the securities takes place within 60 days
after the date of the transaction. In connection with these investments, each
Fund will direct its Custodian to place cash, U.S. Government obligations or
other liquid high-grade debt obligations 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 a 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
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upon changes in the level of interest rates (which will generally result in all
of those securities changing in value in the same way, i.e., all those
securities experiencing appreciation when interest rates decline and
depreciation when interest rates rise). Therefore, if in order to achieve higher
returns, a Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a possibility
that the market value of the Fund's assets will experience greater fluctuation.
The purchase of securities on a when-issued basis may involve a risk of loss if
the seller 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 securities before the settlement date if it is deemed
advisable by the Adviser as a matter of investment strategy.
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. The Money Market 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. The Intermediate Bond Fund will not enter into a repurchase
agreement not terminable within seven days if, as a result thereof, more than
15% 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
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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 be of a credit quality at least equal to a Fund's investment
criteria for portfolio securities and will be held by the Custodian or in the
Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase agreement
is deemed to be a loan from a Fund to the seller subject to the repurchase
agreement and is therefore subject to that Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
securities purchased by a Fund subject to a repurchase agreement as being owned
by that Fund or as being collateral for a loan by the Fund to the seller. In the
event of the commencement of bankruptcy or insolvency proceedings with respect
to the seller of the securities before repurchase of the security under a
repurchase agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve loss of interest or decline in
price of the security. If a court characterized the transaction as a loan and a
Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for a Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case, the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case a Fund may
incur a loss if the proceeds to that Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund involved will direct the seller of the
security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
enforce the seller's contractual obligation to deliver additional securities.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities subject to the restrictions stated in its Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the
loaned securities. To be
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acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by a Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to the Fund. The Funds receive amounts
equal to the interest on loaned securities and also receive one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, or (c)
interest on short-term debt securities purchased with such collateral; either
type of interest may be shared with the borrower. The Funds may also pay fees to
placing brokers as well as custodian and administrative fees in connection with
loans. Fees may only be paid to a placing broker provided that the Trustees
determine that the fee paid to the placing broker is reasonable and based solely
upon services rendered, that the Trustees separately consider the propriety of
any fee shared by the placing broker with the borrower, and that the fees are
not used to compensate the Adviser or any affiliated person of the Trust or an
affiliated person of the Adviser or other affiliated person. The terms of the
Funds' loans must meet applicable tests under the Internal Revenue Code and
permit the Funds to reacquire loaned securities on five days' notice or in time
to vote on any important matter.
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. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Investments in time deposits maturing
in more than seven days will be subject to each Fund's restrictions on illiquid
investments (see "Investment Limitations"). The Funds may also invest in
certificates of deposit, bankers' acceptances and time deposits issued by
foreign branches of national banks. Eurodollar certificates of deposit are
negotiable U.S. dollar denominated certificates of deposit issued by foreign
branches of major U.S. commercial banks. Eurodollar bankers' acceptances are
U.S. dollar denominated bankers' acceptances "accepted" by foreign branches of
major U.S. commercial banks. Investments in the obligations of foreign branches
of U.S. commercial banks may be subject to special risks, including future
political and economic developments, imposition of withholding taxes on income,
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establishment of exchange controls or other restrictions, less governmental
supervision and the lack of uniform accounting, auditing and financial reporting
standards that might affect an investment adversely.
COMMERCIAL PAPER. Commercial paper consists of short-term, (usually
from one to two hundred seventy days) unsecured promissory notes issued by U.S.
corporations in order to finance their current operations. Certain notes may
have floating or variable rates. Variable and floating rate notes with a demand
notice period exceeding seven days will be subject to each Fund's restrictions
on illiquid investments (see "Investment Limitations") unless, in the judgment
of the Adviser, subject to the direction of the Board of Trustees, such note is
liquid.
RESTRICTED SECURITIES. Restricted securities generally can be sold in
privately negotiated transactions, pursuant to an exemption from registration
under the Securities Act of 1933, or in a registered public offering. Where
registration is required, a Fund may be obligated to pay all or part of the
registration expense and a considerable period may elapse between the time it
decides to seek registration and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, a Fund might obtain a less favorable
price than prevailed when it decided to seek registration of the shares.
However, in general, the Funds anticipate holding restricted securities to
maturity or selling them in an exempt transaction.
MAJORITY. As used in the Prospectuses and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
either Fund) means the lesser of (1) 67% or more of the outstanding shares of
the Trust (or the applicable Fund) present at a meeting, if the holders of more
than 50% of the outstanding shares of the Trust (or the applicable Fund) are
present or represented at such meeting or (2) more than 50% of the outstanding
shares of the Trust (or the applicable Fund).
INVESTMENT LIMITATIONS
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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 without the affirmative vote of a majority of the outstanding
shares of a Fund.
THE FUNDAMENTAL LIMITATIONS APPLICABLE TO EACH FUND ARE:
1. Borrowing Money. Each 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
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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. Each Fund also will not make any
borrowing which would cause outstanding borrowings to exceed one-third of the
value of its total assets.
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. Real Estate. Each Fund will not purchase, hold or deal in real
estate.
4. Concentration. The Fund will not invest more than 25% of its total
assets in the securities of issuers in any particular industry; provided,
however, that there is no limitation with respect to investments in obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities or repurchase agreements with respect thereto.
5. Commodities. Each Fund will not purchase, hold or deal in
commodities and will not invest in oil, gas or other mineral explorative or
development programs.
6. Loans. Each Fund will not make loans to other persons if, as a
result, more than one-third of the value of the Fund's total assets would be
subject to such loans. This limitation does not apply to (a) the purchase of a
portion of an issue of debt securities in accordance with a Fund's investment
objective, policies and limitations or (b) engaging in repurchase transactions.
7. Options. Each Fund will not engage in the purchase or sale of put
or call options.
8. Senior Securities. Each Fund will not issue or sell any senior
security as defined by the Investment Company Act of 1940 except insofar as any
borrowing that the Funds may engage in may be deemed to be an issuance of a
senior security.
THE FOLLOWING INVESTMENT LIMITATIONS OF THE FUNDS ARE NONFUNDAMENTAL
AND MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
1. 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 15% of the
- 15 -
<PAGE>
value of the Intermediate Bond Fund's net assets or 10% of the value of the
Money Market Fund's net assets would be invested in such securities.
2. 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 the value of its total assets in securities of other
investment companies.
3. 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 Fund for the clearance of purchases and
sales or redemption of securities.
4. Short Sales. Each Fund will not make short sales of securities,
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short.
As a diversified series of the Trust, the Money Market Fund has adopted the
following additional investment limitation, which may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. The Fund
will not purchase the securities of any issuer if such purchase at the time
thereof would cause more than 5% of the value of its total assets to be invested
in the securities of such issuer (the foregoing limitation does not apply to
investments in government securities as defined in the Investment Company Act of
1940).
With respect to the percentages adopted by the Trust as maximum
limitations on a Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money) 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.
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the
Trust and their aggregate compensation from the Trust and the funds of
Countrywide Investments (consisting of the Trust, Countrywide Tax-Free Trust and
Countrywide Strategic Trust) for the fiscal year ended September 30, 1996. Each
Trustee who is an "interested person" of the Trust, as defined by the Investment
Company Act of 1940, is indicated by an asterisk. Each of the Trustees is also a
Trustee of Countrywide Tax-Free Trust and Countrywide Strategic Trust.
- 16 -
<PAGE>
AGGREGATE
COMPENSATION
FROM
COMPENSATION COUNTRYWIDE
NAME AGE POSITION HELD FROM TRUST INVESTMENTS
Donald L. Bodgon, MD 66 Trustee $ 0 $ 0
John R. Delfino 63 Trustee 0 0
+H. Jerome Lerner 58 Trustee 2,849 8,100
*Robert H. Leshner 57 President/Trustee 0 0
*Angelo R. Mozilo 58 Chairman/Trustee 0 0
+Oscar P. Robertson 57 Trustee 2,549 6,600
John F. Seymour, Jr. 59 Trustee 0 0
+Sebastiano Sterpa 67 Trustee 0 0
Robert G. Dorsey 40 Vice President 0 0
John F. Splain 40 Secretary 0 0
Mark J. Seger 35 Treasurer 0 0
* Mr. Leshner and Mr. Mozilo, as officers and directors of
Countrywide Investments, Inc., are each an "interested
person" of the Trust within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940.
+ Member of Audit Committee
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
DONALD L. BOGDON, M.D., 435 Arden Avenue, Glendale, California is a
physician with Hematology Oncology Consultants and a Director of Verdugo VNA (a
hospice facility). Until 1996 he was President of Western Hematology/Oncology
and until 1993 he was Chairman of the Board of Glendale Memorial Hospital.
JOHN R. DELFINO, 2029 Century Park East, Los Angeles, California is
President of Concorde Capital Corporation (an investment firm). Until 1993
he was a director of Cypress Financial and Chairman of Rancho Santa Margarita,
mortgage banking firms.
H. JEROME LERNER, 7149 Knoll Road, Cincinnati, Ohio is a principal of
HJL Enterprises and is Chairman of Crane Electronics, Inc., a manufacturer of
electronic connectors.
ROBERT H. LESHNER, 312 Walnut Street, Cincinnati, Ohio is President
and a director of Countrywide Investments, Inc. (the investment adviser and
principal underwriter of the Trust) and Countrywide Financial Services, Inc.
(a financial services company and parent of Countrywide Investments, Inc. and
Countrywide Fund Services, Inc.). He is Vice Chairman and a director of
Countrywide Fund Services, Inc. (a registered transfer agent) and President and
a Trustee of Countrywide Tax-Free Trust and Countrywide Strategic Trust,
registered investment companies.
- 17 -
<PAGE>
ANGELO R. MOZILO, 4500 Park Granada Road, Calabasas, California is Vice
Chairman and Executive Vice President of Countrywide Credit Industries, Inc. (a
holding company). He is a director of Countrywide Home Loans, Inc. (a
residential mortgage lender), CTC Foreclosure Services Corporation (a
foreclosure trustee) and LandSafe, Inc. (the parent company of fifteen LandSafe
entities which provide property appraisals, credit reporting services, title
insurance and/or closing services for residential mortgages), each a subsidiary
of Countrywide Credit Industries, Inc. He is Chairman and a director of
Countrywide Financial Services, Inc., Countrywide Investments, Inc., Countrywide
Fund Services, Inc., Countrywide Servicing Exchange (a loan servicing broker),
Countrywide Capital Markets, Inc., (parent company of Countrywide Securities
Corporation and Countrywide Servicing Exchange) and various LandSafe
subsidiaries and is Chairman and Chief Executive Officer of Countrywide
Securities Corporation (a registered broker-dealer), each a subsidiary of
Countrywide Credit Industries, Inc. He is Chairman and a Trustee of Countrywide
Tax-Free Trust and Countrywide Strategic Trust. He is also Vice Chairman of CWM
Mortgage Holdings, Inc. (a publicly-held real estate investment trust).
OSCAR P. ROBERTSON, 4293 Muhlhauser Road, Fairfield, Ohio is President
of Orchem Corp., a chemical specialties distributor, and Orpack Stone
Corporation, a corrugated box manufacturer.
JOHN F. SEYMOUR, JR., 46-393 Blackhawk Drive, Indian Wells, California
is Chief Executive Officer of the Southern California Housing Development Agency
and a consultant for Orange Coast Title Co. (a title insurance company). He is
also a director of Irvine Apartment Communities (a real estate investment trust)
and Inco Homes (a home builder). Until 1994 he was a director of the California
Housing Finance Agency.
SEBASTIANO STERPA, 200 West Glenoaks Boulevard, Glendale, California is
Chairman of Sterpa Realty, Inc. and Chairman and a director of the California
Housing Finance Agency. He is also a director of Real Estate Business Services
and a director of the SunAmerica Mutual Funds.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio is President and
Treasurer of Countrywide Fund Services, Inc., Vice President - Finance and
Treasurer of Countrywide Financial Services, Inc. and Treasurer of Countrywide
Investments, Inc. He is also Vice President of Countrywide Investment Trust,
Countrywide Strategic Trust, Brundage, Story and Rose Investment Trust, Markman
MultiFund Trust, PRAGMA Investment Trust, Maplewood Investment Trust, a series
company, The Thermo Opportunity Fund, Inc., Capital Square Funds, The Dean
Family of Funds and The New York State Opportunity Funds and Assistant Vice
President of Williamsburg Investment Trust, Schwartz Investment Trust, Fremont
Mutual Funds, Inc., The Tuscarora Investment Trust, The Gannett Welsh & Kotler
Funds and Interactive Investments, all of which are registered investment
companies.
- 18 -
<PAGE>
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is Secretary and
General Counsel of Countrywide Investments, Inc. and Countrywide Financial
Services, Inc. and Vice President, Secretary and General Counsel of Countrywide
Fund Services, Inc. He is also Secretary of Countrywide Tax-Free Trust,
Countrywide Strategic Trust, Brundage, Story and Rose Investment Trust,
Williamsburg Investment Trust, Markman MultiFund Trust, The Tuscarora Investment
Trust, PRAGMA Investment Trust, Maplewood Investment Trust, a series company,
and The Thermo Opportunity Fund, Inc. and Assistant Secretary of Schwartz
Investment Trust, Fremont Mutual Funds, Inc., Capitol Square Funds, The Gannett
Welsh & Kotler Funds, Interactive Investments, The Dean Family of Funds and the
New York State Opportunity Fund, all of which are registered investment
companies.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio is Vice
President and Fund Controller of Countrywide Fund Services, Inc. He is also
Treasurer of Countrywide Tax-Free Trust, Countrywide Strategic Trust, Brundage,
Story and Rose Investment Trust, Williamsburg Investment Trust, Markman
MultiFund Trust, PRAGMA Investment Trust, Maplewood Investment Trust, a series
company, The Thermo Opportunity Fund, Inc., Capitol Square Funds, The Dean
Family of Funds and the New York State Opportunity Fund, Assistant Treasurer of
Schwartz Investment Trust, The Tuscarora Investment Trust, The Gannett Welsh &
Kotler Funds and Interactive Investments and Assistant Secretary of Fremont
Mutual Funds, Inc.
Each Trustee, except for Messrs. Leshner and Mozilo, receives a
quarterly retainer of $1,500 and a fee of $1,500 for each Board meeting
attended. Such fees are split equally among the Trust, Countrywide Tax-Free
Trust and Countrywide Strategic
Trust.
THE INVESTMENT ADVISER AND UNDERWRITER
- --------------------------------------
Countrywide Investments, Inc. (the "Adviser") is the Funds' investment
manager. The Adviser is a subsidiary of Countrywide Financial Services, Inc.,
which is a wholly-owned subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange listed company principally engaged in the business of
residential mortgage lending. Messrs. Mozilo and Leshner may be deemed to be
affiliates of the Adviser by reason of their position as Chairman and President,
respectively, of the Adviser. Messrs. Mozilo and Leshner, by reason of such
affiliation, may directly or indirectly receive benefits from the advisory fees
paid to the Adviser.
Under the terms of the investment advisory agreements between the Trust
and the Adviser, the Adviser is responsible for the management of the Funds'
investments. Each Fund pays the Adviser a fee computed and accrued daily and
paid monthly at an
- 19 -
<PAGE>
annual rate of .5% of its average daily net assets up to $50,000,000, .45% of
such assets from $50,000,000 to $150,000,000, .4% of such assets from
$150,000,000 to $250,000,000 and .375% of such assets in excess of $250,000,000.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The Adviser bears promotional expenses in
connection with the distribution of the Funds' shares to the extent that such
expenses are not assumed by the Funds under their plan of distribution (see
below). The compensation and expenses of any officer, Trustee or employee of the
Trust who is an officer, director, employee or stockholder of the Adviser are
paid by the Adviser.
By their terms, the Funds' investment advisory agreements remain in
force until February 28, 1999 and from year to year thereafter, subject to
annual approval by (a) the Board of Trustees or (b) a vote of the majority of a
Fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Trustees who are not interested persons of
the Trust, by a vote cast in person at a meeting called for the purpose of
voting such approval. The Funds' investment advisory agreements may be
terminated at any time, on sixty days' written notice, without the payment of
any penalty, by the Board of Trustees, by a vote of the majority of a Fund's
outstanding voting securities, or by the Adviser. The investment advisory
agreements automatically terminate in the event of their assignment, as defined
by the Investment Company Act of 1940 and the rules thereunder.
The Adviser is also the principal underwriter of the Funds and, as
such, the exclusive agent for distribution of shares of the Funds. The Adviser
is obligated to sell the shares on a best efforts basis only against purchase
orders for the shares. Shares of the Funds are offered to the public on a
continuous basis.
The Adviser currently allows concessions to dealers who sell shares of
the Intermediate Bond Fund. The Adviser retains the entire sales load on all
direct initial investments in the Fund and on all investments in accounts with
no designated dealer of record.
- 20 -
<PAGE>
The Funds may compensate dealers, including the Adviser and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plan below."
DISTRIBUTION PLAN
- -----------------
As stated in the Prospectus, the Funds have adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 which permits each Fund to pay for expenses incurred in the
distribution and promotion of the Funds' shares, including but not limited to,
the printing of prospectuses, statements of additional information and reports
used for sales purposes, advertisements, expenses of preparation and printing of
sales literature, promotion, marketing and sales expenses, and other
distribution-related expenses, including any distribution fees paid to
securities dealers or other firms who have executed a distribution or service
agreement with the Adviser. The Plan expressly limits payment of the
distribution expenses listed above in any fiscal year to a maximum of .35% of
the average daily net assets of each Fund. Unreimbursed expenses will not be
carried over from year to year.
Agreements implementing the Plan (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 Plan are made in
accordance with written agreements.
The continuance of the Plan 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 Plan or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. The 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. In the event the Plan
is terminated in accordance with its terms, the affected Fund will not be
required to make any payments for expenses incurred by the Adviser after the
termination date. Each Implementation Agreement terminates automatically in the
event of its assignment and may be terminated at any time by a vote of a
majority of the Independent Trustees or by a vote of the holders of a majority
of the outstanding shares of a Fund on not more than 60 days' written notice to
any other party to the Implementation Agreement. The Plan may not be amended to
increase materially the amount to be spent for distribution without shareholder
approval. All material amendments to the Plan must be approved by a vote of the
Trust's Board of Trustees and by a vote of the Independent Trustees.
- 21 -
<PAGE>
In approving the Plan, 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 Plan will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plan should assist in the growth of
the Funds which will benefit the Funds and their shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plan is in effect, all amounts spent by the Funds pursuant
to the Plan and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. The selection and
nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
Angelo R. Mozilo and Robert H. Leshner, as interested persons of the
Trust, may be deemed to have a financial interest in the operation of the Plan
and the Implementation Agreements.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer. Because the portfolio securities of the Funds are
generally traded on a net basis and transactions in such securities do not
normally involve brokerage commissions, the cost of portfolio securities
transactions of the Funds will consist primarily of dealer or underwriter
spreads.
- 22 -
<PAGE>
The Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Funds and/or other accounts over
which the Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if it is
determined in good faith that the commission is reasonable in relation to the
value of the brokerage and research services provided. The determination may be
viewed in terms of a particular transaction or the Adviser's overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Adviser and other affiliates
of the Trust or the Adviser may effect securities transactions which are
executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. Neither Fund will effect
any brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Funds do not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Adviser nor
affiliates of the Trust or the Adviser will receive reciprocal brokerage
business as a result of the brokerage business transacted by the Funds with
other brokers.
CODE OF ETHICS. The Trust and the Adviser have each adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act of 1940. The Code significantly
restricts the personal investing activities of all employees of the Adviser and,
as described below, imposes additional, more onerous, restrictions on investment
personnel of the Adviser. The Code requires that all employees of the Adviser
preclear any personal securities investment (with limited exceptions, such as
U.S. Government obligations). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition
- 23 -
<PAGE>
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 either Fund. The substantive restrictions applicable to
investment personnel of the Adviser include a ban on acquiring any securities in
an initial public offering and a prohibition from profiting on short-term
trading in securities. Furthermore, the Code provides for trading "blackout
periods" which prohibit trading by investment personnel of the Adviser within
periods of trading by the Funds in the same (or equivalent) security.
