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. 32
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 32
----
(Check appropriate box or boxes.)
COUNTRYWIDE STRATEGIC TRUST
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(Exact name of Registrant as Specified in Charter)
FILE NOS. 811-3651 and 2-80859
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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,
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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)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 75 days after filing pursuant to paragraph (a)
/X/ on (July 21, 1997) pursuant to paragraph (a) of Rule 485
Registrant registered an indefinite number of securities under
Rule 24f-2 by filing Registrant's initial registration statement
effective April 14, 1983. Pursuant to paragraph (b)(1) of Rule
24f-2, Registrant filed a Rule 24f-2 Notice for the fiscal year
ended March 31, 1996 on May 28, 1996.
TOTAL NUMBER OF PAGES:
EXHIBIT INDEX ON PAGE:
<PAGE>
FORM N-1A
CROSS REFERENCE SHEET
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ITEM SECTION IN PROSPECTUS
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1........................... Cover Page
2........................... Expense Information
3........................... Financial Highlighs, Performance Information
4........................... Operation of the Funds, Investment
Objective and Policies
5........................... Operation of the Funds
6........................... Cover Page, Dividends and Distributions,
Taxes, Operation of the Funds
7........................... How to Purchase Shares, Shareholder
Services, Exchange Privilege, Operation
of the Funds, Calculation of Share
Price and Public Offering Price,
Distribution Plan
8........................... How to Redeem Shares, Shareholder
Services
9........................... None
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
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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.......................... None
16.......................... The Investment Manager and Underwriter, the
Investment Adviser, 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 Manager and Underwriter
22.......................... Historical Performance Information
23.......................... Financial Statements
<PAGE>
PROSPECTUS
__________, 1997
COUNTRYWIDE STRATEGIC TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
GROWTH/VALUE FUND
AGGRESSIVE GROWTH FUND
The Growth/Value Fund and the Aggressive Growth Fund (individually a
"Fund" and collectively the "Funds") are two separate series of Countrywide
Strategic Trust.
The GROWTH/VALUE FUND seeks long-term capital appreciation primarily
through equity investments in companies whose valuation may not yet reflect the
prospects for accelerated earnings/cash flow growth.
The AGGRESSIVE GROWTH FUND seeks long-term capital appreciation
primarily through equity investments. The Fund will seek growth opportunities
among companies of various sizes.
EACH FUND IS A NON-DIVERSIFIED SERIES AND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER. THEREFORE, AN INVESTMENT IN THE
FUNDS MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MUTUAL FUNDS.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Mastrapasqua & Associates, Inc. (the "Adviser") manages the Funds'
investments under the supervision of Countrywide Investments, Inc. (the
"Manager"). See "Operation of the Funds."
Pursuant to an Agreement and Plan of Reorganization dated ___________,
1997, each Fund, on __________, 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 each Fund and its Predecessor Fund
are substantially identical and the financial data and information in this
Prospectus relates to the Predecessor Funds.
This Prospectus sets forth concisely the information about the Funds
that you should know before investing. Please retain this Prospectus for
future reference. A Statement of Additional Information dated ____________,
1997 has been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling one of the
numbers listed below.
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For Information or Assistance in Opening an Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . . 800-543-0407
Cincinnati . . . . . . . . . . . . . . . . . . . . . 513-629-2050
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<PAGE>
EXPENSE INFORMATION
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . 4%
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**
* Purchases at net asset value of amounts totaling $1 million or more may be
subject to a contingent deferred sales load of .75% if a redemption
occurred within 12 months of purchase and a commission was paid by the
Adviser to a participating unaffiliated dealer.
** A wire transfer fee is charged by the Funds' Custodian in the case
of redemptions made by wire. Such fee is subject to change and is
currently $8. See "How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
Growth/Value Aggressive
Fund Growth Fund
Management Fees 1.00% 1.00%
12b-1 Fees(A) .25% .09%
Other Expenses .41% .86%
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Total Fund Operating Expenses 1.66% 1.95%
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(A) 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 Funds will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on estimated amounts for the current fiscal year. The Manager will, until at
least August , 1999, waive fees and reimburse expenses to the extent necessary
to limit total operating expenses to 1.95% of each 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 Growth/Value Aggressive Growth
expenses on a $1,000 Fund Fund
investment, assuming (1) 1 year $56 $59
5% annual return and (2) 3 years 90 99
redemption at the end of 5 years 127 141
each time period: 10 years 229 258
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<PAGE>
FINANCIAL HIGHLIGHTS
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The following audited financial information for the Predecessor Funds
for the fiscal year ended August 31, 1996 has been audited by KPMG Peat Marwick
LLP, independent auditors, and should be read in conjunction with the
financial statements. The following unaudited financial information for the
period ended February 28, 1997 should be read in conjunction with the financial
statements. The annual financial statements as of August 31, 1996 and the
independent auditors' report thereon and the semiannual financial statements as
of February 28, 1997 appear in the Statement of Additional Information of the
Funds, which can be obtained by shareholders at no charge by calling the Funds.
Selected Per Share Data and Ratios for a Share Outstanding for each
Predecessor Fund Throughout the Periods
<TABLE>
GROWTH AGGRESSIVE
VALUE GROWTH
FUND FUND
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SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
2/28/97 8/31/96(a) 2/28/97 8/31/96(a)
(Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 11.18 $ 10.00 $ 10.95 $ 10.00
----------- ----------- ----------- -----------
Investment Operations
Net Investment Income
(Loss).................... (0.06) (0.06)(c) (0.08) (0.11)(c)
Net Realized and Unrealized
Gain (Loss) on
Investments............... 2.22 1.24 1.63 1.06
----------- ----------- ----------- -----------
Total from Investment
Operations.................. 2.16 1.18 1.55 0.95
----------- ----------- ----------- -----------
Distributions from
Net Investment Income....... (0.03) -- (0.03) --
Net Realized Gain on
Investments............... -- -- -- --
----------- ----------- ----------- -----------
Total Distributions........... (0.03) -- (0.03) --
----------- ----------- ----------- -----------
Net Asset Value, End of
Period...................... $ 13.31 $ 11.18 $ 12.47 $ 10.95
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total Return(b)............ 42.67%(e) 11.80% 30.53%(e) 9.50%
Ratio/Supplementary Data:
Net Assets at End of Period
(000's omitted)............. $ 20,685 $ 15,108 $ 9,424 $ 6,550
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver
(e)....................... 1.95% 1.95% 1.95% 1.95%
Expenses excluding
reimbursement/waiver
(e)....................... 2.09% 2.83% 2.95% 5.05%
Net investment income (loss)
including
reimbursement/waiver
(e)....................... (1.02)% (0.62 )% (1.61 )% (1.26)%
Average Commission Rate(d).... $ 0.0576 $ 0.0700 $ 0.0553 $ 0.0800
Portfolio Turnover Rate....... 18.89% 21.12% 15.45% 15.70%
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</TABLE>
(a) Date of commencement of operations was September 29, 1995.
(b) Total return calculation does not include sales charges.
(c) Using weighted average shares outstanding for the period.
(d) Amount represents the average commission per share paid to brokers on the
purchase or sale of equity securities.
(e) Annualized.
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective and policies of each Fund are described below.
Specific investment techniques that may be employed by the Funds are described
in a separate section of this Prospectus and in the Statement of Additional
Information. While each Fund's objective is fundamental and can only be changed
by vote of the majority of the outstanding shares of a particular Fund, the
Board of Trustees of the Trust reserves the right to change any of the
investment policies, strategies or practices of either Fund without shareholder
approval, except in those instances where shareholder approval is expressly
required.
The GROWTH/VALUE FUND seeks long-term capital appreciation primarily
through equity investments in companies whose valuation may not yet reflect the
prospect for accelerating earnings/cash flow growth. The Fund seeks to achieve
its objective by investing primarily in common stocks but also in preferred
stocks, convertible bonds and warrants of companies which, in the opinion of the
Fund's investment adviser, are expected to achieve growth of investment
principal over time. The investment style is to focus on companies that have a
demonstrated record of achievement with excellent prospects for earnings and/or
cash flow growth over a 3-to-5 year period. It is anticipated that the average
stock holding period will be within an 18 to 36 month time frame. Of course,
changes in fundamental outlook and market conditions can alter these time
horizons materially.
It is anticipated that common stocks will be the principal form of
investment by the Fund. The Fund's portfolio is comprised of securities of two
basic categories of companies: (1) "core" companies, which Fund management
considers to have experienced above-average and consistent long-term growth in
earnings/cash flow and to have excellent prospects for outstanding future
growth, and (2) "earnings/cash flow acceleration" companies, which Fund
management believes are either currently enjoying or are projected to enjoy a
dramatic increase in earnings and/or cash flow. Investments will largely be made
in companies of greater than $750 million capitalization. The Fund will invest
no more than 10% of its assets in companies with market capitalization of less
than $750 million at the time of purchase.
The AGGRESSIVE GROWTH FUND seeks long-term capital appreciation
primarily through equity investments. The Fund will seek growth opportunities
among companies of various sizes. The Fund seeks to achieve its objective by
investing primarily in common stocks but also in preferred stocks, convertible
bonds, options and warrants of companies which in the opinion of the Fund's
investment adviser are expected to achieve growth of
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<PAGE>
investment principal over time. Many of these companies are in the small to
medium-sized category (companies with market capitalizations of less than $750
million at the time of purchase). In addition, up to 15% of the Fund's assets
may be invested in illiquid investments or in private companies whose common
shares are not actively traded on any national or regional exchange.
The investment style is to focus on companies that have an excellent
prospect for earnings cash flow growth over a 3 to 5 year period. Of course,
changes in fundamental outlook and market conditions can alter potential returns
substantially. It is intended that the Aggressive Growth Fund will assume a more
expanded risk profile than will be the case with the Growth/Value Fund. While
this could result in above-average appreciation, there is no assurance that this
will in fact be the case and the potential exists for above-average
depreciation.
It is anticipated that common stocks will be the principal form of
investment by the Fund. The Fund's portfolio is comprised of securities of two
basic categories of companies: (1) "core" companies, which Fund management
considers to have experienced above-average and consistent long-term growth in
earnings/cash flow and to have excellent prospects for future growth, and (2)
"earnings/cash flow acceleration" companies, which Fund management believes are
either currently enjoying or are projected to enjoy a dramatic increase in
earnings and/or cash flow. Investments will largely be made in companies of
varying sizes, even those with less than $750 million capitalization.
Additionally, the Aggressive Growth Fund may invest a maximum of 20% of
its assets, and the Growth/Value Fund may invest a maximum of 30% of its assets,
in fixed-income securities rated Baa or better by Moody's Investors Service,
Inc. ("Moody's") or BBB or better by Standard & Poor's Ratings Group ("S&P") or,
if unrated, deemed to be of comparable quality by the Adviser. The fixed-income
securities in which the Funds may invest include U.S. Government obligations,
mortgage-backed securities, asset-backed securities, bank obligations, corporate
debt obligations and unrated obligations, including those of foreign issuers.
The Adviser will be particularly interested in growth companies that
are likely to benefit from new or innovative products, services or processes
that should enhance such companies' prospects for future growth in earnings/cash
flow. As a result of this policy, the market prices of many of the securities
purchased and held by the Funds may fluctuate widely. Any income received from
securities held by the Funds will be
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<PAGE>
incidental, and an investor should not consider a purchase of shares of the
Funds as equivalent to a complete investment program.
OTHER INVESTMENT PRACTICES
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SECURITIES LENDING. In order to generate additional income, the Funds may, from
time to time, lend their portfolio securities to broker-dealers, banks or
institutional borrowers of securities. While the lending of securities may
subject a 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 Funds 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 Funds. During the time
portfolio securities are on loan, the borrower pays the Funds any dividends or
interest paid on such securities. Loans are subject to termination by the Funds
or the borrower at any time. While the Funds do not have the right to vote
securities on loan, the Funds intend to terminate the loan and regain the right
to vote if that is considered important with respect to the investment. The
Funds 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 Funds may borrow money from banks (including their custodian
bank) or from other lenders to the extent permitted under applicable law, for
temporary or emergency purposes and to meet redemptions and may pledge their
assets to secure such borrowings. Additionally, the Aggressive Growth Fund may
borrow for purposes of leveraging. Borrowing for investment increases both
investment opportunity and investment risk. Such borrowings in no way affect the
federal tax status of the Funds or their dividends. If the investment income on
securities purchased with borrowed money exceeds the interest paid on the
borrowing, the net asset value of the Aggressive Growth Fund's shares will rise
faster than would otherwise be the case. On the other hand, if the investment
income fails to cover the Aggressive Growth Fund's costs, including the interest
on borrowings or if there are losses, the net asset value of such Fund's shares
will decrease faster than would otherwise be the case. This is the speculative
factor known as leverage.
The Investment Company Act of 1940 (the "1940 Act") requires the Funds
to maintain asset coverage of at least 300% for all such borrowings, and should
such asset coverage at any time fall below 300%, the Funds would be required to
reduce their borrowings within three days to the extent necessary to meet the
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<PAGE>
requirements of the 1940 Act. To reduce their borrowings, the Funds 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 Funds may have less net investment income
during periods when its borrowings are substantial. The interest paid by the
Funds on borrowings may be more or less than the yield on the securities
purchased with borrowed funds, depending on prevailing market conditions.
SHORT-TERM TRADING. The Aggressive Growth Fund may engage in the technique of
short-term trading. Such trading involves the selling of securities held for a
short time, ranging from several months to less than a day. The object of such
short-term trading is to increase the potential for capital appreciation and/or
income of the Aggressive Growth Fund in order to take advantage of what the
Adviser believes are changes in market, industry or individual company
conditions or outlook. Any such trading would increase the turnover rate of the
Aggressive Growth Fund and its transaction costs.
WHEN-ISSUED SECURITIES. Each of the Funds 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 Funds will
generally not pay for such securities or start earning interest on them until
they are received. When a Fund agrees to purchase securities on a "when-issued"
basis, the Funds' 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. Each
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, a Fund's liquidity and the Adviser's ability to
manage it might be adversely affected. The Funds do not intend to purchase
"when-issued" securities for speculative purposes, but only for the purpose of
acquiring portfolio securities.
VARIABLE AND FLOATING RATE SECURITIES. Each of the Funds may acquire variable
and floating rate securities, subject to each Fund's investment objective,
policies and restrictions. A variable rate security is one whose terms
provide for the
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<PAGE>
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 Aggressive Growth 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 repurchase 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 agreement are
considered by the staff of the Commission to be loans by the Fund.
REVERSE REPURCHASE AGREEMENTS. The Aggressive Growth Fund may borrow funds for
temporary purposes by entering into reverse repurchase agreements. Pursuant to
such agreements, the Fund sells portfolio securities to financial institutions
such as banks and broker-dealers, and agrees to repurchase them at a mutually
agreed upon date and price. At the time the Fund enters into a reverse
repurchase agreement, it must place in a segregated custodial account cash and
liquid, high-grade debt securities having a value equal to the repurchase price
(including accrued interest); the collateral will be marked-to- market on a
daily basis, and will be continuously monitored to ensure that such equivalent
value is maintained. Reverse repurchase agreements involve the risk that the
market value of the securities sold by the Fund may decline below the price at
which the Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act.
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<PAGE>
CONVERTIBLE SECURITIES. The Funds may invest in all types of common stocks and
equivalents (such as convertible debt securities and warrants) and preferred
stocks. The Funds may invest in convertible securities which may offer higher
income than the common stocks into which they are convertible. The convertible
securities in which the Funds may invest consist of bonds, notes, debentures and
preferred stocks which may be converted or exchanged at a stated or determinable
exchange ratio into underlying shares of common stock. The Funds may be required
to permit the issuer of a convertible security to redeem the security, convert
it into the underlying common stock or sell it to a third party. Thus, the Funds
may not be able to control whether the issuer of a convertible security chooses
to convert that security. If the issuer chooses to do so, this action could have
an adverse effect on a Fund's ability to achieve its investment objective.
Convertible securities are bonds, debentures, notes, preferred stock or
other securities which may be converted or exchanged by the holder into shares
of the underlying common stock at a stated exchange ratio. A convertible
security may also be subject to redemption by the issuer, but only after a date
and under certain circumstances (including a specified price) established on
issue. Adjustable rate preferred stocks are preferred stocks which adjust their
dividend rates quarterly based on specified relationships to certain indices of
U.S. Treasury securities. A Fund may continue to hold securities obtained as a
result of the conversion of convertible securities held by the Fund when the
Adviser believes retaining such securities is consistent with the Fund's
investment objective.
LOWER-RATED SECURITIES. The Aggressive Growth Fund may invest up to 20% of its
assets, and the Growth/Value Fund may invest up to 10% of its assets in higher
yielding (and, therefore, higher risk), lower rated fixed-income securities,
including debt securities, convertible securities and preferred stocks and
unrated fixed-income securities. Lower rated fixed-income securities, commonly
referred to as "junk bonds," are considered speculative and involve greater risk
of default or price changes due to changes in the issuer's creditworthiness than
higher rated fixed-income securities. See "Risk Factors-Lower Rated Fixed-
Income Securities" below for a discussion of certain risks.
Differing yields on fixed-income securities of the same maturity are a
function of several factors, including the relative financial strength of the
issuers. Higher yields are generally available from securities in the lower
categories of recognized rating agencies, i.e., Ba or lower by Moody's or BB or
lower by S&P. The Funds may invest in any security which is rated by Moody's or
by S&P, or in any unrated security which the
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<PAGE>
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 services
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 services. The Adviser's
analysis generally may include, among other things, consideration of the
issuer's experience and managerial strength, changing financial conditions,
borrowing requirements or debt maturity schedules, and its responsiveness to
changes in business conditions and interest rates. It also considers relative
values based on anticipated cash flow, interest or dividend coverage, asset
coverage and earnings prospects.
ADRs. The Funds may invest in foreign securities through the purchase of
American Depository Receipts but will not do so if immediately after a purchase
and as a result of the purchase the total value of such foreign securities owned
by a Fund would exceed 10% of the value of the total assets of the Fund.
Investment in foreign securities is subject to special risks, such as future
adverse political and economic developments, possible seizure, nationalization,
or expropriation of foreign investments, less stringent disclosure requirements,
the possible establishment of exchange controls or taxation at the source and
the adoption of other foreign governmental restrictions. Additional risks
include less publicly available information, the risk that companies may not be
subject to the accounting, auditing and financial reporting standards and
requirements of U.S. companies, the risk that foreign securities markets may
have less volume and therefore less liquidity and greater price volatility than
U.S. securities, and the risk that custodian and brokerage costs may be higher.
OPTIONS. The Aggressive Growth Fund may engage in writing put and call options
from time to time as the Adviser deems to be appropriate. Such options must be
listed on a national securities exchange and issued by the Options Clearing
Corporation. In order to close out a written call option position, the Fund will
enter into a "closing purchase
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<PAGE>
transaction"-the purchase of a call option on the same security with the same
exercise price and expiration date as any call option which it may previously
have written on any particular securities. When the portfolio security is sold,
the Fund effects a closing purchase transaction so as to close out any existing
call option on that security. If the Fund is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or the Fund delivers the underlying security upon exercise. When
writing a covered call option, the Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security above
the exercise price, but retains the risk of loss should the price of the
security decline. The Fund seeks to terminate its position in a put option it
writes before exercise by closing out the option in the secondary market at its
current price. If the secondary market is not liquid for a put option the Fund
has written, however, the Fund must continue to be prepared to pay the strike
price while the option is outstanding, regardless of price changes and must
continue to set aside assets to cover its position.
The Aggressive Growth Fund may purchase put options from time to time
as the Adviser deems to be appropriate. A put is a right to sell a specified
security (or securities) within a specified period of time at a specified
exercise price. The Fund has no intention of investing more than 5% of its
assets in put options.
WARRANTS. The Funds may invest in warrants which entitle the holder to buy
equity securities at a specified price for a specific period of time. Warrants
may be considered more speculative than certain other types of investments
because they do not entitle a holder to dividends or voting rights with respect
to the securities which may be purchased, nor do they represent any rights in
the assets of the issuing company. The value of a warrant may be more volatile
than the value of the securities underlying the warrants. Also, the value of the
warrant does not necessarily change with the value of the underlying securities
and a warrant ceases to have value if it is not exercised prior to the
expiration date.
SHORT-TERM OBLIGATIONS. With respect to each Fund 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 a Fund's normal
investment programs. Accordingly, for temporary defensive purposes, each Fund
may hold up to 100% of its total assets in cash and/or short-term obligations.
To the extent that a Fund's assets are so invested, they will not be invested so
as to meet
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<PAGE>
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.
FUTURES CONTRACTS. The Aggressive Growth Fund may also enter into contracts for
the future delivery of securities and futures contracts based on a specific
security, class of securities or an index, purchase or sell options on any such
futures contracts and engage in related closing transactions. A futures contract
on a securities index is an agreement obligating either party to pay, and
entitling the other party to receive, while the contract is outstanding, cash
payments based on the level of a specified securities index.
The Fund may enter into futures contracts in an effort to hedge against
market risks and in anticipation of future purchases or sales of securities. For
example, when interest rates are expected to rise or market values of portfolio
securities are expected to fall, the Fund can seek to offset a decline in the
value of its portfolio securities by entering into futures contract
transactions. When interest rates are expected to fall or market values are
expected to rise, the Fund, through the purchase of such contracts, can attempt
to secure better rates or prices than might later be available in the market
when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will give
the Fund the right (but not the obligation), for a specified price, to sell or
to repurchase the underlying futures contract, upon exercise of the option, at
any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed 5% of the Fund's total assets (other
than in connection with bona fide hedging purposes), and the value of securities
that are the subject of such futures and options (both for receipt and delivery)
may not exceed one-third of the market value of the Fund's total assets. Futures
transactions will be limited to the extent necessary to maintain the Fund's
qualification as a regulated investment company.
Futures transactions involve brokerage costs and require the Fund to
segregate assets to cover contracts that would require it to purchase
securities. The Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or
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<PAGE>
securities prices move in an unanticipated manner. Such unanticipated changes
may also result in poorer overall performance than if the Fund had not entered
into any futures transactions. In addition, the value of the Fund's futures
positions may not prove to be perfectly or even highly correlated with the value
of its portfolio securities, limiting the Fund's ability to hedge effectively
against interest rate, exchange rate and/or market risk and giving rise to
additional risks. There is no assurance of liquidity in the secondary market for
purposes of closing out futures positions.
ZERO COUPON BONDS. The Growth/Value 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 will have to be provided from the assets of the Fund or
other sources such as proceeds of sales of Fund shares and/or sales 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 Growth/Value 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
- 13 -
<PAGE>
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 total assets.
INVESTMENT COMPANY SECURITIES. Each 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. Each Fund may invest up to 15%
of its 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 and the Manager, determines the
liquidity of a Fund's investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses.
Restricted Securities are securities which cannot be sold to the public without
registration under the Securities Act of 1933. Unless registered for sale, these
securities can only be sold in privately negotiated transactions or pursuant to
an exemption from registration.
PRIVATE PLACEMENT INVESTMENTS. The Aggressive Growth 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
- 14 -
<PAGE>
4(2) commercial paper, thus providing liquidity. The Adviser believes that
Section 4(2) commercial paper and possibly certain other restricted securities
which meet the criteria for liquidity established by the Trustees are quite
liquid. The Fund intends therefore, to treat the restricted securities which
meet the criteria for liquidity established by the trustees, including Section
4(2) commercial paper, as determined by the Adviser, as liquid and not subject
to the investment limitation applicable to illiquid securities. In addition,
because Section 4(2) commercial paper is liquid, the Fund does not intend to
subject such paper to the limitation applicable to restricted securities.
The ability of the Board of Trustees to determine the liquidity of
certain restricted securities is permitted under a position of the staff of the
Commission set forth in the adopting release for Rule 144A under the Securities
Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor for certain
secondary market transactions involving securities subject to restrictions on
resale under federal securities laws. The Rule provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further enhance the liquidity of
the secondary market for securities eligible for resale under Rule 144A. The
staff of the Commission has left the question of determining the liquidity of
all restricted securities to the Trustees. The Trustees consider the following
criteria in determining the liquidity of certain restricted securities
(including Section 4(2) commercial paper): the frequency of trades and quotes
for the security; the number of dealers willing to purchase or sell the security
and the number of other potential buyers; dealer undertakings to make a market
in the security; and the nature of the security and the nature of the
marketplace trades. The Trustees have delegated to the Adviser the daily
function of determining and monitoring the liquidity of restricted securities
pursuant to the above criteria and guidelines adopted by the Board of Trustees.
The Trustees will continue to monitor and periodically review the Adviser's
selection of Rule 144A and Section 4(2) commercial paper as well as any
determinations as to their liquidity.
RISK FACTORS
- ------------
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
- 15 -
<PAGE>
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 a Fund's portfolio, the net asset value of the
Fund will be negatively affected. Moreover, as the market for lower rated
fixed-income securities is a relatively new one, a severe economic downturn
might increase the number of defaults, thereby adversely affecting the value of
all outstanding lower rated fixed-income securities and disrupting the market
for such securities. Fixed-income securities purchased by a 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 a 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 a Fund to value lower rated fixed-income
securities becomes more difficult, and judgment plans 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 a 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
- 16 -
<PAGE>
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
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 a
Fund's investment objective is more dependent on the Adviser's proprietary
credit analysis, than is otherwise the case for a fund that invests exclusively
in higher quality fixed-income securities.
Once the rating of a portfolio security or the quality determination
ascribed by the Adviser to an unrated fixed-income security has been downgraded,
the Adviser will consider all circumstances deemed relevant in determining
whether to continue to hold the security, but in no event will a Fund retain
such securities if it would cause the Fund to have 35% 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 Funds 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 a Fund's investments in the
high yield market; therefore, a Fund may at times invest in fixed-income
securities not currently paying interest or in default. The Funds will invest in
such fixed-income securities where the Adviser perceives a substantial
opportunity to realize a Fund's objective based on its analysis of the
underlying financial condition of the issuer. It is not, however, the current
intention of either 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 a Fund is not required in the event of a subsequent
change in circumstances.
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<PAGE>
OTHER RISK FACTORS
- ------------------
The portfolio turnover of each Fund may vary greatly from year to year
as well as within a particular year. High turnover rates will generally result
in higher transaction costs and higher levels of taxable realized gains to the
Fund's shareholders.
Particular portfolio securities and yields will differ due to
differences in the types of investments permitted, cash flow, and the
availability of particular portfolio investments. Market conditions and interest
rates may affect the types and yields of securities held in each Fund. The
investment objective of the Funds are fundamental and may be changed only by a
vote of a majority of the outstanding shares of that Fund. There can be, of
course, no assurance that a Fund will achieve its investment objective. Changes
in prevailing interest rates may affect the yield, and possibly the net asset
value, of a Fund.
Each Fund is classified as a "non-diversified" investment company under
the 1940 Act. Each Fund also intends to qualify as a "regulated investment
company" under the Code. One of the tests for such qualification under the Code
is, in general, that at the end of each fiscal quarter of each Fund, at least
50% of its assets must consist of (i) cash and U.S. Government securities and
(ii) securities which, as to any one issuer, do not exceed 5% of the value of
the Fund's assets. If a Fund had elected to register under the 1940 Act as a
"diversified" investment company, it would have to meet the same test as to 75%
of its assets. Each Fund may therefore not have as much diversification among
securities, and thus diversification of risk, as if it had made this election
under the 1940 Act. In general, the more a Fund invests in the securities of
specific issuers, the more that Fund is exposed to risks associated with
investments in those issuers.
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in either Fund ordinarily must be at least
$1,000 ($250 for tax-deferred retirement plans). You may purchase additional
shares through the Open Account Program described below. You may open an account
and make an initial investment through securities dealers having a sales
agreement with the Trust's principal underwriter, Countrywide Investments, Inc.
(the "Manager"). You may also make a direct initial investment by sending a
check and a completed account application form to Countrywide Fund Services,
Inc. (the "Transfer Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks
should be made payable to the "Growth/Value Fund" or the "Aggressive Growth
Fund," whichever is applicable. An account application is included in this
Prospectus.
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<PAGE>
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not ordinarily issued, but you
may receive a certificate without charge by sending a written request to the
Transfer Agent. Certificates for fractional shares will not be issued. If a
certificate has been issued to you, you will not be permitted to exchange shares
by telephone or to use the automatic withdrawal plan as to those shares. The
Trust and the Manager reserve the rights to limit the amount of investments and
to refuse to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services (for example, telephone exchanges) made available to
investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or numbers \
listed below.
After an initial investment, all investors are considered participants
in the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Funds over a period of years and permits the
automatic reinvestment of dividends and distributions of the Funds in additional
shares without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to the Transfer Agent, P.O. Box 5354, Cincinnati, Ohio 45201-5354. The check
should be made payable to the applicable Fund.
Under the Open Account Program, you may also purchase shares of the
Funds 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.
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<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 Funds to a current shareholder, such broker-dealer will receive
the concessions described above with respect to additional investments by the
shareholder.
Shares of each 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 of the Funds 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 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50 3.63 3.30
$250,000 but less than $500,000 2.50 2.56 2.30
$500,000 but less than $1,000,000 2.00 2.04 1.80
$1,000,000 or more None* None*
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .75% may apply if a commission was paid
by the Adviser to a participating unaffiliated dealer and the shares are
redeemed within twelve months from the date of purchase.
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<PAGE>
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Funds 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 Funds and
on all investments in accounts with no designated dealer of record.
For initial purchases of $1,000,000 or more and subsequent purchases
further increasing the size of the account, a dealer's commission of .75% of the
purchase amount may be paid by the Manager to participating unaffiliated dealers
through whom such purchases are effected. In determining a dealer's eligibility
for such commission, purchases of shares of the Funds may be aggregated with
concurrent purchases of shares of other funds of Countrywide Investments.
Dealers should contact the Manager concerning the applicability and calculation
of the dealer's commission in the case of combined purchases. An exchange from
other funds of Countrywide Investments will not qualify for payment of the
dealer's commission, unless such exchange is from a Countrywide fund with assets
as to which a dealer's commission or similar payment has not been previously
paid. Redemptions of 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
Manager may from time to time pay from its own resources additional cash bonuses
or other incentives to selected dealers in connection with the sale of shares of
the Funds. On some occasions, such bonuses or incentive may be conditioned upon
the sale of a specified minimum dollar amount of the shares of the Funds and/or
other funds of Countrywide Investments during a specified 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.
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 Manager with
the amount of his current purchases in order to take advantage of the reduced
sales loads set forth in the table above. Purchases made in any load fund
distributed by the Manager pursuant to a Letter of Intent may also be eligible
for the reduced sales loads. The minimum initial investment under a Letter of
Intent is $10,000. The load funds currently distributed by the Manager are
listed in the
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<PAGE>
Exchange Privilege section of this Prospectus. Shareholders should contact the
Transfer Agent for information about the Right of Accumulation and Letter of
Intent.
PURCHASES AT NET ASSET VALUE. You may purchase shares of either Fund at
net asset value when the payment for your investment represents the proceeds
from the redemption of shares of any other mutual fund which has a front-end
sales load and is not distributed by the Manager. Your investment will qualify
for this provision if the purchase price of the shares of the other fund
included a sales load and the redemption occurred within one year of the
purchase of such shares and no more than sixty days prior to your purchase of
shares of the Funds. To make a purchase at net asset value pursuant to this
provision, you must submit photocopies of the confirmations (or similar
evidence) showing the purchase and redemption of shares of the other fund. Your
payment may be made with the redemption check representing the proceeds of the
shares redeemed, endorsed to the order of the applicable Fund. The redemption of
shares of the other fund is, for federal income tax purposes, a sale on which
you may realize a gain or loss. These provisions may be modified or terminated
at any time. Contact your securities dealer or the Trust for further
information.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase shares of
the Funds 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 Funds may be purchased at net asset value by
broker-dealers who have a sales agreement with the Manager, and their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees.
Clients of investment advisers and financial planners may also purchase
shares of the Funds at net asset value if their investment adviser or financial
planner has made arrangements to permit them to do so with the Trust and the
Manager. The investment adviser or financial planner must notify the Transfer
Agent that an investment qualifies as a purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the Manager,
the Adviser, the Transfer Agent or any affiliated company, including members of
the immediate family of such individuals and employee benefit plans established
by such entities, may also purchase shares of the Funds at net asset value.
