PROSPECTUS
February 1, 1997
Revised March 31, 1997
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
SHORT TERM GOVERNMENT INCOME FUND
INTERMEDIATE TERM GOVERNMENT INCOME FUND
==============================================================================
The Short Term Government Income Fund and the Intermediate Term Government
Income Fund (individually a "Fund" and collectively the "Funds") are two
separate series of Countrywide Investment Trust.
The SHORT TERM GOVERNMENT INCOME FUND invests primarily in short-term U.S.
Government obligations backed by the "full faith and credit" of the United
States and seeks high current income, consistent with protection of capital.
THE SHORT TERM GOVERNMENT INCOME FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN
AMORTIZED COST BASIS. FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE
UNITED STATES GOVERNMENT OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS
NO ASSURANCE, THAT THE FUND WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE
OF $1.
The INTERMEDIATE TERM GOVERNMENT INCOME FUND invests primarily in U.S.
Government obligations maturing within twenty years or less with a
dollar-weighted average portfolio maturity under normal market conditions of
between three and ten years and seeks high current income, consistent with
protection of capital. To the extent consistent with the Fund's primary
objective, capital appreciation is a secondary objective.
The Intermediate Term Government Income Fund offers two classes of shares:
Class A shares (sold subject to a maximum 2% front-end sales load and a 12b-1
fee of up to .35% of average daily net assets) and Class C shares (sold
subject to a 1% contingent deferred sales load for a one-year period and a
12b-1 fee of up to 1% of average daily net assets). Each Class A and Class C
share of the Fund represents identical interests in the Fund's investment
portfolio and has the same rights, except that (i) Class C shares bear the
expenses of higher distribution fees, which will cause Class C shares to have
a higher expense ratio and to pay lower dividends than those related to Class
A shares; (ii) certain other class specific expenses will be borne solely by
the class to which such expenses are attributable; and (iii) each class has
exclusive voting rights with respect to matters relating to its own
distribution arrangements.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY 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 Funds' investments
and their business affairs.
This Prospectus sets forth concisely the information about the Funds that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated February 1, 1997, and
amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by
calling one of the numbers listed below.
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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.
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<PAGE>
<TABLE>
<CAPTION>
EXPENSE INFORMATION
==============================================================================
SHORT TERM GOVERNMENT INCOME FUND
<S> <C>
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)
Management Fees.............................................................. .48%
12b-1 Fees................................................................... .11% (A)
Other Expenses............................................................... .40%
-------
Total Fund Operating Expenses................................................ .99%
=======
<FN>
(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.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
CLASS A CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).... 2% None
Maximum Contingent Deferred Sales Load (as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends..................................... None None
Exchange Fee................................................................... None None
Redemption Fee ................................................................ None ** None **
Check Redemption Processing Fee (per check):
First six checks per month................................................. None None
Additional checks per month................................................ $0.25 $0.25
<FN>
* 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."
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS A CLASS C
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) SHARES SHARES
<S> <C> <C>
Management Fees................................................................ .49% .49%
12b-1 Fees(A) ................................................................ .16% .01%
Other Expenses After Reimbursements............................................ .34% 1.14% (B)
-------- -------
Total Fund Operating Expenses After Expense Reimbursements..................... .99% 1.64% (C)
======== =======
<FN>
(A) Class A shares may incur 12b-1 fees in an amount up to .35% of average net
assets and Class C shares may incur 12b-1 fees in an amount up to 1.00% of
average net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the National
Association of Securities Dealers.
(B) Absent expense reimbursements by the Adviser, other expenses of Class
C shares would have been 2.46% for the fiscal year ended September 30, 1996.
(C) Absent expense reimbursements by the Adviser, total operating expenses of
Class C shares would have been 2.96% for the fiscal year ended September
30, 1996.
</FN>
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages expressing annual fund operating expenses are
based on amounts incurred during the most recent fiscal year except that other
expenses for Class C shares of the Intermediate Term Government Income Fund
have been restated to reflect an anticipated decrease in the amount of expense
reimbursements to be made by the Adviser during 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:
CLASS A SHARES CLASS C SHARES
SHORT TERM INTERMEDIATE INTERMEDIATE
GOVERNMENT TERM GOVT TERM GOVT
INCOME FUND INCOME FUND INCOME FUND
1 Year $ 10 $ 30 $ 27
3 Years 32 51 52
5 Years 55 74 89
10 Years 121 139 194
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP, is
an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
September 30, 1996 and related auditors' report appear in the Statement of
Additional Information of the Funds, which can be obtained by shareholders at
no charge by calling Countrywide Fund Services, Inc. (Nationwide call
toll-free 800-543-0407, in Cincinnati call 629-2050) or by writing to the
Trust at the address on the front of this Prospectus.
SHORT TERM GOVERNMENT INCOME FUND
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR(A)
===================================================================================================================================
Year Ended September 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- -------- -------- -------- -------- -------- -------- ------- ------
Net investment income 0.044 0.046 0.027 0.022 0.035 0.059 0.073 0.079 0.058 0.051
------- ------- -------- -------- -------- -------- -------- -------- ------- ------
Dividends from net
investment income. (0.044) (0.046) (0.027) (0.022) (0.035) (0.059) (0.073) (0.079) (0.058) (0.051)
------- ------- -------- -------- -------- -------- -------- -------- ------- ------
Net asset value at
end of year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ======== ======== ======== ======== ======== ======= ======
Total return ....... 4.51% 4.69% 2.72% 2.24% 3.55% 6.06% 7.50% 8.22% 6.08% 5.22%
======= ======= ======== ======== ======== ======== ======== ======== ======= ======
Net assets at
end of year (000's) $ 91,439 $87,141 $89,708 $96,962 $ 91,519 $ 101,535 $101,835 $104,956 $110,156 $142,083
======= ======= ======== ======== ======== ======== ======== ======== ======= ======
Ratio of expenses to
average net assets 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 1.01% 1.00% 1.01%
Ratio of net investment
income to average
net assets ....... 4.42% 4.59% 2.69% 2.22% 3.51% 5.90% 7.25% 7.91% 5.84% 5.09%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(A) All per share data has been restated to reflect the effect of a 10 for 1 share split on February 28, 1990.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================================
Year Ended September 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year. $10.73 $10.14 $ 11.59 $ 11.10 $ 10.45 $ 9.85 $ 10.09 $ 10.12 $ 10.02 $10.71
------- ------- -------- -------- -------- -------- -------- -------- ------- ------
Income from investment
operations:
Net investment income 0.61 0.64 0.56 0.60 0.68 0.75 0.76 0.79 0.76 0.77
Net realized and
unrealized gains (losses)
on investments... (0.24) 0.59 (1.32) 0.49 0.65 0.60 (0.24) (0.03) 0.10 (0.69)
------- ------- -------- -------- -------- -------- -------- -------- ------- ------
Total from investment
operations........ 0.37 1.23 (0.76) 1.09 1.33 1.35 0.52 0.76 0.86 0.08
------- ------- -------- -------- -------- -------- -------- -------- ------- ------
Less distributions:
Dividends from net
investment income (0.61) (0.64) (0.56) (0.60) (0.68) (0.75) (0.76) (0.79) (0.76) (0.77)
Distributions from net
realized gains... -- -- (0.13) -- -- -- -- -- -- --
------- ------- -------- -------- -------- -------- -------- -------- ------- ------
Total distributions. (0.61) (0.64) (0.69) (0.60) (0.68) (0.75) (0.76) (0.79) (0.76) (0.77)
------- ------- -------- -------- -------- -------- -------- -------- ------- ------
Net asset value at
end of year....... $10.49 $10.73 $ 10.14 $ 11.59 $ 11.10 $ 10.45 $ 9.85 $ 10.09 $ 10.12 $10.02
======= ======= ======== ======== ======== ======== ======== ======== ======= ======
Total return(A) .... 3.55% 12.52% (6.76%) 10.15% 13.27% 14.19% 5.31% 7.79% 8.77% 0.66%
======= ======= ======== ======== ======== ======== ======== ======== ======= ======
Net assets at
end of year (000's) $ 56,095 $56,969 $64,395 $89,666 $59,290 $40,896 $37,800 $40,391 $52,405 $56,084
======= ======= ======== ======== ======== ======== ======== ======== ======= ======
Ratio of expenses to
average net assets 0.99% 0.99% 0.99% 0.99% 1.00% 1.00% 1.02% 1.03% 1.04% 1.03%
Ratio of net investment
income to average
net assets........ 5.75% 6.17% 5.17% 5.31% 6.40% 7.39% 7.57% 7.83% 7.43% 7.30%
Portfolio turnover rate 70% 58% 236% 255% 76% 74% 92% 161% 88% 54%
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<FN>
(A) The total returns shown do not include the effect of applicable sales loads.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
=============================================================================================================
PERIOD
ENDED
YEAR ENDED SEPT. 30, SEPT. 30,
1996 1995 1994(A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.......................... $ 10.73 $ 10.14 $ 11.27
------------ ------------ -------------
Income from investment operations:
Net investment income........................................ 0.56 0.59 0.34
Net realized and unrealized gains (losses) on investments.... (0.24) 0.59 (1.13)
------------ ------------ -------------
Total from investment operations................................ 0.32 1.18 (0.79)
------------ ------------ -------------
Less distributions:
Dividends from net investment income......................... (0.56) (0.59) (0.34)
------------ ------------ -------------
Total distributions............................................. (0.56) (0.59) (0.34)
------------ ------------ -------------
Net asset value at end of period................................ $ 10.49 $ 10.73 $ 10.14
============ ============ =============
Total return(B) ................................................ 3.03% 11.96% (10.38%)(D)
============ ============ =============
Net assets at end of period (000's)............................. $ 771 $ 598 $ 508
============ ============ =============
Ratio of expenses to average net assets(C) ..................... 1.49% 1.48% 1.46%(D)
Ratio of net investment income to average net assets............ 5.25% 5.60% 4.89%(D)
Portfolio turnover rate......................................... 70% 58% 236%(D)
- -----------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from initial public offering of Class C shares
(February 1, 1994) through September 30, 1994.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 2.96%, 3.57%
and 2.41%(D) for the periods ended September 30, 1996, 1995 and 1994,
respectively.
(D) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES
==============================================================================
The Short Term Government Income Fund and the Intermediate Term Government
Income Fund are two series of Countrywide Investment Trust (the "Trust"), each
with its own portfolio and investment objective(s). Neither Fund is intended
to be a complete investment program, and there is no assurance that the
investment objectives of either Fund can be achieved. Unless otherwise
indicated, all investment practices and limitations of the Funds are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval. For a discussion of each Fund's investment practices,
see "Investment Policies."
The SHORT TERM GOVERNMENT INCOME FUND seeks high current income, consistent
with protection of capital. The Fund seeks to achieve its investment objective
by investing primarily in obligations issued or guaranteed as to principal and
interest by the United States Government, its agencies or instrumentalities
("U.S. Government obligations" described below) and backed by the "full faith
and credit" of the United States, maturing within thirteen months or less with
a dollar-weighted average portfolio maturity of 90 days or less. In order to
achieve its investment objective, the Fund may also enter into repurchase
agreements collateralized by U.S. Government obligations backed by the "full
faith and credit" of the United States.
The investment objective of the Short Term Government Income 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. Notwithstanding
the foregoing, the limitation of the Short Term Government Income Fund's
permissible investments to obligations backed by the "full faith and credit"
of the United States is a determination made by the Board of Trustees which
may be changed by the Board without shareholder approval, but only after
notification has been given to shareholders and after this Prospectus has been
revised accordingly.
The INTERMEDIATE TERM GOVERNMENT INCOME FUND seeks high current income,
consistent with protection of capital, by investing primarily in U.S.
Government obligations maturing within twenty years or less with a
dollar-weighted average portfolio maturity under normal market conditions of
between three and ten years. To the extent consistent with the Fund's primary
objective, capital appreciation is a secondary objective. In order to achieve
its investment objectives, the Fund may also enter into repurchase agreements
collateralized by U.S. Government obligations.
The investment objectives of the Intermediate Term Government Income Fund may
be changed by the Board of Trustees without shareholder approval, but only
after notification has been given to shareholders and after this Prospectus
has been revised accordingly. If there is a change in the Fund's investment
objectives, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs.
INVESTMENT POLICIES
==============================================================================
Each Fund invests in U.S. Government obligations. The Short Term
Government Income Fund invests in short-term U.S. Government obligations
backed by the "full faith and credit" of the United States. The Intermediate
Term Government Income Fund invests in intermediate-term U.S.
Government obligations.
"U.S. Government obligations" include securities which are issued or
guaranteed by the United States Treasury, by various agencies of the United
States Government, and by various instrumentalities which have been
established or sponsored by the United States Government. U.S. Treasury
obligations are backed by the "full faith and credit" of the United States
Government. U.S. Treasury obligations include Treasury bills, Treasury notes,
and Treasury bonds. U.S. Treasury obligations also include the separate
principal and interest components of U.S. Treasury obligations which are
traded under the Separate Trading of Registered Interest and Principal of
Securities ("STRIPS") program. Agencies or instrumentalities established by
<PAGE>
the United States Government include the Federal Home Loan Banks, the Federal
Land Bank, the Government National Mortgage Association, the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, the Student
Loan Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing
Bank, the Federal Farm Credit Banks, the Federal Agricultural Mortgage
Corporation, the Resolution Funding Corporation, the Financing Corporation of
America and the Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the United States Government while
others are supported only by the credit of the agency or instrumentality,
which may include the right of the issuer to borrow from the United States
Treasury. In the case of securities not backed by the full faith and credit of
the United States, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the United States in the event the agency or
instrumentality does not meet its commitments. Shares of the Funds are not
guaranteed or backed by the United States Government.
Each Fund may invest in securities issued or guaranteed by any of the entities
listed above or by any other agency or instrumentality established or
sponsored by the United States Government, provided that the securities are
otherwise permissible investments of the Fund. Certain U.S. Government
obligations which have a variable rate of interest readjusted no less
frequently than annually will be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate.
The market value of investments available to the Funds, and therefore each
Fund's yield, will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the
Adviser. The net asset value of the Intermediate Term Government Income Fund
also will fluctuate due to these changes. The portfolio securities held by the
Funds are subject to price fluctuations based upon changes in the level of
interest rates, which will generally result in all those securities changing
in price in the same way, i.e., all those securities experiencing appreciation
when interest rates decline and depreciation when interest rates rise. In
addition, the prepayment experience of the mortgages underlying
mortgage-related U.S. Government obligations may affect the value of, and the
return on an investment in, such securities.
OTHER INVESTMENT TECHNIQUES
The Funds may also engage in the following investment techniques, each of
which may involve certain risks:
MORTGAGE-RELATED U.S. GOVERNMENT OBLIGATIONS. The Intermediate Term
Government Income Fund may invest in mortgage-related U.S. Government
obligations, including GNMA Certificates, FHLMC Certificates and
FNMA Certificates.
GNMA Certificates are U.S. Government obligations guaranteed by the Government
National Mortgage Association (the GNMA) and are mortgage-backed securities
representing part ownership of a pool of mortgage loans. The pool of mortgage
loans underlying the GNMA Certificates is assembled by the issuer, usually a
private mortgage lender. The loans in the pool, issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations, are
either insured by the Federal Housing Administration or the Farmers' Home
Administration or guaranteed by the Veterans Administration. If the pool is
approved by the GNMA, GNMA Certificates are issued and sold to investors such
as the Countrywide Intermediate Term Government Income Fund. The Fund will
invest only in GNMA Certificates of the pass-through type. This type of GNMA
Certificate entitles the holder to receive all interest and principal payments
owed on the pool of mortgage loans, net of fees paid to the issuer and the
GNMA. In addition, the timely payment of interest and principal on this type
of GNMA Certificate is guaranteed by the GNMA, even in the event of the
foreclosure of underlying mortgage loans. The GNMA guarantee is backed by the
full faith and credit of the United States. However, shares of the Fund are
not guaranteed or backed by either the GNMA or the United States Government.
FHLMC Certificates are U.S. Government obligations guaranteed by the Federal
Home Loan Mortgage Corporation (the FHLMC). As with GNMA Certificates, FHLMC
Certificates are pass-through mortgage-backed securities representing part
ownership of a pool of mortgage loans. The FHLMC generally purchases such
mortgage loans from those lenders insured by the Federal Deposit Insurance
Corporation, or Federal Housing Administration mortgagees approved by the
Department of Housing and Urban Development. The securities and guarantees of
the FHLMC are not backed, directly or indirectly, by the full faith and credit
of the United States.
<PAGE>
FNMA Certificates are U.S. Government obligations guaranteed by the Federal
National Mortgage Association (the FNMA). The FNMA is a U.S. Government
sponsored corporation owned entirely by private stockholders. It is subject to
general regulation by the Secretary of Housing and Urban Development. The FNMA
purchases residential mortgages from a list of approved sellers, which include
state and federally-chartered savings and loan associations, mutual savings
banks, commercial banks, credit unions and mortgage banks. Pass-through
securities issued by the FNMA are not backed by the full faith and credit of
the United States, although the Secretary of the Treasury of the United States
has discretionary authority to lend the FNMA up to $2.25 billion outstanding
at any time.
Prepayments of and payments on foreclosures of mortgage loans underlying a
mortgage-related security are passed through to the registered holder with the
regular monthly payments of principal and interest, and have the effect of
reducing future payments. The mortgage loans underlying a mortgage-related
security may be prepaid at any time without penalty. If a prepayment of a
mortgage loan underlying a particular mortgage-related security occurs, the
return to the Fund may be lower if the Fund acquired the security at a premium
over par or higher if the Fund acquired the security at a discount from par.
In addition, prepayments of mortgage loans underlying a particular
mortgage-related security held by the Fund will reduce the market value of the
security to the extent the market value of the security at the time of
prepayment exceeds its par value. In periods of declining mortgage interest
rates, prepayments may occur with increasing frequency because, among other
reasons, mortgagors may be able to refinance outstanding mortgages at lower
interest rates. In general, a decline in interest rates will cause the net
asset value of the Fund to increase to the extent that prepayments do not
occur, while a rise in interest rates will cause the net asset value of the
Fund to decrease.
Some of the pass-through mortgage securities in which the Intermediate Term
Government Income Fund invests may be adjustable rate mortgage securities
("ARMS"). ARMS are collateralized by adjustable rather than fixed-rate
mortgages. The ARMS in which the Fund invests are actively traded. Generally,
adjustable rate mortgages have a specified maturity date and amortize
principal over their life. In periods of declining interest rates there is a
reasonable likelihood that ARMS will experience increased rates of prepayment
of principal. However, the major difference between ARMS and fixed-rate
mortgage securities is that the interest rate can and does change in
accordance with movements in a particular, pre-specified, published interest
rate index. There are two main categories of indices: those based on U.S.
Treasury obligations and those derived from a calculated measure, such as a
cost of funds index or a moving average of mortgage rates. The amount of
interest on an adjustable rate mortgage is calculated by adding a specified
amount to the applicable index, subject to limitations on the maximum and
minimum interest that is charged during the life of the mortgage or to maximum
and minimum changes to that interest rate during a given period. Because the
interest rate on ARMS generally moves in the same direction as market interest
rates, the market value of ARMS tends to be more stable than that of
fixed-rate mortgage securities and ARMS tend to experience lower rates of
prepayment of principal than fixed-rate mortgage securities. However, ARMS are
also less likely than fixed-rate mortgage securities of comparable quality and
maturity to increase significantly in value during periods of declining
interest rates.
DELAYED SETTLEMENT TRANSACTIONS. The Intermediate Term Government Income Fund
may trade securities on a "when-issued" or "to-be-announced" basis.
Obligations issued on a when-issued or to-be-announced basis are settled by
delivery and payment after the date of the transaction, usually within 15 to
45 days. In a to-be-announced transaction, the Fund has committed to
purchasing or selling securities for which all specific information is not yet
known at the time of the trade, particularly the face amount in transactions
involving mortgage-related securities. The Fund will only make commitments to
purchase obligations on a when-issued or to-be-announced basis with the
intention of actually acquiring the obligations, but the Fund may sell these
securities before the settlement date if it is deemed advisable as a matter of
investment strategy or in order to meet its obligations, although it would not
normally expect to do so. The Fund does not currently intend to invest more
than 5% of its net assets in securities purchased on this basis, and the Fund
will not enter into a delayed settlement transaction which settles in more
than 120 days.
REPURCHASE AGREEMENTS. Each Fund may enter into 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
<PAGE>
intends to enter into repurchase agreements only with its Custodian, banks
having assets in excess of $10 billion and the largest and, in the Board of
Trustees' judgment, most creditworthy primary U.S. Government securities
dealers. Each Fund will enter into repurchase agreements which are
collateralized by U.S. Government obligations in which that Fund could invest
directly. Collateral for repurchase agreements is held in safekeeping in the
customer-only account of the Funds' Custodian at the Federal Reserve Bank. At
the time a Fund enters into a repurchase agreement, the value of the
collateral, 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 agrees to maintain sufficient collateral so that the value of
the underlying collateral, including accrued interest, will at all times equal
or exceed the value of the repurchase agreement. A Fund will not enter into a
repurchase agreement not terminable within seven days if, as a result thereof,
more than 10% of the value of the net assets of the Fund would be invested in
such securities and other illiquid securities.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, each Fund may borrow money from banks or other persons in an amount
not exceeding 10% of its total assets. Each Fund may pledge assets in
connection with borrowings but will not pledge more than 15% of its total
assets. Neither Fund will make any additional purchases of portfolio
securities if outstanding borrowings exceed 5% of the value of its total
assets. Borrowing magnifies the potential for gain or loss on the portfolio
securities of the Funds and, therefore, if employed, increases the possibility
of fluctuation in a Fund's net asset value. This is the speculative factor
known as leverage. To reduce the risks of borrowing, the Funds will limit
their borrowings as described above. Each Fund's policies on borrowing and
pledging are fundamental policies which may not be changed without the
affirmative vote of a majority of its outstanding shares.
PORTFOLIO TURNOVER. The Funds do not intend to use short-term trading as a
primary means of achieving their investment objectives. However, each Fund's
rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when portfolio changes are deemed necessary
or appropriate by the Adviser. High turnover involves correspondingly greater
commission expenses and transaction costs and increases the possibility that
the Funds would not qualify as regulated investment companies under Subchapter
M of the Internal Revenue Code. A Fund will not qualify as a regulated
investment company if it derives 30% or more of its gross income from gains
(without offset for losses) from the sale or other disposition of securities
held for less than three months. High turnover may result in a Fund
recognizing greater amounts of income and capital gains, which would increase
the amount of income and capital gains which the Fund must distribute to its
shareholders in order to maintain its status as a regulated investment company
and to avoid the imposition of federal income or excise taxes. See "Taxes."
HOW TO PURCHASE SHARES
==============================================================================
SHORT TERM GOVERNMENT INCOME FUND
Your initial investment in the Short Term Government Income Fund ordinarily
must be at least $1,000 ($250 for tax-deferred retirement plans). Shares of
the Fund are sold on a continuous basis at the net asset value next determined
after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Short Term Government Income 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 "Short Term Government Income Fund." An account
application is included in this Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month.
Certificates representing shares are not issued. The Trust and the Adviser
reserve the rights to limit the amount of investments and to refuse to sell to
any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
<PAGE>
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 Short Term
Government Income 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.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to the Transfer Agent, P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Short
Term Government Income 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 Short Term Government Income
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.
INTERMEDIATE TERM GOVERNMENT INCOME FUND
Your initial investment in the Intermediate Term Government Income Fund
ordinarily must be at least $1,000 ($250 for tax-deferred retirement plans).
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 Term Government Income Fund." An account application is
included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of shares of
the Intermediate Term Government Income Fund. Certificates representing shares
are not ordinarily issued, but you may receive a certificate without charge by
sending a written request to the Transfer Agent. Certificates for fractional
shares will not be issued. If a certificate has been issued to you, you will
not be permitted to redeem shares by check, to redeem or exchange shares by
telephone or to use the automatic withdrawal plan as to those shares. The
Trust and the Adviser reserve the rights to limit the amount of investments
and to refuse to sell to any person.
<PAGE>
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
to the various services (for example, telephone redemptions and exchanges and
check redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers
listed below.
After an initial investment, all investors are considered participants in the
Open Account Program. The Open Account Program helps investors make purchases
of shares of the Intermediate Term Government Income 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 the Transfer Agent, P.O. Box 5354, Cincinnati, Ohio 45201-5354. The
check should be made payable to the "Intermediate Term Government Income
Fund."
Under the Open Account Program, you may also purchase shares of the
Intermediate Term Government Income 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 Intermediate Term Government Income Fund to a current
shareholder, such broker-dealer will receive the concessions described above
with respect to additional investments by the shareholder.
SALES LOAD ALTERNATIVES
The Intermediate Term Government Income Fund offers two classes of shares
which may be purchased at the election of the purchaser. The two classes of
shares each represent interests in the same portfolio of investments of the
Fund, have the same rights and are identical in all material respects except
that (i) Class C shares bear the expenses of higher distribution fees; (ii)
certain other class specific expenses will be borne solely by the class to
which such expenses are attributable, including transfer agent fees
attributable to a specific class of shares, printing and postage expenses
related to preparing and distributing materials to current shareholders of a
specific class, registration fees incurred by a specific class of shares, the
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating
to a class of shares, Trustees' fees or expenses incurred as a result of
issues relating to a specific class of shares and accounting fees and expenses
relating to a specific class of shares; and (iii) each class has exclusive
voting rights with respect to matters relating to its own distribution
arrangements. The net income attributable to Class C shares and the dividends
payable on Class C shares will be reduced by the amount of the incremental
expenses associated with the distribution fee. See "Distribution Plans."
Shares of the Intermediate Term Government Income Fund purchased prior to
February 1, 1994 are Class A shares.
The Fund's alternative sales arrangements permit investors to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold his shares and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur a front-end sales
load and be subject to lower ongoing charges, as discussed below, or to have
all of the initial purchase price invested in the Fund with the investment
<PAGE>
thereafter being subject to higher ongoing charges. A salesperson or any other
person entitled to receive any portion of a distribution fee may receive
different compensation for selling Class A or Class C shares.
As an illustration, investors who qualify for reduced sales loads as described
below, might elect the Class A sales load alternative because similar sales
load reductions are not available for purchases under the Class C sales load
alternative. Moreover, shares acquired under the Class A sales load
alternative would be subject to lower ongoing distribution fees as described
below. Investors not qualifying for reduced initial sales loads who expect to
maintain their investment for an extended period of time might also elect the
Class A sales load alternative because over time the accumulated continuing
distribution fees on Class C shares may exceed the difference in initial sales
loads between Class A and Class C shares. Again, however, such investors must
weigh this consideration against the fact that less of their funds will be
invested initially under the Class A sales load alternative. Furthermore, the
higher ongoing distribution fees will be offset to the extent any return is
realized on the additional funds initially invested under the Class C sales
load alternative.
Some investors might determine that it would be more advantageous to utilize
the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 2% initial sales load on Class A shares who elects to reinvest
dividends in additional shares would have to hold the investment in Class A
shares approximately 3 years before the accumulated ongoing distribution fees
on the alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 3 years, the investor
might consider purchasing Class A shares. This example does not take into
account the time value of money which reduces the impact of the higher ongoing
Class C distribution fees, fluctuations in net asset value or the effect of
different performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Adviser may from time to time pay from its own resources additional cash
bonuses or other incentives to selected dealers in connection with the sale of
shares of the Intermediate Term Government Income Fund. On some occasions,
such bonuses or incentives may be conditioned upon the sale of a specified
minimum dollar amount of the shares of the Fund and/or other funds of
Countrywide Investments during a specific period of time. Such bonuses or
incentives may include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising, sales campaigns and other dealer-sponsored programs or
events.
CLASS A SHARES
Class A shares of the Intermediate Term Government Income Fund are sold on a
continuous basis at the public offering price next determined after receipt of
a purchase order by the Trust. Purchase orders received by dealers prior to
4:00 p.m., Eastern time, on any business day and transmitted to the Adviser by
5:00 p.m., Eastern time, that day are confirmed at the public offering price
determined as of the close of the regular session of trading on the New York
Stock Exchange on that day. It is the responsibility of dealers to transmit
properly completed orders so that they will be received by the Adviser by 5:00
p.m., Eastern time. Dealers may charge a fee for effecting purchase orders.
Direct purchase orders received by the Transfer Agent by 4:00 p.m., Eastern
time, are confirmed at that day's public offering price. Direct investments
received by the Transfer Agent after 4:00 p.m., Eastern time, and orders
received from dealers after 5:00 p.m., Eastern time, are confirmed at the
public offering price next determined on the following business day.
<PAGE>
The public offering price of Class A shares applicable to investors whose
accounts are opened after January 31, 1995 is the next determined net asset
value per share plus a sales load as shown in the following table.
<TABLE>
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
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*
</TABLE>
Investors whose accounts were opened prior to February 1, 1995 are subject to
a different table of sales loads as follows:
<TABLE>
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 .75% .76% .75%
$1,000,000 or more None* None*
<FN>
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .75% may apply with respect to Class A
shares if a commission was paid by the Adviser to a participating
unaffiliated dealer and the shares are redeemed within twelve months from
the date of purchase.
</FN>
</TABLE>
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may
be deemed to be underwriters under the Securities Act of 1933. The Adviser
retains the entire sales load on all direct initial investments in the Fund
and on all investments in accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made after
October 1, 1995 and subsequent purchases further increasing the size of the
account, a dealer's commission of .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 Class A shares of the Intermediate Term Government Income Fund
may be aggregated with concurrent purchases of Class A shares of other funds
of Countrywide Investments. Dealers should contact the Adviser concerning the
applicability and calculation of the dealer's commission in the case of
combined purchases. An exchange from other funds of Countrywide Investments
will not qualify for payment of the dealer's commission, unless such exchange
is from a Countrywide fund with assets as to which a dealer's commission or
similar payment has not been previously paid. Redemptions of Class A shares
may result in the imposition of a contingent deferred sales load if the
dealer's commission described in this paragraph was paid in connection with
the purchase of such shares. See "Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares" below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the tables above. Purchases made in any
load fund distributed by the Adviser pursuant to a Letter of Intent may also
be eligible for the reduced sales loads. The minimum initial investment under
a Letter of Intent is $10,000. The load funds currently distributed by the
Adviser are listed in the Exchange Privilege section of this Prospectus.
Shareholders should contact the Transfer Agent for information about the Right
of Accumulation and Letter of Intent.
<PAGE>
PURCHASES AT NET ASSET VALUE. You may purchase Class A shares of the
Intermediate Term Government Income 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 Class A 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 Term Government Income 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 Class A shares
of the Intermediate Term Government Income Fund at net asset value. To the
extent permitted by regulatory authorities, a bank trust department may charge
fees to clients for whose account it purchases shares at net asset value.
Federal and state credit unions may also purchase Class A shares at net asset
value.
In addition, Class A shares of the Intermediate Term Government Income 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 Class
A shares of the Intermediate Term Government Income 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.
Trustees, directors, officers and employees of the Trust, the Adviser, the
Transfer Agent or any affiliated company, including members of the immediate
family of such individuals and employee benefit plans established by such
entities, may also purchase Class A shares of the Intermediate Term Government
Income Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Intermediate Term Government Income Fund (or shares into which
such Class A shares were exchanged) purchased at net asset value in amounts
totaling $1 million or more, if the dealer's commission described above was
paid by the Adviser and the shares are redeemed within twelve months from the
date of purchase. The contingent deferred sales load will be paid to the
Adviser and will be equal to .75% of the lesser of (1) the net asset value at
the time of purchase of the Class A shares being redeemed or (2) the net asset
value of such Class A shares at the time of redemption. In determining whether
the contingent deferred sales load is payable, it is assumed that shares not
subject to the contingent deferred sales load are the first redeemed followed
by other shares held for the longest period of time. The contingent deferred
sales load will not be imposed upon shares representing reinvested dividends
or capital gains distributions, or upon amounts representing share
appreciation. If a purchase of Class A shares is subject to the contingent
deferred sales load, the investor will be so notified on the confirmation for
such purchase.
Redemptions of such Class A shares of the Intermediate Term Government Income
Fund held for at least 12 months will not be subject to the contingent
deferred sales load and an exchange of such Class A shares into another fund
of Countrywide Investments is not treated as a redemption and will not trigger
the imposition of the contingent deferred sales load at the time of such
exchange. A fund will "tack" the period for which such Class A shares being
exchanged were held onto the holding period of the acquired shares for
purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange;
however, the period of time that the redemption proceeds of such Class A
shares are held in a money market fund will not count toward the holding
period for determining whether a contingent deferred sales load is applicable.
See "Exchange Privilege."
<PAGE>
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 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 applicable sales load
and for purposes of the Letter of Intent and Right of Accumulation privileges,
a purchaser includes an individual, his spouse and their children under the
age of 21, purchasing shares for his or their own account; or a trustee or
other fiduciary purchasing shares for a single fiduciary account although more
than one beneficiary is involved; or employees of a common employer, provided
that economies of scale are realized through remittances from a single source
and quarterly confirmation of such purchases; or an organized group, provided
that the purchases are made through a central administration, or a single
dealer, or by other means which result in economy of sales effort or expense.
Contact the Transfer Agent for additional information concerning purchases at
net asset value or at reduced sales loads.
CLASS C SHARES
Class C shares of the Intermediate Term Government Income Fund are sold on a
continuous basis at the net asset value next determined after receipt of a
purchase order by the Trust. Purchase orders received by dealers prior to 4:00
p.m., Eastern time, on any business day and transmitted to the Adviser by 5:00
p.m., Eastern time, that day are confirmed at the net asset value determined
as of the close of the regular session of trading on the New York Stock
Exchange on that day. It is the responsibility of dealers to transmit properly
completed orders so that they will be received by the Adviser by 5:00 p.m.,
Eastern time. Dealers may charge a fee for effecting purchase orders. Direct
purchase orders received by the Transfer Agent by 4:00 p.m., Eastern time, are
confirmed at that day's net asset value. Direct investments received by the
Transfer Agent after 4:00 p.m., Eastern time, and orders received from dealers
after 5:00 p.m., Eastern time, are confirmed at the net asset value next
determined on the following business day.
A contingent deferred sales load is imposed on Class C shares of the
Intermediate Term Government Income Fund if an investor redeems an amount
which causes the current value of the investor's account to fall below the
total dollar amount of purchase payments subject to the deferred sales load,
except that no such charge is imposed if the shares redeemed have been
acquired through the reinvestment of dividends or capital gains distributions
or to the extent the amount redeemed is derived from increases in the value of
the account above the amount of purchase payments subject to the deferred
sales load.
Whether a contingent deferred sales load is imposed will depend on the amount
of time since the investor made a purchase payment from which an amount is
being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it is
assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that an individual opens an account and purchases 1,000
shares at $10 per share and that six months later the net asset value per
share is $12 and, during such time, the investor has acquired 50 additional
shares through reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not be subject
to the load because of dividend reinvestment. With respect to the remaining
400 shares, the load is applied only to the original cost of $10 per share and
<PAGE>
not to the increase in net asset value of $2 per share. Therefore, $4,000 of
the $5,400 redemption proceeds will be charged the load. At the rate of 1%,
the contingent deferred sales load would be $40. In determining whether an
amount is available for redemption without incurring a deferred sales load,
the purchase payments made for all Class C shares of the Intermediate Term
Government Income Fund in the shareholder's account are aggregated, and the
current value of all such shares is aggregated.
All sales loads imposed on redemptions are paid to the Adviser. The Adviser
intends to pay a commission of 1% of the purchase amount to participating
brokers at the time the investor purchases Class C shares of the Intermediate
Term Government Income Fund.
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986, as amended) of a shareholder (including one who owns the
shares with his or her spouse as a joint tenant with rights of survivorship)
from an account in which the deceased or disabled is named. The Adviser may
require documentation prior to waiver of the charge, including death
certificates, physicians' certificates, etc.
SHAREHOLDER SERVICES
==============================================================================
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may elect
to receive, or may designate another person to receive, monthly or quarterly
payments in a specified amount of not less than $50 each. There is no charge
for this service. Purchases of additional Class A shares of the Intermediate
Term Government Income Fund while the plan is in effect are generally
undesirable because a sales load is incurred whenever purchases are made.
TAX-DEFERRED RETIREMENT PLANS
Shares of either 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 either Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder to
have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Funds.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in either Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds.
<PAGE>
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Intermediate Term Government Income Fund,
you may reinvest all or part of the proceeds without any additional sales
load. This reinvestment must occur within ninety days of the redemption and
the privilege may only be exercised once per year.
HOW TO REDEEM SHARES
==============================================================================
You may redeem shares of either Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described below, less any applicable contingent deferred sales load. Payment
is normally made within three business days after tender in such form,
provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares
of the Funds by certified check or wire.
A contingent deferred sales load may apply to a redemption of Class C shares
of the Intermediate Term Government Income Fund or to a redemption of certain
Class A shares of the Fund purchased at net asset value. See "How to Purchase
Shares." A contingent deferred sales load may be imposed on a redemption of
shares of the Short Term Government Income Fund if such shares had previously
been acquired in connection with an exchange from another fund of Countrywide
Investments which imposes a contingent deferred sales load, as described in
the Prospectus of such other fund.
BY TELEPHONE. You may redeem shares 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
signature must be guaranteed by any of the eligible guarantor institutions
outlined above.
<PAGE>
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 either Fund for
the purpose of redeeming shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer Agent, as
your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check. Checks
will be processed at the net asset value on the day the check is presented to
the Custodian for payment.
If the amount of a check is greater than the value of the shares held in your
account, the check will be returned. Shareholders of the Intermediate Term
Government Income Fund should consider potential fluctuations in the net asset
value of the Fund's shares when writing checks. A check representing a
redemption request will take precedence over any other redemption instructions
issued by a shareholder.
As long as no more than six check redemptions are effected in your account in
any month, there will be no charge for the check redemption privilege.
However, 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. The Transfer Agent charges shareholders its costs for
each stop payment and each check returned for insufficient funds. In addition,
the Transfer Agent reserves the right to make additional charges to recover
the costs of providing the check redemption service. All charges will be
deducted from your account by redemption of shares in your account. The check
redemption procedure may be suspended or terminated at any time upon written
notice by the Trust or the Transfer Agent.
Shareholders of the Intermediate Term Government Income Fund should be aware
that writing a check (a redemption of shares) is a taxable event. Shares of
the Intermediate Term Government Income Fund for which certificates have been
issued may not be redeemed by check. Shareholders who invest in the Short Term
Government Income Fund through a cash sweep or similar program with a
financial institution are not eligible for the checkwriting privilege.
THROUGH BROKER-DEALERS. You may also redeem shares of the Intermediate Term
Government Income Fund by placing a wire redemption request through a
securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per
share next determined after receipt by the Trust or its agent of your wire
redemption request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a redemption
by wire, you will be charged an $8 processing fee by the Funds' 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.
If a certificate for shares of the Intermediate Term Government Income Fund
was issued, it must be delivered to the Transfer Agent, or the dealer in the
case of a wire redemption, duly endorsed or accompanied by a duly endorsed
stock power, with the signature guaranteed by any of the eligible guarantor
institutions outlined above.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested including any
sales load paid, unaffected by market fluctuations), or $250 in the case of
<PAGE>
tax-deferred retirement plans, or such other minimum amount as the Trust may
determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
==============================================================================
Shares of either Fund and of any other fund of Countrywide Investments may be
exchanged for each other.