PORTFOLIO TURNOVER
- -------------------
The Adviser intends to hold the portfolio securities of the Money
Market Fund to maturity and to limit portfolio turnover to the extent possible.
Nevertheless, changes in the 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 Intermediate Bond Fund does not intend to purchase securities for
short-term trading; however, a security may be sold in anticipation of a market
decline, or purchased in anticipation of a market rise and later sold.
Securities will be purchased and sold in response to the Adviser's evaluation of
an issuer's ability to meet its debt obligations in the future. A security may
be sold and another purchased when, in the opinion of the Adviser, a favorable
yield spread exists between specific issues or different market sectors.
A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. 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 Money Market
Fund is determined as of 12:30 p.m. 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
Intermediate Bond Fund are determined as of the close of the regular session of
trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time), on
each day the Trust is open for business. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence
- 24 -
<PAGE>
Day, Labor Day, Thanksgiving and Christmas. The Trust may also be open for
business on other days in which there is sufficient trading in the 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, see "Calculation
of Share Price and Public Offering Price" in the Prospectus.
Pursuant to Rule 2a-7 promulgated under the Investment Company Act of
1940, the Money Market Fund values its 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 Money Market 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 Money Market Fund.
Pursuant to Rule 2a-7, the Money Market Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less, purchases only
securities having remaining maturities of thirteen months or less and invests
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 U.S.
Government obligations which have a variable rate of interest readjusted no less
frequently than annually will be deemed to be the period of time remaining until
the next readjustment of the interest rate.
The Board of Trustees has established procedures designed to stabilize,
to the extent reasonably possible, the price per share of the Money Market Fund
as computed for the purpose of sales and redemptions at $1 per share. The
procedures include review of the Fund's portfolio holdings by the Board of
Trustees to determine whether the 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.
- 25 -
<PAGE>
The Board of Trustees has also established procedures designed to ensure that
the Money Market 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 Money Market Fund would
receive if it sold the instrument. During periods of declining interest rates,
the daily yield on shares of the 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 the 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.
Portfolio securities held by the Intermediate Bond Fund for which
market quotations are readily available are generally valued at their most
recent bid prices as obtained from one or more of the major market makers for
such securities. Securities (and other assets) for which market quotations are
not readily available are valued at their fair value as determined in good faith
in accordance with consistently applied procedures established by and under the
general supervision of the Board of Trustees.
OTHER PURCHASE INFORMATION
- ---------------------------
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of shares of
the Intermediate Bond Fund is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
the Intermediate Bond Fund has the right to combine the cost or current net
asset value (whichever is higher) of his existing shares of the load funds
distributed by the Adviser with the amount of his current purchases in order to
take advantage of the reduced sales loads set forth in the tables in the
Prospectus. The purchaser or his dealer must notify the Transfer Agent that an
investment qualifies for a reduced sales load. The reduced load will be granted
upon confirmation of the purchaser's holdings by the Transfer Agent.
LETTER OF INTENT. The reduced sales loads set forth in the tables in
the Prospectus may also be available to any "purchaser" (as defined in the
Prospectus) of the Intermediate Bond Fund who submits a Letter of Intent to the
Transfer Agent. The Letter must state an intention to invest within a thirteen
month period
- 26 -
<PAGE>
in any load fund distributed by the Adviser a specified amount which, if made at
one time, would qualify for a reduced sales load. A Letter of Intent may be
submitted with a purchase at the beginning of the thirteen month period or
within ninety days of the first purchase under the Letter of Intent. Upon
acceptance of this Letter, the purchaser becomes eligible for the reduced sales
load applicable to the level of investment covered by such Letter of Intent as
if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose a front-end sales load or
imposes a reduced sales load in connection with purchases of shares of the
Intermediate Bond Fund made under the reinvestment privilege or the purchases
described in the "Reduced Sales Load," "Purchases at Net Asset Value" or
"Exchange Privilege" sections in the Prospectus because such purchases require
minimal sales effort by the Adviser. Purchases described in the "Purchases at
Net Asset Value" section may be made for investment only, and the shares may not
be resold except through redemption by or on behalf of the Trust.
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
Each Fund 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)
- 27 -
<PAGE>
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currency, or certain other
income (including but not limited to gains from options, futures and forward
contracts) derived with respect to its business of investing in stock,
securities or currencies; (ii) derive less than 30% of its gross income in each
taxable year from the sale or other disposition of the following assets held for
less than three months: (a) stock or securities, (b) options, futures or forward
contracts not directly related to its principal business of investing in stock
or securities; and (iii) diversify its holdings so that at the end of each
quarter of its taxable year the following two conditions are met: (a) at least
50% of the value of the Fund's total assets is represented by cash, U.S.
Government securities, securities of other regulated investment companies and
other securities (for this purpose such other securities will qualify only if
the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
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.
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.
- 28 -
<PAGE>
REDEMPTION IN KIND
- ------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
Yield quotations on investments in the Money Market 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 Fund does not
normally recognize unrealized gains and losses under the amortized cost
valuation method).
From time to time, the Intermediate Bond Fund may advertise average
annual total return. Average annual total return quotations will be computed by
finding the average annual compounded rates of return over 1, 5 and 10 year
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 and 10 year periods at the end of the 1,
5 or 10 year periods (or fractional portion thereof)
- 29 -
<PAGE>
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions. The calculation also assumes the deduction of the
current maximum sales load from the initial $1,000 payment, at the times, in the
amounts, and under the terms disclosed in the Prospectus. If the Fund 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 Intermediate Bond Fund may also advertise total return (a
"nonstandardized quotation") which is calculated differently from average annual
total return. A nonstandardized quotation of total return may be a cumulative
return which measures the percentage change in the value of an account between
the beginning and end of a period, assuming no activity in the account other
than reinvestment of dividends and capital gains distributions. This computation
does not include the effect of the applicable front-end sales load which, if
included, would reduce total return.
A nonstandardized quotation may also indicate average annual compounded
rates of return without including the effect of the applicable front-end sales
load or over periods other than those specified for average annual total return.
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 Intermediate Bond Fund may advertise its yield.
A yield quotation is based on a 30-day (or one month) period and is computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:
Yield = 2[a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Generally, interest earned (for the purpose of "a" above) on debt obligations is
computed by reference to the yield to maturity of each obligation held based on
the market value of the obligation (including actual accrued interest) at the
close of business on the last business day prior to the start of the 30-day (or
one month) period for which yield is being calculated, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest). With respect to the treatment of discount and premium on mortgage or
other
- 30 -
<PAGE>
receivables-backed obligations which are expected to be subject to monthly
paydowns of principal and interest, gain or loss attributable to actual monthly
paydowns is accounted for as an increase or decrease to interest income during
the period and discount or premium on the remaining security is not amortized.
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding each Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Funds may use the following
publications or indices to discuss or compare Fund performance:
Donoghue's Money Fund Report provides a comparative analysis of
performance for various categories of money market funds. The Money Market Fund
may compare performance rankings with money market funds appearing in the Second
Tier category.
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 Money Market Fund may provide
comparative performance information appearing in the Money Market Funds category
and the Intermediate Bond Fund may provide comparable performance information
appearing in the Intermediate Investment Grade 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.
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has
been retained to act as Custodian for the investments of each 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
- 31 -
<PAGE>
Fund a base fee at the annual rate of .005% of average net assets (subject to a
minimum annual fee of $1,500 and a maximum fee of $5,000) plus transaction
charges for each security transaction of the Funds.
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent
auditors for the Trust for the fiscal year ending September 30, 1997. Arthur
Andersen LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of
the Trust's financial statements and advises the Funds as to certain accounting
matters.
TRANSFER AGENT
- --------------
The Trust's transfer agent, Countrywide Fund Services, Inc. ("CFS"),
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. CFS is an affiliate of the Adviser by
reason of common ownership. CFS receives for its services as transfer agent a
fee payable monthly at an annual rate of $25 per account from the Money Market
Fund and $21 per account from the Intermediate Bond Fund, provided, however,
that the minimum fee is $1,000 per month for each Fund. In addition, the Funds
pay out-of-pocket expenses, including but not limited to, postage, envelopes,
checks, drafts, forms, reports, record storage and communication lines.
CFS also provides accounting and pricing services to the Trust. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable CFS to perform its duties, the Money Market
Fund pays CFS a fee in accordance with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $100,000,000 $3,000
$100,000,000 - $250,000,000 $3,500
$250,000,000 - $400,000,000 $4,000
Over $400,000,000 $4,500
The Intermediate Bond Fund pays CFS a fee in accordance with the following
schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $2,750
$ 50,000,000 - $100,000,000 $3,250
$100,000,000 - $250,000,000 $3,750
Over $250,000,000 $4,250
In addition, each Fund pays all costs of external pricing services.
- 32 -
<PAGE>
CFS is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, CFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. CFS supervises
the preparation of tax returns, reports to shareholders of the Funds, reports to
and filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For the
performance of these administrative services, CFS receives a fee from the
Adviser equal to .1% of the average value of each Fund's daily net assets. The
Adviser is solely responsible for the payment of these administrative fees to
CFS, and CFS has agreed to seek payment of such fees solely from the Adviser.
FINANCIAL STATEMENTS
- --------------------
The Predecessor Funds' audited financial statements as of August 31,
1996 appear in the Trust's annual report which is attached to this Statement of
Additional Information. The Predecessor Funds' unaudited financial statements as
of February 28, 1997 appear in the Trust's semiannual report which is also
attached to this Statement of Additional Information.
- 33 -
<PAGE>
Growth/Value Fund Shareholder Inquiries:
Aggressive Growth Fund Forum Financial Corp.
Intermediate Bond Fund P.O. Box 446
Kentucky Tax-Free Fund Portland, Maine 04112
Money Market Fund 207-879-0001
800-811-8258
- - -----------------------------------------------------------------------------
October 17, 1996
Dear Shareholder:
We are pleased to present the August 31, 1996 annual report for the Trans
Adviser Funds. This report includes the five funds: Growth/Value, Aggressive
Growth, Intermediate Bond, Money Market and Kentucky Tax-Free Funds.
The stock market, as measured by the Standard & Poor's 500 Index, performed well
over our first fiscal year, but masked several inconsistent counter-trends. The
technology sector reached a peak in the final three months of 1995 and
subsequently entered into a six-month down-draft period. The good news is that,
for Growth/Value and Aggressive Growth Funds, this afforded us the opportunity
of building our technology positions at valuations that were substantially
discounted from 1995 highs. The bad news, however, is many of these technology
issues either stayed depressed or got even cheaper during this interval.
Happily, trends in the past three to four months are much improved and appear to
validate our decision to maintain a meaningful presence in the growth-oriented
technology sector. The second observation is that smaller stock indices such as
the Russell 2000 Index and the Wilshire Small Cap Index, significantly trailed
the S&P 500 as well as the Dow Jones Industrial Average. We take some comfort
that the performance of Growth/Value and Aggressive Growth was positive in
comparison to these other indices.
The municipal market experienced significant volatility during the Funds' fiscal
year. First, the market experienced a wide rate swing (120 basis points plus a
zigzag movement); second, there was much talk of a flat tax; and third, the lack
of supply, then the tremendous supply, and again the lack of supply within the
municipal market. Most of the year, however, the municipal market's performance
was better than that of the taxable market, especially on the shorter
maturities. For example, rates on the 30-year Government bond first fell by more
than 50 basis points, then rose by more than 100 basis points to 6.95%, before
finally settling to 7.12% at the end of the period. Intermediate Bond, Money
Market, and Kentucky Tax-Free Funds performed in line with representative
benchmarks and are described in more detail later in this report.
We take great pride in the Trans Adviser Funds' first year of operations. In a
short period of one year, we have grown to the $130 million level, confirming
our original vision that there is a broad-based appeal for funds managed locally
that employ our investment style and experience. We are further encouraged that
the Funds will enjoy continued growth as a broader network of investors become
informed about our investment approach and capabilities.
If you have any questions or would like additional information about the Trans
Adviser Funds, please call 800-811-8258. Thank you for choosing to invest with
the Trans Adviser Funds.
/s/GORDON B. DAVIDSON /s/THOMAS A. TRANTUM
- - --------------------- --------------------
GORDON B. DAVIDSON THOMAS A. TRANTUM
Chairman of the Board President
<PAGE>
GROWTH/VALUE FUND MANAGED BY: FRANK MASTRAPASQUA AND THOMAS A. TRANTUM
From inception of the Trans Adviser Growth/Value Equity Fund on September 29,
1995 through August 31, 1996, the Net Asset Value before any applicable sales
charges rose 11.8% compared with the S&P 500 gain of 13.9%. Including all sales
charges, the Fund rose just 6.8%. The positive but somewhat disappointing
relative performance should be viewed from the following three perspectives.
First, the mainstay focus of the Fund throughout the period was in the health
care, medical and drug sectors. This focus provided the Fund with good earnings
visibility, growth characteristics, and reasonable stock valuations. These three
related sectors had a combined concentration level of between 25% and 30% of the
entire portfolio throughout the period.
Second, excessive valuations and less confidence in underlying demand caused a
retrenchment in the technology sector during the final three months of 1995. As
we entered the opening months of 1996, your Fund managers began to accumulate
what they believed to be quality, high growth technology shares at prices that
were significantly off their high points reached in 1995. Unfortunately, the
technology recession extended not only through the spring of 1996, but lasted
well into the summer months before confidence in these issues began to return.
Within our normal three to five year investment timeframe, we remain confident
that our participation in the technology sector will prove to be "well worth the
weight." In fact, we have already witnessed the return to popularity of many
issues we purchased earlier this year.
Third, in the second half of the fiscal year, we have focused on building up
meaningful positions in the oil service sector, which we feel is being
stimulated by new discovery technologies, limited capacity, continuing good
demand, and recent price increases that have been holding well above levels
assumed in consensus earnings models. We also believe the oil service sector may
provide above average potential returns in the next several years while
continuing to exhibit desirable defensive characteristics.
In summary, core holdings in medical/health care have provided good current risk
adjusted valuation performance, while technology and, to a lesser extent, the
oil service sector have represented a bit of a drag on near term performance. In
recent months, however, the oil service sector seems to be reaching the
performance levels that we initially envisioned.
- - ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
TRANS ADVISER GROWTH/VALUE FUND VS. STANDARD & POOR'S 500 INDEX
- - ----------------------------------------------------------------------------
The following chart reflects a comparison of a change in value of a $10,000
investment in the Fund, including reinvested dividends and distributions, and
the performance of the Index. The Index excludes the effect of any fees or sales
charges. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANS ADVISER GROWTH/VALUE STANDARD & POOR'S 500 INDEX
<S> <C> <C>
09/29/95 $9,550 $10,000
10/31/95 $9,388 $9,964
11/30/95 $9,971 $10,401
12/31/95 $10,047 $10,602
01/31/96 $10,410 $10,963
02/29/96 $10,831 $11,065
03/31/96 $10,936 $11,171
04/30/96 $11,327 $11,335
05/31/96 $11,413 $11,626
06/30/96 $11,041 $11,671
07/31/96 $10,220 $11,156
08/31/96 $10,677 $11,391
Value on 8/31/96
Trans Advise Growth/Value Fund $10,677
Standard & Poor...s 500 Index $11,391
Average Annual Total Return
Since Inception on 9/29/95
Trans Advise Growth/Value Fund 6.77%
Standard & Poor...s 500 Index 13.91%
</TABLE>
2 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND MANAGED BY: FRANK MASTRAPASQUA AND THOMAS A. TRANTUM
From inception of the Trans Adviser Aggressive Growth Fund on September 29, 1995
through August 31, 1996, the Net Asset Value before any applicable sales charges
rose 9.5% compared with the NASDAQ Composite Index gain of 9.8%. Including all
sales charges, the Fund rose just 4.6%. A couple of factors should be noted in
this record.
First, while the overall sector strategy pursued in Aggressive Growth Fund was
similar to the strategy employed with the Growth/Value Fund, the technology
sector was given a greater weighting in Aggressive Fund than was the
medical/health care area. Since technology underwent a deeper-than-anticipated
market disfavor, Aggressive Fund's performance lagged that of both the market as
well as Growth/Value Fund.
Second, Aggressive Growth by design is composed of smaller capitalization stocks
which can elevate the Fund's growth prospects but also can raise the Fund's risk
profile. During the period, smaller stock indices, such as the Russell 2000
Index and the Wilshire Small Cap Index, significantly trailed the S&P 500. We
remain confident that over the long term (three to five years) the higher risks
can be adequately rewarded through compensatory returns.
- - ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
TRANS ADVISER AGGRESSIVE GROWTH FUND VS. NASDAQ INDEX
- - ----------------------------------------------------------------------------
The following chart reflects a comparison of a change in value of a $10,000
investment in the Fund, including reinvested dividends and distributions, and
the performance of the Index. The Index excludes the effect of any fees or sales
charges. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANS ADVISER AGGRESSIVE GROWTH FUND NASDAQ INDEX
<S> <C> <C>
9/29/95 $9,550 $10,000
10/31/95 $9,044 $9,930
11/30/95 $9,578 $10,157
12/31/95 $9,502 $10,097
1/31/96 $9,473 $10,174
2/29/96 $10,065 $10,567
3/31/96 $10,352 $10,580
4/30/96 $11,394 $11,438
5/31/96 $11,365 $11,948
6/30/96 $10,706 $11,390
7/31/96 $9,808 $10,387
8/31/96 $10,457 $10,976
Value on 8/31/96
Trans Advise Aggressive Growth Fund $10,457
NASDAQ Index $10,976
Average Annual Total Return
Since Inception on 9/29/95
Trans Advise Aggressive Growth Fund 4.57%
NASDAQ Index 9.76%
</TABLE>
3 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND MANAGED BY: MARSHALL E. COX, JR.
From inception of the Intermediate Bond Fund on October 3, 1995 through August
31, 1996 the Net Asset Value before any applicable sales charges rose 3.2%
compared with the Lehman Brothers Intermediate Govt./Corp. Index gain of 3.7%.
Including all sales charges, the Fund lost 1.41%. The relative performance
should be viewed from the following perspectives.
The Fund's fiscal year witnessed huge volatility, as measured by the 30-year
Government bond. Rates on the 30-year Government bond first fell by more than 50
basis points, and then rose by more than 100 basis points to 6.95%, before
finally recovering to 7.12% at the end of the period.
The Fund continues to attract assets and remains well positioned to participate
in a rallying bond market with an average duration of 4.4 years and an average
maturity of 6.45 years, as of the end of the period. The Fund's securities
currently are of very high quality, being comprised of 42% US government
securities with only 11% of the Fund's securities rated BBB. The Fund also
remains well diversified among 46 issues with consumer and commercial finance,
banking, insurance, electric, telephone, natural gas and pipeline, retail and
industrial consumer, oil, metals and chemicals all represented.
- - -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
TRANS ADVISER INTERMEDIATE BOND FUND VS. LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE INDEX
- - ----------------------------------------------------------------------------
The following chart reflects a comparison of a change in value of a $10,000
investment in the Fund, including reinvested dividends and distributions, and
the performance of the Index. The Index excludes the effect of any fees or sales
charges. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANS ADVISER INTERMEDIATE BOND FUND LEHMAN INTERMEDIATE GOVT./CORP. INDEX
<S> <C> <C>
10/03/95 $9,550 $10,000
10/31/95 $9,599 $10,111
11/30/95 $9,701 $10,243
12/31/95 $9,782 $10,351
01/31/96 $9,873 $10,440
02/29/96 $9,779 $10,318
03/31/96 $9,756 $10,265
04/30/96 $9,709 $10,229
05/31/96 $9,725 $10,221
06/30/96 $9,842 $10,329
07/31/96 $9,865 $10,360
08/31/96 $9,859 $10,369
Value on 8/31/96
Trans Advise Intermediate Bond Fund
Lehman IntermediateGovt./Corp. Index
Average Annual Total Return
Since Inception on 10/3/95
Trans Advise Intermediate Bond Fund -1.41%
Lehman IntermediateGovt./Corp. Index 3.69%
</TABLE>
4 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND MANAGED BY: MARSHALL E. COX, JR.