- 22 -
<PAGE>
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF SHARES. A
contingent deferred sales load is imposed upon certain redemptions of shares of
the Funds (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 Manager and the shares are redeemed within
twelve months from the date of purchase. The contingent deferred sales load will
be paid to the Manager and will be equal to .75% of the lesser of (1) the net
asset value at the time of purchase of the 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 Funds 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 1986) of a shareholder (including one who owns the shares with
his or her spouse as a joint tenant with rights of survivorship) from an account
in which the deceased or disabled is named. The Manager may require
documentation prior to waiver of the charge, including death certificates,
physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the applicable
sales load and for purposes of the Letter of Intent and Right of Accumulation
privileges, a purchaser includes an individual, his spouse and their children
under the age of 21, purchasing shares for his or their own account; or a
trustee or
- 23 -
<PAGE>
other fiduciary purchasing shares for a single fiduciary account although more
than one beneficiary is involved; or employees of a common employer, provided
that economies of scale are realized through remittances from a single source
and quarterly confirmation of such purchases; or an organized group, provided
that the purchases are made through a central administration, or a single
dealer, or by other means which result in economy of sales effort or expense.
Contact the Transfer Agent for additional information concerning purchases at
net asset value or at reduced sales loads.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
-------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional shares of the Funds while the
plan is in effect are generally undesirable because a sales load is incurred
whenever purchases are made.
Tax-Deferred Retirement Plans
-----------------------------
Shares of either Fund are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
Direct Deposit Plans
--------------------
Shares of either Fund may be purchased through direct deposit plans
offered by certain employers and government
- 24 -
<PAGE>
agencies. These plans enable a shareholder to have all or a portion of his or
her payroll or social security checks transferred automatically to purchase
shares of the Funds.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in either Fund from your
bank, savings and loan or other depository institution account. The minimum
initial and subsequent investments must be $50 under the plan. The Transfer
Agent pays the costs associated with these transfers, but reserves the right,
upon thirty days' written notice, to make reasonable charges for this service.
Your depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds.
Reinvestment Privilege
----------------------
If you have redeemed shares of either Fund, you may reinvest all or
part of the proceeds without any additional sales load. This reinvestment must
occur within ninety days of the redemption and the privilege may only be
exercised once per year.
HOW TO REDEEM SHARES
- ---------------------
You may redeem shares of either Fund on each day that the Trust is open
for business by sending a written request to the Transfer Agent. The request
must state the number of shares or the dollar amount to be redeemed and your
account number. The request must be signed exactly as your name appears on the
Trust's account records. If the shares to be redeemed have a value of $25,000 or
more, your signature must be guaranteed by any eligible guarantor institution,
including banks, brokers and dealers, municipal securities brokers and dealers,
government securities brokers and dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations.
You may also redeem shares by placing a wire redemption request through
a securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
If your instructions request a redemption by wire, you will be charged
an $8 processing fee by the Funds' Custodian. The Trust reserves the right, upon
thirty days' written notice, to change the processing fee. All charges will be
deducted from your account by redemption of shares in your account. Your bank
- 25 -
<PAGE>
or brokerage firm may also impose a charge for processing the wire. In the event
that wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
If a certificate for the shares was issued, it must be delivered to the
Transfer Agent, or the dealer in the case of a wire redemption, duly endorsed or
accompanied by a duly endorsed stock power, with the signature guaranteed by any
of the eligible guarantor institutions outlined above.
A contingent deferred sales load may apply to a redemption of certain
shares purchased at net asset value. See "How to Purchase Shares."
Shares are redeemed at their net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Funds by
certified check or wire.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege of
exchanging shares by telephone is automatically available to all shareholders.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
- 26 -
<PAGE>
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than $1,000 (based on actual amounts invested including
any sales load paid, unaffected by market fluctuations), or $250 in the case of
tax-deferred retirement plans, or such other minimum amount as the Trust may
determine from time to time. After notification to you of the Trust's intention
to close your account, you will be given thirty days to increase the value of
your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- ------------------
Shares of either Fund and of any other fund of Countrywide Investments
may be exchanged for each other.
Shares of the Funds which are not subject to a contingent deferred
sales load may be exchanged for 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 Funds 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.
- 27 -
<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 *U.S. Government Securities Fund
Florida Tax-Free Money Fund *Growth/Value Fund
*Tax-Free Intermediate Term *Aggressive Growth Fund
Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
You may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. If you
are unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202. An exchange will be effected at the next determined net asset value (or
offering price, if sales load is applicable) after receipt of a request by the
Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
Each Fund expects to distribute substantially all of its net investment
income, if any, annually. Each Fund expects to distribute any net realized
long-term capital gains at least once each year. Management will determine the
timing and frequency of the distributions of any net realized short-term capital
gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
- 28 -
<PAGE>
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital
gains distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option.
An investor who has received in cash any dividend or capital gains
distribution from either 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
- ------
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. Each Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its shareholders.
Distributions of net investment income as well as from net realized short-term
capital gains, if any, are taxable as ordinary income. Dividends distributed by
the Funds from net investment income may be eligible, in whole or in part, for
the dividends received deduction available to corporations. Distributions of net
realized long-term capital gains are taxable as long-term capital gains
regardless of how long you have held your Fund shares. Redemptions and exchanges
of shares of the Funds are taxable events on which a shareholder may realize a
gain or loss.
The Funds will mail to each of their shareholders a statement
indicating the amount and federal income tax status of all distributions made
during the year. In addition to federal taxes, shareholders of the Funds may be
subject to state and
- 29 -
<PAGE>
local taxes on distributions. Shareholders should consult their tax advisors
about the tax effect of distributions and withdrawals from the Funds and the use
of the Automatic Withdrawal Plan and the Exchange Privilege. The tax
consequences described in this section apply whether distributions are taken in
cash or reinvested in additional shares.
OPERATION OF THE FUNDS
- ----------------------
The Funds are non-diversified series of Countrywide Strategic Trust, an
open-end management investment company organized as a Massachusetts business
trust on November 18, 1982. The Board of Trustees supervises the business
activities of the Trust. Like other mutual funds, the Trust retains various
organizations to perform specialized services for the Funds.
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio (the "Manager"), to provide general investment supervisory
services to the Funds and to manage the Funds' business affairs. The Manager was
organized in 1974 and is also the investment adviser to three other series of
the Trust, seven series of Countrywide Investment Trust and seven series of
Countrywide Tax-Free Trust. The Manager is an indirect wholly-owned subsidiary
of Countrywide Credit Industries, Inc., a New York Stock Exchange listed company
principally engaged in the business of residential mortgage lending. Each Fund
pays the Manager a fee equal to the annual rate of 1.00% of the average value of
its daily net assets up to $50 million; .90% of such assets from $50 million to
$100 million; .80% of such assets from $100 million to $200 million; and .75% of
such assets in excess of $200 million.
Mastrapasqua & Associates, Inc. (the "Adviser"), 814 Church Street,
Nashville, Tennessee, has been retained by the Manager to manage the Funds'
investments. The Adviser was organized in 1993 and provides investment advisory
services to institutions and individual investors. The Manager (not the Funds)
pays the Adviser a fee equal to the annual rate of .60% of the average value of
each Fund's daily net assets up to $50 million; .50% of such assets from $50
million to $100 million; .40% of such assets from $100 to $200 million; and .35%
of such assets in excess of $200 million.
Frank Mastrapasqua, Ph.D, Chairman and Chief Executive Officer of the
Adviser, and Thomas A. Trantum, President of the Adviser, are primarily
responsible for managing the portfolios of each Fund. Mr. Mastrapasqua founded
the Adviser in 1993. Prior to 1993, he was Director of Research and Chief
Investment Strategist and a partner at J.C. Bradford & Co. Mr. Trantum was
previously Senior Security Analyst and a partner at J.C. Bradford & Co.
- 30 -
<PAGE>
The Funds are responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Funds, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Funds may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Funds' transfer agent,
dividend paying agent and shareholder service agent.
The Transfer Agent also provides accounting and pricing services to the
Funds. The Transfer Agent receives a monthly fee from each Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Manager to
assist the Manager in providing administrative services to the Funds. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Manager
(not the Funds) pays the Transfer Agent a fee for these administrative services
equal to the annual rate of .1% of the average value of each Fund's daily net
assets.
The Manager serves as principal underwriter for the Funds and, as
such, is the exclusive agent for the distribution of shares of the Funds. Angelo
R. Mozilo, Chairman and a director of the Manager, is a Trustee of the Trust.
Robert H. Leshner, President and a director of the Manager, is President and a
Trustee of the Trust. Robert G. Dorsey, Treasurer of the Manager, is Vice
President of the Trust. John F. Splain, Secretary and General Counsel of the
Manager, is Secretary of the Trust.
- 31 -
<PAGE>
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to sales
of shares of the Funds as a factor in the selection of brokers and dealers to
execute portfolio transactions of the Funds. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board of Trustees,
the Funds may execute portfolio transactions through any broker or dealer and
pay brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust, the Manager or
the Adviser.
Shares of each Fund have equal voting rights and liquidation rights.
Each Fund shall vote separately on matters submitted to a vote of the
shareholders except in matters where a vote of all series of the Trust in the
aggregate is required by the Investment Company Act of 1940 or otherwise. 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
Funds have adopted a plan of distribution (the "Plan") under which the Funds may
directly incur or reimburse the Manager for certain distribution-related
expenses, including payments to securities dealers and others who are engaged in
the sale of shares of the Funds 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 Funds; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable; and any other expenses related to the
distribution of the Funds' shares.
- 32 -
<PAGE>
The annual limitation for payment of expenses pursuant to the Plan is
.25% of each 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 a Fund
in accordance with its terms, the Fund will not be required to make any payments
for expenses incurred by the Adviser after the date the Plan terminates.
Pursuant to the Plan, the Funds may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Funds or their shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Funds may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Funds, no preference will be shown for
such securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of mutual
funds. These Rules require fund-level accounting in which all sales charges --
front-end load, 12b-1 fees or contingent deferred load -- terminate when a
percentage of gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (net asset value plus applicable sales load) of the shares of each 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 a Fund's investments that its net
asset value might be materially
- 33 -
<PAGE>
affected. The net asset value per share of each Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest cent.
Each Fund's portfolio securities are valued as follows: (i) securities
which are traded on stock exchanges are valued at the last sale price as of the
close of the regular session of trading on the New York Stock Exchange on the
day the securities are being valued, or, if not traded on a particular day, at
the closing bid price, (ii) securities traded in the over-the-counter market are
valued at the last sale price (or, if the last sale price is not readily
available, at the last bid price as quoted by brokers that make markets in the
securities) as of the close of the regular session of trading on the New York
Stock Exchange on the day the securities are being valued, (iii) securities
which are traded both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market and (iv)
securities (and other assets) for which market quotations are not readily
available are valued at their fair value as determined in good faith in
accordance with consistently applied procedures established by and under the
general supervision of the Board of Trustees. The net asset value per share of
each Fund will fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, each Fund may advertise its "average annual total
return." Each 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 a 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. A 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
- 34 -
<PAGE>
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 a Fund's "average annual total return" as described above.
The "yield" of a Fund is computed by dividing the net investment income
per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, the Funds may advertise their performance rankings
as published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also compare
their performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators such as the Standard & Poor's 500 Stock Index or the NASDAQ Composite
Index. In connection with a ranking, the Funds may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Funds may also present their performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Adviser's view of current or past market conditions or historical trends.
- 35 -
<PAGE>
Countrywide Strategic Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4004
Nationwide (Toll-Free) 800-543-8721
Cincinnati 513-629-2000
Board of Trustees
Donald L. Bogdon, M.D.
John R. Delfino
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
Investment Manager
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4004
Transfer Agent
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
- 36 -
<PAGE>
TABLE OF CONTENTS
PAGE
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 FUNDS ...........................................
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.
- 37 -
<PAGE>
COUNTRYWIDE STRATEGIC TRUST
STATEMENT OF ADDITIONAL INFORMATION
__________, 1997
Growth/Value Fund
Aggressive Growth Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the Growth/Value Fund and the
Aggressive Growth Fund of Countrywide Strategic Trust dated ________, 1997. A
copy of the Funds' 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, or in Cincinnati 629-2050.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Countrywide Strategic Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS
PAGE
THE TRUST..................................................
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS. . . . . . . .
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS..............
INVESTMENT LIMITATIONS.....................................
TRUSTEES AND OFFICERS......................................
THE INVESTMENT MANAGER AND UNDERWRITER.....................
THE INVESTMENT ADVISER . . . . . . . . . . . . . . . . . .
DISTRIBUTION PLAN. . . . ..................................
SECURITIES TRANSACTIONS....................................
PORTFOLIO TURNOVER.........................................
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE. . . .
OTHER PURCHASE INFORMATION.................................
TAXES......................................................
REDEMPTION IN KIND.........................................
HISTORICAL PERFORMANCE INFORMATION.........................
CUSTODIAN..................................................
AUDITORS...................................................
TRANSFER AGENT . ..........................................
FINANCIAL STATEMENTS.......................................
- 2 -
<PAGE>
THE TRUST
- ---------
Countrywide Strategic Trust (the "Trust"), formerly Midwest Strategic
Trust, was organized as a Massachusetts business trust on November 18, 1982. The
Trust currently offers six series of shares to investors: the U.S. Government
Securities Fund, the Treasury Total Return Fund (formerly the Leshner Financial
Treasury Total Return Fund), the Utility Fund (formerly the Leshner Financial
Utility Fund), the Equity Fund (formerly the Leshner Financial Equity Fund), the
Growth/Value Fund and the Aggressive Growth Fund. This Statement of Additional
Information provides information relating to the Growth/Value Fund and the
Aggressive Growth Fund (referred to individually as a "Fund" and collectively as
the "Funds"). Information relating to the U.S. Government Securities Fund, the
Treasury Total Return Fund, the Utility Fund and the Equity Fund is contained in
a separate Statement of Additional Information. Each Fund has its own investment
strategies and policies.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of an instance where such result has occurred. In addition, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of
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such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or the Trustees. The Trust Agreement also provides
for the indemnification out of the Trust property for all losses and expenses of
any shareholder held personally liable for the obligations of the Trust.
Moreover, it provides that the Trust will, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of the Trust
and satisfy any judgment thereon. As a result, and particularly because the
Trust assets are readily marketable and ordinarily substantially exceed
liabilities, management believes that the risk of shareholder liability is
slight and limited to circumstances in which the Trust itself would be unable to
meet its obligations. Management believes that, in view of the above, the risk
of personal liability is remote.
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS
- -------------------------------------------
MOODY'S INVESTORS SERVICE, INC. PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE BOND RATINGS:
Aaa - "Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as 'gilt edge.' Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues."
Aa - "Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities."
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."
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Ba - "Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterize bonds in this class."
B - "Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small."
Caa - "Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest."
Ca - "Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings."
C - "Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing."
STANDARD & POOR'S RATINGS GROUP PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE BOND RATINGS:
AAA - "Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong."
AA - "Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree."
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
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meet timely interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or implied BBB
rating."
B - "Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating."
CCC - "Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial or economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest or repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating."
CC - "The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating."
C - "The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy has been filed but debt service
payments are continued."
CI - "The rating CI is reserved for income bonds on which no interest is
being paid."
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.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ----------------------------------------------
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objective and Policies")
appears below:
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or of banks or
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institutions the accounts of which are insured by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation. Certificates
of deposit are negotiable certificates evidencing the indebtedness of a
commercial bank to repay funds deposited with it for a definite period of time
(usually from fourteen days to one year) at a stated or variable interest rate.
Bankers' acceptances are credit instruments evidencing the obligation of a bank
to pay a draft which has been drawn on it by a customer, which instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Investments in time deposits maturing in more than seven days
will be subject to each Fund's restrictions on illiquid investments (see
"Investment Limitations"). The Funds may also invest in certificates of deposit,
bankers' acceptances and time deposits issued by foreign branches of national
banks. Eurodollar certificates of deposit are negotiable U.S. dollar denominated
certificates of deposit issued by foreign branches of major U.S. commercial
banks. Eurodollar bankers' acceptances are U.S. dollar denominated bankers'
acceptances "accepted" by foreign branches of major U.S. commercial banks.
Investments in the obligations of foreign branches of U.S. commercial banks may
be subject to special risks, including future political and economic
developments, imposition of withholding taxes on income, establishment of
exchange controls or other restrictions, less governmental supervision and the
lack of uniform accounting, auditing and financial reporting standards that
might affect an investment adversely.
COMMERCIAL PAPER. Commercial paper consists of short-term, (usually
from one to two hundred seventy days) unsecured promissory notes issued by U.S.
corporations in order to finance their current operations. Certain notes may
have floating or variable rates. Variable and floating rate notes with a demand
notice period exceeding seven days will be subject to each Fund's restrictions
on illiquid investments (see "Investment Limitations") unless, in the judgment
of the Adviser, subject to the direction of the Board of Trustees, such note is
liquid.
WHEN-ISSUED SECURITIES. The Funds will only make commitments to purchase
securities on a when-issued basis with the intention of actually acquiring the
securities. In addition, the Funds may purchase securities on a when-issued
basis only if delivery and payment for the securities takes place within 60 days
after the date of the transaction. In connection with these investments, each
Fund will direct its Custodian to place cash, U.S. Government obligations or
other liquid high-grade debt obligations in a segregated account in an amount
sufficient to make payment for the securities to be purchased. When a
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<PAGE>
segregated account is maintained because a Fund purchases securities on a
when-issued basis, the assets deposited in the segregated account will be valued
daily at market for the purpose of determining the adequacy of the securities in
the account. If the market value of such securities declines, additional cash or
securities will be placed in the account on a daily basis so that the market
value of the account will equal the amount of a Fund's commitments to purchase
securities on a when-issued basis. To the extent funds are in a segregated
account, they will not be available for new investment or to meet redemptions.
Securities purchased on a when-issued basis and the securities held in a Fund's
portfolio are subject to changes in market value based upon changes in the level
of interest rates (which will generally result in all of those securities
changing in value in the same way, i.e., all those securities experiencing
appreciation when interest rates decline and depreciation when interest rates
rise). Therefore, if in order to achieve higher returns, a Fund remains
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be a possibility that the market value of the
Fund's assets will experience greater fluctuation. The purchase of securities on
a when-issued basis may involve a risk of loss if the seller fails to deliver
after the value of the securities has risen.
When the time comes for a Fund to make payment for securities purchased
on a when-issued basis, the Fund will do so by using then available cash flow,
by sale of the securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the securities purchased on a when-issued basis themselves (which may
have a market value greater or less than the Fund's payment obligation).
Although a Fund will only make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, the
Funds may sell these securities before the settlement date if it is deemed
advisable by the Adviser as a matter of investment strategy.
REPURCHASE AGREEMENTS. The Aggressive Growth Fund may enter into
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,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in
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the customer-only account of the Fund's Custodian at the Federal Reserve Bank.
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 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 the 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 the 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 the Fund to the seller subject to the
repurchase agreement and is therefore subject to the Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by the Fund subject to a repurchase agreement as being
owned by the 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, the 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
the Fund has not perfected a security interest in the security, the 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, the Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for the 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 the Fund may
incur a loss if the proceeds to it 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
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<PAGE>
becomes less than the repurchase price (including interest), the Fund 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 the Fund will be unsuccessful
in seeking to enforce the seller's contractual obligation to deliver additional
securities.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by a Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Funds receive amounts equal to the dividends or interest on loaned securities
and also receive one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be shared with the
borrower. The Funds may also pay fees to placing brokers as well as custodian
and administrative fees in connection with loans. Fees may only be paid to a
placing broker provided that the Trustees determine that the fee paid to the
placing broker is reasonable and based solely upon services rendered, that the
Trustees separately consider the propriety of any fee shared by the placing
broker with the borrower, and that the fees are not used to compensate the
Adviser or any affiliated person of the Trust or an affiliated person of the
Adviser or other affiliated person. The terms of the Funds' loans must meet
applicable tests under the Internal Revenue Code and permit the Funds to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.
FOREIGN SECURITIES. Each Fund may invest in the securities (payable in
U.S. dollars) of foreign issuers. Because the Funds may invest in foreign
securities, an investment in the Funds involves risks that are different in some
respects from an investment in a fund which invests only in securities of U.S.
domestic issuers. Foreign investments may be affected favorably or unfavorably
by changes in currency rates and exchange control regulations. There may be less
publicly available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies. There may be less governmental supervision of securities
markets, brokers and issuers of securities. Securities of some foreign companies
are less liquid or more volatile than securities of U.S. companies, and foreign
brokerage commissions and custodian fees are generally higher than in the United
States. Settlement practices may include delays and may differ from those
customary in United States markets. Investments in foreign securities may also
be
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<PAGE>
subject to other risks different from those affecting U.S. investments,
including local political or economic developments, expropriation or
nationalization of assets, restrictions on foreign investment and repatriation
of capital, imposition of withholding taxes on dividend or interest payments,
currency blockage (which would prevent cash from being brought back to the
United States), and difficulty in enforcing legal rights outside the United
States.
TRANSACTIONS IN OPTIONS AND FUTURES. The Adviser may engage
in the use of the options and futures strategies for the
Aggressive Growth Fund described below.
1. Futures Contracts: The Aggressive Growth Fund may enter into
contracts for the future delivery of securities commonly referred to as "futures
contracts." A futures contract is a contract by the Fund to buy or sell
securities at a specified date and price. No payment is made for securities when
the Fund buys a futures contract and no securities are delivered when the Fund
sells a futures contract. Instead, the Fund makes a deposit called an "initial
margin" equal to a percentage of the contract's value. Payment or delivery is
made when the contract expires. Futures contracts will be used only as a hedge
against anticipated interest rate changes and for other transactions permitted
to entities exempt from the definition of the term commodity pool operator. The
Fund will not enter into a futures contract if immediately thereafter the sum of
the then aggregate futures market prices of financial or other instruments
required to be delivered under open futures contract sales and the aggregate
futures market prices of financial instruments required to be delivered under
open futures contract purchases would exceed one-third of the value of its total
assets. The Fund will not enter into a futures contract if immediately
thereafter more than 5% of the fair market value of its assets would be
committed to initial margins.
2. Writing Covered Call Options on Equity Securities: The
Aggressive Growth Fund may write covered call options on equity securities to
earn premium income, to assure a definite price for a security it has considered
selling, or to close out options previously purchased. A call option gives the
holder (buyer) the right to purchase a security at a specified price (the
exercise price) at any time until a certain date (the expiration date). A call
option is "covered" if the Fund owns the underlying security subject to the call
option at all times during the option period. A covered call writer is required
to deposit in escrow the underlying security in accordance with the rules of the
exchanges on which the option is traded and the appropriate clearing agency.
The writing of covered call options is a conservative
investment technique which the Adviser believes involves relatively little risk.
However, there is no assurance that a closing transaction can be effected at a
favorable price. During
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the option period, the covered call writer has, in return for the premium
received, given up the opportunity for capital appreciation above the exercise
price should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security decline.
The Fund may write covered call options if, immediately thereafter, not
more than 25% of its net assets would be committed to such transactions. The
ability of the Fund to write covered call options may be limited by the tax
requirement that less than 30% of the Fund's gross income be derived from the
sale or other disposition of securities held for less than 3 months.
3. Writing Covered Put Options on Equity Securities: The
Aggressive Growth Fund may write covered put options on securities and on
futures contracts to assure a definite price for a security if it is considering
acquiring the security at a lower price than the current market price or to
close out options previously purchased. A put option gives the holder of the
option the right to sell, and the writer has the obligation to buy, the
underlying security at the exercise price at any time during the option period.
The operation of put options in other respects is substantially identical to
that of call options. When the Fund writes a covered put option, it maintains
in a segregated account with its Custodian cash or liquid debt obligations in
an amount not less than the exercise price at all times while the put option is
outstanding.
The risks involved in writing put options include the risk that a
closing transaction cannot be effected at a favorable price and the possibility
that the price of the underlying security may fall below the exercise price, in
which case the Fund may be required to purchase the underlying security at a
higher price than the market price of the security at the time the option is
exercised. The Fund may not write a put option if, immediately thereafter, more
than 25% of its net assets would be committed to such transactions.
4. Purchasing Options on Futures Contracts: The Aggressive Growth Fund may
purchase put and call options on futures contracts. The purchase of put options
on futures contracts hedges the Fund's portfolio against the risk of rising
interest rates. The purchase of call options on futures contracts is a means of
obtaining temporary exposure to market appreciation at limited risk and is a
hedge against a market advance when the Fund is not fully invested. Assuming
that any decline in the securities being hedged is accompanied by a rise in
interest rates, the purchase of options on the futures contracts may generate
gains which can partially offset any decline in the value of the Fund's
portfolio securities which have been hedged. However, if after the Fund
purchases an option
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<PAGE>
on a futures contract, the value of the securities being hedged moves in the
opposite direction from that contemplated, the Fund will tend to experience
losses in the form of premiums on such options which would partially offset
gains the Fund would have.
A futures contract is a contract to buy or sell specified debt
securities at a future time for a fixed price. The Fund may purchase put and
call options on futures contracts which are traded on a national exchange or
board of trade and sell such options to terminate an existing position. Options
on futures contracts give the purchaser the right, in return for the premium
paid, to assume a position in a futures contract (a long position if the option
is a call and a short position if the option is a put), rather than to purchase
or sell a security, at a specified exercise price at any time during the period
of the option.
The holder of an option on a futures contract may terminate his
position by selling an option of the same series. There is no guarantee that
such closing transactions can be effected. In addition to the risks which apply
to all options, there are several special risks relating to options on futures
contracts. The ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market. Compared to the use of
futures contracts, the purchase of options on futures contracts involves less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options, plus transaction costs.
5. Options Transactions Generally: Option transactions in which the
Aggressive Growth Fund may engage involve the specific risks described above as
well as the following risks: the writer of an option may be assigned an exercise
at any time during the option period; disruptions in the markets for underlying
instruments could result in losses for options investors; imperfect or no
correlation between the option and the securities being hedged; the insolvency
of a broker could present risks for the broker's customers; and market imposed
restrictions may prohibit the exercise of certain options. In addition, the
option activities of the Fund may affect its portfolio turnover rate and the
amount of brokerage commissions paid by the Fund. The success of the Fund in
using the option strategies described above depends, among other things, on the
Adviser's ability to predict the direction and volatility of price movements in
the options, futures contracts and securities markets and the Adviser's ability
to select the proper time, type and duration of the options.
MAJORITY. As used in the Prospectus 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
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Fund) present at a meeting, if the holders of more than 50% of the outstanding
shares of the Trust (or the applicable Fund) are present or represented at such
meeting or (2) more than 50% of the outstanding shares of the Trust (or the
applicable Fund).
INVESTMENT LIMITATIONS
- ----------------------
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to any Fund without the affirmative vote of a
majority of the outstanding shares of that Fund.
THE LIMITATIONS APPLICABLE TO EACH FUND ARE:
1. Borrowing Money. Each Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is asset coverage of
300% for all borrowings of a 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 Growth/Value 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. Pledging. Each Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. Each Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings.
3. Options. Each Fund will not purchase or sell puts, calls,
options, straddles, commodities or commodities futures except as described in
the Prospectus and this Statement of Additional Information.
4. Mineral Leases. Each Fund will not purchase oil, gas or other
mineral leases, rights or royalty contracts.
5. Underwriting. Each Fund will not act as underwriters
of securities issued by other persons. This limitation is not applicable to
the extent that, in connection with the disposition of its portfolio
securities, a Fund may be deemed an underwriter under certain federal
securities laws.
6. 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
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<PAGE>
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.
7. Real Estate. Each Fund will not purchase, hold or deal in real estate
or real estate mortgage loans, except it may purchase (a) U.S. Government
obligations, (b) securities of companies which deal in real estate, or (c)
securities which are secured by interests in real estate or by interests in
mortgage loans including securities secured by mortgage-backed securities.
8. Loans. Each Fund will not make loans to other persons if, as a
result, more than one-third of the value of its total assets would be subject to
such loans. This limitation does not apply to (a) the purchase of marketable
bonds, debentures, commercial paper or corporate notes, and similar marketable
evidences of indebtedness which are part of an issue for the public or (b) entry
into repurchase agreements.
9. Investing for Control. Each Fund will not invest in companies
for the purpose of exercising control.
10. Senior Securities. Each Fund will not issue or sell any senior
security. This limitation is not applicable to short-term credit obtained by a
Fund for the clearance of purchases and sales or redemptions of securities, or
to arrangements with respect to transactions involving options, futures
contracts and other similar permitted investments and techniques.
THE FOLLOWING INVESTMENT LIMITATIONS FOR THE FUNDS ARE NONFUNDAMENTAL AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL:
1. Illiquid Investments. Each Fund will not purchase securities for
which there are legal or contractual restrictions on resale or for which no
readily available market exists (or, which respect to the Aggressive/Growth
Fund, engage in a repurchase agreement maturing in more than seven days) if, as
a result thereof, more than 15% of the value of a Fund's net assets would be
invested in such securities.
2. 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 or to the extent necessary to engage in transactions
described in the Prospectus and Statement of Additional Information which
involve margin purchases.
3. Short Sales. Each Fund will make short sales of securities.
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4. 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.
With respect to the percentages adopted by the Trust as maximum limitations
on the Funds' investment policies and restrictions, an excess above the fixed
percentage (except for the percentage limitations relative to the borrowing of
money) will not be a violation of the policy or restriction unless the excess
results immediately and directly from the acquisition of any security or the
action taken.
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 Family of Funds (consisting of the Trust, Countrywide
Tax-Free Trust and Countrywide Investment Trust) for the fiscal year ended March
31, 1997. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk. Each Trustee is
also a Trustee of Countrywide Tax- Free Trust and Countrywide Investment Trust.
AGGREGATE
COMPENSATION
POSITION COMPENSATION FROM
NAME AGE HELD FROM TRUST COUNTRYWIDE FAMILY
Donald L. Bodgon, MD 66 Trustee $ 0 $ 0
John R. Delfino 63 Trustee 0 0
+H. Jerome Lerner 58 Trustee 2,983 9,030
*Robert H. Leshner 57 President/Trustee 0 0
*Angelo R. Mozilo 58 Chairman/Trustee 0 0
+Oscar P. Robertson 57 Trustee 2,583 7,750
John F. Seymour, Jr. 59 Trustee 0 0
+Sebastiano Sterpa 67 Trustee 0 0
John F. Splain 40 Secretary 0 0
Mark J. Seger 35 Treasurer 0 0
* Mr. Leshner and Mr. Mozilo, as officers and directors of
Countrywide Investments, Inc., are each an "interested
person" of the Trust within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940.
+ 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:
- 16 -
<PAGE>
DONALD L. BOGDON, M.D., 435 Arden Avenue, Glendale, California is a
physician with Hematology Oncology Consultants and a Director of Verdugo VNA (a
hospice facility). Until 1996 he was President of Western Hematology/Oncology
and until 1993 he was Chairman of the Board of Glendale Memorial Hospital.
JOHN R. DELFINO, 2029 Century Park East, Los Angeles, California is
President of Concorde Capital Corporation (an investment firm). Until 1993
he was a director of Cypress Financial and Chairman of Rancho Santa Margarita,
mortgage banking firms.
H. JEROME LERNER, 7149 Knoll Road, Cincinnati, Ohio is a principal of
HJL Enterprises and is Chairman of Crane Electronics, Inc., a manufacturer of
electronic connectors.
ROBERT H. LESHNER, 312 Walnut Street, Cincinnati, Ohio is President
and a director of Countrywide Investments, Inc. (the investment adviser and
principal underwriter of the Trust) and Countrywide Financial Services, Inc.
(a financial services company and parent of Countrywide Investments, Inc. and
Countrywide Fund Services, Inc.). He is Vice Chairman and a director of
Countrywide Fund Services, Inc. (a registered transfer agent) and President
and a Trustee of Countrywide Tax-Free Trust and Countrywide Investment Trust,
registered investment companies.