Shares of the Short Term Government Income Fund and Class A shares of the
Intermediate Term Government Income Fund which are not subject to a contingent
deferred sales load may be exchanged for Class A shares of any other fund and
for shares of any other fund which offers only one class of shares (provided
such shares are not subject to a contingent deferred sales load). A sales load
will be imposed equal to the excess, if any, of the sales load rate applicable
to the shares being acquired over the sales load rate, if any, previously paid
on the shares being exchanged.
Class C shares of the Intermediate Term Government Income Fund, as well as
Class A shares of the Fund subject to a contingent deferred sales load, may be
exchanged, on the basis of relative net asset value per share, for shares of
any other fund which imposes a contingent deferred sales load and for shares
of any fund which is a money market fund. A fund will "tack" the period for
which the shares being exchanged were held onto the holding period of the
acquired shares for purposes of determining if a contingent deferred sales
load is applicable in the event that the acquired shares are redeemed
following the exchange. The period of time that shares are held in a money
market fund will not count toward the holding period for determining whether a
contingent deferred sales load is applicable.
The following are the funds of Countrywide Investments currently offered to
the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
COUNTRYWIDE TAX-FREE TRUST COUNTRYWIDE INVESTMENT TRUST
Tax-Free Money Fund Short Term Government Income Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
COUNTRYWIDE STRATEGIC TRUST
*U.S. Government Securities Fund
*Equity Fund
*Utility Fund
*Treasury Total Return 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.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
==============================================================================
All of the net investment income of each Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Each Fund expects to distribute any net realized long-term capital gains at
least once each year. Management will determine the timing and frequency of
the distributions of any net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option -- income distributions and capital gains distributions
reinvested in additional shares.
Income Option -- income distributions and short-term
capital gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option -- income distributions and capital gains distributions
paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested
in additional shares. All distributions will be based on the net asset value
in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then-current net asset
value and your account will be converted to the Share Option.
An investor in the Intermediate Term Government Income Fund who has received
in cash any dividend or capital gains distribution may return the distribution
within thirty days of the distribution date to the Transfer Agent for
reinvestment at the net asset value next determined after its return. The
investor or his dealer must notify the Transfer Agent that a distribution is
being reinvested pursuant to this provision.
TAXES
==============================================================================
Each Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders.
Each Fund 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 Funds' investment income is
derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
Distributions of net 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 Intermediate Term Government Income
Fund are taxable events on which a shareholder may realize a gain or loss.
The Funds will mail to each of their shareholders a statement indicating the
amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Funds 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
Funds and the use of the Automatic Withdrawal Plan and the Exchange Privilege.
The tax consequences described in this section apply whether distributions are
taken in cash or reinvested in additional shares.
<PAGE>
OPERATION OF THE FUNDS
==============================================================================
The Funds are 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 Funds.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Funds' investments and
their business affairs. The Adviser was organized in 1974 and is also the
investment adviser to three other series of the Trust, six series of
Countrywide Tax-Free Trust and four series of Countrywide Strategic Trust. The
Adviser is an indirect wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending. Each Fund pays the Adviser a
fee equal to the annual rate of .5% of the average value of its daily net
assets up to $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 each Fund. Mr. Weston has
been employed by the Adviser since 1992 and has been managing each Fund's
portfolio since March 1996. Mr. Weston was previously employed by Adex
International, Inc. as a cost control manager.
The Funds are responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees
and expenses of the custodian, transfer agent and accounting and pricing agent
of the Funds, fees and expenses of members of the Board of Trustees who are
not interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders,
expenses of shareholders' meetings and proxy solicitations, and such
extraordinary or non-recurring expenses as may arise, including litigation to
which the Funds may be a party and indemnification of the Trust's officers and
Trustees with respect thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary
of Countrywide Credit Industries, Inc., to serve as the Funds' transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Funds.
The Transfer Agent receives a monthly fee from each Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Funds. In this capacity,
the Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the
Funds) pays the Transfer Agent a fee for these administrative services equal
to the annual rate of .1% of the average value of each Fund's daily net
assets.
The Adviser serves as principal underwriter for the Funds and, as such, is the
exclusive agent for the distribution of shares of the Funds. Robert H.
Leshner, President and a director of the Adviser, is President and a Trustee
of the Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of 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 Funds as a factor in the selection of brokers and
dealers to execute portfolio transactions of the Funds. Subject to the
requirements of the Investment Company Act of 1940 and procedures adopted by
the Board of Trustees, the Funds may execute portfolio transactions through
any broker or dealer and pay brokerage commissions to a broker (i) which is an
<PAGE>
affiliated person of the Trust, or (ii) which is an affiliated person of such
person, or (iii) an affiliated person of which is an affiliated person of the
Trust or the Adviser.
Shares of each Fund have equal voting rights and liquidation rights. Each Fund
shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Intermediate Term Government Income Fund shall vote separately
on matters relating to its plan of distribution pursuant to Rule 12b-1 (see
"Distribution Plans"). When matters are submitted to shareholders for a vote,
each shareholder is entitled to one vote for each full share owned and
fractional votes for fractional shares owned. The Trust does not normally hold
annual meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon the removal
of any Trustee when requested to do so in writing by shareholders holding 10%
or more of the Trust's outstanding shares. The Trust will comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 in order to
facilitate communications among shareholders.
Amivest Corporation, P.O. Box 370 Cooper Station, New York, New York, may be
deemed to control the Intermediate Term Government Income Fund by virtue of
the fact that it owns of record more than 25% of the Fund's shares as of the
date of this Prospectus.
DISTRIBUTION PLANS
==============================================================================
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Short Term Government Income Fund and Class A shares of the
Intermediate Term Government Income Fund have adopted a plan of distribution
(the "Class A Plan") under which such shares may directly incur or reimburse
the Adviser for certain distribution-related expenses, including payments to
securities dealers and others who are engaged in the sale of such shares and
who may be advising investors regarding the purchase, sale or retention of
such shares; expenses of maintaining personnel who engage in or support
distribution of shares or who render shareholder support services not
otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Funds; expenses of obtaining such information, analyses and reports with
respect to marketing and promotional activities as the Trust may, from time to
time, deem advisable; and any other expenses related to the distribution of
such shares.
Pursuant to the Class A Plan, the Funds may make payments to dealers and other
persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of shares of the Funds.
For the fiscal year ended September 30, 1996, the Short Term Government Income
Fund and Class A shares of the Intermediate Term Government Income Fund paid
$89,000 and $90,334, respectively, to the Adviser to reimburse it for payments
made to dealers and other persons who may be advising shareholders in this
regard.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.35% of the Short Term Government Income Fund's average daily net assets and
.35% of the Intermediate Term Government Income Fund's average daily net
assets allocable to Class A shares. Unreimbursed expenditures will not be
carried over from year to year. In the event the Class A Plan is terminated by
a Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Class A Plan
terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Intermediate Term Government Income Fund has adopted a plan of
distribution (the "Class C Plan") which provides for two categories of
payments. First, the Class C Plan provides for the payment to the Adviser of
an account maintenance fee, in an amount equal to an annual rate of .25% of
the Fund's average daily net assets allocable to Class C shares, which may be
paid to other dealers based on the average value of such shares owned by
clients of such dealers. In addition, the Class C shares may directly incur or
reimburse the Adviser in an amount not to exceed .75% per annum of the Fund's
average daily net assets allocable to Class C shares for expenses incurred in
<PAGE>
the distribution and promotion of the Fund's Class C shares, including
payments to securities dealers and others who are engaged in the sale of such
shares and who may be advising investors regarding the purchase, sale or
retention of such shares; expenses of maintaining personnel who engage in or
support distribution of shares or who render shareholder support services not
otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Fund; expenses of obtaining such information, analyses and reports with
respect to marketing and promotional activities as the Trust may, from time to
time, deem advisable; and any other expenses related to the distribution of
such shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class C Plan is terminated by the Intermediate Term Government
Income Fund in accordance with its terms, the Fund will not be required to
make any payments for expenses incurred by the Adviser after the date the
Class C Plan terminates. The Adviser may make payments to dealers and other
persons in an amount up to .75% per annum of the average value of Class C
shares owned by their clients, in addition to the .25% account maintenance fee
described above.
GENERAL. Pursuant to the Plans, the Funds may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to
state law. If a bank were prohibited from continuing to perform all or a part
of such services, management of the Trust believes that there would be no
material impact on the Funds or their shareholders. Banks may charge their
customers fees for offering these services to the extent permitted by
applicable regulatory authorities, and the overall return to those
shareholders availing themselves of the bank services will be lower than to
those shareholders who do not. The Funds may from time to time purchase
securities issued by banks which provide such services; however, in selecting
investments for the Funds, no preference will be shown for such securities.
The National Association of Securities Dealers, 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 share price (net asset
value) of the Short Term Government Income Fund's shares is determined as of
12:30 p.m. and 4:00 p.m., Eastern time. The share price of Class C shares and
the public offering price (net asset value plus applicable sales load) of
Class A shares of the Intermediate Term Government Income Fund are determined
as of the close of the regular session of trading on the New York Stock
Exchange, currently 4:00 p.m., Eastern time. The Trust is open for business on
each day the New York Stock Exchange is open for business and on any other day
when there is sufficient trading in a Fund's investments that its net asset
value might be materially affected. The net asset value per share of each Fund
is calculated by dividing the sum of the value of the securities held by the
Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund,
rounded to the nearest cent.
The Short Term Government Income Fund's portfolio securities are valued on an
amortized cost basis. In connection with the use of the amortized cost method
of valuation, the Short Term Government Income 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
<PAGE>
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 Short Term Government Income Fund to
maintain a stable net asset value per share of $1.
The Intermediate Term Government Income 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) of the Fund for which market
quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees. The
net asset value per share of the Intermediate Term Government Income Fund will
fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
==============================================================================
From time to time, the Short Term Government Income 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 Short Term Government Income 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.
From time to time, the Intermediate Term Government Income Fund may advertise
its "average annual total return." The Fund may also advertise "yield." Both
yield and average annual total return figures are based on historical earnings
and are not intended to indicate future performance. Total return and yield
are computed separately for Class A and Class C shares. The yield of Class A
shares is expected to be higher than the yield of Class C shares due to the
higher distribution fees imposed on Class C shares.
The "average annual total return" of the Intermediate Term Government Income
Fund refers to the average annual compounded rates of return over the most
recent 1, 5 and 10 year periods or, where the Fund has not been in operation
for such period, over the life of the Fund (which periods will be stated in
the advertisement) that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable value of the investment.
The calculation of "average annual total return" assumes the reinvestment of
all dividends and distributions and, for Class A shares, the deduction of the
current maximum sales load from the initial investment. The Intermediate Term
Government Income 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 Intermediate Term Government Income 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 Funds may advertise their performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
<PAGE>
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also
compare their performance to that of other selected mutual funds, averages of
the other mutual funds within their categories as determined by Lipper, or
recognized indicators. In connection with a ranking, the Funds may provide
additional information, such as the particular category of funds to which the
ranking relates, the number of funds in the category, the criteria upon which
the ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. Each Fund may also present its performance and other
investment characteristics, such as volatility or a temporary defense posture,
in light of the Adviser's view of current or past market conditions or
historical trends.
Further information about the Intermediate Term Government Income Fund's
performance is contained in the Trust's annual report which can be obtained by
shareholders at no charge by calling the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629-2050) or by writing to the
Trust at the address on the front of this Prospectus.
<PAGE>
ACCOUNT NO.____________________
(For Fund Use Only)
ACCOUNT APPLICATION(check appropriate Fund)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o Short Term Govt. Income Fund (0) $ _____________
Intermediate Term Govt. Income Fund
o A Shares (1) $ _____________
o C Shares (15) $ _____________
- ----------------------------------------------
FOR BROKER/DEALER USE ONLY
Firm Name:___________________________________
Home Office Address:_________________________
Branch Address:______________________________
Rep Name & No.:______________________________
Rep Signature:_______________________________
- ----------------------------------------------
==============================================================================
o Check or draft enclosed payable to the Fund(s) designated above.
o Bank Wire From: __________________________________________________________
o Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/TAX I.D.#
____________________________________________ ______________________________
Name of Individual, Corporation, (In case of custodial account
Organization, or Minor, etc. please list minor's S.S.#)
____________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other________
ADDRESS PHONE
____________________________________________ ( )__________________________
Street or P.O. Box Business Phone
____________________________________________ ( )__________________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (right of survivorship presumed)
o Partnership
o Corporation
o Trust
o Custodial
o Non-Profit
o Other
Occupation and Employer Name/Address__________________________________________
Are you an associated person of an NASD member? o Yes o 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 your consent to any provision of
this document other than the certifications required to avoid backup
withholding. Check box if appropriate:
o 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.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
==============================================================================
<PAGE>
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
==============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, or upon receipt of and in the amounts of
checks as described below (if checkwriting is selected), to have amounts
withdrawn from my (our) account in any fund of Countrywide Investments (see
prospectus for limitations on this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I
(we) further authorize the used of automated cash transfers to and from the
account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
PLEASE ATTACH A VOIDED CHECK FOR THE ACCOUNT.
Bank Account Number________________Bank Routing Transit Number________________
Name of Account Holder________________________________________________________
Bank Name______________________________Bank Address___________________________
City State
o 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 (COUNTRYWIDE INTERMEDIATE TERM GOVERNMENT INCOME
FUND'S CLASS A SHARES ONLY)
RIGHT OF ACCUMULATION: I apply for Right of Accumulation subject to the
Agent's confirmation of the following holdings of eligible load funds of
Countrywide Investments.
ACCOUNT NUMBER/NAME ACCOUNT NUMBER/NAME
__________________________________ ____________________________________
__________________________________ ____________________________________
LETTER OF INTENT: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o 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):
o $100,000 o $250,000 o $500,000 o $1,000,000
==============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Funds' current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for
shares whether by direct purchase or exchange, to receive dividends and
distributions for automatic reinvestment in additional shares of the Funds 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 Investments, Inc., and their respective
officers, employees, agents and affiliates from any and all liability in the
performance of the acts instructed herein. Neither the Trust, Countrywide Fund
Services, Inc., nor their respective affiliates will be liable for complying
with telephone instructions they reasonably believe to be genuine or for any
loss, damage, cost or expense in acting on such telephone instructions. The
investor(s) will bear the risk of any such loss. The Trust or Countrywide Fund
Services, Inc., or both, will employ reasonable procedures to determine that
telephone instructions are genuine. If the Trust and/or Countrywide Fund
Services, Inc. do not employ such procedures, they may be liable for losses
due to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
_______________________________________ ___________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
_______________________________________ ___________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST
COMPLETE THE RESOLUTION FORM ON THE REVERSE SIDE. UNLESS
OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL
AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
<PAGE>
AUTOMATIC INVESTMENT PLAN (COMPLETE FOR INVESTMENTS INTO THE FUND(S))
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 ABA Routing Number___________________
(Check applicable Fund)
o Short Term Govt. Income Fund FI Account Number____________________
o Intermediate Term Govt. Income Fund
o Checking Account o Savings Account
______________________________________ Please make my automatic investment on:
Name of Financial Institution (FI)
o the last business day of each month
______________________________________ o the 15th day of each month
City State o both the 15th and last business day
X_____________________________________ X____________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant - if any)
it appears on FI Records)
(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 applicable Fund designated above, for purchase
of shares of said 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 Funds to their own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you whether
with or without cause or intentionally or inadvertently, of any such
amount. CFS will defend, at its own cost and expense, any action which
might be brought against you by any person or persons whatsoever because of
your actions taken pursuant to the foregoing request or in any manner arising
by reason of your participation in this arrangement. CFS will refund to you
any amount erroneously paid by you to the Funds 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 Funds may be terminated by thirty (30) days written notice from either
party to the other.
==============================================================================
AUTOMATIC WITHDRAWAL PLAN (COMPLETE FOR WITHDRAWALS FROM THE FUND(S))
This is an authorization for you to withdraw $______ from my mutual
fund account beginning the last business day of the month of ___________.
Please Indicate Withdrawal Schedule Please indicate which Fund:
(Check One): o Short Term Govt. Income Fund
o Intermediate Term Govt. Income Fund
o MONTHLY -- Withdrawals will be made on the last business day of each month.
o QUARTERLY -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o ANNUALLY -- Please make withdrawals on the last business day of the month
of:____________.
Please Select Payment Method (Check One):
o EXCHANGE: Please exchange the withdrawal proceeds into another
Countrywide account number: __ __-__ __ __ __ __ __-__
o CHECK: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o 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.
o 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
o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_________________________________________________________________
Please send to:_______________________________________________________________
Street address City State Zip
==============================================================================
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide 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, and it is
(If checkwriting privilege is not desired, please cross out the following
resolution.)
FURTHER RESOLVED: That the corporation or organization
participate in the Countrywide Pay Through Draft Account (PTDA) and that until
otherwise ordered in writing, Countrywide Fund Services, Inc. is authorized to
make redemptions of shares held by the corporation or organization, and to
make payment from PTDA upon and according to the check, draft, note or order
of this corporation or organization when signed by
____________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the
payee or any other holder without inquiry as to the circumstances of issue or
the disposition or proceeds, whether drawn to the individual order or tendered
in payment of individual obligations of the persons above named or other
officers of this corporation or organization or otherwise.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on at which a quorum was
present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s)
of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
NAME TITLE
______________________________________ _____________________________________
______________________________________ _____________________________________
______________________________________ _____________________________________
Witness my hand and seal of the corporation or organization this___________day
of_______________, 19_______
______________________________________ _____________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
INCOME
PROSPECTUS
FEBRUARY 1, 1997
Revised March 31, 1997
SHORT TERM
GOVERNMENT
INCOME FUND
INTERMEDIATE TERM
GOVERNMENT
INCOME FUND
COUNTRYWIDE
INVESTMENTS
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
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 4
Investment Objectives......................... 7
Investment Policies........................... 7
How to Purchase Shares ....................... 10
Shareholder Services.......................... 17
How to Redeem Shares.......................... 18
Exchange Privilege............................ 20
Dividends and Distributions................... 21
Taxes......................................... 21
Operation of the Funds........................ 22
Distribution Plans............................ 23
Calculation of Share Price and
Public Offering Price.................... 24
Performance Information....................... 25
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
February 1, 1997
Revised March 31, 1997
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
INSTITUTIONAL GOVERNMENT INCOME FUND
==============================================================================
The Institutional Government Income Fund (the "Fund"), a separate series of
Countrywide Investment Trust, seeks high current income, consistent with
protection of capital, by investing primarily in short-term obligations issued
or guaranteed as to principal and interest by the United States Government, its
agencies or instrumentalities.
The Fund is designed primarily for institutions as an economical and convenient
means for the investment of short-term funds. Such institutions include banks
and trust companies, savings institutions, corporations, investment bankers and
brokers, insurance companies, pension funds, employee benefit plans and
educational, religious and charitable institutions. The minimum initial purchase
is $100,000 per investor.
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.
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 February 1, 1997, and
amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by calling
one of the numbers listed below.
- ------------------------------------------------------------------------------
For Information or Assistance in Opening An Account, Please 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
==============================================================================
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases....................................... None
Sales Load Imposed on Reinvested Dividends............................ None
Exchange Fee.......................................................... None
Redemption Fee........................................................ None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees After Waivers......................................... .11% (A)
12b-1 Fees............................................................ .01% (B)
Other Expenses........................................................ .28%
-------
Total Fund Operating Expenses After Waivers........................... .40% (C)
=======
<FN>
(A) Absent waivers of management fees, such fees would have been .20% for
the fiscal year ended September 30, 1996.
(B) The Fund may incur 12b-1 fees in an amount up to .10% of its average
net assets.
(C) Absent waivers of management fees, total Fund operating expenses would
have been .49% for the fiscal year ended September 30, 1996.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year $ 4
3 Years 13
5 Years 22
10 Years 51
Institutions who utilize the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements will be charged a
subaccounting fee based on the level of services. See "Subaccounting Services".
<PAGE>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP,
is an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
September 30, 1996 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<TABLE>
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
FROM DATE OF
PUBLIC
OFFERING
(MAY 23, 1988)
THROUGH
YEAR ENDED SEPTEMBER 30, SEPT.30,
1996 1995 1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period......... $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- ------- -------- -------
Net investment income....... 0.051 0.053 0.034 0.029 0.040 0.065 0.081 0.087 0.025
------- ------- ------- ------- ------- ------- ------- -------- -------
Dividends from net
investment income (0.051) (0.053) (0.034) (0.029) (0.040) (0.065) (0.081) (0.087) (0.025)
------- ------- ------- ------- ------- ------- ------- -------- -------
Net asset value at end
of period................... $1.00 $1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= ======= ======== =======
Total return................ 5.18% 5.42% 3.43% 2.96% 4.08% 6.61% 8.31% 9.07% 7.42% (B)
======= ======= ======= ======= ======= ======= ======= ======== =======
Net assets at end of
period (000's)............. $39,382 $36,009 $41,769 $34,610 $43,432 $62,313 $97,727 $121,826 $70,489
======= ======= ======= ======= ======= ======= ======= ======== =======
Ratio of expenses to
average net assets(A) ... 0.40% 0.40% 0.40% 0.40% 0.37% 0.35% 0.33% 0.32% 0.30% (B)
Ratio of net investment
income to average
net assets .............. 5.06% 5.30% 3.41% 2.92% 4.04% 6.50% 8.04% 8.74% 7.39% (B)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 0.49%, 0.42%, 0.42%, 0.48%, 0.43%, 0.36% and 0.34%
for the years ended September 30, 1996, 1995, 1994, 1993, 1992, 1991 and
1989, respectively.
(B) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
==============================================================================
The Fund is a series of Countrywide Investment Trust (the "Trust"). The
investment objective of the Fund is to seek high current income, consistent with
protection of capital. The Fund seeks to achieve its investment objective by
investing primarily in obligations issued or guaranteed as to principal and
interest by the United States Government, its agencies or instrumentalities
("U.S. Government obligations" described below), maturing within thirteen months
or less with a dollar-weighted average portfolio maturity of 90 days or less.
The Fund is not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved. The Fund's investment
objective may be changed by the Board of Trustees without shareholder approval,
but only after notification has been given to shareholders and after this
Prospectus has been revised accordingly. If there is a change in the Fund's
investment objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Fund are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
The Fund invests in U.S. Government obligations. "U.S. Government obligations"
include securities which are issued or guaranteed by the United States Treasury,
by various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government. U.S. Treasury obligations are backed by the "full faith and credit"
of the United States Government. U.S. Treasury obligations include Treasury
bills, Treasury notes, and Treasury bonds. U.S. Treasury obligations also
include the separate principal and interest components of U.S. Treasury
obligations which are traded under the Separate Trading of Registered Interest
and Principal of Securities ("STRIPS") program. Agencies or instrumentalities
established by the United States Government include the Federal Home Loan Banks,
the Federal Land Bank, the Government National Mortgage Association, the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation, the
Student Loan Marketing Association, the Small Business Administration, the Bank
for Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing
Bank, the Federal Farm Credit Banks, the Federal Agricultural Mortgage
Corporation, the Resolution Funding Corporation, the Financing Corporation of
America and the Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the United States Government while
others are supported only by the credit of the agency or instrumentality, which
may include the right of the issuer to borrow from the United States Treasury.
In the case of securities not backed by the full faith and credit of the United
States, the investor must look principally to the agency issuing or guaranteeing
the obligation for ultimate repayment, and may not be able to assert a claim
against the United States in the event the agency or instrumentality does not
meet its commitments. Shares of the Fund are not guaranteed or backed by the
United States Government.
The Fund may invest in securities issued or guaranteed by any of the entities
listed above or by any other agency or instrumentality established or sponsored
by the United States Government, provided that the securities are otherwise
permissible investments of the Fund. Certain U.S. Government obligations which
have a variable rate of interest readjusted no less frequently than annually
will be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
The market value of investments available to the Fund and therefore 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 price in the same way, i.e., all those securities
experiencing appreciation when interest rates decline and depreciation when
interest rates rise. In addition, the prepayment experience of the mortgages
underlying mortgage-related U.S. Government obligations, such as obligations
issued by the Government National Mortgage Association, the Federal National
Mortgage Association or the Federal Home Loan Mortgage Corporation, may affect
the value of, and the return on an investment in, such securities.
<PAGE>
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
DELAYED SETTLEMENT TRANSACTIONS. Obligations issued on a when-issued or
to-be-announced basis are settled by delivery and payment after the date of the
transaction, usually within 15 to 45 days. In a to-be-announced transaction, the
Fund has committed to purchasing or selling securities for which all specific
information is not yet known at the time of the trade, particularly the face
amount in transactions involving mortgage-related securities. The Fund will only
make commitments to purchase obligations on a when-issued or to-be-announced
basis with the intention of actually acquiring the obligations, but the Fund may
sell these securities before the settlement date if it is deemed advisable as a
matter of investment strategy or in order to meet its obligations, although it
would not normally expect to do so. The Fund does not currently intend to invest
more than 5% of its net assets in securities purchased on this basis, and the
Fund will not enter into a delayed settlement transaction which settles in more
than 120 days.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the 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, the Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
the Fund intends to enter into repurchase agreements only with its Custodian,
banks having assets in excess of $10 billion and the largest and, in the Board
of Trustees' judgment, most creditworthy primary U.S. Government securities
dealers. The Fund will enter into repurchase agreements which are collateralized
by U.S. Government obligations. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's Custodian at the Federal
Reserve Bank. At the time the Fund enters into a repurchase agreement, the value
of the collateral, 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 agrees to maintain sufficient collateral so that the value
of the underlying collateral, including accrued interest, will at all times
equal or exceed the value of the repurchase agreement. The 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 the net assets of the Fund would be
invested in such securities and other illiquid securities.
BORROWING AND PLEDGING. The Fund may borrow money from banks (provided there is
300% asset coverage) or from banks or other persons for temporary purposes (in
an amount not exceeding 5% of its total assets). The Fund will not make any
borrowing which would cause its outstanding borrowings to exceed one-third of
the value of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than one-third of its total assets. The Fund
will not make any additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total assets. Borrowing magnifies the
potential for gain or loss on the Fund's portfolio securities and, therefore, if
employed, increases the possibility of fluctuation in its net asset value. This
is the speculative factor known as leverage. The Fund's policies on borrowing
and pledging are fundamental policies which may not be changed without the
affirmative vote of a majority of its outstanding shares.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid high-grade debt obligations, with the Fund's Custodian in
an amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
<PAGE>
HOW TO PURCHASE SHARES
==============================================================================
Your initial investment in the Fund ordinarily must be at least $100,000. Shares
of the Fund are sold on a continuous basis at the net asset value next
determined after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Institutional
Government Income 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) 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.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by mail
or by bank wire. Checks should be sent to the Transfer Agent, P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Institutional
Government Income 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.
<PAGE>
HOW TO REDEEM SHARES
==============================================================================
You may redeem shares of the Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
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.
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.
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 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.
ADDITIONAL REDEMPTION INFORMATION. There is currently no charge for processing
wire redemptions. However, the Trust reserves the right, upon thirty days'
written notice, to make reasonable charges for wire redemptions. All charges
will be deducted from your account by redemption of shares in your account. Your
bank or brokerage firm may also impose a charge for processing the wire. In the
event that wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
<PAGE>
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an Automated
Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $100,000 (based on actual amounts invested, unaffected by
market fluctuations) or such other minimum amount as the Trust may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given thirty days to increase the value of your
account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
==============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other. A sales load will be imposed equal to the excess, if
any, of the sales load rate applicable to the shares being acquired over the
sales load rate, if any, previously paid on the shares being exchanged.
The following are the funds of Countrywide Investments currently offered to the
public. Funds which may be subject to a front-end or contingent deferred sales
load are indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C> <C>
Countrywide Tax-Free Trust Countrywide Investment Trust Countrywide Strategic Trust
Tax-Free Money Fund Short Term Government Income Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund *Equity Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund *Utility Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government *Treasury Total Return Fund
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
</TABLE>
You may request an exchange by sending a written request to the Transfer Agent.
The request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to shareholders. An exchange results in a
sale of fund shares, which may cause you to recognize a capital gain or loss.
Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
SUBACCOUNTING SERVICES
==============================================================================
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The Transfer Agent may
charge a subaccounting fee based on the level of services rendered. Institutions
holding Fund shares in a fiduciary, agency, custodial or similar capacity may
charge or pass through subaccounting fees as part of or in addition to normal
trust or agency account fees. This Prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fee charged for those services and any
restrictions and limitations imposed.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
==============================================================================
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year.
Dividends are automatically reinvested in additional shares of the Fund (the
Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option.
TAXES
==============================================================================
The Fund has qualified in all prior years and intends to continue to qualify for
the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The Fund 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.
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. The tax consequences described in this section
apply whether distributions are taken in cash or reinvested in additional
shares.
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
four other series of the Trust, six series of Countrywide Tax-Free Trust and
four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.2% of the average value of its daily net assets.
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.
<PAGE>
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services 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. Robert H. Leshner,
President and a director of the Adviser, is President and a Trustee of the
Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of 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
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. When matters are submitted
to shareholders for a vote, each shareholder is entitled to one vote for each
full share owned and fractional votes for fractional shares owned. The Trust
does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
DISTRIBUTION PLAN
==============================================================================
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund has
adopted a plan of distribution (the "Plan") under which the Fund may directly
incur or reimburse the Adviser for certain distribution-related expenses,
including payments to securities dealers and others who are engaged in the sale
of shares of the Fund and who may be advising investors regarding the purchase,
sale or retention of Fund shares; expenses of maintaining personnel who engage
in or support distribution of shares or who render shareholder support services
not otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Fund; 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 .1% of the
Fund's average daily net assets. Unreimbursed expenditures will not be carried
over from year to year. In the event the Plan is terminated by the Fund in
accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Adviser after the date the Plan terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
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.
<PAGE>
ACCOUNT NO. 23- ______________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name: __________________________________
Home Office Address: ________________________
Branch Address: _____________________________
Rep Name & No.: _____________________________
Account Application
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Institutional Government
Income Fund
Initial Investment of $__________________________ ($100,000 Minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From: ___________________________________________________________
o Exchange From: ____________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
___________________________________________________ _________________________
Name of Individual, Corporation, Organization, (In case of custodial
or Minor, etc. account please list
minor's S.S.#)
___________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other ____
Address Phone
___________________________________________________ ( )__________________
Street or P.O. Box Business Phone
___________________________________________________ ( )__________________
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (right of survivorship
presumed) o Partnership o Corporation o Trust o Custodial o Non-Profit
o Other
==============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. The
Internal Revenue Service does not require your consent to any provision of this
document other than the certifications required to avoid backup withholding.
Check box if appropriate:
o 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.
o 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.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions paid
in cash.
==============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, 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 used of automated cash transfers to and from
the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Please attach a voided check for the account.
Bank Account Number_______________ Bank Routing Transit Number________________
Name of Account Holder________________________________________________________
Bank Name________________Bank Address_________________________________________
City State
==============================================================================
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 Investments,
Inc., and their respective officers, employees, agents and affiliates from any
and all liability in the performance of the acts instructed herein. Neither the
Trust, Countrywide Fund Services, Inc., nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The investor(s) will bear the risk of any such loss. The Trust or
Countrywide Fund Services, Inc., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or
Countrywide Fund Services, Inc. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
______________________________________ ______________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
______________________________________ ______________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, trusts and other organizations must complete the
resolution form on the reverse side. Unless otherwise specified, each joint
owner shall have full authority to act on behalf of the account.
<PAGE>
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.
<PAGE>
INCOME
PROSPECTUS
FEBRUARY 1, 1997
Revised March 31, 1997
INSTITUTIONAL
GOVERNMENT
INCOME FUND
COUNTRYWIDE
INVESTMENTS
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
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 3
Investment Objective and Policies............. 4
How to Purchase Shares ....................... 6
How to Redeem Shares.......................... 7
Exchange Privilege............................ 8
Subaccounting Services ....................... 8
Dividends and Distributions................... 9
Taxes......................................... 9
Operation of the Fund......................... 9
Distribution Plan............................. 10
Calculation of Share Price.................... 11
Performance Information....................... 11
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
February 1, 1997
Revised March 31, 1997
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
==============================================================================
The Adjustable Rate U.S. Government Securities Fund (the "Fund"), a separate
series of Countrywide Investment Trust, seeks high current income, consistent
with lower volatility of principal, by investing primarily in mortgage-related
securities created from pools of adjustable rate mortgages which are issued or
guaranteed by the United States Government, its agencies or instrumentalities.
The Fund offers two classes of shares: Class A shares (sold subject to a maximum
2% front-end sales load and a 12b-1 fee of up to .35% of average daily net
assets) and Class C shares (sold subject to a 1% contingent deferred sales load
for a one-year period and a 12b-1 fee of up to 1% of average daily net assets).
Each Class A and Class C share of the Fund represents identical interests in the
Fund's investment portfolio and has the same rights, except that (i) Class C
shares bear the expenses of higher distribution fees, which will cause Class C
shares to have a higher expense ratio and to pay lower dividends than those
related to Class A shares; (ii) certain other class specific expenses will be
borne solely by the class to which such expenses are attributable; and (iii)
each class has exclusive voting rights with respect to matters relating to its
own distribution arrangements.
SHARES OF THE 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.
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 February 1, 1997, and
amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by calling
one of the numbers listed below.
- ------------------------------------------------------------------------------
For Information or Assistance in Opening an Account, Please 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>
<TABLE>
<CAPTION>
EXPENSE INFORMATION
===========================================================================================================
CLASS A CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).... 2% None
Maximum Contingent Deferred Sales Load (as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends..................................... None None
Exchange Fee................................................................... None None
Redemption Fee................................................................. None ** None **
Check Redemption Processing Fee (per check):
First Six Checks per Month................................................... None None
Additional Checks per Month.................................................. $0.25 $0.25
<FN>
* 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."
</FN>
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) SHARES SHARES
<S> <C> <C>
Management Fees After Waivers(A) .............................................. .00% .00%
12b-1 Fees(B) ................................................................. .11% .01%
Other Expenses After Reimbursements(C) ........................................ .64% 1.39%
-------- -------
Total Fund Operating Expenses After Waivers and Expense Reimbursements(D) ..... .75% 1.40%
======== =======
<FN>
(A) Absent waivers of management fees, such fees would have been .50% for the
fiscal year ended September 30, 1996.
(B) Class A shares may incur 12b-1 fees in an amount up to .35% of average net
assets and Class C shares may incur 12b-1 fees in an amount up to 1.00% of
average net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the National
Association of Securities Dealers.
(C) Absent expense reimbursements by the Adviser, other expenses would have been
.85% and 7.07% for Class A and Class C shares, respectively, for the fiscal
year ended September 30, 1996.
(D Absent waivers of management fees and expense reimbursements by the Adviser,
total Fund operating expenses would have been 1.46% and 7.58% for Class A and
Class C shares, respectively, for the fiscal year ended September 30, 1996.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year except that other
expenses for Class C shares of the Fund have been restated to reflect an
anticipated decrease in the amount of expense reimbursements to be made by the
Adviser during 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:
Class A Class C
Shares Shares
1 Year $ 28 $ 24
3 Years 43 44
5 Years 61 77
10 Years 111 168
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP, is an
integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
September 30, 1996 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - CLASS A
==============================================================================================================
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1994 1993(A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ........ $ 9.78 $ 9.82 $ 10.01 $ 10.00
------------ -------------- ------------- --------------
Income from investment operations:
Net investment income ...................... 0.57 0.55 0.39 0.28
Net realized and unrealized gains
(losses) on investments .................. 0.03 (0.04) (0.18) 0.01
------------ -------------- ------------- --------------
Total from investment operations .............. 0.60 0.51 0.21 0.29
------------ -------------- ------------- --------------
Less distributions:
Dividends from net investment income........ (0.57) (0.55) (0.39) (0.28)
Distributions from net realized gains....... -- -- (0.01) --
------------ -------------- ------------- --------------
Total distributions ........................... (0.57) (0.55) (0.40) (0.28)
------------ -------------- ------------- --------------
Net asset value at end of period .............. $ 9.81 $ 9.78 $ 9.82 $ 10.01
============ ============== ============= ==============
Total return(B) ............................... 6.32% 5.33% 2.09% 4.56%(D)
============ ============== ============= ==============
Net assets at end of period (000's) ........... $ 11,732 $ 20,752 $ 37,572 $ 24,400
============ ============== ============= ==============
Ratio of expenses to average net assets(C) .... 0.75% 0.75% 0.68% 0.22%(D)
Ratio of net investment income to average net assets 5.91% 5.57% 3.91% 4.17%(D)
Portfolio turnover rate ....................... 44% 115% 81% 170%(D)
- ------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of Class A shares
(February 10, 1993) through September 30, 1993.
(B) The total returns shown do not include the effect of applicable sales loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 1.46%, 1.21%,
0.78% and 1.18%(D) for the periods ended September 30, 1996, 1995, 1994
and 1993, respectively.
(D) Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - CLASS C
=============================================================================================================
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period ........................................ $ 9.78 $ 9.76
------------ -------------
Income from investment operations:
Net investment income ...................................................... 0.52 0.22
Net realized and unrealized gains on investments ........................... 0.03 0.02
------------ -------------
Total from investment operations .............................................. 0.55 0.24
------------ -------------
Less distributions:
Dividends from net investment income........................................ (0.52) (0.22)
------------ -------------
Total distributions ........................................................... (0.52) (0.22)
------------ -------------
Net asset value at end of period .............................................. $ 9.81 $ 9.78
============ =============
Total return(B) ............................................................... 5.77% 5.87%(D)
============ =============
Net assets at end of period (000's) ........................................... $ 629 $ 86
============ =============
Ratio of expenses to average net assets(C) .................................... 1.24% 1.24%(D)
Ratio of net investment income to average net assets .......................... 5.17% 5.38%(D)
Portfolio turnover rate ....................................................... 44% 115%(D)
- ------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of Class C shares
(May 1, 1995) through September 30, 1995.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 7.58% and 18.84%(D) for the
periods ended September 30, 1996 and 1995, respectively.
(D) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
==============================================================================
The Fund is a series of Countrywide Investment Trust (the "Trust"). The Fund
seeks high current income, consistent with lower volatility of principal. The
Fund seeks to achieve its investment objective by investing primarily in
mortgage-related securities created from pools of adjustable rate mortgages
which are guaranteed as to principal and interest by the United States
Government, its agencies or instrumentalities.
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 65% of the Fund's total assets will be
invested in adjustable rate mortgage securities which have interest rates that
are reset at periodic intervals and which are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. It is anticipated that by
investing primarily in mortgage-related securities which have variable rates of
interest, the Fund will achieve a less volatile net asset value than is
characteristic of mutual funds that invest primarily in mortgage-related
securities paying a fixed rate of interest. Mortgage-related securities eligible
for purchase by the Fund are described below.
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 interest rates decline
and depreciation when interest rates rise. In addition, the prepayment
experience of the mortgages underlying mortgage-related U.S. Government
obligations may affect the value of, and the return on an investment in, such
securities.
In addition to mortgage-related securities, the Fund may invest in all types of
U.S. Government obligations (described below). For defensive or liquidity
purposes, the Fund may temporarily hold up to 10% of its assets in short-term
obligations such as bank debt instruments (certificates of deposit, bankers'
acceptances and time deposits) or repurchase agreements collateralized by U.S.
Government obligations.
It is the current policy of the Fund to limit its investments and transactions
to those investments and transactions permissible for Federal credit unions
pursuant to 12 U.S.C. Section 1757(7) and (8) and 12 CFR Part 703. If this
policy is changed as to permit the Fund to make portfolio investments and engage
in transactions not permissible for Federal credit unions, the Trust will so
notify all Federal credit union shareholders.
