SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
--
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
--
Pre-Effective Amendment No. -----
Post-Effective Amendment No. 68
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and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
--
Amendment No. 62
-----
(Check appropriate box or boxes.)
COUNTRYWIDE INVESTMENT TRUST FILE NO. 2-52242 and 811-2538
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(Exact name of Registrant as Specified in Charter)
312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202
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(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code (513) 629-2000
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Robert H. Leshner, 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
/X/ immediately upon filing pursuant to paragraph(b)
/ / on ______________ pursuant to paragraph (b)
/ / 75 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
<PAGE>
CROSS REFERENCE SHEET
FORM N-1A
ITEM SECTION IN PROSPECTUS
1........................... Cover Page
2........................... Expense Information
3........................... Financial Highlights, Performance Information
4........................... Operation of the Fund; Investment
Objectives and Policies
5........................... Operation of the Fund
6........................... Cover Page; Dividends and
Distributions; Taxes; Operation of
the Fund
7........................... How to Purchase Shares; Operation
of the Fund; Calculation of Share
Price and Public Offering Price;
Exchange Privilege; Shareholder
Services; Distribution Plan;
8........................... How to Redeem Shares; Shareholder
Services
9........................... None
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
10.......................... Cover Page
11.......................... Table of Contents
12.......................... The Trust
13.......................... Quality Ratings of Fixed-Income Obligations;
Definitions, Policies and Risk
Considerations; Investment
Limitations; Portfolio Turnover
14.......................... Trustees and Officers
15.......................... Principal Security Holders
16.......................... The Investment Adviser and
Underwriter; Distribution Plan;
Custodian; Auditors; Transfer
Agent
17.......................... Securities Transactions
18.......................... The Trust
19.......................... Calculation of Share Price and Public
Offering Price; Other Purchase
Information; Redemption in Kind
20.......................... Taxes
21.......................... The Investment Adviser and
Underwriter
22.......................... Historical Performance Information
23.......................... Annual Report
<PAGE>
PROSPECTUS
November 30, 1998
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
SHORT TERM GOVERNMENT INCOME FUND
The Short Term 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 U.S. Government
obligations backed by the "full faith and credit" of the United States.
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 BANKING OR DEPOSITORY INSTITUTION. SHARES 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 November 30, 1998 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please
contact your broker, or call us at the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
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Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None*
Check Redemption Processing Fee (per check):
First six checks per month None
Additional checks per month $0.25
* A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See
"How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees After Waivers .45%(A)
12b-1 Fees .08%(B)
Other Expenses .38%
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Total Fund Operating Expenses After Waivers .91% (C)
====
(A) Absent waivers of management fees, such fees would have been .48%.
(B) The Fund may incur 12b-1 fees in an amount up to .35% of its average net
assets. Long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales loads permitted by the National Association
of Securities Dealers.
(C) Absent waivers of management fees, total Fund operating expenses would
have been .94%.
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 $ 9
3 Years 29
5 Years 50
10 Years 112
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<PAGE>
FINANCIAL HIGHLIGHTS
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The following information, which has been audited by Arthur Andersen
LLP, is an integral part of the audited financial statements and should be read
in conjunction with the financial statements. The financial statements as of
September 30, 1998 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR(A)
<TABLE>
Years Ended September 30,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<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 0.046 0.044 0.044 0.046 0.027 0.022 0.035 0.059 0.073 0.079
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Dividends from net
investment income (0.046) (0.044) (0.044) (0.046) (0.027) (0.022) (0.035) (0.059) (0.073) (0.079)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
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 4.74% 4.53% 4.51% 4.69% 2.72% 2.24% 3.55% 6.06% 7.50% 8.22%
====== ====== ======= ======= ====== ===== ===== ====== ====== ======
Net assets at end
of year (000's) $102,481 $96,797 $91,439 $87,141 $89,708 $96,962 $91,519 $101,535 $101,835 $104,956
======= ======= ======= ======= ======= ======= ======== ======== ======== ========
Ratio of net expenses to
average net assets(B) 0.91% 0.97% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 1.01%
Ratio of net investment
income to average
net assets 4.63% 4.43% 4.42% 4.59% 2.69% 2.22% 3.51% 5.90% 7.25% 7.91%
(A)All per share data has been restated to reflect the effect of a 10 for 1 share split on February 28, 1990.
(B)Absent fee waivers by the Adviser, the ratio of expenses to average net assets would have been 0.94% for the year ended September
30, 1998.
</TABLE>
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
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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) 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 Fund is not intended to be a complete investment program, and there is
no assurance that its investment objective can be achieved. The investment
objective of the Fund is fundamental and as such may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. The term
"majority" of the outstanding shares means the lesser of (1) 67% or more of the
outstanding shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented at such
meeting or (2) more than 50% of the outstanding shares of the Fund.
Notwithstanding the foregoing, the limitation of the 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.
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.
U.S. Government Obligations
----------------------------
The Fund invests in short-term U.S. Government obligations backed by
the "full faith and credit" of the United States Treasury. "U.S. Government
obligations" include obligations directly issued by the U.S. Treasury,
such as 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. U.S.
Treasury obligations are backed by the "full faith and credit" of the U.S.
Treasury. U.S. Government obligations also include securities issued by various
agencies of the United States Government and by various instrumentalities
established or sponsored by the U.S. Government which are backed
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<PAGE>
by the "full faith and credit" of the U.S. Treasury. 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 agency or
instrumentality established or sponsored by the United States Government,
provided that the securities are backed by the "full faith and credit" of the
U.S. Treasury and 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.
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.
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, may affect
the value of, and the return on an investment in, such securities.
Other Investment Techniques
---------------------------
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
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
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<PAGE>
Custodian, banks having assets in excess of $10 billion and the largest and, in
the judgment of the Adviser under guidelines established by the Board of
Trustees, most creditworthy primary U.S. Government securities dealers. The Fund
will enter into repurchase agreements which are collateralized by U.S.
Government obligations backed by the "full faith and credit" of the United
States. 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 its net assets 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.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. 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
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<PAGE>
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 Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund
by wire. Please telephone the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629- 2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided
you have given notice of your intention to make such investment to the Transfer
Agent by 12:30 p.m., Eastern time, on that day. Your investment will be made at
the net asset value next determined after your wire is received together with
the account information indicated above. If the Trust does not receive timely
and complete account information, there may be a delay in the investment of your
money and any accrual of dividends. To make your initial wire purchase, you are
required to mail a completed account application to the Transfer Agent. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
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<PAGE>
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account
by mail or by bank wire. Checks should be sent to Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the Fund. Bank wires should be sent as outlined above. You may also make
additional investments at the Trust's offices at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202. Each additional purchase request must contain the name
of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its customer,
or when the account balance reaches a predetermined dollar amount (e.g.,
$5,000).
Participating institutions are responsible for prompt transmission of
orders relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer and
the participating institution with regard to the services provided, the fees
charged for these services and any restrictions and limitations imposed.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
-------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service.
Tax-Deferred Retirement Plans
-----------------------------
Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
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<PAGE>
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses, including
Roth IRAs and Education IRAs
-- 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.
InvestPlus Plan
---------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
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, government check or wire.
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<PAGE>
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 having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within 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.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone
redemption privilege with respect to any account if the name(s) or the address
on the account has been changed within the previous 30 days.
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
- 10 -
<PAGE>
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. If the
name(s) or the address on your account has been changed within 30 days of your
redemption request, you will be required to request the redemption in writing
with your signature guaranteed, regardless of the value of the shares being
redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank account or brokerage account designated on
your account application for telephone redemptions. Proceeds of redemptions
requested by mail are normally mailed within three business days following
receipt of instructions in proper form.
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.
If the amount of a check is greater than the value of the shares held
in your account, the check will be returned. A check representing a redemption
request will take precedence over any other redemption instructions issued by a
shareholder.
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals.
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<PAGE>
The Transfer Agent charges shareholders its costs for each stop payment
and each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption procedure may be
suspended or terminated at any time upon written notice by the Trust or the
Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar
program with a financial institution are not eligible for the checkwriting
privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee. The Trust reserves
the right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested, unaffected by market fluctuations),
or such other minimum amount as the Trust may determine from time to time. After
notification to you of the Trust's intention to close your account, you will be
given thirty days to increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
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<PAGE>
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.
Countrywide Tax-Free Trust Countrywide Strategic Trust
- -------------------------- ---------------------------
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Growth/Value Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
-----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
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.
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<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. No interest will accrue on amounts represented by
uncashed distribution checks.
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. 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.
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<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 five other series of the Trust, seven 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.
The Adviser serves as principal underwriter for the Fund and, as such, is
the exclusive agent for the distribution of shares of the Fund. The officers of
the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
- 15 -
<PAGE>
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. 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.
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<PAGE>
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.
Pursuant to the 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 shares of the Fund. For the fiscal
year ended September 30, 1998, the Fund paid $71,000 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 Plan is
.35% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register
- 17 -
<PAGE>
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
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<PAGE>
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 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.
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<PAGE>
<TABLE>
ACCOUNT NO. 0-_____________________
Account Application (For Fund Use Only)
<S> <C> <C> <C>
Short Term Government Income Fund FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________
Home Office Address: ___________________
Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
========================================================================================================================
Initial Investment of $_______________________
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From:
______________________________________________________________________________________________________________
[ ] Exchange From:
______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial
account please list
minor's S.S.#)
___________________________________________________________________________________________________ Citizenship:[] U.S.
Name of Joint Tenant, Partner, Custodian []Other
Address Phone
___________________________________________________________________________________________________ ( )_______________
Street or P.O. Box Business Phone
___________________________________________________________________________________________________ ( )_______________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer Name/Address____________________________________________________________________________________
Are you an associated person of an NASD member? [ ] Yes [ ] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
=======================================================================================================================
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
[ ] Reinvest all distributions
[ ] Pay all distributions in cash
[ ] By Check [ ] By ACH to my bank checking or savings account. PLEASE ATTACH A VOIDED CHECK.
====================================================================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon
receipt of and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Bank Account Number _____________________________________ Bank Routing Transit Number _______________________________
Name of Account Holder _______________________________________________________________________________________________
Bank Name _________________________________________________________ Bank Address ______________________________________
City State
[ ]CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA)
or otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons
whose signatures appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our)
shares of the Trust. I (we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time.
- --------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number (PIN).
You will need to use this PIN when requesting account information and placing transactions. For institutional accounts,
please use a four digit number. For retail accounts, please use the first four letters of your mother's maiden name.[ ] [ ] [ ] [ ]
===========================================================================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself and
his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Investment Trust, Countrywide Investment
Trust, Countrywide Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in
the performance of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide
Fund Services, Inc., or both will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust
and/or Countrywide Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring forms of personal identification prior to acting
upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions.
are genuine.
___________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Signature of Joint Owner, if Any
Trustee, etc.
________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
========================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Investment Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________ per month in the Fund.
ABA Routing Number______________________________
FI Account Number________________________________
[ ] Checking Account [ ] Savings Account
_____________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
______________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X_____________________________________________________________________ X_______________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check for from your checking account or a voided deposit/withdrawal slip from your savings
account for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[] Monthly -- Withdrawals will be made on the last business day of each month.
[] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[] Exchange: Please exchange the withdrawal proceeds into another Countywide account number:_ _-- _ _ _ _--_
[] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided
check for ACH or bank wire____________________________________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of payee________________________________________________________________________________________________________
Please send to:______________________________________________________________________________________________________
Street address City State Zip
========================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Investment Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
(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.
</TABLE>
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 20 -
<PAGE>
TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . .
Financial Highlights. . . . . .. . . . . . . . . . . . . . .
Investment Objective and Policies. . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund . . . . . . . . . . . . . . . . . . .
Distribution Plan . . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . . . .
- -----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 21 -
<PAGE>
PROSPECTUS
November 30, 1998
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
INTERMEDIATE TERM GOVERNMENT INCOME FUND
The Intermediate Term 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 U.S. Government
obligations having an effective maturity of twenty years or less with a
dollar-weighted effective average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about the Fund
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 30, 1998 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please contact
your broker, or call us at the above number.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
- --------------------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 2%
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None*
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None**
Check Redemption Processing Fee (per check):
First six checks per month None
Additional checks per month $0.25
* Purchases at net asset value of amounts totaling $1 million or more may
be subject to a contingent deferred sales load of 1% if a redemption
occurred within 12 months of purchase and a commission was paid by the
Adviser to a participating unaffiliated dealer.
** A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See
"How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .50%
12b-1 Fees(A) .17%
Other Expenses .32%
----
Total Fund Operating Expenses .99%
====
(A) The Fund may incur 12b-1 fees in an amount up to .35% of its average
net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
$30 $51 $74 $139
- 2 -
<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, 1998 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
<TABLE>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year $10.67 $10.49 $10.73 $10.14 $11.59 $11.10 $10.45 $9.85 $10.09 $10.12
------- ------- ------- ------- ------ ------ ------ ------- ------ -------
Income from investment
operations:
Net investment income 0.61 0.61 0.61 0.64 0.56 0.60 0.68 0.75 0.76 0.79
Net realized and
unrealized gains
(losses)on investments 0.48 0.18 (0.24) 0.59 (1.32) 0.49 0.65 0.60 (0.24) (0.03)
------- ----- ------- ------ ------ ------ ------ ------ ----- ------
Total from investment
operations 1.09 0.79 0.37 1.23 (0.76) 1.09 1.33 1.35 0.52 0.76
------- ------- ------- ------- ------- ------- ----- ----- ----- ------
Less distributions:
Dividends from net
investment income (0.61) (0.61) (0.61) (0.64) (0.56) (0.60) (0.68) (0.75) (0.76) (0.79)
Distributions from
net realized gains -- -- -- -- (0.13) -- -- -- -- --
------- ------- ------- ------- ------- ------ ------- ------- ------- ------
Total distributions (0.61) (0.61) (0.61) (0.64) (0.69) (0.60) (0.68) (0.75) (0.76) (0.79)
------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Net asset value at
end of year $11.15 $10.67 $10.49 $10.73 $10.14 $11.59 $11.10 $10.45 $9.85 $10.09
======= ======= ======= ====== ====== ====== ====== ====== ====== =====
Total return(A) 10.54% 7.74% 3.55% 12.52% (6.76%) 10.15% 13.27% 14.19% 5.31% 7.79%
======= ======= ======= ======== ======= ======= ====== ====== ====== ======
Net assets at end
of year (000's) $51,168 $53,033 $56,095 $56,969 $64,395 $89,666 $59,290 $40,896 $37,800 $40,391
======== ======== ======= ======= ======== ======= ======= ======= ======= =======
Ratio of expenses to
average net assets 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 1.00% 1.00% 1.02% 1.03%
Ratio of net investment
income to average
net assets 5.64% 5.78% 5.75% 6.17% 5.17% 5.31% 6.40% 7.39% 7.57% 7.83%
Portfolio turnover rate 29% 49% 70% 58% 236% 255% 76% 74% 92% 161%
(A)Total returns shown exclude the effect of applicable sales loads.
</TABLE>
- 3 -
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
The Fund is a series of Countrywide Investment Trust (the "Trust"). The
Fund seeks high current income, consistent with protection of capital, by
investing primarily in U.S. Government obligations having an effective maturity
of twenty years or less with a dollar-weighted effective 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 Fund is not intended to be a complete investment program, and
there is no assurance that its investment objectives can be achieved.
The investment objectives of the 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. 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.
U.S. Government Obligations
---------------------------
The 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. The Fund may
also invest in inflation-indexed bonds which as U.S. Treasury obligations whose
principal value is periodically adjusted according to the rate of inflation.
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
- 4 -
<PAGE>
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.
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.
The market value of investments available to the Fund, and therefore
the Fund's yield and net asset value, will fluctuate due to changes in interest
rates, economic conditions, quality ratings and other factors beyond the control
of the Adviser. The net asset value of the Fund also will fluctuate due to these
changes. 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.
- 5 -
<PAGE>
Other Investment Techniques
----------------------------
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
MORTGAGE-RELATED U.S. GOVERNMENT OBLIGATIONS. The 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 Fund. The Fund's investments in GNMA Certificates may include pass-through
GNMA Certificates which entitle 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). 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
- 6 -
<PAGE>
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 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
- 7 -
<PAGE>
mortgage securities of comparable quality and maturity to increase significantly
in value during periods of declining interest rates.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND REAL ESTATE MORTGAGE
INVESTMENT CONDUITS ("REMICS"). The Fund may invest in CMOs and REMICs issued or
guaranteed by U.S. Government agencies or instrumentalities. CMOs and REMICs are
debt instruments issued by special purpose entities that are secured by pools of
mortgage loans or other mortgage-backed securities. Payments of principal and
interest on the underlying collateral provides the funds to pay the debt service
on CMOs or REMICs.
CMOs are issued in multiple classes. Each class, often referred to as a
"tranche," is issued at a specified coupon rate or adjustable rate and has a
stated maturity or final distribution date. Principal prepayments on collateral
underlying CMOs may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates. Interest is paid or accrues
on classes of a CMO on a monthly, quarterly or semiannual basis. The principal
and interest on the mortgages underlying CMOs may be allocated among the several
classes in many ways.
REMICs, which are authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities. As with CMOs the underlying mortgages
include those backed by GNMA Certificates or other mortgage pass-throughs issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
ASSET-BACKED SECURITIES. The Fund may invest in various types of
adjustable rate securities in the form of asset-backed securities issued or
guaranteed by U.S. Government agencies or instrumentalities. The securitization
techniques used in the context of asset-backed securities are similar to those
used for mortgage-related securities. Thus, through the use of trusts and
special purpose corporations, various types of receivables are
- 8 -
<PAGE>
securitized in pass-through structures similar to the mortgage pass-through
structures described above or in a pay-through structure similar to the CMO
structure. In general, collateral supporting asset-backed securities has shorter
maturities than mortgage loans and has been less likely to experience
substantial prepayment.
The Fund's investments in asset-backed securities may include
pass-through securities collateralized by Student Loan Marketing Association
("SLMA") guaranteed loans whose interest rates adjust in much the same fashion
as described above with respect to ARMS. The underlying loans are originally
made by private lenders and are guaranteed by the SLMA. It is the guaranteed
loans that constitute the underlying financial assets in these asset-backed
securities. There may be other types of asset-backed securities that are
developed in the future in which the Fund may invest.
INFLATION-INDEXED BONDS. The Fund may invest in inflation-indexed
bonds, which are fixed-income securities whose principal value is periodically
adjusted according to the rate of inflation. Such bonds generally are issued at
an interest rate lower than typical bonds, but are expected to retain their
principal value over time. The interest rate on these bonds is fixed at
issuance, but over the life of the bond this interest may be paid on an
increasing principal value, which has been adjusted for inflation.
The value of inflation-indexed bonds is expected to change in response
to changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if inflation were to rise at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds. While these securities are
expected to be protected from long-term inflationary trends, short-term
increases in inflation may lead to a decline in value. If interest rates rise
due to reasons other than inflation (for example, due to changes in currency
exchange rates), investors in these securities may not be protected to the
extent that the increase is not reflected in the bond's inflation measure.
DELAYED SETTLEMENT TRANSACTIONS. The 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
- 9 -
<PAGE>
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.
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 judgment of the Adviser under guidelines established by the Board of
Trustees, 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 its net assets 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
- 10 -
<PAGE>
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 the Fund's net asset value. This is the speculative factor known as leverage.
To reduce the risks of borrowing, the Fund will limit its borrowings as
described above. The Fund's policies on borrowing and pledging are fundamental
policies which may not be changed without the affirmative vote of a majority of
its outstanding shares.
PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading
as a primary means of achieving its investment objectives. However, the Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. High turnover involves correspondingly greater
commission expenses and transaction costs and may result in the Fund recognizing
greater amounts of income and capital gains, which would increase the amount of
income and capital gains which the Fund must distribute to its shareholders in
order to maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. You may purchase additional shares through
the Open Account Program described below. You may open an account and make an
initial investment through securities dealers having a sales agreement with the
Trust's principal underwriter, Countrywide Investments, Inc. (the "Adviser").
You may also make a direct initial investment by sending a check and a completed
account application form to Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made
payable to the "Intermediate Term Government Income Fund." An account
application is included in this Prospectus.
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
- 11 -
<PAGE>
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Adviser by 5:00 p.m., Eastern time. Dealers may charge a
fee for effecting purchase orders. Direct purchase orders received by the
Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's public
offering price. Direct investments received by the Transfer Agent after 4:00
p.m., Eastern time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the public offering price next determined on the
following business day.
The public offering price of shares 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.
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- ------- --------- ------
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50% 1.52% 1.35%
$250,000 but less than $500,000 1.00% 1.01% .90%
$500,000 but less than $1,000,000 .75% .76% .65%
$1,000,000 or more None* None*
Investors whose accounts were opened prior to February 1, 1995 are
subject to a different table of sales loads as follows:
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- ----- -------- ------
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 .75% .76% .75%
$1,000,000 or more None* None*
* There is no front-end sales load on purchases of $1 million or more but
a contingent deferred sales load of 1% may apply 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.
- 12 -
<PAGE>
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of $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 up to 1% of the purchase amount may be paid by the Adviser to
participating unaffiliated dealers through whom such purchases are effected. In
determining a dealer's eligibility for such commission, purchases of shares of
the Fund may be aggregated with concurrent purchases of 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 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 Shares"
below.
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.
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.
- 13 -
<PAGE>
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
The check should be made payable to the Fund.
Under the Open Account Program, you may also purchase shares of the
Fund by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629- 2050) for instructions. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Fund to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing shares of the load funds distributed by the Adviser with
the amount of his current purchases in order to take advantage of the reduced
sales loads set forth in the tables above. Purchases made in any load fund
distributed by the Adviser pursuant to a Letter of Intent may also be eligible
for the reduced sales loads. The minimum initial investment under a Letter of
Intent is $10,000. The load funds currently distributed by the Adviser are
listed in the Exchange Privilege section of this Prospectus. Shareholders should
contact the Transfer Agent for information about the Right of Accumulation and
Letter of Intent.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at
net asset value by pension and profit-sharing plans, pension funds and other
company-sponsored benefit plans that (1) have plan assets of $500,000 or more,
or (2) have, at the time of purchase, 100 or more eligible participants, or (3)
certify that they project to have annual plan purchases of $200,000 or more, or
(4) are provided administrative services by certain third-party administrators
that have entered into a special service arrangement with the Adviser relating
to such plan.
- 14 -
<PAGE>
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase shares of
the Fund at net asset value. To the extent permitted by regulatory authorities,
a bank trust department may charge fees to clients for whose account it
purchases shares at net asset value. Federal and state credit unions may also
purchase shares at net asset value.
In addition, shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Adviser, and their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees.
Clients of investment advisers may also purchase shares of the Fund at
net asset value if their investment adviser or broker-dealer has made
arrangements to permit them to do so with the Trust. The investment adviser must
notify the Transfer Agent that an investment qualifies as a purchase at net
asset value.
Associations and affinity groups and their members may purchase shares
of the Fund at net asset value provided that management of these groups or their
financial adviser has made arrangements to permit them to do so with the Trust.
Investors or their financial adviser must notify the Transfer Agent that an
investment qualifies as a purchase at net asset value.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals and employee benefit plans established by such entities, may
also purchase shares of the Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF SHARES. A
contingent deferred sales load is imposed upon certain redemptions of shares of
the Fund (or shares into which such shares were exchanged) purchased at net
asset value in amounts totaling $1 million or more, if the dealer's commission
described above was paid by the Adviser and the shares are redeemed within
twelve months from the date of purchase. The contingent deferred sales load will
be paid to the Adviser and will be equal to 1% of the lesser of (1) the net
asset value at the time of purchase of the shares being redeemed or (2) the net
asset value of such shares at the time of redemption. In determining whether the
contingent deferred sales load is payable, it is assumed that shares not subject
to the contingent deferred sales load are the first redeemed followed by other
shares held for the longest period of time. The contingent deferred sales load
will not be imposed upon shares representing reinvested dividends or capital
gains distributions, or upon amounts representing share
- 15 -
<PAGE>
appreciation. If a purchase of shares is subject to the contingent deferred
sales load, the investor will be so notified on the confirmation for such
purchase.
Redemptions of such shares of the Fund held for at least 12 months will
not be subject to the contingent deferred sales load and an exchange of such
shares into another fund of Countrywide Investments is not treated as a
redemption and will not trigger the imposition of the contingent deferred sales
load at the time of such exchange. A fund will "tack" the period for which such
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange; however,
the period of time that the redemption proceeds of such shares are held in a
money market fund will not count toward the holding period for determining
whether a contingent deferred sales load is applicable. See "Exchange
Privilege."
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21, purchasing shares
for his or their own account; or a trustee or other fiduciary purchasing shares
for a single fiduciary account although more than one beneficiary is involved;
or employees of a common employer, provided that economies of scale are realized
through remittances from a single source and quarterly confirmation of such
purchases; or an organized group, provided that the purchases are made through a
central administration, or a single dealer, or by other means which result in
economy of sales effort or expense. Contact the Transfer Agent for additional
information concerning purchases at net asset value or at reduced sales loads.
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
- 16 -
<PAGE>
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges 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.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
-------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional shares of the Fund while the
plan is in effect are generally undesirable because a sales load is incurred
whenever purchases are made.
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, including
Roth IRAs and Education IRAs
-- 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
- 17 -
<PAGE>
Direct Deposit Plans
--------------------
Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Transfer Agent pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund.
InvestPlus Plan
----------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
Reinvestment Privilege
----------------------
If you have redeemed shares of the Fund, you may reinvest all or part
of the proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of the Fund on each day that the Trust is open
for business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described below, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check, government check or wire.
- 18 -
<PAGE>
A contingent deferred sales load may apply to a redemption of certain
shares of the Fund purchased at net asset value. See "How to Purchase Shares."
BY TELEPHONE. You may redeem shares having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within one business day (but not later than
three business days) after receipt of your telephone instructions. IRA accounts
are not redeemable by telephone.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone
redemption privilege with respect to any account if the name(s) or the address
on the account has been changed within the previous 30 days.
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
- 19 -
<PAGE>
prior to acting upon telephone instructions, providing written confirmation of
the transactions and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, you will be required to request the
redemption in writing with your signature guaranteed, regardless of the value of
the shares being redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
BY CHECK. You may establish a special checking account with the Fund
for the purpose of redeeming shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, the Transfer
Agent, as your agent, will cause the Fund to redeem a sufficient number of full
and fractional shares in your account to cover the amount of the check. Checks
will be processed at the net asset value on the day the check is presented to
the Custodian for payment.
If the amount of a check is greater than the value of the shares held
in your account, the check will be returned. Shareholders should consider
potential fluctuations in the net asset value of the Fund's shares when writing
checks. A check representing a redemption request will take precedence over any
other redemption instructions issued by a shareholder.
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of
- 20 -
<PAGE>
Countrywide Credit Industries, Inc. or any affiliated company, including members
of the immediate family of such individuals.
The Transfer Agent charges shareholders its costs for each stop payment and
each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption procedure may be
suspended or terminated at any time upon written notice by the Trust or the
Transfer Agent.
Shareholders 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, the proceeds will be wired directly to your existing account
in any commercial bank or brokerage firm in the United States as designated on
your application and you will be charged an $8 processing fee. The Trust
reserves the right, upon thirty days' written notice, to change the processing
fee. All charges will be deducted from your account by redemption of shares in
your account. Your bank or brokerage 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 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. In order
to redeem such shares, the certificate must be delivered to the Transfer Agent,
or the dealer in the case of a wire redemption, duly endorsed or
- 21 -
<PAGE>
accompanied by a duly endorsed stock power, with the signature guaranteed by any
of the eligible guarantor institutions outlined above.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested including any sales load paid,
unaffected by market fluctuations), or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other.
Shares of the Fund which are not subject to a contingent deferred sales
load may be exchanged for Class A shares of any other fund and for shares of any
other fund which offers only one class of shares (provided such shares are not
subject to a contingent deferred sales load). A sales load will be imposed equal
to the excess, if any, of the sales load rate applicable to the shares being
acquired over the sales load rate, if any, previously paid on the shares being
exchanged.
Shares of the Fund subject to a contingent deferred sales load may be
exchanged, on the basis of relative net asset value per share, for shares of any
other fund which imposes a contingent deferred sales load and for shares of any
fund which is a money market fund. A fund will "tack" the period for which the
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange. The
period of time that shares are held in a money market fund will not count toward
the holding period for determining whether a contingent deferred sales load is
applicable.
- 22 -
<PAGE>
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
- -------------------------- ---------------------------
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund ----------------------------
Short Term Government
Income Fund
Institutional Government
Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term
Government Income Fund
*Adjustable Rate U.S.
Government Securities Fund
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
The Fund expects to distribute any net
- 23 -
<PAGE>
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. No interest
will accrue on amounts represented by uncashed distribution checks.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty days of the
distribution date to the Transfer Agent for reinvestment at the net asset value
next determined after its return. The investor or his dealer must notify the
Transfer Agent that a distribution is being reinvested pursuant to this
provision.
TAXES
- -----
The Fund 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.
- 24 -
<PAGE>
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 capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by the Fund to its
shareholders are taxable to the recipient shareholders as capital gains, without
regard to the length of time a shareholder has held Fund shares. The maximum
capital gains rate for individuals is 20% with respect to assets held more than
12 months. The maximum capital gains rate for corporate shareholders is the same
as the maximum tax rate for ordinary income. Redemptions 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.
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 five other series of the Trust, seven 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
- 25 -
<PAGE>
million; .4% of such assets from $150 million to $250 million; and .375% of such
assets in excess of $250 million.
Margaret D. Weinblatt, Chief Investment Officer-Taxable Fixed Income of
the Adviser, and Scott Weston, Assistant Vice President-Investments of the
Adviser, are primarily responsible for managing the portfolio of the Fund. Ms.
Weinblatt has been managing the Fund's portfolio since she became employed by
the Adviser in July 1998. From 1996 until 1998, she was President of Copernicus
Asset Management, Ltd. and from 1986 until 1995, she was Senior Portfolio
Manager-Fixed Income Group of Neuberger & Berman. Mr. Weston has been employed
by the Adviser since 1992 and has been managing the Fund's portfolio since March
1996.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
- 26 -
<PAGE>
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. 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
- 27 -
<PAGE>
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.
Pursuant to the 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 shares of the Fund. For the fiscal
year ended September 30, 1998, the Fund paid $83,500 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 Plan is
.35% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which
- 28 -
<PAGE>
provide such services; however, in selecting investments for the Fund, no
preference will be shown for such securities.
The National Association of Securities Dealers places certain
limitations on asset-based sales charges of mutual funds. These limitations
require fund-level accounting in which all sales charges--front-end load, 12b-1
fees or contingent deferred load--terminate when a percentage of gross sales is
reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- -----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (net asset value plus applicable sales load) of the shares of the Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange, currently 4:00 p.m., Eastern time. The Trust is open for
business on each day the New York Stock Exchange is open for business and on any
other day when there is sufficient trading in the Fund's investments that its
net asset value might be materially affected. The net asset value per share of
the Fund is calculated by dividing the sum of the value of the securities held
by the Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund, rounded
to the nearest cent.
The Fund's portfolio securities for which market quotations are readily
available are valued at their most recent bid prices as obtained from one or
more of the major market makers for such securities. Securities (and other
assets) of the Fund for which market quotations are not readily available are
valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general supervision
of the Board of Trustees. The net asset value per share of the Fund will
fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its "average annual total
return." The Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance.
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
(which periods will be stated in the advertisement) that would equate an initial
amount invested at the beginning of a stated period to the ending redeemable
value of the investment. The calculation of "average annual total return"
assumes the reinvestment of all dividends and distributions and the deduction of
the current maximum sales load from the initial investment. The Fund may also
advertise total return (a "nonstandardized quotation") which is calculated
- 29 -
<PAGE>
differently from "average annual total return." A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation of total return may also indicate
average annual compounded rates of return over periods other than those
specified for "average annual total return." These nonstandardized returns do
not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation of total return will always be
accompanied by the Fund's "average annual total return" as described above.
The "yield" of the 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.
- 30 -
<PAGE>
<TABLE>
ACCOUNT NO. 3-_____________________
Account Application (For Fund Use Only)
<S> <C> <C> <C>
Intermediate Term Government Income Fund FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________
Home Office Address: ___________________
Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
========================================================================================================================
Initial Investment of $_______________________
[] Check or draft enclosed payable to the Fund.
[] Bank Wire From:
______________________________________________________________________________________________________________
[] Exchange From:
______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial
account please list
minor's S.S.#)
___________________________________________________________________________________________________ Citizenship:[] U.S.
Name of Joint Tenant, Partner, Custodian []Other
Address Phone
___________________________________________________________________________________________________ ( )_______________
Street or P.O. Box Business Phone
___________________________________________________________________________________________________ ( )_______________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer
Name/Address______________________________________________________________________________________________
Are you an associated person of an NASD member? [] Yes [] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
=======================================================================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[] Share Option -- Income distributions and capital gains distributions automatically reinvested in additional
shares.
[] Income Option -- Income distributions and short term capital gains distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
[] Cash Option -- Income distributions and capital gains distributions paid in cash.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
========================================================================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon
receipt of and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Bank Account Number _____________________________________ Bank Routing Transit Number _______________________________
Name of Account Holder _______________________________________________________________________________________________
Bank Name _________________________________________________________ Bank Address ______________________________________
City State
[ ]CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA)
or otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons
whose signatures appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our)
shares of the Trust. I (we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time.
===========================================================================================================================
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of
eligible load funds of Countrywide Investments.
Account Number/Name Account Number/Name
_______________________________________________________ ______________________________________________________
_______________________________________________________ ______________________________________________________
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your Letter of Intent.)
[] I agree to the Letter of Intent in the current Prospectus of Countrywide Investment Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning ____________________ 19
(Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of Countrywide Investments
at least equal to (check appropriate box):
[] $100,000 [] $250,000 [] $500,000 [] $1,000,000
===================================================================================================================================
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number (PIN).
You will need to use this PIN when requesting account information and placing transactions. For institutional accounts,
please use a four digit number. For retail accounts, please use the first four letters of your mother's maiden name.[ ] [ ] [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself and
his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Investment Trust, Countrywide Investment
Trust, Countrywide Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in
the performance of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide
Fund Services, Inc., or both will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust
and/or Countrywide Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring forms of personal identification prior to acting
upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions.
are genuine.
___________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Signature of Joint Owner, if Any
Trustee, etc.
________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
========================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Investment Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________ per month in the Fund.
ABA Routing Number______________________________
FI Account Number________________________________
[] Checking Account [] Savings Account
- ----------------------------------------------------------------------
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
______________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X_____________________________________________________________________ X_______________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check from your checking account or a voided deposit/
withdrawal slip from your savings account for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[] Monthly -- Withdrawals will be made on the last business day of each month.
[] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[] Exchange: Please exchange the withdrawal proceeds into another Countywide account number:_ _-- _ _ _ _--_
[] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided
check for ACH or bank wire____________________________________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of
payee___________________________________________________________________________________________________________________
Please send
to:____________________________________________________________________________________________________________________
Street address City State Zip
========================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Investment Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
(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.
</TABLE>
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 31 -
<PAGE>
TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . .
Financial Highlights. . . . . .. . . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund. . . . . . . . . . . . . . . . . . . .
Distribution Plan. . . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price and Public Offering Price . . . .
Performance Information. . . . . . . . . . . . . . . . . . .
- -----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 32 -
<PAGE>
PROSPECTUS
November 30, 1998
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
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 BANKING OR DEPOSITORY INSTITUTION. SHARES 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 November 30, 1998 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please
contact your broker, or call us at the above number.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
- --------------------
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 .15%(A)
12b-1 Fees .01%(B)
Other Expenses .24%
----
Total Fund Operating Expenses After Waivers .40%(C)
====
(A) Absent waivers of management fees, such fees would have been .20%.
(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 .45%.
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."
- 2 -
<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, 1998 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
-------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Net asset value at beginning $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
of year................... ----- ------- ------ ------ ------ ------ ------ ------ ------ -----
Net investment income....... 0.052 0.051 0.051 0.053 0.034 0.029 0.040 0.065 0.081 0.087
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Dividends from net investment (0.052) (0.051) (0.051) (0.053) (0.034) (0.029) (0.040) (0.065) (0.081) (0.087)
income..................... ------- ------- ------ ------ ------ ------ ------ ------ ------ -------
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.................. 5.30% 5.17% 5.18% 5.42% 3.43% 2.96% 4.08% 6.61% 8.31% 9.07%
======= ====== ====== ====== ===== ===== ====== ====== ====== ========
Net assets at end of $44,797 $61,248 $39,382 $36,009 $41,769 $34,610 $43,432 $62,313 $97,727 $121,826
year (000's)................ ======= ======= ======= ======= ======= ======= ======= ======= ======== ========
Ratio of net expenses to 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.37% 0.35% 0.33% 0.32%
average net assets(A).......
Ratio of net investment income 5.17% 5.07% 5.06% 5.30% 3.41% 2.92% 4.04% 6.50% 8.04% 8.74%
to average net assets.......
(A) Absent fee waivers by the Adviser, the ratios of expenses to average net assets would have been 0.45%, 0.45%, 0.49%, 0.42%,
0.42%, 0.48%, 0.43%, 0.36% and 0.34% for the years ended September 30, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and
1989, respectively.
</TABLE>
- 3 -
<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
- 4 -
<PAGE>
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.
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.
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.
Other Investment Techniques
---------------------------
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
- 5 -
<PAGE>
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 judgment of the Adviser under guidelines established by the Board of
Trustees, 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
- 6 -
<PAGE>
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 securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
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
- 7 -
<PAGE>
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 Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the 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.
- 8 -
<PAGE>
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.
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, government 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 having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within 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.
- 9 -
<PAGE>
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone
redemption privilege with respect to any account if the name(s) or the address
on the account has been changed within the previous 30 days.
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. If the
name(s) or the address on your account has been changed within 30 days of your
redemption request, you will be required to request the redemption in writing
with your signature guaranteed, regardless of the value of the shares being
redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are
- 10 -
<PAGE>
normally 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.
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.
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<PAGE>
Countrywide Tax-Free Trust Countrywide Strategic Trust
- -------------------------- ---------------------------
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Growth/Value Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund ----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
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.
- 12 -
<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. No interest will accrue on amounts represented by
uncashed distribution checks.
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
- 13 -
<PAGE>
other mutual funds, the Trust retains various organizations to perform
specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to five other series of the Trust, seven 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 Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
- 14 -
<PAGE>
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. 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
- 15 -
<PAGE>
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
- 16 -
<PAGE>
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.
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.
- 17 -
<PAGE>
ACCOUNT APPLICATION
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
INSTITUTIONAL GOVERNMENT
INCOME FUND
ACCOUNT NO. 23-______________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:________________________
Home Office Address:______________
Branch Address:___________________
Rep Name & No.:___________________
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, (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
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TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. The
Internal Revenue Service does not require my consent to any provision of this
document other than the certifications required to avoid backup withholding.
Check box if appropriate:
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>
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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.
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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 in 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
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ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you
establish a Personal Identification Number (PIN). You will need to use this
PIN when requesting account information and placing transactions. For
institutional accounts, please use a four digit number. For retail accounts,
please use the first four letters of your mother's maiden name. [ ] [ ] [ ] [ ]
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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>
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.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 18 -
<PAGE>
TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies. . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . . . . .
Subaccounting Services . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund. . . . . . . . . . . . . . . . . . . .
Distribution Plan. . . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . . . .
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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.
- 19 -
<PAGE>
PROSPECTUS
November 30, 1998
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
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
adjustable rate mortgage securities ("ARMS") or other securities collateralized
by or representing an interest in mortgages which have interest rates that reset
at periodic intervals. The Fund will invest in mortgage-related securities only
if they are issued or guaranteed by the United States Government, its agencies
or instrumentalities.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about the Fund
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 30, 1998 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please
contact your broker, or call us at the above number.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
- -------------------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . 2%
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price). . . . None*
Sales Load Imposed on Reinvested Dividends. . . . . None
Exchange Fee. . . . . . . . . . . . . . . . . . . . None
Redemption Fee. . . . . . . . . . . . . . . . . . . None**
Check Redemption Processing Fee (per check):
First Six Checks per Month . . . . . . . . . . . None
Additional Checks per Month. . . . . . . . . . . $0.25
* Purchases at net asset value of amounts totaling $1 million or more may
be subject to a contingent deferred sales load of 1% if a redemption
occurred within 12 months of purchase and a commission was paid by the
Adviser to a participating unaffiliated dealer.
** A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How to
Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees After Waivers .00%(A)
12b-1 Fees .05%(B)
Other Expenses After Reimbursements .70%(C)
----
Total Fund Operating Expenses After Waivers .75%(D)
and Reimbursements ====
(A) Absent waivers of management fees, such fees would have been .50%.
(B) The Fund may incur 12b-1 fees in an amount up to .35% 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 .82%.
(D) Absent waivers of management fees and expense reimbursements by the
Adviser, total Fund operating expenses would have been 1.37%.
- 2 -
<PAGE>
The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The percentages expressing annual fund operating expenses are
based on 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 $ 28
3 Years 43
5 Years 61
10 Years 111
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<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, 1998 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<TABLE>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Period
Ended
Years Ended September 30, September 30,
1998 1997 1996 1995 1994 1993(A)
------------------------------------------------------------ ----------
Net asset value at beginning of period .......... $ 9.85 $ 9.81 $ 9.78 $ 9.82 $ 10.01 $ 10.00
---------- -------- --------- -------- --------- --------
Income from investment operations:
Net investment income ........................ 0.53 0.57 0.57 0.55 0.39 0.28
Net realized and unrealized gains (losses)
on investments ............................. (0.16) 0.04 0.03 (0.04) (0.18) 0.01
---------- ---------- -------- ---------- ---------- ------
Total from investment operations ................ 0.37 0.61 0.60 0.51 0.21 0.29
---------- ---------- -------- ---------- ---------- ------
Less distributions:
Dividends from net investment income ......... (0.53) (0.57) (0.57) (0.55) (0.39) (0.28)
Distributions from net realized gains ........ -- -- -- -- (0.01) --
---------- ---------- -------- -------- -------- -------
Total distributions ............................. (0.53) (0.57) (0.57) (0.55) (0.40) (0.28)
----------- ----------- --------- -------- ------- -------
Net asset value at end of period ................ $ 9.69 $ 9.85 $ 9.81 $ 9.78 $ 9.82 $10.01
=========== ========== ========== ======== ====== =======
Total return(B) ................................. 3.88% 6.34% 6.32% 5.33% 2.09% 4.56%(D)
========== ========== ========== ======== ======== ========
Net assets at end of period (000's) ............. $ 10,616 $ 23,202 $ 11,732 $ 20,752 $ 37,572 $ 24,400
========== ========== ========== ========= ========== ========
Ratio of net expenses to average ............... 0.75% 0.75% 0.75% 0.75% 0.68% 0.22%(D)
net assets(C)
Ratio of net investment income to
average net assets ........................... 5.47% 5.73% 5.91% 5.57% 3.91% 4.17%(D)
Portfolio turnover rate ......................... 45% 58% 44% 115% 81% 170%(D)
<FN>
(A) Represents the period from the initial public offering of shares (February 10, 1993) through September 30, 1993.
(B) Total returns shown exclude 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 1.37%, 1.47%, 1.46%, 1.21%, 0.78% and 1.18%(D) for the periods ended September 30, 1998, 1997, 1996, 1995,
1994 and 1993, respectively.
(D) Annualized.
</FN>
</TABLE>
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<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
adjustable rate mortgage securities ("ARMS") or other securities collateralized
by or representing an interest in mortgages which have interest rates that reset
at periodic intervals. The Fund will invest in mortgage-related securities only
if they are issued or guaranteed 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 ARMS 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.
In addition to mortgage-related securities, the Fund may invest in all
types of U.S. Government obligations (described below). 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) 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
- 5 -
<PAGE>
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.
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, 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.
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's investments in GNMA Certificates may include pass-through
GNMA Certificates which entitle 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
pass-through 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). FHLMC Certificates are
pass-through mortgage-backed
- 6 -
<PAGE>
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
mortgages 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 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
- 7 -
<PAGE>
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.
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
- 8 -
<PAGE>
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.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND REAL ESTATE MORTGAGE
INVESTMENT CONDUITS ("REMICS"). The Fund may invest in CMOs and REMICs issued or
guaranteed by U.S. Government agencies or instrumentalities. CMOs and REMICs are
debt instruments issued by special purpose entities that are secured by pools of
mortgage loans or other mortgage-backed securities. Payments of principal and
interest on the underlying collateral provides the funds to pay the debt service
on CMOs or REMICs.
CMOs are issued in multiple classes. Each class, often referred to as a
"tranche," is issued at a specified coupon rate or adjustable rate and has a
stated maturity or final distribution date. Principal prepayments on collateral
underlying CMOs may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates. Interest is paid or accrues
on classes of a CMO on a monthly, quarterly or semiannual basis. The principal
and interest on the mortgages underlying CMOs may be allocated among the several
classes in many ways.
One or more tranches of a CMO may have coupon rates that reset
periodically at a specified increment over an index, such as the London
Interbank Offered Rate ("LIBOR"). These adjustable rate tranches, known as
"floating-rate CMOs," will be treated as ARMS by the Fund. Floating-rate CMOs
may be backed by fixed-rate or adjustable-rate mortgages. Floating-rate CMOs are
typically issued with lifetime "caps" on the coupon rate. These caps, similar to
the caps on ARMS, represent a ceiling beyond which the coupon rate may not be
increased, regardless of increases in the underlying interest rate index.
REMICs, which are authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities. As with CMOs the underlying mortgages
include those backed by GNMA Certificates or other mortgage pass-throughs issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
The Fund currently intends to limit its investments in CMOs and REMICs
to either floating rate tranches or fixed-rate tranches having an average life
(giving effect to projected prepayments) of 5 years or less at the time of
purchase.
ASSET-BACKED SECURITIES. The Fund may invest in various types of
adjustable rate securities in the form of asset-backed
- 9 -
<PAGE>
securities issued or guaranteed by U.S. Government agencies or
instrumentalities. The securitization techniques used in the context of
asset-backed securities are similar to those used for mortgage-related
securities. Thus, through the use of trusts and special purpose corporations,
various types of receivables are securitized in pass-through structures similar
to the mortgage pass-through structures described above or in a pay-through
structure similar to the CMO structure. In general, collateral supporting
asset-backed securities has shorter maturities than mortgage loans and has been
less likely to experience substantial prepayment.
The Fund's investments in asset-backed securities may include
pass-through securities collateralized by Student Loan Marketing Association
("SLMA") guaranteed loans whose interest rates adjust in much the same fashion
as described above with respect to ARMS. The underlying loans are originally
made by private lenders and are guaranteed by the SLMA. It is the guaranteed
loans that constitute the underlying financial assets in these asset-backed
securities. There may be other types of asset-backed securities that are
developed in the future in which the Fund may invest.
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
- 10 -
<PAGE>
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.
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.
- 11 -
<PAGE>
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 judgment of the Adviser under guidelines established by the Board of
Trustees, 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
- 12 -
<PAGE>
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 securities, with the Fund's Custodian in an amount at
least equal to the market value of the loaned securities. The Fund will limit
the amount of its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without the
affirmative vote of a majority of its outstanding shares.
PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading
as a primary means of achieving its investment objective. However, the Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. High turnover involves correspondingly greater
commission expenses and transaction costs and may result in the Fund recognizing
greater amounts of income and capital gains, which would increase the amount of
income and capital gains which the Fund must distribute to its shareholders in
order to maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. You may purchase additional shares through
the Open Account Program described below. You may open an account and make an
initial investment through securities dealers having a sales agreement with the
Trust's principal underwriter, Countrywide Investments, Inc. (the "Adviser").
You may also make a direct initial investment by sending a check and a completed
account application form to Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made
payable to the "Adjustable Rate U.S. Government Securities Fund." An account
application is included in this Prospectus.
- 13 -
<PAGE>
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 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.
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- -------- -------- ------
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50% 1.52% 1.35%
$250,000 but less than $500,000 1.00% 1.01% .90%
$500,000 but less than $1,000,000 .75% .76% .65%
$1,000,000 or more None* None*
Investors whose accounts were opened prior to February 1, 1995 are subject to a
different table of sales loads as follows:
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- ------- --------- -------
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 .75% .76% .75%
$1,000,000 or more None* None*
- 14 -
<PAGE>
* There is no front-end sales load on purchases of $1 million or more but
a contingent deferred sales load of 1% may apply if a commission was
paid by the Adviser to a participating unaffiliated dealer and the
shares are redeemed within twelve months from the date of purchase.
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of $1,000,000 or more made after October 1, 1995
and subsequent purchases further increasing the size of the account, a dealer's
commission of up to 1% of the purchase amount may be paid by the Adviser to
participating unaffiliated dealers through whom such purchases are effected. In
determining a dealer's eligibility for such commission, purchases of shares of
the Fund may be aggregated with concurrent purchases of 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 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 Shares"
below.
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.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers listed
below.
- 15 -
<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 Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
The check should be made payable to the Fund.
Under the Open Account Program, you may also purchase shares of the
Fund by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629- 2050) for instructions. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Fund to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing shares of the load funds distributed by the Adviser with
the amount of his current purchases in order to take advantage of the reduced
sales loads set forth in the 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.
- 16 -
<PAGE>
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at
net asset value by pension and profit-sharing plans, pension funds and other
company-sponsored benefit plans that (1) have plan assets of $500,000 or more,
or (2) have, at the time of purchase, 100 or more eligible participants, or (3)
certify that they project to have annual plan purchases of $200,000 or more, or
(4) are provided administrative services by certain third-party administrators
that have entered into a special service arrangement with the Adviser relating
to such plan.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase 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 shares at net asset value.
In addition, shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Adviser, and their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees.
Clients of municipal fund advisers, public finance investment
specialists, municipal reinvestment brokers, authorities and trustees may
purchase 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 may also purchase shares of the Fund at
net asset value if their investment adviser or broker-dealer has made
arrangements to permit them to do so with the Trust. The investment adviser must
notify the Transfer Agent that an investment qualifies as a purchase at net
asset value.
Associations and affinity groups and their members may purchase shares
of the Fund at net asset value provided that management of these groups or their
financial adviser has made arrangements to permit them to do so with the Trust.
Investors or their financial adviser must notify the Transfer Agent that an
investment qualifies as a purchase at net asset value.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals and employee benefit plans established by such entities, may
also purchase shares of the Fund at net asset value.
- 17 -
<PAGE>
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF SHARES. A
contingent deferred sales load is imposed upon certain redemptions of shares of
the Fund (or shares into which such shares were exchanged) purchased at net
asset value in amounts totaling $1 million or more, if the dealer's commission
described above was paid by the Adviser and the shares are redeemed within
twelve months from the date of purchase. The contingent deferred sales load will
be paid to the Adviser and will be equal to 1% of the lesser of (1) the net
asset value at the time of purchase of the shares being redeemed or (2) the net
asset value of such shares at the time of redemption. In determining whether the
contingent deferred sales load is payable, it is assumed that shares not subject
to the contingent deferred sales load are the first redeemed followed by other
shares held for the longest period of time. The contingent deferred sales load
will not be imposed upon shares representing reinvested dividends or capital
gains distributions, or upon amounts representing share appreciation. If a
purchase of shares is subject to the contingent deferred sales load, the
investor will be so notified on the confirmation for such purchase.