ANGELO R. MOZILO, 155 North Lake Avenue, Pasadena, California is Vice
Chairman and Executive Vice President of Countrywide Credit Industries, Inc. (a
holding company). He is a director of Countrywide Home Loans, Inc. (a
residential mortgage lender), CTC Foreclosure Services Corporation (a
foreclosure trustee) and LandSafe, Inc. (the parent company of fifteen LandSafe
entities which provide property appraisals, credit reporting services, title
insurance and/or closing services for residential mortgages), each a subsidiary
of Countrywide Credit Industries, Inc. He is Chairman and a director of
Countrywide Financial Services, Inc., Countrywide Investments, Inc., Countrywide
Fund Services, Inc., Countrywide Servicing Exchange (a loan servicing broker),
Countrywide Capital Markets, Inc., (parent company of Countrywide Securities
Corporation and Countrywide Servicing Exchange) and various LandSafe
subsidiaries and is Chairman and Chief Executive Officer of Countrywide
Securities Corporation (a registered broker-dealer), each a subsidiary of
Countrywide Credit Industries, Inc. He is also Vice Chairman of CWM Mortgage
Holdings, Inc. (a publicly-held real estate investment trust).
OSCAR P. ROBERTSON, 4293 Muhlhauser Road, Fairfield, Ohio is President
of Orchem Corp., a chemical specialties distributor, and Orpack Stone
Corporation, a corrugated box manufacturer.
- 17 -
<PAGE>
JOHN F. SEYMOUR, JR., 46-393 Blackhawk Drive, Indian Wells, California
is Chief Executive Officer of the Southern California Housing Development Agency
and a consultant for Orange Coast Title Co. (a title insurance company). He is
also a director of Irvine Apartment Communities (a real estate investment trust)
and Inco Homes (a home builder). Until 1994 he was a director of the California
Housing Finance Agency.
SEBASTIANO STERPA, 200 West Glenoaks Boulevard, Glendale, California is
Chairman of Sterpa Realty, Inc. and Chairman and a director of the California
Housing Finance Agency. He is also a director of Real Estate Business Services
and a director of the SunAmerica Mutual Funds.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is Secretary and
General Counsel of Countrywide Investments, Inc. and Countrywide Financial
Services, Inc. and Vice President, Secretary and General Counsel of Countrywide
Fund Services, Inc. He is also Secretary of Countrywide Tax-Free Trust,
Countrywide Investment Trust, Brundage, Story and Rose Investment Trust,
Williamsburg Investment Trust, Markman MultiFund Trust, The Tuscarora Investment
Trust, PRAGMA Investment Trust, Maplewood Investment Trust, a series company,
and The Thermo Opportunity Fund, Inc. and Assistant Secretary of Schwartz
Investment Trust, Fremont Mutual Funds, Inc., Capitol Square Funds, The Gannett
Welsh & Kotler Funds and Interactive Investments, all of which are registered
investment companies.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio is Vice
President and Fund Controller of Countrywide Fund Services, Inc. He is also
Treasurer of Countrywide Tax-Free Trust, Countrywide Investment Trust, Brundage,
Story and Rose Investment Trust, Williamsburg Investment Trust, Markman
MultiFund Trust, PRAGMA Investment Trust, Maplewood Investment Trust, a series
company, The Thermo Opportunity Fund, Inc. and Capitol Square Funds, Assistant
Treasurer of Schwartz Investment Trust, The Tuscarora Investment Trust, The
Gannett Welsh & Kotler Funds and Interactive Investments and Assistant Secretary
of Fremont Mutual Funds, Inc.
Each Trustee, except for Messrs. Leshner and Mozilo, receives a
quarterly retainer of $1,500 and a fee of $1,500 for each Board meeting
attended. Such fees are split equally among the Trust, Countrywide Tax-Free
Trust and Countrywide Investment
Trust.
THE INVESTMENT MANAGER AND UNDERWRITER
- --------------------------------------
Countrywide Investments, Inc. (the "Manager") performs
management, statistical, portfolio adviser selection and other services for the
Funds. The Manager is a subsidiary of Countrywide Financial Services, Inc.,
which is a wholly-owned
- 18 -
<PAGE>
subsidiary of Countrywide Credit Industries, Inc., a New York Stock Exchange
listed company principally engaged in the business of residential mortgage
lending. Messrs. Mozilo and Leshner may be deemed to be affiliates of the
Manager by reason of their position as Chairman and President, respectively, of
the Manager. Messrs. Mozilo and Leshner, by reason of such affiliation, may
directly or indirectly receive benefits from the management fees paid to the
Manager.
Under the terms of the management agreements between the Trust and the
Manager, each Fund pays the Manager a fee computed and accrued daily and paid
monthly at an annual rate of 1.00% of its average daily net assets up to
$50,000,000, .90% of such assets from $50,000,000 to $100,000,000, .80% of such
assets from $100,000,000 to $200,000,000 and .75% of such assets in excess of
$200,000,000. The total fees paid by a Fund during the first and second halves
of each fiscal year of the Trust may not exceed the semiannual total of the
daily fee accruals requested by the Manager during the applicable six month
period.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The Manager bears promotional expenses in
connection with the distribution of the Funds' shares to the extent that such
expenses are not assumed by the Funds under their plan of distribution (see
below). The compensation and expenses of any officer, Trustee or employee of the
Trust who is an officer, director, employee or stockholder of the Manager are
paid by the Manager.
By their terms, the Funds' management agreements will 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' management 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 Manager. The management agreements automatically terminate
in the event of their assignment, as defined by the Investment Company Act of
1940 and the rules thereunder.
- 19 -
<PAGE>
The Manager is also the principal underwriter of the Funds and, as
such, the exclusive agent for distribution of shares of the Funds. The Manager
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 Manager currently allows concessions to dealers who sell shares of
the Funds. The Manager receives that portion of the sales load which is not
reallowed to the dealers who sell shares of the Funds. The Manager 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.
The Funds may compensate dealers, including the Manager and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plan" below.
INVESTMENT ADVISER
- ------------------
Mastrapasqua & Associates, Inc. (the "Adviser") has been retained by the
Manager to serve as the discretionary portfolio adviser of the Funds. The
Adviser selects the portfolio securities for investment by the Funds, purchases
and sells securities of the Funds and places orders for the execution of such
portfolio transactions, subject to the general supervision of the Board of
Trustees and the Manager. The Adviser receives a fee equal to the annual rate of
.6% of each Fund's average daily net assets up to $50,000,000, .5% of such
assets from $50,000,000 to $100,000,000, .4% of such assets from $100,000,000 to
$200,000,000 and .35% of such assets in excess of $200,000,000. The services
provided by the Adviser are paid for wholly by the Manager. The compensation of
any officer, director or employee of the Adviser who is rendering services to
the Fund is paid by the Adviser.
The employment of the Adviser will 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
employment of the Adviser may be terminated at any time, on sixty days' written
notice, without the payment of any penalty, by the Board of Trustees, by a vote
of a majority of a Fund's outstanding voting securities, by the Manager, or by
the Adviser. The agreement with the Adviser automatically terminated in the
event of its assignment, as defined by the Investment Company Act of 1940 and
the rules thereunder.
- 20 -
<PAGE>
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 Manager. The Plan expressly limits payment of the
distribution expenses listed above in any fiscal year to a maximum of .25% of
each Fund's average daily net assets. Unreimbursed expenses will not be carried
over from year to year.
Agreements implementing the Plan (the "Implementation Agreements"),
including agreements with dealers wherein such dealers agree for a fee to act as
agents for the sale of the Funds' shares, are in writing and have been approved
by the Board of Trustees. All payments made pursuant to the Plan are made in
accordance with written agreements.
The continuance of the Plan and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plan or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. The Plan may be terminated at any
time by a vote of a majority of the Independent Trustees or by a vote of the
holders of a majority of the outstanding shares of a Fund. In the event the Plan
is terminated in accordance with its terms, the affected Fund will not be
required to make any payments for expenses incurred by the Manager 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
- 21 -
<PAGE>
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plan should assist in the growth of
the Funds which will benefit the Funds and their shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plan is in effect, all amounts spent by the Funds pursuant
to the Plan and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. The selection and
nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
Angelo R. Mozilo and Robert H. Leshner, as interested persons of the
Trust, may be deemed to have a financial interest in the operation of the Plan
and the Implementation Agreements.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer.
The Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Funds and/or other accounts over
which the Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
Adviser determines in good faith that the commission is reasonable in relation
to the value of the brokerage and research services provided. The determination
may be viewed in terms of a particular transaction
- 22 -
<PAGE>
or the Adviser's overall responsibilities with respect to the Funds and to
accounts over which it exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Adviser and other affiliates
of the Trust, the Adviser or the Manager, 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, the Manager
nor affiliates of the Trust, the Manager or the Adviser will receive reciprocal
brokerage business as a result of the brokerage business transacted by the Funds
with other brokers.
CODE OF ETHICS. The Trust and the Manager 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 Manager and,
as described below, imposes additional, more onerous, restrictions on investment
personnel of the Manager. The Code requires that all employees of the Manager
preclear any personal securities investment (with limited exceptions, such as
U.S. Government obligations). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition or limitation
applicable to the proposed investment. In addition, no employee may purchase or
sell any security which at the time is being purchased or sold (as the case may
be), or to the knowledge of the employee is being considered for purchase or
sale, by any Fund. The substantive restrictions applicable to investment
personnel of the Manager include a ban on acquiring
- 23 -
<PAGE>
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 Manager
within periods of trading by the Funds in the same (or equivalent) security.
PORTFOLIO TURNOVER
- ------------------
Because the Funds are actively managed by the Adviser in light of the
Adviser's investment outlook for common stocks, there may be a very substantial
turnover of each Fund's portfolio. 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.
The Growth/Value Fund expects that the average holding period of its
equity securities will be between eighteen and thirty-six months. However, the
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when the Adviser believes that portfolio changes
are appropriate.
If warranted by market conditions, the Aggressive Growth Fund may
engage in short-term trading if the Adviser believes the transactions, net of
costs, will result in improving the income or the appreciation potential of the
Fund's portfolio. Because of the possibility of short-term trading, there may be
a very substantial turnover of the Fund's portfolio.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
The share price (net asset value) and the public offering price (net
asset value plus applicable sales load) of the shares of each Fund are
determined as of the close of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), on each day the Trust is
open for business. The Trust is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Trust may also be open for business on other days in which there is
sufficient trading in a Fund's portfolio securities that its net asset value
might be materially affected. For a description of the methods used to determine
the share price and the public offering price, see "Calculation of Share Price
and Public Offering Price" in the Prospectus.
- 24 -
<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 Funds is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
shares of a Fund has the right to combine the cost or current net asset value
(whichever is higher) of his existing shares of the load funds distributed by
the Manager 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 a Fund who submits a Letter of Intent to the Transfer
Agent The Letter must state an intention to invest within a thirteen month
period in any load fund distributed by the Adviser a specified amount which, if
made at one time, would qualify for a reduced sales load. A Letter of Intent may
be submitted with a purchase at the beginning of the thirteen month period or
within ninety days of the first purchase under the Letter of Intent. Upon
acceptance of this Letter, the purchaser becomes eligible for the reduced sales
load applicable to the level of investment covered by such Letter of Intent as
if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
- 25 -
<PAGE>
OTHER INFORMATION. The Trust does not impose a front-end sales load or
imposes a reduced sales load in connection with purchases of shares of a Fund
made under the reinvestment privilege 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
Manager. Purchases described in the "Purchases at Net Asset Value" section may
be made for investment only, and the shares may not be resold except through
redemption by or on behalf of the Trust.
TAXES
- ------
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
Each Fund intends to qualify annually for the special tax treatment
afforded a "regulated investment company" under Subchapter M of the Internal
Revenue Code so that it does not pay federal taxes on income and capital gains
distributed to shareholders. To so qualify a Fund must, among other things, (i)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currency, or certain other
income (including but not limited to gains from options, futures and forward
contracts) derived with respect to its business of investing in stock,
securities or currencies; (ii) derive less than 30% of its gross income in each
taxable year from the sale or other disposition of the following assets held for
less than three months: (a) stock or securities, (b) options, futures or forward
contracts not directly related to its principal business of investing in stock
or securities; and (iii) diversify its holdings so that at the end of each
quarter of its taxable year the following two conditions are met: (a) at least
50% of the value of the Fund's total assets is represented by cash, U.S.
Government securities, securities of other regulated investment companies and
other securities (for this purpose such other securities will qualify only if
the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards.
- 26 -
<PAGE>
Capital losses may be carried forward to offset any capital gains for eight
years, after which any undeducted capital loss remaining is lost as a deduction.
Investments by the Aggressive Growth Fund in certain options, futures
contracts and options on futures contracts are "section 1256 contracts." Any
gains or losses on section 1256 contracts are generally considered 60% long-term
and 40% short-term capital gains or losses ("60/40"). Section 1256 contracts
held by the Fund at the end of each taxable year are treated for federal income
tax purposes as being sold on such date for their fair market value. The
resultant paper gains or losses are also treated as 60/40 gains or losses. When
the section 1256 contract is subsequently disposed of, the actual gain or loss
will be adjusted by the amount of any preceding year-end gain or loss. The use
of section 1256 contracts may force the Fund to distribute to shareholders paper
gains that have not yet been realized in order to avoid federal income tax
liability.
Certain hedging transactions undertaken by the Aggressive Growth Fund
may result in "straddles" for federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by the Fund. In addition,
losses realized by the Fund on positions that are part of a straddle may be
deferred, rather than being taken into account in calculating taxable income for
the taxable year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences of hedging transactions to the Fund are not entirely clear. The
hedging transactions may increase the amount of short-term capital gain realized
by the Fund which is taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available under the Internal
Revenue Code of 1986, as amended, which are applicable to straddles. If the Fund
makes any of the elections, the amount, character and timing of the recognition
of gains or losses from the affected straddle positions will be determined under
rules that vary according to the elections made. The rules applicable under
certain of the elections operate to accelerate the recognition of gains or
losses from the affected straddle positions. Because application of the straddle
rules may affect the character of gains or losses, defer losses and/or
accelerate the recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders, and which will
be taxed to shareholders as ordinary income or long-term capital gain in any
year, may be increased or decreased substantially as compared to a fund that did
not engage in such hedging transactions.
- 27 -
<PAGE>
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Funds intend to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
- ------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
From time to time, each 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)
- 28 -
<PAGE>
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 $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.
Each 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 sales load which, if included, would reduce total
return. A nonstandardized quotation may also indicate average annual compounded
rates of return without including the effect of the applicable sales load or
over periods other than those specified for average annual total return. A
nonstandardized quotation of total return will always be accompanied by the
Fund's average annual total return as described above.
From time to time, each Fund may advertise its yield. A yield quotation
is based on a 30-day (or one month) period and is computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:
Yield = 2[(a-b/cd +1)6 -1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that a Fund
owns the security. 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
- 29 -
<PAGE>
attributable to actual monthly paydowns is accounted for as an increase or
decrease to interest income during the period and discount or premium on the
remaining security is not amortized.
The 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:
Lipper Mutual Fund Performance Analysis measures total return and
average current yield for the mutual fund industry and rank individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Growth/Value Fund may provide
comparative performance information appearing in the Growth Funds category and
the Aggressive Growth Fund may provide comparative performance information
appearing in the Capital Appreciation Funds category. In addition, the Funds may
also use comparative performance information of relevant indices, including the
following:
S&P 500 Index is an unmanaged index of 500 stocks, the purpose of which
is to portray the pattern of common stock price movement.
NASDAQ Composite Index is an unmanaged index of common stocks of
companies traded over-the-counter and offered through the National Association
of Securities Dealers Automated
Quotations ("NASDAQ") system.
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.
- 30 -
<PAGE>
CUSTODIAN
- ---------
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio, has been retained
to act as Custodian for each Fund's investments. Star 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.
AUDITORS
- ---------
The firm of Arthur Andersen LLP has been selected as independent
auditors for the Trust for the fiscal year ending March 31, 1998. Arthur
Andersen LLP, 425 Walnut Street, Cincinnati, Ohio, performs an annual audit of
the Trust's financial statements and advises the Trust 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 $17 per account from each of the Funds,
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 Funds. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable CFS to perform its duties, each Fund pays CFS
a fee in accordance with the following schedule:
Asset Size of Fund Monthly Fee
$ 0 - $ 50,000,000 $3,500
50,000,000 - 100,000,000 4,000
100,000,000 - 150,000,000 4,500
150,000,000 - 200,000,000 5,000
200,000,000 - 250,000,000 5,500
Over 250,000,000 6,500
In addition, each Fund pays all costs of external pricing services.
- 31 -
<PAGE>
CFS is retained by the Manager to assist the Manager 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
Manager equal to .1% of the average value of each Fund's daily net assets. The
Manager 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 Manager.
- 32 -
<PAGE>
FINANCIAL STATEMENTS
- --------------------
The Predecessor Funds' audited financial statements as of August 31,
1996 appear in the Trust's annual report which is attached to this Statement of
Additional Information. The Predecessor Funds' unaudited financial statements as
of February 28, 1997 appear in the Trust's semiannual report which is also
attached to this Statement of Additional Information.
- 33 -
<PAGE>
Growth/Value Fund Shareholder Inquiries:
Aggressive Growth Fund Forum Financial Corp.
Intermediate Bond Fund P.O. Box 446
Kentucky Tax-Free Fund Portland, Maine 04112
Money Market Fund 207-879-0001
800-811-8258
- - -----------------------------------------------------------------------------
October 17, 1996
Dear Shareholder:
We are pleased to present the August 31, 1996 annual report for the Trans
Adviser Funds. This report includes the five funds: Growth/Value, Aggressive
Growth, Intermediate Bond, Money Market and Kentucky Tax-Free Funds.
The stock market, as measured by the Standard & Poor's 500 Index, performed well
over our first fiscal year, but masked several inconsistent counter-trends. The
technology sector reached a peak in the final three months of 1995 and
subsequently entered into a six-month down-draft period. The good news is that,
for Growth/Value and Aggressive Growth Funds, this afforded us the opportunity
of building our technology positions at valuations that were substantially
discounted from 1995 highs. The bad news, however, is many of these technology
issues either stayed depressed or got even cheaper during this interval.
Happily, trends in the past three to four months are much improved and appear to
validate our decision to maintain a meaningful presence in the growth-oriented
technology sector. The second observation is that smaller stock indices such as
the Russell 2000 Index and the Wilshire Small Cap Index, significantly trailed
the S&P 500 as well as the Dow Jones Industrial Average. We take some comfort
that the performance of Growth/Value and Aggressive Growth was positive in
comparison to these other indices.
The municipal market experienced significant volatility during the Funds' fiscal
year. First, the market experienced a wide rate swing (120 basis points plus a
zigzag movement); second, there was much talk of a flat tax; and third, the lack
of supply, then the tremendous supply, and again the lack of supply within the
municipal market. Most of the year, however, the municipal market's performance
was better than that of the taxable market, especially on the shorter
maturities. For example, rates on the 30-year Government bond first fell by more
than 50 basis points, then rose by more than 100 basis points to 6.95%, before
finally settling to 7.12% at the end of the period. Intermediate Bond, Money
Market, and Kentucky Tax-Free Funds performed in line with representative
benchmarks and are described in more detail later in this report.
We take great pride in the Trans Adviser Funds' first year of operations. In a
short period of one year, we have grown to the $130 million level, confirming
our original vision that there is a broad-based appeal for funds managed locally
that employ our investment style and experience. We are further encouraged that
the Funds will enjoy continued growth as a broader network of investors become
informed about our investment approach and capabilities.
If you have any questions or would like additional information about the Trans
Adviser Funds, please call 800-811-8258. Thank you for choosing to invest with
the Trans Adviser Funds.
/s/GORDON B. DAVIDSON /s/THOMAS A. TRANTUM
- ---------------------- --------------------
GORDON B. DAVIDSON THOMAS A. TRANTUM
Chairman of the Board President
<PAGE>
GROWTH/VALUE FUND MANAGED BY: FRANK MASTRAPASQUA AND THOMAS A. TRANTUM
From inception of the Trans Adviser Growth/Value Equity Fund on September 29,
1995 through August 31, 1996, the Net Asset Value before any applicable sales
charges rose 11.8% compared with the S&P 500 gain of 13.9%. Including all sales
charges, the Fund rose just 6.8%. The positive but somewhat disappointing
relative performance should be viewed from the following three perspectives.
First, the mainstay focus of the Fund throughout the period was in the health
care, medical and drug sectors. This focus provided the Fund with good earnings
visibility, growth characteristics, and reasonable stock valuations. These three
related sectors had a combined concentration level of between 25% and 30% of the
entire portfolio throughout the period.
Second, excessive valuations and less confidence in underlying demand caused a
retrenchment in the technology sector during the final three months of 1995. As
we entered the opening months of 1996, your Fund managers began to accumulate
what they believed to be quality, high growth technology shares at prices that
were significantly off their high points reached in 1995. Unfortunately, the
technology recession extended not only through the spring of 1996, but lasted
well into the summer months before confidence in these issues began to return.
Within our normal three to five year investment timeframe, we remain confident
that our participation in the technology sector will prove to be "well worth the
weight." In fact, we have already witnessed the return to popularity of many
issues we purchased earlier this year.
Third, in the second half of the fiscal year, we have focused on building up
meaningful positions in the oil service sector, which we feel is being
stimulated by new discovery technologies, limited capacity, continuing good
demand, and recent price increases that have been holding well above levels
assumed in consensus earnings models. We also believe the oil service sector may
provide above average potential returns in the next several years while
continuing to exhibit desirable defensive characteristics.
In summary, core holdings in medical/health care have provided good current risk
adjusted valuation performance, while technology and, to a lesser extent, the
oil service sector have represented a bit of a drag on near term performance. In
recent months, however, the oil service sector seems to be reaching the
performance levels that we initially envisioned.
- - ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
TRANS ADVISER GROWTH/VALUE FUND VS. STANDARD & POOR'S 500 INDEX
- - ----------------------------------------------------------------------------
The following chart reflects a comparison of a change in value of a $10,000
investment in the Fund, including reinvested dividends and distributions, and
the performance of the Index. The Index excludes the effect of any fees or sales
charges. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANS ADVISER GROWTH/VALUE STANDARD & POOR'S 500 INDEX
<S> <C> <C>
09/29/95 $9,550 $10,000
10/31/95 $9,388 $9,964
11/30/95 $9,971 $10,401
12/31/95 $10,047 $10,602
01/31/96 $10,410 $10,963
02/29/96 $10,831 $11,065
03/31/96 $10,936 $11,171
04/30/96 $11,327 $11,335
05/31/96 $11,413 $11,626
06/30/96 $11,041 $11,671
07/31/96 $10,220 $11,156
08/31/96 $10,677 $11,391
Value on 8/31/96
Trans Advise Growth/Value Fund $10,677
Standard & Poor...s 500 Index $11,391
Average Annual Total Return
Since Inception on 9/29/95
Trans Advise Growth/Value Fund 6.77%
Standard & Poor...s 500 Index 13.91%
</TABLE>
2 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND MANAGED BY: FRANK MASTRAPASQUA AND THOMAS A. TRANTUM
From inception of the Trans Adviser Aggressive Growth Fund on September 29, 1995
through August 31, 1996, the Net Asset Value before any applicable sales charges
rose 9.5% compared with the NASDAQ Composite Index gain of 9.8%. Including all
sales charges, the Fund rose just 4.6%. A couple of factors should be noted in
this record.
First, while the overall sector strategy pursued in Aggressive Growth Fund was
similar to the strategy employed with the Growth/Value Fund, the technology
sector was given a greater weighting in Aggressive Fund than was the
medical/health care area. Since technology underwent a deeper-than-anticipated
market disfavor, Aggressive Fund's performance lagged that of both the market as
well as Growth/Value Fund.
Second, Aggressive Growth by design is composed of smaller capitalization stocks
which can elevate the Fund's growth prospects but also can raise the Fund's risk
profile. During the period, smaller stock indices, such as the Russell 2000
Index and the Wilshire Small Cap Index, significantly trailed the S&P 500. We
remain confident that over the long term (three to five years) the higher risks
can be adequately rewarded through compensatory returns.
- - ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
TRANS ADVISER AGGRESSIVE GROWTH FUND VS. NASDAQ INDEX
- - ----------------------------------------------------------------------------
The following chart reflects a comparison of a change in value of a $10,000
investment in the Fund, including reinvested dividends and distributions, and
the performance of the Index. The Index excludes the effect of any fees or sales
charges. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANS ADVISER AGGRESSIVE GROWTH FUND NASDAQ INDEX
<S> <C> <C>
9/29/95 $9,550 $10,000
10/31/95 $9,044 $9,930
11/30/95 $9,578 $10,157
12/31/95 $9,502 $10,097
1/31/96 $9,473 $10,174
2/29/96 $10,065 $10,567
3/31/96 $10,352 $10,580
4/30/96 $11,394 $11,438
5/31/96 $11,365 $11,948
6/30/96 $10,706 $11,390
7/31/96 $9,808 $10,387
8/31/96 $10,457 $10,976
Value on 8/31/96
Trans Advise Aggressive Growth Fund $10,457
NASDAQ Index $10,976
Average Annual Total Return
Since Inception on 9/29/95
Trans Advise Aggressive Growth Fund 4.57%
NASDAQ Index 9.76%
</TABLE>
3 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND MANAGED BY: MARSHALL E. COX, JR.
From inception of the Intermediate Bond Fund on October 3, 1995 through August
31, 1996 the Net Asset Value before any applicable sales charges rose 3.2%
compared with the Lehman Brothers Intermediate Govt./Corp. Index gain of 3.7%.
Including all sales charges, the Fund lost 1.41%. The relative performance
should be viewed from the following perspectives.
The Fund's fiscal year witnessed huge volatility, as measured by the 30-year
Government bond. Rates on the 30-year Government bond first fell by more than 50
basis points, and then rose by more than 100 basis points to 6.95%, before
finally recovering to 7.12% at the end of the period.
The Fund continues to attract assets and remains well positioned to participate
in a rallying bond market with an average duration of 4.4 years and an average
maturity of 6.45 years, as of the end of the period. The Fund's securities
currently are of very high quality, being comprised of 42% US government
securities with only 11% of the Fund's securities rated BBB. The Fund also
remains well diversified among 46 issues with consumer and commercial finance,
banking, insurance, electric, telephone, natural gas and pipeline, retail and
industrial consumer, oil, metals and chemicals all represented.
- - -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
TRANS ADVISER INTERMEDIATE BOND FUND VS. LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE INDEX
- - ----------------------------------------------------------------------------
The following chart reflects a comparison of a change in value of a $10,000
investment in the Fund, including reinvested dividends and distributions, and
the performance of the Index. The Index excludes the effect of any fees or sales
charges. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANS ADVISER INTERMEDIATE BOND FUND LEHMAN INTERMEDIATE GOVT./CORP. INDEX
<S> <C> <C>
10/03/95 $9,550 $10,000
10/31/95 $9,599 $10,111
11/30/95 $9,701 $10,243
12/31/95 $9,782 $10,351
01/31/96 $9,873 $10,440
02/29/96 $9,779 $10,318
03/31/96 $9,756 $10,265
04/30/96 $9,709 $10,229
05/31/96 $9,725 $10,221
06/30/96 $9,842 $10,329
07/31/96 $9,865 $10,360
08/31/96 $9,859 $10,369
Value on 8/31/96
Trans Advise Intermediate Bond Fund
Lehman IntermediateGovt./Corp. Index
Average Annual Total Return
Since Inception on 10/3/95
Trans Advise Intermediate Bond Fund -1.41%
Lehman IntermediateGovt./Corp. Index 3.69%
</TABLE>
4 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND MANAGED BY: MARSHALL E. COX, JR.
From inception of the Kentucky Tax-Free Fund on September 27, 1995 through
August 31, 1996 the Net Asset Value before any applicable sales charges rose
5.8% compared with the Lehman Brothers Municipal Index gain of 4.6%. Including
all sales charges, the Fund rose just 1.0%. The relative performance should be
viewed from the following perspectives.
The municipal market in Kentucky experienced significant volatility during the
Fund's fiscal year. First, the market experienced a wide rate swing (120 basis
points plus a zigzag movement); second, there was much talk of a flat tax; and
third, the lack of supply, then the tremendous supply, and again the lack of
supply within the municipal market. Most of the year, however, the municipal
market's performance was better than that of the taxable market, as measured by
the 30-year Government bond.
Also contributing to the Fund's performance was the fact that the quality of the
Fund's securities is up significantly, with 91% of the securities rated A or
better. In addition, duration has been shortened substantially to 5.5 years,
with an average maturity of 7.9 years. This selective shortening of the duration
dramatically improved the convexity of the Fund (the concept that measures
sensitivity of the market price to changes in the interest rate levels). The
result is that in an improving municipal market, the Fund may perform well
without having a substantial number of bonds called away and in a deteriorating
market, the losses can be limited because of the much shorter duration and
maturity. We feel the limited duration and better convexity, along with the very
high quality of the Fund's securities, will position this Fund more
conservatively while not sacrificing yield.
- - ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
TRANS ADVISER KENTUCKY TAX-FREE FUND VS. LEHMAN MUNICIPAL INDEX
- - ----------------------------------------------------------------------------
The following chart reflects a comparison of a change in value of a $10,000
investment in the Fund, including reinvested dividends and distributions, and
the performance of the Index. The Index excludes the effect of any fees or sales
charges. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF
FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANS ADVISER KENTUCKY TAX-FREE FUND LEHMAN MUNICIPAL INDEX
<S> <C> <C>
9/27/95 $9,550 $10,000
10/31/95 $9,800 $10,145
11/30/95 $9,986 $10,313
12/31/95 $10,109 $10,412
1/31/96 $10,175 $10,492
2/29/96 $10,101 $10,420
3/31/96 $9,979 $10,287
4/30/96 $9,963 $10,258
5/31/96 $9,962 $10,254
6/30/96 $9,944 $10,366
7/31/96 $10,109 $10,459
8/31/96 $10,104 $10,457
Value on 8/31/96
Trans Advise Kentucky Tax-Free Fund $10,104
Lehman Municipal Index $10,457
Average Annual Total Return
Since Inception on 9/27/95
Trans Advise Kentucky Tax-Free Fund 1.04%
Lehman Municipal Index 4.57%
</TABLE>
5 TRANS ADVISER FUNDS, INC.
<PAGE>
GROWTH/VALUE FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
COMMON STOCK (95.2%):
AMUSEMENT & RECREATION SERVICES (3.3%):
10,000 Harrah's Entertainment, Inc.*.... $ 190,000
10,000 Promus Hotel Corporation*........ 301,250
-------------
491,250
-------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE STATIONS (1.4%):
7,500 Autozone, Inc.*.................. 204,375
-------------
BUSINESS SERVICES (7.1%):
20,000 ADT Ltd.*........................ 392,500
6,000 Oracle Corporation*.............. 211,500
10,000 SCB Computer Technology, Inc.*... 192,500
5,000 Sun Microsystems, Inc.*.......... 271,875
-------------
1,068,375
-------------
CHEMICALS & ALLIED PRODUCTS (7.6%):
4,000 Bristol-Myers Squibb Company..... 351,000
6,000 Merck & Company, Inc. ........... 393,750
7,000 Schering-Plough Corporation...... 391,125
-------------
1,135,875
-------------
COMMUNICATIONS (1.0%):
10,000 Tele-Communications, Inc.*....... 148,750
-------------
DEPOSITORY INSTITUTIONS (4.9%):
10,000 Carolina First Corporation....... 188,750
10,000 MBNA Corporation................. 303,750
10,000 Signet Banking Corporation....... 241,250
-------------
733,750
-------------
EATING & DRINKING PLACES (3.5%):
7,500 McDonald's Corporation........... 347,812
20,000 Shoney's, Inc.*.................. 182,500
-------------
530,312
-------------
ELECTRIC, GAS, & SANITARY SERVICES (2.9%):
10,000 Sonat, Inc. ..................... 441,250
-------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT &
COMPONENTS, EXCEPT COMPUTER EQUIPMENT (1.2%):
5,000 Novellus Systems, Inc.*.......... 188,750
-------------
FOOD STORES (2.1%):
7,500 Kroger Company*.................. 317,813
-------------
FOOD & KINDRED PRODUCTS (0.4%):
15,000 Monterey Pasta Company*.......... 67,500
-------------
GENERAL MERCHANDISE STORES (1.8%):
6,000 Sears, Roebuck and Company....... 264,000
-------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
HEALTH SERVICES (9.6%):
10,000 Beverly Enterprises*............. $ 102,500
5,000 Columbia HCA Healthcare
Corporation.................... 281,875
2,345 Healthsouth Rehabilitation
Corporation*................... 75,919
10,000 Living Centers of America,
Inc.*.......................... 267,500
1,000 Quorum Health Group, Inc.*....... 25,250
15,000 Tenet Healthcare Corporation*.... 315,000
12,000 Vencor, Inc.*.................... 376,500
-------------
1,444,544
-------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER
EQUIPMENT (13.4%):
10,000 Hewlett-Packard Company.......... 437,500
5,000 International Business Machines
Corporation.................... 571,875
10,000 Lam Research Corporation*........ 236,250
5,000 Seagate Technology, Inc.*........ 240,000
15,000 Western Digital Corporation*..... 526,875
-------------
2,012,500
-------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (1.8%):
10,000 Tech-Sym Corporation*............ 277,500
-------------
MISCELLANEOUS RETAIL (3.6%):
6,000 Friedman's, Inc. Class A*........ 126,000
10,000 Melville Corporation............. 422,500
-------------
548,500
-------------
MOTION PICTURES (0.8%):
2,000 The Walt Disney Company.......... 114,000
-------------
NONDEPOSITORY CREDIT INSTITUTIONS (3.5%):
5,000 American Express Company......... 218,750
10,000 Capital One Financial
Corporation.................... 301,250
-------------
520,000
-------------
OIL & GAS EXTRACTION (5.4%):
10,000 Nuevo Energy Company*............ 373,750
6,500 Pride Petroleum Services, Inc.*.. 93,438
4,000 Schlumberger, Ltd. .............. 337,500
-------------
804,688
-------------
PHARMACEUTICAL PREPARATIONS (3.2%):
8,000 American Home Products
Corporation.................... 474,000
-------------
</TABLE>
See notes to financial statements. 6 TRANS ADVISER FUNDS, INC.