From inception of the Kentucky Tax-Free Fund on September 27, 1995 through
August 31, 1996 the Net Asset Value before any applicable sales charges rose
5.8% compared with the Lehman Brothers Municipal Index gain of 4.6%. Including
all sales charges, the Fund rose just 1.0%. The relative performance should be
viewed from the following perspectives.
The municipal market in Kentucky experienced significant volatility during the
Fund's fiscal year. First, the market experienced a wide rate swing (120 basis
points plus a zigzag movement); second, there was much talk of a flat tax; and
third, the lack of supply, then the tremendous supply, and again the lack of
supply within the municipal market. Most of the year, however, the municipal
market's performance was better than that of the taxable market, as measured by
the 30-year Government bond.
Also contributing to the Fund's performance was the fact that the quality of the
Fund's securities is up significantly, with 91% of the securities rated A or
better. In addition, duration has been shortened substantially to 5.5 years,
with an average maturity of 7.9 years. This selective shortening of the duration
dramatically improved the convexity of the Fund (the concept that measures
sensitivity of the market price to changes in the interest rate levels). The
result is that in an improving municipal market, the Fund may perform well
without having a substantial number of bonds called away and in a deteriorating
market, the losses can be limited because of the much shorter duration and
maturity. We feel the limited duration and better convexity, along with the very
high quality of the Fund's securities, will position this Fund more
conservatively while not sacrificing yield.
- - ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
TRANS ADVISER KENTUCKY TAX-FREE FUND VS. LEHMAN MUNICIPAL INDEX
- - ----------------------------------------------------------------------------
The following chart reflects a comparison of a change in value of a $10,000
investment in the Fund, including reinvested dividends and distributions, and
the performance of the Index. The Index excludes the effect of any fees or sales
charges. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANS ADVISER KENTUCKY TAX-FREE FUND LEHMAN MUNICIPAL INDEX
<S> <C> <C>
9/27/95 $9,550 $10,000
10/31/95 $9,800 $10,145
11/30/95 $9,986 $10,313
12/31/95 $10,109 $10,412
1/31/96 $10,175 $10,492
2/29/96 $10,101 $10,420
3/31/96 $9,979 $10,287
4/30/96 $9,963 $10,258
5/31/96 $9,962 $10,254
6/30/96 $9,944 $10,366
7/31/96 $10,109 $10,459
8/31/96 $10,104 $10,457
Value on 8/31/96
Trans Advise Kentucky Tax-Free Fund $10,104
Lehman Municipal Index $10,457
Average Annual Total Return
Since Inception on 9/27/95
Trans Advise Kentucky Tax-Free Fund 1.04%
Lehman Municipal Index 4.57%
</TABLE>
5 TRANS ADVISER FUNDS, INC.
<PAGE>
GROWTH/VALUE FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
COMMON STOCK (95.2%):
AMUSEMENT & RECREATION SERVICES (3.3%):
10,000 Harrah's Entertainment, Inc.*.... $ 190,000
10,000 Promus Hotel Corporation*........ 301,250
-------------
491,250
-------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE STATIONS (1.4%):
7,500 Autozone, Inc.*.................. 204,375
-------------
BUSINESS SERVICES (7.1%):
20,000 ADT Ltd.*........................ 392,500
6,000 Oracle Corporation*.............. 211,500
10,000 SCB Computer Technology, Inc.*... 192,500
5,000 Sun Microsystems, Inc.*.......... 271,875
-------------
1,068,375
-------------
CHEMICALS & ALLIED PRODUCTS (7.6%):
4,000 Bristol-Myers Squibb Company..... 351,000
6,000 Merck & Company, Inc. ........... 393,750
7,000 Schering-Plough Corporation...... 391,125
-------------
1,135,875
-------------
COMMUNICATIONS (1.0%):
10,000 Tele-Communications, Inc.*....... 148,750
-------------
DEPOSITORY INSTITUTIONS (4.9%):
10,000 Carolina First Corporation....... 188,750
10,000 MBNA Corporation................. 303,750
10,000 Signet Banking Corporation....... 241,250
-------------
733,750
-------------
EATING & DRINKING PLACES (3.5%):
7,500 McDonald's Corporation........... 347,812
20,000 Shoney's, Inc.*.................. 182,500
-------------
530,312
-------------
ELECTRIC, GAS, & SANITARY SERVICES (2.9%):
10,000 Sonat, Inc. ..................... 441,250
-------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT &
COMPONENTS, EXCEPT COMPUTER EQUIPMENT (1.2%):
5,000 Novellus Systems, Inc.*.......... 188,750
-------------
FOOD STORES (2.1%):
7,500 Kroger Company*.................. 317,813
-------------
FOOD & KINDRED PRODUCTS (0.4%):
15,000 Monterey Pasta Company*.......... 67,500
-------------
GENERAL MERCHANDISE STORES (1.8%):
6,000 Sears, Roebuck and Company....... 264,000
-------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
HEALTH SERVICES (9.6%):
10,000 Beverly Enterprises*............. $ 102,500
5,000 Columbia HCA Healthcare
Corporation.................... 281,875
2,345 Healthsouth Rehabilitation
Corporation*................... 75,919
10,000 Living Centers of America,
Inc.*.......................... 267,500
1,000 Quorum Health Group, Inc.*....... 25,250
15,000 Tenet Healthcare Corporation*.... 315,000
12,000 Vencor, Inc.*.................... 376,500
-------------
1,444,544
-------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER
EQUIPMENT (13.4%):
10,000 Hewlett-Packard Company.......... 437,500
5,000 International Business Machines
Corporation.................... 571,875
10,000 Lam Research Corporation*........ 236,250
5,000 Seagate Technology, Inc.*........ 240,000
15,000 Western Digital Corporation*..... 526,875
-------------
2,012,500
-------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (1.8%):
10,000 Tech-Sym Corporation*............ 277,500
-------------
MISCELLANEOUS RETAIL (3.6%):
6,000 Friedman's, Inc. Class A*........ 126,000
10,000 Melville Corporation............. 422,500
-------------
548,500
-------------
MOTION PICTURES (0.8%):
2,000 The Walt Disney Company.......... 114,000
-------------
NONDEPOSITORY CREDIT INSTITUTIONS (3.5%):
5,000 American Express Company......... 218,750
10,000 Capital One Financial
Corporation.................... 301,250
-------------
520,000
-------------
OIL & GAS EXTRACTION (5.4%):
10,000 Nuevo Energy Company*............ 373,750
6,500 Pride Petroleum Services, Inc.*.. 93,438
4,000 Schlumberger, Ltd. .............. 337,500
-------------
804,688
-------------
PHARMACEUTICAL PREPARATIONS (3.2%):
8,000 American Home Products
Corporation.................... 474,000
-------------
</TABLE>
See notes to financial statements. 6 TRANS ADVISER FUNDS, INC.
<PAGE>
GROWTH/VALUE FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
TRANSPORTATION EQUIPMENT (1.5%):
2,500 Boeing Company................... $ 226,250
-------------
TRANSPORTATION SERVICES (1.3%):
15,000 United Transnet, Inc.*........... 195,000
-------------
TRANSPORTATION BY AIR (1.5%):
10,000 Southwest Airlines Company....... 228,750
-------------
WATER TRANSPORTATION (2.6%):
10,000 Tidewater, Inc. ................. 383,750
-------------
WHOLESALE TRADE--DURABLE GOODS (8.6%):
6,000 Arrow Electronics Inc.*.......... 273,750
4,000 Avnet, Inc. ..................... 187,000
5,000 Lockheed Martin Corporation...... 420,625
15,000 Sybron International
Corporation-Wisconsin*......... 412,500
-------------
1,293,875
-------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
WHOLESALE TRADE--NONDURABLE GOODS (1.2%):
5,000 Safeway, Inc.*................... $ 181,250
-------------
Total Common Stock
(cost $14,053,526)......................... 14,296,607
-------------
SHORT-TERM HOLDINGS (4.8%):
16,152 1784 U.S. Treasury Money Market
Fund........................... 16,152
711,813 Forum Daily Assets Treasury
Fund........................... 711,813
-------------
Total Short-Term Holdings
(cost $727,965)............................ 727,965
-------------
Total Investments (100.0%)
(cost $14,781,491)......................... $ 15,024,572
-------------
-------------
</TABLE>
*Non-income producing security.
See notes to financial statements. 7 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
COMMON STOCK (98.9%):
AMUSEMENT & RECREATION SERVICES (3.8%):
5,000 Harrah's Entertainment, Inc.*..... $ 95,000
5,000 Promus Hotel Corporation*......... 150,625
------------
245,625
------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE
STATIONS (1.9%):
10,000 Rush Enterprises, Inc.*........... 125,000
------------
BUSINESS SERVICES (12.1%):
10,000 ADT Ltd.*......................... 196,250
10,000 Cerplex Group*.................... 68,750
5,000 Oracle Corporation*............... 176,250
9,500 SCB Computer Technology, Inc.*.... 182,875
3,000 Sun Microsystems, Inc.*........... 163,125
------------
787,250
------------
CHEMICALS & ALLIED PRODUCTS (1.6%):
10,000 NABI, Inc.*....................... 106,250
------------
COMMUNICATIONS (1.1%):
5,000 Mobile Telecommunication Tech
Corp*........................... 69,375
------------
DEPOSITORY INSTITUTIONS (2.9%):
10,000 Carolina First Corporation........ 188,750
------------
EATING & DRINKING PLACES (4.9%):
6,000 Quality Dining, Inc.*............. 176,250
16,000 Shoney's, Inc.*................... 146,000
------------
322,250
------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT &
COMPONENTS, EXCEPT COMPUTER EQUIPMENT (2.3%):
4,000 Novellus Systems, Inc.*........... 151,000
------------
FOOD STORES (2.3%):
3,500 Kroger Company*................... 148,312
------------
FOOD & KINDRED PRODUCTS (0.7%):
10,000 Monterey Pasta Company*........... 45,000
------------
GENERAL MERCHANDISE STORES (1.2%):
2,000 Consolidated Stores
Corporation*.................... 76,000
------------
HEALTH SERVICES (11.9%):
7,500 Living Centers of America, Inc.*.. 200,625
2,000 Quorum Health Group, Inc.*........ 50,500
10,000 Tenet Healthcare Corporation*..... 210,000
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
HEALTH SERVICES, CONTINUED:
10,000 Vencor, Inc.*..................... $ 313,750
------------
774,875
------------
HOLDING & OTHER INVESTMENT OFFICES (0.5%):
1,000 Felcor Suite Hotels, Inc. ........ 30,500
------------
HOME FURNITURE, FURNISHINGS, & EQUIPMENT
STORES (1.2%):
5,000 Movie Gallery, Inc.*.............. 76,250
------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER
EQUIPMENT (14.4%):
4,000 Hewlett-Packard Company........... 175,000
8,000 Lam Research Corporation*......... 189,000
15,000 Smart Modular Technologies*....... 225,000
10,000 Western Digital Corporation*...... 351,250
------------
940,250
------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (2.5%):
6,000 Tech-Sym Corporation*............. 166,500
------------
MISCELLANEOUS RETAIL (3.5%):
6,000 Friedman's, Inc. Class A*......... 126,000
2,500 Melville Corporation.............. 105,625
------------
231,625
------------
NONDEPOSITORY CREDIT INSTITUTIONS (4.6%):
6,000 Capital One Financial
Corporation..................... 180,750
5,000 Olympic Financial, Ltd.*.......... 122,500
------------
303,250
------------
OIL & GAS EXTRACTION (7.9%):
8,000 Nuevo Energy Company*............. 299,000
15,000 Pride Petroleum Services, Inc.*... 215,625
------------
514,625
------------
TRANSPORTATION SERVICES (5.1%):
10,000 Simon Transportation Services*.... 137,500
15,000 United Transnet, Inc.*............ 195,000
------------
332,500
------------
TRANSPORTATION BY AIR (2.5%):
5,000 Southwest Airlines Company........ 114,375
5,000 Western Pacific Airlines, Inc.*... 50,625
------------
165,000
------------
WATER TRANSPORTATION (3.5%):
6,000 Tidewater, Inc. .................. 230,250
------------
</TABLE>
See notes to financial statements. 8 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
WHOLESALE TRADE--DURABLE GOODS (2.1%):
5,000 Sybron International
Corporation-Wisconsin*.......... $ 137,500
------------
WHOLESALE TRADE--NONDURABLE GOODS (4.4%):
7,500 AmeriSource Health Corporation*... 285,938
------------
Total Common Stock
(cost $6,393,306)........................... 6,453,875
------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
SHORT-TERM HOLDINGS (1.1%)
576 1784 U.S. Treasury Money Market
Fund............................ $ 576
72,947 Forum Daily Assets Treasury
Fund............................ 72,947
------------
Total Short-Term Holdings
(cost $73,523).............................. 73,523
------------
Total Investments (100.0%)
(cost $6,466,829)........................... $ 6,527,398
------------
------------
</TABLE>
*Non-income producing security.
See notes to financial statements. 9 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (7.9%):
$ 290,038 Federal Home Loan Mortgage
Corporation, Series 1072,
Class G, 7.00%, due
5/15/06...................... $ 289,228
800,000 Federal Home Loan Mortgage
Corporation, Series 1720,
Class E, 7.50% due
12/15/09..................... 797,647
-------------
Total Collateralized Mortgage Obligations
(cost $1,118,738).......................... 1,086,875
-------------
FIXED RATE BONDS--CORPORATE (55.4%):
686,000 Alabama Power Company, 8.30%,
due 7/1/22................... 684,720
400,000 Anheuser-Busch Companies,
7.00%, due 9/1/05............ 388,401
178,000 Anheuser-Busch Companies,
8.75%, due 12/1/99........... 187,100
169,000 Associates Corporation of North
America, 6.00%, due
3/15/00...................... 164,005
250,000 B.P. America, 6.50%, due
12/15/99..................... 245,774
50,000 Berkley W.R. Corporation,
9.875%, due 5/15/08.......... 57,698
190,000 The Chase Manhattan
Corporation, 8.00%, due
5/15/04...................... 191,230
115,000 Citicorp, 10.75%, due
12/15/15..................... 118,364
146,000 Citicorp, 10.50%, due 2/1/16... 149,355
140,000 Commonwealth Edison Company,
9.50%, due 5/1/16............ 146,775
160,000 Florida Power & Light Company,
8.00%, due 8/25/22........... 156,388
100,000 Ford Motor Credit Company,
5.83%, due 6/29/98........... 98,648
160,000 Ford Motor Credit Company,
7.50%, due 1/15/03........... 161,039
160,000 GTE of Southeast Corporation,
8.00%, due 12/1/01........... 160,812
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE BONDS--CORPORATE, CONTINUED:
$ 130,000 General Electric Capital
Corporation, 6.66%, due
5/1/18....................... $ 128,744
69,000 Georgia Power Company First
Mortgage Bonds, 7.95%, due
2/1/23....................... 67,860
250,000 Greyhound Financial
Corporation, 7.82%, due
1/27/03...................... 253,009
250,000 IBM Credit Corporation, 6.20%,
due 3/19/01.................. 239,773
300,000 Inco, Ltd., 9.60%, due
6/15/22...................... 317,897
120,000 Jersey Central Power & Light
Company, 9.20%, due 7/1/21... 128,346
46,000 Kaiser Permanente, 9.55%, due
7/15/05...................... 52,472
56,000 Kraft, Inc., 8.50%, due
2/15/17...................... 56,264
200,000 Michigan Bell Telephone
Company, 6.375%, due
2/1/05....................... 188,882
175,000 Pacific Gas & Electric Company,
6.625%, due 6/1/00........... 170,867
439,000 Pennsylvania Power & Light
Company, 9.25%, due
10/1/19...................... 468,786
120,000 Public Service Electric & Gas
Company, 8.75%, due
11/1/21...................... 128,669
165,000 Questar Pipeline, 9.375%, due
6/1/21....................... 180,413
70,000 Rohm & Haas Company, 9.80%, due
4/15/20...................... 83,520
50,000 Sara Lee Corporation, 8.75%,
due 5/15/16.................. 51,814
675,000 Shopko Stores, 9.25%, due
3/15/22...................... 693,309
200,000 Southern California Edison,
7.375%, due 12/15/03......... 203,407
85,000 Southwestern Public Service
Company, 8.20%, due
12/1/22...................... 86,728
</TABLE>
See notes to financial statements. 10 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE BONDS--CORPORATE, CONTINUED:
$ 199,000 TJX Companies, Inc., 9.50%, due
5/2/16....................... $ 206,408
68,000 U.S. Leasing International,
6.625%, due 5/15/03.......... 65,228
130,000 Union Electric Company, 8.00%,
due 12/15/22................. 128,740
500,000 Union Oil of California
Corporation, 6.70%, due
10/15/07..................... 463,422
250,000 Washington Gas Light Company,
6.50%, due 1/14/97........... 250,778
65,000 Wisconsin Electric Power,
7.75%, due 1/15/23........... 63,377
-------------
Total Fixed Rate Bonds--Corporate
(cost $7,817,554).......................... 7,589,022
-------------
FIXED RATE NOTES--AGENCY (7.1%):
500,000 Federal Home Loan Bank, 6.62%,
due 12/6/00.................. 487,668
150,000 Federal National Mortgage
Association, 6.17%, due
12/2/03...................... 141,364
265,000 Tennessee Valley Authority,
6.875%, due 1/15/02.......... 261,356
50,000 Tennessee Valley Authority,
6.875%, due 8/1/02........... 49,128
30,000 Tennessee Valley Authority,
8.05%, due 7/15/24........... 29,261
-------------
Total Fixed Rate Notes--Agency
(cost $998,362)............................ 968,777
-------------
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
REPURCHASE AGREEMENTS (15.3%):
$ 2,101,575 The First Boston Corporation,
5.30%, due 9/3/96, to be
repurchased at 2,102,813
(collateralized by
$16,050,000 Federal National
Mortgage Association, pool
#339017, 6.092%, due
12/1/35)..................... $ 2,101,575
-------------
Total Repurchase Agreements
(cost $2,101,575).......................... 2,101,575
-------------
TREASURY NOTES (14.2%):
2,000,000 U.S. Treasury Notes, 6.50%, due
8/15/05...................... 1,943,750
-------------
Total Treasury Notes
(cost $1,986,601).......................... 1,943,750
-------------
SHORT-TERM HOLDINGS (0.1%):
5,006 1784 U.S. Treasury Money Market
Fund......................... 5,006
-------------
Total Short-Term Holdings
(cost $5,006).............................. 5,006
-------------
Total Investments (100.0%)
(cost $14,027,836)......................... $ 13,695,005
-------------
-------------
</TABLE>
See notes to financial statements. 11 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - -------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
MUNICIPAL BONDS (100.0%):
AIRPORT REVENUE (5.0%):
$ 750,000 Kenton County, KY, Airport
Revenue Bonds, MBIA insured,
5.75%, due
3/1/13....................... $ 733,125
50,000 Lexington-Fayette Urban County
Airport Corporation, KY,
First Mortgage Revenue Bonds,
7.75%, due 4/1/08............ 53,937
-------------
787,062
-------------
ECONOMIC DEVELOPMENT REVENUE (15.3%):
100,000 Covington, KY, Municipal
Properties Corporation
Revenue Bonds, Series A,
8.25%, due 8/1/10,
prerefunded 8/1/98 at 103.... 109,875
490,000 Jefferson County, KY, Capital
Projects Corporation Revenue
Bonds, Series A, 5.65%, due
8/15/03...................... 508,987
100,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #26 Second
Series, 7.10%, due 12/1/97... 103,500
110,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #27, 7.10%,
due 5/1/06, prerefunded
11/1/96
at 102....................... 112,773
50,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #27, 7.10%,
due 5/1/08, prerefunded
11/1/96
at 102....................... 51,260
100,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #30 Fifth
Series, 7.00%, due 12/1/96... 100,792
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
ECONOMIC DEVELOPMENT REVENUE, CONTINUED:
$ 70,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #32 Third
Series, 6.50%, due 12/1/99... $ 73,762
65,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #51, escrowed
to maturity, 6.00%, due
8/1/97....................... 66,159
455,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #51, escrowed
to maturity, 6.30%, due
8/1/01....................... 482,869
100,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #52, 6.50%,
due 8/1/11, prerefunded
8/1/01 at 102................ 109,125
425,000 Kentucky State Turnpike
Authority, Economic
Development Revenue Bonds,
Revitalization Projects,
escrowed to maturity, 7.00%,
due 5/15/99.................. 452,094
200,000 Kentucky State Turnpike
Authority, Economic
Development Revenue Bonds,
7.25%, due 5/15/10,
prerefunded 5/15/00 at
101.50....................... 219,750
-------------
2,390,946
-------------
EDUCATION FACILITIES REVENUE (19.9%):
350,000 Fayette County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, Series C, 5.25%, due
10/1/09...................... 334,687
</TABLE>
See notes to financial statements. 12 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
EDUCATION FACILITIES REVENUE, CONTINUED:
$ 365,000 Fayette County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, Series C, 5.25%, due
10/1/10...................... $ 346,750