Redemptions of such shares of the Fund held for at least 12 months will
not be subject to the contingent deferred sales load and an exchange of such
shares into another fund of Countrywide Investments is not treated as a
redemption and will not trigger the imposition of the contingent deferred sales
load at the time of such exchange. A fund will "tack" the period for which such
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange; however,
the period of time that the redemption proceeds of such shares are held in a
money market fund will not count toward the holding period for determining
whether a contingent deferred sales load is applicable. See "Exchange
Privilege."
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21, purchasing shares
for his or their own account; or a trustee or other fiduciary purchasing
- 18 -
<PAGE>
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.
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone 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.
SHAREHOLDER SERVICES
- -------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
-------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional shares of the Fund while the
plan is in effect are generally undesirable because a sales load is incurred
whenever purchases are made.
Tax-Deferred Retirement Plans
------------------------------
Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
- 19 -
<PAGE>
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses, including
Roth IRAs and Education IRAs
-- 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.
InvestPlus Plan
----------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
Reinvestment Privilege
----------------------
If you have redeemed shares of the Fund, you may reinvest all or part
of the proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
- 20 -
<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, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check, government check or wire.
A contingent deferred sales load may apply to a redemption of certain
shares purchased at net asset value. See "How to Purchase Shares."
BY TELEPHONE. You may redeem shares having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within one business day (but not later than
three business days) after receipt of your telephone instructions. IRA accounts
are not redeemable by telephone.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer Agent to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone
redemption privilege with respect to any account if the name(s) or the address
on the account has been changed within the previous 30 days.
- 21 -
<PAGE>
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, you will be required to request the
redemption in writing with your signature guaranteed, regardless of the value of
the shares being redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
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
- 22 -
<PAGE>
asset value of the Fund's shares when writing checks. A check representing a
redemption request will take precedence over any other redemption instructions
issued by a shareholder.
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals.
The Transfer Agent charges shareholders its costs for each stop payment
and each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption procedure may be
suspended or terminated at any time upon written notice by the Trust or the
Transfer Agent.
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, the proceeds will be wired directly to your existing account
in any commercial bank or brokerage firm in the United States as designated on
your application and you will be charged an $8 processing fee. The Trust
reserves the right, upon thirty days' written notice, to change the processing
fee. All charges will be deducted from your account by redemption of shares in
your account. Your bank or brokerage 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.
- 23 -
<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.
If a certificate for shares of the Fund was 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. In order
to redeem such shares, the certificate must be delivered to the Transfer Agent,
or the dealer in the case of a wire redemption, duly endorsed or accompanied by
a duly endorsed stock power, with the signature guaranteed by any of the
eligible guarantor institutions outlined above.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested including any sales load paid,
unaffected by market fluctuations), or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other.
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.
- 24 -
<PAGE>
Shares of the Fund subject to a contingent deferred sales load may be
exchanged, on the basis of relative net asset value per share, for shares of any
other fund which imposes a contingent deferred sales load and for shares of any
fund which is a money market fund. A fund will "tack" the period for which the
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange. The
period of time that shares are held in a money market fund will not count toward
the holding period for determining whether a contingent deferred sales load is
applicable.
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
- -------------------------- ---------------------------
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Growth/Value Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund ----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
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
- 25 -
<PAGE>
in a sale of fund shares, which may cause you to recognize a capital gain or
loss. Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
The Fund expects to distribute any net realized long-term capital gains at least
once each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed distribution checks.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty days of the
distribution date to the Transfer Agent for reinvestment at the net asset value
next determined after its return. The investor or his dealer must notify the
Transfer Agent that a distribution is being reinvested pursuant to this
provision.
- 26 -
<PAGE>
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 capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by the Fund to its
shareholders are taxable to the recipient shareholders as capital gains, without
regard to the length of time a shareholder has held Fund shares. The maximum
capital gains rate for individuals is 20% with respect to assets held more than
12 months. The maximum capital gains rate for corporate shareholders is the same
as the maximum tax rate for ordinary income. Redemptions 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.
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.
- 27 -
<PAGE>
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to five other series of the Trust, seven 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.
Margaret D. Weinblatt, Chief Investment Officer-Taxable Fixed Income of
the Adviser, and Scott Weston, Assistant Vice President-Investments of the
Adviser, are primarily responsible for managing the portfolio of the Fund. Ms.
Weinblatt has been managing the Fund's portfolio since she became employed by
the Adviser in July 1998. From 1996 until 1998, she was President of Copernicus
Asset Management, Ltd. and from 1986 until 1995, she was Senior Portfolio
Manager-Fixed Income Group of Neuberger & Berman. Mr. Weston has been employed
by the Adviser since 1992 and has been managing the Fund's portfolio since March
1996.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution 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.
- 28 -
<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.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. 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.
- 29 -
<PAGE>
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
.35% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which
- 30 -
<PAGE>
provide such services; however, in selecting investments for the Fund, no
preference will be shown for such securities.
The National Association of Securities Dealers places certain
limitations on asset-based sales charges of mutual funds. These limitations
require fund-level accounting in which all sales charges -- front-end load,
12b-1 fees or contingent deferred load -- terminate when a percentage of gross
sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- -----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (net asset value plus applicable sales load) of the shares of the Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange, currently 4:00 p.m., Eastern time. The Trust is open for
business on each day the New York Stock Exchange is open for business and on any
other day when there is sufficient trading in the Fund's investments that its
net asset value might be materially affected. The net asset value per share of
the Fund is calculated by dividing the sum of the value of the securities held
by the Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund, rounded
to the nearest cent.
The Fund's portfolio securities for which market quotations are readily
available are valued at their most recent bid prices as obtained from one or
more of the major market makers for such securities. Securities (and other
assets) of the Fund for which market quotations are not readily available are
valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general supervision
of the Board of Trustees. The net asset value per share of the Fund will
fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its "average annual total
return." The Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance.
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
- 31 -
<PAGE>
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and the
deduction of the current maximum sales load from the initial investment. The
Fund may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. A nonstandardized quotation of total return may
also indicate average annual compounded rates of return over periods other than
those specified for "average annual total return." These nonstandardized returns
do not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation of total return will always be
accompanied by the Fund's "average annual total return" as described above.
The "yield" of the Fund is computed by dividing the net investment
income per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within its category as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Fund may also present its 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.
- 32 -
<PAGE>
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.
- 33 -
<PAGE>
<TABLE>
ACCOUNT NO. 27-_____________________
Account Application (For Fund Use Only)
<S> <C> <C> <C>
Adjustable Rate U.S. Government Securities Fund FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________
Home Office Address: ___________________
Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
========================================================================================================================
Initial Investment of $_______________________
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From:
______________________________________________________________________________________________________________
[ ] Exchange From:
______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial
account please list
minor's S.S.#)
___________________________________________________________________________________________________ Citizenship:[] U.S.
Name of Joint Tenant, Partner, Custodian []Other
Address Phone
___________________________________________________________________________________________________ ( )_______________
Street or P.O. Box Business Phone
___________________________________________________________________________________________________ ( )_______________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer Name/Address________________________________________________________________________________________
Are you an associated person of an NASD member? [] Yes [] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
=======================================================================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[] Share Option -- Income distributions and capital gains distributions automatically reinvested in additional
shares.
[] Income Option -- Income distributions and short term capital gains distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
[] Cash Option -- Income distributions and capital gains distributions paid in cash.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
========================================================================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon
receipt of and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Bank Account Number _____________________________________ Bank Routing Transit Number _______________________________
Name of Account Holder _______________________________________________________________________________________________
Bank Name _________________________________________________________ Bank Address ______________________________________
City State
[ ]CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA)
or otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons
whose signatures appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our)
shares of the Trust. I (we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time.
===========================================================================================================================
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of
eligible load funds of Countrywide Investments.
Account Number/Name Account Number/Name
_______________________________________________________ ______________________________________________________
_______________________________________________________ ______________________________________________________
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your Letter of Intent.)
[] I agree to the Letter of Intent in the current Prospectus of Countrywide Investment Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning ____________________ 19
(Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of Countrywide Investments
at least equal to (check appropriate box):
[] $100,000 [] $250,000 [] $500,000 [] $1,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number (PIN).
You will need to use this PIN when requesting account information and placing transactions. For institutional accounts,
please use a four digit number. For retail accounts, please use the first four letters of your mother's maiden name.[ ] [ ] [ ] [ ]
====================================================================================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself and
his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Investment Trust, Countrywide Investment
Trust, Countrywide Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in
the performance of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide
Fund Services, Inc., or both will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust
and/or Countrywide Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring forms of personal identification prior to acting
upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions.
are genuine.
___________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Signature of Joint Owner, if Any
Trustee, etc.
________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
=========================================================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Investment Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________ per month in the Fund.
ABA Routing Number______________________________
FI Account Number________________________________
[] Checking Account [] Savings Account
- ----------------------------------------------------------------------
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
______________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X_____________________________________________________________________ X_______________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account
for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[] Monthly -- Withdrawals will be made on the last business day of each month.
[] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[] Exchange: Please exchange the withdrawal proceeds into another Countywide account number:_ _-- _ _ _ _--_
[] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided check for ACH or bank wire____________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of payee___________________________________________________________________________________________________________________
Please send to:_________________________________________________________________________________________________________________
Street address City State Zip
==================================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Investment Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
(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.
</TABLE>
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 34 -
<PAGE>
TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . .
Financial Highlights. . . . . .. . . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund. . . . . . . . . . . . . . . . . . . .
Distribution Plan. . . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price and Public Offering Price . . . .
Performance Information. . . . . . . . . . . . . . . . . . .
- -----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 35 -
<PAGE>
PROSPECTUS
November 30, 1998
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
MONEY MARKET FUND
The Money Market Fund (the "Fund"), a separate series of Countrywide
Investment Trust, seeks high current income, consistent with liquidity and
stability of principal. The Fund invests primarily in high-quality U.S.
dollar-denominated money market instruments.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS.
FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT
OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997, the
Fund, on August 29, 1997, succeeded to the assets and liabilities of another
mutual fund of the same name (the "Predecessor Fund"), which was an investment
series of Trans Adviser Funds, Inc. The investment objective, policies and
restrictions of the Fund and the Predecessor Fund are substantially identical.
This Prospectus sets forth concisely the information about the Fund that
you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 30, 1998 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please
contact your broker, or call us at the above number.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
- -------------------
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 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 .49%
12b-1 Fees .11%(A)
Other Expenses .19%
----
Total Fund Operating Expenses .79%
====
(A) The Fund may incur 12b-1 fees in an amount up to .35% of its average
net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
The purpose of 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 by the Fund during the most recent fiscal year. The Adviser
will, until at least August 31, 1999, waive fees and reimburse expenses to the
extent necessary to limit total operating expenses to .80% of the Fund's average
net assets. THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
$ 8 $ 25 $ 44 $ 98
- 2 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following audited financial information for the Fund for the fiscal
periods ended August 31, 1997 and thereafter has been audited by Arthur Andersen
LLP, independent auditors, and should be read in conjunction with the financial
statements. The audited financial information for the fiscal period ended August
31, 1996 was audited by other independent accountants. The financial statements
as of September 30, 1998 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<TABLE>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year One Month Year Period
Ended Ended Ended Ended
Sept. 30, Sept. 30, August 31, August 31,
1998 1997(A) 1997 1996(B)
<S> <C> <C> <C> <C>
Net asset value at beginning of period ................$ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- ----------
Net investment income ................................. 0.050 0.004 0.050 0.046(C)
--------- ----------- ---------- -------------
Dividends from net investment income .................. (0.050) (0.004) (0.050) (0.046)
---------- ---------- ---------- -------------
Net asset value at end of period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ============
Total return .......................................... 5.07% 4.99%(E) 5.14% 4.70%
=========== =========== =========== =============
Net assets at end of period (000's) ................... $ 18,492 73,821 $ 94,569 $ 76,363
=========== =========== ========== ==============
Ratio of net expenses to average net assets(D) ......... 0.79% 0.80%(E) 0.65% 0.65%(E)
Ratio of net investment income to average net assets .. 4.95% 4.99%(E) 5.03% 4.94%(E)
<FN>
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end, subsequent to
August 31, 1997, was changed to September 30.
(B) Represents the period from the commencement of operations (September 29, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Absent fee waivers and/or expense reimbursements, the ratios of expenses to average net assets would have been 0.79% and
0.99%(E) for the periods ended August 31, 1997 and 1996, respectively.
(E) Annualized.
</FN>
</TABLE>
- 3 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Investment Trust (the "Trust"). The
Fund seeks high current income, consistent with liquidity and stability of
principal. The Fund is not intended to be a complete investment program, and
there is no assurance that its investment objective can be achieved. The
investment objective of the Fund is fundamental and as such may not be changed
without the affirmative vote of a majority of the outstanding shares of the
Fund. The term "majority" of the outstanding shares means the lesser of (1) 67%
or more of the outstanding shares of the Fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented at such meeting or (2) more than 50% of the outstanding shares of
the Fund.
The Fund seeks to achieve its investment objective by investing in
securities determined by the Board of Trustees to be of high quality and to
present minimal credit risks, maturing within thirteen months or less with a
dollar-weighted average portfolio maturity of 90 days or less. Unless otherwise
indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval. The Fund invests in the following securities:
o obligations of domestic financial institutions including certificates
of deposit, bankers' acceptances and time deposits.
o obligations of foreign branches of U.S. banks (Eurodollars)
consisting of certificates of deposit, bankers' acceptances and
time deposits.
o obligations of the U.S. Government or any of its agencies or
instrumentalities which may be backed by the creditworthiness of
the issuing agency.
o short-term corporate obligations, consisting of commercial paper, notes,
and bonds, with remaining maturities of 397 days or less.
o repurchase agreements with member banks of the Federal Reserve System and
primary dealers in U.S. Government securities with respect to any security
in which the Fund is authorized to invest.
- 4 -
<PAGE>
o obligations issued by highly rated U.S. insurance companies
including guaranteed investment contracts and similar funding
agreements.
o taxable and tax-exempt municipal securities.
o other short-term debt obligations of domestic issuers
discussed in this Prospectus.
The Fund may invest in obligations of foreign branches of U.S. banks
(Eurodollars). Payment of interest and principal upon these obligations may also
be affected by governmental action in the country of domicile of the branch
(generally referred to as sovereign risk). In addition, evidences of ownership
of portfolio securities may be held outside of the U.S. and the Fund may be
subject to the risks associated with the holding of such property overseas.
Various provisions of federal law governing the establishment and operation of
domestic branches do not apply to foreign branches of domestic banks. The
Adviser, subject to the overall supervision of the Board of Trustees, carefully
considers these factors when making investments. The Fund does not limit the
amount of its assets which can be invested in any one type of instrument or in
any foreign country in which a branch of a U.S. bank or the parent of a U.S.
branch is located. Investments in obligations of foreign banks are subject to
the overall limit of 25% of total assets which may be invested in a single
industry.
Available cash invested in the Fund earns income at current money
market rates while remaining conveniently liquid. In order to provide full
liquidity, the Fund will seek to maintain a stable $1.00 share price; limit
portfolio average maturity to 90 days or less; buy U.S. dollar-denominated
securities which mature in 397 days or less; and buy only high quality
securities with minimal credit risks. As required by Rule 2a-7 under the
Investment Company Act of 1940 ("Rule 2a-7"), the Board of Trustees will monitor
the quality of the Fund's investments.
Of course, a $1.00 share price cannot be guaranteed, but these
practices help to minimize any price fluctuations that might result from rising
or declining interest rates. Accordingly, while the Fund invests in high quality
securities, investors should be aware that an investment is not without risk
even if all securities are paid in full at maturity. All money market
instruments, including U.S. Government securities, can change in value when
interest rates change or an issuer's creditworthiness changes.
- 5 -
<PAGE>
The Fund's yield will fluctuate due to changes in interest rates,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. The portfolio securities held by the Fund are subject to price
fluctuations based upon changes in the level of interest rates, which will
generally result in all those securities changing in the same way, i.e., all
those securities experiencing appreciation when interest rates decline and
depreciation when interest rates rise. In addition, the financial condition of
an issuer or adverse changes in general economic conditions, or both, may impair
the issuer's ability to make payments of interest and principal.
LIMITING INVESTMENT RISKS. The Fund follows specific guidelines in buying
portfolio securities:
The Fund will only purchase obligations that (i) are rated high quality
by any two of the following nationally recognized rating services: Duff & Phelps
Inc. ("Duff"), Fitch Investors Service, Inc. ("Fitch"), Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P") and Thomson
BankWatch, Inc., if rated by two or more of such services; (ii) are rated high
quality by any one rating service if rated by only one rating service; or (iii)
if unrated, are determined to be of equivalent quality pursuant to procedures
reviewed by the Board of Trustees. Obligations that are not rated are not
necessarily of lower quality than those which are rated, but may be less
marketable and therefore may provide higher yields.
Currently, only obligations in the top two categories are considered to
be rated high quality for commercial paper. The two highest rating categories of
Duff, Fitch, Moody's, S&P and Thomson are Duff 1 and Duff 2, Fitch-1 and Fitch-
2, Prime-1 and Prime-2, A-1 and A-2, and TBW-1 and TBW-2, respectively. Under
Rule 2a-7, the Fund is not permitted to invest more than 5% of its total assets
in securities that would be considered to be in the second highest rating
category, and, subject to this limitation, the Fund may not invest more than
the greater of 1% of its total assets or $1 million in such securities of any
one issuer. The Fund may purchase an instrument rated below highest quality by a
rating service if two other services have given that instrument a highest
quality rating ("split rated" obligation), and if the Adviser considers that
the instrument presents minimal credit risks.
For other corporate obligations, the two highest rating categories are
AAA and AA by Duff, Fitch, S&P and Thomson and Aaa and Aa by Moody's. For a
more complete description of these ratings, see the Statement of Additional
Information.
- 6 -
<PAGE>
The Fund will commit no more than 10% of its net assets to illiquid
securities, including repurchase agreements maturing in more than seven days.
In addition, the Fund has certain other limitations. As a matter of
nonfundamental policy, the Fund will limit the percentage allocation of its
investments so as to comply with Rule 2a-7, which generally limits to 5% of
total assets the amount which may be invested in the securities of any one
issuer and to no more than 25% of total assets the amount which may be invested
in a particular industry, except that the Fund may invest more than 25% of total
assets in the securities of banks.
Currently, the Securities and Exchange Commission defines the term
"bank" to include U.S. banks and their foreign branches if, in the case of
foreign branches, the parent U.S. bank is unconditionally liable for such
obligations. These limitations do not apply to obligations of the U.S.
Government or any of its agencies or instrumentalities. The Fund does not
consider utilities or companies engaged in finance generally to be one industry.
Finance companies will be considered a part of the industry they finance (e.g.,
GMAC-auto; VISA-credit cards). Utilities will be divided according to the types
of services they provide; for example, gas, gas transmission, electric and gas,
electric and telephone will each be considered a separate industry.
The Fund may borrow money from banks or from other lenders, but not in
an amount exceeding 33 1/3% of the current value of its total assets.
As a matter of operating policy, the Fund does not intend to purchase
securities for investment during periods when the sum of bank borrowings exceed
5% of its total assets. This operating policy is not fundamental and may be
changed without shareholder notification.
OTHER INVESTMENT PRACTICES
SECURITIES LENDING. In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. While the lending of securities may
subject the Fund to certain risks, such as delays or the inability to regain the
securities in the event the borrower were to default on its lending agreement or
enter into bankruptcy, the Fund will receive at least 100% collateral in the
form of cash or U.S. Government securities. This collateral will be valued daily
by the Adviser and should the market value of the loaned securities increase,
the borrower will furnish additional collateral to the Fund.
- 7 -
<PAGE>
During the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to termination
by the Fund or the borrower at any time. While the Fund does not have the right
to vote securities on loan, the Fund intends to terminate the loan and regain
the right to vote if that is considered important with respect to the
investment. The Fund will only enter into loan arrangements with broker-dealers,
banks or other institutions which the Adviser has determined are creditworthy
under guidelines established by the Board of Trustees.
BORROWING. The Fund may borrow money from banks or from other lenders to the
extent permitted under applicable law, for temporary or emergency purposes and
to meet redemptions, and may pledge its assets to secure such borrowings.
Borrowing for investment increases both investment opportunity and investment
risk. This is the speculative factor known as leverage. Such borrowings in no
way affect the federal tax status of the Fund or its dividends.
The Investment Company Act of 1940 (the "1940 Act") requires the Fund
to maintain asset coverage of at least 300% for all such borrowings, and should
such asset coverage at any time fall below 300%, the Fund would be required to
reduce its borrowings within three days to the extent necessary to meet the
requirements of the 1940 Act. To reduce its borrowings, the Fund might be
required to sell securities at a time when it would be disadvantageous to do so.
In addition, because interest on money borrowed is a Fund expense that
it would not otherwise incur, the Fund may have less net investment income
during periods when its borrowings are substantial. The interest paid by the
Fund on borrowings may be more or less than the yield on the securities
purchased with borrowed funds, depending on prevailing market conditions.
MUNICIPAL SECURITIES. The Fund may invest in taxable and tax-exempt municipal
securities. Municipal securities consist of (i) debt obligations issued by or on
behalf of public authorities to obtain funds to be used for various public
facilities, for refunding outstanding obligations, for general operating
expenses, and for lending such funds to other public institutions and
facilities; and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair, or improvement of privately operated
facilities. Municipal notes include general obligation notes, tax anticipation
notes, revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes and participation
interests in municipal notes. Municipal bonds
- 8 -
<PAGE>
include general obligation bonds, revenue or special obligation bonds, private
activity and industrial development bonds, and participation interests in
municipal bonds. General obligation bonds are backed by the taxing power of the
issuing municipality. Revenue bonds are backed by the revenues of a project or
facility. The payment of principal and interest on private activity and
industrial development bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property so financed as security for such payment.
WHEN-ISSUED SECURITIES. The Fund may also purchase securities on a "when-issued"
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield and thereby involve a risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. The Fund will generally not pay for such
securities or start earning interest on them until they are received. When the
Fund agrees to purchase securities on a "when-issued" basis, its custodian will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a segregated account. Securities purchased on a "when-issued"
basis are recorded as an asset and are subject to changes in value based upon
changes in the general level of interest rates. The Fund expects that
commitments to purchase "when-issued" securities will not exceed 25% of the
value of its total assets under normal market conditions and that a commitment
to purchase "when-issued" securities will not exceed 60 days. In the event its
commitment to purchase "when-issued" securities ever exceeded 25% of the value
of its assets, the Fund's liquidity and the Adviser's ability to manage it might
be adversely affected. The Fund does not intend to purchase "when- issued"
securities for speculative purposes, but only for the purpose of acquiring
portfolio securities.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may acquire variable and
floating rate securities, subject to the Fund's investment objective, policies
and restrictions. A variable rate security is one whose terms provide for the
readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate security is one whose terms provide
for the readjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under a
repurchase agreement, the Fund acquires a debt instrument for a relatively short
period (usually not more
- 9 -
<PAGE>
than one week), subject to the obligation of the seller to purchase and the Fund
to resell such debt instrument at a fixed price. The resale price is in excess
of the purchase price in that it reflects an agreed-upon market interest rate
effective for the period of time during which the Fund's money is invested. The
Fund's repurchase agreements will at all times be fully collateralized in an
amount at least equal to 100% of the purchase price including accrued interest
earned on the underlying securities. The instruments held as collateral are
valued daily by the Adviser and as the value of instruments declines, the Fund
will require additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Fund may incur a
loss. If such a defaulting seller were to become insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws,
disposition of the underlying securities could involve certain costs or delays
pending court action. Finally, it is not certain whether the Fund would be
entitled, as against a claim of the seller or its receiver, trustee in
bankruptcy or creditors, to retain the underlying securities. Repurchase
agreements are considered by the staff of the Securities and Exchange Commission
to be loans by the Fund.
GUARANTEED INVESTMENT CONTRACTS. The Fund may make investments in obligations
issued by highly rated U.S. insurance companies, such as guaranteed investment
contracts and similar funding agreements (collectively "GICs"). A GIC is a
general obligation of the issuing insurance company and not a separate account.
Under these contracts, the Fund makes cash contributions to a deposit fund of
the insurance company's general account. The insurance company then credits to
the Fund on a monthly basis guaranteed interest which is based on an index. The
GICs provide that this guaranteed interest will not be less than a certain
minimum rate. GIC investments that do not provide for payment within seven days
after notice are subject to the Fund's policy regarding investments in illiquid
securities.
INVESTMENT COMPANY SECURITIES. The Fund may invest in the securities of other
investment companies to the extent permissible under the applicable regulations
and interpretations of the 1940 Act or an exemptive order.
ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES. The Fund may invest up to 10% of
its net assets in illiquid investments (investments that cannot be readily sold
within seven days), including restricted securities which do not meet the
criteria for liquidity established by the Board of Trustees. The Adviser, under
the supervision of the Board of Trustees, determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for
- 10 -
<PAGE>
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses. Restricted Securities are
securities which cannot be sold to the public without registration under the
Securities Act of 1933. Unless registered for sale, these securities can only be
sold in privately negotiated transactions or pursuant to an exemption from
registration.
PRIVATE PLACEMENT INVESTMENTS. The Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities laws and is generally sold to institutional
investors who agree that they are purchasing the paper for investment purposes
and not with a view to public distribution. Any resale by the purchaser must be
in an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Adviser believes that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Fund intends
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Fund does not intend to subject such paper to
the limitation applicable to restricted securities.
The ability of the Board of Trustees to determine the liquidity of
certain restricted securities is permitted under a position of the staff of the
Securities and Exchange Commission set forth in the adopting release for Rule
144A under the Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive
safe-harbor for certain secondary market transactions involving securities
subject to restrictions on resale under federal securities laws. The Rule
provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule was expected to further
enhance the liquidity of the secondary market for securities eligible for resale
under Rule 144A. The staff of the Securities and Exchange Commission has left
the question of determining the liquidity of all restricted securities to the
Trustees. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities (including Section 4(2) commercial
paper): the frequency of trades and quotes for the security; the number of
dealers willing to purchase or sell the security and the number of other
potential buyers; dealer
- 11 -
<PAGE>
undertakings to make a market in the security; and the nature of the security
and the nature of the marketplace trades. The Trustees have delegated to the
Adviser the daily function of determining and monitoring the liquidity of
restricted securities pursuant to the above criteria and guidelines adopted by
the Board of Trustees. The Trustees will monitor and periodically review the
Adviser's selection of Rule 144A and Section 4(2) commercial paper as well as
any determinations as to its liquidity.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. Shares of the Fund are sold on a continuous
basis at the net asset value next determined after receipt of a purchase order
by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an
initial investment in the Fund by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Money Market Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month
a written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
- 12 -
<PAGE>
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 Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the 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.
- 13 -
<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.
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, including
Roth IRAs and Education IRAs
-- 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.
- 14 -
<PAGE>
InvestPlus Plan
----------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
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, government 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 having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within 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.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer
- 15 -
<PAGE>
Agent to obtain this form. Further documentation will be required to change the
designated account if shares are held by a corporation, fiduciary or other
organization.
The Transfer Agent reserves the right to suspend the telephone
redemption privilege with respect to any account if the name(s) or the address
on the account has been changed within the previous 30 days.
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. If the
name(s) or the address on your account has been changed within 30 days of your
redemption request, you will be required to request the redemption in writing
with your signature guaranteed, regardless of the value of the shares being
redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
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.
- 16 -
<PAGE>
If the amount of a check is greater than the value of the shares held
in your account, the check will be returned. A check representing a redemption
request will take precedence over any other redemption instructions issued by a
shareholder.
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check redemption
privilege. After six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals.
The Transfer Agent charges shareholders its costs for each stop payment
and each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption procedure may be
suspended or terminated at any time upon written notice by the Trust or the
Transfer Agent.
Shareholders who invest in the Fund through a cash sweep or similar
program with a financial institution are not eligible for the checkwriting
privilege.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee. The Trust reserves
the right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of
- 17 -
<PAGE>
your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested unaffected by market fluctuations), or
such other minimum amount as the Trust may determine from time to time. After
notification to you of the Trust's intention to close your account, you will be
given thirty days to increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the 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 may be imposed (if applicable) equal
to the excess, if any, of the sales load rate applicable to the shares being
acquired over the sales load rate, if any, previously paid on the shares being
exchanged.
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
- -------------------------- ---------------------------
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund Countrywide Investment Trust
----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
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
Transfer Agent's 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 Transfer Agent's offices at 312 Walnut Street, 21st
- 18 -
<PAGE>
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
upon 60 days' prior notice to shareholders. An exchange results in a sale of
fund shares, which may cause you to recognize a capital gain or loss. Before
making an exchange, contact the Transfer Agent to obtain a current prospectus
for any of the other funds of Countrywide Investments and more information about
exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ----------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it will
distribute them at least once each year.
Dividends are automatically reinvested in additional shares of the Fund
(the Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting the Transfer Agent. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested in
your account at the then-current net asset value and your account will be
converted to the Share Option. No interest will accrue on amounts represented by
uncashed distribution checks.
TAXES
- -----
The Fund 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
- 19 -
<PAGE>
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 five other series of the Trust, seven 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.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution 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
- 20 -
<PAGE>
expenses of members of the Board of Trustees who are not interested persons of
the Trust, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or non-recurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Trust's officers and Trustees with respect thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the 1940 Act
and procedures adopted by the Board of Trustees, the Fund may execute portfolio
transactions through any broker or dealer and pay brokerage commissions to a
broker (i) which is an affiliated person of the Trust, or (ii) which is an
affiliated person of such person, or (iii) an affiliated person of which is an
affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the 1940 Act or otherwise. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
- 21 -
<PAGE>
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the 1940 Act in order to facilitate
communications among shareholders.
FIRSTCINCO, 425 Walnut Street, Cincinnati, Ohio, may be deemed to
control the 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 PLAN
- -----------------
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a plan of
distribution (the "Plan") under which the Fund may directly incur or reimburse
the Adviser for certain distribution-related expenses, including payments to
securities dealers and others who are engaged in the sale of shares of the Fund
and who may be advising investors regarding the purchase, sale or retention of
Fund shares; expenses of maintaining personnel who engage in or support
distribution of shares or who render shareholder support services not otherwise
provided by the Transfer Agent; expenses of formulating and implementing
marketing and promotional activities, including direct mail promotions and mass
media advertising; expenses of preparing, printing and distributing sales
literature and prospectuses and statements of additional information and reports
for recipients other than existing shareholders of the Fund; expenses of
obtaining such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable; and
any other expenses related to the distribution of the Fund's shares.
Pursuant to the 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 shares of the Fund. For the fiscal
year ended September 30, 1998, the Fund paid $64,529 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 Plan is
.35% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make
- 22 -
<PAGE>
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
- 23 -
<PAGE>
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.
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.
- 24 -
<PAGE>
<TABLE>
ACCOUNT NO. 96-_____________________
Account Application (For Fund Use Only)
<S> <C> <C> <C>
Money Market Fund FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________
Home Office Address: ___________________
Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
========================================================================================================================
Initial Investment of $_______________________
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From:
______________________________________________________________________________________________________________
[ ] Exchange From:
______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial
account please list
minor's S.S.#)
___________________________________________________________________________________________________ Citizenship:[] U.S.
Name of Joint Tenant, Partner, Custodian []Other
Address Phone
___________________________________________________________________________________________________ ( )_______________
Street or P.O. Box Business Phone
___________________________________________________________________________________________________ ( )_______________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer Name/Address______________________________________________________________________________________________
Are you an associated person of an NASD member? [] Yes [] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
=======================================================================================================================
DISTRIBUTIONS (Distributions are reinvested if no choice is indicated)
[ ] Reinvest all distributions
[ ] Pay all distributions in cash
[ ] By Check [ ] By ACH to my bank checking or savings account. PLEASE ATTACH A VOIDED CHECK.
====================================================================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon
receipt of and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Bank Account Number _____________________________________ Bank Routing Transit Number _______________________________
Name of Account Holder _______________________________________________________________________________________________
Bank Name _________________________________________________________ Bank Address ______________________________________
City State
[ ]CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA)
or otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons
whose signatures appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our)
shares of the Trust. I (we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time.
- --------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number (PIN).
You will need to use this PIN when requesting account information and placing transactions. For institutional accounts,
please use a four digit number. For retail accounts, please use the first four letters of your mother's maiden name.[ ] [ ] [ ] [ ]
===========================================================================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself and
his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Investment Trust, Countrywide Investment
Trust, Countrywide Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in
the performance of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide
Fund Services, Inc., or both will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust
and/or Countrywide Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring forms of personal identification prior to acting
upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions.
are genuine.
___________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Signature of Joint Owner, if Any
Trustee, etc.
________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
==========================================================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Investment Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________ per month in the Fund.
ABA Routing Number______________________________
FI Account Number________________________________
[] Checking Account [] Savings Account
____________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
______________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X_____________________________________________________________________ X_______________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check for from your checking account or a voided deposit/withdrawal slip from your savings
account for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly -- Withdrawals will be made on the last business day of each month.
[ ] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Countywide account number:_ _-- _ _ _ _--_
[ ] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[ ] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[ ] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided check for ACH or bank wire____________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[ ] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of payee___________________________________________________________________________________________________________________
Please send to:__________________________________________________________________________________________________________________
Street address City State Zip
===================================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Investment Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
(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.
</TABLE>
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 25 -
<PAGE>
TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies. . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . .
Exchange Privilege . . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund . . . . . . . . . . . . . . . . . . .
Distribution Plan . . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . . . .
- -----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 26 -
<PAGE>
PROSPECTUS
November 30, 1998
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
MONEY MARKET FUND
The Money Market Fund (the "Fund"), a separate series of Countrywide
Investment Trust, seeks high current income, consistent with liquidity and
stability of principal. The Fund invests primarily in high-quality U.S.
dollar-denominated money market instruments.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS.
FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT
OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997, the
Fund, on August 29, 1997, succeeded to the assets and liabilities of another
mutual fund of the same name (the "Predecessor Fund"), which was an investment
series of Trans Adviser Funds, Inc. The investment objective, policies and
restrictions of the Fund and the Predecessor Fund are substantially identical.
This Prospectus sets forth concisely the information about the Fund that
you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 30, 1998 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please
contact your broker, or call us at the above number.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
- -------------------
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Redemption Fee None*
* A wire transfer fee is charged in the case of redemptions
made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
- ------------------------------
Management Fees .49%
12b-1 Fees .11%(A)
Other Expenses .19%
----
Total Fund Operating Expenses .79%
====
(A) The Fund may incur 12b-1 fees in an amount up to .35% of its average
net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
The purpose of 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 by the Fund during the most recent fiscal year. The Adviser
will, until at least August 31, 1999, waive fees and reimburse expenses to the
extent necessary to limit total operating expenses to .80% of the Fund's average
net assets. THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
$ 8 $ 25 $ 44 $ 98
- 2 -
<PAGE>
FINANCIAL HIGHLIGHTS
- ---------------------
The following audited financial information for the Fund for the fiscal
periods ended August 31, 1997 and thereafter has been audited by Arthur Andersen
LLP, independent auditors, and should be read in conjunction with the financial
statements. The audited financial information for the fiscal period ended August
31, 1996 was audited by other independent accountants. The financial statements
as of September 30, 1998 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<TABLE>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year One Month Year Period
Ended Ended Ended Ended
Sept. 30, Sept. 30, August 31, August 31,
1998 1997(A) 1997 1996(B)
<S> <C> <C> <C> <C>
Net asset value at beginning of period ................$ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- ----------
Net investment income ................................. 0.050 0.004 0.050 0.046(C)
--------- ----------- ----------- -------------
Dividends from net investment income .................. (0.050) (0.004) (0.050) (0.046)
---------- ---------- ----------- -------------
Net asset value at end of period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ============
Total return .......................................... 5.07% 4.99%(E) 5.14% 4.70%
=========== =========== =========== =============
Net assets at end of period (000's) ................... $ 18,492 73,821 $ 94,569 $ 76,363
=========== =========== ============= ==============
Ratio of net expenses to average net assets(D) ......... 0.79% 0.80%(E) 0.65% 0.65%(E)
Ratio of net investment income to average net assets .. 4.95% 4.99%(E) 5.03% 4.94%(E)
<FN>
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end, subsequent to
August 31, 1997, was changed to September 30.
(B) Represents the period from the commencement of operations (September 29, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Absent fee waivers and/or expense reimbursements, the ratios of expenses to average net assets would have been 0.79% and
0.99%(E) for the periods ended August 31, 1997 and 1996, respectively.
(E) Annualized.
</FN>
</TABLE>
- 3 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ----------------------------------
The Fund is a series of Countrywide Investment Trust (the "Trust"). The
Fund seeks high current income, consistent with liquidity and stability of
principal. The Fund is not intended to be a complete investment program, and
there is no assurance that its investment objective can be achieved. The
investment objective of the Fund is fundamental and as such may not be changed
without the affirmative vote of a majority of the outstanding shares of the
Fund. The term "majority" of the outstanding shares means the lesser of (1) 67%
or more of the outstanding shares of the Fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented at such meeting or (2) more than 50% of the outstanding shares of
the Fund.
The Fund seeks to achieve its investment objective by investing in
securities determined by the Board of Trustees to be of high quality and to
present minimal credit risks, maturing within thirteen months or less with a
dollar-weighted average portfolio maturity of 90 days or less. Unless otherwise
indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval. The Fund invests in the following securities:
o obligations of domestic financial institutions including certificates of
deposit, bankers' acceptances and time deposits.
o obligations of foreign branches of U.S. banks (Eurodollars) consisting of
certificates of deposit, bankers' acceptances and time deposits.
o obligations of the U.S. Government or any of its agencies or
instrumentalities which may be backed by the creditworthiness of the
issuing agency.
o short-term corporate obligations, consisting of commercial paper, notes,
and bonds, with remaining maturities of 397 days or less.
o repurchase agreements with member banks of the Federal Reserve System and
primary dealers in U.S. Government securities with respect to any security
in which the Fund is authorized to invest.
- 4 -
<PAGE>
o obligations issued by highly rated U.S. insurance companies including
guaranteed investment contracts and similar funding agreements.
o taxable and tax-exempt municipal securities.
o other short-term debt obligations of domestic issuers discussed in this
Prospectus.
The Fund may invest in obligations of foreign branches of U.S. banks
(Eurodollars). Payment of interest and principal upon these obligations may also
be affected by governmental action in the country of domicile of the branch
(generally referred to as sovereign risk). In addition, evidences of ownership
of portfolio securities may be held outside of the U.S. and the Fund may be
subject to the risks associated with the holding of such property overseas.
Various provisions of federal law governing the establishment and operation of
domestic branches do not apply to foreign branches of domestic banks. The
Adviser, subject to the overall supervision of the Board of Trustees, carefully
considers these factors when making investments. The Fund does not limit the
amount of its assets which can be invested in any one type of instrument or in
any foreign country in which a branch of a U.S. bank or the parent of a U.S.
branch is located. Investments in obligations of foreign banks are subject to
the overall limit of 25% of total assets which may be invested in a single
industry.
Available cash invested in the Fund earns income at current money
market rates while remaining conveniently liquid. In order to provide full
liquidity, the Fund will seek to maintain a stable $1.00 share price; limit
portfolio average maturity to 90 days or less; buy U.S. dollar-denominated
securities which mature in 397 days or less; and buy only high quality
securities with minimal credit risks. As required by Rule 2a-7 under the
Investment Company Act of 1940 ("Rule 2a-7"), the Board of Trustees will monitor
the quality of the Fund's investments.
Of course, a $1.00 share price cannot be guaranteed, but these
practices help to minimize any price fluctuations that might result from rising
or declining interest rates. Accordingly, while the Fund invests in high quality
securities, investors should be aware that an investment is not without risk
even if all securities are paid in full at maturity. All money market
instruments, including U.S. Government securities, can change in value when
interest rates change or an issuer's creditworthiness changes.
- 5 -
<PAGE>
The Fund's yield will fluctuate due to changes in interest rates,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. The portfolio securities held by the Fund are subject to price
fluctuations based upon changes in the level of interest rates, which will
generally result in all those securities changing in the same way, i.e., all
those securities experiencing appreciation when interest rates decline and
depreciation when interest rates rise. In addition, the financial condition of
an issuer or adverse changes in general economic conditions, or both, may impair
the issuer's ability to make payments of interest and principal.
LIMITING INVESTMENT RISKS. The Fund follows specific guidelines in buying
portfolio securities:
The Fund will only purchase obligations that (i) are rated high quality
by any two of the following nationally recognized rating services: Duff & Phelps
Inc. ("Duff"), Fitch Investors Service, Inc. ("Fitch"), Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P") and Thomson
BankWatch, Inc., if rated by two or more of such services; (ii) are rated high
quality by any one rating service if rated by only one rating service; or (iii)
if unrated, are determined to be of equivalent quality pursuant to procedures
reviewed by the Board of Trustees. Obligations that are not rated are not
necessarily of lower quality than those which are rated, but may be less
marketable and therefore may provide higher yields.
Currently, only obligations in the top two categories are considered to
be rated high quality for commercial paper. The two highest rating categories of
Duff, Fitch, Moody's, S&P and Thomson are Duff 1 and Duff 2, Fitch-1 and Fitch-
2, Prime-1 and Prime-2, A-1 and A-2, and TBW-1 and TBW-2, respectively. Under
Rule 2a-7, the Fund is not permitted to invest more than 5% of its total assets
in securities that would be considered to be in the second highest rating
category, and, subject to this limitation, the Fund may not invest more than
the greater of 1% of its total assets or $1 million in such securities of any
one issuer. The Fund may purchase an instrument rated below highest quality by a
rating service if two other services have given that instrument a highest
quality rating ("split rated" obligation), and if the Adviser considers that
the instrument presents minimal credit risks.
For other corporate obligations, the two highest rating categories are
AAA and AA by Duff, Fitch, S&P and Thomson and Aaa and Aa by Moody's. For a
more complete description of these ratings, see the Statement of Additional
Information.
- 6 -
<PAGE>
The Fund will commit no more than 10% of its net assets to illiquid
securities, including repurchase agreements maturing in more than seven days.
In addition, the Fund has certain other limitations. As a matter of
nonfundamental policy, the Fund will limit the percentage allocation of its
investments so as to comply with Rule 2a-7, which generally limits to 5% of
total assets the amount which may be invested in the securities of any one
issuer and to no more than 25% of total assets the amount which may be invested
in a particular industry, except that the Fund may invest more than 25% of total
assets in the securities of banks.
Currently, the Securities and Exchange Commission defines the term
"bank" to include U.S. banks and their foreign branches if, in the case of
foreign branches, the parent U.S. bank is unconditionally liable for such
obligations. These limitations do not apply to obligations of the U.S.
Government or any of its agencies or instrumentalities. The Fund does not
consider utilities or companies engaged in finance generally to be one industry.
Finance companies will be considered a part of the industry they finance (e.g.,
GMAC-auto; VISA-credit cards). Utilities will be divided according to the types
of services they provide; for example, gas, gas transmission, electric and gas,
electric and telephone will each be considered a separate industry.
The Fund may borrow money from banks or from other lenders, but not in
an amount exceeding 33 1/3% of the current value of its total assets.
As a matter of operating policy, the Fund does not intend to purchase
securities for investment during periods when the sum of bank borrowings exceed
5% of its total assets. This operating policy is not fundamental and may be
changed without shareholder notification.
OTHER INVESTMENT PRACTICES
SECURITIES LENDING. In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. While the lending of securities may
subject the Fund to certain risks, such as delays or the inability to regain the
securities in the event the borrower were to default on its lending agreement or
enter into bankruptcy, the Fund will receive at least 100% collateral in the
form of cash or U.S. Government securities. This collateral will be valued daily
by the Adviser and should the market value of the loaned securities increase,
the borrower will furnish additional collateral to the Fund.
- 7 -
<PAGE>
During the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to termination
by the Fund or the borrower at any time. While the Fund does not have the right
to vote securities on loan, the Fund intends to terminate the loan and regain
the right to vote if that is considered important with respect to the
investment. The Fund will only enter into loan arrangements with broker-dealers,
banks or other institutions which the Adviser has determined are creditworthy
under guidelines established by the Board of Trustees.
BORROWING. The Fund may borrow money from banks or from other lenders to the
extent permitted under applicable law, for temporary or emergency purposes and
to meet redemptions, and may pledge its assets to secure such borrowings.
Borrowing for investment increases both investment opportunity and investment
risk. This is the speculative factor known as leverage. Such borrowings in no
way affect the federal tax status of the Fund or its dividends.
The Investment Company Act of 1940 (the "1940 Act") requires the Fund
to maintain asset coverage of at least 300% for all such borrowings, and should
such asset coverage at any time fall below 300%, the Fund would be required to
reduce its borrowings within three days to the extent necessary to meet the
requirements of the 1940 Act. To reduce its borrowings, the Fund might be
required to sell securities at a time when it would be disadvantageous to do so.
In addition, because interest on money borrowed is a Fund expense that
it would not otherwise incur, the Fund may have less net investment income
during periods when its borrowings are substantial. The interest paid by the
Fund on borrowings may be more or less than the yield on the securities
purchased with borrowed funds, depending on prevailing market conditions.
MUNICIPAL SECURITIES. The Fund may invest in taxable and tax-exempt municipal
securities. Municipal securities consist of (i) debt obligations issued by or on
behalf of public authorities to obtain funds to be used for various public
facilities, for refunding outstanding obligations, for general operating
expenses, and for lending such funds to other public institutions and
facilities; and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair, or improvement of privately operated
facilities. Municipal notes include general obligation notes, tax anticipation
notes, revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes and participation
interests in municipal notes. Municipal bonds
- 8 -
<PAGE>
include general obligation bonds, revenue or special obligation bonds, private
activity and industrial development bonds, and participation interests in
municipal bonds. General obligation bonds are backed by the taxing power of the
issuing municipality. Revenue bonds are backed by the revenues of a project or
facility. The payment of principal and interest on private activity and
industrial development bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property so financed as security for such payment.
WHEN-ISSUED SECURITIES. The Fund may also purchase securities on a "when-issued"
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield and thereby involve a risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. The Fund will generally not pay for such
securities or start earning interest on them until they are received. When the
Fund agrees to purchase securities on a "when-issued" basis, its custodian will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a segregated account. Securities purchased on a "when-issued"
basis are recorded as an asset and are subject to changes in value based upon
changes in the general level of interest rates. The Fund expects that
commitments to purchase "when-issued" securities will not exceed 25% of the
value of its total assets under normal market conditions and that a commitment
to purchase "when-issued" securities will not exceed 60 days. In the event its
commitment to purchase "when-issued" securities ever exceeded 25% of the value
of its assets, the Fund's liquidity and the Adviser's ability to manage it might
be adversely affected. The Fund does not intend to purchase "when- issued"
securities for speculative purposes, but only for the purpose of acquiring
portfolio securities.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may acquire variable and
floating rate securities, subject to the Fund's investment objective, policies
and restrictions. A variable rate security is one whose terms provide for the
readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate security is one whose terms provide
for the readjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under a
repurchase agreement, the Fund acquires a debt instrument for a relatively short
period (usually not more
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<PAGE>
than one week), subject to the obligation of the seller to purchase and the Fund
to resell such debt instrument at a fixed price. The resale price is in excess
of the purchase price in that it reflects an agreed-upon market interest rate
effective for the period of time during which the Fund's money is invested. The
Fund's repurchase agreements will at all times be fully collateralized in an
amount at least equal to 100% of the purchase price including accrued interest
earned on the underlying securities. The instruments held as collateral are
valued daily by the Adviser and as the value of instruments declines, the Fund
will require additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Fund may incur a
loss. If such a defaulting seller were to become insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws,
disposition of the underlying securities could involve certain costs or delays
pending court action. Finally, it is not certain whether the Fund would be
entitled, as against a claim of the seller or its receiver, trustee in
bankruptcy or creditors, to retain the underlying securities. Repurchase
agreements are considered by the staff of the Securities and Exchange Commission
to be loans by the Fund.
GUARANTEED INVESTMENT CONTRACTS. The Fund may make investments in obligations
issued by highly rated U.S. insurance companies, such as guaranteed investment
contracts and similar funding agreements (collectively "GICs"). A GIC is a
general obligation of the issuing insurance company and not a separate account.
Under these contracts, the Fund makes cash contributions to a deposit fund of
the insurance company's general account. The insurance company then credits to
the Fund on a monthly basis guaranteed interest which is based on an index. The
GICs provide that this guaranteed interest will not be less than a certain
minimum rate. GIC investments that do not provide for payment within seven days
after notice are subject to the Fund's policy regarding investments in illiquid
securities.
INVESTMENT COMPANY SECURITIES. The Fund may invest in the securities of other
investment companies to the extent permissible under the applicable regulations
and interpretations of the 1940 Act or an exemptive order.
ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES. The Fund may invest up to 10% of
its net assets in illiquid investments (investments that cannot be readily sold
within seven days), including restricted securities which do not meet the
criteria for liquidity established by the Board of Trustees. The Adviser, under
the supervision of the Board of Trustees, determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for
- 10 -
<PAGE>
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses. Restricted Securities are
securities which cannot be sold to the public without registration under the
Securities Act of 1933. Unless registered for sale, these securities can only be
sold in privately negotiated transactions or pursuant to an exemption from
registration.
PRIVATE PLACEMENT INVESTMENTS. The Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities laws and is generally sold to institutional
investors who agree that they are purchasing the paper for investment purposes
and not with a view to public distribution. Any resale by the purchaser must be
in an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Adviser believes that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Fund intends
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Fund does not intend to subject such paper to
the limitation applicable to restricted securities.
The ability of the Board of Trustees to determine the liquidity of
certain restricted securities is permitted under a position of the staff of the
Securities and Exchange Commission set forth in the adopting release for Rule
144A under the Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive
safe-harbor for certain secondary market transactions involving securities
subject to restrictions on resale under federal securities laws. The Rule
provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule was expected to further
enhance the liquidity of the secondary market for securities eligible for resale
under Rule 144A. The staff of the Securities and Exchange Commission has left
the question of determining the liquidity of all restricted securities to the
Trustees. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities (including Section 4(2) commercial
paper): the frequency of trades and quotes for the security; the number of
dealers willing to purchase or sell the security and the number of other
potential buyers; dealer
- 11 -
<PAGE>
undertakings to make a market in the security; and the nature of the security
and the nature of the marketplace trades. The Trustees have delegated to the
Adviser the daily function of determining and monitoring the liquidity of
restricted securities pursuant to the above criteria and guidelines adopted by
the Board of Trustees. The Trustees will monitor and periodically review the
Adviser's selection of Rule 144A and Section 4(2) commercial paper as well as
any determinations as to its liquidity.