<PAGE>
GROWTH/VALUE FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
TRANSPORTATION EQUIPMENT (1.5%):
2,500 Boeing Company................... $ 226,250
-------------
TRANSPORTATION SERVICES (1.3%):
15,000 United Transnet, Inc.*........... 195,000
-------------
TRANSPORTATION BY AIR (1.5%):
10,000 Southwest Airlines Company....... 228,750
-------------
WATER TRANSPORTATION (2.6%):
10,000 Tidewater, Inc. ................. 383,750
-------------
WHOLESALE TRADE--DURABLE GOODS (8.6%):
6,000 Arrow Electronics Inc.*.......... 273,750
4,000 Avnet, Inc. ..................... 187,000
5,000 Lockheed Martin Corporation...... 420,625
15,000 Sybron International
Corporation-Wisconsin*......... 412,500
-------------
1,293,875
-------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
WHOLESALE TRADE--NONDURABLE GOODS (1.2%):
5,000 Safeway, Inc.*................... $ 181,250
-------------
Total Common Stock
(cost $14,053,526)......................... 14,296,607
-------------
SHORT-TERM HOLDINGS (4.8%):
16,152 1784 U.S. Treasury Money Market
Fund........................... 16,152
711,813 Forum Daily Assets Treasury
Fund........................... 711,813
-------------
Total Short-Term Holdings
(cost $727,965)............................ 727,965
-------------
Total Investments (100.0%)
(cost $14,781,491)......................... $ 15,024,572
-------------
-------------
</TABLE>
*Non-income producing security.
See notes to financial statements. 7 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
COMMON STOCK (98.9%):
AMUSEMENT & RECREATION SERVICES (3.8%):
5,000 Harrah's Entertainment, Inc.*..... $ 95,000
5,000 Promus Hotel Corporation*......... 150,625
------------
245,625
------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE
STATIONS (1.9%):
10,000 Rush Enterprises, Inc.*........... 125,000
------------
BUSINESS SERVICES (12.1%):
10,000 ADT Ltd.*......................... 196,250
10,000 Cerplex Group*.................... 68,750
5,000 Oracle Corporation*............... 176,250
9,500 SCB Computer Technology, Inc.*.... 182,875
3,000 Sun Microsystems, Inc.*........... 163,125
------------
787,250
------------
CHEMICALS & ALLIED PRODUCTS (1.6%):
10,000 NABI, Inc.*....................... 106,250
------------
COMMUNICATIONS (1.1%):
5,000 Mobile Telecommunication Tech
Corp*........................... 69,375
------------
DEPOSITORY INSTITUTIONS (2.9%):
10,000 Carolina First Corporation........ 188,750
------------
EATING & DRINKING PLACES (4.9%):
6,000 Quality Dining, Inc.*............. 176,250
16,000 Shoney's, Inc.*................... 146,000
------------
322,250
------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT &
COMPONENTS, EXCEPT COMPUTER EQUIPMENT (2.3%):
4,000 Novellus Systems, Inc.*........... 151,000
------------
FOOD STORES (2.3%):
3,500 Kroger Company*................... 148,312
------------
FOOD & KINDRED PRODUCTS (0.7%):
10,000 Monterey Pasta Company*........... 45,000
------------
GENERAL MERCHANDISE STORES (1.2%):
2,000 Consolidated Stores
Corporation*.................... 76,000
------------
HEALTH SERVICES (11.9%):
7,500 Living Centers of America, Inc.*.. 200,625
2,000 Quorum Health Group, Inc.*........ 50,500
10,000 Tenet Healthcare Corporation*..... 210,000
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
HEALTH SERVICES, CONTINUED:
10,000 Vencor, Inc.*..................... $ 313,750
------------
774,875
------------
HOLDING & OTHER INVESTMENT OFFICES (0.5%):
1,000 Felcor Suite Hotels, Inc. ........ 30,500
------------
HOME FURNITURE, FURNISHINGS, & EQUIPMENT
STORES (1.2%):
5,000 Movie Gallery, Inc.*.............. 76,250
------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER
EQUIPMENT (14.4%):
4,000 Hewlett-Packard Company........... 175,000
8,000 Lam Research Corporation*......... 189,000
15,000 Smart Modular Technologies*....... 225,000
10,000 Western Digital Corporation*...... 351,250
------------
940,250
------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (2.5%):
6,000 Tech-Sym Corporation*............. 166,500
------------
MISCELLANEOUS RETAIL (3.5%):
6,000 Friedman's, Inc. Class A*......... 126,000
2,500 Melville Corporation.............. 105,625
------------
231,625
------------
NONDEPOSITORY CREDIT INSTITUTIONS (4.6%):
6,000 Capital One Financial
Corporation..................... 180,750
5,000 Olympic Financial, Ltd.*.......... 122,500
------------
303,250
------------
OIL & GAS EXTRACTION (7.9%):
8,000 Nuevo Energy Company*............. 299,000
15,000 Pride Petroleum Services, Inc.*... 215,625
------------
514,625
------------
TRANSPORTATION SERVICES (5.1%):
10,000 Simon Transportation Services*.... 137,500
15,000 United Transnet, Inc.*............ 195,000
------------
332,500
------------
TRANSPORTATION BY AIR (2.5%):
5,000 Southwest Airlines Company........ 114,375
5,000 Western Pacific Airlines, Inc.*... 50,625
------------
165,000
------------
WATER TRANSPORTATION (3.5%):
6,000 Tidewater, Inc. .................. 230,250
------------
</TABLE>
See notes to financial statements. 8 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
WHOLESALE TRADE--DURABLE GOODS (2.1%):
5,000 Sybron International
Corporation-Wisconsin*.......... $ 137,500
------------
WHOLESALE TRADE--NONDURABLE GOODS (4.4%):
7,500 AmeriSource Health Corporation*... 285,938
------------
Total Common Stock
(cost $6,393,306)........................... 6,453,875
------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
SHORT-TERM HOLDINGS (1.1%)
576 1784 U.S. Treasury Money Market
Fund............................ $ 576
72,947 Forum Daily Assets Treasury
Fund............................ 72,947
------------
Total Short-Term Holdings
(cost $73,523).............................. 73,523
------------
Total Investments (100.0%)
(cost $6,466,829)........................... $ 6,527,398
------------
------------
</TABLE>
*Non-income producing security.
See notes to financial statements. 9 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (7.9%):
$ 290,038 Federal Home Loan Mortgage
Corporation, Series 1072,
Class G, 7.00%, due
5/15/06...................... $ 289,228
800,000 Federal Home Loan Mortgage
Corporation, Series 1720,
Class E, 7.50% due
12/15/09..................... 797,647
-------------
Total Collateralized Mortgage Obligations
(cost $1,118,738).......................... 1,086,875
-------------
FIXED RATE BONDS--CORPORATE (55.4%):
686,000 Alabama Power Company, 8.30%,
due 7/1/22................... 684,720
400,000 Anheuser-Busch Companies,
7.00%, due 9/1/05............ 388,401
178,000 Anheuser-Busch Companies,
8.75%, due 12/1/99........... 187,100
169,000 Associates Corporation of North
America, 6.00%, due
3/15/00...................... 164,005
250,000 B.P. America, 6.50%, due
12/15/99..................... 245,774
50,000 Berkley W.R. Corporation,
9.875%, due 5/15/08.......... 57,698
190,000 The Chase Manhattan
Corporation, 8.00%, due
5/15/04...................... 191,230
115,000 Citicorp, 10.75%, due
12/15/15..................... 118,364
146,000 Citicorp, 10.50%, due 2/1/16... 149,355
140,000 Commonwealth Edison Company,
9.50%, due 5/1/16............ 146,775
160,000 Florida Power & Light Company,
8.00%, due 8/25/22........... 156,388
100,000 Ford Motor Credit Company,
5.83%, due 6/29/98........... 98,648
160,000 Ford Motor Credit Company,
7.50%, due 1/15/03........... 161,039
160,000 GTE of Southeast Corporation,
8.00%, due 12/1/01........... 160,812
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE BONDS--CORPORATE, CONTINUED:
$ 130,000 General Electric Capital
Corporation, 6.66%, due
5/1/18....................... $ 128,744
69,000 Georgia Power Company First
Mortgage Bonds, 7.95%, due
2/1/23....................... 67,860
250,000 Greyhound Financial
Corporation, 7.82%, due
1/27/03...................... 253,009
250,000 IBM Credit Corporation, 6.20%,
due 3/19/01.................. 239,773
300,000 Inco, Ltd., 9.60%, due
6/15/22...................... 317,897
120,000 Jersey Central Power & Light
Company, 9.20%, due 7/1/21... 128,346
46,000 Kaiser Permanente, 9.55%, due
7/15/05...................... 52,472
56,000 Kraft, Inc., 8.50%, due
2/15/17...................... 56,264
200,000 Michigan Bell Telephone
Company, 6.375%, due
2/1/05....................... 188,882
175,000 Pacific Gas & Electric Company,
6.625%, due 6/1/00........... 170,867
439,000 Pennsylvania Power & Light
Company, 9.25%, due
10/1/19...................... 468,786
120,000 Public Service Electric & Gas
Company, 8.75%, due
11/1/21...................... 128,669
165,000 Questar Pipeline, 9.375%, due
6/1/21....................... 180,413
70,000 Rohm & Haas Company, 9.80%, due
4/15/20...................... 83,520
50,000 Sara Lee Corporation, 8.75%,
due 5/15/16.................. 51,814
675,000 Shopko Stores, 9.25%, due
3/15/22...................... 693,309
200,000 Southern California Edison,
7.375%, due 12/15/03......... 203,407
85,000 Southwestern Public Service
Company, 8.20%, due
12/1/22...................... 86,728
</TABLE>
See notes to financial statements. 10 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE BONDS--CORPORATE, CONTINUED:
$ 199,000 TJX Companies, Inc., 9.50%, due
5/2/16....................... $ 206,408
68,000 U.S. Leasing International,
6.625%, due 5/15/03.......... 65,228
130,000 Union Electric Company, 8.00%,
due 12/15/22................. 128,740
500,000 Union Oil of California
Corporation, 6.70%, due
10/15/07..................... 463,422
250,000 Washington Gas Light Company,
6.50%, due 1/14/97........... 250,778
65,000 Wisconsin Electric Power,
7.75%, due 1/15/23........... 63,377
-------------
Total Fixed Rate Bonds--Corporate
(cost $7,817,554).......................... 7,589,022
-------------
FIXED RATE NOTES--AGENCY (7.1%):
500,000 Federal Home Loan Bank, 6.62%,
due 12/6/00.................. 487,668
150,000 Federal National Mortgage
Association, 6.17%, due
12/2/03...................... 141,364
265,000 Tennessee Valley Authority,
6.875%, due 1/15/02.......... 261,356
50,000 Tennessee Valley Authority,
6.875%, due 8/1/02........... 49,128
30,000 Tennessee Valley Authority,
8.05%, due 7/15/24........... 29,261
-------------
Total Fixed Rate Notes--Agency
(cost $998,362)............................ 968,777
-------------
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
REPURCHASE AGREEMENTS (15.3%):
$ 2,101,575 The First Boston Corporation,
5.30%, due 9/3/96, to be
repurchased at 2,102,813
(collateralized by
$16,050,000 Federal National
Mortgage Association, pool
#339017, 6.092%, due
12/1/35)..................... $ 2,101,575
-------------
Total Repurchase Agreements
(cost $2,101,575).......................... 2,101,575
-------------
TREASURY NOTES (14.2%):
2,000,000 U.S. Treasury Notes, 6.50%, due
8/15/05...................... 1,943,750
-------------
Total Treasury Notes
(cost $1,986,601).......................... 1,943,750
-------------
SHORT-TERM HOLDINGS (0.1%):
5,006 1784 U.S. Treasury Money Market
Fund......................... 5,006
-------------
Total Short-Term Holdings
(cost $5,006).............................. 5,006
-------------
Total Investments (100.0%)
(cost $14,027,836)......................... $ 13,695,005
-------------
-------------
</TABLE>
See notes to financial statements. 11 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - -------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
MUNICIPAL BONDS (100.0%):
AIRPORT REVENUE (5.0%):
$ 750,000 Kenton County, KY, Airport
Revenue Bonds, MBIA insured,
5.75%, due
3/1/13....................... $ 733,125
50,000 Lexington-Fayette Urban County
Airport Corporation, KY,
First Mortgage Revenue Bonds,
7.75%, due 4/1/08............ 53,937
-------------
787,062
-------------
ECONOMIC DEVELOPMENT REVENUE (15.3%):
100,000 Covington, KY, Municipal
Properties Corporation
Revenue Bonds, Series A,
8.25%, due 8/1/10,
prerefunded 8/1/98 at 103.... 109,875
490,000 Jefferson County, KY, Capital
Projects Corporation Revenue
Bonds, Series A, 5.65%, due
8/15/03...................... 508,987
100,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #26 Second
Series, 7.10%, due 12/1/97... 103,500
110,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #27, 7.10%,
due 5/1/06, prerefunded
11/1/96
at 102....................... 112,773
50,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #27, 7.10%,
due 5/1/08, prerefunded
11/1/96
at 102....................... 51,260
100,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #30 Fifth
Series, 7.00%, due 12/1/96... 100,792
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
ECONOMIC DEVELOPMENT REVENUE, CONTINUED:
$ 70,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #32 Third
Series, 6.50%, due 12/1/99... $ 73,762
65,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #51, escrowed
to maturity, 6.00%, due
8/1/97....................... 66,159
455,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #51, escrowed
to maturity, 6.30%, due
8/1/01....................... 482,869
100,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #52, 6.50%,
due 8/1/11, prerefunded
8/1/01 at 102................ 109,125
425,000 Kentucky State Turnpike
Authority, Economic
Development Revenue Bonds,
Revitalization Projects,
escrowed to maturity, 7.00%,
due 5/15/99.................. 452,094
200,000 Kentucky State Turnpike
Authority, Economic
Development Revenue Bonds,
7.25%, due 5/15/10,
prerefunded 5/15/00 at
101.50....................... 219,750
-------------
2,390,946
-------------
EDUCATION FACILITIES REVENUE (19.9%):
350,000 Fayette County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, Series C, 5.25%, due
10/1/09...................... 334,687
</TABLE>
See notes to financial statements. 12 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
EDUCATION FACILITIES REVENUE, CONTINUED:
$ 365,000 Fayette County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, Series C, 5.25%, due
10/1/10...................... $ 346,750
200,000 Hopkins County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, 5.70%, due 6/1/06..... 204,250
495,000 Jefferson County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, Series A, 4.875%, due
1/1/11....................... 449,831
750,000 Jefferson County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, Series A, MBIA
insured, 5.00%, due 2/1/07... 731,250
70,000 Lexington-Fayette Urban County
Government, KY, School
Building Revenue Bonds,
6.80%, due 10/1/01........... 76,300
770,000 Pendleton County, KY, School
District Finance Corporation,
School Building Revenue
Bonds, 5.05%, due 12/1/15.... 685,300
200,000 University of Louisville, KY,
Revenue Bonds, Series H,
5.875%, due 5/1/12........... 201,750
70,000 University of Louisville, KY,
Revenue Bonds, Series G,
6.25%, due 5/1/99............ 72,103
-------------
3,102,221
-------------
GENERAL OBLIGATION (1.8%):
305,000 Fern Creek, KY, Fire Protection
District, Holding Company,
Inc., Revenue Bonds, Fire
Station #2, 5.75%, due
1/15/14...................... 286,319
-------------
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
HEALTH CARE REVENUE (13.2%):
$ 385,000 Jefferson County, KY, Hospital
Revenue Bonds, NKC Hospitals,
Inc. Project, MBIA insured,
7.75%, due 10/1/14,
prerefunded 10/01/97 at
102.......................... $ 407,492
1,225,000 Kentucky Economic Development
Finance Authority, Hospital
Facilities Revenue Bonds,
Society National Bank LOC,
5.75%, due 11/1/05........... 1,211,219
475,000 Kentucky Economic Development
Finance Authority, Hospital
Facilities Revenue Bonds,
Baptist Healthcare System
Project, MBIA insured, 5.00%,
due 8/15/24.................. 408,500
40,000 McCracken County, KY, Revenue
Bonds, Lourdes Hospital,
Inc., 6.00%, due 11/1/12,
prerefunded 11/1/96 at 100... 40,146
-------------
2,067,357
-------------
HOUSING REVENUE (6.6%):
725,000 Boone County, KY, Public
Properties Corporation
Revenue Bonds, Sewer System
Lease, 5.15%, due 12/1/12.... 667,000
270,000 Greater Kentucky Housing
Assistance Corporation,
Mortgage Revenue Bonds,
FHA/Section 8 Assisted
Project, Series A, MBIA/ FHA
insured, 6.25%, due 7/1/22... 270,337
100,000 Jefferson County, KY, Capital
Projects Corporation Revenue
Bonds, Series A, 0.00%
(5.747% effective yield), due
8/15/99...................... 86,750
-------------
1,024,087
-------------
</TABLE>
See notes to financial statements. 13 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
INDUSTRIAL DEVELOPMENT REVENUE (6.1%):
$ 750,000 Clark County, KY, Industrial
Building Revenue Bonds,
Southern Wood Project, 7.00%,
due 12/1/08+................. $ 746,250
200,000 Wickliffe, KY, Industrial
Building Revenue Bonds,
Westvaco Corporation Project,
7.00%, due 1/1/09............ 199,956
-------------
946,206
-------------
JAIL FACILITIES REVENUE (0.7%):
100,000 Kentucky Local Correctional
Facilities Construction
Authority Revenue Bonds,
7.00%, due 11/1/14,
prerefunded 11/1/97 at 102... 105,250
-------------
OTHER REVENUE (6.1%):
475,000 Kentucky Higher Education
Student Loan Corporation,
Insured Student Loan Revenue
Bonds, Series B, 6.40%, due
6/1/00....................... 503,500
300,000 Lexington-Fayette Urban County,
KY, Government Public
Facilities Corporation
Revenue Bonds, Recreation
Project, 7.90%, due 7/1/06,
prerefunded 7/1/97 at 102.... 315,480
120,000 Puerto Rico Public Buildings
Authority Guaranteed Revenue
Bonds, Series K, 6.875%, due
7/1/21, prerefunded 7/1/02 at
101.50....................... 134,400
-------------
953,380
-------------
POLLUTION CONTROL REVENUE (17.7%):
450,000 Ashland, KY, Pollution Control
Revenue Bonds, Ashland Oil,
7.375%, due 7/1/09........... 483,750
295,000 Ashland, KY, Solid Waste
Revenue Bonds, Ashland Oil,
Inc., Project, 7.20%, due
10/1/20...................... 310,488
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
POLLUTION CONTROL REVENUE, CONTINUED:
$ 235,000 Jefferson County, KY, Pollution
Control Revenue Bonds,
Louisville Gas & Electric
Company Project A, 7.45%, due
6/15/15...................... $ 255,269
100,000 Kentucky State Pollution
Abatement & Water Reserve
Finance Authority Revenue
Bonds, Series A, escrowed to
maturity, 7.40%, due
8/1/02....................... 112,875
50,000 Louisville & Jefferson County,
KY, Metropolitan Sewer
District, Sewer & Drain
System Revenue Bonds, Series
A, AMBAC insured, 6.50%, due
5/15/00...................... 52,938
455,000 Meade County, KY, Pollution
Control Revenue Bonds, Olin
Corporation Project, 6.00%,
due 7/1/07................... 457,707
385,000 Trimble County, KY, Pollution
Control Revenue Bonds, Series
A, 7.625%, due 11/1/20,
prerefunded 11/1/00 at 102... 430,719
600,000 Trimble County, KY, Pollution
Control Revenue Bonds, Series
A, 7.625%, due 11/1/20....... 659,250
-------------
2,762,996
-------------
TRANSPORTATION REVENUE (6.1%):
655,000 Kentucky State Turnpike
Authority Resource Recovery
Road Revenue Bonds, escrowed
to maturity, 6.125%, due
7/1/07....................... 674,650
275,000 Kentucky State Turnpike
Authority Resource Recovery
Road Revenue Bonds, Series A,
FGIC insured, 6.00%, due
7/1/09....................... 275,405
-------------
950,055
-------------
</TABLE>
See notes to financial statements. 14 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
UTILITIES REVENUE (1.5%):
$ 200,000 Owensboro, KY, Electric Light &
Power Revenue Bonds, Series
A, 10.25%, due 1/1/09,
prerefunded 1/1/00 at 102.... $ 232,250
-------------
Total Municipal Bonds
(cost $15,867,871)......................... 15,608,129
-------------
Total Investments (100.0%)
(cost $15,867,871)......................... $ 15,608,129
-------------
-------------
</TABLE>
+Securities that may be resold to
"qualified institutional buyers"
under rule 144a or securities offered
pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
These securities have been determined
to be liquid under guidelines
established by the Board of
Directors.