MORTGAGE-RELATED U.S. GOVERNMENT OBLIGATIONS. Mortgage-related U.S.
Government obligations include GNMA Certificates, FHLMC Certificates
and FNMA Certificates.
GNMA Certificates are U.S. Government obligations guaranteed by the Government
National Mortgage Association (the GNMA) and are mortgage-backed securities
representing part ownership of a pool of mortgage loans. The pool of mortgage
loans underlying the GNMA Certificates is assembled by the issuer, usually a
private mortgage lender. The loans in the pool, issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations, are either
insured by the Federal Housing Administration or the Farmers' Home
Administration or guaranteed by the Veterans Administration. If the pool is
approved by the GNMA, GNMA Certificates are issued and sold to investors such as
the Fund. The Fund will invest only in GNMA Certificates of the pass-through
type. This type of GNMA Certificate entitles the holder to receive all interest
and principal payments owed on the pool of mortgage loans, net of fees paid to
the issuer and the GNMA. In addition, the timely payment of interest and
principal on this type of GNMA Certificate is guaranteed by the GNMA, even in
<PAGE>
the event of the foreclosure of underlying mortgage loans. The GNMA guarantee is
backed by the full faith and credit of the United States. However, shares of the
Fund are not guaranteed or backed by either the GNMA or the United States
Government.
FHLMC Certificates are U.S. Government obligations guaranteed by the Federal
Home Loan Mortgage Corporation (the FHLMC). As with GNMA Certificates, FHLMC
Certificates are pass-through mortgage-backed securities representing part
ownership of a pool of mortgage loans. The FHLMC generally purchases such
mortgage loans from those lenders insured by the Federal Deposit Insurance
Corporation, or Federal Housing Administration mortgagees approved by the
Department of Housing and Urban Development. The securities and guarantees of
the FHLMC are not backed, directly or indirectly, by the full faith and credit
of the United States.
FNMA Certificates are U.S. Government obligations guaranteed by the Federal
National Mortgage Association (the FNMA). The FNMA is a U.S. Government
sponsored corporation owned entirely by private stockholders. It is subject to
general regulation by the Secretary of Housing and Urban Development. The FNMA
purchases residential mortgages from a list of approved sellers, which include
state and federally-chartered savings and loan associations, mutual savings
banks, commercial banks, credit unions and mortgage banks. Pass-through
securities issued by the FNMA are not backed by the full faith and credit of the
United States, although the Secretary of the Treasury of the United States has
discretionary authority to lend the FNMA up to $2.25 billion outstanding at any
time.
Prepayments of and payments on foreclosures of mortgage loans underlying a
mortgage-related security are passed through to the registered holder with the
regular monthly payments of principal and interest, and have the effect of
reducing future payments. The mortgage loans underlying a mortgage-related
security may be prepaid at any time without penalty. If a prepayment of a
mortgage loan underlying a particular mortgage-related security occurs, the
return to the Fund may be lower if the Fund acquired the security at a premium
over par or higher if the Fund acquired the security at a discount from par. In
addition, prepayments of mortgage loans underlying a particular mortgage-related
security held by the Fund will reduce the market value of the security to the
extent the market value of the security at the time of prepayment exceeds its
par value. In periods of declining mortgage interest rates, prepayments may
occur with increasing frequency because, among other reasons, mortgagors may be
able to refinance outstanding mortgages at lower interest rates. In general, a
decline in interest rates will cause the net asset value of the Fund to increase
to the extent that prepayments do not occur, while a rise in interest rates will
cause the net asset value of the Fund to decrease.
Most of the pass-through mortgage securities in which the Fund invests will be
adjustable rate mortgage securities ("ARMS"). ARMS are collateralized by
adjustable rather than fixed-rate mortgages. The ARMS in which the Fund invests
are actively traded. Generally, adjustable rate mortgages have a specified
maturity date and amortize principal over their life. In periods of declining
interest rates there is a reasonable likelihood that ARMS will experience
increased rates of prepayment of principal. However, the major difference
between ARMS and fixed-rate mortgage securities is that the interest rate can
and does change in accordance with movements in a particular, pre-specified,
published interest rate index. There are two main categories of indices: those
based on U.S. Treasury obligations and those derived from a calculated measure,
such as a cost of funds index or a moving average of mortgage rates. The amount
of interest on an adjustable rate mortgage is calculated by adding a specified
amount to the applicable index, subject to limitations on the maximum and
minimum interest that is charged during the life of the mortgage or to maximum
and minimum changes to that interest rate during a given period. Because the
interest rate on ARMS generally moves in the same direction as market interest
rates, the market value of ARMS tends to be more stable than that of fixed-rate
mortgage securities and ARMS tend to experience lower rates of prepayment of
principal than fixed-rate mortgage securities. However, ARMS are also less
likely than fixed-rate mortgage securities of comparable quality and maturity to
increase significantly in value during periods of declining interest rates.
<PAGE>
The adjustable interest rate feature of the mortgages underlying ARMS will
generally act as a buffer to reduce sharp changes in the Fund's net asset value
in response to normal interest rate fluctuations. As the interest rates on the
mortgages underling ARMS are reset periodically, yields of portfolio securities
will gradually align themselves to reflect changes in market rates and should
cause the net asset value of the Fund to fluctuate less dramatically than it
would if the Fund invested in more traditional long-term, fixed-rate debt
securities. However, during the periods of rising interest rates, changes in the
coupon rate lag behind changes in the market rate resulting in possibly a
slightly lower net asset value until the coupon resets to market rates. Thus,
investors could suffer some principal loss if they sold their shares of the Fund
before the interest rates on the underlying mortgages are adjusted to reflect
current market rates.
The underlying mortgages which collateralize the ARMS in which the Fund invests
will frequently have caps and floors which limit the maximum amount by which the
loan rate to the residential borrower may change up or down (1) per reset or
adjustment interval and (2) over the life of the loan. Some residential mortgage
loans restrict periodic adjustments by limiting changes in the borrower's
monthly principal and interest payments rather than limiting interest rate
changes. These payment caps may result in negative amortization. The value of
mortgage-related securities in which the Fund invests may be affected if market
interest rates rise or fall faster and farther than the allowable caps or floors
on the underlying residential mortgage loans. Additionally, even though the
interest rates on the underlying residential mortgages are adjustable,
amortization and prepayments may occur, thereby causing the effective maturities
of the mortgage-related securities in which the Fund invests to be shorter than
the maturities stated in the underlying mortgages.
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include securities
which are issued or guaranteed by the United States Treasury, by various
agencies of the United States Government, and by various instrumentalities which
have been established or sponsored by the United States Government. U.S.
Treasury obligations are backed by the "full faith and credit" of the United
States Government. U.S. Treasury obligations include Treasury bills, Treasury
notes, and Treasury bonds. U.S. Treasury obligations also include the separate
principal and interest components of U.S. Treasury obligations which are traded
under the Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Agencies or instrumentalities established by the United
States Government include the Federal Home Loan Banks, the Federal Land Bank,
the GNMA, the FNMA, the FHLMC, the Student Loan Marketing Association, the Small
Business Administration, the Bank for Cooperatives, the Federal Intermediate
Credit Bank, the Federal Financing Bank, the Federal Farm Credit Banks, the
Federal Agricultural Mortgage Corporation, the Resolution Funding Corporation,
the Financing Corporation of America and the Tennessee Valley Authority. Some of
these securities are supported by the full faith and credit of the United States
Government while others are supported only by the credit of the agency or
instrumentality, which may include the right of the issuer to borrow from the
United States Treasury. In the case of securities not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assert a claim against the United States in the event the agency
or instrumentality does not meet its commitments. Shares of the Fund are not
guaranteed or backed by the United States Government.
The Fund may invest in securities issued or guaranteed by any of the entities
listed above or by any other agency or instrumentality established or sponsored
by the United States Government, provided that the securities are otherwise
permissible investments of the Fund. Certain U.S. Government obligations which
have a variable rate of interest readjusted no less frequently than annually
will be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
<PAGE>
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
DELAYED SETTLEMENT TRANSACTIONS. Obligations issued on a when-issued or
to-be-announced basis are settled by delivery and payment after the date of the
transaction, usually within 15 to 45 days. In a to-be-announced transaction, the
Fund has committed to purchasing or selling securities for which all specific
information is not yet known at the time of the trade, particularly the face
amount in transactions involving mortgage-related securities. The Fund will only
make commitments to purchase obligations on a when-issued or to-be-announced
basis with the intention of actually acquiring the obligations, but the Fund may
sell these securities before the settlement date if it is deemed advisable as a
matter of investment strategy or in order to meet its obligations, although it
would not normally expect to do so. The Fund will not enter into a delayed
settlement transaction which settles in more than 120 days.
Purchases of securities on a when-issued or to-be-announced basis are subject to
market fluctuations and their current value is determined in the same manner as
other portfolio securities. When effecting such purchases for the Fund, a
segregated account of cash or U.S. Government obligations of the Fund in an
amount sufficient to make payment for the portfolio securities to be purchased
will be maintained with the Fund's Custodian at the trade date and valued daily
at market for the purpose of determining the adequacy of the securities in the
account. If the market value of segregated securities declines, additional cash
or U.S. Government obligations will be segregated on a daily basis so that the
market value of the Fund's segregated assets will equal the amount of the Fund's
commitments to purchase when-issued obligations and securities on a
to-be-announced basis. The Fund's purchase of securities on a when-issued or
to-be-announced basis may increase its overall investment exposure and involves
a risk of loss if the value of the securities declines prior to the settlement
date or if the broker-dealer selling the securities fails to deliver after the
value of the securities has risen.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the 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, the Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
the Fund intends to enter into repurchase agreements only with its Custodian,
banks having assets in excess of $10 billion and the largest and, in the Board
of Trustees' judgment, most creditworthy primary U.S. Government securities
dealers. The Fund will enter into repurchase agreements which are collateralized
by U.S. Government obligations. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's Custodian at the Federal
Reserve Bank. At the time the Fund enters into a repurchase agreement, the value
of the collateral, 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 agrees to maintain sufficient collateral so that the value
of the underlying collateral, including accrued interest, will at all times
equal or exceed the value of the repurchase agreement. The 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 the net assets of the Fund would be
invested in such securities and other illiquid securities.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, the Fund may borrow money from banks or other persons in an amount not
exceeding 10% of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than 15% of its total assets. The Fund will
not make any additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total assets. Borrowing magnifies the
potential for gain or loss on the Fund's portfolio securities and, therefore, if
employed, increases the possibility of fluctuation in its net asset value. This
is the speculative factor known as leverage. To reduce the risks of borrowing,
the Fund will limit its borrowings as described above. The Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares.
<PAGE>
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid high-grade debt obligations, with the Fund's Custodian in
an amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading as a
primary means of achieving its investment objective. However, the Fund's rate of
portfolio turnover will depend upon market and other conditions, and it will not
be a limiting factor when portfolio changes are deemed necessary or appropriate
by the Adviser. High turnover involves correspondingly greater commission
expenses and transaction costs and increases the possibility that the Fund would
not qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code. The Fund will not qualify as a regulated investment company if it
derives 30% or more of its gross income from gains (without offset for losses)
from the sale or other disposition of securities held for less than three
months. High turnover may result in the Fund recognizing greater amounts of
income and capital gains, which would increase the amount of income and capital
gains which the Fund must distribute to its shareholders in order to maintain
its status as a regulated investment company and to avoid the imposition of
federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
==============================================================================
Your initial investment in the Fund ordinarily must be at least $1,000 ($250 for
tax-deferred retirement plans). 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 "Adjustable Rate U.S. Government Securities 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 ordinarily issued, but you may
receive a certificate without charge by sending a written request to the
Transfer Agent. Certificates for fractional shares will not be issued. If a
certificate has been issued to you, you will not be permitted to redeem shares
by check, to redeem or exchange shares by telephone or to use the automatic
withdrawal plan as to those shares. 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.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address
or numbers listed below.
<PAGE>
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 the Transfer Agent, P.O. Box 5354, Cincinnati, Ohio
45201-5354. The check should be made payable to the "Adjustable Rate U.S.
Government Securities 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.
SALES LOAD ALTERNATIVES
The Fund offers two classes of shares which may be purchased at the election of
the purchaser. The two classes of shares each represent interests in the same
portfolio of investments of the Fund, have the same rights and are identical in
all material respects except that (i) Class C shares bear the expenses of higher
distribution fees; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable, including transfer
agent fees attributable to a specific class of shares, printing and postage
expenses related to preparing and distributing materials to current shareholders
of a specific class, registration fees incurred by a specific class of shares,
the expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements. The net
income attributable to Class C shares and the dividends payable on Class C
shares will be reduced by the amount of the incremental expenses associated with
the distribution fee. See "Distribution Plans." Shares of the Fund purchased
prior to May 2, 1995 are Class A shares.
The Fund's alternative sales arrangements permit investors to choose the method
of purchasing shares that is most beneficial given the amount of the purchase,
the length of time the investor expects to hold his shares and other relevant
circumstances. Investors should determine whether under their particular
circumstances it is more advantageous to incur a front-end sales load and be
subject to lower ongoing charges, as discussed below, or to have all of the
initial purchase price invested in the Fund with the investment thereafter being
subject to higher ongoing charges. A salesperson or any other person entitled to
receive any portion of a distribution fee may receive different compensation for
selling Class A or Class C shares.
As an illustration, investors who qualify for reduced sales loads as described
below, might elect the Class A sales load alternative because similar sales load
reductions are not available for purchases under the Class C sales load
alternative. Moreover, shares acquired under the Class A sales load alternative
would be subject to lower ongoing distribution fees as described below.
Investors not qualifying for reduced initial sales loads who expect to maintain
their investment for an extended period of time might also elect the Class A
sales load alternative because over time the accumulated continuing distribution
fees on Class C shares may exceed the difference in initial sales loads between
<PAGE>
Class A and Class C shares. Again, however, such investors must weigh this
consideration against the fact that less of their funds will be invested
initially under the Class A sales load alternative. Furthermore, the higher
ongoing distribution fees will be offset to the extent any return is realized on
the additional funds initially invested under the Class C sales load
alternative.
Some investors might determine that it would be more advantageous to utilize the
Class C sales load alternative to have more of their funds invested initially,
although remaining subject to higher ongoing distribution fees and, for a
one-year period, being subject to a contingent deferred sales load. For example,
based on estimated fees and expenses, an investor subject to the maximum 2%
initial sales load on Class A shares who elects to reinvest dividends in
additional shares would have to hold the investment in Class A shares
approximately 3 years before the accumulated ongoing distribution fees on the
alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 3 years, the investor might
consider purchasing Class A shares. This example does not take into account the
time value of money which reduces the impact of the higher ongoing Class C
distribution fees, fluctuations in net asset value or the effect of different
performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Adviser may from time to time pay from its own resources additional cash bonuses
or other incentives to selected dealers in connection with the sale of shares of
the Fund. On some occasions, such bonuses or incentives may be conditioned upon
the sale of a specified minimum dollar amount of the shares of the Fund and/or
other funds of Countrywide Investments during a specific period of time. Such
bonuses or incentives may include financial assistance to dealers in connection
with conferences, sales or training programs for their employees, seminars for
the public, advertising, sales campaigns and other dealer-sponsored programs or
events.
CLASS A SHARES
Class A shares of the Fund are sold on a continuous basis at the public offering
price next determined after receipt of a purchase order by the Trust. Purchase
orders received by dealers prior to 4:00 p.m., Eastern time, on any business day
and transmitted to the Adviser by 5:00 p.m., Eastern time, that day are
confirmed at the public offering price determined as of the close of the regular
session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Adviser by 5:00 p.m., Eastern time. Dealers may charge a
fee for effecting purchase orders. Direct purchase orders received by the
Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's public
offering price. Direct investments received by the Transfer Agent after 4:00
p.m., Eastern time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the public offering price next determined on the
following business day.
The public offering price of Class A shares applicable to investors whose
accounts are opened after January 31, 1995 is the next determined net asset
value per share plus a sales load as shown in the following table.
<TABLE>
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
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*
</TABLE>
<PAGE>
Investors whose accounts were opened prior to February 1, 1995 are subject to a
different table of sales loads as follows:
<TABLE>
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 .75% .76% .75%
$1,000,000 or more None* None*
<FN>
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .75% may apply with respect to Class A
shares if a commission was paid by the Adviser to a participating
unaffiliated dealer and the shares are redeemed within twelve months from the
date of purchase.
</FN>
</TABLE>
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made after October
1, 1995 and subsequent purchases further increasing the size of the account, a
dealer's commission of .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 Class A
shares of the Fund may be aggregated with concurrent purchases of Class A shares
of other funds of Countrywide Investments. Dealers should contact the Adviser
concerning the applicability and calculation of the dealer's commission in the
case of combined purchases. An exchange from other funds of Countrywide
Investments will not qualify for payment of the dealer's commission, unless such
exchange is from a Countrywide fund with assets as to which a dealer's
commission or similar payment has not been previously paid. Redemptions of Class
A shares may result in the imposition of a contingent deferred sales load if the
dealer's commission described in this paragraph was paid in connection with the
purchase of such shares. See "Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares" below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the table above. Purchases made in any load
fund distributed by the Adviser pursuant to a Letter of Intent may also be
eligible for the reduced sales loads. The minimum initial investment under a
Letter of Intent is $10,000. The load funds currently distributed by the Adviser
are listed in the Exchange Privilege section of this Prospectus. Shareholders
should contact the Transfer Agent for information about the Right of
Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase Class A 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 Class A 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 "Adjustable Rate U.S. Government Securities 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.
<PAGE>
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase Class A shares
of the Fund at net asset value. To the extent permitted by regulatory
authorities, a bank trust department may charge fees to clients for whose
account it purchases shares at net asset value. Federal and state credit unions
may also purchase Class A shares at net asset value.
In addition, Class A shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Adviser, and their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees.
Clients of municipal fund advisers, public finance investment specialists,
municipal reinvestment brokers, authorities and trustees may purchase Class A
shares of the Fund at net asset value if the permitted investment section of the
trust indenture can be interpreted with an accompanying opinion by the issuer or
trustee counsel.
Clients of investment advisers and financial planners may also purchase Class A
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.
Trustees, directors, officers and employees of the Trust, the Adviser, the
Transfer Agent or any affiliated company, including members of the immediate
family of such individuals and employee benefit plans established by such
entities, may also purchase Class A shares of the Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Fund (or shares into which such Class A shares were exchanged)
purchased at net asset value in amounts totaling $1 million or more, if the
dealer's commission described above was paid by the Adviser and the shares are
redeemed within twelve months from the date of purchase. The contingent deferred
sales load will be paid to the Adviser and will be equal to .75% of the lesser
of (1) the net asset value at the time of purchase of the Class A shares being
redeemed or (2) the net asset value of such Class A shares at the time of
redemption. In determining whether the contingent deferred sales load is
payable, it is assumed that shares not subject to the contingent deferred sales
load are the first redeemed followed by other shares held for the longest period
of time. The contingent deferred sales load will not be imposed upon shares
representing reinvested dividends or capital gains distributions, or upon
amounts representing share appreciation. If a purchase of Class A shares is
subject to the contingent deferred sales load, the investor will be so notified
on the confirmation for such purchase.
Redemptions of such Class A shares of the Fund held for at least 12 months will
not be subject to the contingent deferred sales load and an exchange of such
Class A shares into another fund of Countrywide Investments is not treated as a
redemption and will not trigger the imposition of the contingent deferred sales
load at the time of such exchange. A fund will "tack" the period for which such
Class A shares being exchanged were held onto the holding period of the acquired
shares for purposes of determining if a contingent deferred sales load is
applicable in the event that the acquired shares are redeemed following the
exchange; however, the period of time that the redemption proceeds of such Class
A shares are held in a money market fund will not count toward the holding
period for determining whether a contingent deferred sales load is applicable.
See "Exchange Privilege."
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986, as amended) 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.
<PAGE>
ADDITIONAL INFORMATION. For purposes of determining the applicable sales load
and for purposes of the Letter of Intent and Right of Accumulation privileges, a
purchaser includes an individual, his spouse and their children under the age of
21, purchasing shares for his or their own account; or a trustee or other
fiduciary purchasing shares for a single fiduciary account although more than
one beneficiary is involved; or employees of a common employer, provided that
economies of scale are realized through remittances from a single source and
quarterly confirmation of such purchases; or an organized group, provided that
the purchases are made through a central administration, or a single dealer, or
by other means which result in economy of sales effort or expense. Contact the
Transfer Agent for additional information concerning purchases at net asset
value or at reduced sales loads.
CLASS C SHARES
Class C shares of the Fund are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order by the Trust. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any business day and
transmitted to the Adviser by 5:00 p.m., Eastern time, that day are confirmed at
the net asset value determined as of the close of the regular session of trading
on the New York Stock Exchange on that day. It is the responsibility of dealers
to transmit properly completed orders so that they will be received by the
Adviser by 5:00 p.m., Eastern time. Dealers may charge a fee for effecting
purchase orders. Direct purchase orders received by the Transfer Agent by 4:00
p.m., Eastern time, are confirmed at that day's net asset value. Direct
investments received by the Transfer Agent after 4:00 p.m., Eastern time, and
orders received from dealers after 5:00 p.m., Eastern time, are confirmed at the
net asset value next determined on the following business day.
A contingent deferred sales load is imposed on Class C shares if an investor
redeems an amount which causes the current value of the investor's account to
fall below the total dollar amount of purchase payments subject to the deferred
sales load, except that no such charge is imposed if the shares redeemed have
been acquired through the reinvestment of dividends or capital gains
distributions or to the extent the amount redeemed is derived from increases in
the value of the account above the amount of purchase payments subject to the
deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the amount of
time since the investor made a purchase payment from which an amount is being
redeemed. Purchases are subject to the contingent deferred sales load according
to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it is
assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that an individual opens an account and purchases 1,000
shares at $10 per share and that six months later the net asset value per share
is $12 and, during such time, the investor has acquired 50 additional shares
through reinvestment of distributions. If at such time the investor should
redeem 450 shares (proceeds of $5,400), 50 shares will not be subject to the
load because of dividend reinvestment. With respect to the remaining 400 shares,
the load is applied only to the original cost of $10 per share and not to the
increase in net asset value of $2 per share. Therefore, $4,000 of the $5,400
redemption proceeds will be charged the load. At the rate of 1%, the contingent
deferred sales load would be $40. In determining whether an amount is available
for redemption without incurring a deferred sales load, the purchase payments
made for all Class C shares in the shareholder's account are aggregated, and the
current value of all such shares is aggregated.
<PAGE>
All sales loads imposed on redemptions are paid to the Adviser. The Adviser
intends to pay a commission of 1% of the purchase amount to participating
brokers at the time the investor purchases Class C shares.
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.
SHAREHOLDER SERVICES
==============================================================================
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may elect to
receive, or may designate another person to receive, monthly or quarterly
payments in a specified amount of not less than $50 each. There is no charge for
this service. Purchases of additional Class A shares of the Fund while the plan
is in effect are generally undesirable because a sales load is incurred whenever
purchases are made.
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.
<PAGE>
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Fund, you may reinvest all or part of the
proceeds without any additional sales load. This reinvestment must occur within
ninety days of the redemption and the privilege may only be exercised once per
year.
HOW TO REDEEM SHARES
==============================================================================
You may redeem shares of the Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described below, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check or wire.
A contingent deferred sales load may apply to a redemption of Class C shares or
to a redemption of certain Class A shares 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.
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.
<PAGE>
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. However,
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. 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 should be aware that writing a check (a redemption of shares) is a
taxable event. Shares for which certificates have been issued may not be
redeemed by check.
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.
If a certificate for shares of the Fund was issued, it must be delivered to the
Transfer Agent, or the dealer in the case of a wire redemption, duly endorsed or
accompanied by a duly endorsed stock power, with the signature guaranteed by any
of the eligible guarantor institutions outlined above.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested including any sales
load paid, unaffected by market fluctuations), or $250 in the case of
tax-deferred retirement plans, or such other minimum amount as the Trust may
determine from time to time. After notification to you of the Trust's intention
to close your account, you will be given thirty days to increase the value of
your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
<PAGE>
EXCHANGE PRIVILEGE
==============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other.
Class A shares of the Fund which are not subject to a contingent deferred sales
load may be exchanged for Class A shares of any other fund and for shares of any
other fund which offers only one class of shares (provided such shares are not
subject to a contingent deferred sales load). A sales load will be imposed equal
to the excess, if any, of the sales load rate applicable to the shares being
acquired over the sales load rate, if any, previously paid on the shares being
exchanged.
Class C shares of the Fund, as well as Class A shares of the Fund subject to a
contingent deferred sales load, may be exchanged, on the basis of relative net
asset value per share, for shares of any other fund which imposes a contingent
deferred sales load and for shares of any fund which is a money market fund. A
fund will "tack" the period for which the shares being exchanged were held onto
the holding period of the acquired shares for purposes of determining if a
contingent deferred sales load is applicable in the event that the acquired
shares are redeemed following the exchange. The period of time that shares are
held in a money market fund will not count toward the holding period for
determining whether a contingent deferred sales load is applicable.
The following are the funds of Countrywide Investments currently offered to the
public. Funds which may be subject to a front-end or contingent deferred sales
load are indicated by an asterisk.
COUNTRYWIDE TAX-FREE TRUST COUNTRYWIDE INVESTMENT TRUST
Tax-Free Money Fund Short Term Government Income Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
COUNTRYWIDE STRATEGIC TRUST
*U.S. Government Securities Fund
*Equity Fund
*Utility Fund
*Treasury Total Return 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.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
==============================================================================
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly. 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.
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.
An investor who has received in cash any dividend or capital gains distribution
from the Fund may return the distribution within thirty days of the distribution
date to the Transfer Agent for reinvestment at the net asset value next
determined after its return. The investor or his dealer must notify the Transfer
Agent that a distribution is being reinvested pursuant to this provision.
TAXES
===============================================================================
The Fund has qualified in all prior years and intends to continue to qualify for
the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders.
The Fund 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.
<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
four other series of the Trust, six series of Countrywide Tax-Free Trust and
four series of Countrywide Strategic Trust. The Adviser is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Fund pays the Adviser a fee equal to the annual rate of
.5% of the average value of its daily net assets up to $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.
John J. Goetz, Chief Investment Officer of the Adviser and Scott Weston,
Assistant Vice President-Investments of the Adviser, are primarily
responsible for managing the portfolio of the Fund. Mr. Goetz has been employed
by the Adviser in various capacities since 1981 and has been managing the
Fund's portfolio since March 1997. Mr. Weston has been employed by the
Adviser since 1992 and has been managing the Fund's portfolio since
March 1996. Mr. Weston was previously employed by Adex International,
Inc. as a cost control manager.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the Fund)
pays the Transfer Agent a fee for these administrative services 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. Robert H. Leshner,
President and a director of the Adviser, is President and a Trustee of the
Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
<PAGE>
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
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. Each class of shares of the
Fund shall vote separately on matters relating to its plan of distribution
pursuant to Rule 12b-1 (see "Distribution Plans"). When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.
DISTRIBUTION PLANS
===============================================================================
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted a plan of distribution (the "Class A Plan") under which
Class A shares may directly incur or reimburse the Adviser for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class A Plan, the Fund may make payments to dealers and other
persons, including the Adviser and its affiliates, who may be advising investors
regarding the purchase, sale or retention of Class A shares. For the fiscal year
ended September 30, 1996, Class A shares of the Fund paid $3,119 to the Adviser
to reimburse it for payments made to dealers and other persons who may be
advising shareholders in this regard.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.35% of the Fund's average daily net assets allocable to Class A shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class A Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Adviser after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted a plan of distribution (the "Class C Plan") which provides
for two categories of payments. First, the Class C Plan provides for the payment
to the Adviser of an account maintenance fee, in an amount equal to an annual
rate of .25% of the Fund's average daily net assets allocable to Class C shares,
which may be paid to other dealers based on the average value of such shares
owned by clients of such dealers. In addition, the Class C shares may directly
incur or reimburse the Adviser in an amount not to exceed .75% per annum of the
Fund's average daily net assets allocable to Class C shares for expenses
<PAGE>
incurred in the distribution and promotion of the Fund's Class C shares,
including payments to securities dealers and others who are engaged in the sale
of such shares and who may be advising investors regarding the purchase, sale or
retention of such shares; expenses of maintaining personnel who engage in or
support distribution of shares or who render shareholder support services not
otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Fund; expenses of obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Trust may, from time to time,
deem advisable; and any other expenses related to the distribution of such
shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class C Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Adviser after the date the Class C Plan terminates. The Adviser may make
payments to dealers and other persons in an amount up to .75% per annum of the
average value of Class C shares owned by their clients, in addition to the .25%
account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Fund may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
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 share price (net asset
value) of Class C shares and the public offering price (net asset value plus
applicable sales load) of Class A shares of the Fund are determined as of the
close of the regular session of trading on the New York Stock Exchange,
currently 4:00 p.m., Eastern time. The Trust is open for business on each day
the New York Stock Exchange is open for business and on any other day when there
is sufficient trading in the Fund's investments that its net asset value might
be materially affected. The net asset value per share of the Fund is calculated
by dividing the sum of the value of the securities held by the Fund plus cash or
other assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent.
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
<PAGE>
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
==============================================================================
From time to time, the Fund may advertise its "average annual total return." The
Fund may also advertise "yield." Both yield and average annual total return
figures are based on historical earnings and are not intended to indicate future
performance. Total return and yield are computed separately for Class A and
Class C shares. The yield of Class A shares is expected to be higher than the
yield of Class C shares due to the higher distribution fees imposed on Class C
shares.
The "average annual total return" of the Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and, for
Class A shares, the deduction of the current maximum sales load from the initial
investment. The Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from "average annual total return."
A nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized quotation of
total return may also indicate average annual compounded rates of return over
periods other than those specified for "average annual total return." These
nonstandardized returns do not include the effect of the applicable sales load
which, if included, would reduce total return. A nonstandardized quotation of
total return will always be accompanied by the Fund's "average annual total
return" as described above.
The "yield" of the Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, the Fund may advertise its performance rankings as published
by recognized independent mutual fund statistical services such as Lipper
Analytical Services, Inc. ("Lipper"), or by publications of general interest
such as Forbes, Money, The Wall Street Journal, Business Week, Barron's, Fortune
or Morningstar Mutual Fund Values. The Fund may also compare its performance to
that of other selected mutual funds, averages of the other mutual funds within
its category as determined by Lipper, or recognized indicators. In connection
with a ranking, the Fund may provide additional information, such as the
particular category of funds to which the ranking relates, the number of funds
in the category, the criteria upon which the ranking is based, and the effect of
fee waivers and/or expense reimbursements, if any. The Fund may also present its
performance and other investment characteristics, such as volatility or a
temporary defense posture, in light of the Adviser's view of current or past
market conditions or historical trends.
Further information about the Fund's performance is contained in the Trust's
annual report which can be obtained by shareholders at no charge by calling the
Transfer Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call
629-2050) or by writing to the Trust at the address on the front of this
Prospectus.
<PAGE>
ACCOUNT NO. ___________________
(For Fund Use Only)
ACCOUNT APPLICATION
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
ADJUSTABLE RATE U.S.
GOVERNMENT SECURITIES FUND
o A Shares (27)
o C Shares (10)
- -----------------------------------------------
FOR BROKER/DEALER USE ONLY
Firm Name:____________________________________
Home Office Address:__________________________
Branch Address:_______________________________
Rep Name & No.:_______________________________
Rep Signature:________________________________
- -----------------------------------------------
==============================================================================
Initial Investment of $__________________________ ($1,000 Minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From: __________________________________________________________
o Exchange From: ___________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
______________________________________________ _____________________________
Name of Individual, Corporation, (In case of custodial account
Organization, or Minor, etc. please list minor's S.S.#)
______________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other_______
ADDRESS PHONE
______________________________________________ ( )_________________________
Street or P.O. Box Business Phone
______________________________________________ ( )_________________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (right of survivorship presumed
o Partnership
o Corporation
o Trust
o Custodial
o Non-Profit
o Other
Occupation and Employer Name/Address__________________________________________
Are you an associated person of an NASD member? o Yes o 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 your consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if
appropriate:
o 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.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
===============================================================================
<PAGE>
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
===============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon
instructions received by telephone, or upon receipt of and in the amounts of
checks as described below (if checkwriting is selected), to have amounts
withdrawn from my (our) account in any fund of Countrywide Investments (see
prospectus for limitations on this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I
(we) further authorize the used of automated cash transfers to and from the
account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial
bank. Please attach a voided check for the account.
Bank Account Number__________________Bank Routing Transit Number______________
Name of Account Holder________________________________________________________
Bank Name____________________________Bank Address_____________________________
City State
o 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.)
o l 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):
o $100,000 o $250,000 o $500,000 o $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 Investments,
Inc., and their respective officers, employees, agents and affiliates from any
and all liability in the performance of the acts instructed herein. Neither the
Trust, Countrywide Fund Services, Inc., nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The investor(s) will bear the risk of any such loss. The Trust or
Countrywide Fund Services, Inc., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or
Countrywide Fund Services, Inc. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
____________________________________ _______________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
____________________________________ _______________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST
COMPLETE THE RESOLUTION FORM ON THE REVERSE SIDE. UNLESS
OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL
AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of
Countrywide 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 ABA Routing Number_____________________
in the Fund.
FI Account Number____________
o Checking Account o Savings Account
____________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
_____________________________________ o the 15th day of each month
City State o both the 15th and last business day
X____________________________________ X_____________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant - if any)
it appears on FI Records)
(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 amount. CFS will defend, at its own cost and expense, any action
which might be brought against you by any person or persons whatsoever
because of your actions taken pursuant to the foregoing request or in any
manner arising by reason of your participation in this arrangement. CFS will
refund to you any amount erroneously paid by you to the Fund if the claim
for the amount of such erroneous payment is made by you within six (6)
months from the date of such erroneous payment; your participation in
this arrangement and that of the Fund may be terminated by thirty (30)
days written notice from either party to the other.
===============================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund
account beginning the last business day of the month of __________.
Please Indicate Withdrawal Schedule (Check One):
o MONTHLY -- Withdrawals will be made on the last business day of each month.
o QUARTERLY -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o ANNUALLY -- Please make withdrawals on the last business day of the
month of:_______________.
Please Select Payment Method (Check One):
o EXCHANGE: Please exchange the withdrawal proceeds into another
Countrywide account number: __ __-__ __ __ __ __ __-__
o CHECK: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o 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. o 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
o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_________________________________________________________________
Please send to:_______________________________________________________________
Street address City State Zip
===============================================================================
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide 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 Trust, to establish or acknowledge terms and conditions governing
the redemption of said shares and to otherwise implement the privileges elected
on the Application, and it is (If checkwriting privilege is not desired, please
cross out the following resolution.)
FURTHER RESOLVED: That the corporation or organization participate in
the Countrywide Pay Through Draft Account (PTDA) and that until otherwise
ordered in writing, Countrywide Fund Services, Inc. is authorized to make
redemptions of shares held by the corporation or organization, and
to make payment from PTDA upon and according to the check,
draft, note or order of this corporation or organization when signed by
______________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the
payee or any other holder without inquiry as to the circumstances of issue or
the disposition or proceeds, whether drawn to the individual order or tendered
in payment of individual obligations of the persons above named or other
officers of this corporation or organization or otherwise.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on at which a quorum was
present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
_______________________________________ ____________________________________
_______________________________________ ____________________________________
_______________________________________ ____________________________________
Witness my hand and seal of the corporation or organization this___________day
of______________, 19_______
_______________________________________ ____________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
INCOME
PROSPECTUS
FEBRUARY 1, 1997
Revised March 31, 1997
ADJUSTABLE RATE
U.S. GOVERNMENT
SECURITIES FUND
COUNTRYWIDE
INVESTMENTS
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
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 3
Investment Objective and Policies............. 5
How to Purchase Shares ....................... 9
Shareholder Services.......................... 15
How to Redeem Shares.......................... 16
Exchange Privilege............................ 18
Dividends and Distributions................... 19
Taxes......................................... 19
Operation of the Fund......................... 20
Distribution Plans............................ 21
Calculation of Share Price and
Public Offering Price.................... 22
Performance Information....................... 23
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
PROSPECTUS
February 1, 1997
Revised March 31, 1997
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
GLOBAL BOND FUND
==============================================================================
The Global Bond Fund (the "Fund"), a separate series of Countrywide Investment
Trust, seeks high total return, through both income and capital appreciation.
The Fund invests primarily in high-grade domestic and foreign fixed-income
securities.
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.
The Fund offers two classes of shares: Class A shares (sold subject to a maximum
4% front-end sales load and a 12b-1 fee of up to .35% of average daily net
assets) and Class C shares (sold subject to a 1% contingent deferred sales load
for a one-year period and a 12b-1 fee of up to 1% of average daily net assets).
Each Class A and Class C share of the Fund represents identical interests in the
Fund's investment portfolio and has the same rights, except that (i) Class C
shares bear the expenses of higher distribution fees, which will cause Class C
shares to have a higher expense ratio and to pay lower dividends than those
related to Class A shares; (ii) certain other class specific expenses will be
borne solely by the class to which such expenses are attributable; and (iii)
each class has exclusive voting rights with respect to matters relating to its
own distribution arrangements.
SHARES OF THE 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.
Rogge Global Partners plc (the "Adviser") manages the Fund's investments
under the supervision of Countrywide Investments, Inc. (the "Manager").
See "Operation of the 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 February 1, 1997, and
amended March 31, 1997 has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference in its entirety. A copy of
the Statement of Additional Information can be obtained at no charge by calling
one of the numbers listed below.
- ------------------------------------------------------------------------------
For Information or Assistance in Opening an Account, Please 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>
<TABLE>
<CAPTION>
EXPENSE INFORMATION
===========================================================================================================
CLASS A CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).... 4% None
Maximum Contingent Deferred Sales Load (as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends..................................... None None
Exchange Fee................................................................... None None
Redemption Fee................................................................. None ** None **
<FN>
* 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 Manager 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."
</FN>
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) SHARES SHARES
<S> <C> <C>
Management Fees After Waivers(A) .............................................. .67% .67%
12b-1 Fees(B) ................................................................. .03% .43%
Other Expenses After Reimbursements............................................ .65%(C) .90%
-------- -------
Total Fund Operating Expenses After Waivers and Expense Reimbursements(D) ..... 1.35% 2.00%
======== =======
<FN>
(A) Absent waivers of management fees, such fees would have been .70% for the
fiscal year ended September 30, 1996.
(B) Class A shares may incur 12b-1 fees in an amount up to .35% of average net
assets and Class C shares may incur 12b-1 fees in an amount up to 1.00% of
average net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the National
Association of Securities Dealers.
(C) Absent expense reimbursements by the Manager, other expenses would
have been .77% for Class A shares for the fiscal year ended September 30, 1996.
(D) Absent waivers of management fees and expense reimbursements by the Manager,
total Fund operating expenses would have been 1.50% and 2.03% for Class A and
Class C shares, respectively, for the fiscal year ended September 30, 1996.