HOW TO PURCHASE SHARES
- -----------------------
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. Shares of the Fund are sold on a continuous
basis at the net asset value next determined after receipt of a purchase order
by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an
initial investment in the Fund by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Money Market Fund." An account application is included in this Prospectus.
You will be sent within five business days after the end of each month
a written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month. Certificates
representing shares are not issued. The Trust and the Adviser reserve the rights
to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone redemptions) 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.
- 12 -
<PAGE>
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 Countrywide Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the 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.
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<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.
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, including
Roth IRAs and Education IRAs
-- 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.
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<PAGE>
InvestPlus Plan
----------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
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, government 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 having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within 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.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. You may change the bank or brokerage
account which you have designated under this procedure at any time by writing to
the Transfer Agent with your signature guaranteed by any eligible guarantor
institution (including banks, brokers and dealers, municipal securities brokers
and dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations) or by completing a supplemental telephone redemption
authorization form. Contact the Transfer
- 15 -
<PAGE>
Agent to obtain this form. Further documentation will be required to change the
designated account if shares are held by a corporation, fiduciary or other
organization.
The Transfer Agent reserves the right to suspend the telephone
redemption privilege with respect to any account if the name(s) or the address
on the account has been changed within the previous 30 days.
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. If the
name(s) or the address on your account has been changed within 30 days of your
redemption request, you will be required to request the redemption in writing
with your signature guaranteed, regardless of the value of the shares being
redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee. The Trust reserves
the right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
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<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 the minimum amount required by the Trust for your
account (based on actual amounts invested unaffected by market fluctuations), or
such other minimum amount as the Trust may determine from time to time. After
notification to you of the Trust's intention to close your account, you will be
given thirty days to increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
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. No interest will accrue on amounts represented by
uncashed distribution checks.
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
- 17 -
<PAGE>
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 five other series of the Trust, seven 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.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
- 18 -
<PAGE>
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the 1940 Act
and procedures adopted by the Board of Trustees, the Fund may execute portfolio
transactions through any broker or dealer and pay brokerage commissions to a
broker (i) which is an affiliated person of the Trust, or (ii) which is an
affiliated
- 19 -
<PAGE>
person of such person, or (iii) an affiliated person of which is an affiliated
person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the 1940 Act or otherwise. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the 1940 Act in order to facilitate
communications among shareholders.
FIRSTCINCO, 425 Walnut Street, Cincinnati, Ohio, may be deemed to
control the 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 PLAN
- ------------------
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a plan of
distribution (the "Plan") under which the Fund may directly incur or reimburse
the Adviser for certain distribution-related expenses, including payments to
securities dealers and others who are engaged in the sale of shares of the Fund
and who may be advising investors regarding the purchase, sale or retention of
Fund shares; expenses of maintaining personnel who engage in or support
distribution of shares or who render shareholder support services not otherwise
provided by the Transfer Agent; expenses of formulating and implementing
marketing and promotional activities, including direct mail promotions and mass
media advertising; expenses of preparing, printing and distributing sales
literature and prospectuses and statements of additional information and reports
for recipients other than existing shareholders of the Fund; expenses of
obtaining such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable; and
any other expenses related to the distribution of the Fund's shares.
Pursuant to the 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 shares of the Fund. For the fiscal
year ended September 30, 1998, the Fund paid $64,529 to the Adviser to
- 20 -
<PAGE>
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 Plan is
.35% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which 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.
- 21 -
<PAGE>
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.
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.
- 22 -
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 23 -
<PAGE>
TABLE OF CONTENTS
Expense Information. . . . . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies. . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . .
Dividends and Distributions. . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund . . . . . . . . . . . . . . . . . . .
Distribution Plan . . . . . . . . . . . . . . . . . . . . .
Calculation of Share Price . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . . . .
- -----------------------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 24 -
<PAGE>
PROSPECTUS
November 30, 1998
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
800-543-0407
INTERMEDIATE BOND FUND
The Intermediate Bond Fund (the "Fund"), a separate series of
Countrywide Investment Trust, seeks to provide as high a level of current income
as is consistent with the preservation of capital. The Fund invests in
marketable corporate debt securities, U.S. Government securities,
mortgage-related securities, other asset-backed securities and cash or money
market instruments.
THE FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MUTUAL FUNDS. SHARES OF
THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
Countrywide Investments, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997, the
Fund, on August 29, 1997, succeeded to the assets and liabilities of another
mutual fund of the same name (the "Predecessor Fund"), which was an investment
series of Trans Adviser Funds, Inc. The investment objective, policies and
restrictions of the Fund and the Predecessor Fund are substantially identical.
This Prospectus sets forth concisely the information about the Fund
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated November 30, 1998 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling the above number.
For further information or assistance in opening an account, please
contact your broker, or call us at the above number.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<PAGE>
EXPENSE INFORMATION
- -------------------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . 2%
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price). . . . None*
Sales Load Imposed on Reinvested Dividends. . . . . None
Exchange Fee. . . . . . . . . . . . . . . . . . . . None
Redemption Fee. . . . . . . . . . . . . . . . . . . None**
Check Redemption Processing Fee (per check):
First Six Checks per Month . . . . . . . . . . . None
Additional Checks per Month. . . . . . . . . . . $0.25
* Purchases at net asset value of amounts totaling $1 million or more may
be subject to a contingent deferred sales load of 1% if a redemption
occurred within 12 months of purchase and a commission was paid by the
Adviser to a participating unaffiliated dealer.
** A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See "How to
Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees After Waivers .47%(A)
12b-1 Fees .10%(B)
Other Expenses .38%
----
Total Fund Operating Expenses After Waivers .95%(C)
====
(A) Absent waivers of management fees, such fees would have been .50%.
(B) The Fund may incur 12b-1 fees in an amount up to .35% of its average
net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
(C) Absent waivers of management fees, total Fund operating expenses would
have been .98%.
- 2 -
<PAGE>
The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The percentages expressing annual fund operating expenses are
based on amounts incurred by the Fund during the most recent fiscal year. The
Adviser will, until at least August 31, 1999, waive fees and reimburse expenses
to the extent necessary to limit total operating expenses to .95% of the Fund's
average net assets. THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year $ 30
3 Years $ 50
5 Years $ 71
10 Years $134
- 3 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following audited financial information for the Fund for the fiscal
periods ended August 31, 1997 and thereafter has been audited by Arthur Andersen
LLP, independent auditors, and should be read in conjunction with the financial
statements. The audited financial information for the fiscal period ended August
31, 1996 was audited by other independent accountants. The financial statements
as of September 30, 1998 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800- 543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<TABLE>
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<S> <C> <C> <C> <C>
Year One Month Year Period
Ended Ended Ended Ended
Sept. 30, Sept. 30, August 31, August 31,
1998 1997(A) 1997 1996(B)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .................. $ 10.09 $ 10.00 $ 9.75 $ 10.00
---------- ---------- --------- ----------
Income from investment operations:
Net investment income ................................ 0.62 0.05 0.62 0.57 (C)
Net realized and unrealized gains (losses)
on investments .................................... 0.41 0.09 0.28 (0.25)(C)
---------- ---------- ---------- ------------
Total from investment operations ........................ 1.03 0.14 0.90 0.32
---------- ---------- ---------- ------------
Less distributions:
Dividends from net investment income ................. (0.62) (0.05) (0.62) (0.57)
Distributions from net realized gains ................ -- -- (0.03) --
---------- ---------- ---------- ----------
Total distributions ..................................... (0.62) (0.05) (0.65) (0.57)
---------- ---------- ---------- ----------
Net asset value at end of period ........................ $ 10.50 $ 10.09 $ 10.00 $ 9.75
=========== ========== ========== ==========
Total return(D) ......................................... 10.54% 1.41% 9.48% 3.23%
=========== ========== ========== ==========
Net assets at end of period (000's) ..................... $ 23,718 $ 15,671 $ 15,114 $ 13,357
========== ========== ========== ===========
Ratio of net expenses to average net assets(E) ........... 0.95% 0.95%(F) 0.85% 0.68% (F)
Ratio of net investment income to average net assets .... 6.08% 6.18%(F) 6.26% 6.31% (F)
Portfolio turnover rate ................................. 63% 0% 41% 12%
<FN>
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end, subsequent to
August 31, 1997, was changed to September 30.
(B) Represents the period from the commencement of operations (October 3, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratios of expenses to average net assets would have
been 0.98%, 1.38%(F), 1.53% and 2.04%(F) for the periods ended September 30, 1998, September 30, 1997, August 31, 1997 and
August 31, 1996, respectively.
(F) Annualized.
</FN>
</TABLE>
- 4 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- ---------------------------------
The Fund is a series of Countrywide Investment Trust (the "Trust"). The
Fund seeks to provide as high a level of current income as is consistent with
the preservation of capital. The Fund invests substantially all of its assets in
marketable corporate debt securities, U.S. Government securities,
mortgage-related securities, other asset-backed securities and cash or money
market instruments. Normally, at least 65% of the Fund's total assets will be
invested in bonds (debt securities of the types listed below).
The Fund is not intended to be a complete investment program, and there
is no assurance that its investment objective can be achieved. The Fund's
investment objective is fundamental and as such may not be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. The term
"majority" of the outstanding shares means the lesser of (1) 67% or more of the
outstanding shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented at such
meeting or (2) more than 50% of the outstanding shares of the Fund. Unless
otherwise indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.
Under normal circumstances, at least 60% of the Fund's total assets
will be invested, measured at the time of any purchase, in the following
categories of securities:
o marketable corporate debt securities, such as bonds,
rated at the time of purchase within the three highest
investment grade ratings (A or better) assigned by any
of the nationally recognized rating services, including
Moody's Investors Service, Inc. ("Moody's") or Standard
& Poor's Ratings Group ("S&P") or, if not rated by these
rating services, determined by the Adviser as being of
investment quality equivalent to securities rated A or
better;
o U.S. Government securities including (1) direct
obligations of the U.S. Treasury (such as Treasury
bills, notes and bonds) and inflation-indexed bonds
issued by the U.S. Treasury whose principal value is
periodically adjusted according to the rate of
inflation, (2) obligations guaranteed as to principal
and interest by the U.S. Treasury such as Government
National Mortgage Association certificates (described
below) and Federal Housing Administration debentures,
and (3) securities issued by U.S. Government
instrumentalities and certain federal agencies that are
neither direct obligations of, nor guaranteed by, the
U.S. Treasury;
- 5 -
<PAGE>
o mortgage-related securities rated A or better, or
unrated securities that are determined to be of
equivalent quality of (1) governmental issuers,
including Government National Mortgage Association
certificates, which are securities representing
part ownership of a pool of mortgage loans on which
timely payment of interest and principal is
guaranteed by the U.S. Government, and securities
issued and guaranteed as to the payment of interest
and principal by the Federal National Mortgage
Association or the Federal Home Loan Mortgage
Corporation (but not backed by the U.S.
Government); (2) private issuers, including
mortgage pass-through certificates or mortgage-
backed bonds; and (3) the governmental issuers
mentioned above or private issuers, including
collateralized mortgage obligations and real estate
mortgage investment conduits which are issued in
portions or tranches with varying maturities and
characteristics; some tranches may only receive the
interest paid on the underlying mortgages (IOs) and
others may only receive the principal payments
(POs); the values of IOs and POs are extremely
sensitive to interest rate fluctuations and
prepayment rates, and IOs are also subject to the
risk of early prepayment of the underlying
mortgages which will substantially reduce or
eliminate interest payments (see the Statement of
Additional Information for more about these
securities);
o other asset-backed securities rated A or better or
unrated securities that are determined by the
Adviser to be of equivalent quality (unrelated to
mortgage loans) such as securities whose assets
consist of a pool of motor vehicle retail
installment sales contracts and security interests
in the vehicles securing the contracts or a pool of
credit card loan receivables (see the Statement of
Additional Information for more about these
securities); and
o cash or money market instruments, including
commercial bank obligations (certificates of
deposit, which are interest-bearing time deposits;
bankers' acceptances, which are time drafts on a
commercial bank where the bank accepts an
irrevocable obligation to pay at maturity and
demand or time deposits) and commercial paper
(short-term notes with maturities of up to nine
months issued by corporations or government
bodies).
- 6 -
<PAGE>
The remaining 40% of the Fund's assets, measured at the time of
purchase, may be invested in debt securities rated below A or unrated securities
that are determined to be of equivalent quality, including marketable corporate
debt securities, mortgage-related securities and other asset-backed securities.
Securities rated within the fourth highest category (BBB or Baa) may have
speculative characteristics and display a weakened ability to pay interest and
repay principal under adverse economic conditions or changing circumstances.
However, securities rated lower than BBB or Baa or unrated securities that are
determined to be of equivalent quality (commonly known as "junk" or "high-yield,
high-risk" bonds) will represent less than 20% of the Fund's net assets and are
subject to independent investment analysis by the Adviser before purchase. The
Fund may from time to time invest in fixed-income securities of corporations
outside the U.S. or governmental entities, and the Fund may purchase or sell
various currencies on either a spot or forward basis in connection with these
investments.
The maturity composition of the Fund's portfolio of fixed-income
securities will be adjusted in response to market conditions and expectations.
There are no restrictions on the maturity composition of the portfolio, although
it is anticipated that the Fund normally will be invested substantially in
intermediate-term (3 to 10 years to maturity) and long-term (over 10 years to
maturity) securities and have a dollar-weighted effective average portfolio
maturity of between 3 and 10 years.
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 securities
and other asset-backed securities may affect the value of, and the return on an
investment in, such securities.
OTHER INVESTMENT PRACTICES
- --------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND REAL ESTATE MORTGAGE INVESTMENT
CONDUITS ("REMICS"). The Fund may invest in CMOs and REMICs issued or guaranteed
by U.S. Government agencies or instrumentalities or private issuers. CMOs and
REMICs are debt instruments issued by special purpose entities that are
- 7 -
<PAGE>
secured by pools of mortgage loans or other mortgage-backed securities. Payments
of principal and interest on the underlying collateral provides the funds to pay
the debt service on CMOs or REMICs.
CMOs are issued in multiple classes. Each class, often referred to as a
"tranche," is issued at a specified coupon rate or adjustable rate and has a
stated maturity or final distribution date. Principal prepayments on collateral
underlying CMOs may cause the CMOs to be retired substantially earlier than
their stated maturities or final distribution dates. Interest is paid or accrues
on classes of a CMO on a monthly, quarterly or semiannual basis. The principal
and interest on the mortgages underlying CMOs may be allocated among the several
classes in many ways.
REMICs, which are authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities. As with CMOs the underlying mortgages
include those backed by GNMA Certificates or other mortgage pass-throughs issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
MUNICIPAL SECURITIES. The Fund may invest in taxable and tax-exempt municipal
securities. Municipal securities consist of (i) debt obligations issued by or on
behalf of public authorities to obtain funds to be used for various public
facilities, for refunding outstanding obligations, for general operating
expenses, and for lending such funds to other public institutions and
facilities; and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair, or improvement of privately operated
facilities. Municipal notes include general obligation notes, tax anticipation
notes, revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes and participation
interests in municipal notes. Municipal bonds include general obligation bonds,
revenue or special obligation bonds, private activity and industrial development
bonds, and
- 8 -
<PAGE>
participation interests in municipal bonds. General obligation bonds are backed
by the taxing power of the issuing municipality. Revenue bonds are backed by the
revenues of a project or facility. The payment of principal and interest on
private activity and industrial development bonds generally is dependent solely
on the ability of the facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.
WHEN-ISSUED SECURITIES. The Fund may also purchase securities on a "when-issued"
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield and thereby involve a risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. The Fund will generally not pay for such
securities or start earning interest on them until they are received. When the
Fund agrees to purchase securities on a "when-issued" basis, its custodian will
set aside, in a segregated account, cash or liquid portfolio securities equal to
the amount of the commitment. Securities purchased on a "when-issued" basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. The Fund expects that commitments to
purchase "when-issued" securities will not exceed 25% of the value of its total
assets under normal market conditions and that a commitment to purchase
"when-issued" securities will not exceed 60 days. In the event its commitment to
purchase "when-issued" securities ever exceeded 25% of the value of its assets,
the Fund's liquidity and the Adviser's ability to manage it might be adversely
affected. The Fund does not intend to purchase "when- issued" securities for
speculative purposes, but only for the purpose of acquiring portfolio
securities.
LOAN PARTICIPATIONS. The Fund may invest, subject to an overall 10% limit on
loans, in loan participations, typically made by a syndicate of banks to U.S.
and non-U.S. corporate or governmental borrowers for a variety of purposes. The
underlying loans may be secured or unsecured, and will vary in term and legal
structure. When purchasing such instruments the Fund may assume the credit risks
associated with the original bank lender as well as the credit risks associated
with the borrower. Investments in loan participations present the possibility
that the Fund could be held liable as a co-lender under emerging legal theories
of lender liability. In addition, if the loan is foreclosed, the Fund could be
part owner of any collateral, and could bear the costs and liabilities of owning
and disposing of the collateral. Loan participations are generally not rated by
major rating agencies and may not be protected by securities laws. Also, loan
participations are generally considered to be illiquid and are therefore subject
to the Fund's overall 15% limitation on illiquid securities.
- 9 -
<PAGE>
VARIABLE AND FLOATING RATE SECURITIES. The Fund may acquire variable and
floating rate securities, subject to the Fund's investment objective, policies
and restrictions. A variable rate security is one whose terms provide for the
readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate security is one whose terms provide
for the readjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value.
INFLATION-INDEXED BONDS. The Fund may invest in inflation-indexed bonds, which
are fixed-income securities whose principal value is periodically adjusted
according to the rate of inflation. Such bonds generally are issued at an
interest rate lower than typical bonds, but are expected to retain their
principal value over time. The interest rate on these bonds is fixed at
issuance, but over the life of the bond this interest may be paid on an
increasing principal value, which has been adjusted for inflation.
The value of inflation-indexed bonds is expected to change in response
to changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if inflation were to rise at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds. While these securities are
expected to be protected from long-term inflationary trends, short-term
increases in inflation may lead to a decline in value. If interest rates rise
due to reasons other than inflation (for example, due to changes in currency
exchange rates), investors in these securities may not be protected to the
extent that the increase is not reflected in the bond's inflation measure.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under a
repurchase agreement, the Fund acquires a debt instrument for a relatively short
period (usually not more than one week), subject to the obligation of the seller
to purchase and the Fund to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price in that it reflects an
agreed-upon market interest rate effective for the period of time during which
the Fund's money is invested. The Fund's repurchase agreements will at all times
be fully collateralized in an amount at least equal to 100% of the purchase
price including accrued interest earned on the
- 10 -
<PAGE>
underlying securities. The instruments held as collateral are valued daily by
the Adviser and as the value of instruments declines, the Fund will require
additional collateral. If the seller defaults and the value of the collateral
securing the repurchase agreement declines, the Fund may incur a loss. If such a
defaulting seller were to become insolvent and subject to liquidation or
reorganization under applicable bankruptcy or other laws, disposition of the
underlying securities could involve certain costs or delays pending court
action. Finally, it is not certain whether the Fund would be entitled, as
against a claim of the seller or its receiver, trustee in bankruptcy or
creditors, to retain the underlying securities. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission to be loans by
the Fund.
SECURITIES LENDING. In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. While the lending of securities may
subject the Fund to certain risks, such as delays or the inability to regain the
securities in the event the borrower were to default on its lending agreement or
enter into bankruptcy, the Fund will receive at least 100% collateral in the
form of cash or U.S. Government securities. This collateral will be valued daily
by the Adviser and should the market value of the loaned securities increase,
the borrower will furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination by the Fund
or the borrower at any time. While the Fund does not have the right to vote
securities on loan, the Fund intends to terminate the loan and regain the right
to vote if this is considered important with respect to the investment. The Fund
will only enter into loan arrangements with broker-dealers, banks or other
institutions which the Adviser has determined are creditworthy under guidelines
established by the Board of Trustees.
BORROWING. The Fund may borrow money from banks or from other lenders to the
extent permitted under applicable law, for temporary or emergency purposes and
to meet redemptions, and may pledge its assets to secure such borrowings.
Borrowing for investment increases both investment opportunity and investment
risk. This is the speculative factor known as leverage. Such borrowings in no
way affect the federal tax status of the Fund or its dividends.
The Investment Company Act of 1940 (the "1940 Act") requires the Fund
to maintain asset coverage of at least 300% for all such borrowings, and should
such asset coverage at any time fall below 300%, the Fund would be required to
reduce its borrowings within
- 11 -
<PAGE>
three days to the extent necessary to meet the requirements of the 1940 Act. To
reduce its borrowings, the Fund might be required to sell securities at a time
when it would be disadvantageous to do so.
In addition, because interest on money borrowed is a Fund expense that
it would not otherwise incur, the Fund may have less net investment income
during periods when its borrowings are substantial. The interest paid by the
Fund on borrowings may be more or less than the yield on the securities
purchased with borrowed funds, depending on prevailing market conditions.
LOWER-RATED SECURITIES. The Fund may invest up to 20% of its assets in higher
yielding (and, therefore, higher risk), lower rated fixed-income securities,
including debt securities, convertible securities and preferred stocks and
unrated fixed-income securities. Lower rated fixed-income securities, commonly
referred to as "junk bonds", are considered speculative and involve greater risk
of default or price changes due to changes in the issuer's creditworthiness than
higher rated fixed-income securities. See "Risk Factors of Lower Rated
Fixed-Income Securities" below for a discussion of certain risks.
Differing yields on fixed-income securities of the same maturity are a
function of several factors, including the relative financial strength of the
issuers. Higher yields are generally available from securities in the lower
categories of recognized rating agencies, i.e. Ba or lower by Moody's or BB or
lower by S&P. The Fund may invest in any security which is rated by Moody's or
by S&P, or in any unrated security which the Adviser determines is of suitable
quality. Securities in the rating categories below Baa as determined by Moody's
and BBB as determined by S&P are considered to be of poor standing and
predominantly speculative. The rating agencies' descriptions of these rating
categories, including the speculative characteristics of the lower categories,
are set forth in the Statement of Additional Information.
Securities ratings are based largely on the issuer's historical financial
information and the rating agencies' investment analysis at the time of rating.
Consequently, the rating assigned to any particular security is not necessarily
a reflection of the issuer's current financial condition, which may be better or
worse than the rating would indicate. Although the Adviser will consider
security ratings when making investment decisions in the high yield market, it
will perform its own investment analysis and will not rely principally on the
ratings assigned by the rating agencies. The Adviser's analysis generally may
include, among other things, consideration of the issuer's experience and
managerial strength, changing financial
- 12 -
<PAGE>
conditions, borrowing requirements or debt maturity schedules, and its
responsiveness to changes in business conditions and interest rates. It also
considers relative values based on anticipated cash flow, interest or dividend
coverage, asset coverage and earnings prospects.
SHORT-TERM OBLIGATIONS. There may be times when, in the opinion of the Adviser,
adverse market conditions exist, including any period during which it believes
that the return on certain money market type instruments would be more favorable
than that obtainable through the Fund's normal investment programs. Accordingly,
for temporary defensive purposes, the Fund may hold up to 100% of its total
assets in cash and/or short-term obligations. To the extent that the Fund's
assets are so invested, they will not be invested so as to meet its investment
objective. The instruments may include high-grade liquid debt securities such as
variable amount master demand notes, commercial paper, certificates of deposit,
bankers' acceptances, repurchase agreements which mature in less than seven days
and obligations issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. Bankers' acceptances are instruments of United States banks
which are drafts or bills of exchange "accepted" by a bank or trust company as
an obligation to pay on maturity.
ZERO COUPON BONDS. The Fund is permitted to purchase zero coupon securities
("zero coupon bonds"). Zero coupon bonds are purchased at a discount from the
face amount because the buyer receives only the right to receive a fixed payment
on a certain date in the future and does not receive any periodic interest
payments. The effect of owning instruments which do not make current interest
payments is that a fixed yield is earned not only on the original investment but
also, in effect, on all discount accretion during the life of the obligations.
This implicit reinvestment of earnings at the same rate eliminates the risk of
being unable to reinvest distributions at a rate as high as the implicit yields
on the zero coupon bond, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds are
subject to substantially greater price fluctuations during periods of changing
market interest rates than are comparable securities which pay interest
currently, which fluctuation increases the longer the period to maturity.
Although zero coupon bonds do not pay interest to holders prior to maturity,
federal income tax law requires the Fund to recognize as interest income a
portion of the bond's discount each year and this income must then be
distributed to shareholders along with other income earned by the Fund. To the
extent that any shareholders in the Fund elect to receive their dividends in
cash rather than reinvest such dividends in additional shares, cash to make
these distributions
- 13 -
<PAGE>
will have to be provided from the assets of the Fund or other sources such as
proceeds of sales of Fund shares and/or sale of portfolio securities. In such
cases, the Fund will not be able to purchase additional income-producing
securities with cash used to make such distributions and its current income may
ultimately be reduced as a result.
RECEIPTS. The Fund may also purchase separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book entry system, known as Separately Traded Registered Interest and Principal
Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES"). These
instruments are issued by banks and brokerage firms and are created by
depositing Treasury notes and Treasury bonds into a special account at a
custodian bank; the custodian holds the interest and principal payments for the
benefit of the registered owner of the certificates or receipts. The custodian
arranges for the issuance of the certificates or receipts evidencing ownership
and maintains the register. Receipts include Treasury Receipts ("TRs"), Treasury
Investment Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury
Securities ("CATS"). STRIPS, CUBES, TRs, TIGRs and CATS are sold as zero coupon
securities, which means that they are sold at a substantial discount and
redeemed at face value at their maturity date without interim cash payments of
interest or principal. This discount is amortized over the life of the security,
and such amortization will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, these securities may be
subject to greater interest rate volatility than interest-paying U.S. Treasury
obligations. The Fund will limit its investment in such instruments to 20% of
its net assets.
INVESTMENT COMPANY SECURITIES. The Fund may invest in the securities of other
investment companies to the extent permissible under the applicable regulations
and interpretations of the 1940 Act or an exemptive order.
ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES. The Fund may invest up to 15% of
its net assets in illiquid investments (investments that cannot be readily sold
within seven days), including restricted securities which do not meet the
criteria for liquidity established by the Board of Trustees. The Adviser, under
the supervision of the Board of Trustees, determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses. Restricted securities are
securities which cannot be sold to the public without registration under the
Securities Act of 1933. Unless registered for sale, these securities can only be
sold in
- 14 -
<PAGE>
privately negotiated transactions or pursuant to an exemption from registration.
PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading as a
primary means of achieving its investment objectives. However, the Fund's rate
of portfolio turnover will depend upon market and other conditions, and it will
not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. High turnover involves correspondingly greater
commission expenses and transaction costs and may result in the Fund recognizing
greater amounts of income and capital gains, which would increase the amount of
income and capital gains which the Fund must distribute to its shareholders in
order to maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
Risk Factors of Lower Rated Fixed-Income Securities
- ---------------------------------------------------
Lower quality fixed-income securities generally produce a higher current
yield than do fixed-income securities of higher ratings. However, these
fixed-income securities are considered speculative because they involve greater
price volatility and risk than do higher rated fixed-income securities and
yields on these fixed-income securities will tend to fluctuate over time.
Although the market value of all fixed-income securities varies as a result of
changes in prevailing interest rates (e.g., when interest rates rise, the market
value of fixed-income securities can be expected to decline), values of lower
rated fixed-income securities tend to react differently than the values of
higher rated fixed-income securities. The prices of lower rated fixed-income
securities are less sensitive to changes in interest rates than higher rated
fixed-income securities. Conversely, lower rated fixed-income securities also
involve a greater risk of default by the issuer in the payment of principal and
income and are more sensitive to economic downturns and recessions than higher
rated fixed-income securities. The financial stress resulting from an economic
downturn could have a greater negative effect on the ability of issuers of lower
rated fixed-income securities to service their principal and interest payments,
to meet projected business goals and to obtain additional financing than on more
creditworthy issuers. In the event of an issuer's default in payment of
principal or interest on such securities, or any other fixed-income securities
in the Fund's portfolio, the net asset value of the Fund will be negatively
affected. Moreover, as the market for lower rated fixed-income securities is a
relatively new one, a severe economic downturn might increase the number of
defaults, thereby adversely affecting the value of all outstanding lower rated
fixed-income securities and disrupting the market for such securities.
Fixed-income
- 15 -
<PAGE>
securities purchased by the Fund as part of an initial underwriting present an
additional risk due to their lack of market history. These risks are exacerbated
with respect to fixed-income securities rated Caa or lower by Moody's or CCC or
lower by S&P. Unrated fixed-income securities generally carry the same risks as
do lower rated fixed-income securities.
Lower rated fixed-income securities are typically traded among a smaller
number of broker-dealers rather than in a broad secondary market. Purchasers of
lower rated fixed-income securities tend to be institutions, rather than
individuals, a factor that further limits the secondary market. To the extent
that no established retail secondary market exists, many lower rated
fixed-income securities may not be as liquid as Treasury and investment grade
bonds. The ability of the Fund to sell lower rated fixed-income securities will
be adversely affected to the extent that such securities are thinly traded or
illiquid. Moreover, the ability of the Fund to value lower rated fixed-income
securities becomes more difficult, and judgment plays a greater role in
valuation, as there is less reliable, objective data available with respect to
such securities that are thinly traded or illiquid.
Because investors may perceive that there are greater risks associated with
the lower rated fixed-income securities of the type in which the Fund may
invest, the yields and prices of such securities may tend to fluctuate more than
those for fixed-income securities with a higher rating. Changes in perception of
issuer's creditworthiness tend to occur more frequently and in a more pronounced
manner in the lower quality segments of the fixed-income securities market than
do changes in higher quality segments of the fixed-income securities market,
resulting in greater yield and price volatility. The speculative characteristics
of lower rated fixed-income securities are set forth in the Statement of
Additional Information.
The Adviser believes that the risks of investing in such high yielding,
fixed-income securities may be minimized through careful analysis of prospective
issuers. Although the opinion of ratings services such as Moody's and S&P is
considered in selecting portfolio securities, they evaluate the safety of the
principal and the interest payments of the security, not their market value
risk. Additionally, credit rating agencies may experience slight delays in
updating ratings to reflect current events. The Adviser relies, primarily, on
its own credit analysis. This may suggest, however, that the achievement of the
Fund's investment objective is more dependent on the Adviser's proprietary
credit analysis, than is otherwise the case for a fund that invests exclusively
in higher quality fixed-income securities.
- 16 -
<PAGE>
Once the rating of a portfolio security or the quality determination
ascribed by the Adviser to an unrated, fixed-income security has been
downgraded, the Adviser will consider all circumstances deemed relevant in
determining whether to continue to hold the security, but in no event will the
Fund retain such security if it would cause the Fund to have 20% or more of the
value of its net assets invested in fixed-income securities rated lower than Baa
by Moody's or BBB by S&P, or if unrated, are judged by the Adviser to be of
comparable quality.
The Fund may also invest in unrated fixed-income securities. Unrated
fixed-income securities are not necessarily of lower quality than rated
fixed-income securities, but they may not be attractive to as many buyers.
There is no minimum rating standard for the Fund's investments in the high
yield market; therefore, the Fund may at times invest in fixed-income securities
not currently paying interest or in default. The Fund will invest in such
fixed-income securities where the Adviser perceives a substantial opportunity to
realize the Fund's objective based on its analysis of the underlying financial
condition of the issuer. It is not, however, the current intention of the Fund
to make such investments.
These limitations and the policies discussed in this Prospectus are
considered and applied by the Adviser at the time of purchase of an investment;
the sale of securities by the Fund is not required in the event of a subsequent
change in circumstances.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. You may purchase additional shares through
the Open Account Program described below. You may open an account and make an
initial investment through securities dealers having a sales agreement with the
Trust's principal underwriter, Countrywide Investments, Inc. (the "Adviser").
You may also make a direct initial investment by sending a check and a completed
account application form to Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made
payable to the "Intermediate Bond Fund." An account application is included in
this Prospectus.
- 17 -
<PAGE>
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 shares is the next determined net asset
value per share plus a sales load as shown in the following table.
Dealer
Reallowance
Sales Load as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- ------ -------- -----
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50 1.52 1.35
$250,000 but less than $500,000 1.00 1.01 .90
$500,000 but less than $1,000,000 .75 .76 .65
$1,000,000 or more None* None*
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of 1% may apply if a commission was paid by
the Adviser to a participating unaffiliated dealer and the shares are
redeemed within twelve months from the date of purchase.
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may be
deemed to be underwriters under the Securities Act of 1933. The Adviser retains
the entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
For initial purchases of $1,000,000 or more and subsequent purchases
further increasing the size of the account, a dealer's commission of up to 1% of
the purchase amount may be paid by the Adviser to participating unaffiliated
dealers through whom such purchases are effected. In determining a dealer's
eligibility for such commission, purchases of shares of the Fund may be
- 18 -
<PAGE>
aggregated with concurrent purchases of shares of other funds of Countrywide
Investments. Dealers should contact the Adviser concerning the applicability and
calculation of the dealer's commission in the case of combined purchases. An
exchange from other funds of Countrywide Investments will not qualify for
payment of the dealer's commission, unless such exchange is from a Countrywide
fund with assets as to which a dealer's commission or similar payment has not
been previously paid. Redemptions of shares may result in the imposition of a
contingent deferred sales load if the dealer's commission described in this
paragraph was paid in connection with the purchase of such shares. See
"Contingent Deferred Sales Load for Certain Purchases of Shares" below.
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.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning
the services described in this section to the Transfer Agent at the address or
numbers listed below.
After an initial investment, all investors are considered participants
in the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Fund over a period of years and permits the automatic
reinvestment of dividends and distributions of the Fund in additional shares
without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
The check should be made payable to the Fund.
Under the Open Account Program, you may also purchase shares of the
Fund by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629- 2050) for instructions. Your
bank may impose a charge for sending your wire. There is presently no fee for
receipt of wired funds, but the Transfer Agent reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
- 19 -
<PAGE>
Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Fund to a current shareholder, such broker-dealer will receive the
concessions described above with respect to additional investments by the
shareholder.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing shares of the load funds distributed by the Adviser with
the amount of his current purchases in order to take advantage of the reduced
sales loads set forth in the table above. Purchases made in any load fund
distributed by the Adviser pursuant to a Letter of Intent may also be eligible
for the reduced sales loads. The minimum initial investment under a Letter of
Intent is $10,000. The load funds currently distributed by the Adviser are
listed in the Exchange Privilege section of this Prospectus. Shareholders should
contact the Transfer Agent for information about the Right of Accumulation and
Letter of Intent.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at
net asset value by pension and profit-sharing plans, pension funds and other
company-sponsored benefit plans that (1) have plan assets of $500,000 or more,
or (2) have, at the time of purchase, 100 or more eligible participants, or (3)
certify that they project to have annual plan purchases of $200,000 or more, or
(4) are provided administrative services by certain third-party administrators
that have entered into a special service arrangement with the Adviser relating
to such plan.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase 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 shares at net asset value.
In addition, shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Adviser, and their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees.
Clients of investment advisers may also purchase shares of the Fund at
net asset value if their investment adviser or
- 20 -
<PAGE>
broker-dealer has made arrangements to permit them to do so with the Trust. The
investment adviser must notify the Transfer Agent that an investment qualifies
as a purchase at net asset value.
Associations and affinity groups and their members may purchase shares
of the Fund at net asset value provided that management of these groups or their
financial adviser has made arrangements to permit them to do so with the Trust.
Investors or their financial adviser must notify the Transfer Agent that an
investment qualifies as a purchase at net asset value.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals and employee benefit plans established by such entities, may
also purchase shares of the Fund at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF SHARES. A
contingent deferred sales load is imposed upon certain redemptions of shares of
the Fund (or shares into which such shares were exchanged) purchased at net
asset value in amounts totaling $1 million or more, if the dealer's commission
described above was paid by the Adviser and the shares are redeemed within
twelve months from the date of purchase. The contingent deferred sales load will
be paid to the Adviser and will be equal to 1% of the lesser of (1) the net
asset value at the time of purchase of the shares being redeemed or (2) the net
asset value of such shares at the time of redemption. In determining whether the
contingent deferred sales load is payable, it is assumed that shares not subject
to the contingent deferred sales load are the first redeemed followed by other
shares held for the longest period of time. The contingent deferred sales load
will not be imposed upon shares representing reinvested dividends or capital
gains distributions, or upon amounts representing share appreciation. If a
purchase of shares is subject to the contingent deferred sales load, the
investor will be so notified on the confirmation for such purchase.
Redemptions of such shares of the Fund held for at least 12 months will
not be subject to the contingent deferred sales load and an exchange of such
shares into another fund of Countrywide Investments is not treated as a
redemption and will not trigger the imposition of the contingent deferred sales
load at the time of such exchange. A fund will "tack" the period for which such
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange; however,
the period of time that the redemption proceeds of such shares are held in a
money market fund will not count toward the holding period for
- 21 -
<PAGE>
determining whether a contingent deferred sales load is applicable. See
"Exchange Privilege."
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21, purchasing shares
for his or their own account; or a trustee or other fiduciary purchasing shares
for a single fiduciary account although more than one beneficiary is involved;
or employees of a common employer, provided that economies of scale are realized
through remittances from a single source and quarterly confirmation of such
purchases; or an organized group, provided that the purchases are made through a
central administration, or a single dealer, or by other means which result in
economy of sales effort or expense. Contact the Transfer Agent for additional
information concerning purchases at net asset value or at reduced sales loads.
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone 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.
- 22 -
<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 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, including
Roth IRAs and Education IRAs
-- 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
- 23 -
<PAGE>
with these transfers, but reserves the right, upon thirty days' written notice,
to make reasonable charges for this service. Your depository institution may
impose its own charge for debiting your account which would reduce your return
from an investment in the Fund.
InvestPlus Plan
---------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in the Fund by including your investment with your mortgage
payment. You may write one check for the total amount.
Reinvestment Privilege
----------------------
If you have redeemed shares of the Fund, you may reinvest all or part
of the proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
HOW TO REDEEM SHARES
- ---------------------
You may redeem shares of the Fund on each day that the Trust is open
for business. You will receive the net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described below, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check, government check or wire.
A contingent deferred sales load may apply to a redemption of certain
shares of the Fund purchased at net asset value. See "How to Purchase Shares."
BY TELEPHONE. You may redeem shares having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050). The redemption proceeds will
normally be sent by mail or by wire within three business days after receipt of
your telephone instructions. IRA accounts are not redeemable by telephone.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account.
- 24 -
<PAGE>
You may change the bank or brokerage account which you have designated under
this procedure at any time by writing to the Transfer Agent with your signature
guaranteed by any eligible guarantor institution (including banks, brokers and
dealers, municipal securities brokers and dealers, government securities brokers
and dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations) or by completing a
supplemental telephone redemption authorization form. Contact the Transfer Agent
to obtain this form. Further documentation will be required to change the
designated account if shares are held by a corporation, fiduciary or other
organization.
The Transfer Agent reserves the right to suspend the telephone
redemption privilege with respect to any account if the name(s) or the address
on the account has been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe
to be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The affected shareholders will bear the risk of any such
loss. The Trust or the Transfer Agent, or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or the Transfer Agent do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to the Transfer Agent. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, you will be required to request the
redemption in writing with your signature guaranteed, regardless of the value of
the shares being redeemed.
Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
- 25 -
<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. After six check redemptions are effected in your account in a month,
the Transfer Agent will charge you $.25 for each additional check redemption
effected that month. However, there is no charge for any check redemptions
effected by employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals.
The Transfer Agent charges shareholders its costs for each stop payment
and each check returned for insufficient funds. In addition, the Transfer Agent
reserves the right to make additional charges to recover the costs of providing
the check redemption service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption procedure may be
suspended or terminated at any time upon written notice by the Trust or the
Transfer Agent.
Shareholders should be aware that writing a check (a redemption of
shares) is a taxable event.
THROUGH BROKER-DEALERS. You may also redeem shares by placing a wire
redemption request through a securities broker or dealer. Unaffiliated
broker-dealers may impose a fee on the shareholder for this service. You will
receive the net asset value per share next determined after receipt by the Trust
or its agent of your wire redemption request. It is the responsibility of
broker-dealers to properly transmit wire redemption orders.
- 26 -
<PAGE>
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, the proceeds will be wired directly to your existing account
in any commercial bank or brokerage firm in the United States as designated on
your application and you will be charged an $8 processing fee. The Trust
reserves the right, upon thirty days' written notice, to change the processing
fee. All charges will be deducted from your account by redemption of shares in
your account. Your bank or brokerage firm may also impose a charge for
processing the wire. In the event that wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by mail to the designated
account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested including any sales load paid,
unaffected by market fluctuations), or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of Countrywide Investments may
be exchanged for each other.
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.
- 27 -
<PAGE>
Shares of the Fund subject to a contingent deferred sales load may be
exchanged, on the basis of relative net asset value per share, for shares of any
other fund which imposes a contingent deferred sales load and for shares of any
fund which is a money market fund. A fund will "tack" the period for which the
shares being exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is applicable in
the event that the acquired shares are redeemed following the exchange. The
period of time that shares are held in a money market fund will not count toward
the holding period for determining whether a contingent deferred sales load is
applicable.
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
-------------------------- ---------------------------
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Aggressive Growth Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund ----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
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
- 28 -
<PAGE>
in a sale of fund shares, which may cause you to recognize a capital gain or
loss. Before making an exchange, contact the Transfer Agent to obtain a current
prospectus for any of the other funds of Countrywide Investments and more
information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
All of the net investment income of the Fund is declared as a dividend
to shareholders of record on each business day of the Trust and paid monthly.
The Fund expects to distribute any net realized long-term capital gains at least
once each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term
capital gains distributions paid in cash;
long-term capital gains distributions
reinvested in additional shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed distribution checks.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty days of the
distribution date to the Transfer Agent for reinvestment at the net asset value
next determined after its return. The investor or his dealer must notify the
Transfer Agent that a distribution is being reinvested pursuant to this
provision.
- 29 -
<PAGE>
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 capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by the Fund to its
shareholders are taxable to the recipient shareholders as capital gains, without
regard to the length of time a shareholder has held Fund shares. The maximum
capital gains rate for individuals is 20% with respect to assets held more than
12 months. The maximum capital gains rate for corporate shareholders is the same
as the maximum tax rate for ordinary income. Redemptions 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.
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Countrywide Investment Trust,
an open-end management investment company organized as a Massachusetts business
trust on December 7, 1980. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Fund.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the
- 30 -
<PAGE>
Fund's investments and its business affairs. The Adviser was organized in 1974
and is also the investment adviser to five other series of the Trust, seven
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.
Margaret D. Weinblatt, Chief Investment Officer-Taxable Fixed Income of
the Adviser, and Scott Weston, Assistant Vice President-Investments of the
Adviser, are primarily responsible for managing the portfolio of the Fund. Ms.
Weinblatt has been managing the Fund's portfolio since she became employed by
the Adviser in July 1998. From 1996 until 1998, she was President of Copernicus
Asset Management, Ltd. and from 1986 until 1995, she was Senior Portfolio
Manager-Fixed Income Group of Neuberger & Berman. Mr. Weston has been employed
by the Adviser since 1992 and has been managing the Fund's portfolio since
September 1997.
The Adviser serves as principal underwriter for the Fund and, as such,
is the exclusive agent for the distribution of shares of the Fund. The officers
of the Trust are also officers of the Adviser.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc.,
- 31 -
<PAGE>
to serve as the Fund's transfer agent, dividend paying agent and shareholder
service agent.
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements of the 1940 Act
and procedures adopted by the Board of Trustees, the Fund may execute portfolio
transactions through any broker or dealer and pay brokerage commissions to a
broker (i) which is an affiliated person of the Trust, or (ii) which is an
affiliated person of such person, or (iii) an affiliated person of which is an
affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the 1940 Act or otherwise. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon the
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the 1940 Act in order to facilitate
communications among shareholders.
Amivest Corporation, P.O. Box 370, New York, New York, and FIRSTCINCO,
425 Walnut Street, Cincinnati, Ohio, each may be deemed to control the Fund by
virtue of the fact that each owns
- 32 -
<PAGE>
of record more than 25% of the Fund's shares as of the date of this Prospectus.
DISTRIBUTION PLAN
- ------------------
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a plan of
distribution (the "Plan") under which the Fund may directly incur or reimburse
the Adviser for certain distribution-related expenses, including payments to
securities dealers and others who are engaged in the sale of shares of the Fund
and who may be advising investors regarding the purchase, sale or retention of
Fund shares; expenses of maintaining personnel who engage in or support
distribution of shares or who render shareholder support services not otherwise
provided by the Transfer Agent; expenses of formulating and implementing
marketing and promotional activities, including direct mail promotions and mass
media advertising; expenses of preparing, printing and distributing sales
literature and prospectuses and statements of additional information and reports
for recipients other than existing shareholders of the Fund; expenses of
obtaining such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable; and
any other expenses related to the distribution of the Fund's shares.
Pursuant to the 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 shares of the Fund. For the fiscal
year ended September 30, 1998, the Fund paid $14,000 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 Plan is
.35% of the Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such
- 33 -
<PAGE>
services. However, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
The National Association of Securities Dealers places certain
limitations on asset-based sales charges of mutual funds. These limitations
require fund-level accounting in which all sales charges - front-end load, 12b-1
fees or contingent deferred load - terminate when a percentage of gross sales is
reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- -----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (net asset value plus applicable sales load) of the shares of the Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange, currently 4:00 p.m., Eastern time. The Trust is open for
business on each day the New York Stock Exchange is open for business and on any
other day when there is sufficient trading in the Fund's investments that its
net asset value might be materially affected. The net asset value per share of
the Fund is calculated by dividing the sum of the value of the securities held
by the Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund, rounded
to the nearest cent.
The Fund's portfolio securities for which market quotations are readily
available are valued at their most recent bid prices as obtained from one or
more of the major market makers for such securities. Securities (and other
assets) of the Fund for which market quotations are not readily available are
valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general supervision
of the Board of Trustees. The net asset value per share of the Fund will
fluctuate with the value of the securities it holds.
- 34 -
<PAGE>
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.
The "average annual total return" of the Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which periods will be stated in the advertisement) that would equate
an initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and the
deduction of the current maximum sales load from the initial investment. The
Fund may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. A nonstandardized quotation of total return may
also indicate average annual compounded rates of return over periods other than
those specified for "average annual total return." These nonstandardized returns
do not include the effect of the applicable sales load which, if included, would
reduce total return. A nonstandardized quotation of total return will always be
accompanied by the Fund's "average annual total return" as described above.
The "yield" of the Fund is computed by dividing the net investment
income per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within its category as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide additional
information, such
- 35 -
<PAGE>
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.
- 36 -
<PAGE>
<TABLE>
ACCOUNT NO. 93-_____________________
Account Application (For Fund Use Only)
<S> <C> <C> <C>
Intermediate Bond Fund FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________
Home Office Address: ___________________
Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
========================================================================================================================
Initial Investment of $_______________________
[] Check or draft enclosed payable to the Fund.
[] Bank Wire From:
______________________________________________________________________________________________________________
[] Exchange From:
______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial
account please list
minor's S.S.#)
___________________________________________________________________________________________________ Citizenship:[] U.S.
Name of Joint Tenant, Partner, Custodian []Other
Address Phone
___________________________________________________________________________________________________ ( )_______________
Street or P.O. Box Business Phone
___________________________________________________________________________________________________ ( )_______________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer
Name/Address______________________________________________________________________________________________
Are you an associated person of an NASD member? [] Yes [] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. Check box if appropriate:
[] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
=======================================================================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[] Share Option -- Income distributions and capital gains distributions automatically reinvested in additional
shares.
[] Income Option -- Income distributions and short term capital gains distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
[] Cash Option -- Income distributions and capital gains distributions paid in cash.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
========================================================================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. to act upon instructions received by telephone, or upon
receipt of and in the amounts of checks as described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund of Countrywide Investments (see prospectus for limitations on this option) and:
[ ] WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I (we) further authorize the use of
automated cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Bank Account Number _____________________________________ Bank Routing Transit Number _______________________________
Name of Account Holder _______________________________________________________________________________________________
Bank Name _________________________________________________________ Bank Address ______________________________________
City State
[ ]CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Countrywide Pay Through Draft Account (PTDA)
or otherwise arrange for application of such proceeds to payment of said checks. I (we) authorize the persons
whose signatures appear on the PTDA signature card to draw checks on the PTDA and to cause the redemption of my (our)
shares of the Trust. I (we) agree to be bound by the Rules and Regulations for the Countrywide Pay Through Draft
Account as such Rules and Regulations may be amended from time to time.
===========================================================================================================================
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of
eligible load funds of Countrywide Investments.
Account Number/Name Account Number/Name
_______________________________________________________ ______________________________________________________
_______________________________________________________ ______________________________________________________
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your Letter of Intent.)
[] I agree to the Letter of Intent in the current Prospectus of Countrywide Investment Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning ____________________ 19
(Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of Countrywide Investments
at least equal to (check appropriate box):
[] $100,000 [] $250,000 [] $500,000 [] $1,000,000
- --------------------------------------------------------------------------------------------------------------------------
ACCOUNT SECURITY
For increased security, Countrywide Fund Services, Inc. requires that you establish a Personal Identification Number (PIN).
You will need to use this PIN when requesting account information and placing transactions. For institutional accounts,
please use a four digit number. For retail accounts, please use the first four letters of your mother's maiden name.[ ] [ ] [ ] [ ]
========================================================================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the Fund's current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Fund for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further agrees
that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the address
contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for himself and
his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Investment Trust, Countrywide Investment
Trust, Countrywide Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in
the performance of the acts instructed herein. Neither the Trust, Countrywide Fund Services, Inc., nor their respective affiliates
will be liable for complying with telephone instructions they reasonably believe to be genuine or for any loss, damage, cost or
expense in acting on such telephone instructions. The investor(s) will bear the risk of any such loss. The Trust or Countrywide
Fund Services, Inc., or both will employ reasonable procedures to determine that telephone instructions are genuine. If the Trust
and/or Countrywide Fund Services, Inc. do not employ such procedures, they may be liable for losses due to unauthorized or
fraudulent instructions. These procedures may include, among others, requiring forms of personal identification prior to acting
upon telephone instructions, providing written confirmation of the transactions and/or tape recording telephone instructions.
are genuine.
___________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer, Signature of Joint Owner, if Any
Trustee, etc.
________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
==========================================================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund)
The Automatic Investment Plan is available for all established accounts of Countrywide Investment Trust. There is no charge for
this service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________ per month in the Fund.
ABA Routing Number______________________________
FI Account Number________________________________
[] Checking Account [] Savings Account
__________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
______________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X_____________________________________________________________________ X_______________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account
for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the Fund for purchase of shares of the Fund, are collected by CFS, CFS hereby
agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Fund on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[] Monthly -- Withdrawals will be made on the last business day of each month.
[] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[] Exchange: Please exchange the withdrawal proceeds into another Countywide account number:_ _-- _ _ _ _--_
[] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided check for ACH or bank wire_________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of payee___________________________________________________________________________________________________________________
Please send to:_________________________________________________________________________________________________________________
Street address City State Zip
========================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Investment Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
(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.