See notes to financial statements. 15 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
ASSET BACKED SECURITIES (0.4%):
$ 274,424 Federal Home Loan Mortgage
Corporation, 7.00%, due
4/1/97....................... $ 275,191
-------------
DISCOUNT NOTES--AGENCY (19.8%):
15,015,000 Federal Home Loan Mortgage
Corporation, 5.293% yield,
9/5/96....................... 15,010,662
-------------
FIXED RATE NOTES--AGENCY (4.2%):
100,000 Federal Home Loan Bank, 4.75%,
due 1/13/97.................. 99,641
100,000 Federal Home Loan Bank, 4.57%,
due 2/3/97................... 99,492
100,000 Federal Home Loan Bank, 4.80%,
due 7/24/97.................. 98,810
100,000 Federal Home Loan Mortgage
Corporation, 4.525%, due
1/27/97...................... 99,521
220,000 Federal Land Bank, 7.95%, due
10/21/96..................... 220,645
1,100,000 Federal National Mortgage
Association, 4.50%, due
11/1/96...................... 1,097,763
400,000 Tennessee Valley Authority,
8.25%, due 11/15/96.......... 401,897
230,000 Tennessee Valley Authority,
4.60%, due 12/15/96.......... 229,209
861,000 Tennessee Valley Authority,
6.00%, due 1/15/97........... 861,380
-------------
Total Fixed Rate Notes--Agency............... 3,208,358
-------------
FIXED RATE NOTES--CORPORATE (59.2%):
175,000 AT&T Capital Corporation,
7.66%, due 1/30/97........... 176,132
355,000 American Express Credit
Corporation, 7.875%, due
12/1/96...................... 356,681
1,128,000 American Express Credit
Corporation, 7.75%, due
3/1/97....................... 1,138,977
75,000 American General Finance
Corporation, 7.15%, due
5/15/97...................... 75,568
80,000 American Home Products
Corporation, 6.875%, due
4/15/97...................... 80,322
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 660,000 Associates Corporation of North
America, 7.50%, due
10/15/96..................... $ 661,211
215,000 Associates Corporation of North
America, 8.70%, due 1/1/97... 216,815
395,000 Associates Corporation of North
America, 6.875%, due
1/15/97...................... 396,372
50,000 Associates Corporation of North
America, 9.70%, due 5/1/97... 51,165
290,000 Associates Corporation of North
America, 8.625%, due
6/15/97...................... 295,124
1,520,000 Bankers Trust New York
Corporation, 7.25%, due
11/1/96...................... 1,523,248
190,000 Bausch & Lomb, Inc., 6.80%, due
12/12/96..................... 190,519
50,000 Baxter International, Inc.,
7.50%, due 5/1/97............ 50,470
985,000 CIGNA Corporation, 8.00%, due
9/1/96....................... 985,000
245,000 CIT Group Holdings, Inc.,
8.00%, due 1/13/97........... 246,744
90,000 CIT Group Holdings, Inc.,
8.75%, due 7/1/97............ 91,839
2,000,000 CSX Transportation, Inc.,
5.93%, due 6/1/97............ 1,999,743
75,000 Caterpillar Financial Services
Corporation, 9.125%, due
12/15/96..................... 75,642
230,000 The Chase Manhattan
Corporation, 7.875%, due
1/15/97...................... 231,566
150,000 Chrysler Financial Corporation,
4.99%, due 2/3/97............ 149,431
256,000 Citicorp, 8.75%, due 11/1/96... 257,153
450,000 Commercial Credit Company,
8.00%, due 9/1/96............ 450,000
250,000 Commercial Credit Company,
6.75%, due 1/15/97........... 250,765
500,000 Commercial Credit Company,
8.125%, due 3/1/97........... 506,313
</TABLE>
See notes to financial statements. 16 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 100,000 Discover Credit, 7.98%, due
4/7/97....................... $ 101,067
1,929,000 Dupont Corporation, 8.45%, due
10/15/96..................... 1,934,870
250,000 Fireman's Federal Mortgage,
8.25%, due 11/1/96........... 250,746
531,000 First Union Corporation,
8.125%, due 12/15/96......... 534,341
195,000 Ford Holdings, Inc., 9.25%, due
7/15/97...................... 199,794
503,000 Ford Motor Company, 7.875%, due
10/15/96..................... 504,104
1,007,000 Ford Motor Credit Company,
8.00%, due 10/1/96........... 1,008,560
324,000 Ford Motor Credit Company,
8.00%, due 12/1/96........... 325,584
450,000 Ford Motor Credit Company,
7.875%, due 1/15/97.......... 453,260
25,000 Ford Motor Credit Company,
5.625%, due 3/3/97........... 24,962
132,000 Ford Motor Credit Company,
6.80%, due 8/15/97........... 132,772
500,000 General Electric Capital
Corporation, 7.46%, due
9/30/96...................... 500,556
1,345,000 General Electric Capital
Corporation, 8.75%, due
11/26/96..................... 1,353,619
294,000 General Electric Capital
Corporation, 8.00%, due
2/1/97....................... 296,320
1,319,000 General Motors Acceptance
Corporation, 8.00%, due
10/1/96...................... 1,321,094
500,000 General Motors Acceptance
Corporation, 5.00%, due
1/27/97...................... 498,068
400,000 General Motors Acceptance
Corporation, 7.65%, due
2/4/97....................... 403,086
602,000 General Motors Corporation,
7.625%, due 2/15/97.......... 606,151
545,000 Hospital Corporation of
America, 9.00%, due
3/15/97...................... 553,258
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 130,000 Household Finance Corporation,
7.80%, due 11/1/96........... $ 130,423
70,000 ITT Corporation, 7.25%, due
11/15/96..................... 70,132
560,000 International Lease Finance
Corporation, 7.90%, due
10/1/96...................... 560,843
440,000 International Lease Finance
Corporation, 4.75%, due
1/15/97...................... 438,099
500,000 International Lease Finance
Corporation, 6.35%, due
1/15/97...................... 500,705
100,000 International Lease Finance
Corporation, 5.875%, due
2/1/97....................... 99,909
275,000 International Lease Finance
Corporation, 5.50%, due
4/1/97....................... 273,994
75,000 John Deere Capital, 4.625%, due
9/2/96....................... 75,000
90,000 Lehman Brothers Holdings, Inc.,
8.375%, due 4/1/97........... 91,155
247,000 MGM Grand Hotels Financial
Corporation, Defeased,
11.75%, due 5/1/97........... 260,637
200,000 MGM Grand Hotels Financial
Corporation, Defeased,
12.00%, due 5/1/97........... 217,831
45,000 Merck & Company, Inc., 6.00%,
due 1/15/97.................. 44,989
1,200,000 Morgan Stanley Group, Inc.,
7.32%, due 1/15/97........... 1,206,451
432,000 NationsBank Corporation, 8.50%
due 11/1/96.................. 433,784
250,000 New Zealand Government, 8.25%,
due 9/25/96.................. 250,355
100,000 Northern Illinois Gas, 5.50%,
due 2/1/97................... 99,836
700,000 Norwest Financial, Inc., 4.89%,
due 11/15/96................. 698,820
375,000 Norwest Financial, Inc., 7.10%,
due 11/15/96................. 375,857
130,000 Norwest Financial, Inc., 6.00%,
due 8/15/97.................. 129,701
</TABLE>
See notes to financial statements. 17 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (continued)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 110,000 Oklahoma Gas & Electric
Company, 5.125%, due
1/1/97....................... $ 109,700
100,000 Paccar Financial Corporation,
5.12%, due 3/10/97........... 99,575
250,000 Pacific Gas & Electric Company,
4.87%, due 12/9/96........... 249,350
435,000 Pacific Northwest Bell
Telephone Company, 7.50%, due
12/1/96...................... 436,644
860,000 PepsiCo, Inc., 7.00%, due
11/15/96..................... 861,837
30,000 PepsiCo, Inc., 6.875%, due
5/15/97...................... 30,170
600,000 Pfizer, Inc., 7.125%, due
10/1/96...................... 600,583
834,000 Pfizer, Inc., 6.50%, due
2/1/97....................... 836,057
1,699,000 Philip Morris Companies, Inc.,
8.75%, due 12/1/96........... 1,710,606
1,335,000 Philip Morris Companies, Inc.,
7.50%, due 3/17/97........... 1,345,398
75,000 Philip Morris Companies, Inc.,
9.75%, due 5/1/97............ 76,750
260,000 Philip Morris Companies, Inc.,
8.75%, due 6/15/97........... 265,096
2,666,000 Public Service Electric & Gas
Company, 8.75%, due
11/1/96...................... 2,859,577
170,000 Public Service Electric & Gas
Company, 8.75%, due 2/1/97... 183,393
250,000 Quaker Oats Company, 8.85%, due
11/15/96..................... 251,257
660,000 Quebec Province, 8.74%, due
7/21/97...................... 673,232
300,000 Sara Lee Corporation, 5.05%,
due 2/18/97.................. 299,131
1,897,000 Sears Roebuck and Company,
9.00%, due 9/15/96........... 1,898,891
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
FIXED RATE NOTES--CORPORATE, CONTINUED:
$ 75,000 Security Pacific Corporation,
7.75%, due 12/1/96........... $ 75,310
50,000 Southern California Edison
Company, 5.90%, due
1/15/97...................... 50,042
100,000 Tambrands Inc., 4.65%, due
1/21/97...................... 99,479
325,000 Texaco Capital, 9.00%, due
11/15/96..................... 326,969
200,000 Travelers Group, Inc., 8.375%,
due 12/15/96................. 201,424
175,000 Travelers Group, Inc., 7.625%,
due 1/15/97.................. 175,983
2,160,000 U.S. West Capital Funding,
8.00%, due 10/15/96.......... 2,165,190
135,000 Union Electric Company, 5.50%,
due 3/1/97................... 134,794
365,000 Virginia Electric & Power
Company, 7.25%, due 3/1/97... 367,665
250,000 Wachovia Bank, 4.875%, due
2/18/97...................... 248,760
471,000 Wells Fargo & Company, 8.20%,
due 11/1/96.................. 472,623
445,000 World Book Financial, 8.125%,
due 9/1/96................... 445,000
-------------
Total Fixed Rate Notes--Corporate............ 44,968,019
-------------
REPURCHASE AGREEMENTS (16.4%):
12,472,423 The First Boston Corporation,
5.30%, due 9/3/96, to be
repurchased at 12,479,768
(collateralized by
$16,050,000 Federal National
Mortgage Association, pool
#339017, 6.092%, due
12/1/35)..................... 12,472,423
-------------
Total Repurchase Agreements.................. 12,472,423
-------------
Total Investments (100.0%)................... $ 75,934,653
-------------
-------------
</TABLE>
See notes to financial statements. 18 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1996
- - --------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE
AGGRESSIVE BOND KENTUCKY MONEY MARKET
GROWTH/VALUE FUND GROWTH FUND FUND TAX-FREE FUND FUND
----------------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value................... $ 15,024,572 $ 6,527,398 $ 13,695,005 $ 15,608,129 $ 75,934,653
Cash.................................... -- -- -- 1,798 --
Interest, dividends and other
receivables........................... 16,151 1,422 185,929 261,250 1,173,021
Receivable for fund shares issued....... 70,576 12,716 23,439 45,402 --
Organization costs, net of
amortization.......................... 25,935 25,935 25,935 25,935 25,935
----------------- -------------- --------------- ------------- -------------
Total assets.............................. 15,137,234 6,567,471 13,930,308 15,942,514 77,133,609
----------------- -------------- --------------- ------------- -------------
LIABILITIES:
Payable for securities purchased........ -- -- 487,264 -- 401,228
Payable for fund shares redeemed........ 1,515 1,165 7,000 -- --
Administration fee payable.............. 2,083 2,083 2,083 -- 9,429
Accrued expenses and other payables..... 25,971 14,309 7,064 23,251 49,226
Dividends payable....................... -- -- 70,005 78,774 310,879
----------------- -------------- --------------- ------------- -------------
Total liabilities......................... 29,569 17,557 573,416 102,025 770,762
----------------- -------------- --------------- ------------- -------------
NET ASSETS................................ $ 15,107,665 $ 6,549,914 $ 13,356,892 $ 15,840,489 $ 76,362,847
----------------- -------------- --------------- ------------- -------------
----------------- -------------- --------------- ------------- -------------
COMPONENTS OF NET ASSETS:
Capital paid in......................... $ 14,820,155 $ 6,473,696 $ 13,705,116 $ 16,217,070 $ 76,360,353
Undistributed net investment income
(distributions in excess)............. -- -- -- (114,051) --
Unrealized appreciation (depreciation).. 243,081 60,569 (332,831) (259,742) --
Accumulated net realized gain (loss).... 44,429 15,649 (15,393) (2,788) 2,494
----------------- -------------- --------------- ------------- -------------
NET ASSETS................................ $ 15,107,665 $ 6,549,914 $ 13,356,892 $ 15,840,489 $ 76,362,847
----------------- -------------- --------------- ------------- -------------
----------------- -------------- --------------- ------------- -------------
SHARES OUTSTANDING........................ 1,350,818 598,307 1,370,318 1,574,612 76,360,353
NET ASSET VALUE PER SHARE................. $ 11.18 $ 10.95 $ 9.75 $ 10.06 $ 1.00
OFFERING PRICE PER SHARE EXCEPT MONEY
MARKET FUND (NAV DIVIDED BY (1 -
4.50%))................................. $ 11.71 $ 11.47 $ 10.21 $ 10.53 $ 1.00
INVESTMENTS AT COST....................... $ 14,781,491 $ 6,466,829 $ 14,027,836 $ 15,867,871 $ 75,934,653
</TABLE>
See notes to financial statements. 19 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF OPERATIONS
PERIOD ENDED AUGUST 31, 1996 (1)
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
GROWTH/VALUE GROWTH BOND TAX-FREE MARKET
FUND FUND FUND FUND FUND
----------------- -------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................... $ 30,853 $ 13,762 $ 667,383 $ 843,000 $ 2,798,408
Dividend income........................... 78,497 7,604 -- -- --
----------------- -------------- --------------- ----------- ------------
Total income................................ 109,350 21,366 667,383 843,000 2,798,408
----------------- -------------- --------------- ----------- ------------
EXPENSES:
Advisory.................................. 81,961 31,177 38,478 63,051 99,711
Management................................ 22,916 22,917 22,917 23,644 74,783
Transfer agency........................... 28,121 27,644 25,552 33,235 23,393
Shareholder services...................... 20,490 7,794 24,049 39,407 124,638
Custody................................... 1,964 741 5,455 4,415 21,297
Accounting................................ 33,000 33,000 33,000 35,600 34,000
Legal..................................... 6,682 4,238 8,200 12,962 29,232
Registration.............................. 10,402 6,732 8,984 7,892 35,373
Audit..................................... 14,812 14,319 15,846 16,755 15,268
Amortization of organization costs........ 5,824 5,824 5,824 5,824 5,824
Trustees.................................. 716 196 1,251 1,532 5,351
Other..................................... 5,453 2,874 6,345 15,916 24,224
----------------- -------------- --------------- ----------- ------------
Total expenses.............................. 232,341 157,456 195,901 260,233 493,094
Expenses reimbursed and fees waived....... (72,244) (96,565) (130,304) (132,065) (168,154)
----------------- -------------- --------------- ----------- ------------
Net expenses................................ 160,097 60,891 65,597 128,168 324,940
----------------- -------------- --------------- ----------- ------------
NET INVESTMENT INCOME (LOSS).............. (50,747) (39,525) 601,786 714,832 2,473,468
----------------- -------------- --------------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENTS:
Net realized gain (loss) on investments... 89,352 43,284 (15,393) (2,788) 2,494
Net change in unrealized appreciation
(depreciation).......................... 243,081 60,569 (332,831) (259,742) --
----------------- -------------- --------------- ----------- ------------
Net realized and unrealized gain (loss) from
investments............................... 332,433 103,853 (348,224) (262,530) 2,494
----------------- -------------- --------------- ----------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS...... $ 281,686 $ 64,328 $ 253,562 $ 452,302 $ 2,475,962
----------------- -------------- --------------- ----------- ------------
----------------- -------------- --------------- ----------- ------------
Sept. 27, Sept. 29,
Sept. 29, 1995 Sept. 29, 1995 Oct. 3, 1995 1995 1995
(1) Date of commencement of operations
</TABLE>
See notes to financial statements. 20 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD ENDED AUGUST 31, 1996 (1)
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
GROWTH/VALUE GROWTH BOND TAX-FREE MARKET
FUND FUND FUND FUND FUND
----------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSETS--September 1, 1995.......... -- -- -- -- --
----------------- -------------- --------------- -------------- ---------------
OPERATIONS:
Net investment income (loss)......... $ (50,747) $ (39,525) $ 601,786 $ 714,832 $ 2,473,468
Net realized gain (loss) on
investments........................ 89,352 43,284 (15,393) (2,788) 2,494
Net change in unrealized appreciation
(depreciation)..................... 243,081 60,569 (332,831) (259,742) --
----------------- -------------- --------------- -------------- ---------------
281,686 64,328 253,562 452,302 2,475,962
----------------- -------------- --------------- -------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................ -- -- (601,786) (828,883) (2,473,468)
----------------- -------------- --------------- -------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares....................... 15,471,301 7,269,024 14,919,014 28,751,437 446,620,681
Reinvested dividends................. -- -- 13,886 559,139 84,304
Cost of shares repurchased........... (645,322) (783,438) (1,227,784) (13,093,506) (370,344,632)
----------------- -------------- --------------- -------------- ---------------
14,825,979 6,485,586 13,705,116 16,217,070 76,360,353
----------------- -------------- --------------- -------------- ---------------
NET ASSETS--August 31, 1996............ $ 15,107,665 $ 6,549,914 $ 13,356,892 $ 15,840,489 $ 76,362,847
----------------- -------------- --------------- -------------- ---------------
----------------- -------------- --------------- -------------- ---------------
Sept. 29, 1995 Sept. 29, 1995 Oct. 3, 1995 Sept. 27, 1995 Sept. 29, 1995
(1) Date of commencement of operations
</TABLE>
See notes to financial statements. 21 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Trans Adviser Funds, Inc. (the "Company") is an open-end management investment
company incorporated under the laws of the State of Maryland. The Company
currently consists of five operational non-diversified investment portfolios,
the Growth/Value Fund, the Aggressive Growth Fund, the Intermediate Bond Fund,
the Kentucky Tax-Free Fund, and the Money Market Fund (each a "Fund" and
collectively the "Funds"). The Funds, except for Money Market Fund, are offered
at Net Asset Value ("NAV") plus a sales charge, currently 4.50% of NAV. The
Money Market Fund is offered at NAV. The Funds commenced investment operations
on the following dates:
<TABLE>
<S> <C>
Growth/Value Fund September 29, 1995
Aggressive Growth Fund September 29, 1995
Intermediate Bond Fund October 3, 1995
Kentucky Tax-Free Fund September 27, 1995
Money Market Fund September 29, 1995
</TABLE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates and are expected to be immaterial to the net assets of the Funds.
SECURITY VALUATION-All securities held by the Money Market Fund are valued
utilizing the amortized cost method, which approximates market value, in
accordance with Rule 2a-7 under the Investment Company Act of 1940. Securities,
other than short-term, held by the other Funds (the "Bond and Equity Funds") for
which market quotations are readily available are valued using the last reported
sales price provided by independent pricing services. If no sales are reported,
the mean of the last bid and ask price is used. In the absence of readily
available market quotations, securities are valued at fair value as determined
by the Board of Directors. Securities with a maturity of 60 days or less held by
the Bond and Equity Funds are valued at amortized cost.
PREMIUM AMORTIZATION AND DISCOUNT ACCRETION-In all Funds other than the Kentucky
Tax-Free Fund, if a fixed income investment is purchased at a premium, the
premium is not amortized. The Kentucky Tax-Free Fund amortizes premium on fixed
income investments to the maturity (or first call) date using the yield to
maturity method. If a fixed income investment is purchased at a discount (other
than original issue discount), the discount is not accreted. Original issue
discount on fixed income investments is accreted daily using the yield to
maturity method.
INTEREST AND DIVIDEND INCOME AND DISTRIBUTIONS TO SHAREHOLDERS-Interest income
is accrued as earned. Dividends on securities held by the Funds are recorded on
the ex-dividend date. Distributions of net investment income are declared daily
and paid monthly for Money Market Fund, Kentucky Tax-Free Fund, and Intermediate
Bond Fund, and declared and paid annually for Growth/Value Fund and Aggressive
Growth Fund. Net capital gain, if any, is distributed at least annually.
Distributions from net investment income and realized capital gains are based on
their tax basis. The significant difference between financial statement amounts
available for distribution and distributions made in accordance with income tax
regulations are primarily attributable to the deferral of post-October losses
and wash sales.
ORGANIZATION COSTS-The costs incurred by the Funds in connection with their
organization, in amounts of $31,759 for each Fund, have been capitalized and are
being amortized using the straight-line method over a five year period beginning
on the commencement of each Fund's investment operations. Certain of these costs
were paid by Forum Financial Services, Inc. and have been reimbursed by the
respective Funds. Organization expenses are being amortized to operations over a
five-year period on a straight-line basis. In the event any of the initial
shares are redeemed by any
22 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
holder thereof during the five-year amortization period, redemption proceeds
will be reduced by any unamortized organization expenses in the same proportion
as the number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of redemption.
FEDERAL INCOME TAX-Each Fund intends to qualify as a regulated investment
company and distribute all of its taxable income. Therefore, no Federal income
tax provision is required.
OTHER-Realized gains and losses on investments sold are recorded on the basis of
identified cost. Security transactions are accounted for on a trade date basis.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser of the Funds is Trans Financial Bank, N.A. (the
"Adviser"). The Adviser receives an advisory fee from Growth/Value Fund and
Aggressive Growth Fund at an annual rate of 1.00% of the respective Fund's
average daily net assets. The Adviser receives an advisory fee from Intermediate
Bond Fund and Kentucky Tax-Free Fund at an annual rate of 0.40% of the
respective Fund's average daily net assets. The Adviser receives an advisory fee
from Money Market Fund at an annual rate of 0.20% of the Fund's average daily
net assets. Pursuant to an agreement between the Adviser and Mastrapasqua and
Associates, Inc. ("M&A") (the "Sub-Adviser"), the Adviser may delegate certain
of its advisory responsibilities to the Sub-Adviser. For its services, M&A is
paid by the Adviser as follows: with respect to the Aggressive Growth and the
Growth/Value Funds, the Adviser (not the Fund) pays to M&A an annual fee,
calculated daily and paid monthly, of .50% on the first $100 million of such
Funds' combined average daily net assets plus .25% of such Funds' combined
average daily net assets in excess of $100 million for its services, and, with
respect to each other Trans Adviser Fund, the Adviser (not the Fund) pays M&A an
annual fee, calculated daily and paid monthly, of .03% of average daily net
assets for its services.
The Adviser has agreed to reimburse each Fund for certain operating expenses
(exclusive of interest, taxes, brokerage fees, fees and other expenses paid
pursuant to any distribution plan and organization expenses, all to the extent
permitted by applicable state law or regulation) which in any year exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. Each Fund's annual expenses are estimated and accrued daily, and any
related reimbursements are made monthly by the Adviser.
The administrator of the Company is Forum Financial Services, Inc. ("Forum"), a
registered broker-dealer and a member of the National Association of Securities
Dealers, Inc. For its administrative services Forum receives a fee for each Fund
equal to the greater of $25,000 per year or 0.15% of the annual average daily
net assets of each Fund. Forum also acts as the Company's distributor pursuant
to a separate Distribution Agreement with the Company. Forum receives no
compensation under that agreement. In addition, certain legal expenses were
charged to the Company by Forum amounting to $18,053.
Forum Financial Corp. ("FFC"), an affiliate of Forum, serves as the Company's
transfer agent and dividend disbursing agent, and for those services receives an
annual fee of $12,000 per year for each Fund, an annual shareholder account fee
of $25 per shareholder, additional class charges, and out of pocket expenses
billed at cost. The Company has adopted a shareholder service plan under which
the Company pays Forum a shareholder servicing fee at an annual rate of 0.25% of
the daily net assets of each Fund. Forum may pay any or all amounts of these
payments to various institutions which provide shareholder servicing to their
customers. FFC also serves as the Company's fund accountant and is compensated
for those services at an amount of $36,000 per year per Fund plus certain
amounts based upon the number and types of portfolio transactions within each
Fund.
23 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
- - ---------------------------------------------------------------------------
For the period ended August 31, 1996, fees waived and expenses reimbursed were
as follows:
<TABLE>
<CAPTION>
EXPENSES EXPENSES EXPENSES
VOLUNTARILY VOLUNTARILY VOLUNTARILY
WAIVED BY WAIVED BY REIMBURSED BY
FORUM THE ADVISER THE ADVISER
----------- ----------- --------------
<S> <C> <C> <C>
Growth/Value Fund.......................................... $ 543 $ 34,323 $ 37,378
Aggressive Growth Fund..................................... 288 31,178 65,099
Intermediate Bond Fund..................................... 178 38,478 91,648
Kentucky Tax-Free Fund..................................... 11,185 63,051 57,829
Money Market Fund.......................................... 2,071 93,026 73,057
</TABLE>
NOTE 4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales (including maturities) of securities
(excluding short-term investments) during the period ended August 31, 1996 were
as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
------------------ ---------------------
<S> <C> <C>
Growth/Value Fund......................................... $ 15,678,024 $ 1,713,849
Aggressive Growth Fund.................................... 6,815,109 465,088
Intermediate Bond Fund.................................... 12,911,112 965,841
Kentucky Tax-Free Fund.................................... 38,298,203 23,002,307
</TABLE>
The cost of investments for federal income tax purposes is the same as for
financial reporting purposes. Unrealized appreciation and depreciation as of
August 31, 1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED APPRECIATION UNREALIZED DEPRECIATION
----------------------- -----------------------
<S> <C> <C>
Growth/Value Fund.................................. $ 1,166,837 $ 923,756
Aggressive Growth Fund............................. 661,156 600,587
Intermediate Bond Fund............................. 13,166 345,997
Kentucky Tax-Free Fund............................. 25,840 285,582
</TABLE>
NOTE 5. CAPITAL SHARE TRANSACTIONS
Transactions of Fund shares for the period ended August 31, 1996 are summarized
in the following table:
<TABLE>
<CAPTION>
GROWTH/VALUE AGGRESSIVE INTERMEDIATE KENTUCKY TAX- MONEY MARKET
FUND GROWTH FUND BOND FUND FREE FUND FUND
------------- ------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Sale of Shares......... 1,408,416 668,440 1,491,710 2,814,888 446,620,681
Shares Issued on
Reinvested
Dividends............. -- -- 1,404 57,538 84,304
Shares Repurchased..... 57,598 70,133 122,796 1,297,814 370,344,632
------------- ------------- ------------ -------------- --------------
Net Increase........... 1,350,818 598,307 1,370,318 1,574,612 76,360,353
------------- ------------- ------------ -------------- --------------
------------- ------------- ------------ -------------- --------------
</TABLE>
NOTE 6. CONCENTRATION OF CREDIT RISK
The Kentucky Tax-Free Fund invests substantially all of its assets in debt
obligations of issuers located in the state of Kentucky. The issuers' abilities
to meet their obligations may be affected by Kentucky economic or political
developments.
24 TRANS ADVISER FUNDS, INC.
<PAGE>
FINANCIAL HIGHLIGHTS
PERIOD ENDED AUGUST 31, 1996 (a)
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED PER SHARE DATA AND AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
RATIOS FOR A SHARE OUTSTANDING GROWTH/VALUE GROWTH BOND TAX-FREE MARKET
THROUGHOUT THE PERIOD FUND FUND FUND FUND FUND
----------------- --------------- ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value Per
Share....................... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 1.00
------- ------- ------- ------------ -----------
Net Investment Income
(Loss)(c)................... (0.06) (0.11) 0.57 0.51 0.05
Net Realized and Unrealized
Gain/(Loss) on
Investments................. 1.24 1.06 (0.25) 0.06 --
Distributions from Net
Investment Income........... -- -- (0.57) (0.51) (0.05)
------- ------- ------- ------------ -----------
Ending Net Asset Value Per
Share....................... $ 11.18 $ 10.95 $ 9.75 $ 10.06 $ 1.00
------- ------- ------- ------------ -----------
------- ------- ------- ------------ -----------
Ratios to Average Net Assets:
Expenses(b)(e).............. 1.95% 1.95% 0.68% 0.82% 0.65%
Net Investment Income
(Loss)(e)................. (0.62)% (1.26)% 6.31% 5.30% 4.94%
Total Return (f).............. 11.80% 9.50% 3.23% 5.80% 4.70%
Portfolio Turnover Rate....... 21.12% 15.70% 12.38% 145.12% N/A
Average Commission Rate....... 0.07(d) 0.08(d) N/A N/A N/A
Net Assets at End of Period
(000's omitted)............. $15,108 $6,550 $13,357 $15,840 $76,363
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) Date of commencement of Sept. 29, 1995 Sept. 29, 1995 Oct. 3, 1995 Sept. 27, 1995 Sept. 29, 1995
operations
</TABLE>
(b) During the period, various fees and expenses were waived and reimbursed. Had
such waiver and reimbursement not occurred, the ratio of expenses to average
net assets would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
2.83 % 5.05 % 2.04 % 1.65 % 0.99 %
</TABLE>
(c) Calculated using weighted average shares outstanding for the period.
(d) Amount represents the average commission per share paid to brokers on the
purchase or sale of equity securities.
(e) Annualized.
(f) Excludes applicable sales charge.
- - ----------------------------------------------------------------------------
Federal Tax Status of Dividends Declared (unaudited)
None of the Funds paid long-term capital gain dividends during the period. All
dividends declared by the Funds were distributions of ordinary income. None of
these dividends qualify for the corporate dividend received deduction from
Federal income tax. The amount of the dividends per share declared by the
Kentucky Tax-Free Fund that is exempt from Federal taxes follows.
Sep-95 $0.0086
Oct-95 0.0430
Nov-95 0.0344
Dec-95 0.0430
Jan-96 0.0430
Feb-96 0.0344
Mar-96 0.0430
Apr-96 0.0344
May-96 0.0430
Jun-96 0.0344
Jul-96 0.0344
Aug-96 0.0430
------
$0.4386
------
------
See notes to financial statements. 25 TRANS ADVISER FUNDS, INC.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Trans Adviser Funds, Inc.
We have audited the accompanying statements of assets and liabilities of
Growth/Value Fund, Aggressive Growth Fund, Intermediate Bond Fund, Kentucky
Tax-Free Fund, and Money Market Fund, portfolios of Trans Adviser Funds, Inc.
(the Funds), including the schedules of investments, as of August 31, 1996, and
the related statements of operations, statements of changes in net assets and
financial highlights for the periods presented on pages 20, 21 and 25,
respectively. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Growth/Value Fund, Aggressive Growth Fund, Intermediate Bond Fund, Kentucky
Tax-Free Fund, and Money Market Fund, as of August 31, 1996, and the results of
their operations, the changes in their net assets and financial highlights for
the periods presented on pages 20, 21 and 25, respectively, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
October 18, 1996
<PAGE>
April 11, 1997
Dear Shareholder:
We are pleased to present the report on the operations of the Trans Adviser
Funds, Inc. during the semi-annual period ended February 28, 1997. This report
covers the five Funds: Aggressive Growth, Growth/Value, Intermediate Bond,
Kentucky Tax-Free, and Money Market Funds.
During the period, the stock market, as measured by the S&P 500 Index, rose
21.30%. Because the Index is weighted by the market capitalization of the
issuers comprising the Index, the stock of the fifty largest issuers accounts
for approximately 50% of the performance of the entire Index. Investments in
popular index funds have supported the stock prices of this relatively small
group of issuers, even though many observers have noted that it is primarily the
prices of these companies' stocks that exceed normal valuation parameters. We
are therefore pleased with the total return of 21.34% the Growth/Value Fund and
15.27% for the Aggressive Growth Fund, even though they did not surpass the S&P
benchmark. In our view, by investing in quality companies with strong
fundamentals such as low relative price-to-earnings ratios these Funds are
poised to take advantage of economic data and company results that meet or
exceed the market's current bearish expectations.
The bond market during the last six months has continued to exhibit yield and
price volatility. During this period, the Trans Adviser Intermediate Bond Fund
had a total return of 4.40%. By comparison, the Merrill Lynch Taxable Bond Index
had a total return of 4.12%. The Kentucky Tax-Free Fund's return was 4.45% as
compared to the 4.46% average total return of the funds in the Morningstar
National Municipal Bond category. The Kentucky Tax-Free Fund has also maintained
a relatively stable net asset value despite the movement in interest rates
during this period. On the whole, we continue to believe that superior returns
in the bond markets can be achieved through an actively-managed relative value
approach that seeks out inefficiencies in the market.
During this period, investments in the Money Market Fund grew to over $100
million. The Fund continues to offer a highly diversified and convenient vehicle
for cash management.
We take great pride in the accomplishments of the Trans Adviser Funds during
their first eighteen months of operations. The Funds' continued growth has
confirmed our original vision that there is a broad-based appeal for funds
managed locally that employ our investment style and experience. We are
confident that the Funds will enjoy continued growth as word of our investment
approach and capabilities spreads to a broader network of investors.
If you have any questions or would like additional information about the Trans
Adviser Funds, please call 800-811-8258. Thank you once again for choosing to
invest with the Trans Adviser Funds.
THOMAS A. TRANTUM
THOMAS A. TRANTUM
President
<PAGE>
GROWTH/VALUE FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
COMMON STOCKS (98.8%)
AMUSEMENT & RECREATION SERVICES (1.7%)
10,000 Promus Hotel Corp.(a)............ $ 353,751
-------------
AUTOMOTIVE DEALERS & GASOLINE SERVICE STATIONS (0.9%)
7,500 Autozone, Inc.(a)................ 185,625
-------------
BUSINESS SERVICES (8.0%)
20,000 ADT Ltd.(a)...................... 435,000
15,000 Oracle Systems Corp.(a).......... 588,750
20,000 Sun Microsystems, Inc.(a)........ 617,500
-------------
1,641,250
-------------
CHEMICALS & ALLIED PRODUCTS (8.9%)
4,000 Bristol-Myers Squibb Co. ........ 522,000
6,000 Merck & Co., Inc. ............... 552,000
10,000 Schering-Plough Corp. ........... 766,250
-------------
1,840,250
-------------
DEPOSITORY INSTITUTIONS (7.8%)
12,000 Carolina First Corp. ............ 213,000
5,000 Chase Manhattan Corp. ........... 500,625
22,500 MBNA Corp. ...................... 720,000
4,000 Union Planters Corp. ............ 179,000
-------------
1,612,625
-------------
EATING & DRINKING PLACES (2.1%)
10,000 Host Marriott Corp.(a)........... 180,000
4,000 Quality Dining, Inc.(a).......... 46,500
25,000 Shoney's, Inc.(a)................ 206,250
-------------
432,750
-------------
ELECTRIC, GAS, & SANITARY SERVICES (2.2%)
10,000 Sonat, Inc. ..................... 460,000
-------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT
COMPUTER EQUIPMENT (2.0%)
5,000 Novellus Systems, Inc.(a)........ 408,750
-------------
FOOD STORES (1.9%)
7,500 Kroger Co.(a).................... 397,500
-------------
GENERAL MERCHANDISE STORES (1.6%)
6,000 Sears Roebuck and Co. ........... 325,500
-------------
HEALTH SERVICES (9.3%)
20,000 Beverly Enterprises, Inc.(a)..... 287,500
5,000 Health Management Associates,
Inc.(a)........................ 132,500
2,345 Healthsouth Rehabilitation
Corp.(a)....................... 94,386
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
HEALTH SERVICES, CONTINUED
10,000 Living Centers of America,
Inc.(a)........................ $ 318,750
5,000 Quorum Health Group, Inc.(a)..... 156,875
15,000 Tenet Healthcare Corp.(a)........ 406,875
15,000 Vencor, Inc.(a).................. 519,375
-------------
1,916,261
-------------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT
(13.2%)
7,500 Baker Hughes, Inc. .............. 266,250
6,000 IBM Corp. ....................... 862,500
13,000 Lam Research Corp.(a)............ 495,625
10,000 Qlogic Corp.(a).................. 202,500
15,000 Western Digital Corp.(a)......... 885,000
-------------
2,711,875
-------------
INSURANCE CARRIERS (3.9%)
5,000 Ace, Ltd. ....................... 325,000
4,000 American International Group,
Inc. .......................... 484,000
-------------
809,000
-------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (4.4%)
10,000 Baxter International, Inc. ...... 460,000
7,500 Input/Output Inc.(a)............. 160,312
10,000 Tech-Sym Corp.(a)................ 295,000
-------------
915,312
-------------
MISCELLANEOUS RETAIL (3.3%)
10,000 CVS Corp. ....................... 462,500
6,000 Friedman's, Inc. Class A(a)...... 90,750
10,000 OfficeMax, Inc.(a)............... 120,000
-------------
673,250
-------------
MOTION PICTURES (0.5%)
1,500 The Walt Disney Co. ............. 111,375
-------------
NONDEPOSITORY CREDIT INSTITUTIONS (2.9%)
12,500 Capital One Financial Corp. ..... 496,875
10,000 Olympic Financial, Ltd.(a)....... 110,000
-------------
606,875
-------------
OIL & GAS EXTRACTION (6.4%)
12,000 Nuevo Energy Co.(a).............. 498,000
6,500 Pride Petroleum Services,
Inc.(a)........................ 108,875
4,000 Schlumberger, Ltd. .............. 402,500
5,000 Seagull Energy Corp.(a).......... 91,875
</TABLE>
See Notes to Schedule of Investments. 2 TRANS ADVISER FUNDS, INC.
<PAGE>
GROWTH/VALUE FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
OIL & GAS EXTRACTION, CONTINUED
10,000 Stone Energy Corp.(a)............ $ 220,000
-------------
1,321,250
-------------
PHARMECEUTICAL PREPARATIONS (4.0%)
8,000 American Home Products Corp. .... 512,000
5,000 Teva Pharmaceutical ADR.......... 309,062
-------------
821,062
-------------
PROFESSIONAL SERVICES (0.9%)
10,000 SCB Computer Technology,
Inc.(a)........................ 180,000
-------------
WATER TRANSPORTATION (2.1%)
10,000 Tidewater, Inc. ................. 430,000
-------------
WHOLESALE TRADE--DURABLE GOODS (7.2%)
6,000 Arrow Electronics Inc.(a)........ 336,750
4,000 Avnet, Inc. ..................... 250,000
5,000 Lockheed Martin Corp. ........... 442,500
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- --------------------------------- -------------
<C> <S> <C>
WHOLESALE TRADE--DURABLE GOODS, CONTINUED
15,000 Sybron International Corp.-
Wisconsin(a)................... $ 446,250
-------------
1,475,500
-------------
WHOLESALE TRADE--NONDURABLE GOODS (3.6%)
10,000 AmeriSource Health Corp. ........ 503,750
5,000 Safeway, Inc.(a)................. 240,625
-------------
744,375
-------------
Total Common Stocks
(cost $16,904,586)........................... 20,374,136
-------------
SHORT-TERM HOLDINGS (1.2%)
254,744 Forum Daily Assets Treasury Fund
(cost $254,744)................ 254,744
-------------
Total Investments (100.0%)
(cost $17,159,330)(c)...................... $ 20,628,880
-------------
-------------
</TABLE>
See Notes to Schedule of Investments. 3 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
COMMON STOCKS (95.7%)
AMUSEMENT & RECREATION SERVICES (1.9%)
5,000 Promus Hotel Corp.(a)............. $ 176,875
------------
BUSINESS SERVICES (7.8%)
10,000 ADT Ltd.(a)....................... 217,500
7,500 Oracle Systems Corp.(a)........... 294,375
7,000 Sun Microsystems, Inc.(a)......... 216,125
------------
728,000
------------
DEPOSITORY INSTITUTIONS (2.3%)
12,000 Carolina First Corp. ............. 213,000
------------
EATING & DRINKING PLACES (2.5%)
6,000 Quality Dining, Inc.(a)........... 69,750
20,000 Shoney's, Inc.(a)................. 165,000
------------
234,750
------------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT
COMPUTER EQUIPMENT (6.1%)
4,000 Novellus Systems, Inc.(a)......... 327,000
15,000 Symmetricom, Inc.(a).............. 241,875
------------
568,875
------------
FOOD STORES (3.7%)
3,500 Kroger Co.(a)..................... 185,500
10,000 Ruddick Corp. .................... 160,000
------------
345,500
------------
GENERAL MERCHANDISE STORES (0.9%)
2,500 Consolidated Stores Corp.(a)...... 87,812
------------
HEALTH SERVICES (15.7%)
5,000 Health Management Associates,
Inc.(a)......................... 132,500
5,000 HealthCare COMPARE Corp.(a)....... 213,438
7,500 Living Centers of America,
Inc.(a)......................... 239,063
15,000 NABI, Inc.(a)..................... 144,375
15,000 Paracelsus Healthcare Corp.(a).... 71,250
2,000 Quorum Health Group, Inc.(a)...... 62,750
10,000 Tenet Healthcare Corp.(a)......... 271,251
10,000 Vencor, Inc.(a)................... 346,250
------------
1,480,877
------------
HOME FURNITURE, FURNISHINGS, & EQUIPMENT STORES (0.6%)
5,000 Movie Gallery, Inc.(a)............ 53,750
------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT
(17.1%)
10,000 Lam Research Corp.(a)............. $ 381,250
10,000 Qlogic Corp.(a)................... 202,500
15,000 Smart Modular Technologies(a)..... 436,875
10,000 Western Digital Corp.(a).......... 590,000
------------
1,610,625
------------
INDUSTRY ELECTRONICS & ELECTRICAL EQUIPMENT (2.5%)
12,000 Semtech Corp.(a).................. 238,500
------------
INSURANCE CARRIERS (2.8%)
4,000 Ace, Ltd. ........................ 260,000
------------
MEASURING, ANALYZING, & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (1.9%)
6,000 Tech-Sym Corp.(a)................. 177,000
------------
MISCELLANEOUS RETAIL (2.2%)
2,500 CVS Corp. ........................ 115,625
6,000 Friedman's, Inc. Class A(a)....... 90,750
------------
206,375
------------
NONDEPOSITORY CREDIT INSTITUTIONS (3.7%)
6,000 Capital One Financial Corp. ...... 238,500
10,000 Olympic Financial, Ltd.(a)........ 110,000
------------
348,500
------------
OIL & GAS EXTRACTION (11.8%)
12,500 GeoScience Corp.(a)............... 162,500
9,000 Nuevo Energy Co.(a)............... 373,500
15,000 Pride Petroleum Services,
Inc.(a)......................... 251,250
5,000 Seagull Energy Corp.(a)........... 91,875
5,000 St. Mary Land & Exploration
Co. ............................ 121,875
5,000 Stone Energy Corp.(a)............. 110,000
------------
1,111,000
------------
PROFESSIONAL SERVICES (2.1%)
11,000 SCB Computer Technology,
Inc.(a)......................... 198,000
------------
TRANSPORTATION SERVICES (1.8%)
10,000 Simon Transportation
Services(a)..................... 170,000
------------
WATER TRANSPORTATION (2.7%)
6,000 Tidewater, Inc. .................. 258,000
------------
WHOLESALE TRADE-DURABLE GOODS (1.6%)
5,000 Sybron International Corp.-
Wisconsin(a).................... 148,750
------------
</TABLE>
See Notes to Schedule of Investments. 4 TRANS ADVISER FUNDS, INC.