</FN>
</TABLE>
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
Class A Class C
Shares Shares
1 Year $ 53 $ 30
3 Years 81 63
5 Years 111 108
10 Years 196 233
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP, is an
integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
September 30, 1996 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
==============================================================================================================
CLASS A CLASS C
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995(A) 1996 1995(A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 10.64 $ 10.00 $ 10.59 $ 10.00
------------ -------------- ------------- --------------
Income from investment operations:
Net investment income....................... 0.57 0.35 0.51 0.38
Net realized and unrealized gains (losses) on
investments and foreign currency.......... (0.05) 0.64 (0.08) 0.57
------------ -------------- ------------- --------------
Total from investment operations............... 0.52 0.99 0.43 0.95
------------ -------------- ------------- --------------
Less distributions:
Dividends from net investment income........ (0.13) (0.35) (0.10) (0.36)
------------ -------------- ------------- --------------
Total distributions............................ (0.13) (0.35) (0.10) (0.36)
------------ -------------- ------------- --------------
Net asset value at end of period............... $ 11.03 $ 10.64 $ 10.92 $ 10.59
============ ============== ============= ==============
Total return(B) ............................... 4.88% 14.89%(D) 4.10% 14.25%(D)
============ ============== ============= ==============
Net assets at end of period (000's)............ $ 12,841 $ 13,297 $ 5,847 $ 4,518
============ ============== ============= ==============
Ratio of expenses to average net assets(C) .... 1.35% 1.33%(D) 2.00% 1.98%(D)
Ratio of net investment income to average net assets 4.97% 4.30%(D) 4.34% 3.70%(D)
Portfolio turnover rate........................ 235% 130%(D) 235% 130%(D)
- -----------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from initial public offering of shares (February 1,
1995) through September 30, 1995.
(B) The total returns shown do not include the effect of applicable sales loads.
(C) Absent fee waivers and expense reimbursements by the Manager, the ratios
of expenses to average net assets would have been 1.50% and 2.47%(D) for
Class A shares and 2.03% and 3.45%(D) for Class C shares for the periods
ended September 30, 1996 and 1995, respectively.
(D) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
==============================================================================
The Fund is a series of Countrywide Investment Trust (the "Trust"). The Fund
seeks high total return, through both income and capital appreciation. The Fund
seeks to achieve its investment objective by investing primarily in high-grade
domestic and foreign fixed-income securities. The Fund is not intended to be a
complete investment program, and there is no assurance that its investment
objective can be achieved. The Fund's investment objective may be changed by the
Board of Trustees without shareholder approval, but only after notification has
been given to shareholders and after this Prospectus has been revised
accordingly. If there is a change in the Fund's investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs. Unless otherwise
indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in domestic and foreign bonds issued by governments, corporations and
supranational organizations such as the World Bank, Asian Development Bank,
European Investment Bank and European Economic Community. Bonds are viewed by
the Fund to include fixed-income securities of any maturity. Investments of the
Fund will be geographically concentrated in the countries included in the
Salomon Brothers World Government Bond Index: Australia, Belgium, Canada,
Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, the
United Kingdom and the United States. Under normal market conditions,
investments will be made in a minimum of three countries, one of which may be
the United States. For temporary defensive purposes, the Fund may invest in
securities of only one country, including the United States. The Fund may invest
in non-U.S. dollar denominated securities. The Fund may utilize a variety of
currency hedging techniques in order to reduce volatility resulting from
currency exchange rate fluctuations.
The Fund may invest up to 10% of its total assets in global bonds issued by
emerging countries. The emerging countries in which the Fund may invest
currently include Argentina, Brazil, Chile, Columbia, Indonesia, India,
Malaysia, Mexico, the Philippines, Poland, Singapore, Thailand and Venezuela.
Such markets tend to be in the less economically developed regions of the world.
General characteristics of emerging countries also include lower degrees of
political stability, a high demand for capital investment, a high dependence on
export markets for their major industries, a need to develop basic economic
infrastructures and rapid economic growth. The Adviser believes that investments
in bonds issued in emerging countries offer the opportunity for significant
long-term investment returns; however, these investments involve certain risks.
The Fund may engage in various hedging techniques to seek to hedge all or a
portion of its assets against market value changes resulting from changes in
security prices, interest rates, currency exchange rates or other factors that
affect the value of the Fund's portfolio. Hedging is a means of attempting to
offset, or neutralize, the price movement of an investment by making another
investment, the price of which should tend to move in the opposite direction
from the original investment. The hedging techniques which may be used by the
Fund include buying and selling put and call options, buying and selling futures
contracts and entering into forward currency exchange contracts.
It is anticipated that under normal circumstances the Fund's dollar-weighted
average maturity will be ten years or less, although the Fund may invest in
securities of any maturity, provided that such obligations meet the Fund's
quality standards. The Fund's quality standards limit its investments to those
rated within the three highest grades assigned by Moody's Investors Services,
Inc. (Aaa, Aa or A), Standard & Poor's Ratings Group (AAA, AA or A) or Fitch
Investors Services, Inc. (AAA, AA or A), or unrated securities determined by the
Adviser to be of comparable quality.
For defensive purposes, the Fund may temporarily hold all or a portion of its
assets in short-term obligations such as bank debt instruments (certificates of
deposit, bankers' acceptances and time deposits), commercial paper, domestic and
foreign Government obligations having a maturity of less than one year or
repurchase agreements. The Fund's quality standards limit its investments in
short-term obligations to those which are rated within the two highest grades by
Moody's (Prime-1 or Prime-2), Standard & Poor's (A-1 or A-2) or Fitch (Fitch-1
or Fitch-2). The Statement of Additional Information contains a description of
Moody's, Standard & Poor's and Fitch ratings.
<PAGE>
It is anticipated that by investing in a portfolio of foreign fixed-income
securities in markets that have historically had a low correlation with the U.S.
fixed-income market (when considering the aggregate impact of both fluctuations
in currencies and interest rates), the Fund will achieve a less volatile net
asset value than is characteristic of mutual funds that invest primarily in
fixed-income obligations of a single market denominated in a single currency.
The decision to invest in a given bond market is normally made in tandem with
the decision to invest in the related currency. Generally, the factors used to
determine the relative attractiveness of one market (currency) versus another
are long-term in nature and, therefore, the core structure of the Fund's
portfolio will remain relatively stable over time. In order to reduce the
volatility of short-term investment returns, short-term currency risk is managed
through currency hedging.
HEDGING TECHNIQUES
Unless otherwise indicated, the Fund's Adviser may engage in the following
hedging techniques to seek to hedge all or a portion of the Fund's assets
against market value changes resulting from changes in securities prices,
interest rates and currency fluctuations. Hedging is a means of attempting to
offset, or neutralize, the price movement of an investment by making another
investment, the price of which should tend to move in the opposite direction
from the original investment. The imperfect correlation in price movement
between an option and the underlying financial instrument and/or the costs of
implementing such an option may limit the effectiveness of the hedging strategy.
PUT AND CALL OPTIONS. The Fund may write (sell) covered put and call options as
a means of enhancing its return and may buy put and call options written by
others covering securities, futures contracts and foreign currencies to attempt
to provide protection against the adverse effects of anticipated changes in the
prices of such instruments. The Fund may write covered call options as a means
of enhancing its return through the receipt of premiums when the Adviser
determines that the underlying securities, futures contracts or foreign
currencies have achieved their potential for appreciation. However, by writing
such options, the Fund forgoes the opportunity to profit from an increase in the
market price of the underlying security, futures contract or foreign currency
above the exercise price except insofar as the premium represents such a profit.
The Fund may also seek to earn additional income through receipt of premiums by
writing covered put options. The risk involved in writing such options is that
there could be a decrease in the market value of the underlying security,
futures contract or foreign currency. If this occurred, the option could be
exercised and the underlying instrument would then be sold to the Fund at a
higher price than its then current market value. The Fund may purchase put and
call options to attempt to provide protection against adverse price effects from
anticipated changes in prevailing prices of securities, futures contracts or
foreign currencies. The purchase of a put option protects the value of portfolio
holdings in a falling market, while the purchase of a call option protects cash
reserves from a failure to participate in a rising market. In purchasing a call
option, the Fund would be in a position to realize a gain if, during the option
period, the price of the security, futures contract or foreign currency
increased by an amount greater than the premium paid. It would realize a loss if
the price of the security, futures contract or foreign currency decreased or
remained the same or did not increase during the period by more than the amount
of the premium. If a put or call option purchased by the Fund were permitted to
expire without being sold or exercised, its premium would represent a realized
loss to the Fund. When writing put options the Fund will be required to
segregate cash and/or liquid high-grade debt securities to meet its obligations.
When writing call options the Fund will be required to own the underlying
financial instrument or segregate with its Custodian cash and/or short-term high
quality securities to meet its obligations under written calls. By so doing, the
Fund's ability to meet current obligations, to honor redemptions or to achieve
its investment objective may be impaired. The staff of the Securities and
Exchange Commission has taken the position that over-the-counter options and the
assets used as "cover" for over-the-counter options are illiquid securities.
FUTURES CONTRACTS. The Fund may buy and sell futures contracts as a hedge to
protect the value of the Fund's portfolio against anticipated changes in
interest rates, securities prices and foreign currencies. There are several
risks in using futures contracts. One risk is that futures prices could
correlate imperfectly with the behavior of cash market prices of the financial
instrument being hedged so that even a correct forecast of general price trends
may not result in a successful transaction. Another risk is that the Fund's
Adviser may be incorrect in its expectation of future prices of the underlying
financial instrument. There is also a risk that a secondary market in the
<PAGE>
obligations that the Fund holds may not exist or may not be adequately liquid to
permit the Fund to close out positions when it desires to do so. When buying or
selling futures contracts the Fund will be required to segregate cash and/or
liquid high-grade debt obligations to meet its obligations under these types of
financial instruments. By so doing, the Fund's ability to meet current
obligations, to honor redemptions or to operate in a manner consistent with its
investment objective may be impaired.
FORWARD CURRENCY EXCHANGE CONTRACTS. When the Adviser believes that the currency
of a particular foreign country may suffer a substantial decline against the
U.S. dollar, it may attempt to hedge some portion or all of this anticipated
risk by entering into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's portfolio obligations
denominated in such foreign currency. It may also enter into such contracts to
protect against loss between trade and settlement dates resulting from changes
in foreign currency exchange rates. Such contracts will also have the effect of
limiting any gains to the Fund between trade and settlement dates resulting from
changes in such rates.
RISK FACTORS
The market value of investments available to the Fund, and therefore the Fund's
yield and net asset value, will fluctuate due to changes in interest rates,
economic conditions, foreign exchange conditions, quality ratings and other
factors beyond the control of the Adviser. The Fund's portfolio securities are
subject to price fluctuations based upon changes in the level of interest rates,
which will generally result in all those securities changing in price in the
same way, i.e., all those securities experiencing appreciation when interest
rates decline and depreciation when interest rates rise. In addition, the
financial condition of an issuer or adverse changes in general economic
conditions, or both, may impair the issuer's ability to make payments of
interest and principal.
The Fund may invest in securities which are rated at the time of purchase within
the three highest grades assigned by Moody's, Standard & Poor's or Fitch.
Subsequent to its purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund. In
the event a security's rating is reduced below the Fund's minimum requirements,
the Fund will sell the security, subject to market conditions and the Adviser's
assessment of the most opportune time for sale. Although lower rated securities
will generally provide higher yields than higher rated securities of similar
maturities, they are subject to a greater degree of market fluctuation. The
lower rating also reflects a greater possibility that changing circumstances may
impair the ability of the issuer to make timely payments of interest and
principal. In addition, securities with longer maturities generally offer both
higher yields and greater exposure to market fluctuation from changes in
interest rates. Consequently, investors in the Fund should be aware that there
is a possibility of greater fluctuation in the Fund's net asset value.
The Fund is a non-diversified fund under the Investment Company Act of 1940.
Thus, its investments may be more concentrated in fewer issuers than those of a
diversified fund. This concentration may cause greater fluctuation in the Fund's
net asset value. As the Fund intends to comply with Subchapter M of the Internal
Revenue Code, it may invest up to 50% of its assets at the end of each quarter
of its fiscal year in as few as two issuers, provided that no more than 25% of
the assets are invested in one issuer. With respect to the remaining 50% of its
assets at the end of each quarter, it may invest no more than 5% in one issuer.
INVESTMENTS IN FOREIGN OBLIGATIONS. Where investments in foreign obligations are
made in currencies of foreign countries, the value of the Fund's assets as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
currency exchange rates, currency restrictions and in exchange control
regulations. While the Fund will attempt to hedge against fluctuations in
exchange rates between the U.S. dollar and other currencies in which the Fund
invests, the Fund may nevertheless incur losses from currency translation
effects. Generally, an increase in the value of a foreign currency versus the
U.S. dollar will have a positive effect on the Fund's return while a decline in
the value of a foreign currency versus the U.S. dollar will have a negative
impact on the Fund. Foreign investments may be subject to special risks,
including future political and economic developments and the possibility of
seizure or nationalization of companies, imposition of withholding taxes on
income, establishment of exchange controls or adoption of other restrictions,
less governmental supervision of securities markets, reduced publicly available
information concerning issuers, and the lack of uniform accounting, auditing and
financial reporting standards that might affect an investment adversely.
Moreover, obligations issued by many foreign companies may be less liquid and
<PAGE>
their prices more volatile than obligations issued by U.S. companies. The
settlement practices in foreign countries may include delays and subject the
Fund to risk of loss not customary in U.S. markets. Investment in foreign
obligations may also result in higher expenses due to the cost of converting
foreign currency into U.S. dollars, the payment of fixed brokerage commissions
on foreign exchanges, which generally are higher than commissions on U.S.
exchanges, and the expense of maintaining securities with foreign custodians.
EMERGING MARKETS. The risks of foreign investing are of greater concern in the
case of investments in emerging markets which may exhibit greater price
volatility and have less liquidity. Furthermore, the economies of emerging
market countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, managed adjustments in relative currency values, and other
protectionist measures applied internally or imposed by the countries with which
they trade. These emerging market economies also have been and may continue to
be adversely affected by economic conditions in the countries with which they
trade.
CURRENCY EXPOSURE. Because of exchange rate movements, the net asset value of
the Fund is likely to be more volatile than funds which invest only in U.S.
dollar-denominated securities. As the U.S. dollar strengthens relative to a
given foreign currency, the value of a portfolio security denominated in that
currency will fall. Conversely, when the U.S. dollar weakens relative to a
currency, the value of a portfolio security in that currency will rise.
Therefore, the greater the level of a fund's currency exposure, the greater its
risk and return potential. By actively managing currency exposure, the Adviser
attempts to insulate portfolios from the effect of currency fluctuations, or
profit from them. There is, of course, no guarantee the Adviser will be
successful in this regard.
HEDGING TECHNIQUES. The Fund's ability to establish and close out positions in
futures contracts and options will be subject to the existence of a liquid
secondary market. Although the Fund generally will purchase or sell only those
futures contracts and options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange will
exist for any particular futures contract or option or at any particular time.
Transactions in options involve special risks. The Fund may not be able to enter
into a closing transaction to cancel its obligations with respect to the options
it has written or purchased. If an option purchased by the Fund expires
unexercised, the Fund will lose the premium it paid. In addition, the Fund could
suffer a loss if the premium paid by the Fund in a closing transaction exceeds
the premium income it received. When the Fund writes a call option, its ability
to participate in the capital appreciation of the underlying obligation is
limited.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include securities
which are issued or guaranteed by the United States Treasury, by various
agencies of the United States Government, and by various instrumentalities which
have been established or sponsored by the United States Government. U.S.
Treasury obligations are backed by the "full faith and credit" of the United
States Government. Other U.S. Government obligations may or may not be backed by
the full faith and credit of the United States. In the case of securities not
backed by the full faith and credit of the United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States in
the event the agency or instrumentality does not meet its commitments. Shares of
the Fund are not guaranteed or backed by the United States Government.
DELAYED SETTLEMENT TRANSACTIONS. Obligations issued on a when-issued or
to-be-announced basis are settled by delivery and payment after the date of the
transaction, usually within 15 to 45 days. In a to-be-announced transaction, the
Fund has committed to purchasing or selling securities for which all specific
information is not yet known at the time of the trade, particularly the face
amount in transactions involving mortgage-related securities. The Fund will only
make commitments to purchase obligations on a when-issued or to-be-announced
basis with the intention of actually acquiring the obligations, but the Fund may
sell these securities before the settlement date if it is deemed advisable as a
matter of investment strategy or in order to meet its obligations, although it
would not normally expect to do so. The Fund will not enter into a delayed
settlement transaction which settles in more than 120 days.
<PAGE>
Purchases of securities on a when-issued or to-be-announced basis are subject to
market fluctuations and their current value is determined in the same manner as
other portfolio securities. When effecting such purchases for the Fund, a
segregated account of cash, U.S. Government obligations or other liquid
high-grade debt obligations of the Fund in an amount sufficient to make payment
for the portfolio securities to be purchased will be maintained with the Fund's
Custodian at the trade date and valued daily at market for the purpose of
determining the adequacy of the securities in the account. If the market value
of segregated securities declines, additional cash or securities will be
segregated on a daily basis so that the market value of the Fund's segregated
assets will equal the amount of the Fund's commitments to purchase when-issued
obligations and securities on a to-be-announced basis. The Fund's purchase of
securities on a when-issued or to-be-announced basis may increase its overall
investment exposure and involves a risk of loss if the value of the securities
declines prior to the settlement date or if the broker-dealer selling the
securities fails to deliver after the value of the securities has risen.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the 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, the Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
the Fund intends to enter into repurchase agreements only with its Custodian,
banks having assets in excess of $10 billion and the largest and, in the Board
of Trustees' judgment, most creditworthy primary U.S. Government securities
dealers. The Fund will enter into repurchase agreements which are collateralized
by U.S. Government obligations or other liquid high-grade debt obligations.
Collateral for repurchase agreements is held in safekeeping in the customer-only
account of the Fund's Custodian at the Federal Reserve Bank. At the time the
Fund enters into a repurchase agreement, the value of the collateral, 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 agrees
to maintain sufficient collateral so that the value of the underlying
collateral, including accrued interest, will at all times equal or exceed the
value of the repurchase agreement. The 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 the net assets of the Fund would be invested in such
securities and other illiquid securities.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, the Fund may borrow money from banks or other persons in an amount not
exceeding 10% of its total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than 10% of its total assets. The Fund will
not make any additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total assets. These policies do not
preclude the Fund from entering into reverse repurchase transactions (see
below), provided that the Fund has asset coverage of 300% of all its reverse
repurchase commitments pursuant to such transactions and all other outstanding
borrowings of the Fund. Borrowings of the Fund, including its current
obligations under reverse repurchase agreements, will not exceed one-third of
the current market value of the Fund's total assets (less all its liabilities
other than obligations under reverse repurchase agreements and other
borrowings).
Borrowing magnifies the potential for gain or loss on the Fund's portfolio
securities and, therefore, if employed, increases the possibility of fluctuation
in its net asset value. This is the speculative factor known as leverage. To
reduce the risks of borrowing, the Fund will limit its borrowings as described
above. The Fund's policies on borrowing and pledging are fundamental policies
which may not be changed without the affirmative vote of a majority of its
outstanding shares.
REVERSE REPURCHASE TRANSACTIONS. The Fund may enter into reverse repurchase
transactions. A reverse repurchase transaction involves the
sale of a money market instrument held by the Fund coupled with an agreement by
the Fund to repurchase the instrument at a stated price, date and interest
payment. The Fund will use the proceeds of a reverse repurchase transaction to
purchase other money market instruments which either mature at a date
simultaneous with or prior to the expiration of the reverse repurchase agreement
or which are held under an agreement to resell maturing as of that time.
The Fund will enter into a reverse repurchase transaction only when the interest
income to be earned from the investment of the proceeds of the transaction is
greater than the interest expense of the transaction. Under the Investment
Company Act of 1940, reverse repurchase transactions may be considered to be
borrowings by the seller. The Fund may not enter into a reverse repurchase
<PAGE>
transaction if, as a result, its current obligations under such agreements and
all of its other outstanding borrowings would exceed one-third of the current
market value of the Fund's total assets (less all its liabilities other than
obligations under such agreements and other borrowings). The Fund may enter into
reverse repurchase transactions with banks or broker-dealers. Entry into such
transactions requires the creation and maintenance of a segregated account with
the Fund's Custodian consisting of cash and/or liquid high-grade debt
obligations.
The Fund may also enter into reverse repurchase transactions in order to hedge
against a possible decline in the value of the foreign currency in which a debt
security is denominated. In these transactions, the Fund sells a debt security
denominated in a foreign currency for delivery in the current month and
simultaneously contracts to repurchase the same security on a specified future
date. The foreign currency cash proceeds from the sale of the debt security are
then converted into U.S. dollars. Thus, as a result of the transaction, the Fund
continues to be subject to fluctuations in the value of the security, but not to
fluctuations in the value of the currency in which the security is denominated.
Because these reverse repurchase transactions are entered into to hedge foreign
currency risk and not for leverage purposes, they will not be treated as
borrowing for purposes of the Fund's investment restriction concerning
borrowing.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes the Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid high-grade debt obligations, with the Fund's Custodian in
an amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of portfolio securities to no more than 25%
of its net assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading as a
primary means of achieving its investment objective. However, the Fund's rate of
portfolio turnover will depend upon market and other conditions, and it will not
be a limiting factor when portfolio changes are deemed necessary or appropriate
by the Adviser. The portfolio turnover of the Fund may be greater than that of
many other mutual funds. High turnover involves correspondingly greater
commission expenses and transaction costs and increases the possibility that the
Fund would not qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code. The Fund will not qualify as a regulated investment
company if it derives 30% or more of its gross income from gains (without offset
for losses) from the sale or other disposition of securities held for less than
three months. High turnover may result in the Fund recognizing greater amounts
of income and capital gains, which would increase the amount of income and
capital gains which the Fund must distribute to its shareholders in order to
maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes. See "Taxes."
HOW TO PURCHASE SHARES
==============================================================================
Your initial investment in the Fund ordinarily must be at least $1,000 ($250 for
tax-deferred retirement plans). 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 "Manager").
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 "Global 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 ordinarily issued, but you may
receive a certificate without charge by sending a written request to the
Transfer Agent. Certificates for fractional shares will not be issued. If a
certificate has been issued to you, you will not be permitted to exchange shares
by telephone or to use the automatic withdrawal plan as to those shares. The
Trust and the Manager reserve the rights to limit the amount of investments and
to refuse to sell to any person.
<PAGE>
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone exchanges) made available to
investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers
listed below.
After an initial investment, all investors are considered participants in the
Open Account Program. The Open Account Program helps investors make purchases of
shares of the Fund over a period of years and permits the automatic reinvestment
of dividends and distributions of the Fund in additional shares without a sales
load.
Under the Open Account Program, you may purchase and add shares to your account
at any time either through your securities dealer or by sending a check to the
Transfer Agent, P.O. Box 5354, Cincinnati, Ohio 45201-5354. The check should be
made payable to the "Global 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.
SALES LOAD ALTERNATIVES
The Fund offers two classes of shares which may be purchased at the election of
the purchaser. The two classes of shares each represent interests in the same
portfolio of investments of the Fund, have the same rights and are identical in
all material respects except that (i) Class C shares bear the expenses of higher
distribution fees; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable, including transfer
agent fees attributable to a specific class of shares, printing and postage
expenses related to preparing and distributing materials to current shareholders
of a specific class, registration fees incurred by a specific class of shares,
the expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements. The net
income attributable to Class C shares and the dividends payable on Class C
shares will be reduced by the amount of the incremental expenses associated with
the distribution fee. See "Distribution Plans."
The Fund's alternative sales arrangements permit investors to choose the method
of purchasing shares that is most beneficial given the amount of the purchase,
the length of time the investor expects to hold his shares and other relevant
circumstances. Investors should determine whether under their particular
circumstances it is more advantageous to incur a front-end sales load and be
subject to lower ongoing charges, as discussed below, or to have all of the
initial purchase price invested in the Fund with the investment thereafter being
subject to higher ongoing charges. A salesperson or any other person entitled to
receive any portion of a distribution fee may receive different compensation for
selling Class A or Class C shares.
<PAGE>
As an illustration, investors who qualify for reduced sales loads as described
below, might elect the Class A sales load alternative because similar sales load
reductions are not available for purchases under the Class C sales load
alternative. Moreover, shares acquired under the Class A sales load alternative
would be subject to lower ongoing distribution fees as described below.
Investors not qualifying for reduced initial sales loads who expect to maintain
their investment for an extended period of time might also elect the Class A
sales load alternative because over time the accumulated continuing distribution
fees on Class C shares may exceed the difference in initial sales loads between
Class A and Class C shares. Again, however, such investors must weigh this
consideration against the fact that less of their funds will be invested
initially under the Class A sales load alternative. Furthermore, the higher
ongoing distribution fees will be offset to the extent any return is realized on
the additional funds initially invested under the Class C sales load
alternative.
Some investors might determine that it would be more advantageous to utilize the
Class C sales load alternative to have more of their funds invested initially,
although remaining subject to higher ongoing distribution fees and, for a
one-year period, being subject to a contingent deferred sales load. For example,
based on estimated fees and expenses, an investor subject to the maximum 4%
initial sales load on Class A shares who elects to reinvest dividends in
additional shares would have to hold the investment in Class A shares
approximately 5 years before the accumulated ongoing distribution fees on the
alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 5 years, the investor might
consider purchasing Class A shares. This example does not take into account the
time value of money which reduces the impact of the higher ongoing Class C
distribution fees, fluctuations in net asset value or the effect of different
performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Manager may from time to time pay from its own resources additional cash bonuses
or other incentives to selected dealers in connection with the sale of shares of
the Fund. On some occasions, such bonuses or incentives may be conditioned upon
the sale of a specified minimum dollar amount of the shares of the Fund and/or
other funds of Countrywide Investments during a specific period of time. Such
bonuses or incentives may include financial assistance to dealers in connection
with conferences, sales or training programs for their employees, seminars for
the public, advertising, sales campaigns and other dealer-sponsored programs or
events.
CLASS A SHARES
Class A shares of the Fund are sold on a continuous basis at the public offering
price next determined after receipt of a purchase order by the Trust. Purchase
orders received by dealers prior to 4:00 p.m., Eastern time, on any business day
and transmitted to the Manager 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 Manager 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.
<PAGE>
The public offering price of Class A shares is the next determined net asset
value per share plus a sales load as shown in the following table.
<TABLE>
<CAPTION>
Dealer
Sales Load Reallowance
as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
<S> <C> <C> <C>
Less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50% 3.63% 3.30%
$250,000 but less than $500,000 2.50% 2.56% 2.30%
$500,000 but less than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 or more None* None*
<FN>
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .75% may apply with respect to Class A
shares if a commission was paid by the Manager to a participating
unaffiliated dealer and the shares are redeemed within twelve months from the
date of purchase.
</FN>
</TABLE>
Under certain circumstances, the Manager 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 Manager retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made after October
1, 1995 and subsequent purchases further increasing the size of the account, a
dealer's commission of .75% of the purchase amount may be paid by the Manager to
participating unaffiliated dealers through whom such purchases are effected. In
determining a dealer's eligibility for such commission, purchases of Class A
shares of the Fund may be aggregated with concurrent purchases of Class A shares
of other funds of Countrywide Investments. Dealers should contact the Manager
concerning the applicability and calculation of the dealer's commission in the
case of combined purchases. An exchange from other funds of Countrywide
Investments will not qualify for payment of the dealer's commission, unless such
exchange is from a Countrywide fund with assets as to which a dealer's
commission or similar payment has not been previously paid. Redemptions of Class
A shares may result in the imposition of a contingent deferred sales load if the
dealer's commission described in this paragraph was paid in connection with the
purchase of such shares. See "Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares" below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Manager 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 Manager 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 Manager
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 Class A 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 Manager. 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 Class A 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 "Global 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.
<PAGE>
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase Class A shares
of the Fund at net asset value. To the extent permitted by regulatory
authorities, a bank trust department may charge fees to clients for whose
account it purchases shares at net asset value. Federal and state credit unions
may also purchase Class A shares at net asset value.
In addition, Class A shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Manager, 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 Class A
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
Manager. The investment adviser or financial planner must notify the Transfer
Agent that an investment qualifies as a purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the Manager, the
Adviser, the Transfer Agent or any affiliated company, including members of the
immediate family of such individuals and employee benefit plans established by
such entities, may also purchase Class A shares of the Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Fund (or shares into which such Class A shares were exchanged)
purchased at net asset value in amounts totaling $1 million or more, if the
dealer's commission described above was paid by the Manager and the shares are
redeemed within twelve months from the date of purchase. The contingent deferred
sales load will be paid to the Manager and will be equal to .75% of the lesser
of (1) the net asset value at the time of purchase of the Class A shares being
redeemed or (2) the net asset value of such Class A shares at the time of
redemption. In determining whether the contingent deferred sales load is
payable, it is assumed that shares not subject to the contingent deferred sales
load are the first redeemed followed by other shares held for the longest period
of time. The contingent deferred sales load will not be imposed upon shares
representing reinvested dividends or capital gains distributions, or upon
amounts representing share appreciation. If a purchase of Class A shares is
subject to the contingent deferred sales load, the investor will be so notified
on the confirmation for such purchase.
Redemptions of such Class A shares of the Fund held for at least 12 months will
not be subject to the contingent deferred sales load and an exchange of such
Class A shares into another fund of Countrywide Investments is not treated as a
redemption and will not trigger the imposition of the contingent deferred sales
load at the time of such exchange. A fund will "tack" the period for which such
Class A shares being exchanged were held onto the holding period of the acquired
shares for purposes of determining if a contingent deferred sales load is
applicable in the event that the acquired shares are redeemed following the
exchange; however, the period of time that the redemption proceeds of such Class
A shares are held in a money market fund will not count toward the holding
period for determining whether a contingent deferred sales load is applicable.
See "Exchange Privilege."
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 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 Manager may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining 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.
<PAGE>
CLASS C SHARES
Class C shares of the Fund are sold on a continuous basis at the net asset value
next determined after receipt of a purchase order by the Trust. Purchase orders
received by dealers prior to 4:00 p.m., Eastern time, on any business day and
transmitted to the Manager by 5:00 p.m., Eastern time, that day are confirmed at
the net asset value determined as of the close of the regular session of trading
on the New York Stock Exchange on that day. It is the responsibility of dealers
to transmit properly completed orders so that they will be received by the
Manager by 5:00 p.m., Eastern time. Dealers may charge a fee for effecting
purchase orders. Direct purchase orders received by the Transfer Agent by 4:00
p.m., Eastern time, are confirmed at that day's net asset value. Direct
investments received by the Transfer Agent after 4:00 p.m., Eastern time, and
orders received from dealers after 5:00 p.m., Eastern time, are confirmed at the
net asset value next determined on the following business day.
A contingent deferred sales load is imposed on Class C shares if an investor
redeems an amount which causes the current value of the investor's account to
fall below the total dollar amount of purchase payments subject to the deferred
sales load, except that no such charge is imposed if the shares redeemed have
been acquired through the reinvestment of dividends or capital gains
distributions or to the extent the amount redeemed is derived from increases in
the value of the account above the amount of purchase payments subject to the
deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the amount of
time since the investor made a purchase payment from which an amount is being
redeemed. Purchases are subject to the contingent deferred sales load according
to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it is
assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that an individual opens an account and purchases 1,000
shares at $10 per share and that six months later the net asset value per share
is $12 and, during such time, the investor has acquired 50 additional shares
through reinvestment of distributions. If at such time the investor should
redeem 450 shares (proceeds of $5,400), 50 shares will not be subject to the
load because of dividend reinvestment. With respect to the remaining 400 shares,
the load is applied only to the original cost of $10 per share and not to the
increase in net asset value of $2 per share. Therefore, $4,000 of the $5,400
redemption proceeds will be charged the load. At the rate of 1%, the contingent
deferred sales load would be $40. In determining whether an amount is available
for redemption without incurring a deferred sales load, the purchase payments
made for all Class C shares in the shareholder's account are aggregated, and the
current value of all such shares is aggregated.
All sales loads imposed on redemptions are paid to the Manager. The Manager
intends to pay a commission of 1% of the purchase amount to participating
brokers at the time the investor purchases Class C shares.
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 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 Manager may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
<PAGE>
SHAREHOLDER SERVICES
==============================================================================
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may elect to
receive, or may designate another person to receive, monthly or quarterly
payments in a specified amount of not less than $50 each. There is no charge for
this service. Purchases of additional Class A shares of the Fund while the plan
is in effect are generally undesirable because a sales load is incurred whenever
purchases are made.
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 by sending a written request to the Transfer Agent. The request must
state the number of shares or the dollar amount to be redeemed and your account
number. The request must be signed exactly as your name appears on the Trust's
account records. If the shares to be redeemed have a value of $25,000 or more,
your signature must be guaranteed by any eligible guarantor institution,
including banks, brokers and dealers, municipal securities brokers and dealers,
government securities brokers and dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations.
<PAGE>
You may also redeem shares by placing a wire redemption request through a
securities broker or dealer. Unaffiliated broker-dealers may impose a fee on the
shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
If your instructions request a redemption by wire, 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.
If a certificate for the shares was issued, it must be delivered to the Transfer
Agent, or the dealer in the case of a wire redemption, duly endorsed or
accompanied by a duly endorsed stock power, with the signature guaranteed by any
of the eligible guarantor institutions outlined above.
A contingent deferred sales load may apply to a redemption of Class C shares or
to a redemption of certain Class A shares purchased at net asset value. See "How
to Purchase Shares."
Shares are redeemed at their net asset value per share next determined after
receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check or wire.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege of
exchanging shares by telephone is automatically available to all shareholders.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested including any sales
load paid, unaffected by market fluctuations), or $250 in the case of
tax-deferred retirement plans, or such other minimum amount as the Trust may
determine from time to time. After notification to you of the Trust's intention
to close your account, you will be given thirty days to increase the value of
your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
<PAGE>
EXCHANGE PRIVILEGE
==============================================================================
Shares of the Fund and of any other fund of Countrywide Investments may be
exchanged for each other.
Class A shares of the Fund which are not subject to a contingent deferred sales
load may be exchanged for Class A shares of any other fund and for shares of any
other fund which offers only one class of shares (provided such shares are not
subject to a contingent deferred sales load). A sales load will be imposed equal
to the excess, if any, of the sales load rate applicable to the shares being
acquired over the sales load rate, if any, previously paid on the shares being
exchanged.
Class C shares of the Fund, as well as Class A shares of the Fund subject to a
contingent deferred sales load, may be exchanged, on the basis of relative net
asset value per share, for shares of any other fund which imposes a contingent
deferred sales load and for shares of any fund which is a money market fund. A
fund will "tack" the period for which the shares being exchanged were held onto
the holding period of the acquired shares for purposes of determining if a
contingent deferred sales load is applicable in the event that the acquired
shares are redeemed following the exchange. The period of time that shares are
held in a money market fund will not count toward the holding period for
determining whether a contingent deferred sales load is applicable.
The following are the funds of Countrywide Investments currently offered to the
public. Funds which may be subject to a front-end or contingent deferred sales
load are indicated by an asterisk.
COUNTRYWIDE TAX-FREE TRUST COUNTRYWIDE INVESTMENT TRUST
Tax-Free Money Fund Short Term Government Income Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund
Florida Tax-Free Money Fund *Adjustable Rate U.S. Government
*Tax-Free Intermediate Term Fund Securities Fund
*Ohio Insured Tax-Free Fund *Global Bond Fund
COUNTRYWIDE STRATEGIC TRUST
*U.S. Government Securities Fund
*Equity Fund
*Utility Fund
*Treasury Total Return 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.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
===============================================================================
The Fund expects to distribute substantially all of its net investment income
and 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.
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.
An investor who has received in cash any dividend or capital gains distribution
from the Fund may return the distribution within thirty days of the distribution
date to the Transfer Agent for reinvestment at the net asset value next
determined after its return. The investor or his dealer must notify the Transfer
Agent that a distribution is being reinvested pursuant to this provision.
TAXES
==============================================================================
The Fund has qualified in all prior years and intends to continue to qualify for
the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders.
The Fund 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 resulting from the sale of foreign currencies and foreign
obligations, to the extent of foreign exchange gains, are taxed as ordinary
income or loss. If these transactions result in reducing the Fund's net income,
a portion of the income may be classified as a return of capital (which will
lower your tax basis). If the Fund pays nonrefundable taxes to foreign
governments during the year, the taxes will reduce the Fund's net investment
income but still may be included in your taxable income. However, you may be
able to claim an offsetting tax credit or itemized deduction on your return for
your portion of foreign taxes paid by the Fund. 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.
Under applicable tax law, the Fund may be required to limit its gains from
hedging in foreign currency forwards, futures and options. Although it is
anticipated the Fund will comply with such limits, the Fund's extensive use of
these hedging techniques involves greater risk of unfavorable tax consequences
than funds not engaging in such techniques. Hedging may also result in the
application of the mark-to-market and straddle provisions of the Internal
Revenue Code. These provisions could result in an increase (or decrease) in the
<PAGE>
amount of taxable dividends paid by the Fund as well as affect whether dividends
paid by the Fund are classified as capital gains or ordinary income.
The Fund will mail to each of its shareholders a statement indicating the amount
and federal income tax status of all distributions made during the year. 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.
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 "Manager"), to provide general investment supervisory services
to the Fund and to manage the Fund's business affairs. The Manager was organized
in 1974 and serves as investment adviser to four other series of the Trust, six
series of Countrywide Tax-Free Trust and four series of Countrywide Strategic
Trust. The Manager 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 Manager a fee
equal to the annual rate of .7% of the average value of its daily net assets up
to $100 million and .6% of such assets in excess of $100 million.
Rogge Global Partners plc (the "Adviser"), 5-6 St. Andrew's Hill, London,
England, has been retained by the Manager to manage the Fund's investments. The
Adviser was organized in 1984 and specializes in global fixed-income management.
The Adviser is a wholly-owned subsidiary of United Asset Management Corporation,
a New York Stock Exchange listed company principally engaged, through affiliated
firms in the United States and abroad, in providing institutional investment
management services and acquiring institutional investment firms. The Manager
(not the Fund) pays the Adviser a fee equal to the annual rate of .35% of the
average value of the Fund's daily net assets up to $100 million and .3% of such
assets in excess of $100 million.
Decisions regarding the investment of the Fund's portfolio are made by the
Adviser's Global Strategy Group, which is made up of the Adviser's
directors of portfolio management: Olaf Rogge, John Graham and Richard
Bell. Mr. Rogge is the founder of the Adviser and has been managing global
investments for approximately twenty-three years.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the Fund.
The Transfer Agent receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
<PAGE>
In addition, the Transfer Agent has been retained by the Manager to assist the
Manager in providing administrative services to the Fund. In this capacity, the
Transfer Agent supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Manager (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 Manager serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Robert H. Leshner,
President and a director of the Manager, is President and a Trustee of the
Trust. John F. Splain, Secretary and General Counsel of the Manager, is
Secretary of 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
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust, the Manager or
the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders except
in matters where a vote of all series of the Trust in the aggregate is required
by the Investment Company Act of 1940 or otherwise. Each class of shares of the
Fund shall vote separately on matters relating to its plan of distribution
pursuant to Rule 12b-1 (see "Distribution Plans"). When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.