200,000 Hopkins County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, 5.70%, due 6/1/06..... 204,250
495,000 Jefferson County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, Series A, 4.875%, due
1/1/11....................... 449,831
750,000 Jefferson County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, Series A, MBIA
insured, 5.00%, due 2/1/07... 731,250
70,000 Lexington-Fayette Urban County
Government, KY, School
Building Revenue Bonds,
6.80%, due 10/1/01........... 76,300
770,000 Pendleton County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, 5.05%, due 12/1/15.... 685,300
200,000 University of Louisville, KY,
Revenue Bonds, Series H,
5.875%, due 5/1/12........... 201,750
70,000 University of Louisville, KY,
Revenue Bonds, Series G,
6.25%, due 5/1/99............ 72,103
-------------
3,102,221
-------------
GENERAL OBLIGATION (1.8%):
305,000 Fern Creek, KY, Fire Protection
District, Holding Company,
Inc., Revenue Bonds, Fire
Station #2, 5.75%, due
1/15/14...................... 286,319
-------------
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
HEALTH CARE REVENUE (13.2%):
$ 385,000 Jefferson County, KY, Hospital
Revenue Bonds, NKC Hospitals,
Inc. Project, MBIA insured,
7.75%, due 10/1/14,
prerefunded 10/01/97 at
102.......................... $ 407,492
1,225,000 Kentucky Economic Development
Finance Authority, Hospital
Facilities Revenue Bonds,
Society National Bank LOC,
5.75%, due 11/1/05........... 1,211,219
475,000 Kentucky Economic Development
Finance Authority, Hospital
Facilities Revenue Bonds,
Baptist Healthcare System
Project, MBIA insured, 5.00%,
due 8/15/24.................. 408,500
40,000 McCracken County, KY, Revenue
Bonds, Lourdes Hospital,
Inc., 6.00%, due 11/1/12,
prerefunded 11/1/96 at 100... 40,146
-------------
2,067,357
-------------
HOUSING REVENUE (6.6%):
725,000 Boone County, KY, Public
Properties Corporation
Revenue Bonds, Sewer System
Lease, 5.15%, due 12/1/12.... 667,000
270,000 Greater Kentucky Housing
Assistance Corporation,
Mortgage Revenue Bonds,
FHA/Section 8 Assisted
Project, Series A, MBIA/ FHA
insured, 6.25%, due 7/1/22... 270,337
100,000 Jefferson County, KY, Capital
Projects Corporation Revenue
Bonds, Series A, 0.00%
(5.747% effective yield), due
8/15/99...................... 86,750
-------------
1,024,087
-------------
</TABLE>
See notes to financial statements. 13 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
INDUSTRIAL DEVELOPMENT REVENUE (6.1%):
$ 750,000 Clark County, KY, Industrial
Building Revenue Bonds,
Southern Wood Project, 7.00%,
due 12/1/08+................. $ 746,250
200,000 Wickliffe, KY, Industrial
Building Revenue Bonds,
Westvaco Corporation Project,
7.00%, due 1/1/09............ 199,956
-------------
946,206
-------------
JAIL FACILITIES REVENUE (0.7%):
100,000 Kentucky Local Correctional
Facilities Construction
Authority Revenue Bonds,
7.00%, due 11/1/14,
prerefunded 11/1/97 at 102... 105,250
-------------
OTHER REVENUE (6.1%):
475,000 Kentucky Higher Education
Student Loan Corporation,
Insured Student Loan Revenue
Bonds, Series B, 6.40%, due
6/1/00....................... 503,500
300,000 Lexington-Fayette Urban County,
KY, Government Public
Facilities Corporation
Revenue Bonds, Recreation
Project, 7.90%, due 7/1/06,
prerefunded 7/1/97 at 102.... 315,480
120,000 Puerto Rico Public Buildings
Authority Guaranteed Revenue
Bonds, Series K, 6.875%, due
7/1/21, prerefunded 7/1/02 at
101.50....................... 134,400
-------------
953,380
-------------
POLLUTION CONTROL REVENUE (17.7%):
450,000 Ashland, KY, Pollution Control
Revenue Bonds, Ashland Oil,
7.375%, due 7/1/09........... 483,750
295,000 Ashland, KY, Solid Waste
Revenue Bonds, Ashland Oil,
Inc., Project, 7.20%, due
10/1/20...................... 310,488
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
POLLUTION CONTROL REVENUE, CONTINUED:
$ 235,000 Jefferson County, KY, Pollution
Control Revenue Bonds,
Louisville Gas & Electric
Company Project A, 7.45%, due
6/15/15...................... $ 255,269
100,000 Kentucky State Pollution
Abatement & Water Reserve
Finance Authority Revenue
Bonds, Series A, escrowed to
maturity, 7.40%, due
8/1/02....................... 112,875
50,000 Louisville & Jefferson County,
KY, Metropolitan Sewer
District, Sewer & Drain
System Revenue Bonds, Series
A, AMBAC insured, 6.50%, due
5/15/00...................... 52,938
455,000 Meade County, KY, Pollution
Control Revenue Bonds, Olin
Corporation Project, 6.00%,
due 7/1/07................... 457,707
385,000 Trimble County, KY, Pollution
Control Revenue Bonds, Series
A, 7.625%, due 11/1/20,
prerefunded 11/1/00 at 102... 430,719
600,000 Trimble County, KY, Pollution
Control Revenue Bonds, Series
A, 7.625%, due 11/1/20....... 659,250
-------------
2,762,996
-------------
TRANSPORTATION REVENUE (6.1%):
655,000 Kentucky State Turnpike
Authority Resource Recovery
Road Revenue Bonds, escrowed
to maturity, 6.125%, due
7/1/07....................... 674,650
275,000 Kentucky State Turnpike
Authority Resource Recovery
Road Revenue Bonds, Series A,
FGIC insured, 6.00%, due
7/1/09....................... 275,405
-------------
950,055
-------------
</TABLE>
See notes to financial statements. 14 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
UTILITIES REVENUE (1.5%):
$ 200,000 Owensboro, KY, Electric Light &
Power Revenue Bonds, Series
A, 10.25%, due 1/1/09,
prerefunded 1/1/00 at 102.... $ 232,250
-------------
Total Municipal Bonds
(cost $15,867,871)......................... 15,608,129
-------------
Total Investments (100.0%)
(cost $15,867,871)......................... $ 15,608,129
-------------
-------------
</TABLE>
+Securities that may be resold to
"qualified institutional buyers"
under rule 144a or securities offered
pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
These securities have been determined
to be liquid under guidelines
established by the Board of
Directors.
See notes to financial statements. 15 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
ASSET BACKED SECURITIES (0.4%):
$ 274,424 Federal Home Loan Mortgage
Corporation, 7.00%, due
4/1/97....................... $ 275,191
-------------
DISCOUNT NOTES--AGENCY (19.8%):
15,015,000 Federal Home Loan Mortgage
Corporation, 5.293% yield,
9/5/96....................... 15,010,662
-------------
FIXED RATE NOTES--AGENCY (4.2%):
100,000 Federal Home Loan Bank, 4.75%,
due 1/13/97.................. 99,641
100,000 Federal Home Loan Bank, 4.57%,
due 2/3/97................... 99,492
100,000 Federal Home Loan Bank, 4.80%,
due 7/24/97.................. 98,810
100,000 Federal Home Loan Mortgage
Corporation, 4.525%, due
1/27/97...................... 99,521
220,000 Federal Land Bank, 7.95%, due
10/21/96..................... 220,645
1,100,000 Federal National Mortgage
Association, 4.50%, due
11/1/96...................... 1,097,763
400,000 Tennessee Valley Authority,
8.25%, due 11/15/96.......... 401,897
230,000 Tennessee Valley Authority,
4.60%, due 12/15/96.......... 229,209
861,000 Tennessee Valley Authority,
6.00%, due 1/15/97........... 861,380
-------------
Total Fixed Rate Notes--Agency............... 3,208,358
-------------
FIXED RATE NOTES--CORPORATE (59.2%):
175,000 AT&T Capital Corporation,
7.66%, due 1/30/97........... 176,132
355,000 American Express Credit
Corporation, 7.875%, due
12/1/96...................... 356,681
1,128,000 American Express Credit
Corporation, 7.75%, due
3/1/97....................... 1,138,977
75,000 American General Finance
Corporation, 7.15%, due
5/15/97...................... 75,568
80,000 American Home Products
Corporation, 6.875%, due
4/15/97...................... 80,322
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 660,000 Associates Corporation of North
America, 7.50%, due
10/15/96..................... $ 661,211
215,000 Associates Corporation of North
America, 8.70%, due 1/1/97... 216,815
395,000 Associates Corporation of North
America, 6.875%, due
1/15/97...................... 396,372
50,000 Associates Corporation of North
America, 9.70%, due 5/1/97... 51,165
290,000 Associates Corporation of North
America, 8.625%, due
6/15/97...................... 295,124
1,520,000 Bankers Trust New York
Corporation, 7.25%, due
11/1/96...................... 1,523,248
190,000 Bausch & Lomb, Inc., 6.80%, due
12/12/96..................... 190,519
50,000 Baxter International, Inc.,
7.50%, due 5/1/97............ 50,470
985,000 CIGNA Corporation, 8.00%, due
9/1/96....................... 985,000
245,000 CIT Group Holdings, Inc.,
8.00%, due 1/13/97........... 246,744
90,000 CIT Group Holdings, Inc.,
8.75%, due 7/1/97............ 91,839
2,000,000 CSX Transportation, Inc.,
5.93%, due 6/1/97............ 1,999,743
75,000 Caterpillar Financial Services
Corporation, 9.125%, due
12/15/96..................... 75,642
230,000 The Chase Manhattan
Corporation, 7.875%, due
1/15/97...................... 231,566
150,000 Chrysler Financial Corporation,
4.99%, due 2/3/97............ 149,431
256,000 Citicorp, 8.75%, due 11/1/96... 257,153
450,000 Commercial Credit Company,
8.00%, due 9/1/96............ 450,000
250,000 Commercial Credit Company,
6.75%, due 1/15/97........... 250,765
500,000 Commercial Credit Company,
8.125%, due 3/1/97........... 506,313
</TABLE>
See notes to financial statements. 16 TRANS ADVISER FUNDS, INC.
<PAGE>
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 100,000 Discover Credit, 7.98%, due
4/7/97....................... $ 101,067
1,929,000 Dupont Corporation, 8.45%, due
10/15/96..................... 1,934,870
250,000 Fireman's Federal Mortgage,
8.25%, due 11/1/96........... 250,746
531,000 First Union Corporation,
8.125%, due 12/15/96......... 534,341
195,000 Ford Holdings, Inc., 9.25%, due
7/15/97...................... 199,794
503,000 Ford Motor Company, 7.875%, due
10/15/96..................... 504,104
1,007,000 Ford Motor Credit Company,
8.00%, due 10/1/96........... 1,008,560
324,000 Ford Motor Credit Company,
8.00%, due 12/1/96........... 325,584
450,000 Ford Motor Credit Company,
7.875%, due 1/15/97.......... 453,260
25,000 Ford Motor Credit Company,
5.625%, due 3/3/97........... 24,962
132,000 Ford Motor Credit Company,
6.80%, due 8/15/97........... 132,772
500,000 General Electric Capital
Corporation, 7.46%, due
9/30/96...................... 500,556
1,345,000 General Electric Capital
Corporation, 8.75%, due
11/26/96..................... 1,353,619
294,000 General Electric Capital
Corporation, 8.00%, due
2/1/97....................... 296,320
1,319,000 General Motors Acceptance
Corporation, 8.00%, due
10/1/96...................... 1,321,094
500,000 General Motors Acceptance
Corporation, 5.00%, due
1/27/97...................... 498,068
400,000 General Motors Acceptance
Corporation, 7.65%, due
2/4/97....................... 403,086
602,000 General Motors Corporation,
7.625%, due 2/15/97.......... 606,151
545,000 Hospital Corporation of
America, 9.00%, due
3/15/97...................... 553,258
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 130,000 Household Finance Corporation,
7.80%, due 11/1/96........... $ 130,423
70,000 ITT Corporation, 7.25%, due
11/15/96..................... 70,132
560,000 International Lease Finance
Corporation, 7.90%, due
10/1/96...................... 560,843
440,000 International Lease Finance
Corporation, 4.75%, due
1/15/97...................... 438,099
500,000 International Lease Finance
Corporation, 6.35%, due
1/15/97...................... 500,705
100,000 International Lease Finance
Corporation, 5.875%, due
2/1/97....................... 99,909
275,000 International Lease Finance
Corporation, 5.50%, due
4/1/97....................... 273,994
75,000 John Deere Capital, 4.625%, due
9/2/96....................... 75,000
90,000 Lehman Brothers Holdings, Inc.,
8.375%, due 4/1/97........... 91,155
247,000 MGM Grand Hotels Financial
Corporation, Defeased,
11.75%, due 5/1/97........... 260,637
200,000 MGM Grand Hotels Financial
Corporation, Defeased,
12.00%, due 5/1/97........... 217,831
45,000 Merck & Company, Inc., 6.00%,
due 1/15/97.................. 44,989
1,200,000 Morgan Stanley Group, Inc.,
7.32%, due 1/15/97........... 1,206,451
432,000 NationsBank Corporation, 8.50%
due 11/1/96.................. 433,784
250,000 New Zealand Government, 8.25%,
due 9/25/96.................. 250,355
100,000 Northern Illinois Gas, 5.50%,
due 2/1/97................... 99,836
700,000 Norwest Financial, Inc., 4.89%,
due 11/15/96................. 698,820
375,000 Norwest Financial, Inc., 7.10%,
due 11/15/96................. 375,857
130,000 Norwest Financial, Inc., 6.00%,
due 8/15/97.................. 129,701
</TABLE>
See notes to financial statements. 17 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 110,000 Oklahoma Gas & Electric
Company, 5.125%, due
1/1/97....................... $ 109,700
100,000 Paccar Financial Corporation,
5.12%, due 3/10/97........... 99,575
250,000 Pacific Gas & Electric Company,
4.87%, due 12/9/96........... 249,350
435,000 Pacific Northwest Bell
Telephone Company, 7.50%, due
12/1/96...................... 436,644
860,000 PepsiCo, Inc., 7.00%, due
11/15/96..................... 861,837
30,000 PepsiCo, Inc., 6.875%, due
5/15/97...................... 30,170
600,000 Pfizer, Inc., 7.125%, due
10/1/96...................... 600,583
834,000 Pfizer, Inc., 6.50%, due
2/1/97....................... 836,057
1,699,000 Philip Morris Companies, Inc.,
8.75%, due 12/1/96........... 1,710,606
1,335,000 Philip Morris Companies, Inc.,
7.50%, due 3/17/97........... 1,345,398
75,000 Philip Morris Companies, Inc.,
9.75%, due 5/1/97............ 76,750
260,000 Philip Morris Companies, Inc.,
8.75%, due 6/15/97........... 265,096
2,666,000 Public Service Electric & Gas
Company, 8.75%, due
11/1/96...................... 2,859,577
170,000 Public Service Electric & Gas
Company, 8.75%, due 2/1/97... 183,393
250,000 Quaker Oats Company, 8.85%, due
11/15/96..................... 251,257
660,000 Quebec Province, 8.74%, due
7/21/97...................... 673,232
300,000 Sara Lee Corporation, 5.05%,
due 2/18/97.................. 299,131
1,897,000 Sears Roebuck and Company,
9.00%, due 9/15/96........... 1,898,891
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 75,000 Security Pacific Corporation,
7.75%, due 12/1/96........... $ 75,310
50,000 Southern California Edison
Company, 5.90%, due
1/15/97...................... 50,042
100,000 Tambrands Inc., 4.65%, due
1/21/97...................... 99,479
325,000 Texaco Capital, 9.00%, due
11/15/96..................... 326,969
200,000 Travelers Group, Inc., 8.375%,
due 12/15/96................. 201,424
175,000 Travelers Group, Inc., 7.625%,
due 1/15/97.................. 175,983
2,160,000 U.S. West Capital Funding,
8.00%, due 10/15/96.......... 2,165,190
135,000 Union Electric Company, 5.50%,
due 3/1/97................... 134,794
365,000 Virginia Electric & Power
Company, 7.25%, due 3/1/97... 367,665
250,000 Wachovia Bank, 4.875%, due
2/18/97...................... 248,760
471,000 Wells Fargo & Company, 8.20%,
due 11/1/96.................. 472,623
445,000 World Book Financial, 8.125%,
due 9/1/96................... 445,000
-------------
Total Fixed Rate Notes--Corporate............ 44,968,019
-------------
REPURCHASE AGREEMENTS (16.4%):
12,472,423 The First Boston Corporation,
5.30%, due 9/3/96, to be
repurchased at 12,479,768
(collateralized by
$16,050,000 Federal National
Mortgage Association, pool
#339017, 6.092%, due
12/1/35)..................... 12,472,423
-------------
Total Repurchase Agreements.................. 12,472,423
-------------
Total Investments (100.0%)................... $ 75,934,653
-------------
-------------
</TABLE>
See notes to financial statements. 18 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1996
- - --------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE
AGGRESSIVE BOND KENTUCKY MONEY MARKET
GROWTH/VALUE FUND GROWTH FUND FUND TAX-FREE FUND FUND
----------------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value................... $ 15,024,572 $ 6,527,398 $ 13,695,005 $ 15,608,129 $ 75,934,653
Cash.................................... -- -- -- 1,798 --
Interest, dividends and other
receivables........................... 16,151 1,422 185,929 261,250 1,173,021
Receivable for fund shares issued....... 70,576 12,716 23,439 45,402 --
Organization costs, net of
amortization.......................... 25,935 25,935 25,935 25,935 25,935
----------------- -------------- --------------- ------------- -------------
Total assets.............................. 15,137,234 6,567,471 13,930,308 15,942,514 77,133,609
----------------- -------------- --------------- ------------- -------------
LIABILITIES:
Payable for securities purchased........ -- -- 487,264 -- 401,228
Payable for fund shares redeemed........ 1,515 1,165 7,000 -- --
Administration fee payable.............. 2,083 2,083 2,083 -- 9,429
Accrued expenses and other payables..... 25,971 14,309 7,064 23,251 49,226
Dividends payable....................... -- -- 70,005 78,774 310,879
----------------- -------------- --------------- ------------- -------------
Total liabilities......................... 29,569 17,557 573,416 102,025 770,762
----------------- -------------- --------------- ------------- -------------
NET ASSETS................................ $ 15,107,665 $ 6,549,914 $ 13,356,892 $ 15,840,489 $ 76,362,847
----------------- -------------- --------------- ------------- -------------
----------------- -------------- --------------- ------------- -------------
COMPONENTS OF NET ASSETS:
Capital paid in......................... $ 14,820,155 $ 6,473,696 $ 13,705,116 $ 16,217,070 $ 76,360,353
Undistributed net investment income
(distributions in excess)............. -- -- -- (114,051) --
Unrealized appreciation (depreciation).. 243,081 60,569 (332,831) (259,742) --
Accumulated net realized gain (loss).... 44,429 15,649 (15,393) (2,788) 2,494
----------------- -------------- --------------- ------------- -------------
NET ASSETS................................ $ 15,107,665 $ 6,549,914 $ 13,356,892 $ 15,840,489 $ 76,362,847
----------------- -------------- --------------- ------------- -------------
----------------- -------------- --------------- ------------- -------------
SHARES OUTSTANDING........................ 1,350,818 598,307 1,370,318 1,574,612 76,360,353
NET ASSET VALUE PER SHARE................. $ 11.18 $ 10.95 $ 9.75 $ 10.06 $ 1.00
OFFERING PRICE PER SHARE EXCEPT MONEY
MARKET FUND (NAV DIVIDED BY (1 -
4.50%))................................. $ 11.71 $ 11.47 $ 10.21 $ 10.53 $ 1.00
INVESTMENTS AT COST....................... $ 14,781,491 $ 6,466,829 $ 14,027,836 $ 15,867,871 $ 75,934,653
</TABLE>
See notes to financial statements. 19 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF OPERATIONS
PERIOD ENDED AUGUST 31, 1996 (1)
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
GROWTH/VALUE GROWTH BOND TAX-FREE MARKET
FUND FUND FUND FUND FUND
----------------- -------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................... $ 30,853 $ 13,762 $ 667,383 $ 843,000 $ 2,798,408
Dividend income........................... 78,497 7,604 -- -- --
----------------- -------------- --------------- ----------- ------------
Total income................................ 109,350 21,366 667,383 843,000 2,798,408
----------------- -------------- --------------- ----------- ------------
EXPENSES:
Advisory.................................. 81,961 31,177 38,478 63,051 99,711
Management................................ 22,916 22,917 22,917 23,644 74,783
Transfer agency........................... 28,121 27,644 25,552 33,235 23,393
Shareholder services...................... 20,490 7,794 24,049 39,407 124,638
Custody................................... 1,964 741 5,455 4,415 21,297
Accounting................................ 33,000 33,000 33,000 35,600 34,000
Legal..................................... 6,682 4,238 8,200 12,962 29,232
Registration.............................. 10,402 6,732 8,984 7,892 35,373
Audit..................................... 14,812 14,319 15,846 16,755 15,268
Amortization of organization costs........ 5,824 5,824 5,824 5,824 5,824
Trustees.................................. 716 196 1,251 1,532 5,351
Other..................................... 5,453 2,874 6,345 15,916 24,224
----------------- -------------- --------------- ----------- ------------
Total expenses.............................. 232,341 157,456 195,901 260,233 493,094
Expenses reimbursed and fees waived....... (72,244) (96,565) (130,304) (132,065) (168,154)