<PAGE>
AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- - ---------- ---------------------------------- ------------
<C> <S> <C>
WHOLESALE TRADE-NONDURABLE GOODS (4.0%)
7,500 AmeriSource Health Corp.(a)....... $ 377,812
------------
Total Common Stocks (cost $7,716,134)......... 8,994,001
------------
SHORT-TERM HOLDINGS (4.3%)
399,257 Forum Daily Assets Treasury Fund
(cost $399,257)................. 399,257
------------
Total Investments (100.0%)
(cost $8,115,391)(c)........................ $ 9,393,258
------------
------------
</TABLE>
See Notes to Schedule of Investments. 5 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
ASSET BACKED SECURITIES (0.6%)
$ 90,434 SBA, Series 87-A, 8.45%, due
1/1/07 (cost $93,599)........ $ 92,490
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS (6.7%)
260,070 FHLMC, Series 1072, Class G,
7.00%, due 5/15/06........... 261,833
800,000 FHLMC, Series 1720, Class E,
7.50%, due 12/15/09.......... 809,438
-------------
Total Collateralized Mortgage Obligations
(cost $1,088,246).......................... 1,071,271
-------------
CORPORATE BONDS (52.4%)
686,000 Alabama Power, 8.30%, due
7/1/22....................... 694,923
100,000 Anheuser Busch Cos., 7.00%, due
5/30/00...................... 100,211
400,000 Anheuser Busch Cos., 7.00%, due
9/1/05....................... 399,210
278,000 Anheuser Busch Cos., 8.75%, due
12/1/99...................... 293,062
169,000 Associates Corp. of North
America, 6.00%, due
3/15/00...................... 166,307
50,000 Berkley W.R. Corp., 9.875%, due
5/15/08...................... 58,974
250,000 British Petroleum America,
Inc., 6.50%, due 12/15/99.... 248,942
215,000 Chase Manhatten Corp., 8.00%,
due 5/15/04.................. 219,689
140,000 Commonwealth Edison Co., 9.50%,
due 5/1/16................... 146,709
150,000 Consumers Power, 6.875%, due
5/1/98....................... 150,133
191,000 Dayton Hudson Corp., 9.875%,
due 6/17/97.................. 202,411
150,000 Deere & Co., 8.95%, due
6/15/19...................... 164,844
160,000 Florida Power & Light Co.,
8.00%, due 8/25/22........... 160,673
100,000 Ford Motor Credit Co., 5.83%,
due 6/29/98.................. 99,591
172,000 Ford Motor Credit Co., 6.85%,
due 8/15/00.................. 173,301
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE BONDS, CONTINUED
$ 160,000 Ford Motor Credit Co., 7.50%,
due 1/15/03.................. $ 164,229
160,000 GTE of Southeast Corp., 8.00%,
due 12/1/01.................. 161,924
130,000 General Electric Capital Corp.,
6.66%, due 5/1/18............ 130,240
69,000 Georgia Power Co., First
Mortgage Bonds, 7.95%, due
2/1/23....................... 69,401
250,000 Greyhound Financial Corp.,
7.82%, due 1/27/03........... 258,036
250,000 IBM Credit Corp., 6.20%, due
3/19/01...................... 245,254
300,000 Inco, Ltd., 9.60%, due
6/15/22...................... 327,139
120,000 Jersey Central Power & Light
Co., 9.20%, due 7/1/21....... 131,171
46,000 Kaiser Permanente, 9.55%, due
7/15/05...................... 53,336
56,000 Kraft, Inc., 8.50%, due
2/15/17...................... 58,367
200,000 Michigan Bell Telephone Co.,
6.375%, due 2/1/05........... 193,489
175,000 Pacific Gas & Electric Co.,
6.625%, due 6/1/00........... 173,491
439,000 Pennsylvania Power & Light Co.,
9.25%, due 10/1/19........... 477,390
165,000 Questar Pipeline, 9.375%, due
6/1/21....................... 184,082
70,000 Rohm & Haas Co., 9.80%, due
4/15/20...................... 84,824
675,000 Shopko Stores, 9.25%, due
3/15/22...................... 650,830
200,000 Southern California Edison,
7.375%, due 12/15/03......... 200,864
85,000 Southwestern Public Service
Co., 8.20%, due 12/1/22...... 89,562
40,000 Super Value Store, 8.875%, due
4/1/16....................... 40,631
192,000 TJX Cos. Inc., 9.50%, due
5/1/16....................... 195,740
250,000 Trans Financial Bancorp, 7.25%,
due 9/15/03.................. 242,072
68,000 U.S. Leasing Int'l, 6.625%, due
5/15/03...................... 66,858
</TABLE>
See Notes to Schedule of Investments. 6 TRANS ADVISER FUNDS, INC.
<PAGE>
INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE BONDS, CONTINUED
$ 130,000 Union Electric Co., 8.00%, due
12/15/22..................... $ 133,404
500,000 Union Oil of California Corp.,
6.70%, due 10/15/07.......... 480,406
200,000 V.F. Corp., 7.60%, due 4/1/04.. 204,744
65,000 Wisconsin Electric Power,
7.75%, due 1/15/23........... 65,473
-------------
Total Corporate Bonds
(cost $8,515,941).......................... 8,361,937
-------------
GOVERNMENT AGENCY NOTES (6.2%)
500,000 FHLB, 6.62%, due 12/6/00....... 497,854
150,000 FNMA, 6.17%, due 12/2/03....... 144,653
265,000 TVA, 6.875%, due 1/15/02....... 266,217
50,000 TVA, 6.875%, due 8/1/02........ 50,132
30,000 TVA, 8.05%, due 7/15/24........ 29,844
-------------
Government Agency Notes
(cost $998,362)............................ 988,700
-------------
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
REPURCHASE AGREEMENTS (12.2%)
$ 1,955,394 The First Boston Corp., 5.38%,
due 3/3/97, to be repurchased
at $1,955,686 (cost
$1,955,394)(d)............... $ 1,955,394
-------------
TREASURY NOTES (21.9%)
3,500,000 U.S. Treasury Notes, 6.50%, due
8/15/05 (cost $3,553,437).... 3,490,151
-------------
SHORT-TERM HOLDINGS (0.0%)
5,006 1784 U.S. Treasury Money Market
Fund (cost $5,006)........... 5,006
-------------
Total Investments (100.0%)
(cost $16,209,985)(c)...................... $ 15,964,949
-------------
-------------
</TABLE>
See Notes to Schedule of Investments. 7 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
MUNICIPAL BONDS (96.0%)
AIRPORT REVENUE (0.5%)
$ 50,000 Lexington-Fayette Urban County
Airport Corp., KY, First
Mortgage Revenue Bonds,
7.75%, due 4/1/08............ $ 53,562
-------------
ECONOMIC DEVELOPMENT REVENUE (11.5%)
100,000 Covington, KY, Municipal
Properties Corp. Revenue
Bonds, Series A, 8.25%, due
8/1/10, prerefunded 8/1/98 at
103.......................... 108,750
455,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #51, escrowed
to maturity, 6.30%, due
8/1/01....................... 487,418
70,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #32, 6.50%,
due 12/1/99.................. 73,762
200,000 Kentucky State Turnpike
Authority, Economic
Development Revenue Bonds,
7.25%, due 5/15/10,
prerefunded 5/15/00 at
101.50....................... 220,000
425,000 Kentucky State Turnpike
Authority Economic
Development Revenue Bonds,
Revitalization Projects,
escrowed to maturity, 7.00%,
due 5/15/99.................. 450,500
-------------
1,340,430
-------------
EDUCATION FACILITIES REVENUE (18.9%)
200,000 Hopkins County, KY, School
District Finance Corp.,
School Building Revenue
Bonds, 5.70%, due 6/1/06..... 209,250
495,000 Jefferson County, KY, School
District Finance Corp.,
School Building Revenue
Bonds, Series A, 4.875%, due
1/1/11....................... 464,062
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
EDUCATION FACILITIES REVENUE, CONTINUED
$ 750,000 Jefferson County, KY, School
District Finance Corp. School
Building Revenue Bonds,
Series A, MBIA insured,
5.00%, due 2/1/07............ $ 753,750
475,000 Kentucky Higher Education
Student Loan Corp., Insured
Student Loan Revenue Bonds,
Series B, 6.40%, due
6/1/00....................... 499,937
70,000 Lexington-Fayette Urban County
Government, KY, School
Buildings Revenue Bonds,
6.80%, due 10/1/01........... 76,563
200,000 University of Louisville, KY,
Revenue Bonds, Series H,
5.875%, due 5/1/12........... 206,000
-------------
2,209,562
-------------
GENERAL OBLIGATIONS--BOND BANK (2.5%)
305,000 Fern Creek, KY, Fire Protection
District, Holding Co., Inc.,
Revenue Bonds, Fire Station
#2, 5.75%, due 1/15/14....... 295,850
-------------
HEALTH CARE REVENUE (10.6%)
1,225,000 Kentucky Economic Development
Finance Authority, Hospital
Facilities Revenue Bonds,
Society National Bank LOC,
5.75%, due 11/1/05........... 1,241,844
-------------
HOUSING REVENUE (9.0%)
725,000 Boone County, KY, Public
Properties Corp. Revenue
Bonds, Sewer System Lease,
5.15%, due 12/1/12........... 695,094
270,000 Greater Kentucky Housing
Assistance Corp., Mortgage
Revenue Bonds, FHA/Section 8
Assisted Project, Series A,
MBIA/ FHA insured, 6.25%, due
7/1/22....................... 272,364
</TABLE>
See Notes to Schedule of Investments. 8 TRANS ADVISER FUNDS, INC.
<PAGE>
KENTUCKY TAX-FREE FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
HOUSING REVENUE, CONTINUED
$ 100,000 Jefferson County, KY, Capital
Projects Corp. Revenue Bonds,
0.00% (5.75% effective
yield), due 8/15/99.......... $ 89,375
-------------
1,056,833
-------------
INDUSTRIAL DEVELOPMENT REVENUE (6.4%)
750,000 Clark County, KY, Industrial
Building Revenue Bonds,
Southern Wood Project, 7.00%,
due 12/1/08.................. 753,750
-------------
LEASING REVENUE (5.4%)
490,000 Jefferson County, KY, Capital
Projects Corp. Revenue Bonds,
5.65%, due 8/15/03........... 517,563
100,000 Kentucky State Property &
Buildings Commission Revenue
Bonds, Project #52, 6.50%,
due 8/1/11, Prerefunded
8/1/01 at 102................ 110,000
-------------
627,563
-------------
OTHER REVENUE (1.2%)
120,000 Puerto Rico Public Buildings
Authority Guaranteed Revenue
Bonds, Series K, 6.875%, due
7/1/21, prerefunded 7/1/02 at
101.50....................... 135,750
-------------
POLLUTION CONTROL REVENUE (19.8%)
450,000 Ashland, KY, PCR Bonds, Ashland
Oil, 7.375%, due 7/1/09...... 486,000
295,000 Ashland, KY, Solid Waste
Revenue Bonds, Ashland Oil,
Inc., Project, 7.20%, due
10/1/20...................... 314,913
235,000 Jefferson County, KY, PCR
Bonds, Louisville Gas &
Electric Co. Project A,
7.45%, due 6/15/15........... 256,150
<CAPTION>
FACE SECURITY
AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
POLLUTION CONTROL REVENUE, CONTINUED
$ 100,000 Kentucky State Pollution
Abatement & Water Reserve
Finance Authority Revenue
Bonds, Series A, escrowed to
maturity, 7.40%, due
8/1/02....................... $ 113,750
50,000 Louisville & Jefferson County,
KY, Metropolitan Sewer
District, Sewer & Drain
System Revenue Bonds Series
A, AMBAC insured, 6.50%, due
5/15/00...................... 53,250
385,000 Trimble County, KY, PCR Bonds,
7.625%, due 11/1/20,
Prerefunded 11/1/00 at 102... 431,681
600,000 Trimble County, KY, PCR Bonds,
Series A, 7.625%, due
11/1/20...................... 662,250
-------------
2,317,994
-------------
RESOURCE RECOVERY REVENUE (2.4%)
275,000 Kentucky State Turnpike
Authority Resource Recovery
Road Revenue, 6.00%, due
7/1/09....................... 275,770
-------------
TRANSPORTATION REVENUE (5.9%)
655,000 Kentucky State Turnpike
Authority Resource Recovery
Revenue Bonds, escrowed to
maturity, 6.125%, due
7/1/07....................... 691,844
-------------
UTILITIES REVENUE (1.9%)
200,000 Owensboro, KY, Electric Light &
Power Revenue Bonds, Series
A, 10.25%, due 1/1/09,
prerefunded 1/1/00 at 102.... 228,500
-------------
Total Municipal Bonds
(cost $11,188,810)......................... 11,229,252
-------------
SHORT TERM-HOLDINGS (4.0%)
466,600 1784 Tax Free Money Market Fund
(cost $466,600).............. 466,600
-------------
Total Investments (100.0%)
(cost $11,655,410)(c)...................... $ 11,695,852
-------------
-------------
</TABLE>
See Notes to Schedule of Investments. 9 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
ASSET BACKED SECURITIES (0.2%)
$ 226,593 FHLMC, 7.00%, due 4/1/97....... $ 226,698
-------------
DISCOUNT NOTES (20.4%)
4,376,000 FHLMC, 5.30% yield, due
3/3/97....................... 4,376,000
6,000,000 FHLMC, 5.28% yield, due
3/19/97...................... 5,986,155
6,700,000 FNMA, 5.31% yield, due
3/3/97....................... 6,700,000
3,000,000 FNMA, 5.31% yield, due
3/4/97....................... 2,999,564
-------------
Total Discount Notes......................... 20,061,719
-------------
GOVERNMENT AGENCY NOTES (0.8%)
200,000 FHLB, 6.99%, due 4/25/97....... 200,398
100,000 FHLB, 4.80%, due 7/24/97....... 99,476
500,000 FNMA, 6.84%, due 10/3/97....... 503,289
-------------
Total Government Agency Notes................ 803,163
-------------
CORPORATE NOTES (58.3%)
500,000 Alcan Aluminum, 6.375%, due
9/1/97....................... 500,717
100,000 Allied Corp., 0.00% (5.95%
effective yield), due
8/1/97....................... 97,605
1,373,000 American Express Credit Corp.,
7.75%, due 3/1/97............ 1,373,000
140,000 American General Finance Corp.,
5.80%, due 4/1/97............ 140,000
75,000 American General Finance Corp.,
7.15%, due 5/15/97........... 75,164
80,000 American General Finance Corp.,
7.70%, due 11/15/97.......... 80,941
703,000 American Home Products Corp.,
6.875%, due 4/15/97.......... 703,886
125,000 Associates Corp. of North
America, 9.70%, due 5/1/97... 125,749
1,005,000 Associates Corp. of North
America, 8.625%, due
6/15/97...................... 1,011,880
15,000 Associates Corp. of North
America, 6.75%, due
7/15/97...................... 15,050
30,000 Associates Corp. of North
America, 6.75%, due
7/15/97...................... 30,080
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 1,470,000 Associates Corp. of North
America, 5.875%, due
8/15/97...................... $ 1,470,594
750,000 Associates Corp. of North
America, 7.75%, due
11/1/97...................... 758,588
110,000 Associates Corp. of North
America, 6.625%, due
11/15/97..................... 110,504
70,000 B.P. America, 9.50%, due
1/1/98....................... 71,912
75,000 Bank of Boston, 9.50%, due
8/15/97...................... 76,174
187,000 BankAmerica Corp., 6.00%, due
7/15/97...................... 186,999
175,000 Baxter International, Inc.,
7.50%, due 5/1/97............ 175,416
90,000 Bell Atlantic Financial,
6.625%, due 11/30/97......... 90,359
600,000 Beneficial Corp., 6.79%, due
11/20/97..................... 604,556
240,000 British Petroleum America,
Inc., 8.875%, due 12/1/97.... 245,010
485,000 Brunswick Corp., 8.125%, due
4/1/97....................... 485,791
164,000 CIT Group Holdings, Inc.,
8.75%, due 7/1/97............ 165,362
2,000,000 CSX Transportation, Inc., 5.93
%, due 6/1/97................ 1,999,915
55,000 Campbell Soup Co., 9.00%, due
11/1/97...................... 56,084
100,000 Carolina Power & Light Co.,
6.375%, due 10/1/97.......... 100,000
159,000 Coca-Cola Enterprises Inc.,
6.50%, due 11/15/97.......... 159,539
500,000 Commercial Credit Co., 8.125%,
3/1/97....................... 500,000
500,000 Conagra Inc., 9.75%, due
11/1/97...................... 512,573
125,000 Consolidated Edison, 5.30%, due
8/1/97....................... 124,699
100,000 Discover Credit, 7.98%, due
4/7/97....................... 100,173
430,000 Dow Capital, 5.75%, due
9/15/97...................... 429,098
</TABLE>
See Notes to Schedule of Investments. 10 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 250,000 Dupont Corp., 8.65%, due
12/1/97...................... $ 255,222
200,000 Eastman Kodak Co., 8.55%, due
5/1/97....................... 200,866
205,000 Exxon Capital Corp., 7.875%,
due 8/15/97.................. 206,496
60,000 First Interstate Bancorp,
12.75%, due 5/1/97........... 60,632
1,682,000 Ford Holdings Inc., 9.25%, due
7/15/97...................... 1,701,846
250,000 Ford Motor Co., 5.30%, due
7/1/97....................... 249,408
125,000 Ford Motor Credit Co., 5.625%,
due 3/3/97................... 125,000
357,000 Ford Motor Credit Co., 6.80%,
due 8/15/97.................. 358,204
150,000 Ford Motor Credit Co., 7.125%,
due 12/1/97.................. 151,216
77,000 Ford Motor Credit Co., 8.00%,
due 12/1/97.................. 78,101
1,379,000 GMAC, 7.75%, due 4/15/97....... 1,382,185
220,000 GMAC, 8.375%, due 5/1/97....... 220,882
75,000 GMAC, 6.40%, due 7/30/97....... 75,016
75,000 GMAC, 7.00%, due 8/15/97....... 75,320
1,400,000 GMAC, 6.25%, due 9/12/97....... 1,405,076
1,000,000 GMAC, 7.85%, due 11/17/97...... 1,014,921
20,000 GTE California, 6.25%, due
1/15/98...................... 20,000
750,000 GTE North, Inc., 6.25%, due
7/1/97....................... 750,528
80,000 GTE South, Inc., 6.25%, due
11/15/97..................... 80,067
30,000 General Electric Capital,
8.00%, due 1/15/98........... 30,525
369,000 Golden West Financial Corp.,
10.25%, due 5/15/97.......... 372,192
2,100,000 Greyhound Financial Corp.,
8.25%, due 3/11/97........... 2,101,197
700,000 H.F. Ahmanson & Co., 6.00%, due
4/1/97....................... 700,000
78,000 Heinz (H.J.) Co., 5.50%, due
9/15/97...................... 77,833
4,010,000 Heller Financial, 7.75%, due
5/15/97...................... 4,026,170
965,000 Hospital Corp. of America,
9.00%, due 3/15/97........... 965,907
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 85,000 Household Finance Co., 7.75%,
due 6/15/97.................. $ 85,434
375,000 IBM Corp., 6.375%, due
11/1/97...................... 376,087
100,000 IBM Credit Corp., 5.54%, due
8/18/97...................... 99,812
50,000 Interamerican Development Bank,
9.50%, due 10/15/97.......... 51,051
325,000 International Lease Finance,
5.50%, due 4/1/97............ 324,848
655,000 International Lease Finance,
6.50%, due 7/15/97........... 656,991
250,000 International Lease Finance,
6.75%, due 8/1/97............ 250,901
500,000 Iowa, Illinois Gas & Electric
Co., 5.875%, due 7/15/97..... 500,000
160,000 John Deere Capital, 7.20%, due
5/15/97...................... 160,395
4,020,000 Kellogg Co., 5.90%, due
7/15/97...................... 4,024,995
60,000 Kimberly-Clark Corp., 9.125%,
due 6/1/97................... 60,470
480,000 Lehman Brothers, Inc., 7.375%,
due 8/15/97.................. 483,534
376,000 Lehman Brothers Holdings, Inc.,
8.375%, due 4/1/97........... 376,733
760,000 Lehman Brothers Holdings, Inc.,
7.625%, due 6/15/97.......... 763,745
2,066,000 MGM Grand Hotels Financial
Corp., Defeased, 11.75%, due
5/1/97....................... 2,124,746
871,000 MGM Grand Hotels Financial
Corp., Defeased, 12.00%, due
5/1/02(b).................... 925,377
2,982,000 Marine Midland Banks, Inc.,
8.625%, due 3/1/97........... 2,982,000
285,000 Maytag Corp., 8.875%, due
7/1/97....................... 287,373
100,000 Monongahela Power, 6.50%, due
8/1/97....................... 100,026
125,000 Morgan Stanley Group, 5.65%,
due 6/15/97.................. 125,014
1,265,000 National Rural Utilities Corp.,
9.50%, due 5/15/97........... 1,273,487
</TABLE>
See Notes to Schedule of Investments. 11 TRANS ADVISER FUNDS, INC.
<PAGE>
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS (continued)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 390,000 New York Telephone Co., 4.625%,
due 10/1/97.................. $ 387,017
275,000 Norwest Corp., 7.70%, due
11/15/97..................... 278,426
130,000 Norwest Financial Inc., 6.00%,
due 8/15/97.................. 129,859
65,000 Norwest Financial Inc., 6.50%,
due 11/15/97................. 65,239
100,000 Paccar Financial Corp., 5.12%,
due 3/10/97.................. 99,984
183,000 Pacific, Gas, & Electric Co.,
4.625%, due 6/1/97........... 182,443
230,000 PepsiCo, Inc., 6.875%, due
5/15/97...................... 230,442
1,513,000 Philip Morris Cos., Inc.,
7.50%, due 3/15/97........... 1,513,729
300,000 Philip Morris Cos., Inc.,
9.75%, due 5/1/97............ 301,765
590,000 Philip Morris Cos., Inc.,
8.75%, due 6/15/97........... 594,305
30,000 Philip Morris Cos., Inc.,
9.35%, due 11/21/97.......... 30,726
485,000 Philip Morris Cos. Inc., 9.25%,
due 12/1/97.................. 496,301
45,000 Philip Morris Cos., Inc.,
6.375%, due 1/15/98.......... 45,137
190,000 Procter & Gamble Co., 6.85%,
due 6/1/97................... 190,375
50,000 Province of Ontario Global
Bond, 5.70%, due 10/1/97..... 49,941
360,000 Public Service Electric & Gas
Co., 6.875%, due 6/1/97...... 360,908
40,000 Public Service Electric & Gas
Co., 7.125%, due 11/1/97..... 40,282
1,115,000 Public Service Electric & Gas
Co., 7.125%, due 11/1/97..... 1,124,331
<CAPTION>
SECURITY
FACE AMOUNT DESCRIPTION VALUE
- - ------------ ------------------------------- -------------
<C> <S> <C>
CORPORATE NOTES, CONTINUED
$ 660,000 Quebec Province, 8.74%, due
7/21/97...................... $ 665,770
466,000 Sears Roebuck and Co., 9.25%,
due 8/1/97................... 471,962
830,000 Southern California Edison Co.,
6.125%, due 7/15/97.......... 830,936
205,000 Texaco Capital, 9.00%, due
11/15/97..................... 209,251
190,000 U.S. Leasing International,
Inc., 7.00%, due 11/1/97..... 191,383
135,000 Union Electric Co., 5.50%, due
3/1/97....................... 135,000
937,000 Unisys Corp., 15.00%, due
7/1/97....................... 964,938
650,000 Virginia Electric & Power Co.,
7.25%, due 3/1/97............ 650,000
85,000 WMX Technologies, 8.125%, due
2/1/98....................... 86,500
1,064,000 Wal-Mart Stores, Inc., 5.50%,
due 9/15/97.................. 1,063,000
716,000 Waste Management, Inc. 6.375%,
due 7/1/97................... 717,010
115,000 Wisconsin Natural Gas, 6.125%,
due 9/1/97................... 115,090
-------------
Total Corporate Notes........................ 57,517,297
-------------
REPURCHASE AGREEMENTS (20.3%)
19,973,319 The First Boston Corp., 5.38%,
due 3/3/97, to be repurchased
at 19,976,304 (d)............ 19,973,319
-------------
Total Investments (100.0%)................... $ 98,582,196
-------------
-------------
</TABLE>
See Notes to Schedule of Investments. 12 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
- - ---------------------------------------------------------------------------
(a) Non-income producing securities.
(b) Variable rate demand notes are payable upon not more than one, seven or
thirty business days notice. Put bonds and notes have demand features which
mature within one year. The interest rate shown reflects the rate in effect.
(c) Aggregate cost for Federal tax purposes.
(d) The First Boston Corporation is a tri-party repurchase agreement
collateralized by various Federal Gold Loan Mortgage Corporation 6.50% to
8.50%, due 11/1/21 to 2/1/27, Par $705,941 and by various Federal National
Conventional Loan 6.00% to 9.00%, due 10/1/03 to 3/1/27, Par $24,865,226.
<TABLE>
<S> <C>
AMBAC American Municipal Bond Assurance Corporation
FHA Federal Housing Authority
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GMAC General Motors Acceptance Corporation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
PCR Pollution Control Revenue
SBA Small Business Administration
TVA Tennessee Valley Authority
</TABLE>
13 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH/ INTERMEDIATE
VALUE AGGRESSIVE BOND KENTUCKY MONEY MARKET
FUND GROWTH FUND FUND TAX-FREE FUND FUND
------------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost...................... $ 17,159,330 $ 8,115,391 $ 14,254,591 $ 11,655,410 $ 78,608,877
Repurchase Agreements at cost............ -- -- 1,955,394 -- 19,973,319
Net unrealized appreciation
(depreciation)......................... 3,469,550 1,277,867 (245,036) 40,442 --
------------- -------------- --------------- ------------- -------------
Total investments at value............. 20,628,880 9,393,258 15,964,949 11,695,852 98,582,196
Interest, dividends and other receivables.. 13,372 1,131 211,309 152,340 1,345,605
Receivable for Fund shares issued.......... 75,000 25,000 47 -- --
Organization costs, net of amortization
(Note 2)................................. 22,760 22,760 22,760 22,760 22,760
------------- -------------- --------------- ------------- -------------
Total Assets................................. 20,740,012 9,442,149 16,199,065 11,870,952 99,950,561
------------- -------------- --------------- ------------- -------------
LIABILITIES:
Dividends payable.......................... -- -- 73,869 26,034 319,424
Payable for securities purchased........... -- -- 48,161 -- 1,873,737
Payable for Fund shares redeemed........... 15,801 2,977 37,220 -- --
Payable to Trans Financial................. 26,993 -- -- -- 1,206
Payable to other related parties........... 11,831 15,064 12,286 28,388 66,618
------------- -------------- --------------- ------------- -------------
Total Liabilities............................ 54,625 18,041 171,536 54,422 2,260,985
------------- -------------- --------------- ------------- -------------
NET ASSETS................................... $ 20,685,387 $ 9,424,108 $ 16,027,529 $ 11,816,530 $ 97,689,576
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
COMPONENTS OF NET ASSETS:
Paid in capital............................ $ 17,439,553 $ 8,411,427 $ 16,227,629 $ 11,956,651 $ 97,691,530
Undistributed net investment income
(loss)................................... (90,354) (63,130) -- (173,707) --
Unrealized appreciation (depreciation) on
investments.............................. 3,469,550 1,277,867 (245,036) 40,442 --
Accumulated net realized gain (loss)....... (133,362) (202,056) 44,936 (6,856) (1,954)
------------- -------------- --------------- ------------- -------------
NET ASSETS................................... $ 20,685,387 $ 9,424,108 $ 16,027,529 $ 11,816,530 $ 97,689,576
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
SHARES OF BENEFICIAL INTEREST................ 1,554,603 755,681 1,625,149 1,155,557 97,691,530
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
NET ASSET VALUE PER SHARE, AND REDEMPTION
PRICE PER SHARE............................ $ 13.31 $ 12.47 $ 9.86 $ 10.23 $ 1.00
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
OFFERING PRICE PER SHARE, EXCEPT MONEY MARKET
(NAV DIVIDED BY (1 - 4.50%)).............. $ 13.94 $ 13.06 $ 10.32 $ 10.71 $ 1.00
------------- -------------- --------------- ------------- -------------
------------- -------------- --------------- ------------- -------------
</TABLE>
See Notes to Financial Statements. 14 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH/ AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
VALUE GROWTH BOND TAX-FREE MARKET
FUND FUND FUND FUND FUND
------------ -------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................................ $ 16,937 $ 7,330 $ 511,819 $ 432,568 $ 2,402,069
Dividend income................................ 65,970 5,885 -- -- --
------------ -------------- --------------- ----------- ------------
Total Investment Income.......................... 82,907 13,215 511,819 432,568 2,402,069
------------ -------------- --------------- ----------- ------------
EXPENSES:
Investment advisory (Note 3)................... 89,000 39,197 28,976 28,478 85,174
Administration (Note 3)........................ 13,512 12,500 12,500 12,500 63,881
Transfer agent (Note 3)........................ 12,809 12,445 11,847 13,654 10,336
Shareholder service (Note 3)................... 22,250 9,799 18,110 17,799 106,468
Custody........................................ 697 911 2,157 355 7,772
Accounting (Note 3)............................ 18,000 18,000 18,000 18,000 24,000
Legal (Note 3)................................. 9,767 6,568 9,468 11,320 12,402
Registration................................... 2,632 2,476 1,943 280 3,054
Audit.......................................... 7,946 7,522 8,376 8,431 9,300
Directors...................................... 967 417 821 915 4,721
Amortization of organization costs (Note 3).... 3,176 3,176 3,176 3,176 3,176
Miscellaneous.................................. 5,133 2,531 4,427 7,705 17,339
------------ -------------- --------------- ----------- ------------
Total Expenses................................... 185,889 115,542 119,801 122,613 347,623
Expenses reimbursed and fees waived
(Note 4)..................................... (12,628) (39,197) (58,242) (62,115) (70,760)
------------ -------------- --------------- ----------- ------------
Net Expenses..................................... 173,261 76,345 61,559 60,498 276,863
------------ -------------- --------------- ----------- ------------
NET INVESTMENT INCOME (LOSS)..................... (90,354) (63,130) 450,260 372,070 2,125,206
------------ -------------- --------------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments sold... (133,362) (201,524) 60,329 (4,068) (1,928)
Net change in unrealized appreciation
(depreciation) on investments................ 3,226,469 1,217,298 87,795 300,184 --
------------ -------------- --------------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS.................................... 3,093,107 1,015,774 148,124 296,116 (1,928)
------------ -------------- --------------- ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $ 3,002,753 $ 952,644 $ 598,384 $ 668,186 $ 2,123,278
------------ -------------- --------------- ----------- ------------
------------ -------------- --------------- ----------- ------------
</TABLE>
See Notes to Financial Statements. 15 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31, 1996
AND THE SIX MONTHS ENDED FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH/ AGGRESSIVE INTERMEDIATE
VALUE GROWTH BOND
FUND FUND FUND
-------------------------- ------------------------ --------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
------------- ----------- ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS--September 1, 1995(a)............. $ -- $ -- $ --
- - ----------------------------------
------------- ------------ -------------
OPERATIONS:
Net investment income (loss)............... (50,747) (39,525) 601,786
Net realized gain (loss) on investments
sold..................................... 89,352 43,284 (15,393)
Net change in unrealized appreciation
(depreciation) on investments............ 243,081 60,569 (332,831)
------------- ------------ -------------
Net Increase in Net Assets Resulting from
Operations............................. 281,686 64,328 253,562
------------- ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................... -- -- (601,786)
------------- ------------ -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares............................. 15,471,301 1,408,416 7,269,024 668,440 14,919,014 1,491,710
Reinvestment of distributions.............. -- -- -- -- 13,886 1,404
Redemption of shares....................... (645,322) (57,598) (783,438) (70,133) (1,227,784) (122,796)
------------- ----------- ------------ ---------- ------------- -----------
Net Increase (Decrease) in Capital
Transactions........................... 14,825,979 1,350,818 6,485,586 598,307 13,705,116 1,370,318
------------- ----------- ------------ ---------- ------------- -----------
----------- ---------- -----------
Net Increase (Decrease) in Net Assets...... 15,107,665 6,549,914 13,356,892
------------- ------------ -------------
NET ASSETS--August 31, 1996.................. 15,107,665 6,549,914 13,356,892
- - -----------------------------
------------- ------------ -------------
OPERATIONS:
Net investment income (loss)............... (90,354) (63,130) 450,260
Net realized gain (loss) on investments.... (133,362) (201,524) 60,329
Net change in unrealized appreciation
(depreciation) on investments............ 3,226,469 1,217,298 87,795
------------- ------------ -------------
Net Increase in Net Assets Resulting from
Operations............................. 3,002,753 952,644 598,384
------------- ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................... -- -- (450,260)
Net realized gain (loss) on investments
sold..................................... (44,429) (16,181) --
------------- ------------ -------------
Total Distribution to Shareholders....... (44,429) (16,181) (450,260)
------------- ------------ -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares............................. 4,624,904 361,307 2,810,182 230,029 3,603,774 361,955
Reinvestment of distributions.............. 10,879 875 4,532 376 10,125 1,023
Redemption of shares....................... (2,016,385) (158,397) (876,983) (73,031) (1,091,386) (108,147)
------------- ----------- ------------ ---------- ------------- -----------
Net Increase (Decrease) in Capital
Transactions........................... 2,619,398 203,785 1,937,731 157,374 2,522,513 254,831
------------- ----------- ------------ ---------- ------------- -----------
----------- ---------- -----------
Net Increase (Decrease) in Net Assets...... 5,577,722 2,874,194 2,670,637
------------- ------------ -------------
NET ASSETS--February 28, 1997 (Unaudited).... $ 20,685,387 $ 9,424,108 $ 16,027,529
- - -----------------------------------------
------------- ------------ -------------
------------- ------------ -------------
(a) See Note 1 of Notes to Financial Statements for date of commencement of operations.