DISTRIBUTION PLANS
==============================================================================
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted a plan of distribution (the "Class A Plan") under which
Class A shares may directly incur or reimburse the Manager for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.35% of the Fund's average daily net assets allocable to Class A shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class A Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Manager after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted a plan of distribution (the "Class C Plan") which provides
for two categories of payments. First, the Class C Plan provides for the payment
to the Manager of an account maintenance fee, in an amount equal to an annual
rate of .25% of the Fund's average daily net assets allocable to Class C shares,
which may be paid to other dealers based on the average value of such shares
owned by clients of such dealers. In addition, the Class C shares may directly
incur or reimburse the Manager in an amount not to exceed .75% per annum of the
<PAGE>
Fund's average daily net assets allocable to Class C shares for expenses
incurred in the distribution and promotion of the Fund's Class C shares,
including payments to securities dealers and others who are engaged in the sale
of such shares and who may be advising investors regarding the purchase, sale or
retention of such shares; expenses of maintaining personnel who engage in or
support distribution of shares or who render shareholder support services not
otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Fund; expenses of obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Trust may, from time to time,
deem advisable; and any other expenses related to the distribution of such
shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class C Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Manager after the date the Class C Plan terminates. The Manager may make
payments to dealers and other persons in an amount up to .75% per annum of the
average value of Class C shares owned by their clients, in addition to the .25%
account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Fund may make payments to dealers and other
persons, including the Manager and its affiliates, who may be advising investors
regarding the purchase, sale or retention of Fund shares. For the fiscal year
ended September 30, 1996, Class A shares and Class C shares of the Fund paid
$497 and $22,634, respectively, to the Manager to reimburse it for payments made
to dealers and other persons who may be advising shareholders in this regard.
Pursuant to the Plans, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
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 share price (net asset
value) of Class C shares and the public offering price (net asset value plus
applicable sales load) of Class A shares of the Fund are determined as of the
close of the regular session of trading on the New York Stock Exchange,
currently 4:00 p.m., Eastern time. The Trust is open for business on each day
the New York Stock Exchange is open for business. Obligations held by the Fund
may be primarily listed on foreign exchanges or traded in foreign markets which
are open on days (such as Saturdays and U.S. holidays) when the New York Stock
Exchange is not open for business. As a result, the net asset value per share of
the Fund may be significantly affected by trading on days when the Trust is not
open for business. 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.
<PAGE>
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. Foreign securities are
valued on the basis of quotations from the primary market in which they are
traded and are translated from the local currency into U.S. dollars using
currency exchange rates. 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
performance. Total return and yield are computed separately for Class A and
Class C shares. The yield of Class A shares is expected to be higher than the
yield of Class C shares due to the higher distribution fees imposed on Class C
shares.
The "average annual total return" of the Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and, for
Class A shares, the deduction of the current maximum sales load from the initial
investment. The Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from "average annual total return."
A nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized quotation of
total return may also indicate average annual compounded rates of return over
periods other than those specified for "average annual total return." These
nonstandardized returns do not include the effect of the applicable sales load
which, if included, would reduce total return. A nonstandardized quotation of
total return will always be accompanied by the Fund's "average annual total
return" as described above.
The "yield" of the Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
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 such as the
Salomon Brothers World Government Bond Index. In connection with a ranking, the
Fund may provide additional information, such as the particular category of
funds to which the ranking relates, the number of funds in the category, the
criteria upon which the ranking is based, and the effect of fee waivers and/or
expense reimbursements, if any. The Fund may also present its performance and
other investment characteristics, such as volatility or a temporary defense
posture, in light of the Manager's view of current or past market conditions or
historical trends.
Further information about the Fund's performance is contained in the Trust's
annual report which can be obtained by shareholders at no charge by calling the
Transfer Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call
629-2050) or by writing to the Trust at the address on the front of this
Prospectus.
<PAGE>
ACCOUNT NO. _________________
(For Fund Use Only)
ACCOUNT APPLICATION
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
GLOBAL BOND FUND
o A Shares (12)
o C Shares (13)
- ----------------------------------------------------
FOR BROKER/DEALER USE ONLY
Firm Name:________________________________________
Home Office Address:______________________________
Branch Address:___________________________________
Rep Name & No.:___________________________________
Rep Signature:____________________________________
- ----------------------------------------------------
==============================================================================
Initial Investment of $__________________ ($1,000 minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From: __________________________________________________________
o Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
_____________________________________________ _____________________________
Name of Individual, Corporation, (In case of custodial account
Organization, or Minor, etc. please list minor's S.S.#)
_____________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other________
ADDRESS PHONE
_____________________________________________ ( )__________________________
Street or P.O. Box Business Phone
_____________________________________________ ( )__________________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (right of survivorship presumed)
o Partnership
o Corporation
o Trust
o Custodial
o Non-Profit
o Other
Occupation and Employer Name/Address__________________________________________
Are you an associated person of an NASD member? o Yes o 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 your consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if
appropriate:
o 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.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of
all reportable payments will be withheld until I provide a number.
===============================================================================
<PAGE>
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital
gains distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
===============================================================================
REDUCED SALES CHARGES (CLASS A SHARES ONLY)
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's
confirmation of the following holdings of eligible load funds of Countrywide
Investments.
Account Number/Name Account Number/Name
__________________________________ _________________________________________
__________________________________ _________________________________________
LETTER OF INTENT: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o l 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):
o $100,000 o $250,000 o $500,000 o $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 Investments,
Inc., and their respective officers, employees, agents and affiliates from any
and all liability in the performance of the acts instructed herein provided that
such entities have exercised due care to determine that the instructions are
genuine.
__________________________________ _________________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
__________________________________ _________________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST
COMPLETE THE RESOLUTION FORM ON THE REVERSE SIDE.
UNLESS OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL
HAVE FULL AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of
Countrywide 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 ABA Routing Number_________________
in the Fund.
FI Account Number__________________
o Checking Account o Savings Account
__________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
__________________________________ o the 15th day of each month
City State o both the 15th and last business day
X_________________________________ X______________________________________
(Signature of Depositor EXACTLY (Signature of Joint Tenant - if any)
as it appears on FI Records)
(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 amount. CFS will defend, at its own cost and expense, any action
which might be brought against you by any person or persons whatsoever
because of your actions taken pursuant to the foregoing request or in any
manner arising by reason of your participation in this arrangement. CFS will
refund to you any amount erroneously paid by you to the Fund if the claim
for the amount of such erroneous payment is made by you within six (6)
months from the date of such erroneous payment; your participation in this
arrangement and that of the Fund may be terminated by thirty (30) days written
notice from either party to the other.
==============================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund
account beginning the last business day of the month of_____________.
Please Indicate Withdrawal Schedule (Check One):
o MONTHLY -- Withdrawals will be made on the last business day of each month.
o QUARTERLY -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o ANNUALLY -- Please make withdrawals on the last business day of
the month of:_______________.
Please Select Payment Method (Check One):
o EXCHANGE: Please exchange the withdrawal proceeds into another
Countrywide account number: __ __-__ __ __ __ __ __-__
o Check: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o 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.
o 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
o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_________________________________________________________________
Please send to:_______________________________________________________________
Street address City State Zip
==============================================================================
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Countrywide 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.
<PAGE>
TOTAL RETURN
PROSPECTUS
FEBRUARY 1, 1997
Revised March 31, 1997
GLOBAL
BOND FUND
COUNTRYWIDE
INVESTMENTS
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
==================================================
TABLE OF CONTENTS
Expense Information........................... 2
Financial Highlights.......................... 3
Investment Objective, Investment Policies
and Risk Considerations.................. 4
How to Purchase Shares ....................... 9
Shareholder Services.......................... 15
How to Redeem Shares.......................... 15
Exchange Privilege............................ 17
Dividends and Distributions................... 18
Taxes......................................... 18
Operation of the Fund......................... 19
Distribution Plans............................ 20
Calculation of Share Price and
Public Offering Price.................... 21
Performance Information....................... 22
==================================================
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1997
Amended March 31, 1997
Short Term Government Income Fund
Intermediate Term Government Income Fund
Institutional Government Income Fund
Adjustable Rate U.S. Government Securities Fund
Global 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 February 1, 1997, and amended March 31, 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 ................... 6
INVESTMENT LIMITATIONS............................................19
TRUSTEES AND OFFICERS.............................................28
THE INVESTMENT ADVISER AND UNDERWRITER............................30
DISTRIBUTION PLANS . . . . . .....................................33
SECURITIES TRANSACTIONS...........................................36
PORTFOLIO TURNOVER................................................38
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE..............39
OTHER PURCHASE INFORMATION........................................41
TAXES.............................................................43
REDEMPTION IN KIND................................................45
HISTORICAL PERFORMANCE INFORMATION................................45
PRINCIPAL SECURITY HOLDERS........................................51
CUSTODIAN.........................................................52
AUDITORS..........................................................53
TRANSFER AGENT. ..................................................53
ANNUAL REPORT.....................................................55
<PAGE>
THE TRUST
- ---------
Countrywide Investment Trust (the "Trust"), formerly Midwest Trust and
Midwest Income Trust, was organized as a Massachusetts business trust on
December 7, 1980. The Trust currently offers five 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 and the Global Bond Fund (referred to individually as a "Fund" and
collectively as the "Funds"). Each Fund has its own investment objective(s) and
policies.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
Both Class A shares and Class C shares of the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund and
the Global Bond Fund represent an interest in the same assets of such Fund, have
the same rights and are identical in all material respects except that (i) Class
C shares bear the expenses of higher distribution fees; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable, including transfer agent fees attributable to a specific class of
shares, printing and postage expenses related to preparing and distributing
materials to current shareholders of a specific class, registration fees
incurred by a specific class of shares, the expenses of administrative personnel
and services required to support the shareholders of a specific class,
litigation or other legal
- 3 -
<PAGE>
expenses relating to a class of shares, Trustees' fees or expenses incurred as a
result of issues relating to a specific class of shares and accounting fees and
expenses relating to a specific class of shares; and (iii) each class has
exclusive voting rights with respect to matters relating to its own distribution
arrangements. The Board of Trustees may classify and reclassify the shares of a
Fund into additional classes of shares at a future date.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of an instance where such result has occurred. In addition, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the Trustees.
The Trust Agreement also provides for the indemnification out of the Trust
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Moreover, it provides that the Trust will,
upon request, assume the defense of any claim made against any shareholder for
any act or obligation of the Trust and satisfy any judgment thereon. As a
result, and particularly because the Trust assets are readily marketable and
ordinarily substantially exceed liabilities, management believes that the risk
of shareholder liability is slight and limited to circumstances in which the
Trust itself would be unable to meet its obligations. Management believes that,
in view of the above, the risk of personal liability is remote.
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS
- -------------------------------------------
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."
- 4 -
<PAGE>
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."
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."
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."
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."
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."
MIG-3 "Notes which are rated MIG-3 are judged to be of favorable
quality. All security elements are accounted for but they are
lacking the undeniable strength of the preceding grades.
Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established."
- 5 -
<PAGE>
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."
SP-3 "Debt rated SP-3 has speculative 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 capacity 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 a satisfactory capacity
for timely payment. They are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances
than obligations carrying the higher designations."
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and investment
policies described in the Prospectuses (see "Investment Objectives and
Policies") appears below:
- 6 -
<PAGE>
WHEN-ISSUED SECURITIES AND SECURITIES PURCHASED ON A TO-BE- ANNOUNCED
BASIS. The Intermediate Term Government Income Fund, the Institutional
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund and
the Global Bond Fund will only make commitments to purchase securities on a
when-issued or to-be-announced ("TBA") basis with the intention of actually
acquiring the securities. In addition, the Funds may purchase securities on a
when-issued or TBA basis only if delivery and payment for the securities takes
place within 120 days after the date of the transaction. In connection with
these investments, each Fund will direct the 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 or TBA 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 or TBA 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 or TBA
basis and the securities held in a Fund's portfolio are subject to changes in
market value based upon changes in the level of interest rates (which will
generally result in all of those securities changing in value in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise). Therefore, if in order to achieve
higher returns, a Fund remains substantially fully invested at the same time
that it has purchased securities on a when-issued or TBA 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 or TBA 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 or TBA 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 or TBA 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 or TBA 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.
- 7 -
<PAGE>
STRIPS. STRIPS are U.S. Treasury bills, notes, and bonds that have been
issued without interest coupons or stripped of their unmatured interest coupons,
interest coupons that have been stripped from such U.S. Treasury securities, and
receipts or certificates representing interests in such stripped U.S. Treasury
securities and coupons. A STRIPS security pays no interest in cash to its holder
during its life although interest is accrued for federal income tax purposes.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value. Investing in STRIPS may help
to preserve capital during periods of declining interest rates. For example, if
interest rates decline, GNMA Certificates owned by a Fund which were purchased
at greater than par are more likely to be prepaid, which would cause a loss of
principal. In anticipation of this, a Fund might purchase STRIPS, the value of
which would be expected to increase when interest rates decline.
STRIPS do not entitle the holder to any periodic payments of interest
prior to maturity. Accordingly, such securities usually trade at a deep discount
from their face or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt obligations of
comparable maturities which make periodic distributions of interest. On the
other hand, because there are no periodic interest payments to be reinvested
prior to maturity, STRIPS eliminate the reinvestment risk and lock in a rate of
return to maturity. Current federal tax law requires that a holder of a STRIPS
security accrue a portion of the discount at which the security was purchased as
income each year even though the Fund received no interest payment in cash on
the security during the year.
As a matter of current policy that may be changed without shareholder
approval, the Adjustable Rate U.S. Government Securities Fund will not purchase
STRIPS with a maturity date that is more than 10 years from the settlement of
the purchase.
GNMA CERTIFICATES. The term "GNMA Certificates" refers to
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are guaranteed by the Government National Mortgage Association and
backed by the full faith and credit of the United States.
1. The Life of GNMA Certificates. The average life of GNMA Certificates
is likely to be substantially less than the original maturity of the mortgage
pools underlying the GNMA Certificates due to prepayments, refinancing and
payments from foreclosures. Thus, the greatest part of principal will usually be
paid well before the maturity of the mortgages in the pool. As prepayment rates
of individual mortgage pools will vary widely, it is not possible to accurately
predict the average life of a particular issue of GNMA Certificates. However,
statistics published by the FHA are normally used as an indicator of the
expected average life of GNMA Certificates. These statistics
- 8 -
<PAGE>
indicate that the average life of single-family dwelling mortgages with 25-30
year maturities, the type of mortgages backing the vast majority of GNMA
Certificates, is approximately 12 years. However, mortgages with high interest
rates have experienced accelerated prepayment rates which would indicate a
shorter average life.
2. Yield Characteristics of GNMA Certificates. The coupon rate of
interest of GNMA Certificates is lower than the interest rate paid on the
VA-guaranteed or FHA-insured mortgages underlying the GNMA Certificates, but
only by the amount of the fees paid to the GNMA and the issuer. For the most
common type of mortgage pool, containing single-family dwelling mortgages, the
GNMA receives an annual fee of 0.06 of 1% of the outstanding principal for
providing its guarantee, and the issuer is paid an annual fee of 0.44 of 1% for
assembling the mortgage pool and for passing through monthly payments of
interest and principal to Certificate holders.
The coupon rate by itself, however, does not indicate the yield which
will be earned on the GNMA Certificates for the following reasons:
(a) GNMA Certificates may be issued at a premium or
discount, rather than at par.
(b) After issuance, GNMA Certificates may trade in the
secondary market at a premium or discount.
(c) Interest is earned monthly, rather than semi-annually as
for traditional bonds. Monthly compounding has the effect of raising
the effective yield earned on GNMA Certificates.
(d) The actual yield of each GNMA Certificate is influenced by
the prepayment experience of the mortgage pool underlying the
Certificate. If mortgagors pay off their mortgages early, the principal
returned to Certificate holders may be reinvested at more or less
favorable rates.
3. Market for GNMA Certificates. Since the inception of the GNMA
mortgage-backed securities program in 1970, the amount of GNMA Certificates
outstanding has grown rapidly. The size of the market and the active
participation in the secondary market by securities dealers and many types of
investors make GNMA Certificates highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and depend on, among
other things, the level of market rates, the Certificate's coupon rate and the
prepayment experience of the pool of mortgages backing each Certificate.
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FHLMC CERTIFICATES. The term "FHLMC Certificates" refers to
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are guaranteed by the Federal Home Loan Mortgage Corporation. The
Federal Home Loan Mortgage Corporation is the leading seller of conventional
mortgage securities in the United States. FHLMC Certificates are not guaranteed
by the United States or by any Federal Home Loan Bank and do not constitute
debts or obligations of the United States or any Federal Home Loan Bank.
Mortgage loans underlying FHLMC Certificates will consist of fixed rate
mortgages with original terms to maturity of between 10 and 30 years,
substantially all of which are secured by first liens on one-family or
two-to-four family residential properties. Mortgage interest rates may be mixed
in a pool. The seller/ servicer of each mortgage retains a minimum three-eighths
of 1% servicing fee, and any remaining excess of mortgage rate over coupon rate
is kept by the Federal Home Loan Mortgage Corporation. The coupon rate of a
FHLMC Certificate does not by itself indicate the yield which will be earned on
the Certificate for the reasons discussed above in connection with GNMA
Certificates.
FNMA CERTIFICATES. The term "FNMA Certificates" refers to
mortgage-backed securities representing part ownership of a pool of mortgage
loans, which are guaranteed by the Federal National Mortgage Association.
The FNMA, despite having U.S. Government agency status, is also a
private, for-profit corporation organized to provide assistance in the housing
mortgage market. The only function of the FNMA is to provide a secondary market
for residential mortgages. Mortgage loans underlying FNMA Certificates reflect a
considerable diversity and are purchased from a variety of mortgage originators.
They are typically collateralized by conventional mortgages (not FHA-insured or
VA-guaranteed). FNMA Certificates are highly liquid and usually trade in the
secondary market at higher yields than GNMA Certificates. The coupon rate of a
FNMA Certificate does not by itself indicate the yield which will be earned on
the Certificate for the reasons discussed above in connection with GNMA
Certificates.
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.
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Government obligations by the Federal Reserve Bank of New York. Collateral for
repurchase agreements is held in safekeeping in the customer-only account of the
Funds' Custodian at the Federal Reserve Bank. A Fund will not enter into a
repurchase agreement not terminable within seven days if, as a result thereof,
more than 10% of the value of its net assets would be invested in such
securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time a Fund enters
into a repurchase agreement, the value of the underlying security, including
accrued interest, will equal or exceed the value of the repurchase agreement,
and in the case of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including accrued interest,
will at all times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must 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
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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. The Institutional Government Income
Fund, the Adjustable Rate U.S. Government Securities Fund and the Global Bond
Fund may each lend its portfolio securities subject to the restrictions stated
in its Prospectus. Under applicable regulatory requirements (which are subject
to change), the loan collateral must, on each business day, at least equal the
value of the loaned securities. To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. The Fund receives amounts equal to the interest on
loaned securities and also receives 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 Fund 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 Fund 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 Adjustable
Rate U.S. Government Securities Fund and the Global Bond Fund 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
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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 Global Bond Fund 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.
COMMERCIAL PAPER. Commercial paper consists of short-term, (usually
from one to two hundred seventy days) unsecured promissory notes issued by U.S.
and foreign corporations in order to finance their current operations.
Eurodollar commercial paper refers to notes payable by European issuers in U.S.
dollars. The Adjustable Rate U.S. Government Securities Fund will only invest in
U.S. commercial paper rated A-1 by Standard & Poor's or Prime-1 by Moody's or
unrated paper of issuers who have outstanding unsecured debt rated AAA or better
by Standard & Poor's or Aaa or better by Moody's. The Adjustable Rate U.S.
Government Securities Fund does not presently intend to invest in commercial
paper. The Global Bond Fund will only invest in commercial paper rated A-1 or
A-2 by Standard & Poor's or Prime-1 or Prime-2 by Moody's or unrated paper of
issuers who have outstanding unsecured debt rated A or better by Standard &
Poor's or Moody's. 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 a Fund's restrictions on illiquid investments (see "Investment
Limitations") unless, in the judgment of the Adviser or the Sub-Adviser, subject
to the direction of the Board of Trustees, such note is liquid.
FOREIGN SECURITIES. The Global Bond Fund may invest in non- U.S. dollar
denominated debt securities principally traded in financial markets outside the
United States. Because the Fund invests in foreign securities, an investment in
the Fund involves risks that are different in some respects from an investment
in a fund which invests only in securities of U.S. domestic issuers. Foreign
investments may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations. There may be less publicly available
information about a foreign company than about a U.S. company, and foreign
companies may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S.
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companies. There may be less governmental supervision of securities markets,
brokers and issuers of securities. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Settlement practices may include delays and may differ from those customary in
United States markets. Investments in foreign securities may also be subject to
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets,
restrictions on foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency blockage (which
would prevent cash from being brought back to the United States), and difficulty
in enforcing legal rights outside the United States.
EUROPEAN CURRENCY UNIT BONDS. The European Currency Unit ("ECU") is a
basket of European currencies consisting of specified amounts of the currencies
of ten members of the European community. The ECU is used by members as their
budgetary currency to determine official claims and debts. It fluctuates with
the daily exchange rate changes of the constituent currencies. The ECU is now
defined by the following ten currencies: German Deutschmark, British Pound,
French Franc, Italian Lira, Dutch Guilder, Belgian Franc, Luxembourg Franc,
Finish Kroner, Irish Pound and Greek Drachma. ECU bonds are bonds or debentures
denominated in ECUs.
FORWARD CURRENCY EXCHANGE CONTRACTS. The value of the Global Bond
Fund's portfolio securities which are invested in non-U.S. dollar denominated
instruments as measured in U.S. dollars may be affected favorably or unfavorably
by changes in foreign currency exchange rates and exchange control regulations,
and the Fund may incur costs in connection with conversions between various
currencies. The Fund will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded directly
between currency traders (usually large commercial banks) and their customers.
The Fund will not, however, hold foreign currency except in connection with
purchase and sale of foreign portfolio securities.
The Global Bond Fund will enter into forward currency exchange
contracts as described hereafter. When the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may desire
to establish the
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cost or proceeds relative to another currency. The forward contract may be
denominated in U.S. dollars or may be a "cross-currency" contract where the
forward contract is denominated in a currency other than U.S. dollars. However,
this tends to limit potential gains which might result from a positive change in
such currency relationships.
The forecasting of a short-term currency market movement is extremely
difficult and the successful execution of a short-term hedging strategy is
highly uncertain. The Fund may enter into such forward contracts if, as a
result, not more than 50% of the value of its total assets would be committed to
such contracts. Under normal circumstances, consideration of the prospect for
currency parities will be incorporated into the longer term investment decisions
made with regard to overall diversification strategies. However, the Trustees
believe that it is important to have the flexibility to enter into forward
contracts when the Sub-Adviser determines it to be in the best interests of the
Fund. The Fund's Custodian will segregate cash, U.S. Government obligations or
other liquid high-grade debt obligations in an amount not less than the value of
the Fund's total assets committed to foreign currency exchange contracts entered
into under this type of transaction. If the value of the segregated securities
declines, additional cash or securities will be added on a daily basis, i.e.,
"marked to market," so that the segregated amount will not be less than the
amount of the Fund's commitments with respect to such contracts.
Generally, the Fund will not enter into a forward currency exchange
contract with a term of greater than 90 days. At the maturity of the contract,
the Fund may either sell the portfolio security and make delivery of the foreign
currency, or may retain the security and terminate the obligation to deliver the
foreign currency by purchasing an "offsetting" forward contract with the same
currency trader obligating the Fund to purchase, on the same maturity date, the
same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value
of portfolio securities at the expiration of the contract. Accordingly, it may
be necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Fund is obligated to
deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in
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forward contract prices. If the Fund engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between entering into a forward
contract for the sale of a foreign currency and the date the Fund enters into an
offsetting contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent the price of the currency the Fund has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency the Fund has agreed to purchase exceeds the price of the currency the
Fund has agreed to sell.
The Fund's dealings in forward foreign currency exchange contracts will
be limited to the transactions described above. The Fund is not required to
enter into such transactions with regard to its foreign currency-denominated
securities and will not do so unless deemed appropriate by its Sub-Adviser. It
should also be realized that this method of protecting the value of the Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities held by the
Fund. It simply establishes a rate of exchange which one can achieve at some
future point in time. Additionally, although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time, they tend to limit any potential gain which might result should the value
of such currency increase.
INTEREST RATE FUTURES CONTRACTS. The Global Bond Fund may enter into
contracts for the future delivery of fixed-income securities commonly referred
to as "interest rate futures contracts." In this context, a futures contract is
an agreement by the Fund to buy or sell fixed-income securities at a specified
date and price. No payment is made for securities when the Fund buys a futures
contract and no securities are delivered when the Fund sells a futures contract.
Instead, the Fund makes a deposit called an "initial margin" equal to a
percentage of the contract's value. Payment or delivery is made when the
contract expires. Futures contracts will be used only as a hedge against
anticipated interest rate changes and for other transactions permitted to
entities exempt from the definition of the term commodity pool operator. The
Fund will not enter into a futures contract if immediately thereafter the sum of
the then aggregate futures market prices of financial or other instruments
required to be delivered under open futures contract sales and the aggregate
futures market prices of financial instruments required to be delivered under
open futures contract purchases would exceed 50% of the value of its total
assets. The Fund will not enter into a futures contract if immediately
thereafter more than 5% of the fair market value of its assets would be
committed to initial margins.
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WRITING COVERED CALL OPTIONS. The Global Bond Fund may write covered
call options on individual bonds and on interest rate futures contracts to earn
premium income, to assure a definite price for a security it has considered
selling, or to close out options previously purchased. A call option gives the
holder (buyer) the right to purchase a security or futures contract at a
specified price (the exercise price) at any time until a certain date (the
expiration date). A call option is "covered" if the Fund owns the underlying
security subject to the call option at all times during the option period. A
covered call writer is required to deposit in escrow the underlying security in
accordance with the rules of the exchanges on which the option is traded and the
appropriate clearing agency.
The writing of covered call options is a conservative investment
technique which the Sub-Adviser believes involves relatively little risk.
However, there is no assurance that a closing transaction can be effected at a
favorable price. During the option period, the covered call writer has, in
return for the premium received, given up the opportunity for capital
appreciation above the exercise price should the market price of the underlying
security increase, but has retained the risk of loss should the price of the
underlying security decline.
The Fund may write covered call options if, immediately thereafter, not
more than 30% of its net assets would be committed to such transactions. As long
as the Securities and Exchange Commission continues to take the position that
unlisted options are illiquid securities, the Fund will not commit more than 15%
of its net assets to unlisted covered call transactions and other illiquid
securities. The ability of the Fund to write covered call options may be limited
by the tax requirement that less than 30% of the Fund's gross income be derived
from the sale or other disposition of securities held for less than 3 months.
WRITING COVERED PUT OPTIONS. The Global Bond Fund may write covered put
options on bonds and on interest rate futures contracts to assure a definite
price for a security if it is considering acquiring the security at a lower
price than the current market price or to close out options previously
purchased. A put option gives the holder of the option the right to sell, and
the writer has the obligation to buy, the underlying security at the exercise
price at any time during the option period. The operation of put options in
other respects is substantially identical to that of call options. When the Fund
writes a covered put option, it maintains in a segregated account with its
Custodian cash or liquid debt obligations in an amount not less than the
exercise price at all times while the put option is outstanding.
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The risks involved in writing put options include the risk that a
closing transaction cannot be effected at a favorable price and the possibility
that the price of the underlying security may fall below the exercise price, in
which case the Fund may be required to purchase the underlying security at a
higher price than the market price of the security at the time the option is
exercised. The Fund may not write a put option if, immediately thereafter, more
than 25% of its net assets would be committed to such transactions.
PURCHASING OPTIONS ON INTEREST RATE FUTURES CONTRACTS. The Global Bond
Fund may purchase put and call options on interest rate futures contracts. The
purchase of put options on interest rate futures contracts hedges the Fund's
portfolio against the risk of rising interest rates. The purchase of call
options on futures contracts is a means of obtaining temporary exposure to
market appreciation at limited risk and is a hedge against a market advance when
the Fund is not fully invested. Assuming that any decline in the securities
being hedged is accompanied by a rise in interest rates, the purchase of options
on the futures contracts may generate gains which can partially offset any
decline in the value of the Fund's portfolio securities which have been hedged.
However, if after the Fund purchases an option on a futures contract, the value
of the securities being hedged moves in the opposite direction from that
contemplated, the Fund will tend to experience losses in the form of premiums on
such options which would partially offset gains the Fund would have.
An interest rate futures contract is a contract to buy or sell
specified debt securities at a future time for a fixed price. The Fund may
purchase put and call options on interest rate futures contracts which are
traded on a national exchange or board of trade and sell such options to
terminate an existing position. Options on interest rate futures give the
purchaser the right, in return for the premium paid, to assume a position in an
interest rate futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase or sell a
security, at a specified exercise price at any time during the period of the
option.
The holder of an option on an interest rate futures contract may
terminate his position by selling an option of the same series. There is no
guarantee that such closing transactions can be effected. In addition to the
risks which apply to all options transactions, there are several special risks
relating to options on interest rate futures contracts. The ability to establish
and close out positions on such options is subject to the maintenance of a
liquid secondary market. Compared to the use of interest rate futures, the
purchase of options on interest rate futures involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options,
plus transaction costs.
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OPTIONS TRANSACTIONS GENERALLY. Option transactions in which the Global
Bond Fund may engage involve the specific risks described above as well as the
following risks: the writer of an option may be assigned an exercise at any time
during the option period; disruptions in the markets for underlying instruments
could result in losses for options investors; imperfect or no correlation
between the option and the securities being hedged; the insolvency of a broker
could present risks for the broker's customers; and market imposed restrictions
may prohibit the exercise of certain options. In addition, the option activities
of the Fund may affect its portfolio turnover rate and the amount of brokerage
commissions paid by the Fund. The success of the Fund in using the option
strategies described above depends, among other things, on the Sub-Adviser's
ability to predict the direction and volatility of price movements in the
options, futures contracts and securities markets and the Sub-Adviser's ability
to select the proper time, type and duration of the options.
MAJORITY. As used in the Prospectuses and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
any Fund) means the lesser of (1) 67% or more of the outstanding shares of the
Trust (or the applicable Fund) present at a meeting, if the holders of more than
50% of the outstanding shares of the Trust (or the applicable Fund) are present
or represented at such meeting or (2) more than 50% of the outstanding shares of
the Trust (or the applicable Fund).
INVESTMENT LIMITATIONS
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to any Fund without the affirmative vote of a
majority of the outstanding shares of that Fund.
THE LIMITATIONS APPLICABLE TO THE SHORT TERM GOVERNMENT INCOME FUND AND
THE INTERMEDIATE TERM GOVERNMENT INCOME FUND ARE:
1. Borrowing Money. Each Fund will not borrow money, except (a) as a
temporary measure for extraordinary or emergency purposes and then only in
amounts not in excess of 10% of the value of the Fund's total assets or (b)
pursuant to Paragraph (15) of this section. Each Fund may pledge its assets to
the extent of up to 15% of the value of its total assets to secure such
borrowings.
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.
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3. Illiquid Investments. Each Fund will not purchase securities for
which there are legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 10% of the value of the Fund's total assets would be invested in such
securities.
4. Real Estate. Each Fund will not purchase, hold or deal in real
estate, including real estate limited partnership interests.
5. Commodities. Each Fund will not purchase, hold or deal
in commodities or commodities futures contracts.
6. Loans. Each Fund will not make loans to individuals, to any officer
or Trustee of the Trust or to its Adviser or to any officer or director of the
Adviser (each Fund, however, may purchase and simultaneously resell for later
delivery obligations issued or guaranteed as to principal and interest by the
United States Government or an agency or instrumentality thereof; provided that
each Fund will not enter into such repurchase agreements if, as a result
thereof, more than 10% of the value of the Fund's total assets at that time
would be subject to repurchase agreements maturing in more than seven days). The
making of a loan by either Fund does not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other debt securities,
whether or not the purchase was made upon the original issuance of the
securities.
7. Securities of One Issuer. Each Fund will not purchase the securities
of any issuer if such purchase at the time thereof would cause more than 25% of
the value of the Fund's 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).
8. Securities of One Class. Each Fund will not purchase the securities
of any issuer if such purchase at the time thereof would cause 10% of any class
of securities of such issuer to be held by a Fund, or acquire more than 10% of
the outstanding voting securities of such issuer. (All outstanding bonds and
other evidences of indebtedness shall be deemed to be a single class of
securities of the issuer, and all kinds of stock of an issuer preferred over the
common stock as to dividends or liquidation shall be deemed to constitute a
single class regardless of relative priorities, series designations, conversion
rights and other differences).
9. Investing for Control. Each Fund will not invest in companies for
the purpose of exercising control or management.
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10. Other Investment Companies. Each Fund will not purchase securities
issued by any other investment company or investment trust except (a) by
purchase in the open market where no commission or profit to a sponsor or dealer
results from such purchase other than customary brokers' commission or (b) where
such purchase, not made in the open market, is part of a plan of merger or
consolidation or acquisition of assets; provided that each Fund shall not
purchase the securities of any investment companies or investment trusts if such
purchase at the time thereof would cause more than 10% of the value of the
Fund's total assets to be invested in the securities of such issuers, and
provided further, that each Fund shall not purchase securities issued by any
other open-end investment company.
11. Margin Purchases. Each Fund will not purchase securities or
evidences of interest thereon on "margin," except that the Funds may obtain
such short-term credit as may be necessary for the clearance of purchases and
sales or redemption of securities.
12. Common Stocks. Each Fund will not invest in common stocks.
13. Options. Each Fund will not engage in the purchase or sale of
put or call options.
14. Short Sales. Each Fund will not sell any securities short.
15. When-Issued Purchases. The Funds will not make any commitment to
purchase securities on a when-issued basis except that the Intermediate Term
Government Income Fund may make such commitments if no more than 20% of the
Fund's net assets would be so committed.
16. Concentration. Each 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.
17. Mineral Leases. The Funds will not purchase oil, gas
or other mineral leases or exploration or development programs.
THE LIMITATIONS APPLICABLE TO THE INSTITUTIONAL GOVERNMENT
INCOME FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except
(a) from a bank, provided that immediately after such borrowing there is asset
coverage of 300% for all borrowings of the Fund; or (b) from a bank for
temporary purposes only, provided that,
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when made, such temporary borrowings are in an amount not exceeding 5% of the
Fund's total assets. The Fund also will not make any borrowing which would cause
its outstanding borrowings to exceed one-third of the value of its total assets.
2. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings.
3. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including
restricted securities), the Fund may be deemed an underwriter under certain
federal securities laws.
4. Illiquid Investments. The Fund will not invest more than 10% of
its net assets in securities for which there are legal or contractual
restrictions on resale and other illiquid securities.
5. Real Estate. The Fund will not purchase, hold or deal in real
estate.
6. Commodities. The Fund will not purchase, hold or deal in commodities
or commodities futures contracts, or invest in oil, gas or other mineral
explorative or development programs. This limitation is not applicable to the
extent that the U.S. Government obligations in which the Fund may otherwise
invest would be considered to be such commodities, contracts or investments.
7. Loans. The Fund will not make loans to other persons, except (a)
by loaning portfolio securities, or (b) by engaging in repurchase agreements.
For purposes of this limitation, the term "loans" shall not include the
purchase of a portion of an issue of U.S. Government obligations.
8. Margin Purchases. The Fund will not purchase securities
or evidences of interest thereon on "margin." This limitation is not applicable
to short-term credit obtained by the Fund for the clearance of purchases and
sales or redemption of securities.
9. Short Sales and Options. The Fund will not sell any securities
short or sell put and call options. This limitation is not applicable to the
extent that sales by the Fund of securities in which the Fund may otherwise
invest would be considered to be sales of options.
- 22 -
<PAGE>
10. Other Investment Companies. The Fund will not invest more than
5% of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Concentration. The Fund will not invest more than 25% of its total
assets in a particular industry; this limitation is not applicable to
investments in obligations issued by the U.S. Government, its territories and
possessions, the District of Columbia and their respective agencies and
instrumentalities or repurchase agreements with respect thereto.
12. Mineral Leases. The Fund will not purchase oil, gas or
other mineral leases or exploration or development programs.
THE LIMITATIONS APPLICABLE TO THE ADJUSTABLE RATE U.S. GOVERNMENT
SECURITIES FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except (a) as a
temporary measure for extraordinary or emergency purposes and then only in
amounts not in excess of 10% of the value of its total assets or (b) pursuant to
Paragraph (15) of this section. The Fund may pledge its assets to the extent of
up to 15% of the value of its total assets to secure such borrowings.
2. Underwriting. The Fund will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), the
Fund may be deemed an underwriter under certain federal securities laws.
3. Illiquid Investments. The Fund will not purchase securities for
which there are legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 15% of the value of the Fund's net assets would be invested in such
securities.
4. Real Estate. The Fund will not purchase, hold or deal
in real estate, including real estate limited partnerships.
5. Commodities. The Fund will not purchase, hold or deal
in commodities or commodities futures contracts.
- 23 -
<PAGE>
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities if the borrower agrees to maintain collateral
marked to market daily in an amount at least equal to the market value of the
loaned securities, or (b) by engaging in repurchase agreements. For purposes of
this limitation, the term "loans" shall not include the purchase of a portion of
an issue of U.S. Government obligations.
7. Securities of One Issuer. 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).
8. Securities of One Class. The Fund will not purchase the securities
of any issuer if such purchase at the time thereof would cause 10% of any class
of securities of such issuer to be held by the Fund, or acquire more than 10% of
the outstanding voting securities of such issuer. (All outstanding bonds and
other evidences of indebtedness shall be deemed to be a single class of
securities of the issuer).
9. Investing for Control. The Fund will not invest in companies for
the purpose of exercising control or management.
10. Other Investment Companies. The Fund will not invest more than
5% of its total assets in the securities of any investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
11. Margin Purchases. The Fund will not purchase securities or
evidences of interest thereon on "margin," except that it may obtain such
short-term credit as may be necessary for the clearance of purchases and
sales or redemption of securities.
12. Common Stocks. The Fund will not invest in common stocks.
13. Options. The Fund will not engage in the purchase or
sale of put or call options.
14. Short Sales. The Fund will not sell any securities short.
15. When-Issued Purchases. The Fund will not make any
commitment to purchase securities on a when-issued or to-be-announced basis
if more than 25% of the Fund's net assets would be so committed.
- 24 -
<PAGE>
16. 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.
17. Mineral Leases. The Fund will not purchase oil, gas or
other mineral leases or exploration or development programs.
18. Senior Securities. The Fund will not issue or sell any
senior security as defined by the Investment Company Act of 1940 except insofar
as any borrowing that the Fund may engage in may be deemed to be an issuance of
a senior security.
19. Unseasoned Issuers. The Fund will not purchase securities of
unseasoned issuers, including their predecessors, which have been in operation
for less than three years if more than 5% of the value of the Fund's total
assets would be so committed.
THE LIMITATIONS APPLICABLE TO THE GLOBAL BOND FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except as a
temporary measure for extraordinary or emergency purposes and then only in
amounts not in excess of 10% of the value of its total assets. While the Fund's
borrowings are in excess of 5% of its total assets, the Fund will not purchase
any additional portfolio securities. This investment limitation does not
preclude the Fund from entering into reverse repurchase transactions, provided
that the Fund has asset coverage of 300% for all borrowings of the Fund and
reverse repurchase commitments of the Fund pursuant to such transactions. The
Fund will not pledge, mortgage or hypothecate its assets (collateral
arrangements with respect to writing options and initial margin on futures
contracts are not deemed to be a pledge, mortgage or hypothecation of assets for
purposes of this investment limitation) except in connection with borrowings
described in this investment limitation.
2. Underwriting. The Fund will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), the
Fund may be deemed an underwriter under certain federal securities laws.
3. Illiquid Investments. The Fund will not purchase securities for
which there are legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 15% of the value of the Fund's net assets would be invested in such
securities.
- 25 -
<PAGE>
4. Real Estate. The Fund will not purchase, hold or deal
in real estate, including real estate limited partnerships.