</TABLE>
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
INVESTMENT ADVISER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
- 37 -
<PAGE>
TABLE OF CONTENTS
Expense Information....................................................
Financial Highlights...................................................
Investment Objective and Policies......................................
How to Purchase Shares.................................................
Shareholder Services...................................................
How to Redeem Shares...................................................
Exchange Privilege.....................................................
Dividends and Distributions............................................
Taxes..................................................................
Operation of the Fund..................................................
Distribution Plan . . . ...............................................
Calculation of Share Price and Public Offering Price...................
Performance Information................................................
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
- 38 -
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 30, 1998
Short Term Government Income Fund
Intermediate Term Government Income Fund
Institutional Government Income Fund
Adjustable Rate U.S. Government Securities Fund
Money Market Fund
Intermediate Bond Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the applicable Fund of Countrywide
Investment Trust dated November 30, 1998. A copy of a Fund's Prospectus can be
obtained by writing the Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202-4094, or by calling the Trust nationwide toll-free 800-543-0407, in
Cincinnati 629-2050.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Countrywide Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS
PAGE
THE TRUST..................................................................3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS..............................4
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS.............................. 16
INVESTMENT LIMITATIONS....................................................23
TRUSTEES AND OFFICERS.....................................................31
THE INVESTMENT ADVISER AND UNDERWRITER....................................35
DISTRIBUTION PLAN.........................................................38
SECURITIES TRANSACTIONS...................................................40
PORTFOLIO TURNOVER........................................................42
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE......................42
OTHER PURCHASE INFORMATION................................................45
TAXES.....................................................................46
REDEMPTION IN KIND........................................................47
HISTORICAL PERFORMANCE INFORMATION........................................47
PRINCIPAL SECURITY HOLDERS................................................52
CUSTODIAN.................................................................53
AUDITORS..................................................................53
TRANSFER AGENT............................................................53
ANNUAL REPORT.............................................................54
<PAGE>
THE TRUST
- ---------
Countrywide Investment Trust (the "Trust"), formerly Midwest Trust, was
organized as a Massachusetts business trust on December 7, 1980. The Trust
currently offers six series of shares to investors: the Short Term Government
Income Fund, the Intermediate Term Government Income Fund, the Institutional
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund, the
Money Market Fund and the Intermediate Bond Fund (referred to individually as a
"Fund" and collectively as the "Funds"). Each Fund has its own investment
objective(s) and policies.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997,
the Money Market Fund and the Intermediate Bond Fund, on August 29, 1997, each
succeeded to the assets and liabilities of another mutual fund of the same name
(referred to individually as a "Predecessor Fund", and collectively as the
"Predecessor Funds"), each of which was an investment series of Trans Adviser
Funds, Inc. The investment objective, policies and restrictions of the Money
Market Fund and the Intermediate Bond Fund and its Predecessor Fund are
substantially identical and the financial data and information for periods ended
prior to September 1, 1997 relates to the Predecessor Funds.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of 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.
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
- 3 -
<PAGE>
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.
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:
WHEN-ISSUED SECURITIES AND SECURITIES PURCHASED ON A TO-BE- ANNOUNCED
BASIS. The Funds 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 or liquid
securities in a segregated account in an amount sufficient to make payment for
the securities to be purchased. When a segregated account is maintained because
a Fund purchases securities on a when-issued 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
- 4 -
<PAGE>
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.
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
- 5 -
<PAGE>
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, neither the Intermediate Term Government Income Fund nor the
Adjustable Rate U.S. Government Securities Fund will 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 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.
- 6 -
<PAGE>
(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.
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.
- 7 -
<PAGE>
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.
COLLATERALIZED MORTGAGE OBLIGATIONS. The Intermediate Term Government
Income Fund, the Adjustable Rate U.S. Government Securities Fund and the
Intermediate Bond Fund may invest in Collateralized Mortgage Obligations
("CMOs"). CMOs are fully- collateralized bonds which are the general obligations
of the issuer thereof. The key feature of the CMO structure is the
prioritization of the cash flows from a pool of mortgages among the several
classes of CMO holders, thereby creating a series of obligations with varying
rates and maturities appealing to a wide range of investors. CMOs generally are
secured by an assignment to a trustee under the indenture pursuant to which the
bonds are issued for collateral consisting of a pool of mortgages. Payments with
respect to the underlying mortgages generally are made to the trustee under the
indenture. Payments of principal and interest on the underlying mortgages are
not passed through to the holders of the CMOs as such (that is, the character of
payments of principal and interest is not passed through and therefore payments
to holders of CMOs attributable to interest paid and principal repaid on the
underlying mortgages do not necessarily constitute income and return of capital,
respectively, to such holders), but such payments are dedicated to payment of
interest on and repayment of principal of the CMOs. CMOs are issued in two or
more classes or series with varying maturities and stated rates of interest
determined by the issuer. Because interest and principal payments on the
underlying mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on which
are used to pay interest on each class and to retire successive maturities in
sequence. CMOs are designed to be retired as the underlying mortgages are
repaid. In the event of sufficient early prepayments on such mortgages, the
class or series of CMO first to mature generally will be retired prior to
maturity. Therefore, although in most cases the issuer of CMOs will not supply
additional collateral in the event of such prepayments, there will be sufficient
collateral to secure CMOs that remain outstanding.
- 8 -
<PAGE>
In 1983, the Federal Home Loan Mortgage Corporation began issuing CMOs.
Since FHLMC CMOs are the general obligations of the FHLMC, it will be obligated
to use its general funds to make payments thereon if payments generated by the
underlying mortgages are insufficient to pay principal and interest in its CMOs.
In addition, CMOs are issued by private entities, such as financial
institutions, mortgage bankers and subsidiaries of homebuilding companies. The
structural features of privately issued CMOs will vary considerably from issue
to issue, and the Adviser will consider such features, together with the
character of the underlying mortgage pool and the liquidity and credit rating of
the issue. The Adviser will consider privately issued CMOs as possible
investments only when the underlying mortgage collateral is insured, guaranteed
or otherwise backed by the U.S. Government or one or more of its agencies or
instrumentalities.
Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities; the
first three classes pay interest at their stated rates beginning with the issue
date and the final class is typically an accrual class (or Z bond). The cash
flows from the underlying mortgage collateral are applied first to pay interest
and then to retire securities. The classes of securities are retired
sequentially. All principal payments are directed first to the shortest-maturity
class (or A bonds). When those securities are completely retired, all principal
payments are then directed to the next-shortest-maturity security (or B bond).
This process continues until all of the classes have been paid off. Because the
cash flow is distributed sequentially instead of pro rata as with pass-through
securities, the cash flows and average lives of CMOs are more predictable, and
there is a period of time during which the investors into the longer- maturity
classes receive no principal paydowns.
As a matter of current policy that may be changed without shareholder
approval, the Intermediate Term Government Income Fund and the Adjustable Rate
U.S. Government Securities Fund will invest in a CMO tranche either for (1)
interest rate hedging purposes subject to the adoption of monitoring and
reporting procedures or (2) other purposes where the average tranche life would
not change more than 6 years based upon a hypothetical change in time of
purchase and on any subsequent test dates (at least annually) thereafter.
Testing models employed must assume market interest rates and prepayment speeds
at the time the standard is applied. Adjustable rate CMO tranches are exempted
from the average life requirements if (i) the rate is reset at least annually,
(ii) the maximum rate is at least 3% higher than the rate at the time of
purchase, and (iii) the rate varies directly with the index on which it is based
and is not reset as a multiple of the change in such index.
- 9 -
<PAGE>
INFLATION-INDEXED BONDS. The Intermediate Term Government Income Fund and
the Intermediate Term Bond Fund may invest in inflation-indexed bonds, which are
fixed-income securities whose principal value is periodically adjusted according
to the rate of inflation. Such bonds generally are issued at an interest rate
lower than typical bonds, but are expected to retain their principal value over
time. The interest rate on these bonds is fixed at issuance, but over the life
of the bond this interest may be paid on an increasing principal value, which
has been adjusted for inflation.
Inflation-indexed securities issued by the U.S. Treasury will initially
have maturities of five or ten years, although it is anticipated that securities
with other maturities will be issued in the future. The securities will pay
interest on a semiannual basis, equal to a fixed percentage of the
inflation-adjusted principal amount. For example, if a Fund purchased an
inflation-indexed bond with a par value of $1,000 and a 3% real rate of return
coupon (payable 1.5% semiannually), and inflation over the first six months were
1%, the mid-year par value of the bond would be $1,010 and the first semiannual
interest payment would be $15.15 ($1,010 times 1.5%). If inflation during the
second half of the year reached 3%, the end-of-year par value of the bond would
be $1,030 and the second semiannual interest payment would be $15.45 ($1,030
times 1.5%).
If the periodic adjustment rate measuring inflation falls, the
principal value of inflation-indexed bonds will be adjusted downward, and
consequently the interest payable on these securities (calculated with respect
to a smaller principal amount) will be reduced. Repayment of the original bond
principal upon maturity (as adjusted for inflation) is guaranteed in the case of
U.S. Treasury inflation-indexed bonds, even during a period of deflation.
However, the current market value of the bonds is not guaranteed, and will
fluctuate. The Funds may also invest in other inflation related bonds which may
or may not provide a similar guarantee. If a guarantee of principal is not
provided, the adjusted principal value of the bond repaid at maturity may be
less than the original principal.
The value of inflation-indexed bonds is expected to change in response
to changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if inflation were to rise at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds.
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While these securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the bond's
inflation measure.
The U.S. Treasury has only recently begun issuing inflation-indexed
bonds. As such, there is no trading history of these securities, and there can
be no assurance that a liquid market in these instruments will develop, although
one is expected. Lack of a liquid market may impose the risk of higher
transaction costs and the possibility that a Fund may be forced to liquidate
positions when it would not be advantageous to do so. There also can be no
assurance that the U.S. Treasury will issue any particular amount of
inflation-indexed bonds. Certain foreign governments, such as the United
Kingdom, Canada and Australia, have a longer history of issuing
inflation-indexed bonds, and there may be a more liquid market in certain of
these countries for these securities.
The periodic adjustment of U.S. inflation-indexed bonds is tied to the
Consumer Price Index for Urban Consumers ("CPI-U"), which is calculated monthly
by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in
the cost of living, made up of components such as housing, food, transportation
and energy. Inflation-indexed bonds issued by a foreign government are generally
adjusted to reflect a comparable inflation index, calculated by that government.
There can be no assurance that the CPI-U or any foreign inflation index will
accurately measure the real rate of inflation in the prices of goods and
services. Moreover, there can be no assurance that the rate of inflation in a
foreign country will be correlated to the rate of inflation in the United
States.
Any increase in the principal amount of an inflation-indexed bond will
be considered taxable ordinary income, even though investors do not receive
their principal until maturity.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York.
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Collateral for repurchase agreements is held in safekeeping in the customer-only
account of the Funds' Custodian at the Federal Reserve Bank. The Short Term
Government Income Fund, the Intermediate Term Government Income Fund, the
Institutional Government Income Fund and the Money Market Fund will not enter
into a repurchase agreement not terminable within seven days if, as result
thereof, more than 10% of the value of its net assets would be invested in such
securities and other illiquid securities. The Adjustable Rate U.S. Government
Securities Fund and the Intermediate Bond Fund will not enter into a repurchase
agreement not terminable within seven days if, as a result thereof, more than
15% of the value of its net assets would be invested in such securities and
other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate 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
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the principal and income involved in the transaction. As with any unsecured debt
obligation purchased for a Fund, the Adviser seeks to minimize the risk of loss
through repurchase agreements by analyzing the creditworthiness of the obligor,
in this case, the seller. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
security, in which case a Fund may incur a loss if the proceeds to that Fund of
the sale of the security to a third party are less than the repurchase price.
However, if the market value of the securities subject to the repurchase
agreement becomes less than the repurchase price (including interest), the Fund
involved will direct the seller of the security to deliver additional securities
so that the market value of all securities subject to the repurchase agreement
will equal or exceed the repurchase price. It is possible that a Fund will be
unsuccessful in seeking to enforce the seller's contractual obligation to
deliver additional securities.
LOANS OF PORTFOLIO SECURITIES. The Institutional Government Income
Fund, the Adjustable Rate U.S. Government Securities Fund, the Money Market Fund
and the Intermediate 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 a 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 Funds may also pay fees to
placing brokers as well as custodian and administrative fees in connection with
loans. Fees may only be paid to a placing broker provided that the Trustees
determine that the fee paid to the placing broker is reasonable and based solely
upon services rendered, that the Trustees separately consider the propriety of
any fee shared by the placing broker with the borrower, and that the fees are
not used to compensate the Adviser or any affiliated person of the Trust or an
affiliated person of the Adviser or other affiliated person. The terms of the
Funds' loans must meet applicable tests under the Internal Revenue Code and
permit the 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 Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or of banks or institutions the accounts of which are insured by
the Federal
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<PAGE>
Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time (usually from fourteen days to one year) at a stated or
variable interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft which has been drawn on it by a
customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Investments in time deposits maturing
in more than seven days will be subject to each Fund's restrictions on illiquid
investments (see "Investment Limitations"). The Money Market Fund and the
Intermediate 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.
Investments in the obligations of foreign branches of U.S. commercial banks may
be subject to special risks, including future political and economic
developments, imposition of withholding taxes on income, establishment of
exchange controls or other restrictions, less governmental supervision and the
lack of uniform accounting, auditing and financial reporting standards that
might affect an investment adversely.
COMMERCIAL PAPER. Commercial paper consists of short-term, (usually
from one to two hundred seventy days) unsecured promissory notes issued by U.S.
corporations in order to finance their current operations. Certain notes may
have floating or variable rates. Variable and floating rate notes with a demand
notice period exceeding seven days will be subject to a Fund's restrictions on
illiquid investments (see "Investment Limitations") unless, in the judgment of
the Adviser, subject to the direction of the Board of Trustees, such note is
liquid.
VARIABLE RATE DEMAND INSTRUMENTS. The Funds may purchase variable rate
demand instruments. Variable rate demand instruments that the Funds will
purchase are variable amount master demand notes that provide for a periodic
adjustment in the interest rate paid on the instrument and permit the holder to
demand payment of the unpaid principal balance plus accrued interest at
specified intervals upon a specific number of days' notice either from the
issuer or by drawing on a bank letter of credit, a guarantee, insurance or other
credit facility issued with respect to such instrument.
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<PAGE>
The variable rate demand instruments in which the Funds may invest are
payable on not more than thirty calendar days' notice either on demand or at
specified intervals not exceeding thirteen months depending upon the terms of
the instrument. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to thirteen months and their
adjustments are based upon the prime rate of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. In
order to minimize credit risks, the Adviser will decide which variable rate
demand instruments it will purchase in accordance with procedures prescribed by
the Board of Trustees. Each Fund may only purchase variable rate demand
instruments which have received a short-term rating meeting that Fund's quality
standards from an NRSRO or unrated variable rate demand instruments determined
by the Adviser, under the direction of the Board of Trustees, to be of
comparable quality. If such an instrument does not have a demand feature
exercisable by a Fund in the event of default in the payment of principal or
interest on the underlying securities, then the Fund will also require that the
instrument have a rating as long-term debt in one of the top two categories by
any NRSRO. The Adviser may determine, under the direction of the Board of
Trustees, that an unrated variable rate demand instrument meets a Fund's quality
criteria if it is backed by a letter of credit or guarantee or insurance or
other credit facility that meets the quality criteria for the Fund or on the
basis of a credit evaluation of the underlying obligor. If an instrument is ever
deemed to not meet a Fund's quality standards, such Fund either will sell it in
the market or exercise the demand feature as soon as practicable.
Each Fund will not invest more than 10% of its net assets (or 15% of net
assets with respect to the Adjustable Rate U.S. Government Securities Fund and
the Intermediate Bond Fund) in variable rate demand instruments as to which it
cannot exercise the demand feature on not more than seven days' notice if the
Board of Trustees determines that there is no secondary market available for
these obligations and all other illiquid securities. The Funds intend to
exercise the demand repurchase feature only (1) upon a default under the terms
of the bond documents, (2) as needed to provide liquidity to a Fund in order to
make redemptions of its shares, or (3) to maintain the quality standards of a
Fund's investment portfolio.
While the value of the underlying variable rate demand instruments may
change with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital depreciation is less than would be the case with a
portfolio of fixed income securities. Each Fund may hold variable rate demand
instruments on which stated minimum or
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<PAGE>
maximum rates, or maximum rates set by state law, limit the degree to which
interest on such variable rate demand instruments may fluctuate; to the extent
it does, increases or decreases in value may be somewhat greater than would be
the case without such limits. Because the adjustment of interest rates on the
variable rate demand instruments is made in relation to movements of the
applicable banks' "prime rate," or other interest rate adjustment index, the
variable rate demand instruments are not comparable to long-term fixed rate
securities. Accordingly, interest rates on the variable rate demand instruments
may be higher or lower than current market rates for fixed rate obligations or
obligations of comparable quality with similar maturities.
RESTRICTED SECURITIES. The Money Market Fund and the Intermediate Bond
Fund may invest in restricted securities. Restricted securities generally can be
sold in a privately negotiated transaction, pursuant to an exemption from
registration under the securities Act of 1933, or in a registered public
offering. Where registration is required, a Fund may be obligated to pay all or
part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
shares. However, in general, the Funds anticipate holding restricted securities
to maturity or selling them in an exempt transaction.
MAJORITY. As used in the Prospectuses and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
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).
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS
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Corporate Bonds.
MOODY'S INVESTORS SERVICE, INC. PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE BOND RATINGS:
Aaa - "Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as 'gilt edge.' Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues."
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<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."
Baa - "Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well."
Ba - "Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterize bonds in this class."
B - "Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small."
Caa - "Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest."
Ca - "Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings."
C - "Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing."
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<PAGE>
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."
BBB - "Debt rated BBB is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
BB - "Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating."
B - "Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating."
CCC - "Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial or economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest or repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating."
CC - "The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating."
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<PAGE>
C - "The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy has been filed but debt service
payments are continued."
CI - "The rating CI is reserved for income bonds on which no interest is
being paid."
D - "Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition and debt service payments are jeopardized."
DUFF AND PHELPS INC. PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS CORPORATE BOND
RATINGS:
AAA - "Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt."
AA - "High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions."
A - "Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress."
BBB - "Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles."
BB - "Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category."
B - "Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade."
CCC - "Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments."
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<PAGE>
DD - "Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments."
FITCH INVESTORS SERVICE, INC. PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE BOND RATINGS:
AAA - "AAA ratings denote the lowest expectation of credit risk. They are
assigned only in cases of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events."
AA - "AA ratings denote a very low expectation of credit risk. They
indicate strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events."
A - "A ratings denote a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings."
BBB - "BBB ratings indicate that there is currently a low expectation of
credit risk. Capacity for timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in economic conditions are
more likely to impair this capacity. This is the lowest investment grade
category."
BB - "BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade."
B - "B ratings indicate that significant credit risk is present, but a
limited margin of safety remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a sustained,
favorable business and economic environment."
CCC, CC, C - "Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon sustained, favorable business or economic
developments. A 'CC' rating indicates that default of some kind appears
probable. 'C' ratings signal imminent default."
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<PAGE>
DDD, DD and D - "Securities are not meeting current obligations and are
extremely speculative. 'DDD' designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, 'DD' indicates expected recovery of 50%-90% of such outstanding, and
'D' the lowest recovery potential, i.e. below 50%."
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."
STANDARD & POOR'S RATINGS GROUP PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE NOTE RATINGS:
SP-1 "Debt rated SP-1 has very strong or strong capacity to pay
principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+)
designation."
SP-2 "Debt rated SP-2 has satisfactory capacity to pay
principal and interest."
COMMERCIAL PAPER.
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF MOODY'S INVESTORS SERVICE, INC.:
Prime-1 "Superior capacity for repayment of short-term
promissory obligations."
Prime-2 "Strong capacity for repayment of short-term promissory
obligations."
Prime-3 "Acceptable ability for repayment of short-term
promissory obligations."
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF STANDARD & POOR'S RATINGS GROUP:
A-1 "This designation indicates that the degree of safety
regarding timely payment is very strong."
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DDD, DD and D - "Securities are not meeting current obligations and are
extremely speculative. 'DDD' designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, 'DD' indicates expected recovery of 50%-90% of such outstanding, and
'D' the lowest recovery potential, i.e. below 50%."
THOMSON BANKWATCH PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS CORPORATE BOND
RATINGS:
AAA - "Indicates that the ability to repay principal and interest on a
timely basis is extremely high."
AA - "Indicates a very strong ability to repay principal and interest on a
timely basis, with limited incremental risk compared to issues rated in the
highest category."
A - "Indicates the ability to repay principal and interest is strong.
Issues rated A could be more vulnerable to adverse developments (both internal
and external) than obligations with higher ratings."
BBB - "The lowest investment-grade category; indicates an acceptable
capacity to repay principal and interest. BBB issues are more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings."
BB - "While not investment grade, the BB rating suggests that the
likelihood of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to adequately
service debt obligations."
B - "Issues rated B show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse developments
could negatively affect the payment of interest and principal on a timely
basis."
CCC - "Issues rated CCC clearly have a high likelihood of default, with
little capacity to address further adverse changes in financial circumstances."
CC - "CC is applied to issues that are subordinate to other obligations
rated CCC and are afforded less protection in the event of bankruptcy or
reorganization."
D - "Default."
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<PAGE>
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."
STANDARD & POOR'S RATINGS GROUP PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE NOTE RATINGS:
SP-1 "Debt rated SP-1 has very strong or strong capacity to pay
principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+)
designation."
SP-2 "Debt rated SP-2 has satisfactory capacity to pay
principal and interest."
COMMERCIAL PAPER.
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF MOODY'S INVESTORS SERVICE, INC.:
Prime-1 "Superior capacity for repayment of short-term
promissory obligations."
Prime-2 "Strong capacity for repayment of short-term promissory
obligations."
Prime-3 "Acceptable ability for repayment of short-term
promissory obligations."
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF STANDARD & POOR'S RATINGS GROUP:
A-1 "This designation indicates that the degree of safety
regarding timely payment is very strong."
A-2 "Capacity for timely payment on issues with this
designation is strong. However, the relative degree of
safety is not as overwhelming as for issues designated
A-1."
A-3 "Issues carrying this designation have adequate
capacity for timely payment. They are, however, more
vulnerable to the adverse effects of changes in
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circumstances than obligations carrying the higher
designations."
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF DUFF & PHELPS, INC.:
DUFF-1 - "Very high certainty of timely payment. Liquidity factors are
excellent and supported by strong fundamental protection factors. Risk factors
are minor."
DUFF-2 - "Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small."
DESCRIPTION OF COMMERCIAL PAPER RATINGS OF THOMSON BANKWATCH:
TBW-1 - "The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis."
TBW-2 - "The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated TBW-1."
TBW-3 - "The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate."
TBW-4 - "The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative."
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
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<PAGE>
the extent that, in connection with the disposition of its portfolio securities
(including restricted securities), a Fund may be deemed an underwriter under
certain federal securities laws.
3. Illiquid Investments. Each Fund will not purchase securities for
which there are legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 10% of the value of the 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).
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<PAGE>
9. Investing for Control. Each Fund will not invest in companies for
the purpose of exercising control or management.
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.
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<PAGE>
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, 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
- 26 -
<PAGE>
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.
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.
- 27 -
<PAGE>
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 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.
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<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 MONEY MARKET FUND AND THE
INTERMEDIATE BOND FUND ARE:
1. Borrowing Money. Each Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that, when made, such temporary borrowings are
in an amount not exceeding 5% of the Fund's total assets. Each Fund also will
not make any borrowing which would cause outstanding borrowings to exceed
one-third of the value of its total assets.
2. Underwriting. Each Fund will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), a
Fund may be deemed an underwriter under certain federal securities laws.
3. Real Estate. Each Fund will not purchase, hold or deal in real
estate.
4. Concentration. 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.
- 29 -
<PAGE>
5. Commodities. Each Fund will not purchase, hold or deal in
commodities and will not invest in oil, gas or other mineral explorative or
development programs.
6. Loans. Each Fund will not make loans to other persons if, as a
result, more than one-third of the value of the Fund's total assets would be
subject to such loans. This limitation does not apply to (a) the purchase of a
portion of an issue of debt securities in accordance with a Fund's investment
objective, policies and limitations or (b) engaging in repurchase transactions.
7. Options. Each Fund will not engage in the purchase or sale of put or
call options.
8. Senior Securities. Each Fund will not issue or sell any senior
security as defined by the Investment Company Act of 1940 except insofar as any
borrowing that the Funds may engage in may be deemed to be an issuance of a
senior security.
The Money Market Fund has adopted the following additional investment
limitation, which may not be changed without the affirmative vote of a majority
of the outstanding shares of the Fund. The Fund will not purchase the securities
of any issuer if such purchase at the time thereof would cause more than 5% of
the value of its total assets to be invested in the securities of such issuer
(the foregoing limitation does not apply to investments in government securities
as defined in the Investment Company Act of 1940).
THE FOLLOWING INVESTMENT LIMITATIONS OF THE MONEY MARKET FUND AND THE
INTERMEDIATE BOND FUND ARE NONFUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER
APPROVAL.
1. Illiquid Investments. Each Fund will not purchase securities for
which there are legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 15% of the value of the Intermediate Bond Fund's net assets or 10% of
the value of the Money Market Fund's net assets would be invested in such
securities.
2. Other Investment Companies. Each Fund will not invest more than 5%
of its total assets in the securities of any investment company and will not
invest more than 10% of the value of its total assets in securities of other
investment companies.
3. Margin Purchases. Each Fund will not purchase securities or
evidences of interest thereon on "margin." This limitation is not applicable to
short-term credit obtained by a Fund for the clearance of purchases and sales or
redemption of securities.
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<PAGE>
4. Short Sales. Each Fund will not make short sales of securities,
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short.
With respect to the percentages adopted by the Trust as maximum
limitations on a Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money or investing in illiquid securities) will not be a violation
of the policy or restriction unless the excess results immediately and directly
from the acquisition of any security or the action taken.
The Trust has never pledged, mortgaged or hypothecated the assets of
any Fund, and the Trust presently intends to continue this policy. The Trust has
never acquired, nor does it presently intend to acquire, securities issued by
any other investment company or investment trust. The 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, portfolio investments and
transactions 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 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 Funds to make portfolio investments and engage in transactions
not permissible for Federal credit unions, the Trust will so notify all Federal
credit union shareholders.
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the
Trust and their compensation from the Trust and their aggregate compensation
from the Countrywide complex of mutual funds (consisting of the Trust,
Countrywide Tax-Free Trust and Countrywide Strategic Trust) for the fiscal year
ended September 30, 1998. Each Trustee who is an "interested person"
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<PAGE>
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.
AGGREGATE
COMPENSATION
COMPENSATION FROM
POSITION FROM COUNTRYWIDE
NAME AGE HELD TRUST COMPLEX
- ---- --- -------- ------------ ---------
Donald L. Bodgon, MD 68 Trustee $ 4,000 $ 12,000
+H. Jerome Lerner 60 Trustee 4,000 12,000
*Robert H. Leshner 59 President/Trustee 0 0
Howard J. Levine 62 Trustee 1,000 3,000
*Angelo R. Mozilo 59 Chairman/Trustee 0 0
Fred A. Rappoport 51 Trustee 3,000 9,000
+Oscar P. Robertson 60 Trustee 4,000 12,000
John F. Seymour, Jr. 60 Trustee 4,000 12,000
+Sebastiano Sterpa 69 Trustee 4,000 12,000
Robert G. Dorsey 41 Vice President 0 0
Maryellen Peretzky 46 Vice President 0 0
William E. Hortz 40 Vice President 0 0
John F. Splain 42 Secretary 0 0
Mark J. Seger 36 Treasurer 0 0
* Mr. Leshner and Mr. Mozilo, as officers and directors of
Countrywide Investments, Inc., are each an "interested
person" of the Trust within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the Trust
during the past five years are set forth below:
DONALD L. BOGDON, M.D., 1551 Hillcrest, Glendale, California is a
physician with Hematology Oncology Consultants and a Director of Verdugo VNA (a
hospice facility). Until 1996 he was President of Western Hematology/Oncology.
H. JEROME LERNER, 7149 Knoll Road, Cincinnati, Ohio is a principal of
HJL Enterprises and is Chairman of Crane Electronics, Inc. (a manufacturer of
electronic connectors). He is also a director of Slush Puppy Inc. (a
manufacturer of frozen beverages) and Peerless Manufacturing (a manufacturer of
bakery equipment).
ROBERT H. LESHNER, 312 Walnut Street, Cincinnati, Ohio is President and
a director of Countrywide Investments, Inc. (the investment adviser and
principal underwriter of the Trust) and Countrywide Financial Services,
Inc. (a financial services company and parent of Countrywide Investments, Inc.,
Countrywide Fund Services, Inc. and CW Fund Distributors, Inc.). He is Vice
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<PAGE>
Chairman and a director of Countrywide Fund Services, Inc. (a registered
transfer agent) and CW Fund Distributors, Inc. (a registered broker-dealer) and
President and a Trustee of Countrywide Strategic Trust and Countrywide Tax-Free
Trust, registered investment companies.
HOWARD J. LEVINE, 26901 Agoura Road, Calabasas Hills, California is
President of ARCS Commercial Mortgage Co., L.P.
ANGELO R. MOZILO, 4500 Park Granada Boulevard, Calabasas, California is
Vice Chairman, Director and Chief Executive Officer 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), CCM Municipal Services, Inc. (a tax lien
purchaser), Countrywide Field Services Corporation (foreclosure property
maintenance), Countrywide Tax Services Corporation (mortgage tax services) and
LandSafe, Inc. (the parent company of various LandSafe entities which provide
property appraisals, credit reporting services, title insurance and/or closing
services for residential mortgages). He is Chairman and a director of
Countrywide Financial Services, Inc., Countrywide Investments, Inc., Countrywide
Fund Services, Inc., CW Fund Distributors, Inc., Countrywide Servicing Exchange
(a loan servicing broker), Countrywide Lending Corporation, Countrywide Capital
Markets, Inc., (parent company), LandSafe Servicing, Inc. (a property surveyor)
and various LandSafe subsidiaries and is Chairman and Chief Executive Officer of
Countrywide Securities Corporation (a registered broker-dealer). He is also Vice
Chairman of CWM Mortgage Holdings, Inc. (a real estate investment trust).
FRED A. RAPPOPORT, 830 Birchwood Drive, Los Angeles, California is
Chairman of The Fred Rappoport Company (a broadcasting and entertainment
company).
OSCAR P. ROBERTSON, 4293 Muhlhauser Road, Fairfield, Ohio is
President of Orchem Corp. (a chemical specialties distributor) and Orpack Stone
Corporation (a corrugated box manufacturer).
JOHN F. SEYMOUR, JR., 46-393 Blackhawk Drive, Indian Wells, California
is Chief Executive Officer of the Southern California Housing Development
Corporation (a non-profit affordable housing company). He is a director and a
consultant for Orange Coast Title Insurance Co. and is also a director of Irvine
Apartment Communities (a REIT) and Inco Homes (a home builder). Until
January 1, 1995, he was the Executive Director of the California Housing Finance
Agency. He is a former U.S. Senator, State Senator, California State Legislator
and Mayor of Anaheim, California.
SEBASTIANO STERPA, 200 West Glenoaks Boulevard, Glendale, California is
Chairman of Sterpa Realty, Inc. and Chairman and a director of the California
Housing Finance Agency. He is also a
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<PAGE>
director of Real Estate Business Services and a director of the SunAmerica
Mutual Funds.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio is President and
Treasurer of Countrywide Fund Services, Inc. and CW Fund Distributors, Inc. and
First Vice President and Treasurer of Countrywide Financial Services, Inc. and
Countrywide Investments, Inc. He is also Vice President of Countrywide Tax-Free
Trust, Countrywide Strategic Trust, Brundage, Story and Rose Investment
Trust, Markman MultiFund Trust, Maplewood Investment Trust, a series company,
The Thermo Opportunity Fund, Inc., The Dean Family of Funds, The New York State
Opportunity Funds, the Wells Family of Real Estate Funds, the Lake Shore Family
of Funds, Boyar Value Fund, Inc., Profit Funds Investment Trust, Atalanta/
Sosnoff Investment Trust, UC Investment Trust and The Winter Harbor Fund and
Assistant Vice President of Williamsburg Investment Trust, Schwartz Investment
Trust, The Tuscarora Investment Trust, The Gannett Welsh & Kotler Funds,
Firsthand Funds, the Westport Funds, Albemarle Investment Trust and The
James Advantage Funds, all of which are registered investment companies.
MARYELLEN PERETZKY, 312 Walnut Street, Cincinnati, Ohio is Senior Vice
President and Chief Operating Officer of Countrywide Investments, Inc. and
Senior Vice President of Countrywide Financial Services, Inc., Countrywide Fund
Services, Inc. and CW Fund Distributors, Inc. She is also Vice President of
Countrywide Tax-Free Trust and Countrywide Strategic Trust.
WILLIAM E. HORTZ, 312 Walnut Street, Cincinnati, Ohio is Executive Vice
President and Director of Sales of Countrywide Investments, Inc. and Countrywide
Financial Services, Inc. He is also Vice President of Countrywide Tax-Free
Trust and Countrywide Strategic Trust. From 1996 until 1998, he was President
of Peregrine Asset Management (an investment adviser). From 1991 until 1996, he
was Regional Director of Neuberger & Berman Management (an investment adviser).
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is First Vice
President, Secretary and General Counsel of Countrywide Fund Services, Inc., CW
Fund Distributors, Inc., Countrywide Investments, Inc. and Countrywide Financial
Services, Inc. He is also Secretary of Countrywide Tax-Free Trust, Countrywide
Strategic Trust, Brundage, Story and Rose Investment Trust, Williamsburg
Investment Trust, Markman MultiFund Trust, The Tuscarora Investment Trust,
Maplewood Investment Trust, a series company, The Thermo Opportunity Fund, Inc.,
the Lake Shore Family of Funds, the Wells Family of Real Estate Funds, Boyar
Value Fund, Inc., Profit Funds Investment Trust and The Winter Harbor Fund and
Assistant Secretary of Schwartz Investment Trust, The Gannett Welsh & Kotler
Funds, Firsthand Funds, the New York State Opportunity Funds, the Dean Family of
Funds, the Westport Funds,
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<PAGE>
Atalanta/Sosnoff Investment Trust, Albemarle Investment Trust, The James
Advantage Funds and UC Investment Trust.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio is First
Vice President and Chief Operating Officer of Countrywide Fund Services, Inc.
and CW Fund Distributors, 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, Maplewood Investment
Trust, a series company, The Thermo Opportunity Fund, Inc., the New York State
Opportunity Funds, the Dean Family of Funds, the Wells Family of Real Estate
Funds, Profit Funds Investment Trust, the Lake Shore Family of Funds, Albemarle
Investment Trust, Atalanta/Sosnoff Investment Trust, UC Investment Trust and
The Winter Harbor Fund and Assistant Treasurer of Schwartz Investment Trust, The
Tuscarora Investment Trust, The Gannett Welsh & Kotler Funds, Firsthand Funds,
the Westport Funds, Boyar Value Fund, Inc. and The James Advantage Funds.
Each Trustee, except for Messrs. Leshner and Mozilo, receives a
quarterly retainer of $1,500 and a fee of $1,500 for each Board meeting
attended. Such fees are split equally among the Trust, Countrywide Strategic
Trust and Countrywide Tax-Free Trust.
THE INVESTMENT ADVISER AND UNDERWRITER
- --------------------------------------
Countrywide Investments, Inc. (the "Adviser") is the Funds' investment
manager. The Adviser is a subsidiary of Countrywide Financial Services, Inc.,
which is a wholly-owned subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange listed company principally engaged in the business of
residential mortgage lending. Messrs. Mozilo and Leshner are deemed to be
affiliates of the Adviser by reason of their position as Chairman and President,
respectively, of the Adviser. Messrs. Mozilo and Leshner, by reason of such
affiliation, may directly or indirectly receive benefits from the advisory fees
paid to the Adviser.
Under the terms of the investment advisory agreements between the Trust
and the Adviser, the Adviser is responsible for the management of the Funds'
investments. The Short Term Government Income Fund, the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund, the
Money Market Fund and the Intermediate Bond 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
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<PAGE>
computed and accrued daily and paid monthly at an annual rate of .2% of its
average daily net assets. 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, 1998, 1997 and 1996, the Short
Term Government Income Fund accrued advisory fees of $459,485, $476,697 and
$419,926, respectively; however, the Adviser voluntarily waived $21,569 of such
fees for the fiscal year ended September 30, 1998 in order to reduce the
operating expenses of the Fund. For the fiscal years ended September 30, 1998,
1997 and 1996, the Intermediate Term Government Income Fund paid advisory fees
of $251,601, $274,084 and $289,680, respectively. For the fiscal years ended
September 30, 1998, 1997 and 1996, the Institutional Government Income Fund
accrued advisory fees of $100,484, $100,101 and $70,752, respectively; however,
the Adviser voluntarily waived $23,440, $22,972 and $32,783 of such fees for the
fiscal years ended September 30, 1998, 1997 and 1996, respectively, in order to
reduce the operating expenses of the Fund. For the fiscal years ended September
30, 1998, 1997 and 1996, the Adjustable Rate U.S. Government Securities Fund
accrued advisory fees of $72,130, $79,473 and $79,927, respectively; however,
the Adviser voluntarily waived all of its fees for each fiscal year and
reimbursed the Fund for $16,687 of expenses during the fiscal year ended
September 30, 1998 in order to reduce the operating expenses of the Fund. For
the fiscal year ended September 30, 1998, the Money Market Fund paid advisory
fees of $312,309. For the fiscal year ended September 30, 1998, the Intermediate
Bond Fund accrued advisory fees of $112,811, however, the Adviser voluntarily
waived $7,205 of such fees in order to reduce the operating expenses of the
Fund. Prior to August 29, 1997, the investment adviser of the Predecessor Money
Market Fund and the Predecessor Intermediate Bond Fund was Trans Financial Bank,
N.A. (the "Predecessor Adviser"). For the fiscal periods ended August 31, 1997
and 1996, the Predecessor Money Market Fund accrued advisory fees of $188,896
and $99,711, respectively; however, the Predecessor Adviser voluntarily waived
$130,362 of such fees during the fiscal year ended August 31, 1997 and
voluntarily waived its entire advisory fee and reimbursed the Predecessor Fund
for $68,443 of expenses during the fiscal period ended August 31, 1996. For the
fiscal periods ended August 31, 1997 and 1996, the Predecessor Intermediate Bond
Fund accrued advisory fees of $60,906 and $38,478, respectively; however, the
Predecessor Adviser waived its entire advisory fee and reimbursed the
Predecessor Fund for $43,624 of expenses during the fiscal year ended August 31,
1997 and waived its entire advisory fee and reimbursed the Predecessor Fund for
$91,826 of expenses during the fiscal period ended August 31, 1996.
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
- 36 -
<PAGE>
or non-recurring expenses as may arise, such as litigation to which the Trust
may be a party. The Funds may have an obligation to indemnify the Trust's
officers and Trustees with respect to such litigation, except in instances of
willful misfeasance, bad faith, gross negligence or reckless disregard by such
officers and Trustees in the performance of their duties. The Adviser bears
promotional expenses in connection with the distribution of the Funds' shares to
the extent that such expenses are not assumed by the Funds under their plan of
distribution (see below). The compensation and expenses of any officer, Trustee
or employee of the Trust who is an officer, director or employee 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 Intermediate 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, 1998, the aggregate commissions on sales of the Trust's
shares were $41,770, of which the Adviser paid $33,432 to unaffiliated
broker-dealers in the selling network, earned $5,321 as a broker-dealer in the
selling network and retained $3,017 in underwriting commissions. For the fiscal
year ended September 30, 1997, the aggregate commissions on sales of the Trust's
shares were $46,520, of which the Adviser paid $39,361 to unaffiliated
broker-dealers in the selling network, earned $3,918 as a broker-dealer in the
selling network and retained $3,241 in underwriting commissions. For the fiscal
- 37 -
<PAGE>
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.
The Funds may compensate dealers, including the Adviser and its
affiliates, based on the average balance of all accounts in the Fund for which
the dealer is designated as the party responsible for the account. See
"Distribution Plan" below.
DISTRIBUTION PLAN
- -----------------
As stated in the Prospectus, the Funds have adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 which permits each Fund to pay for expenses incurred in the
distribution and promotion of the Funds' shares, including but not limited to,
the printing of prospectuses, statements of additional information and reports
used for sales purposes, advertisements, expenses of preparation and printing of
sales literature, promotion, marketing and sales expenses, and other
distribution-related expenses, including any distribution fees paid to
securities dealers or other firms who have executed a distribution or service
agreement with the Adviser. The Plan expressly limits payment of the
distribution expenses listed above in any fiscal year to a maximum of .35% of
the average daily net assets of the Short Term Government Income Fund, the
Intermediate Term Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund, the Money Market Fund and the Intermediate 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, 1998, 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"), the Money Market Fund ("MMF") and the Intermediate Bond Fund
("IBF") under the Plan were $75,167, $87,582, $3,319, $7,037, $71,450 and
$22,402, respectively. Amounts were spent as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
STF ITF IGF ARM MMF IBF
Printing and mailing
of prospectuses and
reports to prospective
shareholders...... $4,167 $4,082 $3,319 $7,037 $6,921 $8,402
Payments to broker-
dealers and others
for the sale or
retention of assets 71,000 83,500 -- -- 64,529 14,000
Advertising and
promotion.......... -- -- -- -- -- --
$75,167 $87,582 $3,319 $7,037 $71,450 $22,402
======= ======= ====== ====== ======= =======
</TABLE>
-38-
<PAGE>
GENERAL INFORMATION -- Agreements implementing the Plan (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plan are made in accordance with written agreements.
The continuance of the Plan and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plan or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. The Plan may be terminated at any
time by a vote of a majority of the Independent Trustees or by a vote of the
holders of a majority of the outstanding shares of a Fund. In the event a Plan
is terminated in accordance with its terms, the affected Fund will not be
required to make any payments for expenses incurred by the Adviser after the
termination date. Each Implementation Agreement terminates automatically in the
event of its assignment and may be terminated at any time by a vote of a
majority of the Independent Trustees or by a vote of the holders of a majority
of the outstanding shares of a Fund on not more than 60 days' written notice to
any other party to the Implementation Agreement. The Plan may not be amended to
increase materially the amount to be spent for distribution without shareholder
approval. All material amendments to the Plan must be approved by a vote of the
Trust's Board of Trustees and by a vote of the Independent Trustees.
In approving the Plan, the Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties as Trustees, that
there is a reasonable likelihood that the Plan will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plan should assist in the growth of
the Funds which will benefit the Funds and their shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plan is in effect, all amounts spent by the Funds pursuant
to the Plan and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. The selection and
nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
- 39 -
<PAGE>
Angelo R. Mozilo and Robert H. Leshner, as interested persons of the
Trust, may be deemed to have a financial interest in the operation of the Plan
and the Implementation Agreements.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer. Because the portfolio securities of the Funds are
generally traded on a net basis and transactions in such securities do not
normally involve brokerage commissions, the cost of portfolio securities
transactions of the Funds will consist primarily of dealer or underwriter
spreads. No brokerage commissions were paid by the Funds during the last three
fiscal years.
The Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Funds and/or other accounts over
which the Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if it is
determined in good faith that the commission is reasonable in relation to the
value of the brokerage and research services provided. The determination may be
viewed in terms of a particular transaction or the Adviser's overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds or the
Adviser, it is not possible to place a dollar
- 40 -
<PAGE>
value on it. Research services furnished by brokers through whom the Funds
effect securities transactions may be used by the Adviser in servicing all of
its accounts and not all such services may be used in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Adviser and other affiliates
of the Trust or the Adviser may effect securities transactions which are
executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. No Fund will effect any
brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Funds do not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Adviser nor
affiliates of the Trust or the Adviser will receive reciprocal brokerage
business as a result of the brokerage business transacted by the Funds with
other brokers.
During the fiscal year ended September 30, 1998, the Money Market Fund
and the Intermediate Bond Fund acquired securities of the Trust's regular
broker-dealers as follows: Money Market Fund - Merrill Lynch & Company, Inc.,
corporate notes $784,000 par value, the market value of which was $787,895 as of
September 30, 1998; Bank One Corp. corporate notes, $900,000 par value, the
market value of which was $900,000 as of September 30, 1998; Intermediate Bond
Fund - Merrill Lynch & Company, Inc. medium-term notes, $850,000 par value, the
market value of which was $883,964 as of September 30, 1998; and Lehman Brothers
Holdings, Inc. medium term notes, $407,000 par value, the market value of which
was $389,854 as of September 30, 1998.
During the fiscal year ended September 30, 1998, the Funds entered into
repurchase transactions with the following entities who may be deemed to be
regular broker-dealers of the Trust as defined under the Investment Company Act
of 1940: BT Alex. Brown Incorporated, Banc One Capital Markets, Bankers Trust
Company, Dean Witter Reynolds Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley, Dean Witter & Co., Nesbitt-Burns Securities Inc.,
Prudential-Bache Securities Inc. and Zions First National Bank Capital Markets.
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
- 41 -
<PAGE>
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, the Institutional Government Income Fund and the Money
Market 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 Intermediate 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 evaluation of an issuer's ability to meet its debt obligations in the
future. A security may be sold and another purchased when, in the opinion of the
Adviser, a favorable yield spread exists between specific issues or different
market sectors.
A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. A 100% turnover rate would occur if all of a Fund's portfolio securities
were replaced once within a one year period.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- -----------------------------------------------------
The share price (net asset value) of the shares of the Short Term
Government Income Fund, the Institutional Government Income Fund and the Money
Market Fund is determined as of 12:30 p.m. and 4:00 p.m., Eastern time, on each
day the Trust is open for
- 42 -
<PAGE>
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 Intermediate Bond Fund are determined as of the close of the regular session
of trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time),
on each day the Trust is open for business. The Trust is open for business on
every day except Saturdays, Sundays and the following holidays: New Year's Day,
Martin Luther King Jr. Day, Presidents' 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. 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, the Institutional Government Income
Fund and the Money Market Fund each value their portfolio securities on an
amortized cost basis. The use of the amortized cost method of valuation involves
valuing an instrument at its cost and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. Under the
amortized cost method of valuation, neither the amount of daily income nor the
net asset value of the Short Term Government Income Fund, the Institutional
Government Income Fund or the Money Market Fund is affected by any unrealized
appreciation or depreciation of the portfolio. The Board of Trustees has
determined in good faith that utilization of amortized cost is appropriate and
represents the fair value of the portfolio securities of the Short Term
Government Income Fund, the Institutional Government Income Fund and the Money
Market Fund.
Pursuant to Rule 2a-7, the Short Term Government Income Fund, the
Institutional Government Income Fund and the Money Market 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.
- 43 -
<PAGE>
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, the Institutional Government Income Fund and the Money
Market 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, the Institutional Government Income Fund or the Money Market Fund
would receive if it sold the instrument. During periods of declining interest
rates, the daily yield on shares of each Fund may tend to be higher than a like
computation made by a fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of its
portfolio securities. Thus, if the use of amortized cost by a Fund resulted in a
lower aggregate portfolio value on a particular day, a prospective investor in
the Fund would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values and existing investors would
receive less investment income. The converse would apply in a period of rising
interest rates.
Portfolio securities held by the Intermediate Term Government Income
Fund, the Adjustable Rate U.S. Government Securities Fund or the Intermediate
Bond Fund for which market quotations are readily available are generally valued
at their most recent bid prices as obtained from one or more of the major market
makers for such securities. Securities (and other assets) for which market
quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
- 44 -
<PAGE>
OTHER PURCHASE INFORMATION
- --------------------------
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of shares of
the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Intermediate Bond Fund is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
shares of the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Intermediate Bond Fund has the right to
combine the cost or current net asset value (whichever is higher) of his
existing shares of the load funds distributed by the Adviser with the amount of
his current purchases in order to take advantage of the reduced sales loads set
forth in the tables in the Prospectus. The purchaser or his dealer must notify
the Transfer Agent that an investment qualifies for a reduced sales load. The
reduced load will be granted upon confirmation of the purchaser's holdings by
the Transfer Agent.
LETTER OF INTENT. The reduced sales loads set forth in the tables in
the Prospectus may also be available to any "purchaser" (as defined in the
Prospectus) of shares of the Intermediate Term Government Income Fund, the
Adjustable Rate U.S. Government Securities Fund and the Intermediate Bond Fund
who submits a Letter of Intent to the Transfer Agent. The Letter must state an
intention to invest within a thirteen month period 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
- 45 -
<PAGE>
the ninety-day period. No retroactive adjustment will be made if purchases
exceed the amount indicated in the Letter of Intent. The purchaser or his dealer
must notify the Transfer Agent that an investment is being made pursuant to an
executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose a front-end sales load or
imposes a reduced sales load in connection with purchases of shares of the
Intermediate Term Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund and the Intermediate Bond Fund made under the reinvestment
privilege or the purchases described in the "Reduced Sales Load," "Purchases at
Net Asset Value" or "Exchange Privilege" sections in the Prospectus because such
purchases require minimal sales effort by the Adviser. Purchases described in
the "Purchases at Net Asset Value" section may be made for investment only, and
the shares may not be resold except through redemption by or on behalf of the
Trust.
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
Each Fund has qualified and intends to qualify annually for the special
tax treatment afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; and (ii) diversify its holdings so that at the
end of each quarter of its taxable year the following two conditions are met:
(a) at least 50% of the value of the Fund's total assets is represented by cash,
U.S. Government securities, securities of other regulated investment companies
and other securities (for this purpose such other securities will qualify only
if the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
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. As of
- 46 -
<PAGE>
September 30, 1998, the Intermediate Term Government Income Fund, the
Institutional Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund, the Money Market Fund and the Intermediate Bond Fund had
capital loss carryforwards for federal income tax purposes of $2,744,462,
$21,742, $1,252,395, $3,760 and $21,290, respectively. In addition, the
Adjustable Rate U.S. Government Securities Fund and the Money Market Fund
elected to defer until the September 30, 1999 tax year $57,161 and $2,025,
respectively, of capital losses incurred after October 31, 1997. These capital
loss carryforwards and "post-October" losses may be carried forward to offset
any capital gains for eight years, after which any undeducted capital loss
remaining is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
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, the Institutional Government Income Fund and the Money Market Fund are
provided on both a current and an effective (compounded) basis. Current yields
are calculated by determining
- 47 -
<PAGE>
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,
the Institutional Government Income Fund and the Money Market 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, 1998 were 4.49% and 4.59%,
respectively. The Institutional Government Income Fund's current and effective
yields for the seven days ended September 30, 1998 were 5.11% and 5.24%,
respectively. The Money Market Fund's current and effective yields for the seven
days ended September 30, 1998 were 4.90% and 5.02%, respectively.