</TABLE>
See Notes to Financial Statements. 16 TRANS ADVISER FUNDS, INC.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED AUGUST 31, 1996
AND THE SIX MONTHS ENDED FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
KENTUCKY MONEY
TAX-FREE MARKET
FUND FUND
------------------------- ----------------------------
AMOUNT SHARES AMOUNT SHARES
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS--September 1, 1995(a)...................................... $ -- $ --
------------ -------------
- - ----------------------------------
OPERATIONS:
Net investment income (loss)........................................ 714,832 2,473,468
Net realized gain (loss) on investments sold........................ (2,788) 2,494
Net change in unrealized appreciation (depreciation)
on investments.................................................... (259,742) --
------------ -------------
Net Increase in Net Assets Resulting
from Operations................................................. 452,302 2,475,962
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income............................................... (828,883) (2,473,468)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares...................................................... 28,751,437 2,814,888 446,620,681 446,620,681
Reinvestment of distributions....................................... 559,139 57,538 84,304 84,304
Redemption of shares................................................ (13,093,506) (1,297,814) (370,344,632) (370,344,632)
------------ ----------- ------------- -------------
Net Increase (Decrease) in Capital Transactions................... 16,217,070 1,574,612 76,360,353 76,360,353
------------ ----------- ------------- -------------
----------- -------------
Net Increase (Decrease) in Net Assets............................... 15,840,489 76,362,847
------------ -------------
NET ASSETS--August 31, 1996........................................... 15,840,489 76,362,847
- - -----------------------------
------------ -------------
OPERATIONS:
Net investment income (loss)........................................ 372,070 2,125,206
Net realized gain (loss) on investments............................. (4,068) (1,928)
Net change in unrealized appreciation (depreciation)
on investments.................................................... 300,184 --
------------ -------------
Net Increase in Net Assets Resulting from
Operations...................................................... 668,186 2,123,278
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................... (431,726) (2,125,206)
Net realized gain (loss) on investments sold........................ -- (2,520)
------------ -------------
Total Distribution to Shareholders................................ (431,726) (2,127,726)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares...................................................... 519,442 51,065 241,892,119 241,846,519
Reinvestment of distributions....................................... 180,402 17,695 193,146 193,146
Redemption of shares................................................ (4,960,263) (487,815) (220,754,088) (220,708,488)
------------ ----------- ------------- -------------
Net Increase (Decrease) in Capital Transactions................... (4,260,419) (419,055) 21,331,177 21,331,177
------------ ----------- ------------- -------------
----------- -------------
Net Increase (Decrease) in Net Assets............................... (4,023,959) 21,326,729
------------ -------------
NET ASSETS--February 28, 1997 (Unaudited)............................. $ 11,816,530 $ 97,689,576
- - -----------------------------------------
------------ -------------
------------ -------------
(a) See Note 1 of Notes to Financial Statements for date of commencement of operations.
</TABLE>
See Notes to Financial Statements. 17 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Trans Adviser Funds, Inc. (the "Company") is an open-end management investment
company incorporated under the laws of the State of Maryland. The Company
currently consists of five operational non-diversified investment portfolios,
the Growth/Value Fund, the Aggressive Growth Fund, the Intermediate Bond Fund,
the Kentucky Tax-Free Fund, and the Money Market Fund (each a "Fund" and
collectively the "Funds"). The Funds, except for Money Market Fund, are offered
at Net Asset Value ("NAV") plus a sales charge, currently 4.50% of NAV. The
Money Market Fund is offered at NAV. The Funds commenced investment operations
on the following dates:
<TABLE>
<S> <C>
Growth/Value Fund September 29, 1995
Aggressive Growth Fund September 29, 1995
Intermediate Bond Fund October 3, 1995
Kentucky Tax-Free Fund September 27, 1995
Money Market Fund September 29, 1995
</TABLE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates but are expected to be immaterial.
The following represent significant accounting policies of the Funds:
SECURITY VALUATION-All securities held by the Money Market Fund are valued
utilizing the amortized cost method, which approximates market value, in
accordance with Rule 2a-7 under the Investment Company Act of 1940. Securities,
other than short-term, held by the other Funds (the "Bond and Equity Funds") for
which market quotations are readily available are valued using the last reported
sales price provided by independent pricing services. If no sales are reported,
the mean of the last bid and asked price is used. In the absence of readily
available market quotations, securities are valued at fair value as determined
by the Board of Directors. Securities with a maturity of 60 days or less held by
the Bond and Equity Funds are valued at amortized cost.
PREMIUM AMORTIZATION AND DISCOUNT ACCRETION-In all Funds other than the Kentucky
Tax-Free Fund, if a fixed income investment is purchased at a premium, the
premium is not amortized. The Kentucky Tax-Free Fund amortizes premium on fixed
income investments to the maturity (or first call) date using the yield to
maturity method. If a fixed income investment is purchased at a discount (other
than original issue discount), the discount is not accreted. Original issue
discount on fixed income investments is accreted daily using yield to maturity
method.
INTEREST AND DIVIDEND INCOME-Interest income is accrued as earned. Dividends on
securities held by the Funds are recorded on the ex-dividend date.
DISTRIBUTIONS TO SHAREHOLDERS-Distributions to shareholders of net investment
income, if any, are declared daily and paid monthly for the Money Market Fund,
the Kentucky Tax-Free Fund, and the Intermediate Bond Fund, and declared and
paid annually for the Aggressive Growth Fund and the Growth/Value Fund. Net
capital gain, if any, is distributed to shareholders at least annually.
Distributions are based on amounts calculated in accordance with applicable
income tax regulations.
ORGANIZATION COSTS-The costs incurred by the Funds in connection with their
organization and registration of shares have been capitalized and are being
amortized using the straight-line method over a five year period beginning with
the commencement of the respective Fund's operations. Certain of these costs
were paid by Forum Financial Services, Inc. and have been reimbursed by the
respective Funds.
18 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
FEDERAL TAXES-Each Fund intends to qualify and continue to qualify each year as
a regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, each Fund
will not be subject to a federal excise tax. Therefore, no Federal income or
excise tax provision is required.
EXPENSE ALLOCATION-The Company accounts separately for the assets and
liabilities and operations of each Fund. Expenses that are directly attributable
to more than one Fund are allocated among the respective Funds.
REPURCHASE AGREEMENTS-The Aggressive Growth Fund, the Intermediate Bond Fund and
the Money Market Fund may invest in repurchase agreements. Each Fund, through an
agent bank under a tri-party agreement, receives delivery of the underlying
securities, whose market value must always equal or exceed the repurchase price
plus accrued interest. The investment adviser is responsible for determining the
value of the underlying securities at all times. In the event of default, the
Fund may have difficulties with the disposition of such securities.
REALIZED GAIN AND LOSS-Security transactions are accounted for on a trade date
basis and realized gain and loss on investments sold are determined on the basis
of identified cost.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser of the Funds is Trans Financial Bank, N.A. (the
"Adviser"). The Adviser receives a monthly advisory fee from the Growth/Value
Fund and the Aggressive Growth Fund at an annual rate of 1.00% of the respective
Fund's average daily net assets. The Adviser receives a monthly advisory fee
from the Intermediate Bond Fund and the Kentucky Tax-Free Fund at an annual rate
of 0.40% of the respective Fund's average daily net assets. The Adviser receives
a monthly advisory fee from the Money Market Fund at an annual rate of 0.20% of
the Fund's average daily net assets. Pursuant to a Sub - Advisory Agreement
between the Adviser and Mastrapasqua and Associates, Inc. ("M&A") (the
"Sub-Adviser"), the Adviser may delegate certain of its advisory
responsibilities to the Sub-Adviser. For its services, M&A is paid by the
Adviser as follows: with respect to the Aggressive Growth and the Growth/Value
Funds, the Adviser (not the Fund) pays to M&A an annual fee, calculated daily
and paid monthly, of 0.50% on the first $100 million of such Funds' combined
average daily net assets plus 0.25% of such Funds' combined average daily net
assets in excess of $100 million for its services, and, with respect to each
other, the Adviser (not the Fund) pays M&A an annual fee, calculated on a daily
basis and paid monthly, of 0.03% of average daily net assets for its services.
Effective October 24, 1996, the administrator of the Funds is Forum
Administrative Services, LLC ("FAS") and for its services it receives a fee for
each Fund equal to the greater of $25,000 per year or 0.15% of the annual
average daily net assets of each Fund. Forum Financial Services, Inc. ("Forum")
acts as the Company's distributor pursuant to a separate Distribution Agreement
with the Company. Forum receives no compensation under that agreement. In
addition, certain legal expenses were charged to the Company by FAS amounting to
$1,931.
Prior to October 24, 1996, the administrator of the Funds was Forum, and for its
services received a fee for each Fund equal to the greater of $25,000 per year
or 0.15% of the annual average daily net assets of each Fund.
Forum Financial Corp. ("FFC"), an affiliate of FAS and Forum, serves as the
Funds' transfer agent and dividend disbursing agent, and for those services
receives an annual fee of $12,000 plus account and series charges. The Company
has adopted a shareholder service plan under which the Company pays FAS a
shareholder servicing fee at an annual rate of 0.25% of the daily net assets of
each Fund. FAS may pay any or all amounts of these payments to various
institutions which provide shareholder servicing to their customers. FFC also
serves as the Company's fund accountant and is compensated for those services at
an amount of $36,000 per year per Fund plus certain amounts based upon the
number and types of portfolio transactions within each Fund.
19 TRANS ADVISER FUNDS, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1997 (Unaudited)
- - ----------------------------------------------------------------------------
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
The Adviser has voluntarily waived a portion of its fees and assumed certain
expenses of the Funds so that total expenses of the Funds would not exceed a
certain limitation. For the six months ended February 28, 1997, fees waived and
expenses reimbursed were as follows:
<TABLE>
<CAPTION>
FEES WAIVED EXPENSES REIMBURSED
------------- ----------------------
<S> <C> <C>
Growth/Value Fund.............................................. $ 12,628 $ --
Aggressive Growth Fund......................................... 39,197 --
Intermediate Bond Fund......................................... 28,976 29,266
Kentucky Tax-Free Fund......................................... 28,478 33,637
Money Market Fund.............................................. 70,760 --
</TABLE>
NOTE 5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales (including maturities) of securities
(excluding short-term investments) during the six months ended February 28, 1997
were as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
------------------ ---------------------
<S> <C> <C>
Growth/Value Fund......................................... $ 6,225,001 $ 3,240,579
Aggressive Growth Fund.................................... 2,689,176 1,164,824
Intermediate Bond Fund.................................... 5,640,333 3,374,356
Kentucky Tax-Free Fund.................................... -- 4,519,568
</TABLE>
For the period ended February 28, 1997, aggregate gross unrealized appreciation
for all securities in which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which there was an
excess of tax cost over value for Federal income tax purposes were as follows:
<TABLE>
<CAPTION>
NET APPRECIATION
UNREALIZED APPRECIATION UNREALIZED DEPRECIATION (DEPRECIATION)
----------------------- ----------------------- -----------------
<S> <C> <C> <C>
Growth/Value Fund............... $ 3,848,668 $ 379,118 $ 3,469,550
Aggressive Growth Fund.......... 1,773,754 495,887 1,277,867
Intermediate Bond Fund.......... 30,934 275,970 (245,036)
Kentucky Tax-Free Fund.......... 77,419 36,977 40,442
</TABLE>
NOTE 6. CONCENTRATION OF CREDIT RISK
The Kentucky Tax-Free Fund invests substantially all of its assets in debt
obligations of issuers located in the state of Kentucky. The issuers' abilities
to meet their obligations may be affected by Kentucky economic or political
developments.
20 TRANS ADVISER FUNDS, INC.
<PAGE>
FINANCIAL HIGHLIGHTS
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AGGRESSIVE INTERMEDIATE
VALUE GROWTH BOND
FUND FUND FUND
SELECTED PER SHARE DATA AND ------------------------ ------------------------ ------------------------
RATIOS FOR A SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
SHARE OUTSTANDING THROUGHOUT ENDED ENDED ENDED ENDED ENDED ENDED
THE PERIOD 2/28/97(f) 8/31/96(a) 2/28/97(f) 8/31/96(a) 2/28/97(f) 8/31/96(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 11.18 $ 10.00 $ 10.95 $ 10.00 $ 9.75 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
Investment Operations
Net Investment Income
(Loss).................... (0.06) (0.06)(c) (0.08) (0.11)(c) 0.31 0.57(c)
Net Realized and Unrealized
Gain (Loss) on
Investments............... 2.22 1.24 1.63 1.06 0.11 (0.25)
----------- ----------- ----------- ----------- ----------- -----------
Total from Investment
Operations.................. 2.16 1.18 1.55 0.95 0.42 0.32
----------- ----------- ----------- ----------- ----------- -----------
Distributions from
Net Investment Income....... (0.03) -- (0.03) -- (0.31) (0.57)
Net Realized Gain on
Investments............... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions........... (0.03) -- (0.03) -- (0.31) (0.57)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of
Period...................... $ 13.31 $ 11.18 $ 12.47 $ 10.95 $ 9.86 $ 9.75
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total Return(b)............ 42.67%(e) 11.80% 30.53%(e) 9.50% 8.79%(e) 3.23%
Ratio/Supplementary Data:
Net Assets at End of Period
(000's omitted)............. $ 20,685 $ 15,108 $ 9,424 $ 6,550 $ 16,028 $ 13,357
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver
(e)....................... 1.95% 1.95% 1.95% 1.95% 0.85% 0.68%
Expenses excluding
reimbursement/waiver
(e)....................... 2.09% 2.83% 2.95% 5.05% 1.65% 2.04%
Net investment income (loss)
including
reimbursement/waiver
(e)....................... (1.02)% (0.62 )% (1.61 )% (1.26 )% 6.22% 6.31%
Average Commission Rate(d).... $ 0.0576 $ 0.0700 $ 0.0553 $ 0.0800 N/A N/A
Portfolio Turnover Rate....... 18.89% 21.12% 15.45% 15.70% 26.77% 12.38%
- - --------------------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for date of commencement of
operations.
(b) Total return calculation does not include sales charges.
(c) Using weighted average shares outstanding for the period.
(d) Amount represents the average commission per share paid to brokers on the
purchase or sale of equity securities.
(e) Annualized.
(f) Unaudited.
21 TRANS ADVISER FUNDS, INC.
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- - ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
KENTUCKY MONEY
TAX-FREE MARKET
FUND FUND
SELECTED PER SHARE DATA AND ------------------------ ------------------------
RATIOS FOR A SIX MONTHS YEAR SIX MONTHS YEAR
SHARE OUTSTANDING THROUGHOUT ENDED ENDED ENDED ENDED
THE PERIOD 2/28/97(f) 8/31/96(a) 2/28/97(f) 8/31/96(a)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 10.06 $ 10.00 $ 1.00 $ 1.00
----------- ----------- ----------- -----------
Investment Operations
Net Investment Income
(Loss).................... 0.18 0.51(c) 0.03 0.05(c)
Net Realized and Unrealized
Gain (Loss) on
Investments............... 0.25 0.06 -- --
----------- ----------- ----------- -----------
Total from Investment
Operations.................. 0.43 0.57 0.03 0.05
----------- ----------- ----------- -----------
Distributions from
Net Investment Income....... (0.26) (0.51) (0.03) (0.05)
Net Realized Gain on
Investments............... -- -- -- --
----------- ----------- ----------- -----------
Total Distributions........... (0.26) (0.51) (0.03) (0.05)
----------- ----------- ----------- -----------
Net Asset Value, End of
Period...................... $ 10.23 $ 10.06 $ 1.00 $ 1.00
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total Return(b)............ 8.90%(e) 5.80% 5.11%(e) 4.70%
Ratio/Supplementary Data:
Net Assets at End of Period
(000's omitted)............. $ 11,817 $ 15,840 $ 97,690 $ 76,363
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver
(e)....................... 0.85% 0.82% 0.65% 0.65%
Expenses excluding
reimbursement/waiver
(e)....................... 1.72% 1.65% 0.82% 0.99%
Net investment income (loss)
including
reimbursement/waiver
(e)....................... 5.23% 5.30% 4.99% 4.94%
Average Commission Rate(d).... N/A N/A N/A N/A
Portfolio Turnover Rate....... 0.00% 145.12% N/A N/A
- - --------------------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for date of commencement of
operations.
(b) Total return calculation does not include sales charges.
(c) Using weighted average shares outstanding for the period.
(d) Amount represents the average commission per share paid to brokers on the
purchase or sale of equity securities.
(e) Annualized.
(f) Unaudited.
22
<PAGE>
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
Statements of Operations
Statements of Changes in Net Assets
Portfolio/Schedule of Investments
Notes to Financial Statements
(b) Exhibits:
(1)(i) Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 25, is hereby incorporated by
reference.
(ii) Amendment No. 1, dated May 24, 1994, to
Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 29, is hereby incorporated by
reference.
(iii) Amendment No. 2, dated February 28, 1997,
to Registrant's Restated Agreement and
Declaration of Trust is filed herewith.
(2)(i) Registrant's Bylaws, which was filed as an
Exhibit to Registrant's Pre-Effective
Amendment No. 1, is hereby incorporated by
reference.
(ii) Amendments to Registrant's Bylaws adopted
July 17, 1984, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 4, is hereby incorporated by
reference.
(iii) Amendment to Registrant's Bylaws adopted
April 5, 1989, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 14, is hereby incorporated
by reference.
(3) Voting Trust Agreements - None.
<PAGE>
(4) Specimen Share Certificate, which was filed
as an Exhibit to Registrant's Post-
Effective Amendment No. 12, is hereby
incorporated by reference.
(5) (i) Registrant's Management Agreement with
Countrywide Investments, Inc. for the U.S.
Government Securities Fund is filed
herewith.
(ii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Treasury Total Return Fund is filed
herewith.
(iii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Utility Fund is filed herewith.
(iv) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Equity Fund is filed herewith.
(v) Form of Registrant's Management Agreement
with Countrywide Investments, Inc. for the
Growth/Value Fund is filed herewith.
(vi) Form of Registrant's Management Agreement
with Countrywide Investments, Inc. for the
Aggressive Growth Fund is filed herewith.
(vii) Form of Subadvisory Agreement between
Countrywide Investments, Inc. and
Mastrapasqua & Associates, Inc. for the
Growth/Value Fund and the Aggressive Growth
Fund is filed herewith.
(6) (i) Registrant's Underwriting Agreement with
Countrywide Investments, Inc. is filed
herewith.
(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) Custody Agreement with The Fifth Third
Bank, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No.
31, is hereby incorporated by reference.
(9) (i) Registrant's Accounting and Pricing Service
Agreement with Countrywide Fund Services,
Inc. is filed herewith.
<PAGE>
(ii) Registrant's Transfer, Dividend Disbursing,
Shareholder Service and Plan Agency
Agreement with Countrywide Fund Services,
Inc. is filed herewith.
(iii) Administration Agreement between
Countrywide Investments, Inc. and
Countrywide Fund Services, Inc. is
filed herewith.
(iv) License Agreement with Countrywide Credit
Industries, Inc. is filed herewith.
(10) Opinion and Consent of Goodwin, Procter &
Hoar, which was filed with Registrant's
Rule 24f-2 Notice for the fiscal year ended
March 31, 1996 is hereby incorporated by
reference.
(11) Consents of Independent Auditors are filed
herewith.
(12) Financial Statements Omitted from Item 23 -
None.
(13) Copy of Letter of Initial Stockholder,
which was filed as an Exhibit to
Registrant's Pre-Effective Amendment
No. 1, is hereby incorporated by reference.
(14) (i) Copy of Midwest Group Individual Retirement
Account Plan, including Schedule of Fees,
which was filed as an Exhibit to
Registrant's Post-Effective Amendment No.
22, is hereby incorporated by reference.
(ii) Copy of Midwest Group 403(b) Plan, including
Schedule of Fees, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 22, is hereby incorporated by
reference.
(iii) Copy of the Midwest Group Prototype Defined
Contribution Plan, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 19, is hereby incorporated by
reference.
(15) (i) Registrant's Plans of Distribution Pursuant
to Rule 12b-1 are filed herewith.
(ii) Form of Administration Agreement with
respect to the administration of shareholder
accounts is filed herewith.
<PAGE>
(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. 12, are hereby
incorporated by reference.
(17)(i) Financial Data Schedules for U.S. Government
Securities Fund, Treasury Total Return Fund,
Utility Fund and Equity Fund, which were
filed as Exhibits to Registrant's Post-
Effective Amendment No. 31, are hereby
incorporated by reference.
(ii) Financial Data Schedule for Growth/Value
Fund and Aggressive Growth Fund are 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.
31, is hereby incorporated by reference.
(19) Powers of Attorney for Donald L. Bogdon,
M.D., Angelo R. Mozilo, John F. Seymour, Jr.
and Sebastiano Sterpa are filed herewith.
Item 25. Persons Controlled by or Under Common Control with the
Registrant
-------------------------------------------------------
None
Item 26. Number of Holders of Securities (as of March 31, 1997)
- ------- -----------------------------------------------------
Title of Class Number of Record Holders
-------------- ------------------------
U.S. Government Securities Fund 780
Treasury Total Return Fund 989
Utility Fund
Class A Shares 1,809
Class C Shares 183
Equity Fund
Class A Shares 568
Class C Shares 132
Growth/Value Fund 0
Aggressive Growth Fund 0
<PAGE>
Item 27. Indemnification
- ------- ---------------
(a) Article VI of the Registrant's Restated Agreement and
Declaration of Trust provides for indemnification of
officers and Trustees as follows:
Section 6.4 Indemnification of Trustees, Officers, etc.
----------- ------------------------------------------
The Trust shall indemnify each of its Trustees and officers,
including persons who serve at the Trust's request as
directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise (hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable accountants'
and counsel fees, incurred by any Covered Person in connection
with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being
or having been such a Trustee or officer, director or trustee,
and except that no Covered Person shall be indemnified against
any liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's
office ("disabling conduct"). Anything herein contained to the
contrary notwithstanding, no Covered Person shall be
indemnified for any liability to the Trust or its Shareholders
to which such Covered Person would otherwise be subject unless
(1) a final decision on the merits is made by a court or other
body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of disabling
conduct or, (2) in the absence of such a decision, a
reasonable determination is made, based upon a review of the
facts, that the Covered Person was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum
of Trustees who are neither "interested persons" of the
Company as defined in the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
Trustees"), or (b) an independent legal counsel in a written
opinion.
Section 6.5 Advances of Expenses.
----------- --------------------
The Trust shall advance attorneys' fees or other expenses
incurred by a Covered Person in defending a proceeding, upon
the undertaking by or on behalf of the Covered Person to repay
the advance unless it is
<PAGE>
ultimately determined that such Covered Person is entitled to
indemnification, so long as one of the following conditions is
met: (i) the Covered Person shall provide security for his
undertaking, (ii) the Trust shall be insured against losses
arising by reason of any lawful advances, or (iii) a majority
of a quorum of the disinterested non-party Trustees of the
Trust, or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Person ultimately will be
found entitled to indemnification.
Section 6.6 Indemnification Not Exclusive, etc.
----------- -----------------------------------
The right of indemnification provided by this Article VI shall
not be exclusive of or affect any other rights to which any
such Covered Person may be entitled. As used in this Article
VI, "Covered Person" shall include such person's heirs,
executors and administrators, an "interested Covered Person"
is one against whom the action, suit or other proceeding in
question or another action, suit or other proceeding on the
same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against
whom none of such actions, suits or other proceedings or
another action, suit or other proceeding on the same or
similar grounds is then or has been pending or threatened.
Nothing contained in this article shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any
such person.
(b) The Registrant maintains a standard 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 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 the
<PAGE>
Adviser in the performance of its duties or from the reckless
disregard by the Adviser of its obligations under the
Agreement. Registrant will advance attorneys' fees or other
expenses incurred by the Adviser in defending a proceeding,
upon the undertaking by or on behalf of the Adviser to repay
the advance unless it is ultimately determined that the
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.
Item 28. Business and Other Connections of the 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 six series of Countrywide Tax-Free Trust
and five series of Countrywide Investment Trust,
both of which are registered investment companies.
The Adviser also serves as subadvisor to the
Capitol Square Bond Fund series of Capitol Square
Funds, a registered investment company. The
Adviser provides investment advisory services to
individual and institutional accounts and is a
registered broker-dealer.
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.
<PAGE>
(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,
Countrywide Servicing Exchange,* a loan
servicing broker and Countrywide Capital
Markets, Inc.,* a holding company.
(c) Vice Chairman, Director and Executive Vice
President of Countrywide Credit Industries,
Inc.,* a holding company which provides
residential mortgages and ancillary
financial products and services.
(d) A Director of Countrywide Home Loans, Inc.,*
a residential mortgage lender and CTC
Foreclosure Services Corporation,* a
foreclosure trustee.
(e) A Director of LandSafe, Inc.* and Chairman
and a director of various Landsafe
subsidiaries which provide residential
mortgage title and closing services.
(f) Chairman and CEO of Countrywide Securities
Corporation,* a registered broker-dealer.
(g) Vice Chairman of CWM Mortgage Holdings,
Inc.,* a real estate investment trust.
(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.
<PAGE>
(3) Andrew S. Bielanski - A Director of the Adviser.
(a) A Director of Countrywide Financial Services
Inc., Countrywide Fund Services, Inc. and
Countrywide Agency, Inc.,* an insurance
agency.
(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., Countrywide Agency, Inc.,* Countrywide
Tax Services Corporation,* a residential
mortgage tax service provider and
Countrywide Lending Corporation,* a lending
institution.
(b) Managing Director- Chief Loan Administration
Officer of Countrywide Credit Industries,
Inc. and Countrywide Home Loans, Inc.
(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.
(5) Marshall M. Gates - A Director of the Adviser.
(a) A Director of Countrywide Financial Services
Inc., Countrywide Fund Services, Inc. and
Countrywide Agency, Inc.
(b) Managing Director - Production 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.
(6) David Sambol - A Director of the Adviser.
(a) A Director of Countrywide Financial Services
Inc., Countrywide Fund Services, Inc. and
Countrywide Securities Corporation.
<PAGE>
(b) Managing Director - Capital Markets of
Countrywide Credit Industries, Inc. and
Countrywide Home Loans, Inc.
(c) CEO, President and a Director of Countrywide
Capital Markets, Inc. and Countrywide
Servicing Exchange,* a loan servicing broker
(7) John J. Goetz - Vice President and Chief
Investment Officer of the Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(8) Maryellen Peretzky - Vice President-
Administration, Human Resources and Operations of
the Adviser.
(a) Vice President-Administration, Human
Resources and Operations of Countrywide
Financial Services, Inc. and Countrywide
Fund Services, Inc.
(b) Assistant Secretary of The Tuscarora
Investment Trust and The Gannett Welsh &
Kotler Funds.
(c) Vice President and a Director of Leshner
Financial Services, Inc. until December 1994
(9) Sharon L. Karp - Vice President-Marketing of the
Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(10) John F. Splain - Secretary and General Counsel of
the Adviser.
(a) Vice President, Secretary and General Counsel
of Countrywide Fund Services, Inc.
(b) Secretary and General Counsel of Countrywide
Financial Services, Inc.
(c) 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, PRAGMA Investment Trust,
Maplewood Investment Trust, a series company,
and The Thermo Opportunity Fund, Inc.,
registered investment companies.
<PAGE>
(d) Assistant Secretary of Fremont Mutual Funds,
Inc., Schwartz Investment Trust, The Gannett
Welsh & Kotler Funds, Capitol Square Funds,
Interactive Investments, Dean Family of
Funds and The New York State Opportunity
Funds, registered investment companies.
(e) Secretary of Leeb Personal Finance(TM)
Investment Trust, a registered investment
company, until November 1996.
(11) Robert G. Dorsey - Treasurer of the Adviser.
(a) President and Treasurer of Countrywide Fund
Services, Inc.
(b) Vice President-Finance and Treasurer of
Countrywide Financial Services, Inc.
(c) Vice President of Countrywide Tax-Free Trust,
Countrywide Investment Trust, Countrywide
Stategic Trust, Brundage, Story and Rose
Investment Trust, Markman MultiFund Trust,
PRAGMA Investment Trust, Maplewood Investment
Trust, a series company, The Thermo
Opportunity Fund, Inc., Capitol Square Funds,
Dean Family of Funds and The New York State
Opportunity Funds.