5. Commodities. The Fund will not purchase, hold or deal
in commodities or commodities futures contracts.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities if the borrower agrees to maintain collateral
marked to market daily in an amount at least equal to the market value of the
loaned securities, or (b) by engaging in repurchase agreements. For purposes of
this limitation, the term "loans" shall not include the purchase of marketable
bonds, debentures, commercial paper, corporate notes or similar marketable
evidences of indebtedness which are part of an issue for the public.
7. Investing for Control. The Fund will not invest in
companies for the purpose of exercising control or management.
8. Other Investment Companies. The Fund will not invest more than 5% of
its total assets in the securities of any single investment company and will not
invest more than 10% of its total assets in securities of other investment
companies.
9. Margin Purchases. The Fund will not purchase any
securities or evidences of interest thereon on "margin," except
that it may obtain such short-term credit as may be necessary for
the clearance of purchases and sales or redemption of securities.
10. Common Stocks. The Fund will not invest in common stocks.
11. Options. The Fund will not purchase or sell puts, calls, options,
futures or straddles except as described in its Prospectus and this Statement
of Additional Information.
12. Short Sales. The Fund will not sell any securities short.
13. When-Issued Purchases. The Fund will not make any commitment to
purchase securities on a when-issued or to-be-announced basis if more than 25%
of the Fund's net assets would be so committed.
14. 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, its agencies or
instrumentalities or repurchase agreements with respect thereto.
- 26 -
<PAGE>
15. Mineral Leases. The Fund will not purchase oil, gas or
other mineral leases or exploration or development programs.
16. Senior Securities. The Fund will not issue or sell any senior
security as defined by the Investment Company Act of 1940 except insofar as any
borrowing that the Fund may engage in may be deemed to be an issuance of a
senior security. This limitation is not applicable to arrangements with respect
to transactions involving forward foreign currency exchange contracts, options,
futures contracts and other similar permitted investments and techniques.
17. Unseasoned Issuers. The Fund will not purchase securities of
unseasoned issuers, including their predecessors, which have been in operation
for less than three years if more than 5% of the value of the Fund's total
assets would be so committed.
With respect to the percentages adopted by the Trust as maximum
limitations on the Funds' 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.
The Trust has never pledged, mortgaged or hypothecated the assets of
any Fund, and the Trust presently intends to continue this policy. The Trust has
never acquired, nor does it presently intend to acquire, securities issued by
any other investment company or investment trust. The Institutional Government
Income Fund does not intend to invest in obligations issued by territories and
possessions of the United States, the District of Columbia and their respective
agencies and instrumentalities or repurchase agreements with respect thereto.
The Short Term Government Income Fund and the Intermediate Term Government
Income Fund will not purchase securities for which there are legal or
contractual restrictions on resale or enter into a repurchase agreement maturing
in more than seven days if, as a result thereof, more than 10% of the value of a
Fund's net assets would be invested in such securities. The statements of
intention in this paragraph reflect nonfundamental policies which may be changed
by the Board of Trustees without shareholder approval.
Although not a fundamental policy of the Adjustable Rate U.S.
Government Securities Fund, portfolio investments and transactions of the Fund
will be limited to those investments and transactions permissible for Federal
credit unions pursuant to 12 U.S.C. Section 1757(7) and (8) and 12 CFR Part 703.
If this policy is changed as to allow the Fund to make portfolio investments and
engage in transactions not permissible for Federal credit unions, the Fund will
so notify all Federal credit union shareholders.
- 27 -
<PAGE>
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.
<TABLE>
<C> <C> <C> <C> <C>
COMPENSATION
COMPENSATION FROM
NAME AGE POSITION HELD FROM TRUST COUNTRYWIDE 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 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
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.
</TABLE>
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
- 28 -
<PAGE>
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.
ANGELO R. MOZILO, 155 North Lake Avenue, Pasadena, 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 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.
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,
- 29 -
<PAGE>
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 and Interactive Investments, 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. and Capitol Square Funds, 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 $1,000 and a fee of $750 for each Board meeting
attended. Such fee is split equally among the Trust, Countrywide Tax-Free
Trust and Countrywide Strategic Trust.
THE INVESTMENT ADVISER AND UNDERWRITER
- --------------------------------------
Countrywide Investments, Inc. (the "Adviser"), formerly Midwest Group
Financial Services, Inc., is the Funds' investment manager. The Adviser is a
subsidiary of Countrywide Financial Services, Inc., which is a wholly-owned
subsidiary of Countrywide Credit Industries, Inc., a New York Stock Exchange
listed company principally engaged in the business of residential mortgage
lending. Messrs. Mozilo and Leshner 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. The Short Term Government Income Fund, the Intermediate Term
Government Income Fund and the Adjustable Rate U.S. Government Securities Fund
each pay the Adviser a fee computed and accrued daily and paid monthly at an
annual rate of .5% of its average daily net assets up to $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 Institutional Government Income Fund pays the Adviser a fee
- 30 -
<PAGE>
computed and accrued daily and paid monthly at an annual rate of .2% of its
average daily net assets. The Global Bond Fund pays the Adviser a fee computed
and accrued daily and paid monthly at an annual rate of .7% of its average daily
net assets up to $100,000,000 and .6% of such assets in excess of $100,000,000.
The total fees paid by a Fund during the first and second halves of each fiscal
year of the Trust may not exceed the semiannual total of the daily fee accruals
requested by the Adviser during the applicable six month period.
For the fiscal years ended September 30, 1996, 1995 and 1994, the Short
Term Government Income Fund paid advisory fees of $419,926, $407,097 and
$410,716, respectively. For the fiscal years ended September 30, 1996, 1995 and
1994, the Intermediate Term Government Income Fund accrued advisory fees of
$289,680, $294,316 and $378,622, respectively; however, the Adviser reimbursed
the Fund for $10,334 and $11,362 of Class C expenses during the fiscal years
ended September 30, 1996 and 1995, respectively, and voluntarily waived $2,297
of its advisory fees for the fiscal year ended September 30, 1994 in order to
reduce the operating expenses of the Fund. For the fiscal years ended September
30, 1996, 1995 and 1994, the Institutional Government Income Fund accrued
advisory fees of $70,752, $86,367 and $89,790, respectively; however, the
Adviser voluntarily waived $32,783, $8,500 and $9,000 of such fees for the
fiscal years ended September 30, 1996, 1995 and 1994, respectively, in order to
reduce the operating expenses of the Fund. For the fiscal years ended September
30, 1996, 1995 and 1994, the Adjustable Rate U.S. Government Securities Fund
accrued advisory fees of $79,927, $112,333 and $238,362, respectively; however,
the Adviser voluntarily waived all of its fees and reimbursed $33,564 of common
expenses and $11,886 of Class C expenses for the fiscal year ended September 30,
1996, voluntarily waived $103,298 of its advisory fees and reimbursed the Fund
for $4,898 of Class C expenses for the fiscal year ended September 30, 1995 and
voluntarily waived $45,624 of its advisory fees for the fiscal year ended
September 30, 1994 in order to reduce the operating expenses of the Fund. For
the fiscal periods ended September 30, 1996 and 1995, the Global Bond Fund
accrued advisory fees of $137,065 and $41,518, respectively; however, the
Adviser voluntarily waived $6,473 of its fees and reimbursed the Fund for
$16,631 of Class A expenses for the fiscal year ended September 30, 1996 and
voluntarily waived its entire advisory fee and reimbursed the Fund for $22,707
of common expenses and $6,493 of Class C expenses for the period ended September
30, 1995 in order to reduce the operating expenses of the Fund.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to
- 31 -
<PAGE>
which the Trust may be a party. The Funds may have an obligation to indemnify
the Trust's officers and Trustees with respect to such litigation, except in
instances of willful misfeasance, bad faith, gross negligence or reckless
disregard by such officers and Trustees in the performance of their duties. The
Adviser bears promotional expenses in connection with the distribution of the
Funds' shares to the extent that such expenses are not assumed by the Funds
under their plans of distribution (see below). The compensation and expenses of
any officer, Trustee or employee of the Trust who is an officer, director,
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 each Fund are offered to the public on a
continuous basis.
The Adviser currently allows concessions to dealers who sell shares of
the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund. The Adviser retains the
entire sales load on all direct initial investments in the Funds and on all
investments in accounts with no designated dealer of record. For the fiscal year
ended September 30, 1996, the aggregate commissions on sales of the Trust's
shares were $72,287, of which the Adviser paid $63,235 to unaffiliated
broker-dealers in the selling network, earned $3,313 as a broker-dealer in the
selling network and retained $5,739 in underwriting commissions. For the fiscal
year ended September 30, 1995, the aggregate commissions on sales of the Trust's
shares were $141,293, of which the Adviser paid $130,182 to unaffiliated
broker-dealers in the selling network, earned $5,053 as a broker-dealer in the
selling network and retained $6,058 in underwriting commissions. For the fiscal
year ended September 30, 1994, the aggregate underwriting commissions on sales
of the Trust's shares were $153,921, of which the Adviser paid $146,864 to
unaffiliated broker-dealers in the
- 32 -
<PAGE>
selling network and earned $7,057 as a broker-dealer in the selling network.
The Adviser retains the contingent deferred sales load on redemptions
of shares of the Intermediate Term Government Income Fund, the Adjustable Rate
U.S. Government Securities Fund and the Global Bond Fund which are subject to a
contingent deferred sales load. For the fiscal year ended September 30, 1996,
the Adviser retained $913, $600 and $5,973 of contingent deferred sales loads on
redemptions of Class C shares of the Intermediate Term Government Income Fund,
the Adjustable Rate U.S. Government Securities Fund and the Global Bond Fund,
respectively.
The Funds may compensate dealers, including the Adviser and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account.
See "Distribution Plans below."
ROGGE GLOBAL PARTNERS PLC. Rogge Global Partners plc ("Rogge") has been
retained by the Adviser to serve as the discretionary portfolio adviser of the
Global Bond Fund. Rogge selects the portfolio securities for investment by the
Fund, purchases and sells securities of the Fund and places orders for the
execution of such portfolio transactions, subject to the general supervision of
the Board of Trustees and the Adviser. Rogge receives a fee equal to the annual
rate of .35% of the Fund's average daily net assets up to and including
$100,000,000 and .3% of such assets in excess of $100,000,000. The services
provided by Rogge are paid for wholly by the Adviser. The compensation of any
officer, director or employee of Rogge who is rendering services to the Fund is
paid by Rogge. For the fiscal years ended September 30, 1996 and 1995, the
Adviser paid to Rogge advisory fees of $68,532 and $18,413, respectively.
DISTRIBUTION PLANS
- ------------------
CLASS A PLAN -- As stated in the Prospectus, the Funds have adopted a
plan of distribution (the "Class A Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 which permits each Fund to pay for expenses
incurred in the distribution and promotion of the Funds' shares, including but
not limited to, the printing of prospectuses, statements of additional
information and reports used for sales purposes, advertisements, expenses of
preparation and printing of sales literature, promotion, marketing and sales
expenses, and other distribution-related expenses, including any distribution
fees paid to securities dealers or other firms who have executed a distribution
or service agreement with the Adviser. The Class A Plan expressly limits payment
of the distribution expenses listed above in any fiscal year to a maximum of
.35% of the average daily net assets of the Short Term Government Income Fund,
.35% of the average daily net assets of the Class A shares of the Intermediate
Term
- 33 -
<PAGE>
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund and
the Global Bond Fund and .10% of the average daily net assets of the
Institutional Government Income Fund. Unreimbursed expenses will not be carried
over from year to year.
For the fiscal year ended September 30, 1996, the aggregate
distribution-related expenditures of the Short Term Government Income Fund
("STF"), the Intermediate Term Government Income Fund ("ITF"), the Institutional
Government Income Fund ("IGF"), the Adjustable Rate U.S. Government Securities
Fund ("ARM") and the Global Bond Fund ("GBF") under the Class A Plan were
$93,521, $93,442, $2,655, $17,500 and $4,709, respectively. Amounts were spent
as follows:
STF ITF IGF ARM GBF
Printing and mailing
of prospectuses and
reports to prospective
shareholders......... $ 4,521 $ 3,108 $2,655 $ 5,614 $ 4,212
Payments to broker-
dealers and others
for the sale or
retention of assets... 89,000 90,334 -- 11,886 497
------- ------ ------ ------- -------
$ 93,521 $93,442 $2,655 $17,500 $ 4,709
======== ======= ====== ======= =======
CLASS C PLAN (Intermediate Term Government Income Fund, Adjustable Rate
U.S. Government Securities Fund and Global Bond Fund) -- The Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund and
the Global Bond Fund have also adopted a plan of distribution (the "Class C
Plan") with respect to the Class C shares of such Funds. The Class C Plan
provides for two categories of payments. First, the Class C Plan provides for
the payment to the Adviser of an account maintenance fee, in an amount equal to
an annual rate of .25% of the average daily net assets of the Class C shares,
which may be paid to other dealers based on the average value of Class C shares
owned by clients of such dealers. In addition, a Fund may pay up to an
additional .75% per annum of the daily net assets of the Class C shares for
expenses incurred in the distribution and promotion of the shares, including
prospectus costs for prospective shareholders, costs of responding to
prospective shareholder inquiries, payments to brokers and dealers for selling
and assisting in the distribution of Class C shares, costs of advertising and
promotion and any other expenses related to the distribution of the Class C
shares. Unreimbursed expenditures will not be carried over from year to year.
The Funds may make payments to dealers and other persons in an amount up to .75%
per annum of the average value of Class C shares owned by their clients, in
addition to the .25% account maintenance fee described above.
For the fiscal year ended September 30, 1996, the aggregate
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distribution-related expenditures of the Intermediate Term Government Income
Fund ("ITF"), the Adjustable Rate U.S. Government Securities Fund ("ARM") and
the Global Bond Fund ("GBF") under the Class C Plan were $40, $19 and $24,181,
respectively. Amounts were spent as follows:
ITF ARM GBF
Printing and mailing
of prospectuses and
reports to prospective
shareholders......... $40 $19 $ 1,547
Payments to broker-
dealers and others
for the sale or
retention of assets... --- --- 22,634
--- --- -------
$40 $19 $24,181
=== === =======
GENERAL INFORMATION -- Agreements implementing the Plans (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plans are made in accordance with written agreements.
The continuance of the Plans and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plans or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. A Plan may be terminated at any time
by a vote of a majority of the Independent Trustees or by a vote of the holders
of a majority of the outstanding shares of a Fund or the applicable class of a
Fund. In the event a Plan is terminated in accordance with its terms, the
affected Fund (or class) will not be required to make any payments for expenses
incurred by the Adviser after the termination date. Each Implementation
Agreement terminates automatically in the event of its assignment and may be
terminated at any time by a vote of a majority of the Independent Trustees or by
a vote of the holders of a majority of the outstanding shares of a Fund (or the
applicable class) on not more than 60 days' written notice to any other party to
the Implementation Agreement. The Plans may not be amended to increase
materially the amount to be spent for distribution without shareholder approval.
All material amendments to the Plans must be approved by a vote of the Trust's
Board of Trustees and by a vote of the Independent Trustees.
In approving the Plans, the Trustees determined, in the
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exercise of their business judgment and in light of their fiduciary duties as
Trustees, that there is a reasonable likelihood that the Plans will benefit the
Funds and their shareholders. The Board of Trustees believes that expenditure of
the Funds' assets for distribution expenses under the Plans should assist in the
growth of the Funds which will benefit the Funds and their shareholders through
increased economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plans will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plans. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plans are in effect, all amounts spent by the Funds pursuant
to the Plans and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. Distribution
expenses attributable to the sale of more than one class of shares of a Fund
will be allocated at least annually to each class of shares based upon the ratio
in which the sales of each class of shares bears to the sales of all the shares
of such Fund. In addition, the selection and nomination of those Trustees who
are not interested persons of the Trust are committed to the discretion of the
Independent Trustees during such period.
Angelo R. Mozilo and Robert H. Leshner, as interested persons of the
Trust, may be deemed to have a financial interest in the operation of the Plans
and the Implementation Agreements.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser (or Rogge, with respect to the Global Bond
Fund) and are subject to review by the Board of Trustees of the Trust. In the
purchase and sale of portfolio securities, the Adviser (or Rogge) 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
(or Rogge) 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
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<PAGE>
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. For the fiscal year ended September 30, 1994, the Short
Term Government Income Fund and the Intermediate Term Government Income Fund
paid brokerage commissions of $74 and $15,313, respectively. No brokerage
commissions were paid by the Short Term Government Income Fund and the
Intermediate Term Government Income Fund during the fiscal years ended September
30, 1996 and 1995. No brokerage commissions were paid by the Institutional
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund or
the Global Bond Fund during the last three fiscal years.
The Adviser (or Rogge, with respect to the Global Bond Fund) is
specifically authorized to select brokers who also provide brokerage and
research services to the Funds and/or other accounts over which the Adviser (or
Rogge) 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 (or Rogge'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, the
Adviser and Rogge, 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 (or Rogge) 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. No Fund will effect any
brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Funds do not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the
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<PAGE>
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.
During the fiscal year ended September 30, 1996, the Funds entered into
repurchase transactions with the following of the Trust's regular broker-dealers
as defined under the Investment Company Act of 1940: Daiwa Securities America
Inc., Dean Witter Reynolds Inc., Fuji Securities Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Nesbitt Burns Securities Inc. and Prudential
Securities Incorporated.
CODE OF ETHICS. The Trust and the Adviser have each adopted a Code of Ethics
under Rule 17j-1 of the Investment Company Act of 1940. The Code significantly
restricts the personal investing activities of all employees of the Adviser and,
as described below, imposes additional, more onerous, restrictions on investment
personnel of the Adviser. The Code requires that all employees of the Adviser
preclear any personal securities investment (with limited exceptions, such as
U.S. Government obligations). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition or limitation
applicable to the proposed investment. In addition, no employee may purchase or
sell any security which at the time is being purchased or sold (as the case may
be), or to the knowledge of the employee is being considered for purchase or
sale, by any Fund. The substantive restrictions applicable to investment
personnel of the Adviser include a ban on acquiring any securities in an initial
public offering and a prohibition from profiting on short-term trading in
securities. Furthermore, the Code provides for trading "blackout periods" which
prohibit trading by investment personnel of the Adviser within periods of
trading by the Funds in the same (or equivalent) security.
PORTFOLIO TURNOVER
- ------------------
The Adviser intends to hold the portfolio securities of the Short Term
Government Income Fund and the Institutional Government Income Fund to maturity
and to limit portfolio turnover to the extent possible. Nevertheless, changes in
a Fund's portfolio will be made promptly when determined to be advisable by
reason of developments not foreseen at the time of the original investment
decision, and usually without reference to the length of time a security has
been held.
The Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund do not intend to purchase
securities for short term trading; however, a security may be sold in
anticipation of a market decline, or purchased in anticipation of a market rise
and later sold. Securities will be purchased and sold in response to the
Adviser's (or Rogge's) evaluation of an issuer's ability to meet
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<PAGE>
its debt obligations in the future. A security may be sold and another purchased
when, in the opinion of the Adviser (or Rogge), 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 Short Term
Government Income Fund and the Institutional Government Income 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 Term Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund and the Global 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 Day, Labor
Day, Thanksgiving and Christmas. The Trust may also be open for business on
other days in which there is sufficient trading in any Fund's portfolio
securities that its net asset value might be materially affected. The Global
Bond Fund's net asset value may be materially affected on a day when the Trust
is not open for business because trading in foreign exchanges may take place at
times other than the times trading occurs on the New York Stock Exchange. In
addition, foreign exchange trading may not take place on each day the Trust is
open for business. For a description of the methods used to determine the share
price and the public offering price, see "Calculation of Share Price and Public
Offering Price" in the Prospectus.
Pursuant to Rule 2a-7 promulgated under the Investment Company Act of
1940, the Short Term Government Income Fund and the Institutional Government
Income Fund each value their portfolio securities on an amortized cost basis.
The use of the amortized cost method of valuation involves valuing an instrument
at its cost and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.
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<PAGE>
Under the amortized cost method of valuation, neither the amount of daily income
nor the net asset value of the Short Term Government Income Fund or the
Institutional Government Income 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 Short Term Government Income Fund and
the Institutional Government Income Fund.
Pursuant to Rule 2a-7, the Short Term Government Income Fund and the
Institutional Government Income Fund each maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only securities having remaining
maturities of thirteen months or less and invest only in United States
dollar-denominated securities determined by the Board of Trustees to be of high
quality and to present minimal credit risks. If a security ceases to be an
eligible security, or if the Board of Trustees believes such security no longer
presents minimal credit risks, the Trustees will cause the Fund to dispose of
the security as soon as possible. The maturity of 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 Short Term
Government Income Fund and the Institutional Government Income Fund as computed
for the purpose of sales and redemptions at $1 per share. The procedures include
review of each Fund's portfolio holdings by the Board of Trustees to determine
whether a Fund's net asset value calculated by using available market quotations
deviates more than one-half of one percent from $1 per share and, if so, whether
such deviation may result in material dilution or is otherwise unfair to
existing shareholders. In the event the Board of Trustees determines that such a
deviation exists, it will take corrective action as it regards necessary and
appropriate, including the sale of portfolio securities prior to maturity to
realize capital gains or losses or to shorten average portfolio maturities;
withholding dividends; redemptions of shares in kind; or establishing a net
asset value per share by using available market quotations. The Board of
Trustees has also established procedures designed to ensure that each Fund
complies with the quality requirements of Rule 2a-7.
While the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument, as determined by
amortized cost, is higher or lower than the price the Short Term Government
Income Fund or the Institutional Government Income Fund would receive if it sold
the instrument. During periods of declining interest rates, the daily yield on
shares of each Fund may tend to be higher than a
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<PAGE>
like computation made by a fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of its
portfolio securities. Thus, if the use of amortized cost by a Fund resulted in a
lower aggregate portfolio value on a particular day, a prospective investor in
the Fund would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values and existing investors would
receive less investment income. The converse would apply in a period of rising
interest rates.
Portfolio securities held by the Intermediate Term Government Income
Fund, the Adjustable Rate U.S. Government Securities Fund or the Global 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. However, certain foreign fixed-income securities are
valued at the last quoted sale price. 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 value of non-dollar denominated portfolio instruments held by the
Global Bond Fund will be determined by converting all assets and liabilities
initially expressed in foreign currency values into U.S. dollar values at the
mean between the bid and offered quotations of such currencies against U.S.
dollars as last quoted by any recognized dealer. If such quotations are not
available, the rate of exchange will be determined in accordance with policies
established in good faith by the Board of Trustees. Gains or losses between
trade and settlement dates resulting from changes in exchange rates between the
U.S. dollar and a foreign currency are borne by the Fund. To protect against
such losses, the Fund may enter into forward foreign currency exchange
contracts, which will also have the effect of limiting any such gains.
OTHER PURCHASE INFORMATION
- --------------------------
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of Class A
shares of the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
Class A shares of the Intermediate Term Government Income Fund, the Adjustable
Rate U.S. Government Securities Fund and the Global 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
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<PAGE>
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 Class A shares of the Intermediate Term Government Income Fund,
the Adjustable Rate U.S. Government Securities Fund and the Global 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 in any load fund distributed
by the Adviser a specified amount which, if made at one time, would qualify for
a reduced sales load. A Letter of Intent may be submitted with a purchase at the
beginning of the thirteen month period or within ninety days of the first
purchase under the Letter of Intent. Upon acceptance of this Letter, the
purchaser becomes eligible for the reduced sales load applicable to the level of
investment covered by such Letter of Intent as if the entire amount were
invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose a front-end sales load or
imposes a reduced sales load in connection with purchases of Class A shares of
the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global 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
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<PAGE>
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 has qualified and intends to qualify annually for the special
tax treatment afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; (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. As of September 30, 1996, the Intermediate Term
Government Income Fund, the Institutional Government Income Fund and the
Adjustable Rate U.S. Government Securities Fund had capital loss carryforwards
for federal income tax purposes of $2,899,292, $24,902 and $1,249,150,
respectively, none of which expire until at least September 30, 2001.
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<PAGE>
Investments by the Global Bond Fund in certain options, futures
contracts and options on futures contracts are "section 1256 contracts." Any
gains or losses on section 1256 contracts are generally considered 60% long-term
and 40% short-term capital gains or losses ("60/40"). Section 1256 contracts
held by the Fund at the end of each taxable year are treated for federal income
tax purposes as being sold on such date for their fair market value. The
resultant paper gains or losses are also treated as 60/40 gains or losses. When
the section 1256 contract is subsequently disposed of, the actual gain or loss
will be adjusted by the amount of any preceding year-end gain or loss. The use
of section 1256 contracts may force the Fund to distribute to shareholders paper
gains that have not yet been realized in order to avoid federal income tax
liability.
Foreign currency gains or losses on non-U.S. dollar denominated bonds
and other similar debt instruments and on any non-U.S. dollar denominated
futures contracts, options and forward contracts that are not section 1256
contracts generally will be treated as ordinary income or loss.
Certain hedging transactions undertaken by the Global Bond Fund may
result in "straddles" for federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund. In addition,
losses realized by the Fund on positions that are part of a straddle may be
deferred, rather than being taken into account in calculating taxable income for
the taxable year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences of hedging transactions to the Fund are not entirely clear. The
hedging transactions may increase the amount of short-term capital gain realized
by the Fund which is taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available under the Internal
Revenue Code of 1986, as amended, which are applicable to straddles. If the Fund
makes any of the elections, the amount, character and timing of the recognition
of gains or losses from the affected straddle positions will be determined under
rules that vary according to the elections made. The rules applicable under
certain of the elections operate to accelerate the recognition of gains or
losses from the affected straddle positions. Because application of the straddle
rules may affect the character of gains or losses, defer losses and/or
accelerate the recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders, and which will
be taxed to shareholders as ordinary income or long-term capital gain in any
year, may be increased or decreased substantially as compared to a fund that did
not engage in such hedging transactions.
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<PAGE>
The 30% limit on gains from the sale of certain assets held for less
than three months and the diversification requirements applicable to the Global
Bond Fund's assets may limit the extent to which the Fund will be able to engage
in transactions in options, futures contracts or options on futures contracts.
The Global Bond Fund may be subject to a tax on interest income
received from securities of a non-U.S. issuer withheld by a foreign country at
the source. The United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of tax or exemption from tax
on such income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested within various
countries is not known.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
- ------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
Yield quotations on investments in the Short Term Government Income
Fund and the Institutional Government Income Fund are provided on both a current
and an effective (compounded) basis.
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<PAGE>
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 Short Term Government Income Fund and the Institutional
Government Income Fund do not normally recognize unrealized gains and losses
under the amortized cost valuation method). The Short Term Government Income
Fund's current and effective yields for the seven days ended September 30, 1996
were 4.39% and 4.49%, respectively. The Institutional Government Income Fund's
current and effective yields for the seven days ended September 30, 1996 were
5.00% and 5.12%, respectively.
From time to time, the Intermediate Term Government Income Fund, the
Adjustable Rate U.S. Government Securities Fund and the Global 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)
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 and the deduction of
the current maximum contingent deferred sales load, at the times, in the
amounts, and under the terms disclosed in the Prospectus. If a Fund (or class)
has been in existence less than one, five or ten years, the time period since
the date of the initial public offering of shares will be substituted for the
periods stated. The average annual total returns of the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund and
the Global Bond Fund for the periods ended September 30, 1996 are as follows:
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<PAGE>
Intermediate Term Government Income Fund (Class A)
1 Year 1.47%
5 Years 5.84%
10 Years 6.55%
Intermediate Term Government Income Fund (Class C)
1 Year 3.03%
Since Inception (February 1, 1994) 2.67%
Adjustable Rate U.S. Government Securities Fund (Class A)
1 Year 4.19%
Since Inception (February 10, 1993) 3.99%
Adjustable Rate U.S. Government Securities Fund (Class C)
1 Year 5.77%
Since Inception (May 1, 1995) 5.85%
Global Bond Fund (Class A)
1 Year 0.68%
Since Inception (February 1, 1995) 6.25%
Global Bond Fund (Class C)
1 Year 4.10%
Since Inception (February 1, 1995) 8.16%
The Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global 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 or
contingent deferred sales load which, if included, would reduce total return.
The total returns of the Intermediate Term Government Income Fund ("ITF"), the
Adjustable Rate U.S. Government Securities Fund ("ARM") and the Global Bond Fund
("GBF") as calculated in this manner for each of the last ten fiscal years (or
since inception) are as follows:
- 47 -
<PAGE>
ITF ITF ARM ARM GBF GBF
Class A Class C Class A Class C Class A Class C
------- ------- ------- ------- ------- -------
Period Ended
September 30, 1987 0.66%
September 30, 1988 8.77%
September 30, 1989 7.79%
September 30, 1990 5.31%
September 30, 1991 14.19%
September 30, 1992 13.27%
September 30, 1993 10.15% 2.90%(2)
September 30, 1994 -6.76% 2.45%(1) 2.09%
September 30, 1995 12.52% 11.96% 5.33% 2.46%(3) 9.87%(4) 9.45%(4)
September 30, 1996 3.55% 3.03% 6.32% 5.77% 4.88% 4.10%
(1) From date of initial public offering on February 1, 1994
(2) From date of initial public offering on February 10, 1993
(3) From date of initial public offering on May 1, 1995
(4) From date of initial public offering on February 1, 1995
A nonstandardized quotation may also indicate average annual compounded rates of
return without including the effect of the applicable front-end or contingent
deferred sales load or over periods other than those specified for average
annual total return. The average annual compounded rates of return for the
Intermediate Term Government Income Fund and the Adjustable Rate U.S. Government
Securities Fund (excluding sales loads) for the periods ended September 30, 1996
are as follows:
Intermediate Term Government Income Fund (Class A)
1 Year 3.55%
3 Years 2.80%
5 Years 6.27%
10 Years 6.76%
Since Inception (February 6, 1981) 8.82%
Intermediate Term Government Income Fund (Class C)
1 Year 3.03%
Since Inception (February 1, 1994) 2.67%
Adjustable Rate U.S. Government Securities Fund (Class A)
1 Year 6.32%
3 Years 4.56%
Since Inception (February 10, 1993) 4.57%
Adjustable Rate U.S. Government Securities Fund (Class C)
1 Year 5.77%
Since Inception (May 1, 1995) 5.85%
- 48 -
<PAGE>
Global Bond Fund (Class A)
1 Year 4.88%
Since Inception (February 1, 1995) 8.89%
Global Bond Fund (Class C)
1 Year 4.10%
Since Inception (February 1, 1995) 8.16%
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 Term Government Income Fund, the
Adjustable Rate U.S. Government Securities Fund and the Global Bond Fund may
advertise their 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 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.
The yields of Class A and Class C shares of the Intermediate Term Government
Income Fund for September 1996 were 5.90% and 5.52%, respectively. The yields of
Class A and Class C shares of the Adjustable Rate U.S. Government Securities
Fund for September 1996 were 5.80% and 5.40%, respectively. The yields of Class
A and Class C shares of the Global Bond Fund for September 1996 were 4.86% and
4.40%, respectively.
- 49 -
<PAGE>
The performance quotations described above are based on historical
earnings and are not intended to indicate future performance. Average annual
total return and yield are computed separately for Class A and Class C shares of
the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund. The yield of Class A shares
is expected to be higher than the yield of Class C shares due to the higher
distribution fees imposed on Class C shares.
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding each Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Funds may use the following
publications or indices to discuss or compare Fund performance:
Donoghue's Money Fund Report provides a comparative analysis of
performance for various categories of money market funds. The Short Term
Government Income Fund may compare performance rankings with money market funds
appearing in the Taxable U.S. Treasury & Repo Funds category. The Institutional
Government Income Fund may compare performance rankings with money market funds
appearing in the Taxable Government-Only Institutional Funds category.
Donoghue's Bond Fund Report provides a comparative analysis of performance for
various categories of bond funds. The Intermediate Term Government Income Fund
may compare performance rankings with bond funds appearing in the Government
General Intermediate Term category, the Adjustable Rate U.S. Government
Securities Fund may compare performance rankings with bond funds appearing in
the Adjustable Rate Mortgages category and the Global Bond Fund may compare
performance rankings with bond funds appearing in the Global and International
Long-Term 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 Short Term Government Income Fund
may provide comparative performance information appearing in the U.S. Government
Money Market Funds category, the Intermediate Term Government Income Fund may
provide comparative performance information appearing in the Intermediate U.S.
Government Funds category, the Institutional Government Income Fund may provide
comparative performance information appearing in the Institutional U.S.
Government Money Market Funds category, the Adjustable Rate U.S. Government
Securities Fund may provide
- 50 -
<PAGE>
comparative performance information appearing in the Adjustable Rate Mortgage
Funds category and the Global Bond Fund pay provide comparative performance
information appearing in the Global Income Funds category.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Funds' portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Funds to calculate
their performance. In addition, there can be no assurance that the Funds will
continue this performance as compared to such other averages.
PRINCIPAL SECURITY HOLDERS
- --------------------------
As of January 3, 1997, Amivest Corporation, P.O. Box 370 Cooper
Station, New York, New York owned of record 28.11% of the outstanding Class A
shares of the Intermediate Term Government Income Fund and 24.71% of the
outstanding Class A shares of the Adjustable Rate U.S. Government Securities
Fund. Amivest Corporation may be deemed to control the Class A shares of the
Intermediate Term Government Income Fund by virtue of the fact that it owns of
record more than 25% of such shares. As of January 3, 1997, Donaldson, Lufkin &
Jenrette Securities Corporation, P.O. Box 2052, Jersey City, New Jersey owned of
record 31.71% of the outstanding Class C shares of the Adjustable Rate U.S.
Government Securities Fund and NFSC FEBO #A7D-022349 Ros Angela Contracting Co.
Inc., 450 County Road, Cliffwood, New Jersey owned of record 37.87% of the
outstanding Class C shares of the Adjustable Rate U.S. Government Securities
Fund. Donaldson, Lufkin & Jenrette Securities Corporation and Ros Angela
Contracting Co. Inc. may be deemed to control the Class C shares of the
Adjustable Rate U.S. Government Securities Fund by virtue of the fact that each
of owned of record more than 25% of the outstanding shares. For purposes of
voting on matters submitted to shareholders, any person who owns more than 50%
of the outstanding shares of a Fund generally would be able to cast the deciding
vote.
On January 3, 1997, Star Bank, N.A., 425 Walnut Street Mail Location 6120,
Cincinnati, Ohio owned of record 9.04% of the outstanding shares of the
Institutional Government Income Fund; The Fechheimer Brothers Company, 4545
Malsbary Road, Cincinnati, Ohio owned of record 8.47% of the outstanding shares
of the Institutional Government Income Fund; Ann Butler, P.O. Box 157, Frisco,
Texas owned or record 14.42% of the outstanding Class C shares of the
Intermediate Term Government Income Fund; Resources Trust Co. Trust IRA UA
6-9-94 FBO Arthur R. Thigpen, P.O. Box 5900, Denver, Colorado owned or record
7.86% of the outstanding Class C shares of the Intermediate Term Government
Income Fund;
- 51 -
<PAGE>
Resources Trust Co. Trust IRA UA 1-2-96 FBO Jon L. Layton, P.O. Box 5900,
Denver, Colorado owned of record 5.44% of the outstanding Class C shares of the
Intermediate Term Government Income Fund; Thomas B. Ballard, 258 Manchester,
Highland Park, Michigan owned of record 5.28% of the outstanding Class C shares
of the Intermediate Term Government Income Fund; Martin S. Goldfarb, M.D., 919
N. Crescent, Beverly Hills, California owned of record 15.26% of the outstanding
Class A shares of the Global Bond Fund; Genova Investments Corp., Avenida Samuel
Lewis Calle 53, Edinficio Omega Mezzanine, Republic of Panama owned of record
8.46% of the outstanding Class A shares of the Global Bond Fund; Queen City
Urology Associates, Inc., 400 Martin Luther King Drive, Cincinnati, Ohio owned
of record 5.87% of the outstanding Class A shares of the Global Bond Fund;
PaineWebber FBO Tempel Steel Employee Pension Trust, 5215 Old Orchard Road,
Skokie, Illinois owned of record 16.74% of the outstanding Class A shares of the
Global Bond Fund; Gooss & Co., c/o Chase Manhattan Bank, 1211 Sixth Avenue, New
York, New York owned of record 9.22% of the outstanding Class C shares of the
Global Bond Fund; PaineWebber FBO The American Dietetic Association, 216 W.
Jackson Boulevard, Chicago, Illinois owned of record 8.23% of the outstanding
Class C shares of the Global Bond Fund; and PaineWebber FBO The Florence & Co.
Trust Account #2 Timothy Sheffield, Charles J., 11713 NE 99th Street, Vancouver,
Washington owned of record 8.09% of the outstanding Class C shares of the Global
Bond Fund.
As of January 3, 1997, the Trustees and officers of the Trust as a
group owned of record and beneficially 2.10% of the outstanding shares of the
Short Term Government Income Fund, 1.79% of the outstanding Class A shares of
the Global Bond Fund and less than 1% of the outstanding shares of the Trust and
of each other Fund (or Class thereof).
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has
been retained to act as Custodian for the investments of the Short Term
Government Income Fund, the Intermediate Term Government Income Fund, the
Institutional Government Income Fund and the Adjustable Rate U.S. Government
Securities Fund. The Fifth Third Bank acts as each Fund's depository, safekeeps
its portfolio securities, collects all income and other payments with respect
thereto, disburses funds as instructed and maintains records in connection with
its duties. As compensation, The Fifth Third Bank receives from each Fund a base
fee at the annual rate of .005% of average net assets (subject to a minimum
annual fee of $1,500 per Fund and a maximum fee of $5,000 per Fund) plus
transaction charges for each security transaction of the Funds.
The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois,
has been retained to act as Custodian for the Global Bond Fund's investments.
The Northern Trust Company acts
- 52 -
<PAGE>
as the Fund's depository, safekeeps its portfolio securities, collects all
income and other payments with respect thereto, disburses funds as instructed
and maintains records in connection with its duties.
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 each of the Short
Term Government Income Fund and the Institutional Government Income Fund and $21
per account from the Intermediate Term Government Income Fund, the Adjustable
Rate U.S. Government Securities Fund and the Global Bond Fund, provided,
however, that the minimum fee is $1,000 per month for each class of shares of a
Fund. In addition, the Funds pay out-of-pocket expenses, including but not
limited to, postage, envelopes, checks, drafts, forms, reports, record storage
and communication lines.
CFS also provides accounting and pricing services to the Trust. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable CFS to perform its duties, the Short Term
Government Income Fund and the Institutional Government Income Fund each pay 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
- 53 -
<PAGE>
The Intermediate Term Government Income Fund pays CFS a fee in accordance with
the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $3,750
$ 50,000,000 - $100,000,000 $4,250
$100,000,000 - $250,000,000 $4,750
Over $250,000,000 $5,250
The Adjustable Rate U.S. Government Securities Fund pays CFS a fee in accordance
with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $4,250
$ 50,000,000 - $100,000,000 $4,750
$100,000,000 - $250,000,000 $5,250
Over $250,000,000 $5,750
The Global Bond Fund pays CFS a fee in accordance with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $4,750
$ 50,000,000 - $100,000,000 $5,250
$100,000,000 - $250,000,000 $5,750
Over $250,000,000 $6,750
In addition, each Fund pays all costs of external pricing services.
CFS is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, CFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. CFS supervises
the preparation of tax returns, reports to shareholders of the Funds, reports to
and filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For the
performance of these administrative services, CFS receives a fee from the
Adviser 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.