From time to time, the Intermediate Term Government Income Fund, the
Adjustable Rate U.S. Government Securities Fund and the Intermediate Bond Fund
may advertise average annual total return. Average annual total return
quotations will be computed by finding the average annual compounded rates of
return over 1, 5 and 10 year periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 and 10 year periods at the end of the 1,
5 or 10 year periods (or fractional portion thereof)
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions. The calculation also assumes the deduction of the
current maximum sales load from the initial $1,000 payment. If a Fund 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
Intermediate Bond Fund for the periods ended September 30, 1998 are as follows:
- 48 -
<PAGE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
1 Year 8.33%
5 Years 4.86%
10 Years 7.45%
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
1 Year 1.80%
5 Years 4.36%
Since Inception (February 10, 1993) 4.38%
INTERMEDIATE BOND FUND
1 Year 8.33%
Since Inception (October 3, 1995) 7.50%
The Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Intermediate Bond Fund may also advertise
total return (a "nonstandardized quotation") which is calculated differently
from average annual total return. A nonstandardized quotation of total return
may be a cumulative return which measures the percentage change in the value of
an account between the beginning and end of a period, assuming no activity in
the account other than reinvestment of dividends and capital gains
distributions. This computation does not include the effect of the applicable
front-end sales load which, if included, would reduce total return. The total
returns of the Intermediate Term Government Income Fund ("ITF"), the Adjustable
Rate U.S. Government Securities Fund ("ARM") and the Intermediate Bond Fund
("IBF") as calculated in this manner for each of the last ten fiscal years (or
since inception) are as follows:
ITF ARM IBF
Period Ended ---- ---- ----
- ------------
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%(1)
September 30, 1994 -6.76% 2.09%
September 30, 1995 12.52% 5.33%
September 30, 1996 3.55% 6.32% 4.16%(2)
September 30, 1997 7.74% 6.34% 10.04%
September 30, 1998 10.54% 3.88% 10.54%
(1) From date of initial public offering on February 10, 1993
(2) From date of initial public offering on October 3, 1995
A nonstandardized quotation may also indicate average annual compounded rates of
return without including the effect of the applicable front-end sales load or
over periods other than those specified for average annual total return. The
average annual compounded rates of return for the Intermediate Term Government
Income Fund, the Adjustable Rate U.S. Government Securities Fund and the
Intermediate Bond Fund (excluding sales loads) for the periods ended September
30, 1998 are as follows:
- 49 -
<PAGE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
1 Year 10.54%
3 Years 7.24%
5 Years 5.29%
10 Years 7.66%
Since Inception (February 6, 1981) 8.85%
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
1 Year 3.88%
3 Years 5.50%
5 Years 4.78%
Since Inception (February 10, 1993) 4.76%
INTERMEDIATE BOND FUND
1 Year 10.54%
Since Inception (October 3, 1995) 8.23%
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 Intermediate 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.
- 50 -
<PAGE>
The yield of the Intermediate Term Government Income Fund for September 1998 was
4.40%. The yield of the Adjustable Rate U.S. Government Securities Fund for
September 1998 was 5.28%. The yield of the Intermediate Bond Fund for September
1998 was 5.28%.
The performance quotations described above are based on historical
earnings and are not intended to indicate future performance.
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:
IBC Financial Data Inc.'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 Institutional Government Funds category.
The Money Market Fund may compare performance rankings with money market funds
appearing in the First Tier Taxable 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 comparative performance information appearing in the
Adjustable Rate Mortgage Funds category, the Money Market Fund may provide
comparative performance information appearing in the Money Market Funds category
and the Intermediate Bond Fund may provide comparative performance information
appearing in the Intermediate Investment Grade Debt Funds category.
- 51 -
<PAGE>
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 November 6, 1998, Amivest Corporation, P.O. Box 370 Cooper
Station, New York, New York owned of record 46.0% of the outstanding shares of
the Intermediate Bond Fund. Amivest Corporation may be deemed to control the
Intermediate Bond Fund by virtue of the fact that it owns of record more than
25% of the Fund's shares as of such date. As of November 6, 1998, FIRSTCINCO,
425 Walnut Street, Cincinnati, Ohio owned of record 53.4% of the outstanding
shares of the Money Market Fund and 36.5% of the outstanding shares of the
Intermediate Bond Fund. FIRSTCINCO may be deemed to control the Money Market
Fund and the Intermediate Bond Fund by virtue of the fact that it owns of record
more than 25% of each Fund's shares as of such date. For purposes of voting on
matters submitted to shareholders, any person who owns more than 50% of the
outstanding shares of a Fund generally would be able to cast the deciding vote.
On November 6, 1998, Amivest Corporation, P.O. Box 370 Cooper Station, New
York, New York owned of record 13.1% of the outstanding shares of the
Intermediate Term Government Income Fund; Citizens Business Bank, Trustee FBO
Countrywide Credit Industries, Inc., P.O. Box 671, Pasadena, California owned of
record 6.1% of the outstanding shares of the Intermediate Term Government Income
Fund; Scudder Trust Company FBO Countrywide Credit Industries Tax Deferred
Savings & Supplemental Investment Plan, 5375 Mira Sorrento, San Diego,
California owned of record 17.8% of the outstanding shares of the Institutional
Government Income Fund; The Old Lyme Insurance Company of Rhode Island, c/o
Walter Kaye Association, 122 E. 42nd Street, New York, New York owned of record
13.1% of the outstanding shares of the Institutional Government Income Fund;
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio owned of record 5.8% of the
outstanding shares of the Institutional Government Income Fund; Warren W. and
Betty M. Rosenthal Trust, Betty M. Rosenthal Trustee, P.O. Box 54826, Lexington,
Kentucky owned of record 13.9% of the outstanding shares of the Adjustable Rate
U.S. Government Securities Fund; and Queen City Urology Associates Inc. Profit
Sharing Plan, FBO Asher O. Hoodin, 400 E. Martin Luther King Drive, Cincinnati,
Ohio owned of record 6.6% of the outstanding shares of the Adjustable Rate U.S.
Government Securities Fund.
- 52 -
<PAGE>
As of November 6, 1998, the Trustees and officers of the Trust as a
group owned of record and beneficially 2.0% of the outstanding shares of the
Money Market Fund and less than 1% of the outstanding shares of the Trust and of
each other Fund.
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has
been retained to act as Custodian for each Fund's investments. 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.
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent
auditors for the Trust for the fiscal year ending September 30, 1999. Arthur
Andersen LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of
the Trust's financial statements and advises the Funds as to certain accounting
matters.
TRANSFER AGENT
- --------------
The Trust's transfer agent, Countrywide Fund Services, Inc. ("CFS"),
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. CFS is an affiliate of the Adviser by
reason of common ownership. CFS receives for its services as transfer agent a
fee payable monthly at an annual rate of $25 per account from each of the Short
Term Government Income Fund, the Institutional Government Income Fund and the
Money Market Fund and $21 per account from each of the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund and
the Intermediate Bond Fund, provided, however, that the minimum fee is $1,000
per month for each Fund. In addition, the Funds pay out-of-pocket expenses,
including but not limited to, postage, envelopes, checks, drafts, forms,
reports, record storage and communication lines.
CFS also provides accounting and pricing services to the Trust. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable CFS to perform its duties, the Short Term
Government Income Fund, the Institutional Government Income Fund, the
Intermediate Term Government Income Fund, the Money Market Fund and the
Intermediate Bond Fund each pay CFS a fee in accordance with the
- 53 -
<PAGE>
following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $2,000
$500,000,000 - $100,000,000 $2,500
$100,000,000 - $200,000,000 $3,000
$200,000,000 - $300,000,000 $3,500
Over $300,000,000 $4,500*
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 $2,500
$ 50,000,000 - $100,000,000 $3,000
$100,000,000 - $200,000,000 $3,500
$200,000,000 - $300,000,000 $4,000
Over $300,000,000 $5,000*
* Subject to an additional fee of .001% of average daily net assets in
excess of $300 million.
In addition, each Fund pays all costs of external pricing services.
CFS is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, CFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. CFS supervises
the preparation of tax returns, reports to shareholders of the Funds, reports to
and filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For the
performance of these administrative services, CFS receives a fee from the
Adviser. 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.
ANNUAL REPORT
- -------------
The Funds' financial statements as of September 30, 1998 appear in the
Trust's annual report which is attached to this Statement of Additional
Information.
- 54 -
<PAGE>
ANNUAL REPORT
SEPTEMBER 30, 1998
SHORT TERM GOVERNMENT
INCOME FUND
INSTITUTIONAL GOVERNMENT
INCOME FUND
MONEY MARKET
FUND
INTERMEDIATE
BOND FUND
INTERMEDIATE TERM
GOVERNMENT
INCOME FUND
ADJUSTABLE RATE
U.S. GOVERNMENT
SECURITIES FUND
<PAGE>
INTERMEDIATE BOND FUND
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
Fiscal 1998 was a good year for the bond markets as the long-term trend toward
lower interest rates continued. The rally unfolded in two phases: a surge early
in the fiscal year driven primarily by domestic fundamentals, followed by a
dramatic "flight to quality" in the latter part of the fiscal year induced by
fear of a global financial crisis. For the fiscal year ended September 30, 1998,
the Fund's total return (excluding the impact of applicable sales loads) was
10.54%, as compared to 10.43% for the Lehman Brothers Intermediate
Government/Corporate Bond Index (the Index).
During the early part of the fiscal year, the strong domestic economy combined
with disinflation to produce an exceptional environment for the capital markets
(dubbed the "new era" by many economists). This, combined with projections for
the first balanced budget since 1969, allowed the benchmark 30-year Treasury
bond to push decisively through the 6.0% barrier for the first time since the
Treasury began regularly issuing the bonds in 1977. The Fund's duration at the
beginning of the fiscal year was substantially longer than that of the Index,
allowing the Fund to generate superior returns.
Early in 1998, the Fund's duration was reduced and an emphasis was placed on
liquidity as the global financial crisis began to unfold. The "Asian flu" which
surfaced in the fall of 1997 spread first to Russia where the ruble was
devalued, then to Latin America where many economies teetered on the verge of
recession. With the U.S. economy continuing to exhibit unparalleled performance
(positive growth in Gross Domestic Product, declining inflation and a $70
billion budget surplus), investors from around the world flocked to the U.S.
Treasury market as a safe haven.
This intense demand for U.S. Treasury securities left all other sectors of the
fixed-income market to dramatically underperform. For the second half of the
fiscal year, the Fund generated a total return slightly below that of the Index
which is comprised mostly of Treasury securities. The Fund did, however,
substantially outperform its peer group, the Lipper Intermediate Investment
Grade Debt average, which was more heavily weighted in corporate bonds.
As we move into fiscal 1999, the dislocations caused by the dramatic flight to
quality remain in place, creating exciting opportunities in many sectors of the
fixed-income market. We will look to capitalize on this unique opportunity by
pursuing securities in sectors with the highest relative valuations available in
over a decade. We remain constructive on U.S. economic fundamentals and look to
maintain the Fund's duration in the 4 to 5 year range.
<PAGE>
Comparison of the Change In Value of a $10,000 Investment in the Intermediate
Bond Fund and the Lehman Brothers Intermediate Government/Corporate Bond Index
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX: INTERMEDIATE BOND FUND:
(w/reinvested divds)
MONTHLY MONTHLY
DATE RETURN BALANCE DATE RETURN BALANCE
10/31/95 1.11% 10,111 10/31/95 0.51% 9,850
12/31/95 1.05% 10,351 12/31/95 0.83% 10,038
03/31/96 -0.51% 10,265 03/31/96 -0.24% 10,011
06/30/96 1.06% 10,329 06/30/96 1.20% 10,099
09/30/96 1.39% 10,513 09/30/96 0.90% 10,208
12/31/96 -0.64% 10,771 12/31/96 -0.57% 10,507
01/31/97 0.39% 10,813 01/31/97 0.25% 10,533
03/31/97 -0.69% 10,759 03/31/97 -0.92% 10,454
06/30/97 0.91% 11,076 06/30/97 1.42% 10,869
09/30/97 1.16% 11,375 09/30/97 1.41% 11,233
12/31/97 2.14% 11,618 12/31/97 2.54% 11,518
03/31/98 1.56% 11,799 03/31/98 1.40% 11,679
06/30/98 1.88% 12,021 06/30/98 2.13% 11,928
09/30/98 4.49% 12,561 09/30/98 4.10% 12,417
Past performance is not predictive of future performance.
Intermediate Bond Fund Average Annual Total Returns
1 Year Since Inception*
8.33% 7.50%
Fund inception was October 3, 1995.
<PAGE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
The fixed-income markets turned in a remarkable performance for the fiscal year
with long-term interest rates declining almost 1.5%. The persistent rally in
bonds was spurred primarily by three forces: declining inflation, a balanced
budget and deteriorating economies in Asia, Russia and Latin America. For the
fiscal year ended September 30, 1998, the Fund's total return (excluding the
impact of applicable sales loads) was 10.54%, as compared to 10.61% for the
Lehman Brothers Intermediate Government Bond Index (the Index).
Bond market activity during the first half of the fiscal year was orderly with
virtually all sectors of the fixed-income markets benefiting from the long-term
trend toward lower interest rates. While the extent of the Asian financial
crisis was not wholly known, bond market participants continued to focus
primarily on the domestic economy and the favorable outlook for inflation. The
Fund's duration was positioned neutrally relative to the Index, allowing the
Fund to post comparable returns for the six-month period.
During the latter half of the year, devaluation of the Russian ruble and
economic instability in Latin America forced investors to focus keenly on the
global economy and its ramifications for the U.S. economy. Federal Reserve Board
Chairman Alan Greenspan noted in a recent speech that the U.S. economy "cannot
remain an oasis of prosperity." With economists discussing the possibility of a
global recession and the U.S. economy appearing to be the most stable on the
planet, the only oasis, in the eye of bond investors, was the U.S. Treasury
market. Late in the Fund's fiscal year, investors flocked to the Treasury market
in a true "flight to quality."
The Fund's heavy weighting in Treasuries and agency debentures toward fiscal
year-end aided performance tremendously as these sectors outpaced all others by
a wide margin. While the Fund performed comparably to the Index (which is also
heavily weighted in Treasuries), it substantially outperformed its peer group,
the Lipper Intermediate U.S. Government Fund average, which was more heavily
weighted in those sectors which did not fully participate in the Treasury rally.
The fixed-income markets, following several years of relative calm, have become
somewhat dislocated in recent months. This dislocation has created tremendous
opportunities among the various sectors of the marketplace. With a constructive
outlook for both our domestic economy and inflation, we believe there will
continue to be attractive total return opportunities within the fixed-income
markets. Our strategy is to position the Fund to capitalize on recent
dislocations, investing in those sectors which have the greatest relative value.
<PAGE>
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
LEHMAN BROTHERS INTERMEDIATE INTERMEDIATE TERM GOVERNMENT INCOME FUND:
GOVERNMENT BOND INDEX:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
09/30/88 10,000 09/30/88 9,800
12/31/88 0.60% 10,060 12/31/88 0.27% 9,826
03/31/89 1.04% 10,165 03/31/89 1.05% 9,929
06/30/89 6.64% 10,840 06/30/89 5.40% 10,466
09/30/89 1.13% 10,962 09/30/89 0.93% 10,563
12/31/89 3.41% 11,336 12/31/89 2.88% 10,868
03/31/90 -0.14% 11,320 03/31/90 -1.32% 10,724
06/30/90 3.14% 11,675 06/30/90 2.77% 11,022
09/30/90 1.94% 11,902 09/30/90 0.93% 11,124
12/31/90 4.34% 12,418 12/31/90 4.51% 11,626
03/31/91 2.20% 12,692 03/31/91 1.93% 11,851
06/30/91 1.69% 12,906 06/30/91 1.25% 11,998
09/30/91 4.75% 13,519 09/30/91 5.87% 12,703
12/31/91 4.82% 14,171 12/31/91 5.33% 13,380
03/31/92 -1.05% 14,022 03/31/92 -2.24% 13,081
06/30/92 3.88% 14,566 06/30/92 4.25% 13,637
09/30/92 4.38% 15,204 09/30/92 5.51% 14,389
12/31/92 -0.34% 15,152 12/31/92 -0.87% 14,263
03/31/93 3.74% 15,719 03/31/93 5.09% 14,989
06/30/93 1.96% 16,027 06/30/93 2.76% 15,402
09/30/93 2.11% 16,365 09/30/93 2.90% 15,850
12/31/93 0.15% 16,390 12/31/93 -0.71% 15,737
03/31/94 -1.85% 16,087 03/31/94 -4.07% 15,097
06/30/94 -0.56% 15,997 06/30/94 -1.88% 14,813
09/30/94 0.77% 16,120 09/30/94 -0.24% 14,778
12/31/94 -0.10% 16,104 12/31/94 -0.23% 14,745
03/31/95 4.16% 16,774 03/31/95 5.14% 15,502
06/30/95 4.67% 17,557 06/30/95 5.95% 16,425
09/30/95 1.55% 17,829 09/30/95 1.24% 16,628
12/31/95 3.34% 18,425 12/31/95 3.63% 17,231
03/31/96 -0.68% 18,299 03/31/96 -2.02% 16,882
06/30/96 0.67% 18,422 06/30/96 0.11% 16,901
09/30/96 1.72% 18,739 09/30/96 1.87% 17,218
12/31/96 2.31% 19,172 12/31/96 2.60% 17,666
03/31/97 -0.02% 19,168 03/31/97 -0.56% 17,566
06/30/97 2.79% 19,703 06/30/97 2.84% 18,065
09/30/97 2.56% 20,207 09/30/97 2.69% 18,551
12/31/97 2.21% 20,653 12/31/97 2.11% 18,942
03/31/98 1.51% 20,965 03/31/98 1.42% 19,212
06/30/98 1.85% 21,353 06/30/98 2.07% 19,609
09/30/98 4.67% 22,350 09/30/98 4.58% 20,507
Past performance is not predictive of future performance.
Intermediate Term Government Income Fund
Average Annual Total Returns
1 Year 5 Years 10 Years
8.33% 4.86% 7.45%
<PAGE>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
The Fund's fiscal year ended September 30, 1998 was generally a very
constructive one for the fixed-income markets. However, we witnessed dramatic
changes in the global economic landscape which ultimately cast doubt on the
future course of the domestic economy. This doubt manifested itself in many ways
across the capital markets, changing the shape of the yield curve and forcing
investors to carefully scrutinize every asset class. What began as a year of
relatively normal relationships between asset classes and orderly trading, ended
with serious dislocations and markets characterized by illiquidity. For the
fiscal year, the Fund's total return (excluding the impact of applicable sales
loads) was 3.88%, as compared to 6.19% for the Lehman Brothers Adjustable Rate
Mortgage (ARM) Index.
The Fund's primary objective of high current income consistent with lower
volatility of principal remains in place. With the nominal level of interest
rates declining to cyclical lows, prepayments on mortgage-backed securities
reaching all-time highs and the shape of the yield curve encouraging homeowners
with adjustable-rate mortgages to refinance into fixed-rate mortgages, the
performance of the ARM market lagged that of most other sectors of the
fixed-income markets. The emphasis on minimizing share price volatility has
traditionally focused our investment efforts in seasoned, conventional,
non-convertible ARMs which are indexed to the one-year constant maturity
Treasury (CMT). This sector of the ARM market, while still one of the most
stable sectors, turned in generally lackluster performance.
We recently broadened the Fund's investment guidelines to include short duration
collateralized mortgage obligations (CMO) and asset-backed securities (ABS).
These asset classes will enable the Fund to diversify its holdings and should
enhance performance going forward. Also, the Fund's portfolio and investment
guidelines will be more closely aligned with that of its peer group. Investment
in securities from these asset classes is consistent with the Fund's primary
objective of high current income and low share price volatility.
We remain constructive regarding the total return potential for the Fund over
the next fiscal year. With mortgage rates stabilizing and short-term interest
rates likely to move lower (the result of the Federal Reserve Board "easing"
monetary policy), prepayments on ARMs should stabilize and prices should
recover. Also, the ability to invest in CMOs and ABSs will enhance the Fund's
yield. With the technical factors in the ARM sector of the mortgage market
turning positive, we remain confident in our ability to generate yields
substantively better than money market funds, while limiting share price
volatility.
<PAGE>
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
LEHMAN BROTHERS ARM INDEX: ADJUSTABLE RATE U.S. GOVERNMENT
SECURITIES FUND:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
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 1.89% 10,235 06/30/93 1.19% 9,980
09/30/93 1.09% 10,346 09/30/93 1.04% 10,084
12/31/93 0.51% 10,399 12/31/93 0.95% 10,180
03/31/94 -0.44% 10,353 03/31/94 0.62% 10,242
06/30/94 -0.40% 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 0.16% 10,400 12/31/94 -0.63% 10,230
03/31/95 4.19% 10,836 03/31/95 2.48% 10,484
06/30/95 3.11% 11,173 06/30/95 2.01% 10,695
09/30/95 1.70% 11,362 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
12/31/96 2.44% 12,397 12/31/96 1.69% 11,724
03/31/97 1.34% 12,563 03/31/97 1.23% 11,868
06/30/97 2.07% 12,824 06/30/97 1.95% 12,099
09/30/97 1.95% 13,074 09/30/97 1.32% 12,259
12/31/97 1.65% 13,290 12/31/97 1.17% 12,402
03/31/98 1.52% 13,492 03/31/98 0.99% 12,526
06/30/98 1.42% 13,683 06/30/98 0.72% 12,615
09/30/98 1.47% 13,884 09/30/98 0.95% 12,735
Past performance is not predictive of future performance.
Adjustable Rate U.S. Government Securities Fund
Average Annual Total Returns
1 Year 5 Years Since Inception*
1.80% 4.36% 4.38%
*Fund inception was February 10, 1993.
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1998
<CAPTION>
=============================================================================================================
Short Term Institutional Money
Government Government Market
Income Fund Income Fund Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities:
At acquisition cost.................................. $ 13,998,161 $ 29,725,042 $ 19,020,827
============== ============= ==============
At amortized cost.................................... $ 14,010,501 $ 29,773,074 $ 19,018,268
============== ============= ===============
At market value (Note 2) ............................ $ 14,010,501 $ 29,773,074 $ 19,018,268
Repurchase agreements (Note 2).......................... 88,295,000 14,755,000 --
Cash ................................................... 974 4,204 2,634
Interest receivable..................................... 251,802 293,586 225,521
Organization costs, net (Note 2)........................ -- -- 12,699
Other assets............................................ 12,996 4,229 12,809
-------------- ------------- ---------------
TOTAL ASSETS......................................... 102,571,273 44,830,093 19,271,931
-------------- ------------- ---------------
LIABILITIES
Dividends payable....................................... 4,788 18,371 34,603
Payable for securities purchased........................ -- -- 723,656
Payable to affiliates (Note 4).......................... 71,681 4,649 8,158
Other accrued expenses and liabilities.................. 13,416 9,950 13,650
-------------- ------------- ---------------
TOTAL LIABILITIES ................................... 89,885 32,970 780,067
-------------- ------------- ---------------
NET ASSETS ............................................ $ 102,481,388 $ 44,797,123 $ 18,491,864
============== ============= ===============
Net assets consist of:
Paid-in capital......................................... $ 102,481,388 $ 44,818,865 $ 18,497,649
Accumulated net realized losses from security
transactions....................................... - (21,742) (5,785)
-------------- ------------- ---------------
Net assets ............................................. $ 102,481,388 $ 44,797,123 $ 18,491,864
============== ============= ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value)
(Note 5)............................................. 102,481,388 44,818,865 18,497,649
============== ============= ===============
Net asset value, offering price and redemption price
per share (Note 2) .................................. $ 1.00 $ 1.00 $ 1.00
============== ============= ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1998
<TABLE>
<CAPTION>
============================================================================================================
Adjustable
Intermediate Rate U.S.
Intermediate Term Government
Bond Government Securities
Fund Income Fund Fund
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities:
At acquisition cost.................................. $ 22,356,616 $ 47,560,703 $ 10,513,682
============== =============== ==============
At amortized cost ................................... $ 22,356,673 $ 47,319,081 $ 10,513,791
============== =============== ==============
At market value (Note 2) ............................ $ 23,382,896 $ 50,529,107 $ 10,548,473
Cash ................................................... 970 511 821
Interest receivable .................................... 394,090 731,422 65,414
Receivable for capital shares sold...................... 1,764 6,940 2,531
Receivable for principal paydowns....................... -- -- 43,813
Organization costs, net (Note 2)........................ 12,699 -- --
Other assets............................................ 12,595 8,964 12,517
-------------- --------------- --------------
TOTAL ASSETS ........................................ 23,805,014 51,276,944 10,673,569
-------------- --------------- --------------
LIABILITIES
Dividends payable ...................................... 54,107 24,120 3,041
Payable for capital shares redeemed .................... 8,252 36,293 44,159
Payable to affiliates (Note 4) ......................... 13,639 34,138 1,388
Other accrued expenses and liabilities.................. 10,905 14,372 9,350
-------------- --------------- --------------
TOTAL LIABILITIES ................................... 86,903 108,923 57,938
-------------- --------------- --------------
NET ASSETS ............................................. $ 23,718,111 $ 51,168,021 $ 10,615,631
============== =============== ==============
Net assets consist of:
Paid-in capital ........................................ $ 22,756,902 $ 50,702,457 $ 11,890,505
Undistributed net investment income..................... 4,033 -- --
Accumulated net realized losses from
security transactions (69,047) (2,744,462) (1,309,556)
Net unrealized appreciation on investments.............. 1,026,223 3,210,026 34,682
-------------- --------------- --------------
Net assets.............................................. $ 23,718,111 $ 51,168,021 $ 10,615,631
============== =============== ==============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5).. 2,258,294 4,588,497 1,095,327
============== =============== ==============
Net asset value and redemption price per share (Note 2). $ 10.50 $ 11.15 $ 9.69
============== =============== ==============
Maximum offering price per share (Note 2)............... $ 10.71 $ 11.38 $ 9.89
============== =============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 1998
<TABLE>
<CAPTION>
=============================================================================================================
Short Term Institutional Money
Government Government Market
Income Fund Income Fund Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income ..................................... $ 5,356,492 $ 2,799,172 $ 3,682,153
-------------- --------------- ---------------
EXPENSES
Investment advisory fees (Note 4) ................... 459,485 100,484 312,309
Transfer agent fees (Note 4) ........................ 181,433 19,631 14,098
Distribution expenses (Note 4)....................... 75,167 3,319 71,450
Postage and supplies................................. 65,469 14,709 16,015
Accounting services fees (Note 4).................... 32,500 28,500 30,500
Custodian fees ...................................... 18,668 16,363 13,477
Registration fees.................................... 18,990 5,511 11,798
Professional fees ................................... 12,575 10,575 11,579
Insurance expense.................................... 7,555 5,350 6,575
Standard & Poor's rating expense..................... 9,556 9,556 --
Trustees' fees and expenses ......................... 6,038 6,038 6,038
Reports to shareholders ............................. 10,317 1,139 812
Amortization of organization costs (Note 2).......... -- -- 6,355
Pricing expense...................................... 729 967 1,342
Other expenses ...................................... 4,445 2,265 3,784
-------------- --------------- --------------
TOTAL EXPENSES..................................... 902,927 224,407 506,132
Fees waived by the Adviser (Note 4) ................. ( 21,569) ( 23,440 ) --
-------------- --------------- --------------
NET EXPENSES....................................... 881,358 200,967 506,132
-------------- --------------- --------------
NET INVESTMENT INCOME .................................. 4,475,134 2,598,205 3,176,021
-------------- --------------- --------------
NET REALIZED GAINS (LOSSES) FROM SECURITY
TRANSACTIONS ....................................... -- 22 (2,025)
-------------- --------------- --------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............ $ 4,475,134 $ 2,598,227 $ 3,173,996
============== =============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 1998
<TABLE>
<CAPTION>
============================================================================================================
Adjustable
Intermediate Rate U.S.
Intermediate Term Government
Bond Government Securities
Fund Income Fund Fund
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest ............................................ $ 1,573,544 $ 3,342,596 $ 895,785
Dividends............................................ 12,974 -- --
-------------- --------------- --------------
TOTAL INVESTMENT INCOME............................ 1,586,518 3,342,596 895,785
-------------- --------------- --------------
EXPENSES
Investment advisory fees (Note 4).................... 112,811 251,601 72,130
Distribution expenses (Note 4)....................... 22,402 87,582 7,037
Accounting services fees (Note 4).................... 26,250 30,250 32,250
Transfer agent fees (Note 4)......................... 12,000 42,808 13,486
Postage and supplies................................. 4,891 31,006 12,943
Professional fees.................................... 11,579 16,575 11,375
Registration fees.................................... 3,768 9,789 9,467
Custodian fees....................................... 5,398 8,012 8,889
Trustees' fees and expenses.......................... 6,038 6,038 6,038
Pricing expense...................................... 7,348 3,664 4,440
Standard & Poor's rating expense..................... -- -- 14,889
Insurance expense.................................... 1,940 4,825 2,115
Amortization of organization costs (Note 2).......... 6,355 -- --
Reports to shareholders.............................. 351 3,508 1,168
Other expenses....................................... 418 3,196 785
-------------- --------------- --------------
TOTAL EXPENSES..................................... 221,549 498,854 197,012
Fees waived and/or expenses reimbursed by the
Adviser (Note 4)................................... (7,205) -- (88,817)
-------------- --------------- --------------
NET EXPENSES....................................... 214,344 498,854 108,195
-------------- --------------- --------------
NET INVESTMENT INCOME .................................. 1,372,174 2,843,742 787,590
-------------- --------------- --------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gains (losses) from
security transactions.............................. (12,654) 157,123 (58,901)
Net change in unrealized appreciation/depreciation
on investments..................................... 808,743 2,055,577 (152,939)
-------------- --------------- --------------
NET REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS ..................................... 796,089 2,212,700 (211,840)
-------------- --------------- --------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............ $ 2,168,263 $ 5,056,442 $ 575,750
============== =============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
============================================================================================================
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,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income....................... $ 4,475,134 $ 4,454,318 $ 2,598,205 $ 2,536,827
Net realized gains from security
transactions.............................. -- -- 22 3,138
------------ -------------- ------------- ------------
Net increase in net assets from operations..... 4,475,134 4,454,318 2,598,227 2,539,965
------------ -------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................. (4,475,134) (4,454,318) (2,598,205) (2,536,827)
From net realized gains from security
transactions.............................. -- (2,970) -- --
------------ -------------- ------------- ------------
Decrease in net assets from distributions
to shareholders ............................ (4,475,134) (4,457,288) (2,598,205) (2,536,827)
------------ -------------- ------------- ------------
FROM CAPITAL SHARE TRANSACTIONS (Note 5):
Proceeds from shares sold .................. 301,198,180 346,277,774 179,615,316 214,201,022
Net asset value of shares issued in
reinvestment of distributions to
shareholders.............................. 4,351,699 4,308,683 2,187,984 2,319,214
Payments for shares redeemed................ (299,865,173) (345,226,289) (198,254,085) (194,657,552)
------------ -------------- ------------- ------------
Net increase (decrease) in net assets
from capital share transactions............. 5,684,706 5,360,168 (16,450,785) 21,862,684
------------ -------------- ------------- ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............................ 5,684,706 5,357,198 (16,450,763) 21,865,822
NET ASSETS:
Beginning of year........................... 96,796,682 91,439,484 61,247,886 39,382,064
------------ -------------- ------------- ------------
End of year................................. $102,481,388 $ 96,796,682 $44,797,123 $61,247,886
============ ============== ============= ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended September 30, 1998 and 1997 and August 31, 1997
<TABLE>
<CAPTION>
===============================================================================================================================
Money Market Fund Intermediate Bond Fund
- -------------------------------------------------------------------------------------------------------------------------------
Year One Month Year Year One Month Year
Ended Ended Ended Ended Ended Ended
Sept. 30, Sept. 30, Aug. 31, Sept. 30, Sept. 30, Aug. 31,
1998 1997(A) 1997 1998 1997(A) 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ................ $ 3,176,021 $ 351,005 $ 4,774,454 $ 1,372,174 $ 77,377 $ 958,606
Net realized gains (losses)
from security transactions (2,025) (1,198) (2,536) (12,654) (5,759) 14,511
Net change in unrealized
appreciation/depreciation on
investments......................... -- -- -- 808,743 129,865 420,446
------------- ------------ ------------ ------------ ------------ ------------
Net increase in net assets from
operations.......................... 3,173,996 349,807 4,771,918 2,168,263 201,483 1,393,563
------------- ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ........... (3,176,021) (351,499) (4,773,960) (1,368,141) (77,377) (958,606)
From net realized gains .............. -- -- (2,520) -- -- (49,752)
------------- ------------ ------------ ------------ ------------ ------------
Decrease in net assets from
distributions to shareholders....... (3,176,021) (351,499) (4,776,480) (1,368,141) (77,377) (1,008,358)
------------- ------------ ------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (Note 5):
Proceeds from shares sold ............ 317,725,801 25,255,346 570,122,610 19,932,790 929,562 5,244,400
Net asset value of shares issued in
reinvestment of distributions to
shareholders........................ 674,014 46,897 424,478 529,889 919 19,314
Payments for shares redeemed ............ (373,726,925) (46,048,621) (552,336,304) (13,215,521) (497,633) (3,891,934)
------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
from capital share transactions..... (55,327,110) (20,746,378) 18,210,784 7,247,158 432,848 1,371,780
------------- ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS.......................... (55,329,135) (20,748,070) 18,206,222 8,047,280 556,954 1,756,985
NET ASSETS:
Beginning of period................... 73,820,999 94,569,069 76,362,847 15,670,831 15,113,877 13,356,892
------------- ------------ ------------ ------------ ------------ ------------
End of period......................... $ 18,491,864 $ 73,820,999 $ 94,569,069 $ 23,718,111 $ 15,670,831 $ 15,113,877
============= ============ ============ ============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ..... $ -- $ -- $ 494 $ 4,033 $ -- $ --
============= ============ ============ ============ ============ ============
(A) Effective as of the close of business on August 29, 1997, the Money Market Fund and Intermediate Bond Fund were reorganized
and the fiscal year-end of each Fund, subsequent to August 31, 1997, was changed to September 30 (Note 6).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
==============================================================================================================
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,
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ...................... $ 2,843,742 $ 3,195,242 $ 787,590 $ 908,235
Net realized gains (losses) from
security transactions..................... 157,123 (2,293) (58,901) (1,505)
Net change in unrealized appreciation/
depreciation on investments............... 2,055,577 943,745 (152,939) 63,020
------------ -------------- ------------- -------------
Net increase in net assets from operations .... 5,056,442 4,136,694 575,750 969,750
------------ -------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ........ (2,843,742) (3,155,630) (787,590) (868,844)
From net investment income, Class C ........ -- ( 39,612) -- (39,391)
------------ -------------- ------------- -------------
Decrease in net assets from distributions
to shareholders ............................ (2,843,742) (3,195,242) (787,590) (908,235)
------------ -------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (Note 5):
CLASS A
Proceeds from shares sold .................. 14,138,086 9,148,045 8,356,993 28,836,779
Net asset value of shares issued in
reinvestment of distributions to
shareholders.............................. 2,507,687 2,829,303 716,956 822,109
Payments for shares redeemed ............... (20,723,242) (15,967,680) (21,448,205) (18,246,926)
------------ -------------- ------------- -------------
Net increase (decrease) in net assets
from Class A share transactions ............ (4,077,469) (3,990,332) (12,374,256) 11,411,962
------------ -------------- ------------- -------------
CLASS C
Proceeds from shares sold .................. -- 138,577 -- 760,526
Net asset value of shares issued in
reinvestment of distributions to
shareholders.............................. -- 38,348 -- 30,868
Payments for shares redeemed................ -- ( 961,198) -- (1,423,589)
------------ -------------- ------------- -------------
Net decrease in net assets
from Class C share transactions ............ -- (784,273) -- (632,195)
------------ -------------- ------------- -------------
Net increase (decrease) in net assets
from capital share transactions............. (4,077,469) (4,774,605) (12,374,256) 10,779,767
------------ -------------- ------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............................. (1,864,769) (3,833,153) (12,586,096) 10,841,282
NET ASSETS:
Beginning of year........................... 53,032,790 56,865,943 23,201,727 12,360,445
------------ -------------- ------------- -------------
End of year................................. $ 51,168,021 $ 53,032,790 $ 10,615,631 $23,201,727
============ ============== ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
SHORT TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
==========================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
==========================================================================================================
Years Ended September 30,
==========================================================================================================
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- --------- -------- --------
Net investment income .......................... 0.046 0.044 0.044 0.046 0.027
---------- --------- --------- -------- --------
Dividends from net investment income............ (0.046) (0.044) (0.044) (0.046) (0.027)
---------- --------- --------- -------- --------
Net asset value at end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ======== ========
Total return ................................... 4.74% 4.53% 4.51% 4.69% 2.72%
========== ========= ========= ======== ========
Net assets at end of year (000's) .............. $ 102,481 $ 96,797 $ 91,439 $ 87,141 $ 89,708
========== ========= ========= ======== ========
Ratio of net expenses to average net
assets(A).................................. 0.91% 0.97% 0.99% 0.99% 0.99%
Ratio of net investment income to average
net assets................................. 4.63% 4.43% 4.42% 4.59% 2.69%
- ----------------------------------------------------------------------------------------------------------
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net assets would have been 0.94%
for the year ended September 30, 1998 (Note 4).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
INSTITUTIONAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
==========================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
==========================================================================================================
Years Ended September 30,
==========================================================================================================
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<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........................... 0.052 0.051 0.051 0.053 0.034
---------- --------- --------- -------- --------
Dividends from net investment income............ (0.052) (0.051) (0.051) (0.053) (0.034)
---------- --------- --------- -------- --------
Net asset value at end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ======== ========
Total return.................................... 5.30% 5.17% 5.18% 5.42% 3.43%
========== ========= ========= ======== ========
Net assets at end of year (000's)............... $ 44,797 $ 61,248 $ 39,382 $ 36,009 $ 41,769
========== ========= ========= ======== ========
Ratio of net expenses to average net
assets(A).................................. 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to average
net assets................................. 5.17% 5.07% 5.06% 5.30% 3.41%
- ----------------------------------------------------------------------------------------------------------
(A) Absent fee waivers by the Adviser, the ratios of expenses to average net assets would have been 0.45%,
0.45%, 0.49%, 0.42% and 0.42% for the years ended September 30, 1998, 1997, 1996, 1995 and 1994,
respectively (Note 4).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
=============================================================================================================
Year One Month Year Period
Ended Ended Ended Ended
Sept. 30, Sept. 30 August 31, August 31,
1998 1997(A) 1997 1996(B)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- --------- --------
Net investment income.......................... 0.050 0.004 0.050 0.046(C)
---------- --------- --------- --------
Dividends from net investment income........... (0.050) (0.004) (0.050) (0.046)
---------- --------- --------- --------
Net asset value at end of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ========
Total return .................................. 5.07% 4.99%(E) 5.14% 4.70%
========== ========= ========= ========
Net assets at end of period (000's)............ $ 18,492 $ 73,821 $ 94,569 $ 76,363
========== ========= ========= ========
Ratio of net expenses to average net
assets(D)................................. 0.79% 0.80%(E) 0.65% 0.65%(E)
Ratio of net investment income to average
net assets................................ 4.95% 4.99%(E) 5.03% 4.94%(E)
- -----------------------------------------------------------------------------------------------------------------
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end,
subsequent to August 31, 1997, was changed to September 30 (Note 6).
(B) Represents the period from the commencement of operations (September 29, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Absent fee waivers and/or expense reimbursements, the ratios of expenses to average net assets would have been
0.79% and 0.99%(E) for the periods ended August 31, 1997 and 1996, respectively.
(E) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
=============================================================================================================
Year One Month Year Period
Ended Ended Ended Ended
Sept. 30, Sept. 30 August 31, August 31,
1998 1997(A) 1997 1996(B)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 10.09 $ 10.00 $ 9.75 $ 10.00
---------- --------- --------- --------
Income from investment operations:
Net investment income....................... 0.62 0.05 0.62 0.57(C)
Net realized and unrealized gains (losses)
on investments............................ 0.41 0.09 0.28 (0.25)(C)
---------- --------- --------- --------
Total from investment operations............... 1.03 0.14 0.90 0.32
---------- --------- --------- --------
Less distributions:
Dividends from net investment income........ (0.62) (0.05) (0.62) (0.57)
Distributions from net realized gains....... -- -- (0.03) --
---------- --------- --------- --------
Total distributions............................ (0.62) (0.05) (0.65) (0.57)
---------- --------- --------- --------
Net asset value at end of period............... $ 10.50 $ 10.09 $ 10.00 $ 9.75
========== ========= ========= ========
Total return(D) ............................... 10.54% 1.41% 9.48% 3.23%
========== ========= ========= ========
Net assets at end of period (000's)............ $ 23,718 $ 15,671 $ 15,114 $ 13,357
========== ========= ========= ========
Ratio of net expenses to average net
assets(E)................................. 0.95% 0.95%(F) 0.85% 0.68%(F)
Ratio of net investment income to average
net assets................................ 6.08% 6.18%(F) 6.26% 6.31%(F)
Portfolio turnover rate........................ 63% 0% 41% 12%
- --------------------------------------------------------------------------------------------------------------
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end,
subsequent to August 31, 1997, was changed to September 30 (Note 6).
(B) Represents the period from the commencement of operations (October 3, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratios of expenses to average net assets would have
been 0.98%, 1.38%(F), 1.53% and 2.04%(F) for the periods ended September 30, 1998, September 30, 1997,
August 31, 1997 and August 31, 1996, respectively (Note 4).
(F) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
==========================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
==========================================================================================================
Years Ended September 30,
==========================================================================================================
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 10.67 $ 10.49 $ 10.73 $ 10.14 $ 11.59
---------- --------- --------- -------- --------
Income from investment operations:
Net investment income........................ 0.61 0.61 0.61 0.64 0.56
Net realized and unrealized gains (losses)
on investments............................. 0.48 0.18 (0.24) 0.59 (1.32)
---------- --------- --------- -------- --------
Total from investment operations................ 1.09 0.79 0.37 1.23 (0.76)
---------- --------- --------- -------- --------
Less distributions:
Dividends from net investment income......... (0.61) (0.61) (0.61) (0.64) (0.56)
Distributions from net realized gains........ -- -- -- -- (0.13)
---------- --------- --------- -------- --------
Total distributions............................. (0.61) (0.61) (0.61) (0.64) (0.69)
---------- --------- --------- -------- --------
Net asset value at end of year.................. $ 11.15 $ 10.67 $ 10.49 $ 10.73 $ 10.14
========== ========= ========= ======== ========
Total return(A) ................................ 10.54% 7.74% 3.55% 12.52% (6.76%)
========== ========= ========= ======== ========
Net assets at end of year (000's)............... $ 51,168 $ 53,033 $ 56,095 $ 56,969 $ 64,395
========== ========= ========= ======== ========
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................................. 5.64% 5.78% 5.75% 6.17% 5.17%
Portfolio turnover rate......................... 29% 49% 70% 58% 236%
- ----------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
==========================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
==========================================================================================================
Years Ended September 30,
==========================================================================================================
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ........... $ 9.85 $ 9.81 $ 9.78 $ 9.82 $ 10.01
---------- --------- --------- -------- --------
Income from investment operations:
Net investment income ....................... 0.53 0.57 0.57 0.55 0.39
Net realized and unrealized gains (losses)
on investments ............................ (0.16) 0.04 0.03 (0.04) (0.18)
---------- --------- --------- -------- --------
Total from investment operations ............... 0.37 0.61 0.60 0.51 0.21
---------- --------- --------- -------- --------
Less distributions:
Dividends from net investment income......... (0.53) (0.57) (0.57) (0.55) (0.39)
Distributions from net realized gains........ -- -- -- -- (0.01)
---------- --------- --------- -------- --------
Total distributions ............................ (0.53) (0.57) (0.57) (0.55) (0.40)
---------- --------- --------- -------- --------
Net asset value at end of year ................. $ 9.69 $ 9.85 $ 9.81 $ 9.78 $ 9.82
========== ========= ========= ======== ========
Total return(A) ................................ 3.88% 6.34% 6.32% 5.33% 2.09%
========== ========= ========= ======== ========
Net assets at end of year (000's) .............. $ 10,616 $ 23,202 $ 11,732 $ 20,752 $ 37,572
========== ========= ========= ======== ========
Ratio of net expenses to average net
assets(B).................................. 0.75% 0.75% 0.75% 0.75% 0.68%
Ratio of net investment income to average
net assets................................. 5.47% 5.73% 5.91% 5.57% 3.91%
Portfolio turnover rate ........................ 45% 58% 44% 115% 81%
- ----------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net
assets would have been 1.37%, 1.47%, 1.46%, 1.21% and 0.78% for the years ended September 30, 1998,
1997, 1996, 1995 and 1994, respectively (Note 4).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
================================================================================
1. Organization
The Short Term Government Income Fund, Institutional Government Income Fund,
Money Market Fund, Intermediate Bond Fund, Intermediate Term Government Income
Fund and Adjustable Rate U.S. Government Securities Fund (individually, a Fund
and, collectively, the Funds) are each a series of Countrywide Investment Trust
(the Trust). The Trust is registered under the Investment Company Act of 1940 as
an open-end management investment company. The Trust was organized as a
Massachusetts business trust under a Declaration of Trust dated December 7,
1980. The Declaration of Trust, as amended, permits the Trustees to issue an
unlimited number of shares of each Fund. The Money Market Fund and Intermediate
Bond Fund were originally organized as series of Trans Adviser Funds, Inc.
Note 6).
The Short Term 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 U.S. Government, its agencies
or instrumentalities and backed by the "full faith and credit" of the United
States.
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 Money Market Fund seeks high current income, consistent with liquidity and
stability of principal. The Fund invests primarily in high-quality U.S.
dollar-denominated money market instruments.
The Intermediate Bond Fund seeks to provide as high a level of current income as
is consistent with the preservation of capital. The Fund invests in marketable
corporate debt securities, U.S. Government securities, mortgage-related
securities, other asset-backed securities and cash or money market instruments.
The maturity composition of the Fund's portfolio of fixed-income securities is
adjusted in response to market conditions and expectations.
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.
The Adjustable Rate U.S. Government Securities Fund 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. It is anticipated that by investing primarily in
mortgage-rated securities which have adjustable rates of interest, the Fund will
achieve a less volatile net asset value than is characteristic of investments in
mortgage-related securities paying fixed rates of interest.
Prior to September 22, 1997, the Intermediate Term Government Income Fund and
Adjustable Rate U.S. Government Securities Fund offered two classes of shares:
Class A shares (sold subject to a maximum front-end sales load of 2% and a
distribution fee of up to 0.35% of average daily net assets) 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). On September 22, 1997, all outstanding Class C shares
were redeemed pursuant to a mandatory redemption program authorized by the Board
of Trustees.
<PAGE>
2. Significant Accounting Policies
The following is a summary of the Funds' significant accounting policies:
Securities valuation -- Investment securities in the Short Term Government
Income Fund, Institutional Government Income Fund and Money Market Fund 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. Investment securities in the Intermediate Bond Fund,
Intermediate Term Government Income Fund and Adjustable Rate U.S. Government
Securities Fund for which market quotations are readily available are valued at
their most recent bid prices as obtained from one or more of the major market
makers for such securities by an independent pricing service. Securities for
which market quotations are not readily available are valued at their fair
values as determined in good faith in accordance with consistently applied
procedures approved by and under the general supervision of the Board of
Trustees.
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.
Share valuation -- The net asset value per share of each 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 per share of the Short Term Government Income Fund,
Institutional Government Income Fund and Money Market Fund is equal to the net
asset value per share. The maximum offering price per share of the Intermediate
Bond Fund, Intermediate Term Government Income Fund and Adjustable Rate U.S.
Government Securities Fund is equal to the net asset value per share plus a
sales load equal to 2.04% of the net asset value (or 2% of the offering price).
The redemption price per share of each Fund is equal to the net asset value per
share.
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 each 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
dividends and capital gain distributions are determined in accordance with
income tax regulations.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Organization costs -- Costs incurred by the Money Market Fund and Intermediate
Bond Fund in connection with their organization and registration of shares, net
of certain expenses, have been capitalized and are being amortized on a
straight-line basis over a five year period beginning with each Fund's
commencement of operations.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code 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 the federal income tax cost of portfolio
investments as of September 30, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Adjustable
Intermediate Rate U.S.
Intermediate Term Government
Bond Government Securities
Fund Income Fund Fund
<S> <C> <C> <C>
Gross unrealized appreciation........................... $ 1,074,225 $ 3,210,026 $ 51,346
Gross unrealized depreciation........................... ( 95,759) -- (16,664)
-------------- --------------- ---------------
Net unrealized appreciation ......................... $ 978,466 $ 3,210,026 $ 34,682
============== =============== ===============
Federal income tax cost................................. $ 22,404,430 $ 47,319,081 $ 10,513,791
============== =============== ===============
- --------------------------------------------------------------------------------------------------------------
</TABLE>
With respect to the Intermediate Bond Fund, the difference between the federal
income tax cost of portfolio investments and the amortized cost shown on the
Fund's Statement of Assets and Liabilities is due to certain timing differences
in the recognition of capital losses under income tax regulations and generally
accepted accounting principles.
As of September 30, 1998, the Institutional Government Income Fund, Money Market
Fund, Intermediate Bond Fund, Intermediate Term Government Income Fund and
Adjustable Rate U.S. Government Securities Fund had capital loss carryforwards
for federal income tax purposes of $21,742, $3,760, $21,290, $2,744,462 and
$1,252,395, respectively. In addition, the Money Market Fund and Adjustable Rate
U.S. Government Securities Fund elected to defer until its subsequent tax year
$2,025 and $57,161, respectively, of capital losses incurred after October 31,
1997. These capital loss carryforwards and "post-October" losses may be utilized
in future years to offset net realized capital gains prior to distributing such
gains to shareholders.
3. Investment Transactions
Investment transactions (excluding short-term investments) were as follows for
the year ended September 30, 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Adjustable
Intermediate Rate U.S.
Intermediate Term Government
Bond Government Securities
Fund Income Fund Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases of investment securities...................... $ 20,423,784 $ 14,353,090 $ 5,680,667
============== =============== ===============
Proceeds from sales and maturities of
investment securities.............................. $ 12,789,778 $ 19,163,961 $ 11,862,394
============== =============== ===============
- --------------------------------------------------------------------------------------------------------------
</TABLE>
4. Transactions with Affiliates
The Chairman and the President of the Trust are also officers of Countrywide
Financial Services, Inc., whose subsidiaries include Countrywide Investments,
Inc. (the Adviser), the Trust's investment adviser and principal underwriter,
and Countrywide Fund Services, Inc. (CFS), the Trust's transfer agent,
shareholder service agent and accounting services agent. Countrywide Financial
Services, Inc. is a wholly-owned subsidiary of Countrywide Credit Industries,
Inc., a New York Stock Exchange listed company principally engaged in the
business of residential mortgage lending.