----------------- -------------- --------------- ----------- ------------
Net expenses................................ 160,097 60,891 65,597 128,168 324,940
----------------- -------------- --------------- ----------- ------------
NET INVESTMENT INCOME (LOSS).............. (50,747) (39,525) 601,786 714,832 2,473,468
----------------- -------------- --------------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENTS:
Net realized gain (loss) on investments... 89,352 43,284 (15,393) (2,788) 2,494
Net change in unrealized appreciation
(depreciation).......................... 243,081 60,569 (332,831) (259,742) --
----------------- -------------- --------------- ----------- ------------
Net realized and unrealized gain (loss) from
investments............................... 332,433 103,853 (348,224) (262,530) 2,494
----------------- -------------- --------------- ----------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS...... $ 281,686 $ 64,328 $ 253,562 $ 452,302 $ 2,475,962
----------------- -------------- --------------- ----------- ------------
----------------- -------------- --------------- ----------- ------------
Sept. 27, Sept. 29,
Sept. 29, 1995 Sept. 29, 1995 Oct. 3, 1995 1995 1995
(1) Date of commencement of operations
</TABLE>
See notes to financial statements. 20 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD ENDED AUGUST 31, 1996 (1)
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
GROWTH/VALUE GROWTH BOND TAX-FREE MARKET
FUND FUND FUND FUND FUND
----------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSETS--September 1, 1995.......... -- -- -- -- --
----------------- -------------- --------------- -------------- ---------------
OPERATIONS:
Net investment income (loss)......... $ (50,747) $ (39,525) $ 601,786 $ 714,832 $ 2,473,468
Net realized gain (loss) on
investments........................ 89,352 43,284 (15,393) (2,788) 2,494
Net change in unrealized appreciation
(depreciation)..................... 243,081 60,569 (332,831) (259,742) --
----------------- -------------- --------------- -------------- ---------------
281,686 64,328 253,562 452,302 2,475,962
----------------- -------------- --------------- -------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................ -- -- (601,786) (828,883) (2,473,468)
----------------- -------------- --------------- -------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares....................... 15,471,301 7,269,024 14,919,014 28,751,437 446,620,681
Reinvested dividends................. -- -- 13,886 559,139 84,304
Cost of shares repurchased........... (645,322) (783,438) (1,227,784) (13,093,506) (370,344,632)
----------------- -------------- --------------- -------------- ---------------
14,825,979 6,485,586 13,705,116 16,217,070 76,360,353
----------------- -------------- --------------- -------------- ---------------
NET ASSETS--August 31, 1996............ $ 15,107,665 $ 6,549,914 $ 13,356,892 $ 15,840,489 $ 76,362,847
----------------- -------------- --------------- -------------- ---------------
----------------- -------------- --------------- -------------- ---------------
Sept. 29, 1995 Sept. 29, 1995 Oct. 3, 1995 Sept. 27, 1995 Sept. 29, 1995
(1) Date of commencement of operations
</TABLE>
See notes to financial statements. 21 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Trans Adviser Funds, Inc. (the "Company") is an open-end management investment
company incorporated under the laws of the State of Maryland. The Company
currently consists of five operational non-diversified investment portfolios,
the Growth/Value Fund, the Aggressive Growth Fund, the Intermediate Bond Fund,
the Kentucky Tax-Free Fund, and the Money Market Fund (each a "Fund" and
collectively the "Funds"). The Funds, except for Money Market Fund, are offered
at Net Asset Value ("NAV") plus a sales charge, currently 4.50% of NAV. The
Money Market Fund is offered at NAV. The Funds commenced investment operations
on the following dates:
<TABLE>
<S> <C>
Growth/Value Fund September 29, 1995
Aggressive Growth Fund September 29, 1995
Intermediate Bond Fund October 3, 1995
Kentucky Tax-Free Fund September 27, 1995
Money Market Fund September 29, 1995
</TABLE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates and are expected to be immaterial to the net assets of the Funds.
SECURITY VALUATION-All securities held by the Money Market Fund are valued
utilizing the amortized cost method, which approximates market value, in
accordance with Rule 2a-7 under the Investment Company Act of 1940. Securities,
other than short-term, held by the other Funds (the "Bond and Equity Funds") for
which market quotations are readily available are valued using the last reported
sales price provided by independent pricing services. If no sales are reported,
the mean of the last bid and ask price is used. In the absence of readily
available market quotations, securities are valued at fair value as determined
by the Board of Directors. Securities with a maturity of 60 days or less held by
the Bond and Equity Funds are valued at amortized cost.
PREMIUM AMORTIZATION AND DISCOUNT ACCRETION-In all Funds other than the Kentucky
Tax-Free Fund, if a fixed income investment is purchased at a premium, the
premium is not amortized. The Kentucky Tax-Free Fund amortizes premium on fixed
income investments to the maturity (or first call) date using the yield to
maturity method. If a fixed income investment is purchased at a discount (other
than original issue discount), the discount is not accreted. Original issue
discount on fixed income investments is accreted daily using the yield to
maturity method.
INTEREST AND DIVIDEND INCOME AND DISTRIBUTIONS TO SHAREHOLDERS-Interest income
is accrued as earned. Dividends on securities held by the Funds are recorded on
the ex-dividend date. Distributions of net investment income are declared daily
and paid monthly for Money Market Fund, Kentucky Tax-Free Fund, and Intermediate
Bond Fund, and declared and paid annually for Growth/Value Fund and Aggressive
Growth Fund. Net capital gain, if any, is distributed at least annually.
Distributions from net investment income and realized capital gains are based on
their tax basis. The significant difference between financial statement amounts
available for distribution and distributions made in accordance with income tax
regulations are primarily attributable to the deferral of post-October losses
and wash sales.
ORGANIZATION COSTS-The costs incurred by the Funds in connection with their
organization, in amounts of $31,759 for each Fund, have been capitalized and are
being amortized using the straight-line method over a five year period beginning
on the commencement of each Fund's investment operations. Certain of these costs
were paid by Forum Financial Services, Inc. and have been reimbursed by the
respective Funds. Organization expenses are being amortized to operations over a
five-year period on a straight-line basis. In the event any of the initial
shares are redeemed by any
22 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
holder thereof during the five-year amortization period, redemption proceeds
will be reduced by any unamortized organization expenses in the same proportion
as the number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of redemption.
FEDERAL INCOME TAX-Each Fund intends to qualify as a regulated investment
company and distribute all of its taxable income. Therefore, no Federal income
tax provision is required.
OTHER-Realized gains and losses on investments sold are recorded on the basis of
identified cost. Security transactions are accounted for on a trade date basis.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser of the Funds is Trans Financial Bank, N.A. (the
"Adviser"). The Adviser receives an advisory fee from Growth/Value Fund and
Aggressive Growth Fund at an annual rate of 1.00% of the respective Fund's
average daily net assets. The Adviser receives an advisory fee from Intermediate
Bond Fund and Kentucky Tax-Free Fund at an annual rate of 0.40% of the
respective Fund's average daily net assets. The Adviser receives an advisory fee
from Money Market Fund at an annual rate of 0.20% of the Fund's average daily
net assets. Pursuant to an agreement between the Adviser and Mastrapasqua and
Associates, Inc. ("M&A") (the "Sub-Adviser"), the Adviser may delegate certain
of its advisory responsibilities to the Sub-Adviser. For its services, M&A is
paid by the Adviser as follows: with respect to the Aggressive Growth and the
Growth/Value Funds, the Adviser (not the Fund) pays to M&A an annual fee,
calculated daily and paid monthly, of .50% on the first $100 million of such
Funds' combined average daily net assets plus .25% of such Funds' combined
average daily net assets in excess of $100 million for its services, and, with
respect to each other Trans Adviser Fund, the Adviser (not the Fund) pays M&A an
annual fee, calculated daily and paid monthly, of .03% of average daily net
assets for its services.
The Adviser has agreed to reimburse each Fund for certain operating expenses
(exclusive of interest, taxes, brokerage fees, fees and other expenses paid
pursuant to any distribution plan and organization expenses, all to the extent
permitted by applicable state law or regulation) which in any year exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. Each Fund's annual expenses are estimated and accrued daily, and any
related reimbursements are made monthly by the Adviser.
The administrator of the Company is Forum Financial Services, Inc. ("Forum"), a
registered broker-dealer and a member of the National Association of Securities
Dealers, Inc. For its administrative services Forum receives a fee for each Fund
equal to the greater of $25,000 per year or 0.15% of the annual average daily
net assets of each Fund. Forum also acts as the Company's distributor pursuant
to a separate Distribution Agreement with the Company. Forum receives no
compensation under that agreement. In addition, certain legal expenses were
charged to the Company by Forum amounting to $18,053.
Forum Financial Corp. ("FFC"), an affiliate of Forum, serves as the Company's
transfer agent and dividend disbursing agent, and for those services receives an
annual fee of $12,000 per year for each Fund, an annual shareholder account fee
of $25 per shareholder, additional class charges, and out of pocket expenses
billed at cost. The Company has adopted a shareholder service plan under which
the Company pays Forum a shareholder servicing fee at an annual rate of 0.25% of
the daily net assets of each Fund. Forum may pay any or all amounts of these
payments to various institutions which provide shareholder servicing to their
customers. FFC also serves as the Company's fund accountant and is compensated
for those services at an amount of $36,000 per year per Fund plus certain
amounts based upon the number and types of portfolio transactions within each
Fund.
23 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
For the period ended August 31, 1996, fees waived and expenses reimbursed were
as follows:
<TABLE>
<CAPTION>
EXPENSES EXPENSES EXPENSES
VOLUNTARILY VOLUNTARILY VOLUNTARILY
WAIVED BY WAIVED BY REIMBURSED BY
FORUM THE ADVISER THE ADVISER
----------- ----------- --------------
<S> <C> <C> <C>
Growth/Value Fund.......................................... $ 543 $ 34,323 $ 37,378
Aggressive Growth Fund..................................... 288 31,178 65,099
Intermediate Bond Fund..................................... 178 38,478 91,648
Kentucky Tax-Free Fund..................................... 11,185 63,051 57,829
Money Market Fund.......................................... 2,071 93,026 73,057
</TABLE>
NOTE 4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales (including maturities) of securities
(excluding short-term investments) during the period ended August 31, 1996 were
as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
------------------ ---------------------
<S> <C> <C>
Growth/Value Fund......................................... $ 15,678,024 $ 1,713,849
Aggressive Growth Fund.................................... 6,815,109 465,088
Intermediate Bond Fund.................................... 12,911,112 965,841
Kentucky Tax-Free Fund.................................... 38,298,203 23,002,307
</TABLE>
The cost of investments for federal income tax purposes is the same as for
financial reporting purposes. Unrealized appreciation and depreciation as of
August 31, 1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED APPRECIATION UNREALIZED DEPRECIATION
----------------------- -----------------------
<S> <C> <C>
Growth/Value Fund.................................. $ 1,166,837 $ 923,756
Aggressive Growth Fund............................. 661,156 600,587
Intermediate Bond Fund............................. 13,166 345,997
Kentucky Tax-Free Fund............................. 25,840 285,582
</TABLE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions of Fund shares for the period ended August 31, 1996 are summarized
in the following table:
<TABLE>
<CAPTION>
GROWTH/VALUE AGGRESSIVE INTERMEDIATE KENTUCKY TAX- MONEY MARKET
FUND GROWTH FUND BOND FUND FREE FUND FUND
------------- ------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Sale of Shares......... 1,408,416 668,440 1,491,710 2,814,888 446,620,681
Shares Issued on
Reinvested
Dividends............. -- -- 1,404 57,538 84,304
Shares Repurchased..... 57,598 70,133 122,796 1,297,814 370,344,632
------------- ------------- ------------ -------------- --------------
Net Increase........... 1,350,818 598,307 1,370,318 1,574,612 76,360,353
------------- ------------- ------------ -------------- --------------
------------- ------------- ------------ -------------- --------------
</TABLE>
NOTE 6. CONCENTRATION OF CREDIT RISK
The Kentucky Tax-Free Fund invests substantially all of its assets in debt
obligations of issuers located in the state of Kentucky. The issuers' abilities
to meet their obligations may be affected by Kentucky economic or political
developments.
24 TRANS ADVISER FUNDS, INC.
<PAGE>
FINANCIAL HIGHLIGHTS
PERIOD ENDED AUGUST 31, 1996 (a)
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED PER SHARE DATA AND AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
RATIOS FOR A SHARE OUTSTANDING GROWTH/VALUE GROWTH BOND TAX-FREE MARKET
THROUGHOUT THE PERIOD FUND FUND FUND FUND FUND
----------------- --------------- ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value Per
Share....................... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 1.00
------- ------- ------- ------------ -----------
Net Investment Income
(Loss)(c)................... (0.06) (0.11) 0.57 0.51 0.05
Net Realized and Unrealized
Gain/(Loss) on
Investments................. 1.24 1.06 (0.25) 0.06 --
Distributions from Net
Investment Income........... -- -- (0.57) (0.51) (0.05)
------- ------- ------- ------------ -----------
Ending Net Asset Value Per
Share....................... $ 11.18 $ 10.95 $ 9.75 $ 10.06 $ 1.00
------- ------- ------- ------------ -----------
------- ------- ------- ------------ -----------
Ratios to Average Net Assets:
Expenses(b)(e).............. 1.95% 1.95% 0.68% 0.82% 0.65%
Net Investment Income
(Loss)(e)................. (0.62)% (1.26)% 6.31% 5.30% 4.94%
Total Return (f).............. 11.80% 9.50% 3.23% 5.80% 4.70%
Portfolio Turnover Rate....... 21.12% 15.70% 12.38% 145.12% N/A
Average Commission Rate....... 0.07(d) 0.08(d) N/A N/A N/A
Net Assets at End of Period
(000's omitted)............. $15,108 $6,550 $13,357 $15,840 $76,363
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) Date of commencement of Sept. 29, 1995 Sept. 29, 1995 Oct. 3, 1995 Sept. 27, 1995 Sept. 29, 1995
operations
</TABLE>
(b) During the period, various fees and expenses were waived and reimbursed. Had
such waiver and reimbursement not occurred, the ratio of expenses to average
net assets would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
2.83 % 5.05 % 2.04 % 1.65 % 0.99 %
</TABLE>
(c) Calculated using weighted average shares outstanding for the period.
(d) Amount represents the average commission per share paid to brokers on the
purchase or sale of equity securities.
(e) Annualized.
(f) Excludes applicable sales charge.
- - ----------------------------------------------------------------------------
Federal Tax Status of Dividends Declared (unaudited)
None of the Funds paid long-term capital gain dividends during the period. All
dividends declared by the Funds were distributions of ordinary income. None of
these dividends qualify for the corporate dividend received deduction from
Federal income tax. The amount of the dividends per share declared by the
Kentucky Tax-Free Fund that is exempt from Federal taxes follows.
Sep-95 $0.0086
Oct-95 0.0430
Nov-95 0.0344
Dec-95 0.0430
Jan-96 0.0430
Feb-96 0.0344
Mar-96 0.0430
Apr-96 0.0344
May-96 0.0430
Jun-96 0.0344
Jul-96 0.0344
Aug-96 0.0430
------
$0.4386
------
------
See notes to financial statements. 25 TRANS ADVISER FUNDS, INC.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Trans Adviser Funds, Inc.
We have audited the accompanying statements of assets and liabilities of
Growth/Value Fund, Aggressive Growth Fund, Intermediate Bond Fund, Kentucky
Tax-Free Fund, and Money Market Fund, portfolios of Trans Adviser Funds, Inc.
(the Funds), including the schedules of investments, as of August 31, 1996, and
the related statements of operations, statements of changes in net assets and
financial highlights for the periods presented on pages 20, 21 and 25,
respectively. These financial statements and financial highlights are the
responsibility of the Funds' 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
August 31, 1996 by correspondence with the custodian 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
Growth/Value Fund, Aggressive Growth Fund, Intermediate Bond Fund, Kentucky
Tax-Free Fund, and Money Market Fund, as of August 31, 1996, and the results of
their operations, the changes in their net assets and financial highlights for
the periods presented on pages 20, 21 and 25, respectively, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
October 18, 1996
<PAGE>
April 11, 1997
Dear Shareholder:
We are pleased to present the report on the operations of the Trans Adviser
Funds, Inc. during the semi-annual period ended February 28, 1997. This report
covers the five Funds: Aggressive Growth, Growth/Value, Intermediate Bond,
Kentucky Tax-Free, and Money Market Funds.
During the period, the stock market, as measured by the S&P 500 Index, rose
21.30%. Because the Index is weighted by the market capitalization of the
issuers comprising the Index, the stock of the fifty largest issuers accounts
for approximately 50% of the performance of the entire Index. Investments in
popular index funds have supported the stock prices of this relatively small
group of issuers, even though many observers have noted that it is primarily the
prices of these companies' stocks that exceed normal valuation parameters. We
are therefore pleased with the total return of 21.34% the Growth/Value Fund and
15.27% for the Aggressive Growth Fund, even though they did not surpass the S&P
benchmark. In our view, by investing in quality companies with strong
fundamentals such as low relative price-to-earnings ratios these Funds are
poised to take advantage of economic data and company results that meet or
exceed the market's current bearish expectations.
The bond market during the last six months has continued to exhibit yield and
price volatility. During this period, the Trans Adviser Intermediate Bond Fund
had a total return of 4.40%. By comparison, the Merrill Lynch Taxable Bond Index
had a total return of 4.12%. The Kentucky Tax-Free Fund's return was 4.45% as
compared to the 4.46% average total return of the funds in the Morningstar
National Municipal Bond category. The Kentucky Tax-Free Fund has also maintained
a relatively stable net asset value despite the movement in interest rates
during this period. On the whole, we continue to believe that superior returns
in the bond markets can be achieved through an actively-managed relative value
approach that seeks out inefficiencies in the market.
During this period, investments in the Money Market Fund grew to over $100
million. The Fund continues to offer a highly diversified and convenient vehicle
for cash management.