- 54 -
<PAGE>
ANNUAL REPORT
- -------------
The Funds' financial statements as of September 30, 1996 appear in the
Trust's annual report which is attached to this Statement of Additional
Information.
- 55 -
<PAGE>
ANNUAL
REPORT
SEPTEMBER 30, 1996
SHORT TERM GOVERNMENT
INCOME FUND
INSTITUTIONAL GOVERNMENT
INCOME FUND
INTERMEDIATE TERM
GOVERNMENT
INCOME FUND
ADJUSTABLE RATE
U.S. GOVERNMENT
SECURITIES FUND
GLOBAL
BOND FUND
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
INTERMEDIATE TERM GOVERNMENT INCOME FUND
==============================================================================
The fiscal year ended September 30, 1996 was a difficult year for the
fixed-income markets with interest rates generally moving higher. The
benchmark 30-year Treasury bond began the fiscal year yielding 6.47% and ended
the year yielding 6.92%. During the quarter ended December 31, 1995, the
market found tremendous support in constructive budget negotiations between
the Republican Congress and the Clinton Presidency. At the time, it appeared
that a budget resolution would be reached, paving the way for the Federal
Reserve Board to lower interest rates. The market was also aided by a
softening economy and muted inflationary pressures. The yield on the 30-year
Treasury bond reached a low of 5.95% in January 1996.
The next two quarters proved difficult beginning with the budget impasse and
the partial shutdown of the U.S. government in the latter part of January.
Market sentiment worsened, exacerbated by accelerating economic activity.
Gross domestic product climbed to a torrid 4.7% growth rate for the quarter
ended June 30, 1996, well in excess of the economy's long-term potential
growth rate of around 2.5%. The Federal Reserve's bias changed from "easy
money" to "tight money" with many investors wondering when, not if, interest
rates would be raised. Long-term rates peaked in mid-June at 7.20%, then
traded within a well-defined range through fiscal year-end as investors
grappled with questions concerning the strength of the economy and the
potential for inflation. For the twelve months ended September 30, 1996, the
Lehman Brothers Intermediate Government Bond Index returned 5.10%.
The Intermediate Term Government Income Fund, positioned for an advancing
market, performed well through January 1996. However, when market interest
rates abruptly changed direction in February, the Fund suffered a loss of
principal. The Fund underperformed the Lehman Brothers Intermediate Government
Bond Index during the downturn due to its higher duration and convexity
characteristics. Management responded by repositioning the portfolio to take
advantage of the higher interest rate environment. By purchasing callable
bonds with good call protection, the Fund was able to increase its yield while
maintaining better-than-average upside potential. This allowed the Fund to
outperform the Index in the latter part of the fiscal year as interest rates
began trending lower. For the fiscal year ended September 30, 1996, the Fund's
total returns (excluding the impact of applicable sales loads) were 3.55% and
3.03% for Class A shares and Class C shares, respectively.
Our outlook for the next several months remains constructive. Economic
activity appears to be moderating and inflation is nominal -- a boon to bonds.
While the economy may rebound somewhat during the holiday season, our
longer-term outlook is for economic growth at, or near, the economy's
long-term potential. Management has worked to improve the call protection in
the Fund and slightly extend the effective duration which should enhance
performance in a lower interest rate environment. The portfolio remains over
50% invested in callable bonds to provide protection in the event rates move
higher.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
INTERMEDIATE TERM GOVERNMENT INCOME FUND* AND THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT BOND INDEX
<TABLE>
LEHMAN BROTHERS INTERMEDIATE GOVT BOND INDEX: INTERMED TERM GOVT INCOME FUND - CLASS A:
<CAPTION>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
09/30/86 10,000 09/30/86 9,800
12/31/86 2.49% 10,249 12/31/86 2.35% 10,030
03/31/87 1.18% 10,370 03/31/87 0.84% 10,114
06/30/87 -0.83% 10,284 06/30/87 -1.32% 9,981
09/30/87 -1.29% 10,151 09/30/87 -1.17% 9,864
12/31/87 4.60% 10,618 12/31/87 3.91% 10,250
03/31/88 3.13% 10,951 03/31/88 2.50% 10,507
06/30/88 0.97% 11,057 06/30/88 0.47% 10,556
09/30/88 1.56% 11,229 09/30/88 1.64% 10,730
12/31/88 0.60% 11,297 12/31/88 0.27% 10,758
03/31/89 1.04% 11,414 03/31/89 1.05% 10,871
06/30/89 6.64% 12,172 06/30/89 5.40% 11,458
09/30/89 1.13% 12,310 09/30/89 0.93% 11,565
12/31/89 3.41% 12,729 12/31/89 2.88% 11,899
03/31/90 -0.14% 12,711 03/31/90 -1.32% 11,742
06/30/90 3.14% 13,111 06/30/90 2.77% 12,067
09/30/90 1.94% 13,365 09/30/90 0.93% 12,180
12/31/90 4.34% 13,945 12/31/90 4.51% 12,729
03/31/91 2.20% 14,252 03/31/91 1.93% 12,975
06/30/91 1.69% 14,493 06/30/91 1.25% 13,136
09/30/91 4.75% 15,181 09/30/91 5.87% 13,908
12/31/91 4.82% 15,913 12/31/91 5.33% 14,650
03/31/92 -1.05% 15,746 03/31/92 -2.24% 14,321
06/30/92 3.88% 16,357 06/30/92 4.25% 14,931
09/30/92 4.38% 17,073 09/30/92 5.51% 15,754
12/31/92 -0.34% 17,015 12/31/92 -0.87% 15,616
03/31/93 3.74% 17,651 03/31/93 5.09% 16,411
06/30/93 1.96% 17,997 06/30/93 2.76% 16,863
09/30/93 2.11% 18,377 09/30/93 2.90% 17,353
12/31/93 0.15% 18,405 12/31/93 -0.71% 17,230
03/31/94 -1.85% 18,064 03/31/94 -4.07% 16,529
06/30/94 -0.56% 17,963 06/30/94 -1.88% 16,219
09/30/94 0.77% 18,101 09/30/94 -0.24% 16,180
12/31/94 -0.10% 18,083 12/31/94 -0.23% 16,143
03/31/95 4.16% 18,835 03/31/95 5.14% 16,973
06/30/95 4.67% 19,715 06/30/95 5.95% 17,983
09/30/95 1.55% 20,021 09/30/95 1.24% 18,206
12/31/95 3.34% 20,689 12/31/95 3.63% 18,866
03/31/96 -0.68% 20,549 03/31/96 -2.02% 18,484
06/30/96 0.67% 20,686 06/30/96 0.11% 18,504
09/30/96 1.72% 21,042 09/30/96 1.87% 18,851
</TABLE>
Intermediate Term Government Income Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 1.47% 5.84% 6.55% 8.68%
Class C 3.03% N/A N/A 2.67%
Past performance is not predictive of future performance.
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. The initial public offering of
Class A shares commenced on February 6, 1981, and the initial public offering
of Class C shares commenced on February 1, 1994.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
==============================================================================
The fixed-income markets exhibited a high degree of volatility in the fiscal
year ended September 30, 1996, almost completing a "mini" interest rate cycle.
The year began with a positive tone as Congress and the President appeared to
be nearing agreement on the national budget. This constructive fiscal
backdrop, along with a moderating economy and muted inflation, allowed
interest rates to move lower through the quarter ended December 31, 1995. The
Federal Reserve Board, fearing sluggish economic growth, lowered short-term
interest rates twice, by .25% in December 1995 and by an additional .25% in
January 1996. Short-term rates bottomed-out two weeks later with the 1-year
Treasury bill yielding 4.78%.
February marked a turning point in investor psychology as Congress and the
President failed to reach agreement on the federal budget resulting in a
partial shutdown of the U.S. government. This, combined with a revitalized
economy, sent bond yields sharply higher. Spreads between interest rates on
short-term and long-term Treasuries widened quickly, diminishing the incentive
for mortgage holders to refinance out of adjustable rate mortgages (ARMs) and
into fixed rate mortgages. The resulting slowdown in ARM prepayments allowed
yield spreads to tighten versus U.S. Treasury securities. ARM securities
traded in a relatively narrow range for the rest of the fiscal year,
maintaining tight yield spreads relative to Treasuries. For the twelve months
ended September 30, 1996, the Lehman Brothers ARM Index returned 6.50%.
The Adjustable Rate U.S. Government Securities Fund invests primarily in ARM
securities which are fully-indexed to the 1-year Constant Maturity Treasury
(CMT). These generally conservative bonds exhibit very stable prepayment
patterns. The prepayment profile, combined with the adjustable coupon, allows
the fully-indexed ARM security to maintain an above average degree of price
stability. When short-term interest rates moved higher after January 1996,
fully-indexed, 1-year CMT ARMs actually increased in value as investors sought
refuge in short-duration, mortgage-backed securities with stable prepayment
patterns. Valuations on these securities remained attractive through fiscal
year-end. As a result, the Fund was able to achieve total returns comparable
to the Lehman Brothers ARM Index, but with considerably less volatility and
risk. For the fiscal year ended September 30, 1996, the Fund's total returns
(excluding the impact of applicable sales loads) were 6.32% and 5.77% for
Class A shares and Class C shares, respectively.
The Fund currently intends to continue to invest in fully-indexed, 1-year CMT
ARM securities in an effort to maintain a relatively stable net asset value.
Fund management believes that short-term Treasury securities are currently
fully valued in relation to economic fundamentals and that the Federal Reserve
Board is likely to leave short-term interest rates unchanged for the
foreseeable future. We will continue to pursue a conservative strategy for the
Fund, attempting to maximize current yield while minimizing principal
fluctuation.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ADJUSTABLE
RATE U.S. GOVERNMENT SECURITIES FUND* AND THE LEHMAN BROTHERS ARM INDEX
<TABLE>
LEHMAN BROTHERS ARM INDEX: ADJUSTABLE RATE U.S. GOVT SEC FUND - CLASS A:
<CAPTION>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
02/28/93 10,000 02/28/93 9,800
03/31/93 0.45% 10,045 03/31/93 0.63% 9,862
06/30/93 1.90% 10,236 06/30/93 1.19% 9,980
09/30/93 1.06% 10,345 09/30/93 1.04% 10,084
12/31/93 0.52% 10,398 12/31/93 0.95% 10,180
03/31/94 -0.44% 10,353 03/31/94 0.62% 10,242
06/30/94 -0.39% 10,312 06/30/94 0.32% 10,276
09/30/94 0.69% 10,383 09/30/94 0.19% 10,295
12/31/94 0.15% 10,399 12/31/94 -0.63% 10,230
03/31/95 4.20% 10,836 03/31/95 2.48% 10,484
06/30/95 3.12% 11,174 06/30/95 2.01% 10,695
09/30/95 1.69% 11,363 09/30/95 1.39% 10,844
12/31/95 2.25% 11,618 12/31/95 1.73% 11,032
03/31/96 1.10% 11,746 03/31/96 1.67% 11,216
06/30/96 1.13% 11,879 06/30/96 1.24% 11,355
09/30/96 1.87% 12,102 09/30/96 1.53% 11,529
</TABLE>
Past performance is not predictive of future performance.
Adjustable Rate U.S. Government Securities Fund
Average Annual Total Returns
1 Year Since Inception
Class A 4.19% 3.99%
Class C 5.77% 5.85%
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and
fees paid by shareholders in the different classes. The initial public offering
of Class A shares commenced on February 10, 1993, and the initial public
offering of Class C shares commenced on May 1, 1995.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
GLOBAL BOND FUND
==============================================================================
The Global Bond Fund seeks high total return, through both income and capital
appreciation. The Fund invests primarily in high-grade domestic and foreign
fixed-income securities geographically concentrated in Australia, Belgium,
Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain,
Sweden, the United Kingdom and the United States. The Fund may also invest up
to ten percent of its total assets in global bonds issued in emerging markets.
For the fiscal year ended September 30, 1996, the Fund's total returns
(excluding the impact of applicable sales loads) were 4.88% and 4.10% for
Class A shares and Class C shares, respectively. The Salomon Brothers World
Government Bond Index returned 4.20% during this same period.
Management of the Fund uses an active country/currency allocation in liquid
markets, based on a process of relative value analysis across countries. Focus
is placed on financially healthy countries which management believes have the
potential to produce the highest bond and currency returns on a relative
basis. Careful analysis is made of each country's savings rate, monetary
growth, monetary authorities, fiscal policy and political climate. Optimal
country weightings are then assigned based upon twelve month expectations of
investor confidence and market outlook. The Fund also utilizes various hedging
techniques to reduce short-term volatility resulting from currency exchange
rate fluctuations.
Country selections during the fiscal year generally had a positive impact on
performance relative to the Salomon Brothers World Government Bond Index, as
the Fund was comparatively overweighted in strong markets such as Italy (the
best performing market for the period) and Denmark, while it was comparatively
underweighted in weaker markets including Japan and the U.S. Although
underweighted in U.S. bonds, the Fund typically maintained a neutral currency
position relative to the U.S. dollar and was not hurt by the dollar's rise.
The portfolio's duration position was generally longer than that of the Index
and tended to benefit the Fund, although it did have a negative impact for the
quarter ended March 31, 1996, when bond returns were weak.
Looking forward, management continues to see opportunity in the global bond
markets. Inflation remains subdued globally, which is allowing real interest
rates to come down further. We think that this process can continue given the
tight fiscal policies which are in place throughout Europe and the dollar
block. Monetary policy as well seems relatively tight given the moderate pace
of economic expansion seen in the global economy. Japan remains the least
attractive environment for investment due to its overly loose monetary and
fiscal policies.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GLOBAL
BOND FUND* AND THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX
<TABLE>
SALOMON BROTHERS WORLD GLOBAL BOND FUND - CLASS A:
GOVERNMENT BOND INDEX:
<CAPTION>
MONTHLY MONTHLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
02/01/95 10,000 02/01/95 9,600
02/28/95 2.56% 10,256 02/28/95 2.00% 9,792
03/31/95 5.94% 10,865 03/31/95 6.47% 10,426
04/30/95 1.85% 11,066 04/30/95 1.30% 10,562
05/31/95 2.81% 11,377 05/31/95 1.93% 10,765
06/30/95 0.59% 11,444 06/30/95 -0.09% 10,756
07/31/95 0.24% 11,472 07/31/95 0.00% 10,756
08/31/95 -3.44% 11,077 08/31/95 -3.41% 10,389
09/30/95 2.23% 11,324 09/30/95 1.53% 10,547
10/31/95 0.75% 11,409 10/31/95 0.94% 10,647
11/30/95 1.13% 11,538 11/30/95 1.12% 10,766
12/31/95 1.05% 11,658 12/31/95 1.91% 10,972
01/31/96 -1.24% 11,514 01/31/96 -0.73% 10,891
02/29/96 -0.51% 11,456 02/29/96 -1.66% 10,711
03/31/96 -0.14% 11,440 03/31/96 -1.03% 10,600
04/30/96 -0.40% 11,394 04/30/96 0.95% 10,701
05/31/96 0.02% 11,397 05/31/96 -0.47% 10,651
06/30/96 0.79% 11,486 06/30/96 0.66% 10,721
07/31/96 1.92% 11,706 07/31/96 1.96% 10,931
08/31/96 0.39% 11,752 08/31/96 0.09% 10,941
09/30/96 0.41% 11,800 09/30/96 1.10% 11,062
</TABLE>
Past performance is not predictive of future performance.
Global Bond Fund
Average Annual Total Returns
1 Year Since Inception
Class A 0.68% 6.25%
Class C 4.10% 8.16%
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and
fees paid by shareholders in the different classes. The initial public
offering of Class A shares and Class C shares each commenced on February 1,
1995.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1996
===================================================================================================================
MONEY MARKET FUNDS
===================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
===================================================================================================================
<S> <C> <C>
ASSETS
Investments in securities:
At acquisition cost................................................... $ 50,749,465 $ 23,166,922
============== ===============
At amortized cost..................................................... $ 50,871,866 $ 23,213,713
============== ===============
At value (Note 2) .................................................... $ 50,871,866 $ 23,213,713
Investments in repurchase agreements (Note 2)............................ 40,278,000 15,957,000
Cash .................................................................... 329 54
Interest receivable...................................................... 374,341 231,551
-------------- ---------------
TOTAL ASSETS.......................................................... 91,524,536 39,402,318
-------------- ---------------
LIABILITIES
Dividends payable........................................................ 5,758 9,480
Payable to affiliates (Note 4)........................................... 67,634 4,150
Other accrued expenses and liabilities................................... 11,660 6,624
-------------- ---------------
TOTAL LIABILITIES .................................................... 85,052 20,254
-------------- ---------------
NET ASSETS ............................................................. $ 91,439,484 $ 39,382,064
============== ===============
Net assets consist of:
Capital shares........................................................... $ 91,436,514 $ 39,406,966
Accumulated net realized gains (losses) from security transactions ...... 2,970 (24,902)
-------------- ---------------
Net assets .............................................................. $ 91,439,484 $ 39,382,064
============== ===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 91,436,514 39,406,966
============== ===============
Net asset value, offering price and redemption price per share (Note 2) . $ 1.00 $ 1.00
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1996
===================================================================================================================
GOVERNMENT BOND FUNDS
===================================================================================================================
ADJUSTABLE
INTERMEDIATE RATE U.S.
TERM GOVERNMENT
GOVERNMENT SECURITIES
INCOME FUND FUND
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in securities:
At acquisition cost................................................... $ 55,565,058 $ 11,382,080
============== ===============
At amortized cost .................................................... $ 55,534,106 $ 11,382,080
============== ===============
At value (Note 2) .................................................... $ 55,744,810 $ 11,506,681
Investments in repurchase agreements (Note 2)............................ 226,000 769,000
Cash .................................................................... 756 35
Interest receivable ..................................................... 1,004,718 96,700
Receivable for capital shares sold....................................... 35,498 10,137
Receivable for principal paydowns........................................ -- 62,507
Receivable from Adviser (Note 4)......................................... -- 3,106
Other assets............................................................. 1,194 6,910
-------------- ---------------
TOTAL ASSETS ......................................................... 57,012,976 12,455,076
-------------- ---------------
LIABILITIES
Dividends payable ....................................................... 28,745 4,468
Payable for capital shares redeemed ..................................... 67,151 75,863
Payable to affiliates (Note 4) .......................................... 37,907 6,400
Other accrued expenses and liabilities................................... 13,230 7,900
-------------- ---------------
TOTAL LIABILITIES .................................................... 147,033 94,631
-------------- ---------------
NET ASSETS ............................................................. $ 56,865,943 $ 12,360,445
============== ===============
Net assets consist of:
Capital shares .......................................................... $ 59,554,531 $ 13,484,994
Accumulated net realized losses from security transactions............... (2,899,292) (1,249,150)
Net unrealized appreciation on investments .............................. 210,704 124,601
-------------- ---------------
Net assets .............................................................. $ 56,865,943 $ 12,360,445
============== ===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares ............................... $ 56,094,893 $ 11,731,582
============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) .................. 5,348,350 1,195,580
============== ===============
Net asset value and redemption price per share (Note 2).................. $ 10.49 $ 9.81
============== ===============
Maximum offering price per share (Note 2) ............................... $ 10.70 $ 10.01
============== ===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares ............................... $ 771,050 $ 628,863
============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5)................... 73,518 64,117
============== ===============
Net asset value, offering price and redemption price per share (Note 2).. $ 10.49 $ 9.81
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
===================================================================================================================
GLOBAL BOND
FUND
- - -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities:
At acquisition cost...................................................................... $ 17,784,437
===============
At amortized cost ....................................................................... $ 17,784,437
===============
At value (Note 2) ....................................................................... $ 18,110,218
Cash ....................................................................................... 352,228
Interest receivable ........................................................................ 482,777
Receivable for capital shares sold.......................................................... 555
Receivable for securities sold.............................................................. 1,715,712
Other assets................................................................................ 2,032
---------------
TOTAL ASSETS ............................................................................ 20,663,522
---------------
LIABILITIES
Payable for securities purchased............................................................ 1,874,374
Payable for capital shares redeemed......................................................... 57,997
Payable to affiliates (Note 4) ............................................................. 19,059
Net unrealized depreciation on forward foreign currency exchange contracts (Note 7)......... 7,656
Other accrued expenses and liabilities...................................................... 15,743
---------------
TOTAL LIABILITIES ....................................................................... 1,974,829
---------------
NET ASSETS ................................................................................ $ 18,688,693
===============
Net assets consist of:
Capital shares ............................................................................. $ 17,929,671
Undistributed net investment income......................................................... 287,907
Accumulated net realized gains from security and foreign currency transactions ............. 155,206
Net unrealized appreciation on investments ................................................. 325,781
Net unrealized depreciation on translation of assets and liabilities in foreign currencies.. (9,872)
---------------
Net assets ................................................................................. $ 18,688,693
===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares .................................................. $ 12,841,443
===============
Shares of beneficial interest outstanding (unlimited number of
shares authorized, no par value) (Note 5)................................................. 1,164,325
===============
Net asset value and redemption price per share (Note 2)..................................... $ 11.03
===============
Maximum offering price per share (Note 2) .................................................. $ 11.49
===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares .................................................. $ 5,847,250
===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5)....................................................... 535,423
===============
Net asset value, offering price and redemption price per share (Note 2)..................... $ 10.92
===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 1996
===================================================================================================================
MONEY MARKET FUNDS
===================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ...................................................... $ 4,741,604 $ 1,931,042
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4) .................................... 419,926 70,752
Transfer agent fees (Note 4) ......................................... 183,219 12,862
Distribution expenses (Note 4)........................................ 93,521 2,655
Accounting services fees (Note 4)..................................... 36,000 36,000
Postage and supplies.................................................. 56,667 13,798
Custodian fees ....................................................... 19,169 11,206
Registration fees..................................................... 19,036 7,959
Professional fees .................................................... 11,074 7,074
Insurance expense..................................................... 9,036 4,892
Reports to shareholders .............................................. 11,753 692
Trustees' fees and expenses .......................................... 4,101 4,101
Other expenses ....................................................... 5,333 2,320
-------------- ---------------
TOTAL EXPENSES...................................................... 868,835 174,311
Fees waived by the Adviser (Note 4) .................................. -- (32,783)
-------------- ---------------
NET EXPENSES........................................................ 868,835 141,528
-------------- ---------------
NET INVESTMENT INCOME ................................................... 3,872,769 1,789,514
-------------- ---------------
NET REALIZED GAINS FROM SECURITY TRANSACTIONS .......................... 2,970 3,538
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 3,875,739 $ 1,793,052
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 1996
===================================================================================================================
GOVERNMENT BOND FUNDS
===================================================================================================================
ADJUSTABLE
INTERMEDIATE RATE U.S.
TERM GOVERNMENT
GOVERNMENT SECURITIES
INCOME FUND FUND
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ...................................................... $ 3,962,313 $ 1,062,482
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4)..................................... 289,680 79,927
Distribution expenses, Class A (Note 4)............................... 93,442 17,500
Distribution expenses, Class C (Note 4)............................... 40 19
Accounting services fees (Note 4)..................................... 51,000 51,000
Transfer agent fees, Class A (Note 4)................................. 52,558 14,221
Transfer agent fees, Class C (Note 4)................................. 12,000 12,000
Postage and supplies.................................................. 38,476 13,286
Registration fees, Common............................................. 4,383 5,268
Registration fees, Class A............................................ 8,167 5,002
Registration fees, Class C............................................ 3,674 1,445
Professional fees..................................................... 13,199 8,605
Standard & Poor's rating expense...................................... -- 20,500
Custodian fees........................................................ 8,123 6,642
Insurance expense..................................................... 6,699 3,160
Trustees' fees and expenses........................................... 4,101 4,101
Reports to shareholders............................................... 4,748 1,371
Other expenses........................................................ 5,817 2,317
-------------- ---------------
TOTAL EXPENSES...................................................... 596,107 246,364
Fees waived and/or expenses reimbursed by the Adviser (Note 4)........ (10,334) (125,377)
-------------- ---------------
NET EXPENSES........................................................ 585,773 120,987
-------------- ---------------
NET INVESTMENT INCOME ................................................... 3,376,540 941,495
-------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ........................ 295,706 72,164
Net change in unrealized appreciation/depreciation on investments .... (1,807,714) (24,764)
-------------- ---------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS .............. (1,512,008) 47,400
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 1,864,532 $ 988,895
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1996
===================================================================================================================
GLOBAL BOND
FUND
- - -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest income (net of foreign withholding taxes of $24,233) ........................... $ 1,239,101
---------------
EXPENSES
Investment advisory fees (Note 4)........................................................ 137,065
Accounting services fees (Note 4)........................................................ 57,000
Custodian fees........................................................................... 36,940
Distribution expenses, Class A (Note 4).................................................. 4,709
Distribution expenses, Class C (Note 4).................................................. 24,181
Transfer agent fees, Class A (Note 4).................................................... 12,000
Transfer agent fees, Class C (Note 4).................................................... 12,000
Registration fees, Common................................................................ 3,794
Registration fees, Class A............................................................... 4,469
Registration fees, Class C............................................................... 2,469
Professional fees........................................................................ 9,474
Postage and supplies..................................................................... 6,406
Trustees' fees and expenses.............................................................. 4,101
Insurance expense........................................................................ 2,793
Reports to shareholders.................................................................. 1,128
Other expenses........................................................................... 5,802
---------------
TOTAL EXPENSES......................................................................... 324,331
Fees waived and expenses reimbursed by the Adviser (Note 4).............................. (23,104)
---------------
NET EXPENSES........................................................................... 301,227
---------------
NET INVESTMENT INCOME ...................................................................... 937,874
---------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCY (NOTE 6)
Net realized losses from:
Security transactions ................................................................. (93,933)
Foreign currency transactions.......................................................... (235,290)
Net change in unrealized appreciation/depreciation on:
Investments ........................................................................... 161,908
Translation of assets and liabilities in foreign currencies............................ 57,520
---------------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENTS AND FOREIGN CURRENCY ................... (109,795)
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................................ $ 828,079
===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
===================================================================================================================
MONEY MARKET FUNDS
===================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1996 1995
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income....................... $ 3,872,769 $ 3,888,736 $ 1,789,514 $ 2,286,308
Net realized gains from security transactions 2,970 2,227 3,538 4,844
------------ -------------- ------------- --------------
Net increase in net assets from operations..... 3,875,739 3,890,963 1,793,052 2,291,152
------------ -------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................. (3,872,769) (3,888,736) (1,789,514) (2,286,308)
From net realized gains from security
transactions.............................. (2,227) (4,105) -- --
------------ -------------- ------------- --------------
Decrease in net assets from distributions to
shareholders............................... (3,874,996) (3,892,841) (1,789,514) (2,286,308)
------------ -------------- ------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold .................. 290,338,196 306,531,676 171,325,558 152,663,812
Net asset value of shares issued in
reinvestment of distributions to
shareholders 3,711,242 3,627,273 1,548,806 1,869,015
Payments for shares redeemed................ (289,751,833) (312,723,860) (169,504,468) (160,298,008)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets from
capital share transactions.................. 4,297,605 (2,564,911) 3,369,896 (5,765,181)
------------ -------------- ------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ..... 4,298,348 (2,566,789) 3,373,434 (5,760,337)
NET ASSETS:
Beginning of year........................... 87,141,136 89,707,925 36,008,630 41,768,967
------------ -------------- ------------- --------------
End of year................................. $ 91,439,484 $ 87,141,136 $39,382,064 $36,008,630
============ ============== ============= ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
===================================================================================================================
GOVERNMENT BOND FUNDS
===================================================================================================================
INTERMEDIATE TERM ADJUSTABLE RATE
GOVERNMENT U.S. GOVERNMENT
INCOME FUND SECURITIES FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1996 1995
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ...................... $ 3,376,540 $ 3,691,139 $ 941,495 $ 1,249,966
Net realized gains (losses) from
security transactions 295,706 (932,473) 72,164 (997,493)
Net change in unrealized
appreciation/depreciation on investments.. (1,807,714) 4,287,039 (24,764) 743,284
------------ -------------- ------------- --------------
Net increase in net assets from operations .... 1,864,532 7,045,705 988,895 995,757
------------ -------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ........ (3,339,635) (3,660,758) (930,066) (1,250,247)
From net investment income, Class C ........ (36,905) (30,381) (11,429) (1,540)
------------ -------------- ------------- --------------
Decrease in net assets from distributions
to shareholders (3,376,540) (3,691,139) (941,495) (1,251,787)
------------ -------------- ------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold .................. 19,564,015 13,539,608 12,919,191 17,065,780
Net asset value of shares issued in
reinvestment of distributions
to shareholders 2,911,115 3,085,214 816,771 1,122,368
Payments for shares redeemed ............... (21,856,049) (27,372,364) (22,803,135) (34,751,708)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets
from Class A share transactions ............ 619,081 (10,747,542) (9,067,173 (16,563,560)
------------ -------------- ------------- -----------
CLASS C
Proceeds from shares sold .................. 384,845 438,070 617,534 85,878
Net asset value of shares issued in
reinvestment of distributions
to shareholders 35,459 29,534 8,075 1,510
Payments for shares redeemed................ (228,470) (410,675) (84,110) (1,007)
------------ -------------- ------------- --------------
Net increase in net assets
from Class C share transactions ............ 191,834 56,929 541,499 86,381
------------ -------------- ------------- --------------
Net increase (decrease) in net assets
from capital share transactions............. 810,915 (10,690,613) (8,525,674) (16,477,179)
------------ -------------- ------------- --------------
TOTAL DECREASE IN NET ASSETS ................. (701,093) (7,336,047) (8,478,274) (16,733,209)
NET ASSETS:
Beginning of year........................... 57,567,036 64,903,083 20,838,719 37,571,928
------------ -------------- ------------- --------------
End of year................................. $ 56,865,943 $ 57,567,036 $12,360,445 $20,838,719
============ ============== ============= ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET
ASSETS For the Periods Ended September 30, 1996 and 1995
===================================================================================================================
GLOBAL BOND FUND
===================================================================================================================
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................................................ $ 937,874 $ 254,441
Net realized gains (losses) from security transactions ............... (93,933) 157,918
Net realized losses from foreign currency transactions................ (235,290) (106,555)
Net change in unrealized appreciation/depreciation on investments..... 161,908 119,054
Net change in unrealized appreciation/depreciation on translation
of assets and liabilities in foreign currencies..................... 57,520 (22,573)
-------------- ---------------
Net increase in net assets from operations .............................. 828,079 402,285
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A .................................. (173,473) (232,249)
From net investment income, Class C .................................. (51,783) (13,837)
-------------- ---------------
Decrease in net assets from distributions to shareholders ............... (225,256) (246,086)
-------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold ............................................ 2,196,018 13,448,590
Net asset value of shares issued in reinvestment of
distributions to shareholders....................................... 167,215 226,752
Payments for shares redeemed ......................................... (3,249,417) (560,630)
-------------- ---------------
Net increase (decrease) in net assets from Class A share transactions ... (886,184) 13,114,712
-------------- ---------------
CLASS C
Proceeds from shares sold ............................................ 2,001,544 4,554,154
Net asset value of shares issued in reinvestment of
distributions to shareholders 50,833 13,614
Payments for shares redeemed.......................................... (895,367) (23,635)
-------------- ---------------
Net increase in net assets from Class C share transactions .............. 1,157,010 4,544,133
-------------- ---------------
Net increase in net assets from capital share transactions............... 270,826 17,658,845
-------------- ---------------
TOTAL INCREASE IN NET ASSETS ........................................... 873,649 17,815,044
NET ASSETS:
Beginning of period................................................... 17,815,044 --
-------------- ---------------
End of period......................................................... $ 18,688,693 $ 17,815,044
============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME ..................................... $ 720,973 $ 8,355
============== ===============
<FN>
(A)Represents the period from initial public offering of shares (February 1,
1995) through September 30, 1995.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- ---------- --------- -----------
Net investment income .......................... 0.044 0.046 0.027 0.022 0.035
---------- --------- ---------- --------- -----------
Dividends from net investment income............ (0.044) (0.046) (0.027) (0.022) (0.035)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========== ========= ===========
Total return ................................... 4.51% 4.69% 2.72% 2.24% 3.55%
========== ========= ========== ========= ===========
Net assets at end of year (000's) .............. $ 91,439 $ 87,141 $ 89,708 $ 96,962 $91,519
---------- --------- ---------- --------- -----------
Ratio of expenses to average net assets ........ 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to average
net assets 4.42% 4.59% 2.69% 2.22% 3.51%
- - -------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED SEPTEMBER 30,
===================================================================================================================
1996 1995 1994 1993 1992
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- ---------- --------- -----------
Net investment income........................... 0.051 0.053 0.034 0.029 0.040
---------- --------- ---------- --------- -----------
Dividends from net investment income............ (0.051) (0.053) (0.034) (0.029) (0.040)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========== ========= ===========
Total return.................................... 5.18% 5.42% 3.43% 2.96% 4.08%
========== ========= ========== ========= ===========
Net assets at end of year (000's) .............. $ 39,382 $ 36,009 $ 41,769 $ 34,610 $43,432
========== ========= ========== ========= ===========
Ratio of expenses to average net assets(A) ..... 0.40% 0.40% 0.40% 0.40% 0.37%
Ratio of net investment income to average
net assets 5.06% 5.30% 3.41% 2.92% 4.04%
- - -------------------------------------------------------------------------------------------------------------------
<FN>
(A)Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 0.49%, 0.42%, 0.42%, 0.48% and 0.43% for the years
ended September 30, 1996, 1995, 1994, 1993 and 1992, respectively (Note 4).
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS A
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 10.73 $ 10.14 $ 11.59 $ 11.10 $ 10.45
---------- --------- ---------- --------- -----------
Income from investment operations:
Net investment income........................ 0.61 0.64 0.56 0.60 0.68
Net realized and unrealized gains (losses)
on investments............................. (0.24) 0.59 (1.32) 0.49 0.65
---------- --------- ---------- --------- -----------
Total from investment operations................ 0.37 1.23 (0.76) 1.09 1.33
---------- --------- ---------- --------- -----------
Less distributions:
Dividends from net investment income......... (0.61) (0.64) (0.56) (0.60) (0.68)
Distributions from net realized gains........ -- -- (0.13) -- --
---------- --------- ---------- --------- -----------
Total distributions............................. (0.61) (0.64) (0.69) (0.60) (0.68)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 10.49 $ 10.73 $ 10.14 $ 11.59 $ 11.10
========== ========= ========== ========= ===========
Total return(A) ................................ 3.55% 12.52% (6.76%) 10.15% 13.27%
========== ========= ========== ========= ===========
Net assets at end of year (000's)............... $ 56,095 $ 56,969 $ 64,395 $ 89,666 $59,290
========== ========= ========== ========= ===========
Ratio of expenses to average net assets......... 0.99% 0.99% 0.99% 0.99% 1.00%
Ratio of net investment income to average
net assets................................... 5.75% 6.17% 5.17% 5.31% 6.40%
Portfolio turnover rate......................... 70% 58% 236% 255% 76%
- - -------------------------------------------------------------------------------------------------------------------
<FN>
(A) The total returns shown do not include the effect of applicable sales
loads.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS C
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
YEAR YEAR PERIOD
ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1994(A)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 10.73 $ 10.14 $ 11.27
-------------- -------------- ---------------
Income from investment operations:
Net investment income................................ 0.56 0.59 0.34
Net realized and unrealized gains (losses) on
investments........................................ (0.24) 0.59 (1.13)
-------------- -------------- ---------------
Total from investment operations........................ 0.32 1.18 (0.79)
-------------- -------------- ---------------
Less distributions:
Dividends from net investment income................. (0.56) (0.59) (0.34)
-------------- -------------- ---------------
Total distributions..................................... (0.56) (0.59) (0.34)
-------------- -------------- ---------------
Net asset value at end of period........................ $ 10.49 $ 10.73 $ 10.14
============== ============== ===============
Total return(B) ........................................ 3.03% 11.96% (10.38%)(D)
============== ============== ===============
Net assets at end of period (000's)..................... $ 771 $ 598 $ 508
============== ============== ===============
Ratio of expenses to average net assets(C) ............. 1.49% 1.48% 1.46%(D)
Ratio of net investment income to average net assets.... 5.25% 5.60% 4.89%(D)
Portfolio turnover rate................................. 70% 58% 236%(D)
- - -------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from initial public offering of Class C shares
(February 1, 1994) through September 30, 1994.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 2.96%, 3.57% and
2.41%(D) for the periods ended September 30, 1996, 1995 and 1994,
respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS A
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1994 1993(A)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ........ $ 9.78 $ 9.82 $ 10.01 $ 10.00
------------ -------------- ------------- --------------
Income from investment operations:
Net investment income ...................... 0.57 0.55 0.39 0.28
Net realized and unrealized gains (losses)
on investments 0.03 (0.04) (0.18) 0.01
------------ -------------- ------------- --------------
Total from investment operations .............. 0.60 0.51 0.21 0.29
------------ -------------- ------------- --------------
Less distributions:
Dividends from net investment income........ (0.57) (0.55) (0.39) (0.28)
Distributions from net realized gains....... -- -- (0.01) -
------------ -------------- ------------- --------------
Total distributions ........................... (0.57) (0.55) (0.40) (0.28)
------------ -------------- ------------- --------------
Net asset value at end of period .............. $ 9.81 $ 9.78 $ 9.82 $ 10.01
============ ============== ============= ==============
Total return(B) ............................... 6.32% 5.33% 2.09% 4.56%(D)
============ ============== ============= ==============
Net assets at end of period (000's) ........... $ 11,732 $ 20,752 $ 37,572 $ 24,400
============ ============== ============= ==============
Ratio of expenses to average net assets(C) .... 0.75% 0.75% 0.68% 0.22%(D)
Ratio of net investment income to average net assets 5.91% 5.57% 3.91% 4.17%(D)
Portfolio turnover rate ....................... 44% 115% 81% 170%(D)
- - -------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of Class A shares
(February 10, 1993) through September 30, 1993.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 1.46%, 1.21%,
0.78% and 1.18%(D) for the periods ended September 30, 1996, 1995, 1994 and
1993, respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
<S> <C> <C>
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- - -------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .................................. $ 9.78 $ 9.76
-------------- ---------------
Income from investment operations:
Net investment income ................................................ 0.52 0.22
Net realized and unrealized gains on investments ..................... 0.03 0.02
-------------- ---------------
Total from investment operations ........................................ 0.55 0.24
-------------- ---------------
Less distributions:
Dividends from net investment income.................................. (0.52) (0.22)
-------------- ---------------
Total distributions ..................................................... (0.52) (0.22)
-------------- ---------------
Net asset value at end of period ........................................ $ 9.81 $ 9.78
============== ===============
Total return(B) ......................................................... 5.77% 5.87%(D)
============== ===============
Net assets at end of period (000's) ..................................... $ 629 $ 86
============== ===============
Ratio of expenses to average net assets(C) .............................. 1.24% 1.24%(D)
Ratio of net investment income to average net assets .................... 5.17% 5.38%(D)
Portfolio turnover rate ................................................. 44% 115%(D)
- - -------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of Class C shares (May 1, 1995) through September
30, 1995.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 7.58% and 18.84%(D) for the
periods ended September 30, 1996 and 1995, respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS - CLASS A
=============================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
=============================================================================================================
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period................................... $ 10.64 $ 10.00
-------------- ---------------
Income from investment operations:
Net investment income................................................. 0.57 0.35
Net realized and unrealized gains (losses) on investments and
foreign currency (0.05) 0.64
-------------- ---------------
Total from investment operations......................................... 0.52 0.99
-------------- ---------------
Less distributions:
Dividends from net investment income.................................. (0.13) (0.35)
-------------- ---------------
Total distributions...................................................... (0.13) (0.35)
-------------- ---------------
Net asset value at end of period......................................... $ 11.03 $ 10.64
============== ===============
Total return(B) ......................................................... 4.88% 14.89%(D)
============== ===============
Net assets at end of period (000's)...................................... $ 12,841 $ 13,297
============== ===============
Ratio of expenses to average net assets(C) .............................. 1.35% 1.33%(D)
Ratio of net investment income to average net assets..................... 4.97% 4.30%(D)
Portfolio turnover rate.................................................. 235% 130%(D)
- - ----------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from initial public offering of Class A shares
(February 1, 1995) through September 30, 1995.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 1.50% and 2.47%(D) for
the periods ended September 30, 1996 and 1995, respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
=============================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
=============================================================================================================
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period................................... $ 10.59 $ 10.00
-------------- ---------------
Income from investment operations:
Net investment income................................................. 0.51 0.38
Net realized and unrealized gains (losses) on investments and
foreign currency (0.08) 0.57
-------------- ---------------
Total from investment operations......................................... 0.43 0.95
-------------- ---------------
Less distributions:
Dividends from net investment income.................................. (0.10) (0.36)
-------------- ---------------
Total distributions...................................................... (0.10) (0.36)
-------------- ---------------
Net asset value at end of period......................................... $ 10.92 $ 10.59
============== ===============
Total return(B) ......................................................... 4.10% 14.25%(D)
============== ===============
Net assets at end of period (000's)...................................... $ 5,847 $ 4,518
============== ===============
Ratio of expenses to average net assets(C) .............................. 2.00% 1.98%(D)
Ratio of net investment income to average net assets..................... 4.34% 3.70%(D)
Portfolio turnover rate.................................................. 235% 130%(D)
- - ----------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from initial public offering of Class C shares
(February 1, 1995) through September 30, 1995.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 2.03% and 3.45%(D) for
the periods ended September 30, 1996 and 1995, respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
==============================================================================
1. ORGANIZATION
The Short Term Government Income Fund, the Institutional Government Income
Fund, the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund (collectively, the Funds)
are each a series of Midwest Trust (the Trust). The Trust is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust was organized as a Massachusetts business trust
on December 7, 1980. The Declaration of Trust, as amended, permits the
Trustees to issue an unlimited number of shares of each Fund.