<PAGE>
MANAGEMENT AGREEMENT
Each Fund's investments are managed by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, the Short Term Government
Income Fund, Money Market Fund, Intermediate Bond Fund, Intermediate Term
Government Income Fund and 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
million; 0.45% of such net assets from $50 million to $150 million; 0.40% of
such net assets from $150 million to $250 million; and 0.375% of such net assets
in excess of $250 million. 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.
In order to voluntarily reduce operating expenses during the year ended
September 30, 1998, the Adviser waived $21,569 of its advisory fees for the
Short Term Government Income Fund; waived $23,440 of its advisory fees for the
Institutional Government Income Fund; waived $7,205 of its advisory fees for the
Intermediate Bond Fund; and waived its advisory fees of $72,130 and reimbursed
$16,687 of other operating expenses for the Adjustable Rate U.S. Government
Securities Fund.
The Adviser has agreed, until at least August 31, 1999, to waive fees and
reimburse expenses to the extent necessary to limit total operating expenses of
the Money Market Fund and Intermediate Bond Fund to 0.80% and 0.95%,
respectively, of each Fund's average daily net assets.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and CFS, CFS maintains the records 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, CFS receives a monthly fee at an annual
rate of $25 per shareholder account from each of the Short Term Government
Income Fund, Institutional Government Income Fund and Money Market Fund and $21
per shareholder account from each of the Intermediate Bond Fund, Intermediate
Term Government Income Fund and Adjustable Rate U.S. Government Securities Fund,
subject to a $1,000 minimum monthly fee for each Fund. In addition, each Fund
pays out-of-pocket expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and CFS,
CFS calculates the daily net asset value per share and maintains the financial
books and records of each Fund. For these services, CFS receives a monthly fee,
based on current asset levels, of $3,000 from the Short Term Government Income
Fund, $2,000 from each of the Institutional Government Income Fund, Money Market
Fund and Intermediate Bond Fund and $2,500 from each of the Intermediate Term
Government Income Fund and Adjustable Rate U.S. Government Securities Fund. In
addition, each Fund pays certain out-of-pocket expenses incurred by CFS in
obtaining valuations of such Fund's portfolio securities.
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as exclusive
agent for distribution of the Funds' shares. Under the terms of the Underwriting
Agreement between the Trust and the Adviser, the Adviser earned $1,429, $5,200
and $1,709 from underwriting and broker commissions on the sale of shares of the
Intermediate Bond Fund, Intermediate Term Government Income Fund and Adjustable
Rate U.S. Government Securities Fund, respectively, for the year ended September
30, 1998.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution under which shares of each Fund may
directly incur or reimburse the Adviser for expenses related to the distribution
and promotion of shares. The annual limitation for payment of such expenses
under the Plan is 0.35% of each Fund's average daily net assets, except for the
Institutional Government Income Fund for which the annual limitation is 0.10% of
its average daily net assets.
<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 shown:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund
- ---------------------------------------------------------------------------------------------------------------
Year One Month Year
Ended Ended Ended
Sept. 30, Sept. 30, Aug. 31,
1998 1997 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares sold............................................. 1,947,922 92,013 542,916
Shares issued in reinvestment of distributions to
shareholders....................................... 51,693 91 1,951
Shares redeemed......................................... (1,294,973) (49,574) (404,063)
-------------- --------------- ---------------
Net increase in shares outstanding...................... 704,642 42,530 140,804
Shares outstanding, beginning of period................. 1,553,652 1,511,122 1,370,318
-------------- --------------- ---------------
Shares outstanding, end of period....................... 2,258,294 1,553,652 1,511,122
============== =============== ===============
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
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,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C>
Shares sold.................................... 1,312,955 864,111 852,470 2,931,702
Shares issued in reinvestment of distributions
to shareholders............................. 232,218 267,417 73,312 83,540
Shares redeemed................................ (1,926,636) (1,509,918) (2,186,125) (1,855,152)
------------ -------------- ------------- -------------
Net increase (decrease) in shares outstanding.. (381,463) (378,390) (1,260,343) 1,160,090
Shares outstanding, beginning of year.......... 4,969,960 5,348,350 2,355,670 1,195,580
------------ -------------- ------------- -------------
Shares outstanding, end of year................ 4,588,497 4,969,960 1,095,327 2,355,670
============ ============== ============= =============
CLASS C
Shares sold.................................... -- 13,106 -- 77,399
Shares issued in reinvestment of distributions
to shareholders............................. -- 3,625 -- 3,139
Shares redeemed................................ -- (90,249) -- (144,655)
------------ -------------- ------------- -------------
Net decrease in shares outstanding............. -- (73,518) -- (64,117)
Shares outstanding, beginning of year.......... -- 73,518 -- 64,117
------------ -------------- ------------- -------------
Shares outstanding, end of year................ -- -- -- --
============ ============== ============= =============
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Share transactions for the Short Term Government Income Fund, Institutional
Government Income Fund and Money Market Fund are identical to the dollar value
of those transactions as shown in the Statements of Changes in Net Assets.
<PAGE>
6. Agreement and Plan of Reorganization
The Money Market Fund and Intermediate Bond Fund were originally organized as
series of Trans Adviser Funds, Inc. (Trans Adviser), an open-end management
investment company incorporated under the laws of the State of Maryland.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997, each
Fund, on August 29, 1997, succeeded to the assets and liabilities of a series of
Trans Adviser with the same name (the Predecessor Fund). The investment
objective, policies and restrictions of each Fund and its Predecessor Fund are
substantially identical.
For federal income tax purposes, the reorganization of the Money Market Fund and
Intermediate Bond Fund qualifies as a tax-free reorganization with no tax
consequences to either Fund, its Predecessor Fund or their shareholders. In
connection with the reorganization, the fiscal year-end of each Fund, subsequent
to August 31, 1997, has been changed from August 31 to September 30.
<PAGE>
SHORT TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
<TABLE>
<CAPTION>
=============================================================================================================
Par Market
Value U.S. TREASURY OBLIGATIONS-- 13.7% Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 2,000,000 U.S. Treasury Notes, 4.75%, 10/31/98...................................... $ 1,998,531
5,000,000 U.S. Treasury Notes, 5.125%, 11/30/98..................................... 4,996,950
5,000,000 U.S. Treasury Notes, 5.875%, 2/28/99...................................... 5,006,396
2,000,000 U.S. Treasury Notes, 6.375%, 4/30/99...................................... 2,008,624
- --------------- ---------------
$ 14,000,000 TOTAL U.S. TREASURY OBLIGATIONS
=============== (Amortized Cost $14,010,501).............................................. $ 14,010,501
---------------
<CAPTION>
=============================================================================================================
Face Market
Amount REPURCHASE AGREEMENTS (Note A)-- 86.1% Value
- -------------------------------------------------------------------------------------------------------------
$ 25,000,000 Prudential Securities, Inc., 5.65%, dated 9/30/98, due 10/01/98,
repurchase proceeds $25,003,924......................................... $ 25,000,000
10,000,000 BT Alex Brown, Inc., 5.50%, dated 9/24/98, due 10/01/98,
repurchase proceeds $10,010,694......................................... 10,000,000
13,295,000 Nesbitt Burns Securities, Inc., 5.25%, dated 9/30/98, due 10/01/98,
repurchase proceeds $13,296,939......................................... 13,295,000
16,000,000 Morgan Stanley Dean Witter, Inc., 5.55%, dated 9/30/98, due 10/01/98,
repurchase proceeds $16,002,467......................................... 16,000,000
15,000,000 Bankers Trust Corp., 5.60%, dated 9/30/98, due 10/01/98,
repurchase proceeds $15,002,333......................................... 15,000,000
5,000,000 Morgan Stanley Dean Witter, Inc., 5.27%, dated 9/11/98, due 1/11/99,
repurchase proceeds $5,089,297.......................................... 5,000,000
4,000,000 Morgan Stanley Dean Witter, Inc., 5.14%, dated 9/11/98, due 3/10/99,
repurchase proceeds $4,102,800.......................................... 4,000,000
- --------------- ---------------
$ 88,295,000 TOTAL REPURCHASE AGREEMENTS .............................................. $ 88,295,000
=============== ---------------
TOTAL INVESTMENT SECURITIES AND REPURCHASE AGREEMENTS-- 99.8% ............ $ 102,305,501
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.2% ............................. 175,887
---------------
NET ASSETS-- 100.0% ...................................................... $ 102,481,388
===============
See accompanying notes to portfolios of investments and notes to financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
============================================================================================================
Par Market
Value INVESTMENT SECURITIES-- 66.5% Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY ISSUES -- 57.1%
$ 1,500,000 FNMA, 5.55%, 10/05/98...................................................... $ 1,499,963
1,420,000 FHLMC Discount Notes, 10/06/98............................................. 1,418,915
119,000 FRMC Discount Notes, 10/08/98.............................................. 118,870
770,000 FRMC Discount Notes, 10/09/98.............................................. 769,064
300,000 FHLMC Discount Notes, 10/09/98............................................. 299,633
207,000 FNMA Discount Notes, 10/09/98.............................................. 206,747
1,900,000 FNMA, 6.20%, 10/14/98...................................................... 1,900,816
620,000 FHLMC Discount Notes, 10/14/98............................................. 618,769
400,000 FNMA, 4.875%, 10/15/98..................................................... 399,894
200,000 SLMA Floating Rate Notes, 4.943%, 10/15/98 (Note B)........................ 199,958
991,000 FHLB Discount Notes, 10/21/98.............................................. 987,972
300,000 FNMA Discount Notes, 10/21/98.............................................. 299,088
750,000 FHLB Floating Rate Notes, 5.013%, 10/23/98 (Note B)........................ 749,985
1,000,000 FNMA, 5.42%, 11/02/98...................................................... 999,597
270,000 FNMA Discount Notes, 11/04/98.............................................. 268,598
750,000 FFCB Discount Notes, 11/09/98.............................................. 745,694
450,000 FNMA, 5.05%, 11/10/98...................................................... 449,721
200,000 FFCB, 5.02%, 11/23/98...................................................... 199,798
1,165,000 FNMA, 7.05%, 12/10/98...................................................... 1,167,954
400,000 FNMA, 5.30%, 12/10/98...................................................... 399,801
250,000 FHLMC, 5.00%, 12/15/98..................................................... 249,684
1,000,000 FHLB, 5.735%, 12/23/98..................................................... 1,000,130
200,000 FHLMC, 5.34%, 1/25/99...................................................... 199,835
227,000 FNMA Discount Notes, 1/27/99............................................... 222,945
1,000,000 FHLB, 5.23%, 2/03/99....................................................... 998,653
210,000 FHLB Discount Notes, 2/10/99............................................... 206,035
550,000 FNMA, 5.55%, 2/12/99....................................................... 549,598
500,000 FNMA, 5.20%, 2/18/99....................................................... 499,373
375,000 FNMA, 4.95%, 2/22/99....................................................... 373,879
215,000 FNMA Discount Notes, 3/02/99............................................... 210,398
361,000 FHLMC Discount Notes, 3/08/99.............................................. 352,967
200,000 FNMA, 9.55%, 3/10/99....................................................... 203,418
3,000,000 FNMA Floating Rate Notes, 4.943%, 3/16/99 (Note B)......................... 2,999,303
500,000 FHLB, 5.57%, 4/07/99....................................................... 499,845
2,000,000 FHLB Floating Rate Notes, 5.013%, 4/09/99 (Note B)......................... 2,000,000
200,000 FHLB, 5.72%, 4/23/99....................................................... 200,029
300,000 FHLB, 5.805%, 5/19/99...................................................... 300,000
245,000 FFCB, 6.21%, 6/03/99....................................................... 245,741
200,000 FFCB, 5.835%, 6/14/99...................................................... 200,113
260,000 FNMA, 8.45%, 7/12/99....................................................... 265,444
105,000 FHLMC, 7.125%, 7/21/99..................................................... 105,918
- --------------- --------------
$ 25,610,000 TOTAL U.S. GOVERNMENT AGENCY ISSUES
- --------------- (Amortized Cost $25,584,145)............................................... $ 25,584,145
--------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT INCOME FUND (continued)
============================================================================================================
Par Market
Value INVESTMENT SECURITIES-- 66.5% (continued) Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 4.9%
$ 2,200,000 Kirksville College of Osteopathic Medicine, Inc., 11/03/98, Guarantor SLMA
- --------------- (Amortized Cost $2,188,929)................................................ $ 2,188,929
---------------
VARIABLE RATE DEMAND NOTES (Note C) -- 4.5%
$ 2,000,000 Harris Co., TX, HFC MFH Rev. (Sandalwood Apts.), 5.64%, 12/15/36, Guarantor FNMA
- --------------- (Amortized Cost $2,000,000)................................................ $ 2,000,000
---------------
$ 29,810,000 TOTAL INVESTMENT SECURITIES
=============== (Amortized Cost $29,773,074)............................................... $ 29,773,074
---------------
<CAPTION>
=============================================================================================================
Face Market
Amount REPURCHASE AGREEMENTS (Note A)-- 32.9% Value
- -------------------------------------------------------------------------------------------------------------
$ 11,000,000 Prudential Securities, Inc., 5.65%, dated 9/30/98, due 10/01/98,
repurchase proceeds $11,001,726......................................... $ 11,000,000
3,755,000 Nesbitt Burns Securities, Inc., 5.25%, dated 9/30/98, due 10/01/98,
repurchase proceeds $3,755,548.......................................... 3,755,000
- --------------- ---------------
$ 14,755,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 14,755,000
- --------------- ---------------
TOTAL INVESTMENT SECURITIES AND REPURCHASE AGREEMENTS -- 99.4% ............ $ 44,528,074
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.6% .............................. 269,049
---------------
NET ASSETS-- 100.0% ....................................................... $ 44,797,123
===============
See accompanying notes to portfolios of investments and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
=============================================================================================================
Par Market
Value INVESTMENT SECURITIES-- 102.8% Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE NOTES -- 34.2%
$ 200,000 Consolidated Natural Gas Co., 5.875%, 10/01/98............................. $ 200,000
500,000 Key Bank, N.A., 6.00%, 10/07/98............................................ 500,023
500,000 Chrysler Financial Corp., 5.375%, 10/15/98................................. 499,932
502,000 Wal-Mart Stores, Inc., 5.125%, 10/22/98.................................... 501,791
500,000 Fleet Financial Group, 6.00%, 10/26/98..................................... 500,088
500,000 Beta Finance Corp., Inc. 6.00%, 10/27/98................................... 500,065
200,000 Caterpillar Financial Services, Inc. 5.47%, 12/15/98....................... 199,886
100,000 Southern California Edison, 5.60%, 12/15/98................................ 99,963
400,000 Chrysler Financial Corp., 5.88%, 12/21/98.................................. 400,065
100,000 Associates Corp., N.A., 5.57%, 12/31/98.................................... 99,944
525,000 General Motors Acceptance Corp., 7.75% 1/15/99............................. 527,825
110,000 Ford Motor Credit Co., 5.625%, 1/15/99..................................... 109,938
600,000 Associates Corp., N.A., 5.47%, 1/28/99..................................... 599,379
419,000 Merrill Lynch & Company, Inc., 7.75%, 3/01/99.............................. 422,895
292,000 Citicorp, 9.00%, 4/15/99................................................... 297,578
247,000 Chase Manhattan Corp., 10.00%, 6/15/99..................................... 254,416
320,000 Citicorp, 9.75%, 8/01/99................................................... 331,522
153,000 Ford Motor Credit Co., 6.375%, 9/15/99..................................... 154,059
130,000 American General Corp., 7.70%, 10/15/99.................................... 132,990
- --------------- --------------
$ 6,298,000 TOTAL CORPORATE NOTES
- --------------- (Amortized Cost $6,332,359)................................................ $ 6,332,359
--------------
MUNICIPAL NOTES -- 8.2%
$ 445,000 Bolingbrook, IL, MFH Rev., 5.70%, 10/01/98................................. $ 445,000
970,000 New York, NY, MFH Rev., Series B, 5.70%, 10/01/98.......................... 970,000
100,000 Emeryville, CA, PFA Rev., Series C (Emeryville Redevelopment),
5.75%, 9/01/99.......................................................... 99,909
- --------------- --------------
$ 1,515,000 TOTAL MUNICIPAL NOTES
- --------------- (Amortized Cost $1,514,909)................................................ $ 1,514,909
--------------
VARIABLE RATE DEMAND NOTES (Note C) -- 53.6%
$ 500,000 Brownsburg, IN, EDR, Ser. 1998B (Zanetis Enterprises), 5.70%, 6/01/03...... $ 500,000
601,000 Illinois Development Finance Auth. IDR (Landcomp Corp.), 5.80%, 7/01/05.... 601,000
825,000 Diamond Development Group, Inc., Ser. 1996, 5.72%, 9/01/08................. 825,000
850,000 Vista Funding Corp., 5.74%, 9/01/11........................................ 850,000
2,500,000 South Central Communications Corp., Ser. 1998, 5.95%, 9/01/16.............. 2,500,000
530,000 Ohio HFA Rev., Ser. 1998A-2, 5.70%, 7/01/18................................ 530,000
1,300,000 Fontana, CA, COP, 6.15%, 10/01/20.......................................... 1,300,000
1,500,000 Abag Finance Auth. for Nonprofit Corp., CA, COP, Ser. 1997D,
5.80%, 10/01/27......................................................... 1,500,000
1,300,000 Illinois HFA Rev., Ser. 1998B (Elmhurst Memorial), 5,75%, 1/01/28.......... 1,300,000
- --------------- --------------
$ 9,906,000 TOTAL VARIABLE RATE DEMAND NOTES
- --------------- (Amortized Cost $9,906,000)................................................ $ 9,906,000
--------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND (continued)
============================================================================================================
Par Market
Value INVESTMENT SECURITIES-- 102.8% (continued) Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 6.8%
$ 900,000 Bank One Corp., 10/01/98................................................... $ 900,000
365,000 Merrill Lynch & Company, Inc., 10/01/98.................................... 365,000
- --------------- --------------
$ 1,265,000 TOTAL COMMERCIAL PAPER
- --------------- (Amortized Cost $1,265,000)................................................ $ 1,265,000
--------------
$ 18,984,000 TOTAL INVESTMENT SECURITIES
=============== (Amortized Cost $19,018,268)............................................... $ 19,018,268
LIABILITIES IN EXCESS OF OTHER ASSETS-- (2.8%) ............................ ( 526,404)
--------------
NET ASSETS-- 100.0% ....................................................... $ 18,491,864
==============
See accompanying notes to portfolios of investments and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
============================================================================================================
Par Market
Value FIXED RATE OBLIGATIONS-- 97.7% Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 7.1%
$ 1,500,000 U.S. Treasury Notes, 6.50%, 8/15/05
- --------------- (Amortized Cost $1,464,297)................................................ $ 1,690,313
--------------
U.S. GOVERNMENT AGENCY ISSUES -- 14.7%
$ 1,000,000 FHLMC, 5.75%, 7/15/03...................................................... $ 1,041,837
2,000,000 FHLMC, 7.93%, 1/20/05...................................................... 2,332,220
69,960 SBA, 8.45%, 1/01/07........................................................ 78,352
30,000 TVA, 8.05%, 7/15/24........................................................ 30,738
- --------------- --------------
$ 3,099,960 TOTAL U.S. GOVERNMENT AGENCY ISSUES
- --------------- (Amortized Cost $3,294,728)................................................ $ 3,483,147
--------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 6.4%
$ 800,000 FHLMC #1720-E, 7.50%, 12/15/09............................................. $ 808,507
681,574 FNMA #50811, 7.50%, 12/01/12............................................... 706,111
- --------------- --------------
$ 1,481,574 TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
- --------------- (Amortized Cost $1,522,825)................................................ $ 1,514,618
--------------
CORPORATE BONDS-- 60.1% ...................................................
$ 250,000 British Petroleum America, Inc., 6.50%, 12/15/99........................... $ 252,924
175,000 Pacific Gas & Electric Co., 6.625%, 6/01/00................................ 175,385
415,000 Bear Stearns Co., Inc., 6.25%, 12/01/00.................................... 421,445
250,000 IBM Credit Corp. Medium Term Notes, 6.20%, 3/19/01......................... 250,862
350,000 Florida Residential Property & Casualty Co., 7.25%, 7/01/02................ 367,514
259,000 May Department Stores Co., 9.875%, 12/01/02................................ 304,243
660,000 Ford Motor Credit Co., 7.50%, 1/15/03...................................... 713,314
380,000 Bankers Trust Corp., 7.25%, 1/15/03........................................ 402,724
68,000 U.S. Leasing International, Inc., 6.625%, 5/15/03......................... 71,539
215,000 Chase Manhattan Corp., 8.00%, 5/15/04...................................... 217,675
250,000 Citicorp Medium Term Notes, 8.625%, 11/01/04............................... 257,876
200,000 Michigan Bell Telephone Co., 6.375%, 2/01/05............................... 201,408
66,000 Kaiser Permanente, 9.55%, 7/15/05.......................................... 81,138
400,000 Anheuser-Busch Co., Inc. 7.00%, 9/01/05.................................... 422,678
510,000 Honeywell, Inc. 8.625%, 4/15/06............................................ 611,485
1,000,000 Monsanto Co., 8.13%, 12/15/06.............................................. 1,142,700
500,000 Union Oil of California Corp. Medium Term Notes, 6.70%, 10/15/07........... 535,126
50,000 Berkley (W.R.) Corp., 9.875%, 5/15/08...................................... 64,555
575,000 General Electric Capital Corp. Medium Term Notes, 7.50%, 6/15/09........... 664,925
407,000 Lehman Brothers Holdings, Inc. Medium Term Notes, 7.40%, 11/24/10.......... 389,854
850,000 Merrill Lynch & Company, Inc. Medium Term Notes, 7.19%, 8/07/12............ 883,964
268,000 Super Value Stores, 8.875%, 4/01/16........................................ 274,089
20,000 Union Camp Corp., 8.625%, 4/15/16.......................................... 20,724
107,000 Anheuser-Busch Co., Inc., 8.625%, 12/01/16................................. 109,167
46,000 Kraft, Inc., 8.50%, 2/15/17................................................ 48,072
260,000 Dayton Hudson Corp., 9.875%, 6/01/17....................................... 266,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND (continued)
============================================================================================================
Par Market
Value FIXED RATE OBLIGATIONS-- 97.7% (continued) Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 150,000 Deere & Co., 8.95%, 6/15/19................................................ $ 188,257
439,000 Pennsylvania Power & Light Co., 9.25%, 10/01/19............................ 471,378
115,000 Rohm & Haas Co., 9.80%, 4/15/20............................................ 156,157
165,000 Questar Pipeline Co., 9.375%, 6/01/21...................................... 187,019
120,000 Jersey Central Power & Light Co., 9.20%, 7/01/21........................... 138,094
500,000 AT&T Corp., 8.125%, 1/15/22................................................ 554,996
675,000 Shopko Stores, Inc., 9.25%, 3/15/22........................................ 871,071
300,000 Inco, Ltd., 9.60%, 6/15/22................................................. 346,177
765,000 Alabama Power Co., 8.30%, 7/01/22.......................................... 802,074
85,000 Southwestern Public Service Co., 8.20%, 12/01/22........................... 97,124
130,000 Union Electric Co., 8.00%, 12/15/22........................................ 144,511
315,000 Wisconsin Electric Power Co., 7.75%, 1/15/23............................... 346,201
58,000 Georgia Power Co., 7.95%, 2/01/23.......................................... 60,870
711,000 Loews Corp., 7.00%, 10/15/23............................................... 728,278
- --------------- --------------
$ 13,059,000 TOTAL CORPORATE BONDS
- --------------- (Amortized Cost $13,740,813)............................................... $ 14,244,493
--------------
MUNICIPAL NOTES -- 7.9%
$ 1,500,000 Chula Vista, CA, Pension Obligation Rev., 8.125%, 8/01/11
- --------------- (Amortized Cost $1,724,010)................................................ $ 1,869,075
--------------
COMMERCIAL PAPER -- 1.5%
$ 360,000 Union Bank of Switzerland, 10/01/98
- --------------- (Amortized Cost $360,000).................................................. $ 360,000
--------------
$ 21,000,534 TOTAL FIXED RATE OBLIGATIONS
=============== (Amortized Cost $22,106,673)............................................... $ 23,161,646
--------------
============================================================================================================
Market
Shares PREFERRED STOCK -- 0.9% Value
- ------------------------------------------------------------------------------------------------------------
10,000 First Industrial Realty Trust, Inc., 7.95%
(Amortized Cost $250,000).................................................. $ 221,250
--------------
TOTAL INVESTMENT SECURITIES
(Amortized Cost $22,356,673)............................................... $ 23,382,896
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.4% .............................. 335,215
--------------
NET ASSETS-- 100.0% ....................................................... $ 23,718,111
==============
See accompanying notes to portfolios of investments and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
============================================================================================================
Par Market
Value INVESTMENT SECURITIES-- 98.7% Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 19.4%
$ 1,000,000 U.S. Treasury Notes, 7.75%, 2/15/01........................................ $ 1,075,000
1,000,000 U.S. Treasury Notes, 8.00%, 5/15/01........................................ 1,087,813
3,000,000 U.S. Treasury Notes, 7.875%, 8/15/01....................................... 3,277,500
2,000,000 U.S. Treasury Notes, 7.50%, 11/15/01....................................... 2,179,376
1,000,000 U.S. Treasury Notes, 5.50%, 3/31/03........................................ 1,048,750
1,000,000 U.S. Treasury Bonds, 7.50%, 11/15/16....................................... 1,275,000
- --------------- --------------
$ 9,000,000 TOTAL U.S. TREASURY OBLIGATIONS
- --------------- (Amortized Cost $9,189,883)................................................ $ 9,943,439
--------------
U.S. GOVERNMENT AGENCY ISSUES -- 79.3%
$ 954,000 FHLB Discount Notes, 10/01/98.............................................. $ 954,000
1,000,000 SLMA Medium Term Notes, 7.50%, 7/02/01..................................... 1,072,411
3,000,000 FHLB Notes, 7.31%, 7/06/01................................................. 3,203,766
2,000,000 FHLB Medium Term Notes, 8.43%, 8/01/01..................................... 2,197,452
1,400,000 FHLB Notes, 6.25%, 9/27/01................................................. 1,461,627
2,000,000 FNMA Notes, 7.55%, 4/22/02................................................. 2,187,008
1,000,000 FHLMC Notes, 6.07%, 2/05/03................................................ 1,003,812
2,000,000 FHLMC Notes, 6.80%, 7/09/04................................................ 2,112,424
2,000,000 FHLMC Notes, 8.53%, 11/18/04............................................... 2,081,576
2,000,000 FHLMC Notes, 7.65%, 5/10/05................................................ 2,074,050
2,000,000 FNMA Medium Term Notes, 6.85%, 8/22/05..................................... 2,219,426
2,000,000 FNMA Notes, 6.77%, 9/01/05................................................. 2,210,160
1,400,000 FNMA Notes, 6.26%, 1/24/06................................................. 1,447,603
2,500,000 FNMA Notes, 6.21%, 1/26/06................................................. 2,580,810
2,000,000 FNMA Notes, 6.06%, 2/03/06................................................. 2,091,220
1,000,000 FHLMC Notes, 6.345%, 2/15/06............................................... 1,033,213
2,000,000 FNMA Notes, 6.90%, 12/26/06................................................ 2,167,482
2,000,000 FNMA Notes, 6.64%, 7/02/07................................................. 2,231,470
2,500,000 FHLMC Notes, 5.75%, 4/15/08................................................ 2,638,322
2,203,000 RFCO STRIPS, 10/15/08...................................................... 1,356,012
2,000,000 FNMA Notes, 6.96%, 9/05/12................................................. 2,261,824
- --------------- --------------
$ 38,957,000 TOTAL U.S. GOVERNMENT AGENCY ISSUES
- --------------- (Amortized Cost $38,129,198)............................................... $ 40,585,668
--------------
$ 47,957,000 TOTAL INVESTMENT SECURITIES
=============== (Amortized Cost $47,319,081)............................................... $ 50,529,107
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.3% .............................. 638,914
--------------
NET ASSETS-- 100.0% ....................................................... $ 51,168,021
==============
See accompanying notes to portfolios of investments and notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
============================================================================================================
Par Market
Value INVESTMENT SECURITIES -- 99.4% Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADJUSTABLE RATE U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES (Note D) -- 70.5%
$ 993,279 FNMA #70907, 7.344%, 3/01/18............................................... $ 1,015,498
974,621 FHLMC #605793, 7.231%, 5/01/18............................................. 994,210
1,011,107 FNMA #70614, 7.14%, 10/01/18............................................... 1,031,340
308,959 FNMA #70635, 7.028%, 6/01/20............................................... 313,303
1,383,881 FHLMC #846013, 7.578%, 6/01/22............................................. 1,423,695
1,168,797 FNMA #70176, 7.206%, 8/01/27............................................... 1,193,272
1,478,610 FNMA #70243, 7.235%, 3/01/28............................................... 1,511,155
- --------------- --------------
$ 7,319,254 TOTAL ADJUSTABLE RATE U.S. GOVERNMENT AGENCY
- ---------------
MORTGAGE-BACKED SECURITIES
(Amortized Cost $7,447,791)................................................ $ 7,482,473
--------------
VARIABLE RATE DEMAND NOTES (Note C) -- 21.7%
$ 2,300,000 Bexar Co., TX, HFC MFH Rev. (Shallow Creek Apts.), 5.64%, 10/15/26,
- --------------- Guarantor FNMA
(Amortized Cost $2,300,000)................................................ $ 2,300,000
--------------
U.S. GOVERNMENT AGENCY ISSUES-- 7.2%
$ 766,000 FHLB Discount Notes, 10/01/98
- --------------- (Amortized Cost $766,000).................................................. $ 766,000
--------------
$ 10,385,254 TOTAL INVESTMENT SECURITIES
=============== (Amortized Cost $10,513,791)............................................... $ 10,548,473
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.6% .............................. 67,158
--------------
NET ASSETS-- 100.0% ....................................................... $ 10,615,631
==============
See accompanying notes to portfolios of investments and notes to financial statements.
</TABLE>
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS
September 30, 1998
================================================================================
A. Repurchase Agreements
Repurchase agreements are fully collateralized by U.S. Government obligations.
B. Floating Rate Notes
A floating rate note is a security whose terms provide for the periodic
readjustment of its interest rate whenever a specified interest rate index
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. The interest rates shown represent the
effective rates as of the report date. The dates shown represent the scheduled
maturity dates.
C. Variable Rate Demand Notes
A variable rate demand note is a security payable on demand at par whose terms
provide for the periodic readjustment of its interest rate on set dates and
which, at any time, can reasonably be expected to have a market value that
approximates its par value. The interest rates shown represent the effective
rates as of the report date. The dates shown represent the scheduled maturity
dates.
D. Adjustable Rate U.S. Government Agency Mortgage-Backed Securities
Adjustable rate U.S. Government agency mortgage-backed securities are
mortgage-related securities created from pools of adjustable rate mortgages
which are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities. Such adjustable rate mortgage
securities have interest rates that reset at periodic intervals based on a
specified interest rate index. The interest rates shown represent the effective
rates as of the report date. The dates shown represent the scheduled maturity
date.
Portfolio Abbreviations:
COP - Certificate of Participation
EDR - Economic Development Revenue
FFCB - Federal Farm Credit Bank
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation FNMA - Federal National Mortgage
Association FRMC - Federal Agricultural Mortgage Corporation HFA - Housing
Finance Authority HFC - Housing Finance Corporation IDR - Industrial Development
Revenue MFH - Multi-Family Housing PFA - Public Finance Authority RFCO -
Resolution Funding Corporation SBA - Small Business Administration SLMA -
Student Loan Marketing Association
STRIPS - Separate Trading of Registered Interest and Principal of Securities
TVA - Tennessee Valley Authority
<PAGE>
Report of Independent Public Accountants
================================================================================
Arthur Andersen LLP
(Arthur Andersen logo)
To the Shareholders and Board of Trustees of Countrywide Investment Trust:
We have audited the statements of assets and liabilities, including the
portfolios of investments, of Countrywide Investment Trust (a Massachusetts
business trust) (comprising, respectively, 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, the
Intermediate Bond Fund, and the Money Market Fund) as of September 30, 1998, and
(i) for 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, the related statements of operations, the
statements of changes in net assets, and the financial highlights for the
periods indicated thereon and (ii) for the Intermediate Bond Fund and the Money
Market Fund the related statements of operations for the year ended September
30, 1998, the statements of changes in net assets and the financial highlights
for the year ended September 30, 1998, the one-month period ended September 30,
1997 and the year ended August 31, 1997. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights of the
Intermediate Bond Fund and the Money Market Fund for the period ended August 31,
1996 were audited by other auditors whose report dated October 18, 1996,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights audited by us
and referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting the Countrywide
Investment Trust as of September 30, 1998, the results of their operations, the
changes in their net assets, and their financial highlights for the periods
referred to above, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
- -------------------------
Cincinnati, Ohio,
October 30, 1998
<PAGE>
COUNTRYWIDE INVESTMENT TRUST
PART C. OTHER INFORMATION
-----------------
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
- ------- ---------------------------------
(a) (i) Financial Statements included in Part A:
Financial Highlights
(ii) Financial Statements included in Part B:
Statements of Assets and Liabilities,
September 30, 1998
Statements of Operations For the Year Ended
September 30, 1998
Statements of Changes in Net Assets For the
Periods Ended September 30, 1998 and 1997 and
August 31, 1997
Portfolios of Investments
Financial Highlights
Notes to Financial Statements
(b) EXHIBITS
(1) (i) Registrant's Restated Agreement and
Declaration of Trust is filed herewith.
(ii) Amendment No. 1, dated December 8, 1994, to
Registrant's Restated Agreement and
Declaration of Trust is filed herewith.
(iii) Amendment No. 2, dated January 31, 1995, to
Registrant's Restated Agreement and
Declaration of Trust is filed herewith.
<PAGE>
(iv) Amendment No. 3, dated February 28, 1997, to
Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 66, is hereby incorporated by
reference.
(2) (i) Registrant's Bylaws are filed herewith.
(ii) Amendment to Registrant's Bylaws adopted on
January 10, 1984 is filed herewith.
(3) Voting Trust Agreements - None.
(4) Specimen of Share Certificate, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
38, is hereby incorporated by reference.
(5) (i) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Short
Term Government Income Fund, which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 66, is hereby incorporated by
reference.
(ii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Intermediate Term Government Income Fund,
which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 66, is hereby
incorporated by reference.
(iii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Institutional Government Income Fund, which
was filed as an Exhibit to Registrant's
Post- Effective Amendment No. 66, is hereby
incorporated by reference.
(iv) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Adjustable Rate U.S. Government Securities
Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No.
66, is hereby incorporated by reference.
<PAGE>
(v) Registrant's Management Agreement with
Countrywide Investments, Inc. for the Money
Market Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendement No. 67, is
hereby incorporated by reference.
(vi) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Intermediate Bond Fund, which was filed as an
Exhibit to Registrant's Post-Effective Amendment
No. 67, is hereby incorporated by reference.
(6) (i) Registrant's Underwriting Agreement with
Countrywide Investments, Inc., which was
filed as an Exhibit to Registrant's Post-
Effective Amendment No. 66, is hereby
incorporated by reference.
(ii) Form of Underwriter's Dealer Agreement is
filed herewith.
(7) Bonus, Profit Sharing, Pension or Similar Contracts for
the benefit of Directors or Officers - None.
(8) (i) Custody Agreement with The Fifth Third Bank is
filed herewith.
(9) (i) Transfer Agency, Dividend Disbursing,
Shareholder Service and Plan Agency Agreement
with Countrywide Fund Services, Inc., which was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 67, is hereby incorporated by
reference.
(ii) Accounting and Pricing Services Agreement
with Countrywide Fund Services, Inc., which was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 67, is hereby incorporated by
reference.
(iii) Administration Agreement between Countrywide
Investments, Inc. and Countrywide Fund
Services, Inc., which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 67, is
hereby incorporated by reference.
(iv) License Agreement with Countrywide Credit
Industries, Inc., which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 66, is hereby incorporated by
reference.
<PAGE>
(10) Opinion and Consent of Counsel, which was filed as an
Exhibit to Registrant's Pre-Effective Amendment No.
1, is hereby incorporated by reference.
(11) Consent of Arthur Andersen LLP is filed herewith.
(12) Financial Statements Omitted from Item 23 - None.
(13) Agreements or understandings concerning initial
capital - None.
(14) (i) Copy of Individual Retirement Account Plan,
including Schedule of Fees, which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 45, is hereby incorporated by
reference.
(ii) Copy of 403(b) Plan, including Schedule of
Fees, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 49,
is hereby incorporated by reference.
(15)(i) Registrant's Plans of Distribution
Pursuant to Rule 12b-1, which were filed as
Exhibits to Registrant's Post-Effective
Amendment No. 66, are hereby incorporated by
reference.
(ii) Form of Sales Agreement for Money Market
Funds is filed herewith.
(iii) Form of Administration Agreement with respect
to the administration of shareholder accounts,
which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 67, is hereby
incorporated by reference.
(16) Computations of each performance quotation provided
in response to Item 22, which were filed as an
Exhibit to Registrant's Post-Effective Amendment No.
43, are hereby incorporated by reference.
<PAGE>
(17) Financial Data Schedules
(i) Financial Data Schedule for Short Term
Government Income Fund is filed herewith.
(ii) Financial Data Schedule for Intermediate
Term Government Income Fund is filed
herewith.
(iii) Financial Data Schedule for Institutional
Government Income Fund is filed herewith.
(iv) Financial Data Schedule for Adjustable Rate
U.S. Government Securities Fund is filed
herewith
(v) Financial Data Schedule for Money Market Fund
is filed herewith.
(vi) Financial Data Schedule for Intermediate Bond
Fund is filed herewith.
(18) Amended Rule 18f-3 Plan Adopted With Respect to the
Multiple Class Distribution System, which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 65, is hereby incorporated by
reference.
(19) Power of Attorney for Fred A. Rappoport is filed
herewith.
(20) Power of Attorney for Howard J. Levine is filed herewith.
Item Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
None.
<PAGE>
Item Number of Holders of Securities (as of October 31, 1998)
- ----- -----------------------------------------------------------
Title of Class Number of
-------------- Record
Holders
----------
Short Term Government Income Fund 5,862
Intermediate Term Government Income Fund 1,715
Institutional Government Income Fund 487
Adjustable Rate U.S. Government Securities Fund 514
Money Market Fund 794
Intermediate Bond Fund 254
Item Indemnification
- ----- ---------------
Article VI of Registrant's Restated Agreement and Declaration
of Trust provides for indemnification of officers and Trustees
as follows:
"Section 6.4 Indemnification of Trustees, Officers, etc.
The Trust shall indemnify each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise, and including persons who
served as directors or officers of Midwest Income Investment Company)
(hereinafter referred to as a "Covered Person")against all liabilities,
including but not limited to amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court
or administrative or legislative body, in which such Covered Person may
be or may have been involved as a party or otherwise or with which such
person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a Trustee or
officer, director or trustee, and except that no Covered Person
<PAGE>
shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered
Person's office ("disabling conduct"). Anything herein contained to the
contrary notwithstanding, no Covered Person shall be indemnified for
any liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject unless (1) a final decision on the
merits is made by a court or other body before whom the proceeding was
brought that the Covered Person to be indemnified was not liable by
reason of disabling conduct or, (2) in the absence of such a decision,
a reasonable determination is made, based upon a review of the facts,
that the Covered Person was not liable by reason of disabling conduct,
by (a) the vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Company as defined in the Investment
Company Act of 1940 nor parties to the proceeding ("disinterested,
non-party Trustees"), or (b) an independent legal counsel in a written
opinion.
Section 6.5 Advances of Expenses. The Trust shall advance
attorneys' fees or other expenses incurred by a Covered Person in
defending a proceeding, upon the undertaking by or on behalf of the
Covered Person to repay the advance unless it is ultimately
determined that such Covered Person is entitled to indemnification, so
long as one of the following conditions is met: (i) the Covered Person
shall provide security for his undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested non-party Trustees of
the Trust, or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as opposed to
a full trial-type inquiry), that there is reason to believe that the
Covered Person ultimately will be found entitled to indemnification.
Section 6.6 Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Trust" shall
include Midwest Income Investment Company, "Covered Person" shall
include such person's heirs, executors and administrators, an
"interested Covered Person" is one against whom the action, suit or
other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending
or threatened, and a "disinterested" person is a person against whom
none of such actions, suits or other proceedings or another action,
suit or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this article shall
affect any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to purchase
and maintain liability insurance on behalf of any such person."
<PAGE>
The Registrant maintains a mutual fund and investment advisory
professional and directors and officers liability policy. The policy
provides coverage to the Registrant, its Trustees and officers and
Countrywide Investments, Inc. (the "Adviser"), in its capacity as
investment adviser and principal underwriter, among others. Coverage
under the policy includes losses by reason of any act, error, omission,
misstatement, misleading statement, neglect or breach of duty. The
Registrant may not pay for insurance which protects the Trustees and
officers against liabilities rising from action involving willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their offices.
The Advisory Agreements provide that the investment adviser shall not
be liable for any error of judgment or mistake of law or for any loss
suffered by the Registrant in connection with the matters to which the
Agreements relate, except a loss resulting from willful misfeasance,
bad faith or gross negligence of an investment adviser in the
performance of its duties or from the reckless disregard by the
investment adviser of its obligations under the Agreement. Registrant
will advance attorneys' fees or other expenses incurred by an
investment adviser in defending a proceeding, upon the undertaking by
or on behalf of the investment adviser to repay the advance unless it
is ultimately determined that the investment adviser is entitled to
indemnification.
The Underwriting Agreement with the Adviser provides that the Adviser,
its directors, officers, employees, shareholders and control persons
shall not be liable for any error of judgment or mistake of law or for
any loss suffered by Registrant in connection with the matters to which
the Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any of such
persons in the performance of the Adviser's duties or from the reckless
disregard by any of such persons of the Adviser's obligations and
duties under the Agreement.
Registrant will advance attorneys' fees or other expenses incurred by
any such person in defending a proceeding, upon the undertaking by or
on behalf of such person to repay the advance if it is ultimately
determined that such person is not entitled to indemnification.
<PAGE>
Item. 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
A. The Adviser is a registered investment adviser providing
investment advisory services to the Registrant. The Adviser
acts as the investment adviser to seven series of Countrywide
Tax-Free Trust and four series of Countrywide Strategic
Trust, both of which are registered investment companies. The
Adviser provides investment advisory services to individual
and institutional accounts and is a registered broker-dealer.
B. The following list sets forth the business and other
connections of the directors and executive officers of the
Adviser. Unless otherwise noted with an asterisk(*), the
address of the corporations listed below is 312 Walnut Street,
Cincinnati, Ohio 45202.
*The address of each corporation is 4500 Park Granada Road,
Calabasas, California 91302.
(1) Angelo R. Mozilo - Chairman and a Director of the
Adviser.
(a) Chairman and a Trustee of Countrywide
Strategic Trust, Countrywide Investment Trust
and Countrywide Tax-Free Trust, registered
investment companies.
(b) Chairman and a Director of Countrywide
Financial Services, Inc., a financial
services company, Countrywide Fund Services,
Inc., a registered transfer agent,
CW Fund Distributors, Inc., a registered broker-
dealer, Countrywide Servicing Exchange,* a loan
servicing broker, Countrywide Capital
Markets, Inc.,* a holding company and Countrywide
Securities Corporation*, a registered broker-
dealer.
(c) Vice Chairman, Director and Chief Executive
Officer of Countrywide Credit Industries,
Inc.,* a holding company which provides
residential mortgages and ancillary
financial products and services.
<PAGE>
(d) A Director of Countrywide Home Loans, Inc.,*
a residential mortgage lender, CTC Foreclosure
Services Corporation,* a foreclosure trustee,
CCM Municipal Services, Inc.,* a tax lien
purchaser and Countrywide Field Services
Corporation*, a foreclosure property maintenance
provider.
(e) A Director of LandSafe, Inc.* and Chairman
and a director of various Landsafe
subsidiaries which provide residential
mortgage title and closing services.
(2) Robert H. Leshner - President and a Director of the
Adviser.
(a) President and a Trustee of Countrywide
Strategic Trust, Countrywide Investment Trust
and Countrywide Tax-Free Trust.
(b) President and a Director of Countrywide
Financial Services, Inc.
(c) Vice Chairman and a Director of Countrywide
Fund Services, Inc. and CW Fund Distributors, Inc.
(3) Andrew S. Bielanski - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc., CW Fund
Distributors, Inc., Countrywide Agency,
Inc.* and Countrywide Insurance Services, Inc.,*
insurance agencies.
(b) Managing Director - Marketing of Countrywide
Credit Industries, Inc.* and Countrywide Home
Loans, Inc.*
(4) Thomas H. Boone - A Director of the Adviser.
(a) A Director of Countrywide Financial
Services, Inc., Countrywide Fund Services,
Inc., CW Fund Distributors, Inc., Countrywide
Agency, Inc.,* Countrywide Tax Services
Corporation,* a residential mortgage tax service
provider, Countrywide Lending Corporation,* a
lending institution, Countrywide Insurance Agency
of Massachusetts*, and Countrywide Insurance
Services, Inc.*
(b) Managing Director - Portfolio Services of
Countrywide Credit Industries, Inc.* and
Managing Director - Chief Loan Administration
Officer of Countrywide Home Loans, Inc.*
<PAGE>
(c) A Director and Executive Vice President of
CWABS, Inc.,* an asset-backed securities
issuer and CWMBS, Inc.,* a mortgage-backed
securities issuer.
(d) CEO and a Director of CTC Foreclosure
Services Corporation*.
(e) Chairman and Chief Executive Officer of
Countrywide Field Services Corporation*.
(f) Chairman and Director of Countrywide Realty
Partners, Inc.,* a real estate marketing firm.
(5) Marshall M. Gates - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc., CW Fund
Distributors, Inc., Countrywide Agency, Inc.* and
Countrywide Insurance Services, Inc.*
(b) Managing Director - Developing Markets of
Countrywide Credit Industries, Inc.* and
Countrywide Home Loans, Inc.*
(c) President and a Director of Second Charter
Reinsurance Corporation,* a mortgage,
property and casualty reinsurance agency and
Charter Reinsurance Corporation,* a mortgage
reinsurance agency.
(d) Chief Operating Officer and Director of Landsafe,
Inc.* and various LandSafe subsidiaries.
(6) William E. Hortz - Executive Vice President and Director
of Sales of the Adviser.
(a) Executive Vice President and Director of Sales of
Countrywide Financial Services, Inc.
(b) Vice President of Countrywide Investment Trust,
Countrywide Tax-Free Trust and Countrywide
Strategic Trust.
(c) President of Peregrine Asset Management (USA),
(4 Embarcadero Center, San Francisco, California,
94111), an investment adviser, until 1998.
(7) Maryellen Peretzky - Senior Vice President and Chief
Operating Officer of the Adviser.
(a) Senior Vice President-Administration of
Countrywide Financial Services, Inc.,
Countrywide Fund Services, Inc. and CW Fund
Distributors, Inc.
(b) Vice President of Countrywide Strategic Trust,
Countrywide Investment Trust and Countrywide Tax-
Free Trust; Assistant Secretary of The Gannett
Welsh & Kotler Funds, Firsthand Funds and the Dean
Family of Funds.
<PAGE>
(8) John J. Goetz - First Vice President and Chief
Investment Officer- Tax-Free Fixed Income of the Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(9) Susan F. Flischel - First Vice President and Chief
Investment Officer - Equity of the Adviser
(10) Margaret D. Weinblatt - First Vice President and
Chief Investment Officer - Taxable Fixed Income and
Pension of the Adviser
(a) President and Chief Investment Officer of
Copernicus Asset Management, Ltd. (730 Fifth
Avenue, 9th Floor, New York, New York), an
investment adviser, until 1998.
(11) Sharon L. Karp - First Vice President - Marketing of
the Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(12) John F. Splain - First Vice President, Secretary and
General Counsel of the Adviser.
(a) First Vice President, Secretary and General
Counsel of Countrywide Fund Services, Inc.,
CW Fund Distributors, Inc. and Countrywide
Financial Services, Inc.
(b) Secretary of Countrywide Tax-Free Trust,
Countrywide Investment Trust, Countrywide
Strategic Trust, Brundage, Story and Rose
Investment Trust, Williamsburg Investment Trust,
Markman MultiFund Trust, The Tuscarora Investment
Trust, Maplewood Investment Trust, The Thermo
Opportunity Fund, Inc., the Wells Family of Real
Estate Funds, Boyar Value Fund, Inc., Profit Funds
Investment Trust and The Winter Harbor Fund,
registered investment companies.
(c) Assistant Secretary of Schwartz Investment
Trust, The Gannett Welsh & Kotler Funds,
Firsthand Funds, Dean Family of Funds,
The New York State Opportunity Funds,
The Westport Funds, Lake Shore Family of Funds,
Albermarle Investment Trust, Atalanta/Sosnoff
Investment Trust, The James Advantage Funds and
UC Investment Trust, registered investment
companies.
(d) Secretary of PRAGMA Investment Trust until January
1998; Assistant Secretary of Fremont Mutual Funds,
Inc. and Capitol Square Funds until September
1997; Assistant Secretary of Bowes Investment
Trust until October 1998, each a registered
investment company.
<PAGE>
(13) Robert G. Dorsey - First Vice President and Treasurer of
the Adviser.
(a) President and Treasurer of Countrywide Fund
Services, Inc. and CW Fund Distributors, Inc.
(b) First Vice President-Finance and Treasurer of
Countrywide Financial Services, Inc.
(c) Vice President of Countrywide Tax-Free Trust,
Countrywide Investment Trust, Countrywide
Strategic Trust, Brundage, Story and Rose
Investment Trust, Markman MultiFund Trust,
Maplewood Investment Trust, The Thermo
Opportunity Fund, Inc., Dean Family of Funds,
The New York State Opportunity Funds, Wells Family
of Real Estate Funds, Lake Shore Family of Funds,
Boyar Value Fund, Inc., Profit Funds Investment
Trust, Atalanta/Sosnoff Investment Trust, UC
Investment Trust and The Winter Harbor Fund.
(d) Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust,
The Gannett Welsh & Kotler Funds, The
Tuscarora Investment Trust, Firsthand Funds,
The Westport Funds, Albermarle Investment Trust
and The James Advantage Funds.
(e) Vice President of PRAGMA Investment Trust until
January 1998; Vice President of Capitol Square
Funds and Assistant Vice President of Fremont
Mutual Funds, Inc. until September 1997; Vice
President of Bowes Investment Trust until October
1998.
(14) Terrie A. Wiedenheft - First Vice President and
Chief Financial Officer of the Adviser.
(a) First Vice President and Chief Financial
Officer of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc. and
CW Fund Distributors, Inc.
(15) Scott Weston - Assistant Vice President-Investments of
the Adviser.
(16) Michele M. Hawkins - Assistant Vice President - Compliance
of the Adviser.
(17) Timothy M. Roesch - Assistant Vice President -Systems
Manager of the Adviser.