We take great pride in the accomplishments of the Trans Adviser Funds during
their first eighteen months of operations. The Funds' continued growth has
confirmed our original vision that there is a broad-based appeal for funds
managed locally that employ our investment style and experience. We are
confident that the Funds will enjoy continued growth as word of our investment
approach and capabilities spreads to a broader network of investors.
If you have any questions or would like additional information about the Trans
Adviser Funds, please call 800-811-8258. Thank you once again for choosing to
invest with the Trans Adviser Funds.
THOMAS A. TRANTUM
THOMAS A. TRANTUM
President
<PAGE>
GROWTH/VALUE FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
COMMON STOCKS (98.8%)
AMUSEMENT & RECREATION SERVICES (1.7%)
10,000 Promus Hotel Corp.(a)............ $ 353,751
-------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE STATIONS (0.9%)
7,500 Autozone, Inc.(a)................ 185,625
-------------
BUSINESS SERVICES (8.0%)
20,000 ADT Ltd.(a)...................... 435,000
15,000 Oracle Systems Corp.(a).......... 588,750
20,000 Sun Microsystems, Inc.(a)........ 617,500
-------------
1,641,250
-------------
CHEMICALS & ALLIED PRODUCTS (8.9%)
4,000 Bristol-Myers Squibb Co. ........ 522,000
6,000 Merck & Co., Inc. ............... 552,000
10,000 Schering-Plough Corp. ........... 766,250
-------------
1,840,250
-------------
DEPOSITORY INSTITUTIONS (7.8%)
12,000 Carolina First Corp. ............ 213,000
5,000 Chase Manhattan Corp. ........... 500,625
22,500 MBNA Corp. ...................... 720,000
4,000 Union Planters Corp. ............ 179,000
-------------
1,612,625
-------------
EATING & DRINKING PLACES (2.1%)
10,000 Host Marriott Corp.(a)........... 180,000
4,000 Quality Dining, Inc.(a).......... 46,500
25,000 Shoney's, Inc.(a)................ 206,250
-------------
432,750
-------------
ELECTRIC, GAS, & SANITARY SERVICES (2.2%)
10,000 Sonat, Inc. ..................... 460,000
-------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT
COMPUTER EQUIPMENT (2.0%)
5,000 Novellus Systems, Inc.(a)........ 408,750
-------------
FOOD STORES (1.9%)
7,500 Kroger Co.(a).................... 397,500
-------------
GENERAL MERCHANDISE STORES (1.6%)
6,000 Sears Roebuck and Co. ........... 325,500
-------------
HEALTH SERVICES (9.3%)
20,000 Beverly Enterprises, Inc.(a)..... 287,500
5,000 Health Management Associates,
Inc.(a)........................ 132,500
2,345 Healthsouth Rehabilitation
Corp.(a)....................... 94,386
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
HEALTH SERVICES, CONTINUED
10,000 Living Centers of America,
Inc.(a)........................ $ 318,750
5,000 Quorum Health Group, Inc.(a)..... 156,875
15,000 Tenet Healthcare Corp.(a)........ 406,875
15,000 Vencor, Inc.(a).................. 519,375
-------------
1,916,261
-------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT
(13.2%)
7,500 Baker Hughes, Inc. .............. 266,250
6,000 IBM Corp. ....................... 862,500
13,000 Lam Research Corp.(a)............ 495,625
10,000 Qlogic Corp.(a).................. 202,500
15,000 Western Digital Corp.(a)......... 885,000
-------------
2,711,875
-------------
INSURANCE CARRIERS (3.9%)
5,000 Ace, Ltd. ....................... 325,000
4,000 American International Group,
Inc. .......................... 484,000
-------------
809,000
-------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (4.4%)
10,000 Baxter International, Inc. ...... 460,000
7,500 Input/Output Inc.(a)............. 160,312
10,000 Tech-Sym Corp.(a)................ 295,000
-------------
915,312
-------------
MISCELLANEOUS RETAIL (3.3%)
10,000 CVS Corp. ....................... 462,500
6,000 Friedman's, Inc. Class A(a)...... 90,750
10,000 OfficeMax, Inc.(a)............... 120,000
-------------
673,250
-------------
MOTION PICTURES (0.5%)
1,500 The Walt Disney Co. ............. 111,375
-------------
NONDEPOSITORY CREDIT INSTITUTIONS (2.9%)
12,500 Capital One Financial Corp. ..... 496,875
10,000 Olympic Financial, Ltd.(a)....... 110,000
-------------
606,875
-------------
OIL & GAS EXTRACTION (6.4%)
12,000 Nuevo Energy Co.(a).............. 498,000
6,500 Pride Petroleum Services,
Inc.(a)........................ 108,875
4,000 Schlumberger, Ltd. .............. 402,500
5,000 Seagull Energy Corp.(a).......... 91,875
</TABLE>
See Notes to Schedule of Investments. 2 TRANS ADVISER FUNDS, INC.
<PAGE>
GROWTH/VALUE FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
OIL & GAS EXTRACTION, CONTINUED
10,000 Stone Energy Corp.(a)............ $ 220,000
-------------
1,321,250
-------------
PHARMECEUTICAL PREPARATIONS (4.0%)
8,000 American Home Products Corp. .... 512,000
5,000 Teva Pharmaceutical ADR.......... 309,062
-------------
821,062
-------------
PROFESSIONAL SERVICES (0.9%)
10,000 SCB Computer Technology,
Inc.(a)........................ 180,000
-------------
WATER TRANSPORTATION (2.1%)
10,000 Tidewater, Inc. ................. 430,000
-------------
WHOLESALE TRADE--DURABLE GOODS (7.2%)
6,000 Arrow Electronics Inc.(a)........ 336,750
4,000 Avnet, Inc. ..................... 250,000
5,000 Lockheed Martin Corp. ........... 442,500
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
WHOLESALE TRADE--DURABLE GOODS, CONTINUED
15,000 Sybron International Corp.-
Wisconsin(a)................... $ 446,250
-------------
1,475,500
-------------
WHOLESALE TRADE--NONDURABLE GOODS (3.6%)
10,000 AmeriSource Health Corp. ........ 503,750
5,000 Safeway, Inc.(a)................. 240,625
-------------
744,375
-------------
Total Common Stocks
(cost $16,904,586)........................... 20,374,136
-------------
SHORT-TERM HOLDINGS (1.2%)
254,744 Forum Daily Assets Treasury Fund
(cost $254,744)................ 254,744
-------------
Total Investments (100.0%)
(cost $17,159,330)(c)...................... $ 20,628,880
-------------
-------------
</TABLE>
See Notes to Schedule of Investments. 3 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
COMMON STOCKS (95.7%)
AMUSEMENT & RECREATION SERVICES (1.9%)
5,000 Promus Hotel Corp.(a)............. $ 176,875
------------
BUSINESS SERVICES (7.8%)
10,000 ADT Ltd.(a)....................... 217,500
7,500 Oracle Systems Corp.(a)........... 294,375
7,000 Sun Microsystems, Inc.(a)......... 216,125
------------
728,000
------------
DEPOSITORY INSTITUTIONS (2.3%)
12,000 Carolina First Corp. ............. 213,000
------------
EATING & DRINKING PLACES (2.5%)
6,000 Quality Dining, Inc.(a)........... 69,750
20,000 Shoney's, Inc.(a)................. 165,000
------------
234,750
------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT
COMPUTER EQUIPMENT (6.1%)
4,000 Novellus Systems, Inc.(a)......... 327,000
15,000 Symmetricom, Inc.(a).............. 241,875
------------
568,875
------------
FOOD STORES (3.7%)
3,500 Kroger Co.(a)..................... 185,500
10,000 Ruddick Corp. .................... 160,000
------------
345,500
------------
GENERAL MERCHANDISE STORES (0.9%)
2,500 Consolidated Stores Corp.(a)...... 87,812
------------
HEALTH SERVICES (15.7%)
5,000 Health Management Associates,
Inc.(a)......................... 132,500
5,000 HealthCare COMPARE Corp.(a)....... 213,438
7,500 Living Centers of America,
Inc.(a)......................... 239,063
15,000 NABI, Inc.(a)..................... 144,375
15,000 Paracelsus Healthcare Corp.(a).... 71,250
2,000 Quorum Health Group, Inc.(a)...... 62,750
10,000 Tenet Healthcare Corp.(a)......... 271,251
10,000 Vencor, Inc.(a)................... 346,250
------------
1,480,877
------------
HOME FURNITURE, FURNISHINGS, & EQUIPMENT STORES (0.6%)
5,000 Movie Gallery, Inc.(a)............ 53,750
------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT
(17.1%)
10,000 Lam Research Corp.(a)............. $ 381,250
10,000 Qlogic Corp.(a)................... 202,500
15,000 Smart Modular Technologies(a)..... 436,875
10,000 Western Digital Corp.(a).......... 590,000
------------
1,610,625
------------
INDUSTRY ELECTRONICS & ELECTRICAL EQUIPMENT (2.5%)
12,000 Semtech Corp.(a).................. 238,500
------------
INSURANCE CARRIERS (2.8%)
4,000 Ace, Ltd. ........................ 260,000
------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (1.9%)
6,000 Tech-Sym Corp.(a)................. 177,000
------------
MISCELLANEOUS RETAIL (2.2%)
2,500 CVS Corp. ........................ 115,625
6,000 Friedman's, Inc. Class A(a)....... 90,750
------------
206,375
------------
NONDEPOSITORY CREDIT INSTITUTIONS (3.7%)
6,000 Capital One Financial Corp. ...... 238,500
10,000 Olympic Financial, Ltd.(a)........ 110,000
------------
348,500
------------
OIL & GAS EXTRACTION (11.8%)
12,500 GeoScience Corp.(a)............... 162,500
9,000 Nuevo Energy Co.(a)............... 373,500
15,000 Pride Petroleum Services,
Inc.(a)......................... 251,250
5,000 Seagull Energy Corp.(a)........... 91,875
5,000 St. Mary Land & Exploration
Co. ............................ 121,875
5,000 Stone Energy Corp.(a)............. 110,000
------------
1,111,000
------------
PROFESSIONAL SERVICES (2.1%)
11,000 SCB Computer Technology,
Inc.(a)......................... 198,000
------------
TRANSPORTATION SERVICES (1.8%)
10,000 Simon Transportation
Services(a)..................... 170,000
------------
WATER TRANSPORTATION (2.7%)
6,000 Tidewater, Inc. .................. 258,000
------------
WHOLESALE TRADE-DURABLE GOODS (1.6%)
5,000 Sybron International Corp.-
Wisconsin(a).................... 148,750
------------
</TABLE>
See Notes to Schedule of Investments. 4 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
WHOLESALE TRADE-NONDURABLE GOODS (4.0%)
7,500 AmeriSource Health Corp.(a)....... $ 377,812
------------
Total Common Stocks (cost $7,716,134)......... 8,994,001
------------
SHORT-TERM HOLDINGS (4.3%)
399,257 Forum Daily Assets Treasury Fund
(cost $399,257)................. 399,257
------------
Total Investments (100.0%)
(cost $8,115,391)(c)........................ $ 9,393,258
------------
------------
</TABLE>
See Notes to Schedule of Investments. 5 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
ASSET BACKED SECURITIES (0.6%)
$ 90,434 SBA, Series 87-A, 8.45%, due
1/1/07 (cost $93,599)........ $ 92,490
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS (6.7%)
260,070 FHLMC, Series 1072, Class G,
7.00%, due 5/15/06........... 261,833
800,000 FHLMC, Series 1720, Class E,
7.50%, due 12/15/09.......... 809,438
-------------
Total Collateralized Mortgage Obligations
(cost $1,088,246).......................... 1,071,271
-------------
CORPORATE BONDS (52.4%)
686,000 Alabama Power, 8.30%, due
7/1/22....................... 694,923
100,000 Anheuser Busch Cos., 7.00%, due
5/30/00...................... 100,211
400,000 Anheuser Busch Cos., 7.00%, due
9/1/05....................... 399,210
278,000 Anheuser Busch Cos., 8.75%, due
12/1/99...................... 293,062
169,000 Associates Corp. of North
America, 6.00%, due
3/15/00...................... 166,307
50,000 Berkley W.R. Corp., 9.875%, due
5/15/08...................... 58,974
250,000 British Petroleum America,
Inc., 6.50%, due 12/15/99.... 248,942
215,000 Chase Manhatten Corp., 8.00%,
due 5/15/04.................. 219,689
140,000 Commonwealth Edison Co., 9.50%,
due 5/1/16................... 146,709
150,000 Consumers Power, 6.875%, due
5/1/98....................... 150,133
191,000 Dayton Hudson Corp., 9.875%,
due 6/17/97.................. 202,411
150,000 Deere & Co., 8.95%, due
6/15/19...................... 164,844
160,000 Florida Power & Light Co.,
8.00%, due 8/25/22........... 160,673
100,000 Ford Motor Credit Co., 5.83%,
due 6/29/98.................. 99,591
172,000 Ford Motor Credit Co., 6.85%,
due 8/15/00.................. 173,301
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE BONDS, CONTINUED
$ 160,000 Ford Motor Credit Co., 7.50%,
due 1/15/03.................. $ 164,229
160,000 GTE of Southeast Corp., 8.00%,
due 12/1/01.................. 161,924
130,000 General Electric Capital Corp.,
6.66%, due 5/1/18............ 130,240
69,000 Georgia Power Co., First
Mortgage Bonds, 7.95%, due
2/1/23....................... 69,401
250,000 Greyhound Financial Corp.,
7.82%, due 1/27/03........... 258,036
250,000 IBM Credit Corp., 6.20%, due
3/19/01...................... 245,254
300,000 Inco, Ltd., 9.60%, due
6/15/22...................... 327,139
120,000 Jersey Central Power & Light
Co., 9.20%, due 7/1/21....... 131,171
46,000 Kaiser Permanente, 9.55%, due
7/15/05...................... 53,336
56,000 Kraft, Inc., 8.50%, due
2/15/17...................... 58,367
200,000 Michigan Bell Telephone Co.,
6.375%, due 2/1/05........... 193,489
175,000 Pacific Gas & Electric Co.,
6.625%, due 6/1/00........... 173,491
439,000 Pennsylvania Power & Light Co.,
9.25%, due 10/1/19........... 477,390
165,000 Questar Pipeline, 9.375%, due
6/1/21....................... 184,082
70,000 Rohm & Haas Co., 9.80%, due
4/15/20...................... 84,824
675,000 Shopko Stores, 9.25%, due
3/15/22...................... 650,830
200,000 Southern California Edison,
7.375%, due 12/15/03......... 200,864
85,000 Southwestern Public Service
Co., 8.20%, due 12/1/22...... 89,562
40,000 Super Value Store, 8.875%, due
4/1/16....................... 40,631
192,000 TJX Cos. Inc., 9.50%, due
5/1/16....................... 195,740
250,000 Trans Financial Bancorp, 7.25%,
due 9/15/03.................. 242,072
68,000 U.S. Leasing Int'l, 6.625%, due
5/15/03...................... 66,858
</TABLE>
See Notes to Schedule of Investments. 6 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE BONDS, CONTINUED
$ 130,000 Union Electric Co., 8.00%, due
12/15/22..................... $ 133,404
500,000 Union Oil of California Corp.,
6.70%, due 10/15/07.......... 480,406
200,000 V.F. Corp., 7.60%, due 4/1/04.. 204,744
65,000 Wisconsin Electric Power,
7.75%, due 1/15/23........... 65,473
-------------
Total Corporate Bonds
(cost $8,515,941).......................... 8,361,937
-------------
GOVERNMENT AGENCY NOTES (6.2%)
500,000 FHLB, 6.62%, due 12/6/00....... 497,854
150,000 FNMA, 6.17%, due 12/2/03....... 144,653
265,000 TVA, 6.875%, due 1/15/02....... 266,217
50,000 TVA, 6.875%, due 8/1/02........ 50,132
30,000 TVA, 8.05%, due 7/15/24........ 29,844
-------------
Government Agency Notes
(cost $998,362)............................ 988,700
-------------
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
REPURCHASE AGREEMENTS (12.2%)
$ 1,955,394 The First Boston Corp., 5.38%,
due 3/3/97, to be repurchased
at $1,955,686 (cost
$1,955,394)(d)............... $ 1,955,394
-------------
TREASURY NOTES (21.9%)
3,500,000 U.S. Treasury Notes, 6.50%, due
8/15/05 (cost $3,553,437).... 3,490,151
-------------
SHORT-TERM HOLDINGS (0.0%)
5,006 1784 U.S. Treasury Money Market
Fund (cost $5,006)........... 5,006
-------------
Total Investments (100.0%)
(cost $16,209,985)(c)...................... $ 15,964,949
-------------
-------------
</TABLE>
See Notes to Schedule of Investments. 7 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
MUNICIPAL BONDS (96.0%)
AIRPORT REVENUE (0.5%)
$ 50,000 Lexington-Fayette Urban County
Airport Corp., KY, First
Mortgage Revenue Bonds,
7.75%, due 4/1/08............ $ 53,562
-------------
ECONOMIC DEVELOPMENT REVENUE (11.5%)
100,000 Covington, KY, Municipal
Properties Corp. Revenue
Bonds, Series A, 8.25%, due
8/1/10, prerefunded 8/1/98 at
103.......................... 108,750
455,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #51, escrowed
to maturity, 6.30%, due
8/1/01....................... 487,418
70,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #32, 6.50%,
due 12/1/99.................. 73,762
200,000 Kentucky State Turnpike
Authority, Economic
Development Revenue Bonds,
7.25%, due 5/15/10,
prerefunded 5/15/00 at
101.50....................... 220,000
425,000 Kentucky State Turnpike
Authority Economic
Development Revenue Bonds,
Revitalization Projects,
escrowed to maturity, 7.00%,
due 5/15/99.................. 450,500
-------------
1,340,430
-------------
EDUCATION FACILITIES REVENUE (18.9%)
200,000 Hopkins County, KY, School
District Finance Corp.,
School Building Revenue
Bonds, 5.70%, due 6/1/06..... 209,250
495,000 Jefferson County, KY, School
District Finance Corp.,
School Building Revenue
Bonds, Series A, 4.875%, due
1/1/11....................... 464,062
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
EDUCATION FACILITIES REVENUE, CONTINUED
$ 750,000 Jefferson County, KY, School
District Finance Corp. School
Building Revenue Bonds,
Series A, MBIA insured,
5.00%, due 2/1/07............ $ 753,750
475,000 Kentucky Higher Education
Student Loan Corp., Insured
Student Loan Revenue Bonds,
Series B, 6.40%, due
6/1/00....................... 499,937
70,000 Lexington-Fayette Urban County
Government, KY, School
Buildings Revenue Bonds,
6.80%, due 10/1/01........... 76,563
200,000 University of Louisville, KY,
Revenue Bonds, Series H,
5.875%, due 5/1/12........... 206,000
-------------
2,209,562
-------------
GENERAL OBLIGATIONS--BOND BANK (2.5%)
305,000 Fern Creek, KY, Fire Protection
District, Holding Co., Inc.,
Revenue Bonds, Fire Station
#2, 5.75%, due 1/15/14....... 295,850
-------------
HEALTH CARE REVENUE (10.6%)
1,225,000 Kentucky Economic Development
Finance Authority, Hospital
Facilities Revenue Bonds,
Society National Bank LOC,
5.75%, due 11/1/05........... 1,241,844
-------------
HOUSING REVENUE (9.0%)
725,000 Boone County, KY, Public
Properties Corp. Revenue
Bonds, Sewer System Lease,
5.15%, due 12/1/12........... 695,094
270,000 Greater Kentucky Housing
Assistance Corp., Mortgage
Revenue Bonds, FHA/Section 8
Assisted Project, Series A,
MBIA/ FHA insured, 6.25%, due
7/1/22....................... 272,364
</TABLE>
See Notes to Schedule of Investments. 8 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
HOUSING REVENUE, CONTINUED
$ 100,000 Jefferson County, KY, Capital
Projects Corp. Revenue Bonds,
0.00% (5.75% effective
yield), due 8/15/99.......... $ 89,375
-------------
1,056,833
-------------
INDUSTRIAL DEVELOPMENT REVENUE (6.4%)
750,000 Clark County, KY, Industrial
Building Revenue Bonds,
Southern Wood Project, 7.00%,
due 12/1/08.................. 753,750
-------------
LEASING REVENUE (5.4%)
490,000 Jefferson County, KY, Capital
Projects Corp. Revenue Bonds,
5.65%, due 8/15/03........... 517,563
100,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #52, 6.50%,
due 8/1/11, Prerefunded
8/1/01 at 102................ 110,000
-------------
627,563
-------------
OTHER REVENUE (1.2%)
120,000 Puerto Rico Public Buildings
Authority Guaranteed Revenue
Bonds, Series K, 6.875%, due
7/1/21, prerefunded 7/1/02 at
101.50....................... 135,750
-------------
POLLUTION CONTROL REVENUE (19.8%)
450,000 Ashland, KY, PCR Bonds, Ashland
Oil, 7.375%, due 7/1/09...... 486,000
295,000 Ashland, KY, Solid Waste
Revenue Bonds, Ashland Oil,
Inc., Project, 7.20%, due
10/1/20...................... 314,913
235,000 Jefferson County, KY, PCR
Bonds, Louisville Gas &
Electric Co. Project A,
7.45%, due 6/15/15........... 256,150
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
POLLUTION CONTROL REVENUE, CONTINUED
$ 100,000 Kentucky State Pollution
Abatement & Water Reserve
Finance Authority Revenue
Bonds, Series A, escrowed to
maturity, 7.40%, due
8/1/02....................... $ 113,750
50,000 Louisville & Jefferson County,
KY, Metropolitan Sewer
District, Sewer & Drain
System Revenue Bonds Series
A, AMBAC insured, 6.50%, due
5/15/00...................... 53,250
385,000 Trimble County, KY, PCR Bonds,
7.625%, due 11/1/20,
Prerefunded 11/1/00 at 102... 431,681
600,000 Trimble County, KY, PCR Bonds,
Series A, 7.625%, due
11/1/20...................... 662,250
-------------
2,317,994
-------------
RESOURCE RECOVERY REVENUE (2.4%)
275,000 Kentucky State Turnpike
Authority Resource Recovery
Road Revenue, 6.00%, due
7/1/09....................... 275,770
-------------
TRANSPORTATION REVENUE (5.9%)
655,000 Kentucky State Turnpike
Authority Resource Recovery
Revenue Bonds, escrowed to
maturity, 6.125%, due
7/1/07....................... 691,844
-------------
UTILITIES REVENUE (1.9%)
200,000 Owensboro, KY, Electric Light &
Power Revenue Bonds, Series
A, 10.25%, due 1/1/09,
prerefunded 1/1/00 at 102.... 228,500
-------------
Total Municipal Bonds
(cost $11,188,810)......................... 11,229,252
-------------
SHORT TERM-HOLDINGS (4.0%)
466,600 1784 Tax Free Money Market Fund
(cost $466,600).............. 466,600
-------------
Total Investments (100.0%)
(cost $11,655,410)(c)...................... $ 11,695,852
-------------
-------------
</TABLE>
See Notes to Schedule of Investments. 9 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
ASSET BACKED SECURITIES (0.2%)
$ 226,593 FHLMC, 7.00%, due 4/1/97....... $ 226,698