The Short Term Government Fund invests primarily in short-term U.S. Government
obligations backed by the "full faith and credit" of the United States and
seeks high current income, consistent with protection of capital.
The Institutional Government Income Fund seeks high current income, consistent
with protection of capital, by investing primarily in short-term obligations
issued or guaranteed as to principal and interest by the United States
Government, its agencies or instrumentalities. The Fund is designed primarily
for institutions as an economical and convenient means for the investment of
short-term funds.
The Intermediate Term Government Income Fund invests primarily in U.S.
Government obligations maturing within twenty years or less with a
dollar-weighted average portfolio maturity under normal market conditions of
between three and ten years and seeks high current income, consistent with
protection of capital. To the extent consistent with the Fund's primary
objective, capital appreciation is a secondary objective.
The Adjustable Rate U.S. Government Securities Fund seeks high current income,
consistent with lower volatility of principal, by investing primarily in
mortgage-backed securities created from pools of adjustable rate mortgages
which are issued or guaranteed by the United States Government, its agencies
or instrumentalities.
The Global Bond Fund seeks high total return, through both income and capital
appreciation. The Fund invests primarily in high-grade domestic and foreign
fixed-income securities.
The Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund each offer two classes of
shares: Class A shares (sold subject to a maximum front-end sales load of 2%
for the Intermediate Term Government Income Fund and the Adjustable Rate U.S.
Government Securities Fund and 4% for the Global Bond Fund, and a distribution
fee of up to 0.35% of average daily net assets of each Fund) and Class C
shares (sold subject to a maximum contingent deferred sales load of 1% if
redeemed within a one-year period from purchase, and a distribution fee of up
to 1% of average daily net assets.) Each Class A and Class C share of a Fund
represents identical interests in the investment portfolio of such Fund and
has the same rights, except that (i) Class C shares bear the expenses of
higher distribution fees, which is expected to cause Class C shares to have a
higher expense ratio and to pay lower dividends than Class A shares; (ii)
certain other class specific expenses will be borne solely by the class to
which such expenses are attributable; and (iii) each class has exclusive
voting rights with respect to matters relating to its own distribution
arrangements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
Securities valuation -- Short Term Government Income Fund securities and
Institutional Government Income Fund securities are valued on the amortized
cost basis, which approximates market value. This involves initially valuing a
security at its original cost and thereafter assuming a constant amortization
to maturity of any discount or premium. This method of valuation is expected
to enable these Funds to maintain a constant net asset value per share.
Intermediate Term Government Income Fund securities, Adjustable Rate U.S.
Government Securities Fund securities and Global Bond Fund 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 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 U.S. dollar value of foreign
securities and forward foreign currency exchange contracts in the Global Bond
Fund is determined using spot and forward currency exchange rates,
respectively, supplied by a quotation service.
<PAGE>
Repurchase agreements -- Repurchase agreements, which are collateralized by
U.S. Government obligations, are valued at cost which, together with accrued
interest, approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' custodian, at the
Federal Reserve Bank of Cleveland. At the time each Fund enters into a
repurchase agreement, the seller agrees that the value of the underlying
securities, including accrued interest, will at all times be equal to or
exceed the face amount of the repurchase agreement. In addition, each Fund
actively monitors and seeks additional collateral, as needed. Each Fund enters
into repurchase agreements only with institutions deemed to be creditworthy by
the adviser, including banks having assets in excess of $10 billion and
primary U.S. Government securities dealers.
Share valuation -- The net asset value per share of the Short Term Government
Income Fund and the Institutional Government Income Fund is calculated daily
by dividing the total value of a Fund's assets, less liabilities, by the
number of shares outstanding. The offering price and redemption price per
share is equal to the net asset value per share.
The net asset value per share of each class of shares of the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund
and the Global Bond Fund is also calculated daily by dividing the total value
of a Fund's assets attributable to that class, less liabilities attributable
to that class, by the number of shares of that class outstanding. The maximum
offering price of Class A shares of the Intermediate Term Government Income
Fund and the Adjustable Rate U.S. Government Securities Fund is equal to net
asset value per share plus a sales load equal to 2.04% of the net asset value
(or 2% of the offering price). The maximum offering price of Class A shares of
the Global Bond Fund is equal to net asset value per share plus a sales load
equal to 4.17% of the net asset value (or 4% of the offering price). The
offering price of Class C shares of each Fund is equal to the net asset value
per share.
The redemption price per share of Class A shares and Class C shares of the
Intermediate Term Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund and the Global Bond Fund is equal to the net asset value per
share. However, Class C shares of each Fund are subject to a contingent
deferred sales load of 1% of the original purchase price if redeemed within a
one-year period from the date of purchase.
Investment income -- Interest income is accrued as earned. Discounts and
premiums on securities purchased are amortized in accordance with income tax
regulations which approximate generally accepted accounting principles.
Distributions to shareholders -- Dividends arising from net investment income
are declared daily and paid on the last business day of each month to
shareholders of the Short Term Government Income Fund, the Institutional
Government Income Fund, the Intermediate Term Government Income Fund and the
Adjustable Rate U.S. Government Securities Fund. Dividends arising from net
investment income are declared and paid at the discretion of management to
shareholders of the Global Bond Fund. With respect to each Fund, net realized
short-term capital gains, if any, may be distributed throughout the year and
net realized long-term capital gains, if any, are distributed at least once
each year. Income distributions and capital gain distributions are determined
in accordance with income tax regulations.
Allocations between classes -- Investment income earned by the Intermediate
Term Government Income Fund, the Adjustable Rate U.S. Government Securities
Fund and the Global Bond Fund is allocated daily to each class of shares based
on the percentage of the net asset value of settled shares of such class to
the total of the net asset value of settled shares of both classes of shares.
Realized capital gains and losses and unrealized appreciation and depreciation
are allocated daily to each class of shares based upon its proportionate share
of total net assets of the Fund. Class specific expenses are charged directly
to the class incurring the expense. Common expenses which are not attributable
to a specific class are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the
income distributed. Accordingly, no provision for income taxes has been made.
<PAGE>
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ended October 31) plus undistributed amounts from prior
years.
The following information is based upon federal income tax cost of portfolio
investments (excluding repurchase agreements) as of September 30, 1996:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
ADJUSTABLE
INTERMEDIATE RATE U.S.
TERM GOVERNMENT GLOBAL
GOVERNMENT SECURITIES BOND
INCOME FUND FUND FUND
<S> <C> <C> <C>
Gross unrealized appreciation........................... $ 858,035 $ 127,545 $ 410,718
Gross unrealized depreciation........................... (647,331) (2,944) (84,937)
-------------- -------------- ---------------
Net unrealized appreciation. ..................... $ 210,704 $ 124,601 $ 325,781
============== ============== ===============
Federal income tax cost................................. $ 55,534,106 $ 11,382,080 $ 17,784,437
============== ============== ===============
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
As of September 30, 1996, the Institutional Government Income Fund had capital
loss carryforwards for federal income tax purposes of $24,902, none of which
will expire prior to September 30, 2001. As of September 30, 1996, the
Intermediate Term Government Income Fund and the Adjustable Rate U.S.
Government Securities Fund had capital loss carryforwards for federal income
tax purposes of $2,899,292 and $1,249,150, respectively, none of which will
expire prior to September 30, 2003. These capital loss carryforwards may be
utilized in future years to offset net realized capital gains prior to
distributing such gains to shareholders.
Reclassification of capital accounts -- In accordance with generally accepted
accounting principles, the Global Bond Fund, as of September 30, 1996,
reclassified $433,066 from accumulated net realized losses on foreign currency
transactions to undistributed net investment income. This reclassification,
which has no impact on the net asset value of the Fund, is primarily
attributable to permanent differences between federal income tax regulations
and generally accepted accounting principles regarding the classification of
realized foreign currency gains and losses.
3. INVESTMENT TRANSACTIONS
During the year ended September 30, 1996, purchases and proceeds from sales
and maturities of investment securities, other than short-term investments,
amounted to $40,146,808 and $38,527,439, respectively, for the Intermediate
Term Government Income Fund, $6,594,895 and $14,647,758, respectively, for the
Adjustable Rate U.S. Government Securities Fund and $41,658,696 and
$39,696,182, respectively, for the Global Bond Fund.
4. TRANSACTIONS WITH AFFILIATES
The President of the Trust is the controlling shareholder of Leshner
Financial, Inc., whose subsidiaries include Midwest Group Financial Services,
Inc. (the Adviser), the Trust's investment manager and principal underwriter,
and MGF Service Corp. (MGF), the shareholder servicing and transfer agent and
accounting and pricing agent for the Trust.
MANAGEMENT AND SUBADVISORY AGREEMENTS
Each Fund's investments are supervised by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, the Short Term
Government Income Fund, the Intermediate Term Government Income Fund and the
Adjustable Rate U.S. Government Securities Fund each pay the Adviser a fee,
which is computed and accrued daily and paid monthly, at an annual rate of
0.50% of its respective average daily net assets up to $50,000,000; 0.45% of
such net assets from $50,000,000 to $150,000,000; 0.40% of such net assets
from $150,000,000 to $250,000,000; and 0.375% of such net assets in excess of
$250,000,000. The Institutional Government Income Fund pays the Adviser a fee,
which is computed and accrued daily and paid monthly, at an annual rate of
0.20% of its average daily net assets. The Global Bond Fund pays the Adviser a
fee, which is computed and accrued daily and paid monthly, at an annual rate
of 0.70% of its average daily net assets up to $100,000,000 and 0.60% of such
net assets in excess of $100,000,000.
<PAGE>
The Adviser retains Hanover Capital Advisors, Inc. (Hanover) to regularly
review the Adjustable Rate U.S. Government Securities Fund's portfolio
holdings, recommend securities to be purchased for the Fund and confer with
the Adviser regarding the credit and maturity guidelines for investments in
the Fund's portfolio. The Adviser (not the Fund) pays Hanover a fee equal to
an annual rate of 0.25% of the Fund's average daily net assets up to
$50,000,000; 0.225% of such net assets from $50,000,000 to $150,000,000; 0.20%
of such net assets from $150,000,000 to $250,000,000; and 0.1875% of such net
assets in excess of $250,000,000. The fee paid to Hanover is subject to
reduction in the event the Adviser waives or reimburses any portion of its
advisory fee in order to reduce the operating expenses of the Fund.
The Adviser retains Rogge Global Partners, plc (Rogge) to manage the Global
Bond Fund's investments. The Adviser (not the Fund) pays Rogge a fee, which is
computed and accrued daily and paid monthly, at an annual rate of 0.35% of the
Fund's average daily net assets up to $100,000,000 and 0.30% of such net
assets in excess of $100,000,000.
In order to voluntarily reduce operating expenses during the year ended
September 30, 1996, the Adviser waived $32,783 of its advisory fees for the
Institutional Government Income Fund; reimbursed $10,334 of Class C expenses
for the Intermediate Term Government Income Fund; waived its entire advisory
fee of $79,927 and reimbursed $33,564 of common expenses and $11,886 of Class
C expenses for the Adjustable Rate U.S. Government Securities Fund; and waived
$6,473 of its advisory fees and reimbursed $16,631 of Class A expenses for the
Global Bond Fund.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and MGF, MGF maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, MGF receives a monthly fee at an annual
rate of $25.00 per shareholder account from each of the Short Term Government
Income Fund and the Institutional Government Income Fund and $21.00 per
shareholder account from each of the Intermediate Term Government Income Fund,
the Adjustable Rate U.S. Government Securities Fund and the Global Bond Fund,
subject to a $1,000 minimum monthly fee for each Fund, or for each class of
shares of a Fund, as applicable. In addition, each Fund pays out-of-pocket
expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and
MGF, MGF calculates the daily net asset value per share and maintains the
financial books and records of each Fund. For these services, MGF receives a
monthly fee, based on current asset levels, of $3,000 per month from each of
the Short Term Government Income Fund and the Institutional Government Income
Fund, $4,250 per month from each of the Intermediate Term Government Income
Fund and the Adjustable Rate U.S. Government Securities Fund, and $4,750 per
month from the Global Bond Fund. In addition, each Fund pays certain
out-of-pocket expenses incurred by MGF in obtaining valuations of such Fund's
portfolio securities.
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and the Adviser, the Adviser earned
$4,512, $1,049 and $3,490 from underwriting and broker commissions on the sale
of Class A shares of the Intermediate Term Government Income Fund, the
Adjustable Rate U.S. Government Securities Fund and the Global Bond Fund,
respectively, for the year ended September 30, 1996. In addition, the Adviser
collected $913, $600, and $5,973 of contingent deferred sales loads on the
redemption of Class C shares of the Intermediate Term Government Income Fund,
the Adjustable Rate U.S. Government Securities Fund and the Global Bond Fund,
respectively.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of each
Fund having one class of shares and Class A shares of each Fund having two
classes of shares may directly incur or reimburse the Adviser for expenses
related to the distribution and promotion of shares. The annual limitation for
payment of such expenses under the Class A Plan is 0.10% of the Institutional
Government Income Fund's average daily net assets and 0.35% of each of the
other Funds' average daily net assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of each Fund having two classes of shares may directly incur or
reimburse the Adviser for expenses related to the distribution and promotion
of shares. The annual limitation for payment of such expenses under the Class
C Plan is 1% of average daily net assets attributable to Class C shares.
<PAGE>
5. CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold and payments for shares redeemed as shown in the
Statements of Changes in Net Assets are the result of the following capital
share transactions for the periods ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
INTERMEDIATE TERM ADJUSTABLE RATE GLOBAL
GOVERNMENT U.S. GOVERNMENT BOND
INCOME FUND SECURITIES FUND FUND
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1996 1995 1996 1995(A)
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............................ 1,824,629 1,296,111 1,317,967 1,751,161 202,237 1,280,982
Shares issued in reinvestment of
distributions to shareholders........ 274,432 297,350 83,368 115,143 15,285 20,956
Shares redeemed........................ (2,059,645) (2,637,294) (2,327,350) (3,571,519) (302,506) (52,629)
---------- ---------- ----------- -------------- ------------ ---------
Net increase (decrease) in shares
outstanding.......................... 39,416 (1,043,833) (926,015) (1,705,215) (84,984) 1,249,309
Shares outstanding, beginning of period 5,308,934 6,352,767 2,121,595 3,826,810 1,249,309 --
---------- --------- ---------- ------------ ------------- ---------
Shares outstanding, end of period...... 5,348,350 5,308,934 1,195,580 2,121,595 1,164,325 1,249,309
========== ========== =========== ============ ============= =========
CLASS C
Shares sold............................ 36,099 42,546 63,042 8,783 187,748 427,772
Shares issued in reinvestment of
distributions to shareholders........ 3,345 2,836 824 154 4,672 1,259
Shares redeemed........................ (21,699) (39,738) (8,583) (103) (83,836) (2,192)
---------- ---------- ----------- ------------- ----------- ----------
Net increase in shares outstanding..... 17,745 5,644 55,283 8,834 108,584 426,839
Shares outstanding, beginning of period 55,773 50,129 8,834 -- 426,839 --
---------- ---------- ----------- ------------- ----------- ----------
Shares outstanding, end of period...... 73,518 55,773 64,117 8,834 535,423 426,839
========== ========== =========== ============= =========== ==========
- - ----------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of shares (February
1, 1995) through September 30, 1995.
</FN>
</TABLE>
Share transactions for the Short Term Government Income Fund and the
Institutional Government Income Fund are identical to the dollar value of
those transactions as shown in the Statements of Changes in Net Assets.
6. FOREIGN CURRENCY TRANSLATION
With respect to the Global Bond Fund, amounts denominated in or expected to
settle in foreign currencies are translated into U.S. dollars based on
exchange rates on the following basis:
A. The market values of investment securities and other assets and
liabilities are translated at the closing rate of exchange
each day.
B. Purchases and sales of investment securities and income and
expenses are translated at the rate of exchange prevailing on
the respective dates of such transactions.
C. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates
on investments from those resulting from changes in market
prices of securities held. Such fluctuations are included
with the net realized and unrealized gains or losses from
investments. Reported net realized foreign exchange gains
or losses arise from 1)sales of foreign currencies, 2) currency
gains or losses realized between the trade and settlement dates
on securities transactions, and 3) the difference between the
amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Reported net unrealized
foreign exchange gains or losses arise from changes in the value
of assets and liabilities, other than investment securities,
resulting from changes in exchange rates.
<PAGE>
7. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Global Bond Fund enters into foreign currency exchange contracts as a way
of managing foreign exchange rate risk. The Fund may enter into these
contracts for the purchase or sale of a specific foreign currency at a fixed
price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. The objective of the Fund's foreign
currency hedging transactions is to reduce the risk that the U.S. dollar value
of the Fund's securities denominated in foreign currency will decline in value
due to changes in foreign currency exchange rates. All foreign currency
exchange contracts are "marked-to-market" daily at the applicable translation
rates resulting in unrealized gains or losses. Realized and unrealized gains
or losses are included in the Fund's Statement of Assets and Liabilities and
Statement of Operations. Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At September 30, 1996, the Global Bond Fund had forward foreign currency
exchange contracts outstanding as follows:
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
NET
UNREALIZED
SETTLEMENT TO RECEIVE INITIAL MARKET APPRECIATION
DATE (TO DELIVER) VALUE VALUE (DEPRECIATION)
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO SELL
10/04/96 (1,140,237) DEM $ (749,344) $ (747,774) $ 1,570
=============
11/15/96 (6,009,525) DEM (3,965,080) (3,952,199) 12,881
=============
11/15/96 (4,680,794) DKK (807,033) (801,761) 5,272
=============
11/15/96 (48,000,000) ESP (375,843) (373,787) 2,056
=============
11/15/96 (400,000,000) ITL (260,833) (261,877) (1,044)
=============
11/15/96 (759,192) NLG (450,292) (445,306) 4,986
============= ----------- ----------- ----------
Total sell contracts (6,608,425) (6,582,704) 25,721
----------- ----------- ----------
CONTRACTS TO BUY
10/03/96 766,381 CAD 561,126 562,569 1,443
=============
10/04/96 479,212 GBP 749,344 749,200 (144)
=============
10/08/96 708,716 AUD 561,835 560,554 (1,281)
=============
11/15/96 3,370,000 DKK 579,376 577,239 (2,137)
=============
11/15/96 48,000,000 ESP 375,731 373,787 (1,944)
=============
11/15/96 324,607,794 JPY 2,961,750 2,932,436 (29,314)
============= ------------- ------------- -------------
Total buy contracts 5,789,162 5,755,785 (33,377)
------------- ------------- -------------
NET CONTRACTS $ (819,263) $ (826,919) $ (7,656)
============= ============= =============
- - --------------------------------------------------------------------------------------------------------
<FN>
AUD-Australian Dollar DKK-Danish Krone ITL-Italian Lira
CAD-Canadian Dollar ESP-Spanish Peseta JPY-Japanese Yen
DEM-German Deutschemark GBP-British Pound Sterling NLG-Netherlands Guilder
</FN>
</TABLE>
8. SPECIAL MEETING OF GLOBAL BOND FUND SHAREHOLDERS (UNAUDITED)
On August 27, 1996, a Special Meeting of Shareholders of the Global Bond Fund
was held to approve or disapprove a new investment advisory agreement with
Rogge. The approval of the new investment advisory agreement, which has
substantially indentical terms and conditions as the previous agreement, was
made necessary because of the acquisition of Rogge by United Asset Management
Corporation. The total number of shares of the Fund present by proxy
represented 59.9% of the shares entitled to vote at the meeting. The results
of the voting were as follows: 1,073,533.278 shares for approval, no shares
against approval and 3,963.428 shares abstaining.
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
===========================================================================================================
PAR YIELD TO MARKET
VALUE U.S. TREASURY OBLIGATIONS-- 55.6% MATURITY(1) VALUE
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,000,000 U.S. Treasury Bills, 11/14/96............................. 5.349% $ 4,968,344
5,000,000 U.S. Treasury Notes, 4.375%, 11/15/96..................... 5.495% 4,993,196
3,000,000 U.S. Treasury Notes, 6.50%, 11/30/96...................... 5.309 to 5.544% 3,004,781
5,000,000 U.S. Treasury Bills, 12/12/96............................. 5.254% 4,948,200
5,000,000 U.S. Treasury Bills, 12/19/96............................. 5.214% 4,943,548
7,000,000 U.S. Treasury Notes, 8.00%, 1/15/97....................... 5.594 to 5.770% 7,044,513
5,000,000 U.S. Treasury Bills, 1/23/97.............................. 5.344% 4,917,113
4,000,000 U.S. Treasury Notes, 4.75%, 2/15/97....................... 5.657% 3,986,443
12,000,000 U.S. Treasury Notes, 6.75%, 2/28/97....................... 5.380 to 5.399% 12,065,728
- - --------------- ---------------
$ 51,000,000 TOTAL U.S. TREASURY OBLIGATIONS
===============
(Amortized Cost $50,871,866).............................. $ 50,871,866
---------------
<CAPTION>
==============================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(2) -- 44.1% VALUE
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 978,000 Nesbitt Burns Securities, Inc., 4.50%, dated 9/30/96, due 10/1/96,
repurchase proceeds $978,122............................................ $ 978,000
13,500,000 Fuji Securities, Inc., 5.77%, dated 9/30/96, due 10/1/96,
repurchase proceeds $13,502,164......................................... 13,500,000
12,300,000 Daiwa Securities, Inc., 5.60%, dated 9/30/96, due 10/1/96,
repurchase proceeds $12,301,913......................................... 12,300,000
13,500,000 Dean Witter Reynolds, Inc., 5.15%, dated 9/26/96, due 10/3/96,
repurchase proceeds $13,513,519........................................ 13,500,000
- - --------------- ---------------
$ 40,278,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 40,278,000
=============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.7% .............. $ 91,149,866
OTHER ASSETS AND LIABILITIES, NET-- 0.3% .................................. 289,618
---------------
NET ASSETS-- 100.0% ....................................................... $ 91,439,484
===============
<FN>
(1) Yield to maturity at date of purchase.
(2) Repurchase agreements are fully collateralized by U.S. Government obilgations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
===========================================================================================================
PAR YIELD TO MARKET
VALUE U.S. GOVERNMENT AGENCY ISSUES-- 59.0% MATURITY(1) VALUE
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,000,000 Federal Home Loan Bank Notes, 5.59%, 10/16/96.................... 5.403% $ 1,000,070
2,000,000 Federal Home Loan Mortgage Corp. Notes, 5.53%, 11/1/96........... 5.453% 2,000,117
2,000,000 Federal National Mortgage Assoc. Notes, 4.50% 11/1/96............ 5.399% 1,998,339
250,000 Federal Home Loan Mortgage Corp. Notes, 4.625%, 11/15/96......... 5.390% 249,749
1,000,000 Tennessee Valley Authority Notes, 8.25%, 11/15/96................ 5.480% 1,003,210
2,000,000 Federal National Mortgage Assoc. Discount Notes, 12/19/96........ 5.430% 1,976,475
2,815,000 Student Loan Marketing Assoc. Floating Rate Notes, 12/20/96..... -- 2,814,786
400,000 Federal National Mortgage Assoc. Notes, 7.60%, 1/10/97........... 5.709% 402,004
2,500,000 Federal Home Loan Mortgage Corp. Notes, 7.91%, 1/13/97........... 5.460% 2,516,788
1,000,000 Federal Home Loan Bank Discount Notes, 1/13/97................... 5.444% 984,891
350,000 Tennessee Valley Authority Notes, 6.00%, 1/15/97................. 5.793% 350,193
1,000,000 Federal National Mortgage Assoc. Discount Notes, 1/30/97......... 5.479% 982,354
250,000 Federal Home Loan Bank Notes, 4.505%, 1/31/97.................... 5.650% 249,075
2,000,000 Federal Home Loan Mortgage Corp. Notes, 4.78%, 2/10/97........... 5.540% 1,994,661
2,000,000 Federal Home Loan Bank Discount Notes, 2/21/97................... 5.422% 1,958,053
278,533 Federal Home Loan Mortgage Corp. #M12937, 6.50%, 3/1/97.......... 6.500% 278,533
2,000,000 Federal Home Loan Bank Notes, 9.15%, 3/25/97..................... 5.668% 2,032,723
202,555 Federal Home Loan Mortgage Corp. #M14862, 6.50%, 8/1/97.......... 6.565% 202,450
219,120 Federal Home Loan Mortgage Corp. #M15133, 6.50%, 9/1/97.......... 6.437% 219,242
- - --------------- ---------------
$ 23,265,208 TOTAL U.S. GOVERNMENT AGENCY ISSUES
===============
(Amortized Cost $23,213,713)..................................... $ 23,213,713
---------------
<CAPTION>
============================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(2)-- 40.5% VALUE
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 2,957,000 Nesbitt Burns Securities, Inc., 4.50%, dated 9/30/96, due 10/1/96,
repurchase proceeds $2,957,370.......................................... $ 2,957,000
5,000,000 Fuji Securities, Inc., 5.77%, dated 9/30/96, due 10/1/96,
repurchase proceeds $5,000,801.......................................... 5,000,000
3,000,000 Daiwa Securities, Inc., 5.60%, dated 9/30/96, due 10/1/96,
repurchase proceeds $3,000,467.......................................... 3,000,000
5,000,000 Dean Witter Reynolds, Inc., 5.15%, dated 9/26/96, due 10/3/96,
repurchase proceeds $5,005,007.......................................... 5,000,000
- - --------------- ---------------
$ 15,957,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 15,957,000
=============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.5% .............. $ 39,170,713
OTHER ASSETS AND LIABILITIES, NET-- 0.5% .................................. 211,351
---------------
NET ASSETS-- 100.0% ....................................................... $ 39,382,064
===============
<FN>
(1) Yield to maturity at date of purchase.
(2) Repurchase agreements are fully collateralized by U.S. Government obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
==========================================================================================================
PAR MARKET
VALUE INVESTMENTS -- 98.0% VALUE
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 12.9%
$ 1,000,000 U.S. Treasury Notes, 7.75%, 2/15/01........................................ $ 1,048,750
1,000,000 U.S. Treasury Notes, 8.00%, 5/15/01........................................ 1,060,625
3,000,000 U.S. Treasury Notes, 7.875%, 8/15/01....................................... 3,173,439
2,000,000 U.S. Treasury Notes, 7.50%, 11/15/01....................................... 2,086,874
- - --------------- ---------------
$ 7,000,000 TOTAL U.S. TREASURY OBLIGATIONS
- - ---------------
(Amortized Cost $7,084,664)................................................ $ 7,369,688
---------------
U.S. GOVERNMENT AGENCY ISSUES -- 85.1%
$ 1,000,000 Federal National Mortgage Assoc. Notes, 7.89%, 2/23/00..................... $ 1,024,210
2,000,000 Student Loan Marketing Assoc. Notes, 6.05%, 9/14/00........................ 1,969,014
1,500,000 Federal National Mortgage Assoc. Notes, 6.35%, 10/19/00.................... 1,476,885
2,000,000 Federal Home Loan Bank Notes, 5.58%, 2/23/01............................... 1,919,962
1,000,000 Federal National Mortgage Assoc. Notes, 6.45%, 3/26/01..................... 988,910
2,000,000 Federal National Mortgage Assoc. Notes, 6.83%, 4/23/01..................... 1,997,560
3,000,000 Federal National Mortgage Assoc. Notes, 6.74%, 5/7/01...................... 2,995,049
1,000,000 Student Loan Marketing Assoc. Medium Term Notes, 7.50%, 7/2/01............. 1,034,020
3,000,000 Federal Home Loan Bank Notes, 7.31%, 7/6/01................................ 3,084,099
3,000,000 Federal Home Loan Bank Medium Term Notes, 8.43%, 8/1/01.................... 3,214,770
2,300,000 Federal Home Loan Bank Notes, 6.25%, 9/27/01............................... 2,254,388
1,410,000 Federal National Mortgage Assoc. Strips, 3/9/02............................ 1,373,166
2,000,000 Federal National Mortgage Assoc. Notes, 7.55%, 4/22/02..................... 2,077,688
1,000,000 Federal Home Loan Mortgage Corp. Notes, 6.07%, 2/5/03...................... 957,725
1,000,000 Federal National Mortgage Assoc. Notes, 6.72%, 2/25/03..................... 983,140
3,000,000 Federal National Mortgage Assoc. Notes, 6.20%, 7/10/03..................... 2,873,985
2,000,000 Federal National Mortgage Assoc. Notes, 6.25%, 8/12/03..................... 1,912,284
2,000,000 Federal Home Loan Mortgage Corp. Notes, 8.19%, 10/6/04..................... 2,065,110
2,000,000 Federal Home Loan Mortgage Corp. Notes, 8.53%, 11/18/04.................... 2,080,774
1,000,000 Federal National Mortgage Assoc. Notes, 8.50%, 2/1/05...................... 1,040,804
1,000,000 Federal National Mortgage Assoc. Notes, 8.00%, 4/13/05..................... 1,006,810
1,000,000 Federal Home Loan Mortgage Corp. Notes, 7.83%, 4/13/05..................... 1,021,172
1,000,000 Federal Home Loan Mortgage Corp. Notes, 7.65%, 5/10/05..................... 1,008,546
2,000,000 Federal National Mortgage Assoc. Medium Term Notes, 6.85%, 8/22/05......... 1,981,480
2,000,000 Federal National Mortgage Assoc. Notes, 6.77%, 9/1/05...................... 1,969,699
1,000,000 Federal Home Loan Mortgage Corp. Notes, 6.75%, 1/19/06..................... 957,018
3,000,000 Federal Home Loan Mortgage Corp. Notes, 8.57%, 10/26/09.................... 3,106,854
- - --------------- ---------------
$ 48,210,000 TOTAL U.S. GOVERNMENT AGENCY ISSUES
- - --------------
(Amortized Cost $48,449,442) .............................................. $ 48,375,122
---------------
$ 55,210,000 TOTAL INVESTMENTS AT VALUE
===============
(Amortized Cost $55,534,106)............................................... $ 55,744,810
---------------
<PAGE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND (continued)
==========================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(1)-- 0.4% VALUE
- - -----------------------------------------------------------------------------------------------------------
$ 226,000 Nesbitt Burns Securities, Inc., 4.50%, dated 9/30/96, due 10/1/96
repurchase proceeds $226,028............................................ $ 226,000
- - --------------- ---------------
$ 226,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 226,000
=============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 98.4% .............. $ 55,970,810
OTHER ASSETS AND LIABILITIES, NET-- 1.6% .................................. 895,133
---------------
NET ASSETS-- 100.0% ....................................................... $ 56,865,943
===============
<FN>
(1) Repurchase agreements are fully collateralized by U.S. Government obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
=========================================================================================================
PAR MARKET
VALUE ADJUSTABLE RATE U.S. GOVERNMENT AGENCY ISSUES-- 93.1% VALUE
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 1,458,589 Federal National Mortgage Assoc. #70907, 7.28%, 3/1/18..................... $ 1,508,159
1,438,922 Federal Home Loan Mortgage Corp. #605793, 7.27%, 5/1/18.................... 1,468,593
1,841,468 Federal National Mortgage Assoc. #70614, 7.08%, 10/1/18.................... 1,887,016
2,043,443 Federal Home Loan Mortgage Corp. #846013, 7.72%, 6/1/22.................... 2,108,472
78,766 Government National Mortgage Assoc. #8182, 7.13%,4/20/23................... 79,799
967,807 Federal Home Loan Mortgage Corp. #846303, 7.46%, 6/24/26................... 1,000,115
1,206,404 Federal National Mortgage Assoc. #70176, 7.33%, 8/1/27..................... 1,245,110
2,143,611 Federal National Mortgage Assoc. #70243, 7.33%, 3/1/28..................... 2,209,417
- - --------------- ---------------
$ 11,179,010 TOTAL ADJUSTABLE RATE U.S. GOVERNMENT AGENCY ISSUES
===============
(Amortized Cost $11,382,080)............................................... $ 11,506,681
---------------
<CAPTION>
============================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(1)-- 6.2% VALUE
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 769,000 Nesbitt Burns Securities, Inc., 4.50%, dated 9/30/96, due 10/1/96,
repurchase proceeds $769,096............................................ $ 769,000
- - --------------- ---------------
$ 769,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 769,000
=============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.3% ............. $ 12,275,681
OTHER ASSETS AND LIABILITIES, NET-- 0.7% .................................. 84,764
---------------
NET ASSETS-- 100.0% ....................................................... $ 12,360,445
===============
<FN>
(1) Repurchase agreements are fully collateralized by U.S. Government obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
==========================================================================================================
PAR MARKET
VALUE INVESTMENTS -- 96.9% VALUE
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 20.3%
USD 805,000 U.S. Treasury Notes, 7.50%, 11/15/01.................................. $ 839,967
USD 1,490,000 U.S. Treasury Notes, 6.375%, 8/15/02.................................. 1,479,290
USD 1,158,000 U.S. Treasury Notes, 7.00%, 7/15/06................................... 1,181,521
USD 300,000 U.S. Treasury Bonds, 6.75%, 8/15/26................................... 293,156
---------------
TOTAL U.S. TREASURY OBLIGATIONS
(Amortized Cost $3,766,894)........................................... $ 3,793,934
---------------
ASSET-BACKED SECURITIES -- 1.0%
USD 195,000 American Express Credit Account Master Trust #1996-1, 6.80%, 12/15/03. $ 195,956
---------------
TOTAL ASSET-BACKED SECURITIES
(Amortized Cost $196,645)............................................. $ 195,956
---------------
FOREIGN GOVERNMENT ISSUES -- 75.6%
AUD 610,000 Government of Australia, 10.00%, 10/15/07............................. $ 559,733
---------------
CAD 1,890,000 Government of Canada, 7.00%, 12/1/06.................................. 1,373,360
CAD 766,000 Government of Canada, 7.25%, 6/1/07................................... 564,173
---------------
1,937,533
---------------
DEM 575,000 Federal Republic of Germany, 6.50%, 3/15/00.......................... 400,885
DEM 1,880,000 Federal Republic of Germany, 5.875%, 5/15/00......................... 1,285,450
DEM 595,000 Treuhandanstalt, 7.75%, 10/1/02...................................... 434,840
DEM 1,410,000 Treuhandanstalt, 7.125%, 1/29/03..................................... 284,306
DEM 1,036,000 Federal Republic of Germany, 6.50%, 7/15/03.......................... 709,859
---------------
3,115,340
---------------
DKK 3,050,000 Government of Denmark, 8.00%, 3/15/06................................. 557,762
---------------
ESP 44,030,000 Government of Spain, 10.15%, 1/31/06................................. 392,486
ESP 44,300,000 Government of Spain, 8.80%, 4/30/06.................................. 354,921
---------------
747,407
---------------
GBP 765,000 U.K. Gilt, 8.50%, 12/7/05............................................. 1,265,891
GBP 673,000 U.K. Gilt, 7.50%, 12/7/06............................................. 1,039,673
---------------
2,305,564
---------------
ITL 590,000,000 Government of Italy, 9.50%, 2/1/99................................... 403,024
ITL 315,000,000 Government of Italy, 10.50%, 4/1/05.................................. 232,538
ITL 360,000,000 Government of Italy, 10.50%, 9/1/05.................................. 265,828
ITL 1,745,000,000 Government of Italy, 9.50%, 2/1/06................................... 1,225,243
---------------
2,126,633
---------------
NLG 1,380,000 Government of Netherlands, 8.50%, 3/15/01............................ 921,909
---------------
<PAGE>
<CAPTION>
GLOBAL BOND FUND (continued)
============================================================================================================
PAR MARKET
VALUE INVESTMENTS -- 96.9% VALUE
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SEK 9,100,000 Government of Sweden, 6.00%, 2/9/05.................................. $ 1,257,166
SEK 3,800,000 Government of Sweden, 8.00%, 8/15/07................................. 591,281
---------------
1,848,447
---------------
TOTAL FOREIGN GOVERNMENT ISSUES
(Amortized Cost $13,820,898).......................................... $ 14,120,328
---------------
TOTAL INVESTMENTS AT VALUE
(Amortized Cost $17,784,437).......................................... $ 18,110,218
OTHER ASSETS AND LIABILITIES, NET-- 3.1% ............................. 578,475
---------------
NET ASSETS-- 100.0% .................................................. $ 18,688,693
===============
<FN>
AUD-Australian Dollar GBP-British Pound Sterling
CAD-Canadian Dollar ITL-Italian Lira
DEM-German Deutschemark NLG-Netherlands Guilder
DKK-Danish Krone SEK-Swedish Krona
ESP-Spanish Peseta USD-U.S. Dollar
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
==============================================================================
Arthur Andersen LLP
To the Shareholders and Board of Trustees of Midwest Trust:
We have audited the accompanying statements of assets and liabilities of the
Short Term Government Income Fund, the Institutional Government Income Fund,
the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund of Midwest Trust (a
Massachusetts business trust), including the portfolios of investments, as of
September 30, 1996, and the related statements of operations, the statements
of changes in net assets, and the financial highlights for the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of September 30, 1996, by correspondence with custodians and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Short Term Government Income Fund, the Institutional Government Income Fund,
the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund of Midwest Trust as of
September 30, 1996, the results of their operations, the changes in their net
assets, and their financial highlights for the periods indicated thereon, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
November 6, 1996