<PAGE>
Item 29. Principal Underwriters
- ------- ----------------------
(a) Countrywide Investments, Inc. also acts as
underwriter for Countrywide Strategic Trust and
Countrywide Tax-Free Trust. Unless otherwise
indicated by an asterisk (*), the address of the
persons named below is 312 Walnut Street,
Cincinnati, Ohio 45202.
*The address is 4500 Park Granada Road, Calabasas,
California 91302.
Position Position
with with
(b) Name Underwriter Registrant
--------------------------------------------------------
Angelo R. Mozilo Chairman and Chairman/
Director Trustee
Robert H. Leshner President President
and Director and Trustee
* Andrew S. Bielanski Director None
* Thomas H. Boone Director None
* Marshall M. Gates Director None
Maryellen Peretzky Senior Vice Vice
President- President
Chief Operating
Officer
William E. Hortz Executive Vice Vice
President and President
Director of Sales
Sharon L. Karp First Vice None
President-
Marketing
John F. Splain First Vice President,Secretary
Secretary and
General Counsel
Robert G. Dorsey First Vice President Vice
and Treasurer President
John J. Goetz First Vice None
President and
Chief Investment
Officer-Tax-Free
Fixed Income
Susan F. Flischel First Vice None
President and
Chief Investment
Officer-Equity
<PAGE>
Margaret D. Weinblatt First Vice None
President and Chief
Investment Officer-
Taxable Fixed Income
& Pension
Terrie A. Wiedenheft First Vice None
President &
Chief Financial
Officer
Scott Weston Assistant Vice None
President-
Investments
Michele M. Hawkins Assistant Vice None
President-Compliance
Timothy M. Roesch Assistant Vice None
President-Systems
Manager
Item 30. Location of Accounts and Records
- ------- --------------------------------
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder will be maintained by the
Registrant.
Item 31. Management Services Not Discussed in Parts A or B
- ------- -------------------------------------------------
None.
Item 32. Undertakings
- ------- ------------
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes that, if so requested, it
will furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual
report without charge.
<PAGE>
(d) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of
Countrywide Investment Trust pursuant to the provisions
of Massachusetts law and the Restated Agreement and
Declaration of Trust of Countrywide Investment Trust or
the Bylaws of Countrywide Investment Trust, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant
of expenses incurred or paid by a trustee, officer or
controlling person of Countrywide Investment Trust in
the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities
being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.
(e) The Registrant undertakes that, within five business
days after receipt of a written application by
shareholders holding in the aggregate at least 1% of
the shares then outstanding or shares then having a net
asset value of $25,000, whichever is less, each of whom
shall have been a shareholder for at least six months
prior to the date of application (hereinafter the
"Petitioning Shareholders"), requesting to communicate
with other shareholders with a view to obtaining
signatures to a request for a meeting for the purpose
of voting upon removal of any Trustee of the
Registrant, which application shall be accompanied by a
form of communication and request which such
Petitioning Shareholders wish to transmit, Registrant
will:
(i) provide such Petitioning Shareholders with access
to a list of the names and addresses of all
shareholders of the Registrant; or
(ii) inform such Petitioning Shareholders of the
approximate number of shareholders and the
estimated costs of mailing such
communication, and to undertake such mailing
promptly after tender by such Petitioning
Shareholders to the Registrant of the
material to be mailed and the reasonable
expenses of such mailing.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati, State of Ohio, on the 30th day of
November, 1998.
COUNTRYWIDE INVESTMENT TRUST
By: /s/ John F. Splain
-------------------
John F. Splain,
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the 30th day of November, 1998.
*ANGELO R. MOZILO Chairman and Trustee
/s/ Robert H. Leshner President and Trustee
- ---------------------
ROBERT H. LESHNER
/s/ Mark J. Seger Treasurer
- ---------------------
MARK J. SEGER
*DONALD L. BOGDON, M.D. Trustee
*H. JEROME LERNER Trustee
*HOWARD J. LEVINE Trustee
*FRED A. RAPPOPORT Trustee
*OSCAR P. ROBERTSON Trustee
*JOHN F. SEYMOUR, JR. Trustee
*SEBASTIANO STERPA Trustee
By: /s/ John F. Splain
-------------------
Attorney-in-Fact*
November 30, 1998
EXHIBIT INDEX
- -------------
1. Restated Agreement and Declaration of Trust
2. Amendment No. 1 to Restated Agreement and Declaration of Trust
3. Amendment No. 2 to Restated Agreement and Declaration of Trust
4. Bylaws
5. Amendment to Bylaws adopted on January 10, 1984
6. Form of Underwriter's Dealer Agreement
7. Custody Agreement with The Fifth Third Bank
8. Consent of Independent Auditors
9. Form of Sales Agreement for Money Market Funds
10. Financial Data Schedule for Short Term Government Income Fund
11. Financial Data Schedule for Intermediate Term Government Income Fund
12. Financial Data Schedule for Institutional Government Income Fund
13. Financial Data Schedule for Adjustable Rate U.S. Government Securities Fund
14. Financial Data Schedule for Money Market Fund
15. Financial Data Schedule for Intermediate Bond Fund
16. Power of Attorney for Fred A. Rappoport
17. Power of Attorney for Howard J. Levine
MIDWEST INCOME TRUST
RESTATED AGREEMENT AND DECLARATION OF TRUST
AUGUST 26, 1993
<PAGE>
MIDWEST INCOME TRUST
RESTATED AGREEMENT AND DECLARATION OF TRUST
PAGE
ARTICLE I. NAME AND DEFINITIONS........................ 1
Section 1.1 Name......................................... 1
Section 1.2 Definitions.................................. 1
(a) "Trust"...................... 1
(b) "Trustees"................... 1
(c) "Shares"..................... 2
(d) "Series"..................... 2
(e) "Shareholder"................ 2
(f) "1940 Act"................... 2
(g) "Commission"................. 2
(h) "Restated Declaration of Trust"2
(i) "Bylaws"..................... 2
ARTICLE II. PURPOSE OF TRUST............................. 2
- ---------- ----------------
ARTICLE III. THE TRUSTEES................................. 2
- ----------- ------------
Section 3.1 Number, Designation, Election, Term, etc..... 2
(a) Initial Trustees.................... 2
(b) Number.............................. 3
(c) Term................................ 3
(d) Resignation and Retirement.......... 3
(e) Removal............................. 3
(f) Vacancies........................... 4
(g) Effect of Death, Resignation, etc... 4
(h) No Accounting....................... 4
Section 3.2 Powers of the Trustees....................... 5
(a) Investments......................... 5
(b) Disposition of Assets............... 6
(c) Ownership Powers.................... 6
(d) Subscription........................ 6
(e) Form of Holding..................... 6
(f) Reorganization, etc................. 6
(g) Voting Trusts, etc.................. 6
(h) Compromise.......................... 7
(i) Partnerships, etc................... 7
(j) Borrowing and Security.............. 7
(i)
<PAGE>
PAGE
(k) Guarantees, etc..................... 7
(l) Insurance........................... 7
(m) Pensions, etc....................... 7
Section 3.3 Certain Contracts............................ 8
(a) Advisory...........................8
(b) Administration.....................8
(c) Distribution.......................9
(d) Custodian and Depository...........9
(e) Transfer and Dividend Disbursing
Agency.............................9
(f) Shareholder Servicing..............9
(g) Accounting.........................9
Section 3.4 Payment of Trust Expenses and Compensation
of Trustees.................................. 10
Section 3.5 Ownership of Assets of the Trust............. 10
ARTICLE IV. SHARES....................................... 11
- ---------- ------
Section 4.1 Description of Shares........................ 11
Section 4.2 Establishment and Designation of Series...... 12
(a) Assets Belonging to Series.......... 13
(b) Liabilities Belonging to Series..... 14
(c) Dividends........................... 14
(d) Liquidation......................... 15
(e) Voting.............................. 15
(f) Redemption by Shareholder........... 16
(g) Redemption by Trust................. 16
(h) Net Asset Value..................... 17
(i) Transfer............................ 17
(j) Equality............................ 17
(k) Fractions........................... 18
(l) Conversion Rights................... 18
Section 4.3 Ownership of Shares.......................... 18
Section 4.4 Investments in the Trust..................... 18
Section 4.5 No Preemptive Rights......................... 19
Section 4.6 Status of Shares and Limitation of Personal
Liability.................................... 19
(ii)
<PAGE>
PAGE
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS...... 19
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Section 5.1 Voting Powers................................ 19
Section 5.2 Meetings..................................... 20
Section 5.3 Record Dates................................. 20
Section 5.4 Quorum and Required Vote..................... 21
Section 5.5 Action by Written Consent.................... 21
Section 5.6 Inspection of Records........................ 21
Section 5.7 Additional Provisions........................ 21
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION...... 22
- ---------- ----------------------------------------
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice................................ 22
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety............................. 22
Section 6.3 Indemnification of Shareholders.............. 23
Section 6.4 Indemnification of Trustees, Officers, etc... 23
Section 6.5 Advances of Expenses......................... 24
Section 6.6 Indemnification Not Exclusive, etc........... 24
Section 6.7 Liability of Third Persons Dealing with
Trustees..................................... 25
ARTICLE VII. MISCELLANEOUS................................. 25
- ----------- -------------
Section 7.1 Duration and Termination of Trust............. 25
Section 7.2 Reorganization................................ 25
Section 7.3 Amendments................................... 26
Section 7.4 Filing of Copies; References; Headings....... 26
Section 7.5 Applicable Law............................... 27
(iii)
<PAGE>
MIDWEST INCOME TRUST
RESTATED AGREEMENT AND DECLARATION OF TRUST
The Agreement and Declaration of Trust initially made in Bedford,
Massachusetts on December 7, 1980, as heretofore amended, is hereby restated in
its entirety this 26th day of August, 1993 to provide as follows:
WITNESSETH:
WHEREAS, this Trust has been formed to carry on the business
of an investment company; and
WHEREAS, this Trust has also been formed to succeed to the business of
Midwest Income Investment Company, an Ohio corporation; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 NAME. This Trust shall be known as "Midwest Income Trust"
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine. Until otherwise determined,
the principal place of business of the Trust is 312 Walnut Street, Cincinnati,
Ohio 45202. The Trust's resident agent in Massachusetts is CT Corporation
System, 2 Oliver Street, Boston, Massachusetts 02109.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust
established by this Restated Agreement and Declaration of
Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article III;
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(c) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust or any Series of
the Trust (as the context may require) shall be divided from
time to time;
(d) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article IV;
(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time;
(g) "Commission" shall have the meaning given it in the
1940 Act;
(h) "Restated Declaration of Trust" shall mean this Restated
Agreement and Declaration of Trust as amended or restated from
time to time; and
(i) "Bylaws" shall mean the Bylaws of the Trust as amended from
time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company, to
offer Shareholders one or more investment programs primarily in securities and
debt instruments and to transact any or all lawful business.
ARTICLE III
THE TRUSTEES
Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) Initial Trustees. Upon execution of this Restated Declaration
of Trust or a counterpart hereof, each of the following has
agreed to continue to be a Trustee of the Trust and to be
bound by the provisions hereof:
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Gary W. Heldman, 4545 Malsbary Road, Cincinnati, OH 45242
David A. Jones, 80 Maiden Lane, New York, NY 10038
James C. Krumme, 2121 Alpine Place, Cincinnati, OH 45206 H.
Jerome Lerner, 4700 Smith Road, Suite Q, Cincinnati, OH 45212
Robert H. Leshner, 312 Walnut Street, Cincinnati, OH 45202
Oscar P. Robertson, 4293 Muhlhauser Road, Fairfield, OH 45014
G. William Rohde, 7201 Snider Road, Mason, OH 45040
Bruce J. Simpson, 1117 Dunstan Road, Geneva IL 60134
(b) Number. The Trustees serving as such, whether named
above or hereafter becoming a Trustee, may increase or
decrease (to not less than three) the number of
Trustees to a number other than the number theretofore
determined. No decrease in the number of Trustees
shall have the effect of removing any Trustee from
office prior to the expiration of his term, but the
number of Trustees may be decreased in conjunction with
the removal of a Trustee pursuant to subsection (e) of
this Section 3.1.
(c) Term. Each Trustee shall serve as a Trustee during the
lifetime of the Trust and until its termination as
hereinafter provided or until such Trustee sooner dies,
resigns, retires or is removed. The Trustees may elect
their own successors and may, pursuant to Section
3.1(f) hereof, appoint Trustees to fill vacancies;
provided that, immediately after filling a vacancy, at
least 2/3 of the Trustees then holding office shall
have been elected to such office by the Shareholders at
an annual or special meeting. If at any time less than
a majority of the Trustees then holding office were so
elected, the Trustees shall forthwith cause to be held
as promptly as possible, and in any event within 60
days, a meeting of Shareholders for the purpose of
electing Trustees to fill any existing vacancies.
(d) Resignation and Retirement. Any Trustee may resign his trust
or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to any officer of the
Trust, and such resignation or retirement shall take effect
upon such delivery or upon such later date as is specified in
such instrument.
(e) Removal. Any Trustees may be removed with or without cause at
any time: (i) by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become
effective, (ii) by vote of the Shareholders holding not less
than two-thirds of the Shares then outstanding, cast in person
or by proxy at
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any meeting called for the purpose, or (iii) by a declaration
in writing signed by Shareholders holding not less than
two-thirds of the Shares then outstanding and filed with the
Trust's Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including without limitation
the death, resignation, retirement, removal or
incapacity of any of the Trustees, or resulting from an
increase in the number of Trustees by the Trustees may
(but so long as there are at least three remaining
Trustees, need not unless required by the 1940 Act) be
filled either by a majority of the remaining Trustees
through the appointment in writing of such other person
as such remaining Trustees in their discretion shall
determine (unless a shareholder election is required by
the 1940 Act) or by the election by the Shareholders,
at a meeting called for the purpose, of a person to
fill such vacancy, and such appointment or election
shall be effective upon the written acceptance of the
person named therein to serve as a Trustee and
agreement by such person to be bound by the provisions
of this Restated Declaration of Trust, except that any
such appointment or election in anticipation of a
vacancy to occur by reason of retirement, resignation,
or increase in number of Trustees to be effective at a
later date shall become effective only at or after the
effective date of said retirement, resignation, or
increase in number of Trustees. As soon as any Trustee
so appointed or elected shall have accepted such
appointment or election and shall have agreed in
writing to be bound by this Restated Declaration of
Trust and the appointment or election is effective, the
Trust estate shall vest in the new Trustee, together
with the continuing Trustees, without any further act
or conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one
of them, shall not operate to annul or terminate the Trust or
to revoke or terminate any existing agency or contract created
or entered into pursuant to the terms of this Restated
Declaration of Trust.
(h) No Accounting. Except to the extent required by the 1940 Act
or under circumstances which would justify his removal for
cause, no person ceasing to be a Trustee as a result of his
death, resignation, retirement, removal or incapacity (nor the
estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such
cessation.
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<PAGE>
Section 3.2 POWERS OF THE TRUSTEES. Subject to the provisions of this
Restated Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with this Restated
Declaration of Trust providing for the conduct of the business and affairs of
the Trust and may amend and repeal them to the extent that such Bylaws do not
reserve that right to the Shareholders; they may as they consider appropriate
elect and remove officers and appoint and terminate agents and consultants and
hire and terminate employees, any one or more of the foregoing of whom may be a
Trustee, and may provide for the compensation of all of the foregoing; they may
appoint from their own number, and terminate, any one or more committees
consisting of two or more Trustees, including without implied limitation an
executive committee, which may, when the Trustees are not in session and subject
to the 1940 Act, exercise some or all of the power and authority of the Trustees
as the Trustees may determine; in accordance with Section 3.3 they may employ
one or more Advisers, Administrators, Depositories and Custodians and may
authorize any Depository or Custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of securities and debt instruments, retain transfer, dividend,
accounting or Shareholder servicing agents or any of the foregoing, provide for
the distribution of Shares by the Trust through one or more distributors,
principal underwriters or otherwise, set record dates or times for the
determination of Shareholders or various of them with respect to various
matters; they may compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem appropriate;
and in general they may delegate to any officer of the Trust, to any committee
of the Trustees and to any employee, adviser, administrator, distributor,
depository, custodian, transfer and dividend disbursing agent, or any other
agent or consultant of the Trust such authority, powers, functions and duties as
they consider desirable or appropriate for the conduct of the business and
affairs of the Trust, including without implied limitation the power and
authority to act in the name of the Trust and of the Trustees, to sign documents
and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority:
(a) Investments. To invest and reinvest cash and other property,
and to hold cash or other property uninvested without in any
event being bound or limited by any
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<PAGE>
present or future law or custom in regard to investments by
trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all
of the assets of the Trust;
(c) Ownership Powers. To vote or give assent, or exercise
any rights of ownership, with respect to stock or other
securities, debt instruments or property; and to
execute and deliver proxies or powers of attorney to
such person or persons as the Trustees shall deem
proper, granting to such person or persons such power
and discretion with relation to securities, debt
instruments or property as the Trustees shall deem
proper;
(d) Subscription. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities or debt instruments;
(e) Form of Holding. To hold any security, debt instrument or
property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or
otherwise;
(f) Reorganization, etc. To consent to or participate in
any plan for the reorganization, consolidation or
merger of any corporation or issuer, any security or
debt instrument of which is or was held in the Trust;
to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any
security or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any
securities or debt instruments in acting through a
committee, depository, voting trustee or otherwise, and
in that connection to deposit any security or debt
instrument with, or transfer any security or debt
instrument to, any such committee, depository or
trustee, and to delegate to them such power and
authority with relation to any security or debt
instrument (whether or not so deposited or transferred)
as the Trustees shall deem proper, and to agree to pay,
and to pay, such portion of the expenses and
compensation of such committee, depository or trustee
as the Trustees shall deem proper;
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<PAGE>
(h) Compromise. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general or
limited partnerships and any other combinations or
associations;
(j) Borrowing and Security. To borrow funds and to mortgage and
pledge the assets of the Trust or any part thereof to secure
obligations arising in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of any
notes or other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust property
or any part thereof to secure any of or all such obligations;
(l) Insurance. To purchase and pay for entirely out of
Trust property such insurance as they may deem
necessary or appropriate for the conduct of the
business, including, without limitation, insurance
policies insuring the assets of the Trust and payment
of distributions and principal on its portfolio
investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
consultants, investment advisers, managers,
administrators, distributors, principal underwriters,
or independent contractors, or any thereof (or any
person connected therewith), of the Trust individually
against all claims and liabilities of every nature
arising by reason of holding, being or having held any
such office or position, or by reason of any action
alleged to have been taken or omitted by any such
person in any such capacity, including any action taken
or omitted that may be determined to constitute
negligence, whether or not the Trust would have the
power to indemnify such person against such liability;
and
(m) Pensions, etc. To pay pensions for faithful service,
as deemed appropriate by the Trustees, and to adopt,
establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.
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<PAGE>
Except as otherwise provided by the 1940 Act or other applicable law,
this Restated Declaration of Trust or the Bylaws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum, consisting of at least a majority of the Trustees then in
office, being present), within or without Massachusetts, including any meeting
held by means of a conference telephone or other communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time and participation by such means shall constitute presence in
person at a meeting, or by written consents of a majority of the Trustees then
in office.
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter into
one or more contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, other type of organizations, or individuals
("Contracting Party") to provide for the performance and assumption of some or
all of the following services, duties and responsibilities to, for or of the
Trust and/or the Trustees, and to provide for the performance and assumption of
such other services, duties and responsibilities in addition to those set forth
below as the Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the
Trustees and in conformity with the stated policy of
the Trustees with respect to the investments of the
Trust or of the assets belonging to any Series of
Shares of the Trust (as that phrase is defined in
subsection (a) of Section 4.2), to manage such
investments and assets, make investment decisions with
respect thereto, and to place purchase and sale orders
for portfolio transactions relating to such investments
and assets;
(b) Administration. Subject to the general supervision of
the Trustees and in conformity with any policies of the
Trustees with respect to the operations of the Trust,
to supervise all or any part of the operations of the
Trust, and to provide all or any part of the
administrative and clerical personnel, office space and
office equipment and services appropriate for the
efficient administration and operations of the Trust;
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<PAGE>
(c) Distribution. To distribute the Shares of the Trust, to be
principal underwriter of such Shares, and/or to act as agent
of the Trust in the sale of Shares and the acceptance or
rejection of orders for the purchase of Shares;
(d) Custodian and Depository. To act as depository for and to
maintain custody of the property of the Trust and accounting
records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain records
of the ownership of outstanding Shares, the issuance and
redemption and the transfer thereof, and to disburse any
dividends declared by the Trustees and in accordance with the
policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect to the
relationship of the Trust and its Shareholders, records with
respect to Shareholders and their Shares, and similar matters;
and
(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust, or
that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or has other business or interests,
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shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or its Shareholders, provided that in the case of any relationship or
interest referred to in the preceding clause (i) on the part of any Trustee or
officer of the Trust either (1) the material facts as to such relationship or
interest have been disclosed to or are known by the Trustees not having any such
relationship or interest and the contract involved is approved in good faith by
a majority of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of all of
the Trustees), (2) the material facts as to such relationship or interest and as
to the contract have been disclosed to or are known by the Shareholders entitled
to vote thereon and the contract involved is specifically approved in good faith
by vote of the Shareholders, or (3) the specific contract involved is fair to
the Trust as of the time it is authorized, approved or ratified by the Trustees
or by the Shareholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and to
charge or allocate the same to, between or among such one or more of the Series
that may be established and designated pursuant to Article IV, as the Trustees
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend disbursing agent,
accounting agent, Shareholder servicing agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.
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ARTICLE IV
SHARES
Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value and of one class, but the
Trustees shall have the authority from time to time to divide the class of
Shares into two or more Series of Shares (including without limitation those
Series specifically established and designated in Section 4.2), as they deem
necessary or desirable, to establish and designate such Series, and to fix and
determine the relative rights and preferences as between the different Series of
Shares as to right of redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the several Series shall have separate voting rights or
no voting rights. Except as aforesaid all Shares of the different Series shall
be identical.
The Shares of each Series may be issued or reissued from time to time
in one or more sub-series ("Sub-Series"), as determined by the Board of Trustees
pursuant to resolution. Each Sub-Series shall be appropriately designated, prior
to the issuance of any shares thereof, by some distinguishing letter, number or
title. All Shares within a Sub-Series shall be alike in every particular. All
Shares of each Series shall be of equal rank and have the same powers,
preferences and rights, and shall be subject to the same qualifications,
limitations and restrictions without distinction between the shares of different
Sub-Series thereof, except with respect to such differences among such
Sub-Series as the Board of Trustees shall from time to time determine to be
necessary to comply with the 1940 Act or other applicable laws, including
differences in the rate or rates of dividends or distributions. The Board of
Trustees may from time to time increase the number of Shares allocated to any
Sub-Series already created by providing that any unissued Shares of the
applicable Series shall constitute part of such Sub-Series, or may decrease the
number of Shares allocated to any Sub-Series already created by providing that
any unissued Shares previously assigned to such Sub-Series shall no longer
constitute part thereof. The Board of Trustees is hereby empowered to classify
or reclassify from time to time any unissued Shares of each Series by fixing or
altering the terms thereof and by assigning such unissued shares to an existing
or newly created Sub-Series. Notwithstanding anything to the contrary in this
paragraph the Board of Trustees is hereby empowered (i) to redesignate any
issued Shares of any Series by assigning a distinguishing letter, number or
title to such shares and (ii) to reclassify all or any part of the issued Shares
of any Series to make them part of an existing or newly created Sub-Series.
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The number of authorized Shares that may be issued is unlimited, and
the Trustees may issue Shares of any Series for such consideration and on such
terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.2). The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series into one or more Series that may be established and
designated from time to time. The Trustees may hold as treasury Shares (of the
same or some other Series), reissue for such consideration and on such terms as
they may determine, or cancel, at their discretion from time to time, any Shares
of any Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the holders of
Shares entitled to be treated as such, to the extent required for the operation
of the Trust.
The establishment and designation of any Series of Shares in addition
to those established and designated in Section 4.2, or of any Sub-Series of
shares, shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or Sub-Series, or as otherwise
provided in such instrument. At any time that there are no Shares outstanding of
any particular Series or Sub-Series previously established and designated the
Trustees may by an instrument executed by a majority of their number abolish
that Series or Sub-Series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an amendment
to this Restated Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Series of the Trust to the same extent as if such person were not
a Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting
the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Series, the Trustees hereby establish and designate four
Series of Shares:
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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 Short Term Government Income Fund
Shares, the Intermediate Term Government Income Fund Shares, the Institutional
Government Income Fund Shares, the Adjustable Rate U.S. Government Securities
Fund Shares and any Shares of any further Series that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Series or Sub-Series at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Series. All consideration received
by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which
such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably
belong to that Series for all purposes, subject only to
the rights of creditors, and shall be so recorded upon
the books of account of the Trust. Such consideration,
assets, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or
payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together
with any General Items allocated to that Series as
provided in the following sentence, are herein referred
to as "assets belonging to" that Series. In the event
that there are any assets, income, earnings, profits,
and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular
Series (collectively "General Items"), the Trustees
shall allocate such General Items to and among any one
or more of the Series established and designated from
time to time in such manner and on such basis as they,
in their sole discretion, deem fair and equitable; and
any General Items so allocated to a particular Series
shall belong to that Series. Each such allocation by
the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall
be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding
upon the Shareholders.
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(b) Liabilities Belonging to Series. The assets belonging
to each particular Series shall be charged with the
liabilities of the Trust in respect of that Series and
all expenses, costs, charges and reserves attributable
to that Series, and any general liabilities, expenses,
costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees
to and among any one or more of the Series established
and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion
deem fair and equitable. The liabilities, expenses,
costs, charges and reserves allocated and so charged to
a Series are herein referred to as "liabilities
belonging to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the
holders of all Series for all purposes.
(c) Dividends. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as
the Trustees may determine, which may be daily or
otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as
the Trustees may determine, to the holders of Shares of
that Series, from such of the income and capital gains,
accrued or realized, from the assets belonging to that
Series, as the Trustees may determine, after providing
for actual and accrued liabilities belonging to that
Series. All dividends and distributions on Shares of a
particular Series shall be distributed pro rata to the
holders of that Series in proportion to the number of
Shares of that Series held by such holders at the date
and time of record established for the payment of such
dividends or distributions, except that in connection
with any dividend or distribution program or procedure
the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not
been received by the time or times established by the
Trustees under such program or procedure, and except
that if Sub-Series have been established for any
Series, the rate of dividends or distributions may vary
among such Sub-Series pursuant to resolution, which may
be a standing resolution, of the Board of Trustees.
Such dividends and distributions may be made in cash or
Shares or a combination thereof as determined by the
Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend
or distribution to that Shareholder. Any such dividend
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or distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (h)
of Section 4.2.
The Trust intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1954, as amended,
or any successor or comparable statute thereto, and
regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of
the Trust, the Board of Trustees shall have the power, in its
sole discretion, to distribute in any fiscal year as
dividends, including dividends designated in whole or in part
as capital gains distributions, amounts sufficient, in the
opinion of the Board of Trustees, to enable the Trust to
qualify as a regulated investment company and to avoid
liability of the Trust for federal income tax in respect of
that year. However, nothing in the foregoing shall limit the
authority of the Board of Trustees to make distributions
greater than or less than the amount necessary to qualify as a
regulated investment company and to avoid liability of the
Trust for such tax.
(d) Liquidation. In event of the liquidation or
dissolution of the Trust, the Shareholders of each
Series that has been established and designated shall
be entitled to receive, as a Series, when and as
declared by the Trustees, the excess of the assets
belonging to that Series over the liabilities belonging
to that Series. The assets so distributable to the
Shareholders of any particular Series shall be
distributed among such Shareholders in proportion to
the number of Shares of that Series held by them and
recorded on the books of the Trust. The liquidation of
any particular Series may be authorized by vote of a
majority of the Trustees then in office subject to the
approval of a majority of the outstanding voting
securities, as defined in the 1940 Act, (Shares) of
that Series.
(e) Voting. All shares of all Series shall have "equal
voting rights" as such term is defined in the 1940 Act
and except as otherwise provided by that Act or rules,
regulations or orders promulgated thereunder. On each
matter submitted to a vote of the Shareholders, each
Series shall vote as a separate series except as to any
matter with respect to which a vote of all Series
voting as a single series is required by the 1940 Act
or rules and regulations promulgated thereunder, or
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would be required under the Massachusetts Business Corporation
Law if the Trust were a Massachusetts business corporation. As
to any matter which does not affect the interest of a
particular Series, only the holders of Shares of the one or
more affected Series shall be entitled to vote.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Series shall have the right at such times as
may be permitted by the Trust, but no less frequently
than once each week, to require the Trust to redeem all
or any part of his Shares of that Series at a
redemption price equal to the net asset value per Share
of that Series next determined in accordance with
subsection (h) of this Section 4.2 after the Shares are
properly tendered for redemption. Payment of the
redemption price shall be in cash; provided, however,
that if the Trustees determine, which determination
shall be conclusive, that conditions exist which make
payment wholly in cash unwise or undesirable, the Trust
may make payment wholly or partly in securities or
other assets belonging to the Series of which the
Shares being redeemed are part at the value of such
securities or assets used in such determination of net
asset value.
Notwithstanding the foregoing, the Trust may postpone payment
of the redemption price and may suspend the right of the
holders of Shares of any Series to require the Trust to redeem
Shares of that Series during any period or at any time when
and to the extent permissible under the 1940 Act, and such
redemption is conditioned upon the Trust having funds or
property legally available therefor.
(g) Redemption by Trust. Each Share of each Series that
has been established and designated is subject to
redemption by the Trust at the redemption price which
would be applicable if such Share was then being
redeemed by the Shareholder pursuant to subsection (f)
of this Section 4.2 at any time if the Trustees
determine in their sole discretion that failure to so
redeem may have materially adverse consequences to all
or any of the holders of the Shares, or any Series
thereof, of the Trust, and upon such redemption the
holders of the Shares so redeemed shall have no further
right with respect thereto other than to receive
payment of such redemption price. In addition, the
Board of Trustees, in its sole discretion, may require
a Shareholder to redeem all of his Shares of any Series
within thirty days after the end of a calendar quarter,
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if the value of all of his shares of that Series at the end of
said calendar quarter is less than the minimum amount
established from time to time by the Board of Trustees.
(h) Net Asset Value. The net asset value per Share of any
Series shall be the quotient obtained by dividing the
value of the net assets of that Series (being the value
of the assets belonging to that Series less the
liabilities belonging to that Series) by the total
number of Shares of that Series outstanding, all
determined in accordance with the methods and
procedures, including without limitation those with
respect to rounding, established by the Trustees from
time to time.
The Trustees may determine to maintain the net asset value per
Share of any Series at a designated constant dollar amount and
in connection therewith may adopt procedures not inconsistent
with the 1940 Act for the continuing declarations of income
attributable to that Series as dividends payable in additional
Shares of that Series at the designated constant dollar amount
and for the handling of any losses attributable to that
Series. Such procedures may provide that in the event of any
loss each Shareholder shall be deemed to have contributed to
the capital of the Trust attributable to that Series his pro
rata portion of the total number of Shares required to be
canceled in order to permit the net asset value per Share of
that Series to be maintained, after reflecting such loss, at
the designated constant dollar amount. Each Shareholder of the
Trust shall be deemed to have agreed, by his investment in the
Trust, to make the contribution referred to in the preceding
sentence in the event of any such loss.
(i) Transfer. All Shares of each particular Series shall
be transferable, but transfers of Shares of a
particular Series will be recorded on the Share
transfer records of the Trust applicable to that Series
only at such times as Shareholders shall have the right
to require the Trust to redeem Shares of that Series
and at such other times as may be permitted by the
Trustees.
(j) Equality. All Shares of each particular Series shall represent
an equal proportionate interest in the assets belonging to
that Series (subject to the liabilities belonging to that
Series), and each Share of any particular Series shall be
equal to each other Share of
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that Series; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (c) of
this Section 4.2 that may exist with respect to dividends and
distributions on Shares of the same Series. The Trustees may
from time to time divide or combine the Shares of any
particular Series into a greater or lesser number of Shares of
that Series without thereby changing the proportionate
beneficial interest in the assets belonging to that Series or
in any way affecting the rights of Shares of any other Series.
(k) Fractions. Any fractional Share of any Series or Sub- Series,
if any such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole
Share of that Series or Sub- Series, including with respect to
voting, receipt of dividends and distributions, redemption of
Shares, and liquidation of the Trust.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Series shall have the
right to convert said Shares into Shares of one or more other
Series of Shares in accordance with such requirements and
procedures as may be established by the Trustees.
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series
that has been established and designated. No certificates certifying the
ownership of Shares need be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Series and Sub-Series held from time to time by each such
Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
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Section 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust.
Section 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Series to
the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Restated Declaration of Trust to the extent and as provided in
Section 7.3, (v) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders, and (vi) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act,
this Restated Declaration of Trust, the Bylaws or any registration of the Trust
with the Commission (or any successor agency) or any state, or as the Trustees
may consider necessary or desirable. There shall be no cumulative voting in the
election of any Trustee or Trustees. Shares may be voted in person or by proxy.
A proxy with respect to Shares held in the name of two or more persons shall be
valid
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if executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. Until Shares are issued, the Trustees
may exercise all rights of Shareholders and may take any action required by law,
this Restated Declaration of Trust or the Bylaws to be taken by Shareholders.
Section 5.2 MEETINGS. Meetings (including meetings involving only the
holders of Shares of one or more but less than all Series) of Shareholders may
be called by the Trustees from time to time for the purpose of taking action
upon any matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be necessary or
desirable. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder at the Shareholder's address as it appears on the
records of the Trust. The Trustees shall promptly call and give notice of a
meeting of Shareholders for the purpose of voting upon removal of any Trustee of
the Trust when requested to do so in writing by Shareholders holding not less
than 10% of the Shares then outstanding. If the Trustees shall fail to call or
give notice of any meeting of Shareholders (including a meeting involving only
the holders of Shares of one or more but less than all Series) for a period of
30 days after written application by Shareholders holding at least 25% of the
Shares then outstanding requesting a meeting be called for any other purpose
requiring action by the Shareholders as provided herein or in the Bylaws, then
Shareholders holding at least 25% of the Shares then outstanding may call and
give notice of such meeting, and thereupon the meeting shall be held in the
manner provided for herein in case of call thereof by the Trustees."
Section 5.3 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so
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fixed shall be entitled to vote at such meeting or any adjournment thereof or
(subject to any provisions permissible under subsection (c) of Section 4.2 with
respect to dividends or distributions on Shares that have not been ordered
and/or paid for by the time or times established by the Trustees under the
applicable dividend or distribution program or procedure then in effect) to be
treated as a Shareholder of record for purposes of such other action, even
though he has since that date and time disposed of his Shares, and no
Shareholder becoming such after that date and time shall be so entitled to vote
at such meeting or any adjournment thereof or to be treated as a Shareholder of
record for purposes of such other action.
Section 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled
to vote shall be a quorum for the transaction of business at a Shareholders'
meeting,but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present, shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the Bylaws.
Notwithstanding any provision of applicable law requiring a greater proportion
than a majority of the votes entitled to be case in order to take or authorize
any action (unless otherwise provided in this Declaration of Trust or the
Bylaws), any such action may be taken or authorized upon the concurrence of at
least a majority of the aggregate number of votes entitled to be cast thereon.
Section 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such other proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Section 5.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Massachusetts business corporation under the Massachusetts
Business Corporation Law.
Section 5.7 ADDITIONAL PROVISIONS. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters.
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ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; Notice.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust or the Trustees or any of them in connection with the
Trust shall be conclusively deemed to have been executed or done only by or for
the Trust or the Trustees and not personally. Nothing in this Declaration of
Trust shall protect any Trustee or officer against any liability to the Trust or
the Shareholders to which such Trustee or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee or of such
officer.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust, but the omission thereof shall not
operate to bind any Trustees or Trustee or officers or officer or Shareholders
or Shareholder individually.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other
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Trustee; (b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (c) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a Contracting Party appointed by
the Trustees pursuant to Section 3.3. The Trustees as such shall not be required
to give any bond or surety or any other security for the performance of their
duties.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder
or former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the Shareholder)
shall assume the defense against such charge and satisfy any judgment thereon,
and the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust estate to be held harmless from and
indemnified against all loss and expense arising from such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify each of its Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise, and
including persons who served as directors or officers of Midwest Income
Investment Company) (hereinafter referred to as a "Covered Person") against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, and except that no Covered
Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith,
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gross negligence or reckless disregard of the duties involved in the conduct of
such Covered Person's office ("disabling conduct"). Anything herein contained to
the contrary notwithstanding, no Covered Person shall be indemnified for any
liability to the Trust or its Shareholders to which such Covered Person would
otherwise be subject unless (1) a final decision on the merits is made by a
court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of disabling conduct or, (2)
in the absence of such a decision, a reasonable determination is made, based
upon a review of the facts, that the Covered Person was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Company as defined in the Investment Company
Act of 1940 nor parties to the proceeding ("disinterested, non-party Trustees"),
or (b) an independent legal counsel in a written consent.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a proceeding,
upon the undertaking by or on behalf of the Covered Person to repay the advance
unless it is ultimately determined that such Covered Person is entitled to
indemnification, so long as one of the following conditions is met: (i) the
covered Person shall provide security for his undertaking, (ii) the Trust shall
be insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the disinterested non-party Trustees of the Trust, or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be found
entitled to indemnification.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Trust" shall include Midwest Income Investment Company,
"Covered Person" shall include such person's heirs, executors and
administrators, an "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened, and a
"disinterested" person is a person against whom none of such actions, suits or
other proceedings or another action, suite or other proceeding on the
same or similar grounds is then or has been pending or threatened. Nothing
contained in this article shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and officers, and other persons may
be entitled by contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such person.
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Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to t a favorable vote of a majority of the outstanding voting
securities, as defined in the 1940 Act, (Shares) of each Series voting
separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 REORGANIZATION. The Trustees may sell, convey and transfer
the assets of the Trust, or the assets belonging to any one or more Series, to
another Trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting securities, as defined in
the 1940 Act, (Shares) of that Series. Following such transfer, the Trustees
shall distribute such cash, shares or other securities (giving due effect to the
assets and liabilities belonging to and any other differences among the various
Series the assets belonging to which have so been transferred) among the
Shareholders of the Series the assets belonging to which have been so
transferred; and if all of the
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assets of the Trust have been so transferred, the Trust shall be terminated.
Section 7.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservations of the right
to amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees), when authorized so to do
by the vote in accordance with subsection (e) of Section 4.2 of Shareholders
holding a majority of the Shares entitled to vote, except that amendments either
(a) establishing and designating any new Series of Shares not established and
designated in Section 4.2, or any Sub-Series or (b) having the purpose of
changing the name of the Trust or the name of any Shares theretofore established
and designated or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision hereof which is internally
inconsistent with any other provision hereof or which is defective or
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Trust's obtaining the most favorable
treatment thereunder available to regulated investment companies, shall not
require authorization by Shareholder vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer of the Trust
to the effect that such amendment has been duly adopted.
Section 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The
original or a copy of this instrument and of each amendment hereto shall be kept
at the office of the Trust where it may be inspected by any Shareholder. A copy
of this instrument and of each amendment hereto shall be filed by the Trust with
the Secretary of The Commonwealth of Massachusetts and with the Boston City
Clerk, as well as any other governmental office where such filing may from time
to time be required, but the failure to make any such filing shall not impair
the effectiveness of this instrument or any such amendment. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made, as to the identities of the Trustees and
officers, and as to any matters in
- 26 -
<PAGE>
connection with the Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein,"
"hereof" and "hereunder" shall be deemed to refer to this instrument as a whole
as the same may be amended or affected by any such amendments. The masculine
gender shall include the feminine and neuter genders. Headings are placed herein
for convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
Section 7.5 APPLICABLE LAW. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in Massachusetts,
but the reference to said Business Corporation Law is not intended to give the
Trust, the Trustees, the Shareholders or any other person any right, power,
authority or responsibility available only to or in connection with an entity
organized in corporate form. The Trust shall be of the type referred to in
Section 1 of Chapter 182 of the Massachusetts General Laws and of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
- 27 -
<PAGE>
IN WITNESS WHEREOF, the undersigned Trustees, for themselves and their
respective successors and assigns, have executed one or more counterparts of
this Restated Agreement and Declaration of Trust under seal as of the day and
year first above written.
/s/ Robert H. Leshner
---------------------------
ROBERT H. LESHNER
/s/ G. William Rohde
---------------------------
G. WILLIAM ROHDE
/s/ H. Jerome Lerner
----------------------------
H. JEROME LERNER
/s/ Oscar P. Robertson
----------------------------
OSCAR P. ROBERTSON
/s/ James C. Krumme
----------------------------
JAMES C. KRUMME
/s/ Bruce J. Simpson
-----------------------------
BRUCE J. SIMPSON
-----------------------------
DAVID A. JONES
/s/ Gary W. Heldman
-----------------------------
GARY W. HELDMAN
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MIDWEST INCOME TRUST
AMENDMENT NO. 1 TO RESTATED AGREEMENT AND DECLARATION OF TRUST
The undersigned hereby certifies that he is the duly elected Secretary
of Midwest Income Trust and that pursuant to Section 4.1 of the Restated
Agreement and Declaration of Trust of Midwest Income Trust, the Trustees, at a
meeting at which a quorum was present on November 17, 1994, adopted the
following resolutions:
"RESOLVED, that a new series of shares of the Trust be and it hereby is
established and that such new series be and it hereby is designated the
"Global Bond Fund"; and
FURTHER RESOLVED, that the relative rights and preferences of the
Global Bond Fund series of shares shall be those rights and preferences
set forth in Section 4.2 of the Restated Agreement and Declaration of
Trust of Midwest Income Trust; and
FURTHER RESOLVED, that the officers of the Trust be and they hereby are
authorized and empowered to take any and all actions and to execute any
and all documents and instruments, which they or any one of them in his
sole discretion deem necessary, appropriate or desirable to implement
the foregoing resolutions."
The undersigned certifies that the actions to effect the foregoing
Amendment were duly taken in the manner provided by the Restated Agreement and
Declaration of Trust, that said Amendment is to be effective as of November 17,
1994 and that he is causing this Certificate to be signed and filed as provided
in Section 7.4 of the Restated Agreement and Declaration of Trust.
WITNESS my hand this 8th day of December, 1994.
/s/ John F. Splain
------------------------------
John F. Splain, Secretary
MIDWEST INCOME TRUST
Amendment No. 2 to Restated Agreement and Declaration of Trust
(Change of Name to Midwest Trust)
The undersigned hereby certifies that he is the duly elected Secretary
of Midwest Income Trust and that pursuant to Section 7.3 of the Restated
Agreement and Declaration of Trust dated August 26, 1993 the Trustees, by means
of an instrument in writing signed as of January 31, 1995 by a majority of
such Trustees, adopted the following resolutions:
"RESOLVED, that the name of Midwest Income Trust be changed
to Midwest Trust; and
FURTHER RESOLVED, that the Trust's Restated Agreement and
Declaration of Trust and other Trust documents and records, as
necessary or appropriate, be amended to reflect the change in
name of the Trust; and
FURTHER RESOLVED, that the officers of the Trust are hereby
authorized to take such further actions as necessary to effect
the purpose of these resolutions."
The undersigned certifies that the actions to effect the foregoing
Amendment were duly taken in the manner provided by the Restated Agreement and
Declaration of Trust, that said Amendment is to be effective February 1, 1995
and that he is causing this Certificate to be signed and filed as provided in
Section 7.4 of this Agreement.
Witness my hand this 31st day of January, 1995.
/s/ John F. Splain
-------------------------
John F. Splain, Secretary
BYLAWS
OF
MIDWEST INCOME TRUST
ARTICLE 1
Agreement and Declaration of Trust and Offices
1.1 Agreement and Declaration of Trust. These Bylaws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Midwest Income Trust, the Massaschusetts business
trust established by the Declaration of Trust (the "Trust").
1.2 Offices. The Trust shall maintain an office of record in Boston,
Massachusetts, which office may be the office of any resident agent appointed by
the Trust if located in that city. The Trust may maintain one or more other
offices, including its principal office, outside of Massachusetts, in such
cities as the Trustees may determine from time to time. Unless the Trustees
otherwise determine, the principal office of the Trust shall be located in
Cincinnati, Ohio.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice immediately after and
at the same place as the annual meeting of the shareholders.
2.2 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the President or the Treasurer or by two or more Trustees, sufficient notice
thereof being given to each Trustee by the Secretary or an Assistant Secretary
or by the officer or the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any
<PAGE>
Trustee if a written waiver of notice, executed by him or her before or after
the meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him or her. Neither notice of a meeting nor a waiver of a
notice need specify the purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
2.6 Action by Consent. Any action required or permitted to be taken at
any meeting of the Trustees or any committee thereof may be taken without a
meeting, if a written consent of such action is signed by a majority of the
Trustees then in office or a majority of the members of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Trustees or such committee.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including Vice
Presidents, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The President of the Trust shall be a Trustee and
may but need not be a shareholder; and any other officer may be but none need be
a Trustee or shareholder. Any two or more offices may be held by the same
person.
3.2 Election. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees at their first meeting following the annual
meeting of shareholders. Other officers, if any, may be elected or appointed by
the Trustees at said meeting or at any other time. Vacancies in any office may
be filled at any time.
- 2 -
<PAGE>
3.3 Tenure. The President, the Treasurer and the Secretary shall hold
office until the first meeting of the Trustees following the next annual meeting
of the shareholders and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these Bylaws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 President. Unless the Trustees otherwise provide, the President of
the Trustees, or in the absence of the President, any other Trustee chosen by
the Trustees, shall preside at all meetings of the shareholders and of the
Trustees. The President shall be the chief executive officer.
3.6 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.7 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 Resignations and Removals. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
or officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
- 3 -
<PAGE>
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these Bylaws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these Bylaws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its action to the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. The fiscal year of the Trust shall be fixed, and shall be
subject to change by the Trustees.
ARTICLE 7
Seal
7.1 General. If required by applicable law, the seal of the Trust shall
consist of a flat-faced die with the word "Massachusetts", together with the
name of the Trust and the year of its organization cut or engraved thereon, but,
unless otherwise required by the Trustees, the seal shall not be necessary to be
placed on, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
- 4 -
<PAGE>
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust, but shall state the substance of or make reference to the
provisions of Section 6.1 of the Declaration of Trust.
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him, in such form as shall be prescribed
from time to time by the Trustees. Such certificate shall be signed by the
President or a Vice President and by the Treasurer or Assistant Treasurer. Such
signatures may be facsimiles if the certificate is signed by a transfer agent,
or by a registrar, other than a Trustee, officer or employee of the Trust. In
case any officer who has signed or whose facsimile signature has been placed on
such certificate shall cease to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he were such
officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 Issuance of New Certificate to Pledgee. In the event certificates
have been issued, a pledgee of shares transferred as collateral security shall
be entitled to a new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured thereby. Such new
certificate shall express on its face that it is held as collateral security,
and the name of the pledgor shall be stated thereon, who alone shall be liable
as a shareholder, and entitled to vote thereon.
- 5 -
<PAGE>
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
Custodian
10.1 General. The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at least Five Hundred
Thousand ($500,000) Dollars as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such basis
as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 11
Dealings with Trustees and Officers
11.1 General. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which he is interested.
ARTICLE 12
Shareholders
12.1 Annual Meeting. The annual meeting of the shareholders of the
Trust shall be held on the third Thursday in January in each year, or such other
day as the Trustees shall select, at such time as the President or the Trustees
may fix in the notice of the meeting. If that day be a legal holiday at the
place where the meeting is to be held, the meeting shall be held on the mext
preceding day not a legal holiday at such place.
12.2 Record Dates. For the purpose of determining the shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a time, which shall be not more than 60
days before the date of any meeting of shareholders or the date for the payment
of any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such
- 6 -
<PAGE>
case only shareholders of record on such record date shall have such right,
notwithstanding any transfer of shares on the books of the Trust after the
record date; or without fixing such record date the Trustees may for any such
purposes close the register or transfer books for all or any part of such
period.
ARTICLE 13
Amendments to the Bylaws
13.1 General. These Bylaws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
- 7 -
MIDWEST INCOME TRUST
RESOLUTIONS OF BOARD OF TRUSTEES
AMENDING THE BYLAWS
"RESOLVED, that Section 2.1 of Article 2 of the Bylaws of Midwest Income Trust
be amended to read as follows:
2.1 Regular Meetings. Regular meetings of the Trustees may be held without call
or notice at such places and at such times as the Trustees may from time to time
determine, provided that notice of the first regular meeting following any such
determination shall be given to absent Trustees. A regular meeting of the
Trustees may be held without call or notice immediately after and at the same
place as any meeting of the shareholders.
FURTHER RESOLVED, that Section 3.2 of Article 3 of the Bylaws of Midwest Income
Trust be amended to read as follows:
3.2 Election. The President, the Treasurer and the Secretary shall be elected
annually by the Trustees. Other officers, if any, may be elected or appointed by
the Trustees at any time. Vacancies in any office may be filled at any time.
FURTHER RESOLVED, that Section 3.3 of Article 3 of the Bylaws of Midwest Income
Trust be amended to read as follows:
3.3 Tenure. The President, the Treasurer and the Secretary shall hold office for
one year and untiltheir respective successors are chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
FURTHER RESOLVED, that Section 12.1 of Article 12 of the Bylaws of Midwest
Income Trust be amended to read as follows:
12.1. Meetings. A meeting of the shareholders of the Trust shall be held
whenever called by the Trustees, whenever election of a Trustee or Trustees by
shareholders is required by the provisions of Section 16(a) of the Investment
Company Act of 1940 for that purpose or whenever otherwise required pursuant to
the Declaration of Trust. Any meeting shall be held on such day and at such time
as the President or the Trustees may fix in the notice of the meeting."
Dealer #________
COUNTRYWIDE INVESTMENTS, INC.
312 WALNUT STREET
CINCINNATI, OHIO 45202
800-543-8721
513-629-2000
DEALER'S AGREEMENT
Countrywide Investments, Inc. ("Underwriter") invites you, as a
selected dealer, to participate as principal in the distribution of shares (the
"Shares") of the mutual funds set forth on Schedule A to this Agreement (the
"Funds"), of which it is the exclusive underwriter. Underwriter agrees to sell
to you, subject to any limitations imposed by the Funds, Shares issued by the
Funds and to promptly confirm each sale to you. All sales will be made according
to the following terms:
1. All offerings of any of the Shares by you must be made at the public
offering prices, and shall be subject to the conditions of offering, set forth
in the then current Prospectus of the Funds and to the terms and conditions
herein set forth, and you agree to comply with all requirements applicable to
you of all applicable laws, including federal and state securities laws, the
rules and regulations of the Securities and Exchange Commission, and the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. (the
"NASD"), including Section 24 of the Rules of Fair Practice of the NASD. You
will not offer the Shares for sale in any state or other jurisdiction where they
are not qualified for sale under the Blue Sky Laws and regulations of such state
or jurisdiction, or where you are not qualified to act as a dealer. Upon
application to Underwriter, Underwriter will inform you as to the states or
other jurisdictions in which Underwriter believes the Shares may legally be
sold.