-------------
DISCOUNT NOTES (20.4%)
4,376,000 FHLMC, 5.30% yield, due
3/3/97....................... 4,376,000
6,000,000 FHLMC, 5.28% yield, due
3/19/97...................... 5,986,155
6,700,000 FNMA, 5.31% yield, due
3/3/97....................... 6,700,000
3,000,000 FNMA, 5.31% yield, due
3/4/97....................... 2,999,564
-------------
Total Discount Notes......................... 20,061,719
-------------
GOVERNMENT AGENCY NOTES (0.8%)
200,000 FHLB, 6.99%, due 4/25/97....... 200,398
100,000 FHLB, 4.80%, due 7/24/97....... 99,476
500,000 FNMA, 6.84%, due 10/3/97....... 503,289
-------------
Total Government Agency Notes................ 803,163
-------------
CORPORATE NOTES (58.3%)
500,000 Alcan Aluminum, 6.375%, due
9/1/97....................... 500,717
100,000 Allied Corp., 0.00% (5.95%
effective yield), due
8/1/97....................... 97,605
1,373,000 American Express Credit Corp.,
7.75%, due 3/1/97............ 1,373,000
140,000 American General Finance Corp.,
5.80%, due 4/1/97............ 140,000
75,000 American General Finance Corp.,
7.15%, due 5/15/97........... 75,164
80,000 American General Finance Corp.,
7.70%, due 11/15/97.......... 80,941
703,000 American Home Products Corp.,
6.875%, due 4/15/97.......... 703,886
125,000 Associates Corp. of North
America, 9.70%, due 5/1/97... 125,749
1,005,000 Associates Corp. of North
America, 8.625%, due
6/15/97...................... 1,011,880
15,000 Associates Corp. of North
America, 6.75%, due
7/15/97...................... 15,050
30,000 Associates Corp. of North
America, 6.75%, due
7/15/97...................... 30,080
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 1,470,000 Associates Corp. of North
America, 5.875%, due
8/15/97...................... $ 1,470,594
750,000 Associates Corp. of North
America, 7.75%, due
11/1/97...................... 758,588
110,000 Associates Corp. of North
America, 6.625%, due
11/15/97..................... 110,504
70,000 B.P. America, 9.50%, due
1/1/98....................... 71,912
75,000 Bank of Boston, 9.50%, due
8/15/97...................... 76,174
187,000 BankAmerica Corp., 6.00%, due
7/15/97...................... 186,999
175,000 Baxter International, Inc.,
7.50%, due 5/1/97............ 175,416
90,000 Bell Atlantic Financial,
6.625%, due 11/30/97......... 90,359
600,000 Beneficial Corp., 6.79%, due
11/20/97..................... 604,556
240,000 British Petroleum America,
Inc., 8.875%, due 12/1/97.... 245,010
485,000 Brunswick Corp., 8.125%, due
4/1/97....................... 485,791
164,000 CIT Group Holdings, Inc.,
8.75%, due 7/1/97............ 165,362
2,000,000 CSX Transportation, Inc., 5.93
%, due 6/1/97................ 1,999,915
55,000 Campbell Soup Co., 9.00%, due
11/1/97...................... 56,084
100,000 Carolina Power & Light Co.,
6.375%, due 10/1/97.......... 100,000
159,000 Coca-Cola Enterprises Inc.,
6.50%, due 11/15/97.......... 159,539
500,000 Commercial Credit Co., 8.125%,
3/1/97....................... 500,000
500,000 Conagra Inc., 9.75%, due
11/1/97...................... 512,573
125,000 Consolidated Edison, 5.30%, due
8/1/97....................... 124,699
100,000 Discover Credit, 7.98%, due
4/7/97....................... 100,173
430,000 Dow Capital, 5.75%, due
9/15/97...................... 429,098
</TABLE>
See Notes to Schedule of Investments. 10 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 250,000 Dupont Corp., 8.65%, due
12/1/97...................... $ 255,222
200,000 Eastman Kodak Co., 8.55%, due
5/1/97....................... 200,866
205,000 Exxon Capital Corp., 7.875%,
due 8/15/97.................. 206,496
60,000 First Interstate Bancorp,
12.75%, due 5/1/97........... 60,632
1,682,000 Ford Holdings Inc., 9.25%, due
7/15/97...................... 1,701,846
250,000 Ford Motor Co., 5.30%, due
7/1/97....................... 249,408
125,000 Ford Motor Credit Co., 5.625%,
due 3/3/97................... 125,000
357,000 Ford Motor Credit Co., 6.80%,
due 8/15/97.................. 358,204
150,000 Ford Motor Credit Co., 7.125%,
due 12/1/97.................. 151,216
77,000 Ford Motor Credit Co., 8.00%,
due 12/1/97.................. 78,101
1,379,000 GMAC, 7.75%, due 4/15/97....... 1,382,185
220,000 GMAC, 8.375%, due 5/1/97....... 220,882
75,000 GMAC, 6.40%, due 7/30/97....... 75,016
75,000 GMAC, 7.00%, due 8/15/97....... 75,320
1,400,000 GMAC, 6.25%, due 9/12/97....... 1,405,076
1,000,000 GMAC, 7.85%, due 11/17/97...... 1,014,921
20,000 GTE California, 6.25%, due
1/15/98...................... 20,000
750,000 GTE North, Inc., 6.25%, due
7/1/97....................... 750,528
80,000 GTE South, Inc., 6.25%, due
11/15/97..................... 80,067
30,000 General Electric Capital,
8.00%, due 1/15/98........... 30,525
369,000 Golden West Financial Corp.,
10.25%, due 5/15/97.......... 372,192
2,100,000 Greyhound Financial Corp.,
8.25%, due 3/11/97........... 2,101,197
700,000 H.F. Ahmanson & Co., 6.00%, due
4/1/97....................... 700,000
78,000 Heinz (H.J.) Co., 5.50%, due
9/15/97...................... 77,833
4,010,000 Heller Financial, 7.75%, due
5/15/97...................... 4,026,170
965,000 Hospital Corp. of America,
9.00%, due 3/15/97........... 965,907
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 85,000 Household Finance Co., 7.75%,
due 6/15/97.................. $ 85,434
375,000 IBM Corp., 6.375%, due
11/1/97...................... 376,087
100,000 IBM Credit Corp., 5.54%, due
8/18/97...................... 99,812
50,000 Interamerican Development Bank,
9.50%, due 10/15/97.......... 51,051
325,000 International Lease Finance,
5.50%, due 4/1/97............ 324,848
655,000 International Lease Finance,
6.50%, due 7/15/97........... 656,991
250,000 International Lease Finance,
6.75%, due 8/1/97............ 250,901
500,000 Iowa, Illinois Gas & Electric
Co., 5.875%, due 7/15/97..... 500,000
160,000 John Deere Capital, 7.20%, due
5/15/97...................... 160,395
4,020,000 Kellogg Co., 5.90%, due
7/15/97...................... 4,024,995
60,000 Kimberly-Clark Corp., 9.125%,
due 6/1/97................... 60,470
480,000 Lehman Brothers, Inc., 7.375%,
due 8/15/97.................. 483,534
376,000 Lehman Brothers Holdings, Inc.,
8.375%, due 4/1/97........... 376,733
760,000 Lehman Brothers Holdings, Inc.,
7.625%, due 6/15/97.......... 763,745
2,066,000 MGM Grand Hotels Financial
Corp., Defeased, 11.75%, due
5/1/97....................... 2,124,746
871,000 MGM Grand Hotels Financial
Corp., Defeased, 12.00%, due
5/1/02(b).................... 925,377
2,982,000 Marine Midland Banks, Inc.,
8.625%, due 3/1/97........... 2,982,000
285,000 Maytag Corp., 8.875%, due
7/1/97....................... 287,373
100,000 Monongahela Power, 6.50%, due
8/1/97....................... 100,026
125,000 Morgan Stanley Group, 5.65%,
due 6/15/97.................. 125,014
1,265,000 National Rural Utilities Corp.,
9.50%, due 5/15/97........... 1,273,487
</TABLE>
See Notes to Schedule of Investments. 11 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 390,000 New York Telephone Co., 4.625%,
due 10/1/97.................. $ 387,017
275,000 Norwest Corp., 7.70%, due
11/15/97..................... 278,426
130,000 Norwest Financial Inc., 6.00%,
due 8/15/97.................. 129,859
65,000 Norwest Financial Inc., 6.50%,
due 11/15/97................. 65,239
100,000 Paccar Financial Corp., 5.12%,
due 3/10/97.................. 99,984
183,000 Pacific, Gas, & Electric Co.,
4.625%, due 6/1/97........... 182,443
230,000 PepsiCo, Inc., 6.875%, due
5/15/97...................... 230,442
1,513,000 Philip Morris Cos., Inc.,
7.50%, due 3/15/97........... 1,513,729
300,000 Philip Morris Cos., Inc.,
9.75%, due 5/1/97............ 301,765
590,000 Philip Morris Cos., Inc.,
8.75%, due 6/15/97........... 594,305
30,000 Philip Morris Cos., Inc.,
9.35%, due 11/21/97.......... 30,726
485,000 Philip Morris Cos. Inc., 9.25%,
due 12/1/97.................. 496,301
45,000 Philip Morris Cos., Inc.,
6.375%, due 1/15/98.......... 45,137
190,000 Procter & Gamble Co., 6.85%,
due 6/1/97................... 190,375
50,000 Province of Ontario Global
Bond, 5.70%, due 10/1/97..... 49,941
360,000 Public Service Electric & Gas
Co., 6.875%, due 6/1/97...... 360,908
40,000 Public Service Electric & Gas
Co., 7.125%, due 11/1/97..... 40,282
1,115,000 Public Service Electric & Gas
Co., 7.125%, due 11/1/97..... 1,124,331
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 660,000 Quebec Province, 8.74%, due
7/21/97...................... $ 665,770
466,000 Sears Roebuck and Co., 9.25%,
due 8/1/97................... 471,962
830,000 Southern California Edison Co.,
6.125%, due 7/15/97.......... 830,936
205,000 Texaco Capital, 9.00%, due
11/15/97..................... 209,251
190,000 U.S. Leasing International,
Inc., 7.00%, due 11/1/97..... 191,383
135,000 Union Electric Co., 5.50%, due
3/1/97....................... 135,000
937,000 Unisys Corp., 15.00%, due
7/1/97....................... 964,938
650,000 Virginia Electric & Power Co.,
7.25%, due 3/1/97............ 650,000
85,000 WMX Technologies, 8.125%, due
2/1/98....................... 86,500
1,064,000 Wal-Mart Stores, Inc., 5.50%,
due 9/15/97.................. 1,063,000
716,000 Waste Management, Inc. 6.375%,
due 7/1/97................... 717,010
115,000 Wisconsin Natural Gas, 6.125%,
due 9/1/97................... 115,090
-------------
Total Corporate Notes........................ 57,517,297
-------------
REPURCHASE AGREEMENTS (20.3%)
19,973,319 The First Boston Corp., 5.38%,
due 3/3/97, to be repurchased
at 19,976,304 (d)............ 19,973,319
-------------
Total Investments (100.0%)................... $ 98,582,196
-------------
-------------
</TABLE>
See Notes to Schedule of Investments. 12 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
- - ---------------------------------------------------------------------------
(a) Non-income producing securities.
(b) Variable rate demand notes are payable upon not more than one, seven or
thirty business days notice. Put bonds and notes have demand features which
mature within one year. The interest rate shown reflects the rate in effect.
(c) Aggregate cost for Federal tax purposes.
(d) The First Boston Corporation is a tri-party repurchase agreement
collateralized by various Federal Gold Loan Mortgage Corporation 6.50% to
8.50%, due 11/1/21 to 2/1/27, Par $705,941 and by various Federal National
Conventional Loan 6.00% to 9.00%, due 10/1/03 to 3/1/27, Par $24,865,226.
<TABLE>
<S> <C>
AMBAC American Municipal Bond Assurance Corporation
FHA Federal Housing Authority
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GMAC General Motors Acceptance Corporation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
PCR Pollution Control Revenue
SBA Small Business Administration
TVA Tennessee Valley Authority
</TABLE>
13 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH/ INTERMEDIATE
VALUE AGGRESSIVE BOND KENTUCKY MONEY MARKET
FUND GROWTH FUND FUND TAX-FREE FUND FUND
------------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost...................... $ 17,159,330 $ 8,115,391 $ 14,254,591 $ 11,655,410 $ 78,608,877
Repurchase Agreements at cost............ -- -- 1,955,394 -- 19,973,319
Net unrealized appreciation
(depreciation)......................... 3,469,550 1,277,867 (245,036) 40,442 --
------------- -------------- --------------- ------------- -------------
Total investments at value............. 20,628,880 9,393,258 15,964,949 11,695,852 98,582,196
Interest, dividends and other receivables.. 13,372 1,131 211,309 152,340 1,345,605
Receivable for Fund shares issued.......... 75,000 25,000 47 -- --
Organization costs, net of amortization
(Note 2)................................. 22,760 22,760 22,760 22,760 22,760
------------- -------------- --------------- ------------- -------------
Total Assets................................. 20,740,012 9,442,149 16,199,065 11,870,952 99,950,561
------------- -------------- --------------- ------------- -------------
LIABILITIES:
Dividends payable.......................... -- -- 73,869 26,034 319,424
Payable for securities purchased........... -- -- 48,161 -- 1,873,737
Payable for Fund shares redeemed........... 15,801 2,977 37,220 -- --
Payable to Trans Financial................. 26,993 -- -- -- 1,206
Payable to other related parties........... 11,831 15,064 12,286 28,388 66,618
------------- -------------- --------------- ------------- -------------
Total Liabilities............................ 54,625 18,041 171,536 54,422 2,260,985
------------- -------------- --------------- ------------- -------------
NET ASSETS................................... $ 20,685,387 $ 9,424,108 $ 16,027,529 $ 11,816,530 $ 97,689,576
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
COMPONENTS OF NET ASSETS:
Paid in capital............................ $ 17,439,553 $ 8,411,427 $ 16,227,629 $ 11,956,651 $ 97,691,530
Undistributed net investment income
(loss)................................... (90,354) (63,130) -- (173,707) --
Unrealized appreciation (depreciation) on
investments.............................. 3,469,550 1,277,867 (245,036) 40,442 --
Accumulated net realized gain (loss)....... (133,362) (202,056) 44,936 (6,856) (1,954)
------------- -------------- --------------- ------------- -------------
NET ASSETS................................... $ 20,685,387 $ 9,424,108 $ 16,027,529 $ 11,816,530 $ 97,689,576
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
SHARES OF BENEFICIAL INTEREST................ 1,554,603 755,681 1,625,149 1,155,557 97,691,530
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
NET ASSET VALUE PER SHARE, AND REDEMPTION
PRICE PER SHARE............................ $ 13.31 $ 12.47 $ 9.86 $ 10.23 $ 1.00
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
OFFERING PRICE PER SHARE, EXCEPT MONEY MARKET
(NAV DIVIDED BY (1 - 4.50%)).............. $ 13.94 $ 13.06 $ 10.32 $ 10.71 $ 1.00
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
</TABLE>
See Notes to Financial Statements. 14 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH/ AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
VALUE GROWTH BOND TAX-FREE MARKET
FUND FUND FUND FUND FUND
------------ -------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................................ $ 16,937 $ 7,330 $ 511,819 $ 432,568 $ 2,402,069
Dividend income................................ 65,970 5,885 -- -- --
------------ -------------- --------------- ----------- ------------
Total Investment Income.......................... 82,907 13,215 511,819 432,568 2,402,069
------------ -------------- --------------- ----------- ------------
EXPENSES:
Investment advisory (Note 3)................... 89,000 39,197 28,976 28,478 85,174
Administration (Note 3)........................ 13,512 12,500 12,500 12,500 63,881
Transfer agent (Note 3)........................ 12,809 12,445 11,847 13,654 10,336
Shareholder service (Note 3)................... 22,250 9,799 18,110 17,799 106,468
Custody........................................ 697 911 2,157 355 7,772
Accounting (Note 3)............................ 18,000 18,000 18,000 18,000 24,000
Legal (Note 3)................................. 9,767 6,568 9,468 11,320 12,402
Registration................................... 2,632 2,476 1,943 280 3,054
Audit.......................................... 7,946 7,522 8,376 8,431 9,300
Directors...................................... 967 417 821 915 4,721
Amortization of organization costs (Note 3).... 3,176 3,176 3,176 3,176 3,176
Miscellaneous.................................. 5,133 2,531 4,427 7,705 17,339
------------ -------------- --------------- ----------- ------------
Total Expenses................................... 185,889 115,542 119,801 122,613 347,623
Expenses reimbursed and fees waived
(Note 4)..................................... (12,628) (39,197) (58,242) (62,115) (70,760)
------------ -------------- --------------- ----------- ------------
Net Expenses..................................... 173,261 76,345 61,559 60,498 276,863
------------ -------------- --------------- ----------- ------------
NET INVESTMENT INCOME (LOSS)..................... (90,354) (63,130) 450,260 372,070 2,125,206
------------ -------------- --------------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments sold... (133,362) (201,524) 60,329 (4,068) (1,928)
Net change in unrealized appreciation
(depreciation) on investments................ 3,226,469 1,217,298 87,795 300,184 --
------------ -------------- --------------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS.................................... 3,093,107 1,015,774 148,124 296,116 (1,928)
------------ -------------- --------------- ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $ 3,002,753 $ 952,644 $ 598,384 $ 668,186 $ 2,123,278
------------ -------------- --------------- ----------- ------------
------------ -------------- --------------- ----------- ------------
</TABLE>
See Notes to Financial Statements. 15 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31, 1996
AND THE SIX MONTHS ENDED FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH/ AGGRESSIVE INTERMEDIATE
VALUE GROWTH BOND
FUND FUND FUND
-------------------------- ------------------------ --------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------------- ----------- ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS--September 1, 1995(a)............. $ -- $ -- $ --
- - ----------------------------------
------------- ------------ -------------
OPERATIONS:
Net investment income (loss)............... (50,747) (39,525) 601,786
Net realized gain (loss) on investments
sold..................................... 89,352 43,284 (15,393)
Net change in unrealized appreciation
(depreciation) on investments............ 243,081 60,569 (332,831)
------------- ------------ -------------
Net Increase in Net Assets Resulting from
Operations............................. 281,686 64,328 253,562
------------- ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................... -- -- (601,786)
------------- ------------ -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares............................. 15,471,301 1,408,416 7,269,024 668,440 14,919,014 1,491,710
Reinvestment of distributions.............. -- -- -- -- 13,886 1,404
Redemption of shares....................... (645,322) (57,598) (783,438) (70,133) (1,227,784) (122,796)
------------- ----------- ------------ ---------- ------------- -----------
Net Increase (Decrease) in Capital
Transactions........................... 14,825,979 1,350,818 6,485,586 598,307 13,705,116 1,370,318
------------- ----------- ------------ ---------- ------------- -----------
----------- ---------- -----------
Net Increase (Decrease) in Net Assets...... 15,107,665 6,549,914 13,356,892
------------- ------------ -------------
NET ASSETS--August 31, 1996.................. 15,107,665 6,549,914 13,356,892
- - -----------------------------
------------- ------------ -------------
OPERATIONS:
Net investment income (loss)............... (90,354) (63,130) 450,260
Net realized gain (loss) on investments.... (133,362) (201,524) 60,329
Net change in unrealized appreciation
(depreciation) on investments............ 3,226,469 1,217,298 87,795
------------- ------------ -------------
Net Increase in Net Assets Resulting from
Operations............................. 3,002,753 952,644 598,384
------------- ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................... -- -- (450,260)
Net realized gain (loss) on investments
sold..................................... (44,429) (16,181) --
------------- ------------ -------------
Total Distribution to Shareholders....... (44,429) (16,181) (450,260)
------------- ------------ -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares............................. 4,624,904 361,307 2,810,182 230,029 3,603,774 361,955
Reinvestment of distributions.............. 10,879 875 4,532 376 10,125 1,023
Redemption of shares....................... (2,016,385) (158,397) (876,983) (73,031) (1,091,386) (108,147)
------------- ----------- ------------ ---------- ------------- -----------
Net Increase (Decrease) in Capital
Transactions........................... 2,619,398 203,785 1,937,731 157,374 2,522,513 254,831
------------- ----------- ------------ ---------- ------------- -----------
----------- ---------- -----------
Net Increase (Decrease) in Net Assets...... 5,577,722 2,874,194 2,670,637
------------- ------------ -------------
NET ASSETS--February 28, 1997 (Unaudited).... $ 20,685,387 $ 9,424,108 $ 16,027,529
- - -----------------------------------------
------------- ------------ -------------
------------- ------------ -------------
(a) See Note 1 of Notes to Financial Statements for date of commencement of operations.