2. (a) You will receive a discount from the public offering
price ("concession") on all Shares purchased by you from Underwriter as
indicated on Schedule A, as it may be amended by Underwriter from time to time.
(b) In all transactions in open accounts in which you are
designated as Dealer of Record, you will receive the concessions as set forth on
Schedule A. You hereby authorize Underwriter to act as your agent in connection
with all transactions in open accounts in which you are designated as Dealer of
Record. All designations as Dealer of Record, and all authorizations of
Underwriter to act as your Agent pursuant thereto, shall cease upon the
termination of this Agreement or upon the investor's instructions to transfer
his open account to another Dealer of Record. No dealer concessions will be
allowed on purchases generating less than $1.00 in dealer concessions.
(c) As the exclusive underwriter of the Shares, Underwriter
reserves the privilege of revising the discounts specified on Schedule A at any
time by written notice.
3. Concessions will be paid to you at the address of your
principal office, as indicated below in your acceptance of this Agreement.
<PAGE>
4. Underwriter reserves the right to cancel this Agreement at any time
without notice if any Shares shall be offered for sale by you at less than the
then current public offering prices determined by, or for, the Funds.
5. All orders are subject to acceptance or rejection by Underwriter in
its sole discretion. The Underwriter reserves the right, in its discretion,
without notice, to suspend sales or withdraw the offering of Shares entirely.
6. Payment shall be made to the Funds and shall be received by its
Transfer Agent within three (3) business days after the acceptance of your order
or such shorter time as may be required by law. With respect to all Shares
ordered by you for which payment has not been received, you hereby assign and
pledge to Underwriter all of your right, title and interest in such Shares to
secure payment therefor. You appoint Underwriter as your agent to execute and
deliver all documents necessary to effectuate any of the transactions described
in this paragraph. If such payment is not received within the required time
period, Underwriter reserves the right, without notice, and at its option,
forthwith (a) to cancel the sale, (b) to sell the Shares ordered by you back to
the Funds, or (c) to assign your payment obligation, accompanied by all pledged
Shares, to any person. You agree that Underwriter may hold you responsible for
any loss, including loss of profit, suffered by the Funds, its Transfer Agent or
Underwriter, resulting from your failure to make payment within the required
time period.
7. No person is authorized to make any representations concerning
Shares of the Funds except those contained in the current applicable Prospectus
and Statement of Additional Information and in sales literature issued and
furnished by Underwriter supplemental to such Prospectus. Underwriter will
furnish additional copies of the current Prospectus and Statement of Additional
Information and such sales literature and other releases and information issued
by Underwriter in reasonable quantities upon request.
8. Under this Agreement, you act as principal and are not employed by
Underwriter as broker, agent or employee. You are not authorized to act for
Underwriter nor to make any representation on its behalf; and in purchasing or
selling Shares hereunder, you rely only upon the current Prospectus and
Statement of Additional Information furnished to you by Underwriter from time to
time and upon such written representations as may hereafter be made by
Underwriter to you over its signature.
9. You appoint the transfer agent for the Funds as your agent to
execute the purchase transactions of Shares in accordance with the terms and
provisions of any account, program, plan or service established or used by your
customers and to confirm each purchase to your customers on your behalf, and you
guarantee the legal capacity of your customers purchasing such Shares and any
co-owners of such Shares.
<PAGE>
10. You will (a) maintain all records required by law relating to
transactions in the Shares, and upon the request of Underwriter, or the request
of the Funds, promptly make such records available to Underwriter or to the
Funds as are requested, and (b) promptly notify Underwriter if you experience
any difficulty in maintaining the records required in the foregoing clause in an
accurate and complete manner. In addition, you will establish appropriate
procedures and reporting forms and schedules, approved by Underwriter and by the
Funds, to enable the parties hereto and the Funds to identify all accounts
opened and maintained by your customers.
11. Underwriter has adopted compliance standards, attached hereto as
Schedule B, as to when Class A and Class C Shares of the Dual Pricing Funds may
appropriately be sold to particular investors. You agree that all persons
associated with you will conform to such standards when selling Shares.
12. Each party hereto represents that it is presently, and, at all
times during the term of this Agreement, will be, a member in good standing of
the NASD and agrees to abide by all its Rules of Fair Practice including, but
not limited to, the following provisions:
(a) You shall not withhold placing customers' orders for any Shares so
as to profit yourself as a result of such withholding. You shall not purchase
any Shares from Underwriter other than for investment, except for the purpose of
covering purchase orders already received.
(b) All conditional orders received by Underwriter must be at a
specified definite price.
(c) If any Shares purchased by you are repurchased by the Funds (or by
Underwriter for the account of the Funds) or are tendered for redemption within
seven business days after confirmation of the original sale of such Shares (1)
you agree to forthwith refund to Underwriter the full concession allowed to you
on the original sale, such refund to be paid by Underwriter to the Funds, and
(2) Underwriter shall forthwith pay to the Funds that part of the discount
retained by Underwriter on the original sale. Notice will be given to you of any
such repurchase or redemption within ten days of the date on which the
repurchase or redemption request is made.
<PAGE>
(d) Neither Underwriter, as exclusive underwriter for the Funds, nor
you as principal, shall purchase any Shares from a record holder at a price
lower than the net asset value then quoted by, or for, the Funds. Nothing in
this sub-paragraph shall prevent you from selling Shares for the account of a
record holder to Underwriter or the Funds at the net asset value currently
quoted by, or for, the Funds and charging the investor a fair commission for
handling the transaction.
(e) You warrant on behalf of yourself and your registered
representatives and employees that any purchase of Shares at net asset value by
the same pursuant to the terms of the Prospectus of the applicable Fund is for
investment purposes only and not for purposes of resale. Shares so purchased may
be resold only to the Fund which issued them.
13. You agree that you will indemnify Underwriter, the Funds, the
Funds' transfer agent and the Funds' custodians and hold such persons harmless
from any claims or assertions relating to the lawfulness of your company's
participation in this Agreement and the transactions contemplated hereby or
relating to any activities of any persons or entities affiliated with your
company which are performed in connection with the discharge of your
responsibilities under this Agreement. If any such claims are asserted, the
indemnified parties shall have the right to engage in their own defense,
including the selection and engagement of legal counsel of their choosing, and
all costs of such defense shall be borne by you.
<PAGE>
14. This Agreement will automatically terminate in the event of its
assignment. Either party hereto may cancel this Agreement without penalty upon
ten days' written notice. This Agreement may also be terminated as to any Fund
at any time without penalty by the vote of a majority of the members of the
Board of Trustees of the terminating Fund who are not "interested persons" (as
such term is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the applicable Fund's Distribution
Expense Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 or
any agreement relating to such Plan, including this Agreement, or by a vote of a
majority of the outstanding voting securities of the terminating Fund on ten
days' written notice.
15. All communications to Underwriter should be sent to Countrywide
Investments, Inc., 312 Walnut Street, Cincinnati, Ohio 45202, or at such other
address as Underwriter may designate in writing. Any notice to you shall be duly
given if mailed or telegraphed to you at the address of your principal office,
as indicated below in your acceptance of this Agreement.
16. This Agreement supersedes any other agreement with you relating
to the offer and sale of the Shares, and relating to any other matter discussed
herein.
17. This Agreement shall be binding (i) upon placing your first order
with Underwriter for the purchase of Shares, or (ii) upon receipt by Underwriter
in Cincinnati, Ohio of a counterpart of this Agreement duly accepted and signed
by you, whichever shall occur first. This Agreement shall be construed in
accordance with the laws of the State of Ohio.
18. The undersigned, executing this Agreement on behalf of Dealer,
hereby warrants and represents that he is duly authorized to so execute this
Agreement on behalf of Dealer.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return all copies of this Agreement to the
Underwriter.
ACCEPTED BY DEALER
By:________________________________________
Authorized Signature
___________________________________________
Type or Print Name, Position
___________________________________________
Dealer Name
___________________________________________
Address
____________________________________________
Address
____________________________________________
Phone
_____________________________________________
Date
COUNTRYWIDE INVESTMENTS, INC.
By: __________________________________________________
_______________________________________________________
Date
<PAGE>
Schedule A
COUNTRYWIDE INVESTMENTS
COMMISSION SCHEDULE
Intermediate Bond Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
- -----------------------------------------------------------------
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
Equity Fund - Class A
Utility Fund - Class A
Growth/Value Fund
Aggressive Growth Fund
Ohio Insured Tax-Free Fund - Class A
Kentucky Tax-Free Fund
- ---------------------------------------------------------------
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
*As a percentage of offering price.
** Broker/Dealers are entitled to a commission of 75 basis points at the time
the investor purchases Class A shares at NAV in amounts totaling $1 million or
more. However, the investor is subject to a contingent deferred sales load of
75 basis points if a redemption occurs within one year of purchase.
See specific Fund prospectus for details.
<PAGE>
Equity Fund - Class C
Utility Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
The Funds will be offered to clients at net asset value. A commission of 1% of
the purchase amount of Class C shares will be paid to participating brokers at
the time of purchase. Purchases of Class C shares are subject to a contingent
deferred sales load, according to the following schedule:
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
-------------------- --------------------
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid quarterly beginning in
the thirteenth month.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any calendar quarter in
which the average daily balance of all accounts in Countrywide Investments
funds (including no-load money market funds) is less than $1,000,000.
FOR BROKER/DEALER USE ONLY
<PAGE>
Schedule B
POLICIES AND PROCEDURES
WITH RESPECT TO SALES
OF DUAL PRICING FUND
As certain Funds within Countrywide Investments (the "Dual Pricing
Funds") offer two classes of Shares subject to different levels of front-end
sales charges, it is important for an investor not only to choose the Fund that
best suits his investment objectives, but also to choose the sales financing
method which best suits his particular situation. To assist investors in these
decisions, we are instituting the following policy:
1. Any purchase order for $1 million or more must be for Class A
Shares.
2. Any purchase order for $100,000 but less than $1 million is
subject to approval by a registered principal of the
Underwriter, who must approve the purchase order for either
Class A Shares or Class C Shares in light of the relevant
facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold the
Shares; and
(c) any other relevant circumstances, such as the
availability of purchases under a Letter of Intent.
3. Any order to exchange Class A Shares of a Dual Pricing Fund
(or Shares of another Fund having a maximum sales load equal
to or greater than Class A Shares of the Dual Pricing Funds)
for Shares of another Dual Pricing Fund will be for Class A
Shares only. Class C Shares of a Dual Pricing Fund may be
exchanged for either Class A or Class C Shares of another Dual
Pricing Fund, provided that an exchange of Class C Shares for
Class A Shares is subject to approval by a registered
principal of Underwriter, who must approve the exchange in
light of the relevant facts and circumstances.
There are instances when one financing method may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales charge on Class A Shares may determine that
payment of such a reduced front-end sales charge is superior to payment of the
higher ongoing distribution fee applicable to Class C Shares. On the other hand,
an investor whose order would not qualify for such a discount may wish to pay a
lower sales charge and have more of his funds invested in Class C Shares. If
such an investor anticipates that he will redeem his Shares within a short
period of time, the investor may, depending on the amount of his purchase,
choose to bear higher distribution expenses than if he had purchased Class A
Shares.
<PAGE>
In addition, investors who intend to hold their Shares for a
significantly long time may wish to purchase Class A Shares in order to avoid
the higher ongoing distribution expenses of Class C Shares.
The appropriate supervisor must ensure that all employees receiving
investor inquiries about the purchase of Shares of Dual Pricing Funds advise the
investor of the available financing methods offered by mutual funds, and the
impact of choosing one method over another. It may be appropriate for the
supervisor to discuss the purchase with the investor.
This policy is effective immediately with respect to any order for the
purchase of Shares of all Dual Pricing Funds. Questions relating to this policy
should be directed to Sharon Karp, Vice President of the Underwriter, at
513/629-2000.
CUSTODY AGREEMENT
This AGREEMENT, dated as of November 16, 1990, by and between MIDWEST
INCOME TRUST (the "Trust"), a business trust organized under the laws of The
Commonwealth of Massachusetts, acting with respect to the SHORT TERM GOVERNMENT
FUND, the INTERMEDIATE TERM GOVERNMENT FUND, and the INSTITUTIONAL GOVERNMENT
FUND (individually, a "Fund" and, collectively, the "Funds"), each of them a
series of the Trust and each of them operated and administered by the Trust, and
THE FIFTH THIRD BANK, a state of Ohio chartered bank (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Trust desires that the Funds' Securities and cash be held
and administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Funds and named in Exhibit A hereto or in
such resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to time
serving under the Trust's Agreement and Declaration of Trust, as from time to
time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Trust computes
the net asset value of Shares of any Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers,
Inc.
- 2 -
<PAGE>
1.6 "Officer" shall mean the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Trust.
1.7 "Oral Instructions" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Trust shall cause
all Oral Instructions to be confirmed by Written Instructions prior to the end
of the next Business Day. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a transaction, it shall
in no way affect the validity of the transaction or the authorization thereof by
the Trust. If Oral Instructions vary from the Written Instructions which purport
to confirm them, the Custodian shall notify the Trust of such variance but such
Oral Instructions will govern unless the Custodian has not yet acted.
1.8 "Fund Custody Account" shall mean any of the accounts in the name
of the Trust, which are provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
- 3 -
<PAGE>
1.10 "Securities Depository" shall mean The Depository Trust Company
and (provided that Custodian shall have received a copy of a resolution of the
Board of Trustees, certified by an Officer, specifically approving the use of
such clearing agency as a depository for the Funds) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations, and any certificates, receipts, warrants or other instruments
or documents representing rights to receive, purchase or subscribe for the same,
or evidencing or representing any other rights or interests therein, or any
similar property or assets that the Custodian has the facilities to clear and to
service.
1.12 "Shares" shall mean, with respect to a Fund, the units of
beneficial interest issued by the Trust on account of such Fund.
- 4 -
<PAGE>
1.13 "Written Instructions" shall mean (i) written communications
actually received by the Custodian and signed by two Authorized Persons, or (ii)
communications by telex or any other such system from two persons reasonably
believed by the Custodian to be Authorized Persons, or (iii) communications
between electro-mechanical or electronic devices provided that the use of such
devices and the procedures for the use thereof shall have been approved by
resolutions of the Board of Trustees, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.
ARTICLE II
2.1 Appointment. The Trust hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Trust at any time during the period of this Agreement.
2.2 Acceptance. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of a Fund (other than Securities
- 5 -
<PAGE>
maintained in a Securities Depository or Book-Entry System) shall be physically
segregated from other Securities and non-cash property in the possession of the
Custodian (including the Securities and non-cash property of the other Funds)
and shall be identified as subject to this Agreement.
3.2 Fund Custody Accounts. As to each Fund, the Custodian shall open
and maintain in its trust department a custody account in the name of the Trust
coupled with the name of such Fund, subject only to draft or order of the
Custodian, in which the Custodian shall enter and carry all Securities, cash and
other assets of such Fund which are delivered to it.
3.3 Appointment of Agents. (a) In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company, which has
been approved by the Board of Trustees and is qualified to act as a custodian
under the 1940 Act, as primary sub-custodian to hold Securities and cash of the
Funds and to carry out such other provisions of this Agreement as it may
determine, and may also open and maintain one or more banking accounts with such
a bank or trust company (any such accounts to be in the name of the Custodian
and subject only to its draft or order), provided, however, that the appointment
of any such agent or opening and maintenance of any such accounts shall be at
the Custodian's expense and shall not relieve the Custodian of any of its
obligations or liabilities under this Agreement.
- 6 -
<PAGE>
(b) Upon receipt of Written Instructions to do so, Custodian shall
appoint as a non-primary sub-custodian such domestic bank or trust company as is
named therein, provided that such bank or trust company is qualified to act as a
custodian under the 1940 Act and provided that the appointment of any such agent
or opening and maintenance of any such accounts shall be at the Funds' expense.
The Funds shall reimburse the Custodian for all costs incurred by the Custodian
in connection with any such accounts.
3.4 Delivery of Assets to Custodian. The Trust shall deliver, or cause
to be delivered, to the Custodian all of the Funds' Securities, cash and other
assets, including (a) all payments of income, payments or principal and capital
distributions received by the Funds with respect to such Securities, cash or
other assets owned by the Funds at any time during the period of this Agreement,
and (b) all cash received by the Funds for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Trust shall
deliver to the Custodian a resolution of the
- 7 -
<PAGE>
Board of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to deposit in
such Securities Depository or Book-Entry System all Securities
eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent
possible and practical in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of collateral
consisting of Securities. So long as such Securities
Depository or Book-Entry System shall continue to be employed
for the deposit of Securities of the Funds, the Trust shall
annually re-adopt such resolution and deliver a copy thereof,
certified by an Officer, to the Custodian.
(b) Securities of the Funds kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book- Entry System or
Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for
customers.
(c) The records of the Custodian with respect to Securities of a
Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry, identify such Securities as
belonging to such Fund.
- 8 -
<PAGE>
(d) If Securities purchased by a Fund are to be held in a
Book-Entry System or Securities Depository, the
Custodian shall pay for such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been
transferred to the Depository Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of
such Fund. If Securities sold by a Fund are held in a
Book-Entry System or Securities Depository, the
Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities Depository that payment for such Securities
has been transferred to the Depository Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of such Fund.
(e) The Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry System of
Securities Depository in which Securities of the Funds are
kept) on the internal accounting controls and procedures for
safeguarding Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
- 9 -
<PAGE>
Trust for any loss or damage to a Fund resulting (i) from the
use of a Book-Entry System or Securities Depository by reason
of any negligence or willful misconduct on the part of
Custodian or any sub-custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from
failure of Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book- Entry
System or Securities Depository. At its election, the Trust
shall be subrogated to the rights of the Custodian with
respect to any claim against a Book-Entry System or Securities
Depository or any other person from any loss or damage to the
Funds arising from the use of such Book-Entry System or
Securities Depository, if and to the extent that the Funds
have not been made whole for any such loss or damage.
3.6 Disbursement of Moneys from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only (i) in
the case of Securities (other than options on Securities,
futures contracts and options on futures contracts), against
the delivery to the Custodian (or
- 10 -
<PAGE>
any sub-custodian appointed pursuant to Section 3.3 above) of
such Securities registered as provided in Section 3.9 below or
in proper form for transfer, or if the purchase of such
Securities is effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set
forth in Section 3.5 above; (ii) in the case of options on
Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of
futures contracts and options on futures contracts, against
delivery to the Custodian (or such sub-custodian) of evidence
of title thereto in favor of the Fund or any nominee referred
to in Section 3.9 below; and (iv) in the case of repurchase or
reverse repurchase agreements entered into between the Trust
and a bank which is a member of the Federal Reserve System or
between the Trust and a primary dealer in U.S. Government
securities, against delivery of the purchased Securities
either in certificate form or through an entry crediting the
Custodian's account at a Book-Entry System or Securities
Depository with such Securities;
- 11 -
<PAGE>
(b) In connection with the conversion, exchange or surrender, as
set forth in Section 3.7(f) below, of Securities owned by the
Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: interest; taxes;
administration, investment advisory, accounting,
auditing, transfer agent, custodian, trustee and legal
fees; and other operating expenses of the Fund; in all
cases, whether or not such expenses are to be in whole
or in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of
the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or
other arrangements in connection with transactions by
the Fund;
- 12 -
<PAGE>
(g) For transfer in accordance with the provision of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a term
of one year or less; and
(i) For any other proper purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Fund Custody Account but only in the following cases:
- 13 -
<PAGE>
(a) Upon the sale of Securities for the account of the Fund but
only against receipt of payment therefor in cash, by certified
or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of
Section 3.5 above;
(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided
that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer
into the name of the Fund, the Custodian or any sub-
custodian appointed pursuant to Section 3.3 above, or
of any nominee or nominees of any of the foregoing, or
(ii) for exchange for a different number of
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or
readjustment of the issuer of such Securities, or
- 14 -
<PAGE>
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement, including
surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts;
provided that, in any such case, the new Securities and cash,
if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Trust, but only
against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Trust;
- 15 -
<PAGE>
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of
the NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or
other arrangements in connection with transactions by
the Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon
receipt, in addition to Proper Instructions, of a copy
of a resolution of the Board of Trustees, certified by
an Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to
whom delivery of such Securities shall be made.
- 16 -
<PAGE>
3.8 Actions Not Requiring Proper Instructions. Unless
otherwise instructed by the Trust, the Custodian shall with respect to all
Securities held for a Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled either
by law or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect
on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise
become payable;
(c) Endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the
IRS;
(f) Hold for the Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
- 17 -
<PAGE>
Securities Depository, all rights and similar
securities issued with respect to Securities of the
Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securites and assets of the
Fund.
3.9 Registration and Transfer of Securities. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for a Fund may
be registered in the name of such Fund, the Custodian, or any sub-custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Trust shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees hereinabove referred
to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or
- 18 -
<PAGE>
other property held for the Funds, including (i) journals or other records of
original entry containing an itemized daily record in detail of all receipts and
deliveries of Securities and all receipts and disbursements of cash; (ii)
ledgers (or other records) reflecting (A) Securities in transfer, (B) Securities
in physical possession, (C) monies and Securities borrowed and monies and
Securities loaned (together with a record of the collateral therefor and
substitutions of such collateral), (D) dividends and interest received, and (E)
dividends receivable and interest accrued; and (iii) canceled checks and bank
records related thereto. The Custodian shall keep such other books and records
of the Funds as the Trust shall reasonably request, or as may be required by the
1940 Act, including, but not limited to, Section 31 of the 1940 Act and Rule
31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
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3.11 Fund Reports by Custodian. The Custodian shall furnish the Trust
with a daily activity statement by Fund and a summary of all transfers to or
from each Fund Custody Account on the day following such transfers. At least
monthly and from time to time, the Custodian shall furnish the Trust with a
detailed statement, by Fund, of the Securities and moneys held for the Funds
under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Trust
with such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of a Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy soliciting materials and
all notices relating to such Securities.
3.14 Information on Corporate Actions. The Custodian shall promptly
transmit to the Trust all written information received by the Custodian from
issuers of Securities being held for the Funds or from agents of such issuers.
The Custodian shall also promptly notify the Trust of corporate actions, limited
to those
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Securities registered in nominee name and to those Securities held at a
Securities Depository or sub-custodian acting as agent for the Custodian, if the
notice of such corporate actions is published by the Financial Daily Card
Service, J. J. Kenny Called Bond Service or Depository Trust Company. With
respect to tender or exchange offers, the Custodian shall promptly transmit to
the Trust all written information received by the Custodian from issuers of the
Securities whose tender or exchange is sought and from the party (or its agents)
making the tender or exchange offer. If the Trust desires to take action with
respect to any tender offer, exchange offer or other similar transaction, the
Trust shall notify the Custodian at least five Business Days prior to the date
on which the Custodian is to take such action. The Trust will provide or cause
to be provided to the Custodian all relevant information for any Security which
has unique put/option provisions at least five Business Days prior to the
beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUNDS
4.1 Purchase of Securities. Promptly upon each purchase of Securities
for a Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the Fund for which the purchase was made, (b) the name of the issuer or
writer of such Securities, and the title or other description thereof, (c) the
number of
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shares, principal amount (and accrued interest, if any) or other units
purchased, (d) the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the name of the
person to whom such amount is payable. The Custodian shall upon receipt of such
Securities purchased by a Fund pay out of the moneys held for the account of
such Fund the total amount specified in such Written Instructions to the person
named therein. The Custodian shall not be under any obligation to pay out moneys
to cover the cost of a purchase of Securities for a Fund, if in the relevant
Fund Custody Account there is insufficient cash available to the Fund for which
such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of Securities
for a Fund is made by the Custodian in advance of receipt of the Securities
purchased but in the absence of specified Written Instructions to so pay in
advance, the Custodian shall be liable to the Fund for such Securities to the
same extent as if the Securities had been received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the Fund for which the sale was made, (b) the name of the issuer or writer of
such Securities, and the title or other description thereof, (c) the number of
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shares, principal amount (and accrued interest, if any), or other units sold,
(d) the date of sale and settlement, (e) the sale price per unit, (f) the total
amount payable upon such sale, and (g) the person to whom such Securities are to
be delivered. Upon receipt of the total amount payable to the Fund as specified
in such Written Instructions, the Custodian shall deliver such Securities to the
person specified in such Written Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be satisfactory to it, and
may deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund for which such Securities
were delivered shall bear the risk that final payment for such Securities may
not be made or that such Securities may be returned or otherwise held or
disposed of by or through the person to whom they were delivered, and the
Custodian shall have no liability for any for the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from
time to time, the Custodian may credit the relevant Fund Custody Account, prior
to actual receipt of final
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payment thereof, with (i) proceeds from the sale of Securities which it has been
instructed to deliver against payment, (ii) proceeds from the redemption of
Securities or other assets of the Fund, and (iii) income from cash, Securities
or other assets of the Fund. Any such credit shall be conditional upon actual
receipt by Custodian of final payment and may be reversed if final payment is
not actually received in full. The Custodian may, in its sole discretion and
from time to time, permit a Fund to use funds so credited to its Fund Custody
Account in anticipation of actual receipt of final payment. Any such funds shall
be repayable immediately upon demand made by the Custodian at any time prior to
the actual receipt of all final payments in anticipation of which funds were
credited to the Fund Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its
sole discretion and from time to time, advance funds to the Trust to facilitate
the settlement of a Fund's transactions in its Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 Transfer of Funds. From such funds as may be available for the
purpose in the relevant Fund Custody Account, and upon receipt of Proper
Instructions specifying that the funds are
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required to redeem Shares of a Fund, the Custodian shall wire each amount
specified in such Proper Instructions to or through such bank as the Trust may
designate with respect to such amount in such Proper Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be under
any obligation to effect payment or distribution by any bank designated in
Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD
(or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered
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<PAGE>
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by the Fund or in
connection with financial futures contracts (or options
thereon) purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities
made by the Fund,
(d) for purposes of compliance by the Fund with requirements under
the 1940 Act for the maintenance of segregated accounts by
registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees, certified by an Officer,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
Each segregated account established under this Article VI shall be
established and maintained for a single Fund only. All
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Proper Instructions relating to a segregated account shall specify the Fund
involved.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust or either Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Trust of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Trust or a Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or by-laws, or its investment objectives and policies
as then in effect.
7.2 Actual Collection Required. The Custodian shall not be
liable for, or considered to be the custodian of, any cash
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belonging to a Fund or any money represented by a check, draft or other
instrument for the payment of money, until the Custodian or its agents actually
receive such cash or collect on such instrument.
7.3 No Responsibility for Title, etc. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for a Fund if such Securities are in
default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
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7.7 Co-operation. The Custodian shall cooperate with and supply
necessary information, by Fund, to the entity or entities appointed by the Trust
to keep the books of account of the Funds and/or compute the value of the assets
of the Funds. The Custodian shall take all such reasonable actions as the Trust
may from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's reports on Form N-1A and Form N-SAR and any other reports required by
the Securities and Exchange Commission, and (b) the fulfillment by the Trust of
any other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian, from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are
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<PAGE>
registered in the name of any such nominee, or (b) from any action or inaction
by the Custodian or such sub-custodian (i) at the request or direction of or in
reliance on the advice of the Trust, or (ii) upon Proper Instructions, or (c)
generally, from the performance of its obligations under this Agreement or any
sub-custody agreement with a sub-custodian appointed pursuant to Section 3.3
above, provided that neither the Custodian nor any such sub-custodian shall be
indemnified and held harmless from and against any such loss, damage, cost,
expense, liability or claim arising from the Custodian's or such sub-custodian's
negligence, bad faith or willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.3 Security. If the Custodian advances cash or Securities to a Fund
for any purpose, either at the Trust's request or as otherwise contemplated in
this Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
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<PAGE>
(except such as may arise from its or its nominee's negligence, bad faith or
willful misconduct), then, in any such event, any property at any time held for
the account of such Fund shall be security therefor, and should such Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize available cash of such Fund and to dispose of other assets of such Fund
to the extent necessary to obtain reimbursement or indemnification.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against
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the Funds in favor of any other customer of the Custodian in making computer
time and personnel available to input or process the transactions contemplated
by this Agreement and (ii) shall use its best efforts to ameliorate the effects
of any such failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of its
execution and shall continue in full force and effect for a period of two years
(the "Initial Term") and thereafter until terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement
after the Initial Term by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than sixty (60)
days after the date of the giving of such notice. If a successor custodian shall
have been appointed by the Board of Trustees, the Custodian shall, upon receipt
of a notice of acceptance by the successor custodian, on such specified date of
termination (a) deliver directly to the successor custodian all Securities
(other than Securities held in a Book-Entry System or Securities Depository) and
cash then owned by the Funds and held by the Custodian as custodian, and (b)
transfer any Securities held in a Book-Entry System or Securities Depository to
an account of or for the benefit of the Funds at
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the successor custodian, provided that the Trust shall have paid to the
Custodian all fees, expenses and other amounts to the payment or reimbursement
of which it shall then be entitled. Upon such delivery and transfer, the
Custodian shall be relieved of all obligations under this Agreement. The Trust
may at any time immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by regulatory
authorities or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian
is not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Funds at such bank or trust company all Securities of the
Funds held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and
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the Custodian shall be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Trust and the Custodian. The fees and other charges in
effect on the date hereof and applicable to the Funds are set forth in Exhibit B
attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust, as from time to time amended. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind
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only the trust property of the Trust as provided in the above-mentioned
Agreement and Declaration of Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Trust:
Midwest Income Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Telephone: (513) 629-2000
Facsimile: (513) 629-2041
To Custodian:
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Mutual Fund-Operations
Telephone: (513) 579-5672
Facsimile: (513) 762-8698
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
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ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for a Fund and such other printed matter as
merely identifies Custodian as custodian for one or more Funds. The Trust shall
submit printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 No Waiver. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
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14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on
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its behalf by its representatives thereunto duly authorized, all as of the day
and year first above written.
ATTEST: MIDWEST INCOME TRUST
/s/ John F. Splain By: /s/ Robert H. Leshner
- ---------------------------- --------------------------------
Robert H. Leshner, President
ATTEST: THE FIFTH THIRD BANK
/s/ Amanda Grimes By: /s/ Yvonne M. Smaby
- ---------------------------- --------------------------------
Administrative Officer Trust Officer
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EXHIBIT A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer each Fund Custody Account.
Name Signature
Robert H. Leshner /s/ Robert H. Leshner
-----------------------------
Robert G. Dorsey /s/ Robert G. Dorsey
-----------------------------
John F. Splain /s/ John Splain
------------------------------
Mark J. Seger /s/ Mark J. Seger
------------------------------
M. Kathleen Leugers /s/ M. K. Leugers
------------------------------
Maryellen Peretzky /s/ Maryellen Peretzky
------------------------------
Gary Goldschmidt /s/ Gary Goldschmidt
------------------------------
Terrie Wiedenheft /s/ Terrie A. Wiedenheft
-------------------------------
*John J. Goetz /s/ John Goetz
-------------------------------
*Susan Flischel /s/ Susan Flischel
-------------------------------
*Scott Weston /s/ Scott D. Weston
-------------------------------
* Authority restricted; does not include: (i) authority to sign checks on
Fund Custody Accounts or make other withdrawals or distributions of
Fund monies or (ii) such other authority as may be withheld or limited
by Written Instructions signed by two Officers of the Trust and
delivered to the Custodian.
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EXHIBIT B
SCHEDULE OF FEES
CUSTODY
Basic Fee
Asset Value Fee 0.5 Basis Points
Minimum $1,500.00
Maximum $5,000.00
Transaction Fees
DTC Eligible Trades $10.00
FED Eligible Trades $10.00
Money Market Trades $44.00
(includes purchase & maturity)
Repurchase Agreements $15.00
(includes purchase & maturity)
Third Party Repurchase Agreements $15.00
(includes purchase & maturity)
Physical Trades $22.00
Amortized Security Trades $45.00
Options $35.00
Principal & Interest Payments $5.00
Wires & Check Disbursements $7.00
The cost of supplies, postage, taxes, insurance premiums, extraordinary services
and of non-primary agents will be added to the regular service charges.
THESE FEES AND CHARGES WILL REMAIN IN EFFECT FOR THE INITIAL TERM OF THE
AGREEMENT.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public acountants, we hereby consent ot the use of our
report dated October 30, 1998 and to all references to our Firm included in or
made a part of this Post-Effective Amendment No. 68.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
November 25, 1998
Dealer #______
COUNTRYWIDE INVESTMENTS, INC.
312 WALNUT STREET
CINCINNATI, OHIO 45202
800-543-8721
513-629-2000
SALES AGREEMENT
MONEY MARKET FUNDS
Countrywide Investments is a group of investment companies, organized as Trusts,
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"). All of the Trusts have agreed to the terms hereof. The Trusts are
presently offering, or intend to offer, shares of beneficial interest (the
"Shares") in money market funds (the "Funds") to the public in accordance with
the terms and conditions contained in the Prospectuses of the Trusts. The term
"Prospectuses" as used herein refers to the prospectuses on file with the
Securities and Exchange Commission which are part of the most recent
registration statements effective from time to time under the Securities Act of
1933, as amended (the "Securities Act"). We hereby offer to appoint you to act
as a sales agent of the Trusts in connection with the offering of Shares to the
public on the following terms and conditions:
1. In all sales of the Shares to the public, you shall act as agent for the
Trust, and in no transaction shall you act as dealer for your own account.
2. As agent for the Trusts, you are hereby authorized to (i) place orders
directly with the Trusts' Transfer Agent(s) for the purchases of the Shares and
(ii) tender the Trusts' Shares to the Trusts' Transfer Agent(s) for redemption,
in each case subject to the terms and conditions set forth in the applicable
Prospectus and the operating procedures and policies established by the
applicable Trust.
3. No person is authorized to make any representations concerning the Trusts,
or the Shares, except those contained in the Prospectuses and in such printed
information as the Trusts may subsequently prepare. You are specifically
authorized to distribute the Trusts' Prospectuses and sales material received
from the Trusts or the Trusts' Underwriter. No person is authorized to
distribute any other sales material relating to the Trusts or the Funds without
the prior approval of the Trusts.
4. As agent for the Trusts, and upon the request of the Trusts, you will
undertake from time to time distribution efforts to promote the sale of the
Shares. Also, as agent for the Trusts, you will undertake shareholder servicing
activities for customers of yours who have purchased the Shares and who use your
facilities to communicate with the Trusts or to effect redemptions or additional
purchases of the Shares. As compensation for such services, you will be paid by
the appropriate Trust, to the extent permitted by the Investment Company Act and
the rules promulgated thereunder, or by the applicable Trust's Underwriter, such
fees as are set forth in Schedule A hereto. All compensation paid for services
performed by you, pursuant to the terms of this Agreement, will be paid to you
at the address of your principal office, as indicated in your confirmation and
acceptance of this Agreement.
<PAGE>
5. You agree to comply with the provisions contained in all applicable
securities laws governing the distribution of Prospectuses to persons to whom
you offer the Shares as agent for the Trusts. You further agree to deliver,
upon the request of a Trust, copies of any amended Prospectuses to purchasers
whose Shares you are holding as record owner and to deliver to such persons
materials of the appropriate Trust. The Trusts will conduct their businesses
in accordance with the procedures set forth in, and the requirements of, the
Prospectuses, including the prompt execution of orders for the purchase and
redemption of the Shares and the servicing of their shareholder accounts.
6. You represent that you are, and will be at all times relevant hereto, a
member in good standing of the National Association of Securities Dealers, Inc.
and you further represent and warrant that you are and will be at all times
relevant hereto a broker-dealer properly registered and qualified under all
applicable federal, state and local laws to engage in the business and
transactions described in this Agreement. You agree to comply with all
requirements applicable to you of all applicable laws, including federal and
state securities laws, the Rules and Regulations of the Securities and Exchange
Commission and the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. You agree that you will not offer the Shares to persons
in any jurisdiction in which the Shares are not registered for sale and in
which you may not lawfully make such offer due to the fact that you have not
registered under, or are not exempt from, the applicable registration or
licensing requirements of such jurisdiction. You further agree that you will
maintain all records required by applicable law relating to transactions
involving purchases or redemptions of the Shares by you or your customers.
7.The Trusts have each registered an indefinite number of Shares under the
Securities Act. Upon application to us, the Trusts will inform you as to the
states or other jurisdictions in which they believe a Fund's Shares have been
qualified for sale under, or are exempt from, the requirements of the respective
securities laws of such state, but the Trusts assume no responsibility or
obligation as to your right to sell any of the Shares in any jurisdiction.
8.The Trusts shall have full authority to take such action as they may deem
advisable in respect to all matters pertaining to the offering of the Shares,
including the right in their discretion, without notice, to suspend sales or
withdraw the offering of the Shares entirely with regard to one or more of the
Funds. The Trusts will promptly notify you of any such actions.
<PAGE>
9.You will (i) maintain all records required by law relating to transactions in
the Shares and, upon request by any of the Trusts, promptly make such records
available as the Trusts may reasonably request in connection with their
operations; and (ii) promptly notify the Trusts if you experience any difficulty
in maintaining the records described in the foregoing clause in an accurate and
complete manner. In addition, you and the Trusts will establish appropriate
procedures and reporting forms and schedules to enable the parties hereto to
identify all accounts opened and maintained by your customers. At all times
during reasonable hours of the Trusts, you will have the right, upon 48 hours
prior written notice to the Trusts, to conduct appropriate audits or reviews of
such records and to confirm the reports delivered by the Trusts to you or your
customers. The cost of such audits or reviews will be borne solely by you or
your customers.
10.The Trusts shall be under no liability to you and you shall be under no
liability to the Trusts except for lack of good faith, for negligence and for
obligations expressly assumed by either party hereunder. Nothing contained in
this Agreement is intended to operate as a waiver by the Trusts or by you of
compliance with any provision of the Securities Act, the Securities Exchange Act
of 1934, the Investment Company Act or the Rules and Regulations promulgated by
the Securities and Exchange Commission under these Acts.
11.This Agreement will automatically terminate in the event of its assignment.
This Agreement may be terminated as to any Trust or by that Trust's Underwriter
or by you, without penalty, upon ten (10) days' prior written notice to the
other parties. This Agreement may also be terminated as to any Trust at any time
without penalty by the vote of a majority of the members of the Board of
Trustees of the terminating Trust who are not "interested persons" (as such term
is defined in the Investment Company Act) and who have no direct or indirect
financial interest in the applicable Trust's Distribution Expense Plan pursuant
to Rule 12b-1 under the Investment Company Act or any agreement relating to such
Plan, including this Agreement, or by a vote of a majority of the outstanding
voting securities of each series of the terminating Trust on ten days' written
notice.
12.All communications to us should be sent to Countrywide Investments, Inc. 312
Walnut Street, Cincinnati, Ohio 45202, or at such other address as we may
designate in writing. Any notice to you shall be duly given if mailed or
telegraphed to you at the address of your principal office as specified by you
below in your confirmation and acceptance of this Agreement.
13.The obligations of the Trusts under this Agreement shall not be binding upon
any of the Trustees, shareholders, nominees, officers, agents or employees of
the Trusts personally, but shall bind only the property of the Trusts, as
provided in Trust's Agreement and Declaration of Trust. The execution and
delivery of this Agreement has been authorized by the Trustees and signed by a
duly authorized officer of the Trusts acting as such, and neither the
authorization by the Trustees nor the execution and delivery of this Agreement
by such officer of the Trusts shall be deemed to have been made by any of them
individually, but shall bind only the property of the Trusts as provided in
their Agreement and Declaration of Trust.
<PAGE>
14."Trusts" as used herein shall refer to all Trusts offering series of shares
in the no-load mutual funds presently in existence and hereafter organized as
part of Countrywide Investments unless any such Trust is specifically excluded
by a separate writing signed by an authorized officer of such Trust electing not
to be covered by this Agreement.
15.You will indemnify the Trusts and the Underwriter, transfer agent and
custodian of each Trust and hold them harmless from any claims or assertions
relating to the lawfulness of your company's participation in this Agreement and
the transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with your company which are performed in
connection with the discharge of your responsibilities under this Agreement. If
any such claims are asserted, the indemnified parties shall have the right to
engage in their own defense, including the selection and engagement of legal
counsel of their choosing and all costs of such defense shall be borne by you.
16.This Agreement supersedes any other agreement with you relating to the offer
and sale of any of the Trusts' Shares, and relating to any other matter
discussed herein.
17.This Agreement shall be binding upon receipt by the Trusts in Cincinnati,
Ohio of a counterpart hereof duly accepted and signed by you, and shall be
construed in accordance with the laws of the State of Ohio.
18.The undersigned executing this Agreement on behalf of Sales Agent, hereby
warrants and represents that he is duly authorized to so execute this Agreement
on behalf of Sales Agent.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return all copies of this Agreement to Countrywide Investments,
Inc.
<PAGE>
ACCEPTED BY DEALER
By:_______________________________________
Authorized Signature
___________________________________________
Type or Print Name, Position
___________________________________________
Name
___________________________________________
Address
___________________________________________
Address
___________________________________________
Phone
___________________________________________
Date
ON BEHALF OF EACH TRUST OFFERING
SHARES IN THE MONEY MARKET FUNDS OF
COUNTRYWIDE INVESTMENTS
By:________________________________________
Authorized Officer of "Trusts"
___________________________________________
Date
ON BEHALF OF THE UNDERWRITER TO THE
TRUSTS OFFERING SHARES OF MONEY
MARKET FUNDS OF COUNTRYWIDE INVESTMENTS
By:___________________________________________
Authorized Officer of Underwriter to the "Trusts"
______________________________________________
Date
<PAGE>
Schedule A
12b-1 PAYMENT SCHEDULE
You will receive a trailing commission of .25% per annum (payable quarterly) of
the average balance during each calendar quarter of all accounts in the
following Countrywide Investments money market funds:
Short Term Government Income Fund
Money Market Fund
Tax-Free Money Fund
Ohio Tax-Free Money Fund
California Tax-Free Money Fund
Florida Tax-Free Money Fund
However, no trailing commission will be paid to a dealer for any calendar
quarter in which the average daily balance of all accounts in Countrywide
Investments Funds (including load funds) is less than $1,000,000.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> COUNTRYWIDE INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> SHORT TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 102,305,501
<INVESTMENTS-AT-VALUE> 102,305,501
<RECEIVABLES> 251,802
<ASSETS-OTHER> 974
<OTHER-ITEMS-ASSETS> 12,996
<TOTAL-ASSETS> 102,571,273
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89,885
<TOTAL-LIABILITIES> 89,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102,481,388
<SHARES-COMMON-STOCK> 102,481,388
<SHARES-COMMON-PRIOR> 96,796,682
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 102,481,388
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,356,492
<OTHER-INCOME> 0
<EXPENSES-NET> 881,358
<NET-INVESTMENT-INCOME> 4,475,134
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,475,134
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,475,134
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 301,198,180
<NUMBER-OF-SHARES-REDEEMED> 299,865,173
<SHARES-REINVESTED> 4,351,699
<NET-CHANGE-IN-ASSETS> 5,684,706
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 459,485
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 902,927
<AVERAGE-NET-ASSETS> 96,563,980
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .046
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .046
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> COUNTRYWIDE INVESTMENT TRUST
<SERIES>
<NUMBER> 3
<NAME> INTERMEDIATE TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 47,319,081
<INVESTMENTS-AT-VALUE> 50,529,107
<RECEIVABLES> 738,362
<ASSETS-OTHER> 511
<OTHER-ITEMS-ASSETS> 8,964
<TOTAL-ASSETS> 51,276,944
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 108,923
<TOTAL-LIABILITIES> 108,923
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,702,457
<SHARES-COMMON-STOCK> 4,588,497
<SHARES-COMMON-PRIOR> 4,969,960
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,744,462)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,210,026
<NET-ASSETS> 51,168,021
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,342,596
<OTHER-INCOME> 0
<EXPENSES-NET> 498,854
<NET-INVESTMENT-INCOME> 2,843,742
<REALIZED-GAINS-CURRENT> 157,123
<APPREC-INCREASE-CURRENT> 2,055,577
<NET-CHANGE-FROM-OPS> 5,056,442
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,843,742
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,312,955
<NUMBER-OF-SHARES-REDEEMED> 1,926,636
<SHARES-REINVESTED> 232,218
<NET-CHANGE-IN-ASSETS> (1,864,769)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,901,585)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 251,601
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 498,854
<AVERAGE-NET-ASSETS> 50,384,058
<PER-SHARE-NAV-BEGIN> 10.67
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> .48
<PER-SHARE-DIVIDEND> .61
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.15
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> COUNTRYWIDE INVESTMENT TRUST
<SERIES>
<NUMBER> 4
<NAME> INSTITUTIONAL GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 44,528,074
<INVESTMENTS-AT-VALUE> 44,528,074
<RECEIVABLES> 293,586
<ASSETS-OTHER> 4,204
<OTHER-ITEMS-ASSETS> 4,229
<TOTAL-ASSETS> 44,830,093
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,970
<TOTAL-LIABILITIES> 32,970
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44,818,865
<SHARES-COMMON-STOCK> 44,818,865
<SHARES-COMMON-PRIOR> 61,269,650
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (21,742)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 44,797,123
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,799,172
<OTHER-INCOME> 0
<EXPENSES-NET> 200,967
<NET-INVESTMENT-INCOME> 2,598,205
<REALIZED-GAINS-CURRENT> 22
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,598,227
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,598,205
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 179,615,316
<NUMBER-OF-SHARES-REDEEMED> 198,254,085
<SHARES-REINVESTED> 2,187,984
<NET-CHANGE-IN-ASSETS> (16,450,763)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (21,764)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 100,484
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 224,407
<AVERAGE-NET-ASSETS> 50,225,435
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .052
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> COUNTRYWIDE INVESTMENT TRUST
<SERIES>
<NUMBER> 6
<NAME> ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 10,513,791
<INVESTMENTS-AT-VALUE> 10,548,473
<RECEIVABLES> 111,758
<ASSETS-OTHER> 821
<OTHER-ITEMS-ASSETS> 12,517
<TOTAL-ASSETS> 10,673,569
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57,938
<TOTAL-LIABILITIES> 57,938
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,890,505
<SHARES-COMMON-STOCK> 1,095,327
<SHARES-COMMON-PRIOR> 2,355,670
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,309,556)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34,682
<NET-ASSETS> 10,615,631
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 895,785
<OTHER-INCOME> 0
<EXPENSES-NET> 108,195
<NET-INVESTMENT-INCOME> 787,590
<REALIZED-GAINS-CURRENT> (58,901)
<APPREC-INCREASE-CURRENT> (152,939)
<NET-CHANGE-FROM-OPS> 575,750
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 787,590
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 852,470
<NUMBER-OF-SHARES-REDEEMED> 2,186,125
<SHARES-REINVESTED> 73,312
<NET-CHANGE-IN-ASSETS> (12,586,096)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,250,655)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 72,130
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 197,012
<AVERAGE-NET-ASSETS> 14,391,518
<PER-SHARE-NAV-BEGIN> 9.85
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> (.16)
<PER-SHARE-DIVIDEND> .53
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.69
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> COUNTRYWIDE INVESTMENT TRUST
<SERIES>
<NUMBER> 8
<NAME> MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 19,018,268
<INVESTMENTS-AT-VALUE> 19,018,268
<RECEIVABLES> 225,521
<ASSETS-OTHER> 2,634
<OTHER-ITEMS-ASSETS> 25,508
<TOTAL-ASSETS> 19,271,931
<PAYABLE-FOR-SECURITIES> 723,656
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56,411
<TOTAL-LIABILITIES> 780,067
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,497,649
<SHARES-COMMON-STOCK> 18,497,649
<SHARES-COMMON-PRIOR> 73,824,759
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,785)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 18,491,864
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,682,153
<OTHER-INCOME> 0
<EXPENSES-NET> 506,132
<NET-INVESTMENT-INCOME> 3,176,021
<REALIZED-GAINS-CURRENT> (2,025)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,173,996
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,176,021
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 317,725,801
<NUMBER-OF-SHARES-REDEEMED> 373,726,925
<SHARES-REINVESTED> 674,014
<NET-CHANGE-IN-ASSETS> (55,329,135)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,760)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 312,309
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 506,132
<AVERAGE-NET-ASSETS> 64,151,537
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .050
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> COUNTRYWIDE INVESTMENT TRUST
<SERIES>
<NUMBER> 9
<NAME> INTERMEDIATE BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 22,356,673
<INVESTMENTS-AT-VALUE> 23,382,896
<RECEIVABLES> 395,854
<ASSETS-OTHER> 970
<OTHER-ITEMS-ASSETS> 25,294
<TOTAL-ASSETS> 23,805,014
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 86,903
<TOTAL-LIABILITIES> 86,903
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,756,902
<SHARES-COMMON-STOCK> 2,258,294
<SHARES-COMMON-PRIOR> 1,553,652
<ACCUMULATED-NII-CURRENT> 4,033
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (69,047)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,026,223
<NET-ASSETS> 23,718,111
<DIVIDEND-INCOME> 12,974
<INTEREST-INCOME> 1,573,544
<OTHER-INCOME> 0
<EXPENSES-NET> 214,344
<NET-INVESTMENT-INCOME> 1,372,174
<REALIZED-GAINS-CURRENT> (12,654)
<APPREC-INCREASE-CURRENT> 808,743
<NET-CHANGE-FROM-OPS> 2,168,263
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,368,141
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,947,922
<NUMBER-OF-SHARES-REDEEMED> 1,294,973
<SHARES-REINVESTED> 51,693
<NET-CHANGE-IN-ASSETS> 8,047,280
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (56,393)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 112,811
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 221,549
<AVERAGE-NET-ASSETS> 22,587,132
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> .62
<PER-SHARE-GAIN-APPREC> .41
<PER-SHARE-DIVIDEND> .62
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE INVESTMENT TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints JOHN F.
SPLAIN and SANDOR E. SAMUELS, and each of them, his attorneys for him and in his
name, place and stead, to execute and file any amended registration statement or
statements and amended prospectus or prospectuses or amendments or supplements
to any of the foregoing, hereby giving and granting to said attorneys full power
and authority to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 26th
day of February, 1998.
/s/ Fred A. Rappoport
--------------------------------
FRED A. RAPPOPORT
Trustee
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On the 26th day of February, 1998, personally appeared before me, FRED
A. RAPPOPORT, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 26 day of February, 1998.
/s/ Scott C. Hendrickson
-----------------------------
Notary Public
Scott C. Hendrickson
Commission #1140043
Notary Public - California
Los Angeles County
My Comm. Expires May 16, 2001
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE INVESTMENT TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints JOHN F.
SPLAIN and SANDOR E. SAMUELS, and each of them, his attorneys for him and in his
name, place and stead, to execute and file any amended registration statement or
statements and amended prospectus or prospectuses or amendments or supplements
to any of the foregoing, hereby giving and granting to said attorneys full power
and authority to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th
day of August, 1998.
/s/ Howard J. Levine
--------------------------------
HOWARD J. LEVINE
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 18th day of August, 1998, personally appeared before me, HOWARD
J. LEVINE, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 18th day of August, 1998.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