</TABLE>
See Notes to Financial Statements. 16 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED AUGUST 31, 1996
AND THE SIX MONTHS ENDED FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
KENTUCKY MONEY
TAX-FREE MARKET
FUND FUND
------------------------- ----------------------------
AMOUNT SHARES AMOUNT SHARES
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS--September 1, 1995(a)...................................... $ -- $ --
------------ -------------
- - ----------------------------------
OPERATIONS:
Net investment income (loss)........................................ 714,832 2,473,468
Net realized gain (loss) on investments sold........................ (2,788) 2,494
Net change in unrealized appreciation (depreciation)
on investments.................................................... (259,742) --
------------ -------------
Net Increase in Net Assets Resulting
from Operations................................................. 452,302 2,475,962
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income............................................... (828,883) (2,473,468)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares...................................................... 28,751,437 2,814,888 446,620,681 446,620,681
Reinvestment of distributions....................................... 559,139 57,538 84,304 84,304
Redemption of shares................................................ (13,093,506) (1,297,814) (370,344,632) (370,344,632)
------------ ----------- ------------- -------------
Net Increase (Decrease) in Capital Transactions................... 16,217,070 1,574,612 76,360,353 76,360,353
------------ ----------- ------------- -------------
----------- -------------
Net Increase (Decrease) in Net Assets............................... 15,840,489 76,362,847
------------ -------------
NET ASSETS--August 31, 1996........................................... 15,840,489 76,362,847
- - -----------------------------
------------ -------------
OPERATIONS:
Net investment income (loss)........................................ 372,070 2,125,206
Net realized gain (loss) on investments............................. (4,068) (1,928)
Net change in unrealized appreciation (depreciation)
on investments.................................................... 300,184 --
------------ -------------
Net Increase in Net Assets Resulting from
Operations...................................................... 668,186 2,123,278
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................... (431,726) (2,125,206)
Net realized gain (loss) on investments sold........................ -- (2,520)
------------ -------------
Total Distribution to Shareholders................................ (431,726) (2,127,726)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares...................................................... 519,442 51,065 241,892,119 241,846,519
Reinvestment of distributions....................................... 180,402 17,695 193,146 193,146
Redemption of shares................................................ (4,960,263) (487,815) (220,754,088) (220,708,488)
------------ ----------- ------------- -------------
Net Increase (Decrease) in Capital Transactions................... (4,260,419) (419,055) 21,331,177 21,331,177
------------ ----------- ------------- -------------
----------- -------------
Net Increase (Decrease) in Net Assets............................... (4,023,959) 21,326,729
------------ -------------
NET ASSETS--February 28, 1997 (Unaudited)............................. $ 11,816,530 $ 97,689,576
- - -----------------------------------------
------------ -------------
------------ -------------
(a) See Note 1 of Notes to Financial Statements for date of commencement of operations.
</TABLE>
See Notes to Financial Statements. 17 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Trans Adviser Funds, Inc. (the "Company") is an open-end management investment
company incorporated under the laws of the State of Maryland. The Company
currently consists of five operational non-diversified investment portfolios,
the Growth/Value Fund, the Aggressive Growth Fund, the Intermediate Bond Fund,
the Kentucky Tax-Free Fund, and the Money Market Fund (each a "Fund" and
collectively the "Funds"). The Funds, except for Money Market Fund, are offered
at Net Asset Value ("NAV") plus a sales charge, currently 4.50% of NAV. The
Money Market Fund is offered at NAV. The Funds commenced investment operations
on the following dates:
<TABLE>
<S> <C>
Growth/Value Fund September 29, 1995
Aggressive Growth Fund September 29, 1995
Intermediate Bond Fund October 3, 1995
Kentucky Tax-Free Fund September 27, 1995
Money Market Fund September 29, 1995
</TABLE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates but are expected to be immaterial.
The following represent significant accounting policies of the Funds:
SECURITY VALUATION-All securities held by the Money Market Fund are valued
utilizing the amortized cost method, which approximates market value, in
accordance with Rule 2a-7 under the Investment Company Act of 1940. Securities,
other than short-term, held by the other Funds (the "Bond and Equity Funds") for
which market quotations are readily available are valued using the last reported
sales price provided by independent pricing services. If no sales are reported,
the mean of the last bid and asked price is used. In the absence of readily
available market quotations, securities are valued at fair value as determined
by the Board of Directors. Securities with a maturity of 60 days or less held by
the Bond and Equity Funds are valued at amortized cost.
PREMIUM AMORTIZATION AND DISCOUNT ACCRETION-In all Funds other than the Kentucky
Tax-Free Fund, if a fixed income investment is purchased at a premium, the
premium is not amortized. The Kentucky Tax-Free Fund amortizes premium on fixed
income investments to the maturity (or first call) date using the yield to
maturity method. If a fixed income investment is purchased at a discount (other
than original issue discount), the discount is not accreted. Original issue
discount on fixed income investments is accreted daily using yield to maturity
method.
INTEREST AND DIVIDEND INCOME-Interest income is accrued as earned. Dividends on
securities held by the Funds are recorded on the ex-dividend date.
DISTRIBUTIONS TO SHAREHOLDERS-Distributions to shareholders of net investment
income, if any, are declared daily and paid monthly for the Money Market Fund,
the Kentucky Tax-Free Fund, and the Intermediate Bond Fund, and declared and
paid annually for the Aggressive Growth Fund and the Growth/Value Fund. Net
capital gain, if any, is distributed to shareholders at least annually.
Distributions are based on amounts calculated in accordance with applicable
income tax regulations.
ORGANIZATION COSTS-The costs incurred by the Funds in connection with their
organization and registration of shares have been capitalized and are being
amortized using the straight-line method over a five year period beginning with
the commencement of the respective Fund's operations. Certain of these costs
were paid by Forum Financial Services, Inc. and have been reimbursed by the
respective Funds.
18 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
FEDERAL TAXES-Each Fund intends to qualify and continue to qualify each year as
a regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, each Fund
will not be subject to a federal excise tax. Therefore, no Federal income or
excise tax provision is required.
EXPENSE ALLOCATION-The Company accounts separately for the assets and
liabilities and operations of each Fund. Expenses that are directly attributable
to more than one Fund are allocated among the respective Funds.
REPURCHASE AGREEMENTS-The Aggressive Growth Fund, the Intermediate Bond Fund and
the Money Market Fund may invest in repurchase agreements. Each Fund, through an
agent bank under a tri-party agreement, receives delivery of the underlying
securities, whose market value must always equal or exceed the repurchase price
plus accrued interest. The investment adviser is responsible for determining the
value of the underlying securities at all times. In the event of default, the
Fund may have difficulties with the disposition of such securities.
REALIZED GAIN AND LOSS-Security transactions are accounted for on a trade date
basis and realized gain and loss on investments sold are determined on the basis
of identified cost.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser of the Funds is Trans Financial Bank, N.A. (the
"Adviser"). The Adviser receives a monthly advisory fee from the Growth/Value
Fund and the Aggressive Growth Fund at an annual rate of 1.00% of the respective
Fund's average daily net assets. The Adviser receives a monthly advisory fee
from the Intermediate Bond Fund and the Kentucky Tax-Free Fund at an annual rate
of 0.40% of the respective Fund's average daily net assets. The Adviser receives
a monthly advisory fee from the Money Market Fund at an annual rate of 0.20% of
the Fund's average daily net assets. Pursuant to a Sub - Advisory Agreement
between the Adviser and Mastrapasqua and Associates, Inc. ("M&A") (the
"Sub-Adviser"), the Adviser may delegate certain of its advisory
responsibilities to the Sub-Adviser. For its services, M&A is paid by the
Adviser as follows: with respect to the Aggressive Growth and the Growth/Value
Funds, the Adviser (not the Fund) pays to M&A an annual fee, calculated daily
and paid monthly, of 0.50% on the first $100 million of such Funds' combined
average daily net assets plus 0.25% of such Funds' combined average daily net
assets in excess of $100 million for its services, and, with respect to each
other, the Adviser (not the Fund) pays M&A an annual fee, calculated on a daily
basis and paid monthly, of 0.03% of average daily net assets for its services.
Effective October 24, 1996, the administrator of the Funds is Forum
Administrative Services, LLC ("FAS") and for its services it receives a fee for
each Fund equal to the greater of $25,000 per year or 0.15% of the annual
average daily net assets of each Fund. Forum Financial Services, Inc. ("Forum")
acts as the Company's distributor pursuant to a separate Distribution Agreement
with the Company. Forum receives no compensation under that agreement. In
addition, certain legal expenses were charged to the Company by FAS amounting to
$1,931.
Prior to October 24, 1996, the administrator of the Funds was Forum, and for its
services received a fee for each Fund equal to the greater of $25,000 per year
or 0.15% of the annual average daily net assets of each Fund.
Forum Financial Corp. ("FFC"), an affiliate of FAS and Forum, serves as the
Funds' transfer agent and dividend disbursing agent, and for those services
receives an annual fee of $12,000 plus account and series charges. The Company
has adopted a shareholder service plan under which the Company pays FAS a
shareholder servicing fee at an annual rate of 0.25% of the daily net assets of
each Fund. FAS may pay any or all amounts of these payments to various
institutions which provide shareholder servicing to their customers. FFC also
serves as the Company's fund accountant and is compensated for those services at
an amount of $36,000 per year per Fund plus certain amounts based upon the
number and types of portfolio transactions within each Fund.
19 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
The Adviser has voluntarily waived a portion of its fees and assumed certain
expenses of the Funds so that total expenses of the Funds would not exceed a
certain limitation. For the six months ended February 28, 1997, fees waived and
expenses reimbursed were as follows:
<TABLE>
<CAPTION>
FEES WAIVED EXPENSES REIMBURSED
------------- ----------------------
<S> <C> <C>
Growth/Value Fund.............................................. $ 12,628 $ --
Aggressive Growth Fund......................................... 39,197 --
Intermediate Bond Fund......................................... 28,976 29,266
Kentucky Tax-Free Fund......................................... 28,478 33,637
Money Market Fund.............................................. 70,760 --
</TABLE>
NOTE 5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales (including maturities) of securities
(excluding short-term investments) during the six months ended February 28, 1997
were as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
------------------ ---------------------
<S> <C> <C>
Growth/Value Fund......................................... $ 6,225,001 $ 3,240,579
Aggressive Growth Fund.................................... 2,689,176 1,164,824
Intermediate Bond Fund.................................... 5,640,333 3,374,356
Kentucky Tax-Free Fund.................................... -- 4,519,568
</TABLE>
For the period ended February 28, 1997, aggregate gross unrealized appreciation
for all securities in which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which there was an
excess of tax cost over value for Federal income tax purposes were as follows:
<TABLE>
<CAPTION>
NET APPRECIATION
UNREALIZED APPRECIATION UNREALIZED DEPRECIATION (DEPRECIATION)
----------------------- ----------------------- -----------------
<S> <C> <C> <C>
Growth/Value Fund............... $ 3,848,668 $ 379,118 $ 3,469,550
Aggressive Growth Fund.......... 1,773,754 495,887 1,277,867
Intermediate Bond Fund.......... 30,934 275,970 (245,036)
Kentucky Tax-Free Fund.......... 77,419 36,977 40,442
</TABLE>
NOTE 6. CONCENTRATION OF CREDIT RISK
The Kentucky Tax-Free Fund invests substantially all of its assets in debt
obligations of issuers located in the state of Kentucky. The issuers' abilities
to meet their obligations may be affected by Kentucky economic or political
developments.
20 TRANS ADVISER FUNDS, INC.
<PAGE>
FINANCIAL HIGHLIGHTS
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AGGRESSIVE INTERMEDIATE
VALUE GROWTH BOND
FUND FUND FUND
SELECTED PER SHARE DATA AND ------------------------ ------------------------ ------------------------
RATIOS FOR A SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
SHARE OUTSTANDING THROUGHOUT ENDED ENDED ENDED ENDED ENDED ENDED
THE PERIOD 2/28/97(f) 8/31/96(a) 2/28/97(f) 8/31/96(a) 2/28/97(f) 8/31/96(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 11.18 $ 10.00 $ 10.95 $ 10.00 $ 9.75 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment Operations
Net Investment Income
(Loss).................... (0.06) (0.06)(c) (0.08) (0.11)(c) 0.31 0.57(c)
Net Realized and Unrealized
Gain (Loss) on
Investments............... 2.22 1.24 1.63 1.06 0.11 (0.25)
----------- ----------- ----------- ----------- ----------- -----------
Total from Investment
Operations.................. 2.16 1.18 1.55 0.95 0.42 0.32
----------- ----------- ----------- ----------- ----------- -----------
Distributions from
Net Investment Income....... (0.03) -- (0.03) -- (0.31) (0.57)
Net Realized Gain on
Investments............... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions........... (0.03) -- (0.03) -- (0.31) (0.57)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of
Period...................... $ 13.31 $ 11.18 $ 12.47 $ 10.95 $ 9.86 $ 9.75
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total Return(b)............ 42.67%(e) 11.80% 30.53%(e) 9.50% 8.79%(e) 3.23%
Ratio/Supplementary Data:
Net Assets at End of Period
(000's omitted)............. $ 20,685 $ 15,108 $ 9,424 $ 6,550 $ 16,028 $ 13,357
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver
(e)....................... 1.95% 1.95% 1.95% 1.95% 0.85% 0.68%
Expenses excluding
reimbursement/waiver
(e)....................... 2.09% 2.83% 2.95% 5.05% 1.65% 2.04%
Net investment income (loss)
including
reimbursement/waiver
(e)....................... (1.02)% (0.62 )% (1.61 )% (1.26 )% 6.22% 6.31%
Average Commission Rate(d).... $ 0.0576 $ 0.0700 $ 0.0553 $ 0.0800 N/A N/A
Portfolio Turnover Rate....... 18.89% 21.12% 15.45% 15.70% 26.77% 12.38%
- - --------------------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for date of commencement of
operations.
(b) Total return calculation does not include sales charges.
(c) Using weighted average shares outstanding for the period.
(d) Amount represents the average commission per share paid to brokers on the
purchase or sale of equity securities.
(e) Annualized.
(f) Unaudited.
21 TRANS ADVISER FUNDS, INC.
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
KENTUCKY MONEY
TAX-FREE MARKET
FUND FUND
SELECTED PER SHARE DATA AND ------------------------ ------------------------
RATIOS FOR A SIX MONTHS YEAR SIX MONTHS YEAR
SHARE OUTSTANDING THROUGHOUT ENDED ENDED ENDED ENDED
THE PERIOD 2/28/97(f) 8/31/96(a) 2/28/97(f) 8/31/96(a)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 10.06 $ 10.00 $ 1.00 $ 1.00
----------- ----------- ----------- -----------
Investment Operations
Net Investment Income
(Loss).................... 0.18 0.51(c) 0.03 0.05(c)
Net Realized and Unrealized
Gain (Loss) on
Investments............... 0.25 0.06 -- --
----------- ----------- ----------- -----------
Total from Investment
Operations.................. 0.43 0.57 0.03 0.05
----------- ----------- ----------- -----------
Distributions from
Net Investment Income....... (0.26) (0.51) (0.03) (0.05)
Net Realized Gain on
Investments............... -- -- -- --
----------- ----------- ----------- -----------
Total Distributions........... (0.26) (0.51) (0.03) (0.05)
----------- ----------- ----------- -----------
Net Asset Value, End of
Period...................... $ 10.23 $ 10.06 $ 1.00 $ 1.00
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total Return(b)............ 8.90%(e) 5.80% 5.11%(e) 4.70%
Ratio/Supplementary Data:
Net Assets at End of Period
(000's omitted)............. $ 11,817 $ 15,840 $ 97,690 $ 76,363
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver
(e)....................... 0.85% 0.82% 0.65% 0.65%
Expenses excluding
reimbursement/waiver
(e)....................... 1.72% 1.65% 0.82% 0.99%
Net investment income (loss)
including
reimbursement/waiver
(e)....................... 5.23% 5.30% 4.99% 4.94%
Average Commission Rate(d).... N/A N/A N/A N/A
Portfolio Turnover Rate....... 0.00% 145.12% N/A N/A
- - --------------------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for date of commencement of
operations.
(b) Total return calculation does not include sales charges.
(c) Using weighted average shares outstanding for the period.
(d) Amount represents the average commission per share paid to brokers on the
purchase or sale of equity securities.
(e) Annualized.
(f) Unaudited.