(d) Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust,
Fremont Mutual Funds, Inc., The Gannett
Welsh & Kotler Funds, The Tuscarora
Investment Trust and Interactive
Investments.
(e) Vice President of Leeb Personal Finance(TM)
Investment Trust until November 1996.
(12) Susan F. Flischel - Vice President-Investments of
the Adviser
(13) Scott Weston - Assistant Vice President-
Investments of the Adviser.
B. Mastrapasqua & Associates, Inc. ("Mastrapasqua")
is a registered investment adviser providing
investment advisory services to institutions and
individuals as well as the Growth/Value Fund and
the Aggressive Growth Fund. The address of
Mastrapasqua and its officers and directors is 814
Church Street, Suite 600, Nashville, Tennessee.
The following are officers and directors of
Mastrapasqua:
<PAGE>
(1) Frank Mastrapasqua - Chairman and Chief Executive
Officer
(a) Chairman of Management Plus Associates, Inc.,
a sports agency.
(2) Thomas A. Trantum - President
Item 29. Principal Underwriters
- ------- ----------------------
(a) Countrywide Investments, Inc. also acts as
underwriter for Countrywide Tax-Free Trust,
Countrywide Investment Trust, The Milestone Funds
and Brundage, Story and Rose Investment Trust.
Unless otherwise indicated,* 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 and
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
* David Sambol Director None
John J. Goetz Vice None
President and
Chief
Investment
Officer
Maryellen Peretzky Vice President- None
Administration,
Human Resources
and Operations
Sharon L. Karp Vice President- None
Marketing
<PAGE>
John F. Splain Secretary and Secretary
General Counsel
Robert G. Dorsey Treasurer Vice
President
Susan F. Flischel Vice President- None
Investments
Scott Weston Assistant Vice None
President-
Investments
(c) None
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 to shareholders without charge.
(d) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to trustees, officers and controlling persons of
Countrywide Strategic Trust pursuant to the
provisions of Massachusetts law and the Restated
Agreement and Declaration of Trust of Countrywide
Strategic Trust or the Bylaws of Countrywide
Strategic 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
<PAGE>
expenses incurred or paid by a trustee, officer or
controlling person of Countrywide Strategic 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 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 6th
day of June, 1997.
COUNTRYWIDE STRATEGIC 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 6th day of June, 1997.
*ANGELO R. MOZILO Chairman & Trustee
/s/ Robert H. Leshner President &
- ---------------------- Trustee
ROBERT H. LESHNER
/s/ Mark J. Seger Treasurer
- -----------------------
MARK J. SEGER
*DONALD L. BOGDON, M.D. Trustee
JOHN R. DELFINO Trustee
*H. JEROME LERNER Trustee
*OSCAR P. ROBERTSON Trustee
*JOHN F. SEYMOUR, JR. Trustee
*SEBASTIANO STERPA Trustee
By: /s/ John F. Splain
- ----------------------
JOHN F. SPLAIN
Attorney-In-Fact
June 6, 1997
EXHIBIT INDEX
1. Amendment No. 2 to Registrant's Restated Agreement
and Declaration of Trust
2. Management Agreement with Countrywide Investments, Inc. for
the U.S. Government Securities Fund
3. Management Agreement with Countrywide Investments, Inc. for
the Treasury Total Return Fund
4. Management Agreement with Countrywide Investments, Inc.
for the Utility Fund
5. Management Agreement with Countrywide Investments, Inc.
for the Equity Fund
6. Form of Management Agreement with Countrywide Investments,
Inc. for the Growth/Value Fund
7. Form of Management Agreement with Countrywide Investments,
Inc. for the Aggressive Growth Fund
8. Form of Subadvisory Agreement between Countrywide
Investments, Inc. and Mastrapasqua & Associates, Inc. for
the Growth/Value Fund and the Aggressive Growth Fund
9. Underwriting Agreement with Countrywide Investments, Inc.
10. Form of Underwriter's Dealer Agreement
11. Accounting and Pricing Services Agreement with Countrywide
Fund Services, Inc.
12. Transfer Agency, Dividend Disbursing, Shareholder Service
and Plan Agency Agreement with Countrywide Fund Services,
Inc.
13. Administration Agreement between Countrywide Investments,
Inc. and Countrywide Fund Services, Inc.
14. License Agreement with Countrywide Credit Industries, Inc.
15. Consent of Arthur Andersen LLP
16. Consent of KPMG Peat Marwick LLP
17. Plans of Distribution Pursuant to Rule 12b-1
18. Form of Administration Agreement for the Administration of
Shareholder Accounts
19. Financial Data Schedule for Growth/Value Fund
20. Financial Data Schedule for Aggressive Growth Fund
21. Powers of Attorney for Donald L. Bogdon, M.D., Angelo R.
Mozilo, John F. Seymour, Jr. and Sebastiano Sterpa
<PAGE>
MIDWEST STRATEGIC TRUST
AMENDMENT NO. 2 TO RESTATED AGREEMENT AND DECLARATION OF TRUST
The undersigned hereby certifies that he is the duly elected Secretary
of Midwest Strategic Trust and that, pursuant to Section 4.1 of the Restated
Agreement and Declaration of Trust of Midwest Strategic Trust, the Trustees, at
a meeting on January 8, 1997, at which a quorum was present, adopted the
following resolutions:
RESOLVED, that the name of Midwest Strategic Trust be changed to
"Countrywide Strategic 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, as of the consummation of the acquisition of
Leshner Financial, Inc. by Countrywide Credit Industries, Inc., 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 as of February 28,
1997, 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 28th day of February, 1997.
/s/ John F. Splain
------------------------------
John F. Splain, Secretary
TO: COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Countrywide Strategic Trust (hereinafter referred to as the
"Trust") herewith confirms our agreement with you.
The Trust has been organized to engage in the business of an
investment company. The U.S. Government Securities Fund (the "Fund") has been
established as a series of the Trust. You have been selected to act as the
investment adviser of the Fund and to provide certain other services, as more
fully set forth below, and you are willing to act as such investment adviser
and to perform such services under the terms and conditions hereinafter set
forth. Accordingly, the Trust agrees with you as follows upon the date of the
execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment
advice as you in your discretion deem advisable and will furnish
a continuous investment program for the Fund consistent with its
investment objectives and policies. You will determine what
securities shall be purchased for the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of
the Fund's assets shall be held uninvested, subject always to the
Fund's investment objectives, policies and restrictions, as each
of the same shall be from time to time in effect, and subject
further, to such policies and instructions as the Board of
Trustees (the "Board") of the Trust may from time to time
establish and supply to you copies thereof. You will advise and
assist the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of the Board
and the appropriate committees of the Board regarding the conduct
of the business of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay the compensation and expenses of any persons
rendering any services to the Fund who are officers, directors,
stockholders or employees of your corporation and will make
available, without expense to the Fund, the services of such of
your employees as may duly be elected officers or trustees of the
Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any
officers, trustees and employees of the Trust who are not
officers, directors, employees or stockholders of your
corporation will be paid by the Trust.
<PAGE>
You will pay all advertising and promotion expenses incurred
in connection with the sale or distribution of the Fund's shares
to the extent such expenses are not assumed by the Fund under the
Trust's Plans of Distribution Pursuant to Rule 12b-1.
The Fund will also be responsible for the payment of all
other operating expenses of the Fund, including fees and expenses
incurred by the Fund 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, insurance expenses,
taxes or governmental fees, fees and expenses of the custodian,
transfer, shareholder service and dividend disbursing agent and
accounting and pricing agent of the Fund, expenses including
clerical expenses of issue, sale, redemption or repurchase of
shares of the Fund, the fees and expenses of trustees of the
Trust who are not affiliated with you, the cost of preparing and
distributing reports and notices to shareholders, the cost of
printing or preparing prospectuses for delivery to the Fund's
shareholders, the cost of printing or preparing stock
certificates or any other documents, statements or reports to
shareholders, expenses of shareholders' meetings and proxy
solicitations, 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, or any other expense not specifically described
above incurred in the performance of the Fund's obligations. All
other expenses not assumed by you herein incurred by the Fund in
connection with the organization, registration of shares and
operations of the Fund will be borne by the Fund.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments made as
provided in this Agreement, the Fund will pay you as of the last
day of each month, a fee equal to the annual rate of:
.75% of the average value of the daily net assets of
the Fund up to $200,000,000; .7% of such assets from
$200,000,000 to and including $500,000,000; and .5% of
such assets in excess of $500,000,000.
The total fees payable during each of the first and second
halves of each fiscal year of the Trust shall not exceed the
semiannual total of the daily fee accruals requested by you
during the applicable six month period. The average value of net
assets shall be determined pursuant to the applicable provisions
of the Declaration of Trust of the Trust or a resolution of the
Board, if required. If, pursuant to such provisions, the
determination of net asset value of the Fund is suspended for any
particular business day, then for the purposes of this paragraph,
- 2 -
<PAGE>
the value of the net assets of the Fund as last determined shall
be deemed to be the value of the net assets as of the close of
the business day, or as of such other time as the value of the
Fund's net assets may lawfully be determined, on that day. If
the determination of the net asset value of the Fund's shares has
been suspended for a period including such month, your
compensation payable at the end of such month shall be computed
on the basis of the value of the net assets of the Fund as last
determined (whether during or prior to such month).
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio
securities for the account of the Fund, it is understood that you
will arrange for the placing of all orders for the purchase and
sale of portfolio securities for the Fund's accounts with brokers
or dealers selected by you, subject to review of this selection
by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and
portfolio brokerage. In the selection of such brokers or dealers
and the placing of such orders, you are directed at all times to
seek for the Fund the best qualitative execution, 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.
You should generally seek favorable prices and commission
rates that are reasonable in relation to the benefits received.
In seeking best qualitative execution, you are authorized to
select brokers or dealers who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which you exercise investment discretion. You are
authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if you determine in good faith that the amount of the
commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker
or dealer. The determination may be viewed in terms of either a
particular transaction or your overall responsibilities with
respect to the Fund and to accounts over which you exercise
investment discretion. The Trust and you understand that,
although the information may be useful to the Fund and you, it is
not possible to place a dollar value on such information. The
Board shall periodically review the commissions paid by the Fund
to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits to the Fund.
- 3 -
<PAGE>
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best qualitative execution, you 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.
If any occasion should arise in which you give any advice to
clients of yours concerning the shares of the Fund, you will act
solely as investment counsel for such client and not in any way
on behalf of the Trust. Your services to the Fund pursuant to
this Agreement are not to be deemed to be exclusive and it is
understood that you may render investment advice, management and
other services to others.
5. LIMITATION OF LIABILITY OF ADVISER
You (including your directors, officers, shareholders,
employees, control persons and affiliates of any thereof) shall
not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from the reckless disregard
by you of your obligations and duties under this Agreement
("disabling conduct"). However, you will not be indemnified for
any liability unless (1) a final decision is made on the merits
by a court or other body before whom the proceeding was brought
that you were 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 you were 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
Trust 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. The
Fund will advance attorneys' fees or other expenses incurred by
you in defending a proceeding, upon the undertaking by or on
behalf of you to repay the advance unless it is ultimately
determined that you are entitled to indemnification, so long as
you meet at least one of the following as a condition to the
advance: (1) you shall provide a security for your undertaking,
(2) the Fund shall be insured against losses arising by reason of
any lawful advances, or (3) 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 you
ultimately will be found entitled to indemnification. Any person
employed by you who may also be or become an employee of the
Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely
for the Trust and not as your employee or agent.
- 4 -
<PAGE>
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective upon its execution, shall
remain in force for a period of two (2) years from that date and
remain in force from year to year thereafter, subject to annual
approval by (i) the Board of the Trust or (ii) a vote of a
majority (as defined in the Investment Company Act of 1940) of
the outstanding voting securities of the Fund, provided that in
either event continuance is also approved by a majority of the
trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of you or of the Trust, by a vote
cast in person at a meeting called for the purpose of voting such
approval.
If the shareholders of the Fund fail to approve the
Agreement in the manner set forth above, upon approval of the
Board, including a majority of the trustees who are not
interested persons of you or of the Trust, you may continue to
serve or act in such capacity for the Fund for the period of time
(not exceeding one hundred and twenty days after the termination
of the Agreement) pending required approval of the Agreement, of
a new agreement with you or a different adviser or other
definitive action; provided that the compensation to be paid by
the Fund to you will be equal to the lesser of your actual costs
incurred in furnishing investment advisory services to the Fund
or the amount you would have received under this Agreement.
This Agreement may, on sixty days' written notice, be
terminated at any time without the payment of any penalty, by the
Board, by a vote of a majority of the outstanding voting
securities of the Fund or by you. This Agreement shall
automatically terminate in the event of its assignment.
7. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the outstanding voting securities of the
Fund and by the Board, including a majority of the trustees who
are not interested persons of you or of the Trust, cast in person
at a meeting called for the purpose of voting on such approval.
8. LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Fund
hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Fund,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by
- 5 -
<PAGE>
the trustees of the Trust and the shareholders of the Fund and
signed by the officers of the Trust, acting as such, and neither
such authorization by such trustees and shareholders nor such
execution and delivery by such officers 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 only the trust property
of the Fund as provided in the Trust's Declaration of Trust.
9. MISCELLANEOUS
The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
Agreement.
If you are in agreement with the foregoing, please sign the
form of acceptance on the accompanying counterpart of this letter
and return such counterpart to the Trust, whereupon this letter
shall become a binding contract upon the date thereof.
Yours very truly,
ATTEST: COUNTRYWIDE STRATEGIC TRUST
/s/ John F. Splain By:/s/ Robert H. Leshner
- ------------------- ------------------------
Dated: February 28, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: COUNTRYWIDE INVESTMENTS, INC.
/s/ John F. Splain By: /s/ Robert H. Leshner
- ------------------- ---------------------------
Dated: February 28, 1997
- 6 -
TO: COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Countrywide Strategic Trust (hereinafter referred to as the
"Trust") herewith confirms our agreement with you.
The Trust has been organized to engage in the business of an
investment company. The Treasury Total Return Fund (the "Fund") has been
established as a series of the Trust. You have been selected to act as the
investment adviser of the Fund and to provide certain other services, as more
fully set forth below, and you are willing to act as such investment adviser
and to perform such services under the terms and conditions hereinafter set
forth. Accordingly, the Trust agrees with you as follows upon the date of the
execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment
advice as you in your discretion deem advisable and will furnish
a continuous investment program for the Fund consistent with its
investment objectives and policies. You will determine what
securities shall be purchased for the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of
the Fund's assets shall be held uninvested, subject always to the
Fund's investment objectives, policies and restrictions, as each
of the same shall be from time to time in effect, and subject
further, to such policies and instructions as the Board of
Trustees (the "Board") of the Trust may from time to time
establish and supply to you copies thereof. You will advise and
assist the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of the Board
and the appropriate committees of the Board regarding the conduct
of the business of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay the compensation and expenses of any persons
rendering any services to the Fund who are officers, directors,
stockholders or employees of your corporation and will make
available, without expense to the Fund, the services of such of
your employees as may duly be elected officers or trustees of the
Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any
officers, trustees and employees of the Trust who are not
officers, directors, employees or stockholders of your
corporation will be paid by the Trust.
<PAGE>
You will pay all advertising and promotion expenses incurred
in connection with the sale or distribution of the Fund's shares
to the extent such expenses are not assumed by the Fund under the
Trust's Plans of Distribution Pursuant to Rule 12b-1.
The Fund will also be responsible for the payment of all
other operating expenses of the Fund, including fees and expenses
incurred by the Fund 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, insurance expenses,
taxes or governmental fees, fees and expenses of the custodian,
transfer, shareholder service and dividend disbursing agent and
accounting and pricing agent of the Fund, expenses including
clerical expenses of issue, sale, redemption or repurchase of
shares of the Fund, the fees and expenses of trustees of the
Trust who are not affiliated with you, the cost of preparing and
distributing reports and notices to shareholders, the cost of
printing or preparing prospectuses for delivery to the Fund's
shareholders, the cost of printing or preparing stock
certificates or any other documents, statements or reports to
shareholders, expenses of shareholders' meetings and proxy
solicitations, 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, or any other expense not specifically described
above incurred in the performance of the Fund's obligations. All
other expenses not assumed by you herein incurred by the Fund in
connection with the organization, registration of shares and
operations of the Fund will be borne by the Fund.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments made as
provided in this Agreement, the Fund will pay you as of the last
day of each month, a fee equal to the annual rate of:
.75% of the average value of the daily net assets of
the Fund up to $200,000,000; .7% of such assets from
$200,000,000 to and including $500,000,000; and .5% of
such assets in excess of $500,000,000.
The total fees payable during each of the first and second
halves of each fiscal year of the Trust shall not exceed the
semiannual total of the daily fee accruals requested by you
during the applicable six month period. The average value of net
assets shall be determined pursuant to the applicable provisions
of the Declaration of Trust of the Trust or a resolution of the
Board, if required. If, pursuant to such provisions, the
determination of net asset value of the Fund is suspended for any
particular business day, then for the purposes of this paragraph,
- 2 -
<PAGE>
the value of the net assets of the Fund as last determined shall
be deemed to be the value of the net assets as of the close of
the business day, or as of such other time as the value of the
Fund's net assets may lawfully be determined, on that day. If
the determination of the net asset value of the Fund's shares has
been suspended for a period including such month, your
compensation payable at the end of such month shall be computed
on the basis of the value of the net assets of the Fund as last
determined (whether during or prior to such month).
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio
securities for the account of the Fund, it is understood that you
will arrange for the placing of all orders for the purchase and
sale of portfolio securities for the Fund's accounts with brokers
or dealers selected by you, subject to review of this selection
by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and
portfolio brokerage. In the selection of such brokers or dealers
and the placing of such orders, you are directed at all times to
seek for the Fund the best qualitative execution, 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.
You should generally seek favorable prices and commission
rates that are reasonable in relation to the benefits received.
In seeking best qualitative execution, you are authorized to
select brokers or dealers who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which you exercise investment discretion. You are
authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if you determine in good faith that the amount of the
commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker
or dealer. The determination may be viewed in terms of either a
particular transaction or your overall responsibilities with
respect to the Fund and to accounts over which you exercise
investment discretion. The Trust and you understand that,
although the information may be useful to the Fund and you, it is
not possible to place a dollar value on such information. The
Board shall periodically review the commissions paid by the Fund
to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits to the Fund.
- 3 -
<PAGE>
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best qualitative execution, you 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.
If any occasion should arise in which you give any advice to
clients of yours concerning the shares of the Fund, you will act
solely as investment counsel for such client and not in any way
on behalf of the Trust. Your services to the Fund pursuant to
this Agreement are not to be deemed to be exclusive and it is
understood that you may render investment advice, management and
other services to others.
5. LIMITATION OF LIABILITY OF ADVISER
You (including your directors, officers, shareholders,
employees, control persons and affiliates of any thereof) shall
not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from the reckless disregard
by you of your obligations and duties under this Agreement
("disabling conduct"). However, you will not be indemnified for
any liability unless (1) a final decision is made on the merits
by a court or other body before whom the proceeding was brought
that you were 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 you were 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
Trust 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. The
Fund will advance attorneys' fees or other expenses incurred by
you in defending a proceeding, upon the undertaking by or on
behalf of you to repay the advance unless it is ultimately
determined that you are entitled to indemnification, so long as
you meet at least one of the following as a condition to the
advance: (1) you shall provide a security for your undertaking,
(2) the Fund shall be insured against losses arising by reason of
any lawful advances, or (3) 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 you
ultimately will be found entitled to indemnification. Any person
employed by you who may also be or become an employee of the
Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely
for the Trust and not as your employee or agent.
- 4 -
<PAGE>
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective upon its execution, shall
remain in force for a period of two (2) years from that date and
remain in force from year to year thereafter, subject to annual
approval by (i) the Board of the Trust or (ii) a vote of a
majority (as defined in the Investment Company Act of 1940) of
the outstanding voting securities of the Fund, provided that in
either event continuance is also approved by a majority of the
trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of you or of the Trust, by a vote
cast in person at a meeting called for the purpose of voting such
approval.
If the shareholders of the Fund fail to approve the
Agreement in the manner set forth above, upon approval of the
Board, including a majority of the trustees who are not
interested persons of you or of the Trust, you may continue to
serve or act in such capacity for the Fund for the period of time
(not exceeding one hundred and twenty days after the termination
of the Agreement) pending required approval of the Agreement, of
a new agreement with you or a different adviser or other
definitive action; provided that the compensation to be paid by
the Fund to you will be equal to the lesser of your actual costs
incurred in furnishing investment advisory services to the Fund
or the amount you would have received under this Agreement.
This Agreement may, on sixty days' written notice, be
terminated at any time without the payment of any penalty, by the
Board, by a vote of a majority of the outstanding voting
securities of the Fund or by you. This Agreement shall
automatically terminate in the event of its assignment.
7. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the outstanding voting securities of the
Fund and by the Board, including a majority of the trustees who
are not interested persons of you or of the Trust, cast in person
at a meeting called for the purpose of voting on such approval.
8. LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Fund
hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Fund,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by
- 5 -
<PAGE>
the trustees of the Trust and the shareholders of the Fund and
signed by the officers of the Trust, acting as such, and neither
such authorization by such trustees and shareholders nor such
execution and delivery by such officers 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 only the trust property
of the Fund as provided in the Trust's Declaration of Trust.
9. MISCELLANEOUS
The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
Agreement.
If you are in agreement with the foregoing, please sign the
form of acceptance on the accompanying counterpart of this letter
and return such counterpart to the Trust, whereupon this letter
shall become a binding contract upon the date thereof.
Yours very truly,
ATTEST: COUNTRYWIDE STRATEGIC TRUST
/s/ John F. Splain By:/s/ Robert H. Leshner
- ------------------- ------------------------
Dated: February 28, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: COUNTRYWIDE INVESTMENTS, INC.
/s/ John F. Splain By: /s/ Robert H. Leshner
- ------------------- ---------------------------
Dated: February 28, 1997
- 6 -
TO: COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Countrywide Strategic Trust (hereinafter referred to as the
"Trust") herewith confirms our agreement with you.
The Trust has been organized to engage in the business of an
investment company. The Utility Fund (the "Fund") has been established
as a series of the Trust. You have been selected to act as the investment
adviser of the Fund and to provide certain other services, as more fully set
forth below, and you are willing to act as such investment adviser and to
perform such services under the terms and conditions hereinafter set forth.
Accordingly, the Trust agrees with you as follows upon the date of the
execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment
advice as you in your discretion deem advisable and will furnish
a continuous investment program for the Fund consistent with its
investment objectives and policies. You will determine what
securities shall be purchased for the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of
the Fund's assets shall be held uninvested, subject always to the
Fund's investment objectives, policies and restrictions, as each
of the same shall be from time to time in effect, and subject
further, to such policies and instructions as the Board of
Trustees (the "Board") of the Trust may from time to time
establish and supply to you copies thereof. You will advise and
assist the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of the Board
and the appropriate committees of the Board regarding the conduct
of the business of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay the compensation and expenses of any persons
rendering any services to the Fund who are officers, directors,
stockholders or employees of your corporation and will make
available, without expense to the Fund, the services of such of
your employees as may duly be elected officers or trustees of the
Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any
officers, trustees and employees of the Trust who are not
officers, directors, employees or stockholders of your
corporation will be paid by the Trust.
<PAGE>
You will pay all advertising and promotion expenses incurred
in connection with the sale or distribution of the Fund's shares
to the extent such expenses are not assumed by the Fund under the
Trust's Plans of Distribution Pursuant to Rule 12b-1.
The Fund will also be responsible for the payment of all
other operating expenses of the Fund, including fees and expenses
incurred by the Fund 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, insurance expenses,
taxes or governmental fees, fees and expenses of the custodian,
transfer, shareholder service and dividend disbursing agent and
accounting and pricing agent of the Fund, expenses including
clerical expenses of issue, sale, redemption or repurchase of
shares of the Fund, the fees and expenses of trustees of the
Trust who are not affiliated with you, the cost of preparing and
distributing reports and notices to shareholders, the cost of
printing or preparing prospectuses for delivery to the Fund's
shareholders, the cost of printing or preparing stock
certificates or any other documents, statements or reports to
shareholders, expenses of shareholders' meetings and proxy
solicitations, 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, or any other expense not specifically described
above incurred in the performance of the Fund's obligations. All
other expenses not assumed by you herein incurred by the Fund in
connection with the organization, registration of shares and
operations of the Fund will be borne by the Fund.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments made as
provided in this Agreement, the Fund will pay you as of the last
day of each month, a fee equal to the annual rate of:
.75% of the average value of the daily net assets of
the Fund up to $200,000,000; .7% of such assets from
$200,000,000 to and including $500,000,000; and .5% of
such assets in excess of $500,000,000.
The total fees payable during each of the first and second
halves of each fiscal year of the Trust shall not exceed the
semiannual total of the daily fee accruals requested by you
during the applicable six month period. The average value of net
assets shall be determined pursuant to the applicable provisions
of the Declaration of Trust of the Trust or a resolution of the
Board, if required. If, pursuant to such provisions, the
determination of net asset value of the Fund is suspended for any
particular business day, then for the purposes of this paragraph,
- 2 -
<PAGE>
the value of the net assets of the Fund as last determined shall
be deemed to be the value of the net assets as of the close of
the business day, or as of such other time as the value of the
Fund's net assets may lawfully be determined, on that day. If
the determination of the net asset value of the Fund's shares has
been suspended for a period including such month, your
compensation payable at the end of such month shall be computed
on the basis of the value of the net assets of the Fund as last
determined (whether during or prior to such month).
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio
securities for the account of the Fund, it is understood that you
will arrange for the placing of all orders for the purchase and
sale of portfolio securities for the Fund's accounts with brokers
or dealers selected by you, subject to review of this selection
by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and
portfolio brokerage. In the selection of such brokers or dealers
and the placing of such orders, you are directed at all times to
seek for the Fund the best qualitative execution, 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.
You should generally seek favorable prices and commission
rates that are reasonable in relation to the benefits received.
In seeking best qualitative execution, you are authorized to
select brokers or dealers who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which you exercise investment discretion. You are
authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if you determine in good faith that the amount of the
commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker
or dealer. The determination may be viewed in terms of either a
particular transaction or your overall responsibilities with
respect to the Fund and to accounts over which you exercise
investment discretion. The Trust and you understand that,
although the information may be useful to the Fund and you, it is
not possible to place a dollar value on such information. The
Board shall periodically review the commissions paid by the Fund
to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits to the Fund.
- 3 -
<PAGE>
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best qualitative execution, you 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.
If any occasion should arise in which you give any advice to
clients of yours concerning the shares of the Fund, you will act
solely as investment counsel for such client and not in any way
on behalf of the Trust. Your services to the Fund pursuant to
this Agreement are not to be deemed to be exclusive and it is
understood that you may render investment advice, management and
other services to others.
5. LIMITATION OF LIABILITY OF ADVISER
You (including your directors, officers, shareholders,
employees, control persons and affiliates of any thereof) shall
not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from the reckless disregard
by you of your obligations and duties under this Agreement
("disabling conduct"). However, you will not be indemnified for
any liability unless (1) a final decision is made on the merits
by a court or other body before whom the proceeding was brought
that you were 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 you were 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
Trust 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. The
Fund will advance attorneys' fees or other expenses incurred by
you in defending a proceeding, upon the undertaking by or on
behalf of you to repay the advance unless it is ultimately
determined that you are entitled to indemnification, so long as
you meet at least one of the following as a condition to the
advance: (1) you shall provide a security for your undertaking,
(2) the Fund shall be insured against losses arising by reason of
any lawful advances, or (3) 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 you
ultimately will be found entitled to indemnification. Any person
employed by you who may also be or become an employee of the
Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely
for the Trust and not as your employee or agent.
- 4 -
<PAGE>
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective upon its execution, shall
remain in force for a period of two (2) years from that date and
remain in force from year to year thereafter, subject to annual
approval by (i) the Board of the Trust or (ii) a vote of a
majority (as defined in the Investment Company Act of 1940) of
the outstanding voting securities of the Fund, provided that in
either event continuance is also approved by a majority of the
trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of you or of the Trust, by a vote
cast in person at a meeting called for the purpose of voting such
approval.
If the shareholders of the Fund fail to approve the
Agreement in the manner set forth above, upon approval of the
Board, including a majority of the trustees who are not
interested persons of you or of the Trust, you may continue to
serve or act in such capacity for the Fund for the period of time
(not exceeding one hundred and twenty days after the termination
of the Agreement) pending required approval of the Agreement, of
a new agreement with you or a different adviser or other
definitive action; provided that the compensation to be paid by
the Fund to you will be equal to the lesser of your actual costs
incurred in furnishing investment advisory services to the Fund
or the amount you would have received under this Agreement.
This Agreement may, on sixty days' written notice, be
terminated at any time without the payment of any penalty, by the
Board, by a vote of a majority of the outstanding voting
securities of the Fund or by you. This Agreement shall
automatically terminate in the event of its assignment.
7. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the outstanding voting securities of the
Fund and by the Board, including a majority of the trustees who
are not interested persons of you or of the Trust, cast in person
at a meeting called for the purpose of voting on such approval.
8. LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Fund
hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Fund,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by
- 5 -
<PAGE>
the trustees of the Trust and the shareholders of the Fund and
signed by the officers of the Trust, acting as such, and neither
such authorization by such trustees and shareholders nor such
execution and delivery by such officers 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 only the trust property
of the Fund as provided in the Trust's Declaration of Trust.
9. MISCELLANEOUS
The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
Agreement.
If you are in agreement with the foregoing, please sign the
form of acceptance on the accompanying counterpart of this letter
and return such counterpart to the Trust, whereupon this letter
shall become a binding contract upon the date thereof.
Yours very truly,
ATTEST: COUNTRYWIDE STRATEGIC TRUST
/s/ John F. Splain By:/s/ Robert H. Leshner
- ------------------- ------------------------
Dated: February 28, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: COUNTRYWIDE INVESTMENTS, INC.
/s/ John F. Splain By: /s/ Robert H. Leshner
- ------------------- ---------------------------
Dated: February 28, 1997
- 6 -
TO: COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Countrywide Strategic Trust (hereinafter referred to as the
"Trust") herewith confirms our agreement with you.
The Trust has been organized to engage in the business of an
investment company. The Equity Fund (the "Fund") has been established
as a series of the Trust. You have been selected to act as the investment
adviser of the Fund and to provide certain other services, as more fully set
forth below, and you are willing to act as such investment adviser and to
perform such services under the terms and conditions hereinafter set forth.
Accordingly, the Trust agrees with you as follows upon the date of the
execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment
advice as you in your discretion deem advisable and will furnish
a continuous investment program for the Fund consistent with its
investment objectives and policies. You will determine what
securities shall be purchased for the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of
the Fund's assets shall be held uninvested, subject always to the
Fund's investment objectives, policies and restrictions, as each
of the same shall be from time to time in effect, and subject
further, to such policies and instructions as the Board of
Trustees (the "Board") of the Trust may from time to time
establish and supply to you copies thereof. You will advise and
assist the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of the Board
and the appropriate committees of the Board regarding the conduct
of the business of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay the compensation and expenses of any persons
rendering any services to the Fund who are officers, directors,
stockholders or employees of your corporation and will make
available, without expense to the Fund, the services of such of
your employees as may duly be elected officers or trustees of the
Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any
officers, trustees and employees of the Trust who are not
officers, directors, employees or stockholders of your
corporation will be paid by the Trust.
<PAGE>
You will pay all advertising and promotion expenses incurred
in connection with the sale or distribution of the Fund's shares
to the extent such expenses are not assumed by the Fund under the
Trust's Plans of Distribution Pursuant to Rule 12b-1.
The Fund will also be responsible for the payment of all
other operating expenses of the Fund, including fees and expenses
incurred by the Fund 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, insurance expenses,
taxes or governmental fees, fees and expenses of the custodian,
transfer, shareholder service and dividend disbursing agent and
accounting and pricing agent of the Fund, expenses including
clerical expenses of issue, sale, redemption or repurchase of
shares of the Fund, the fees and expenses of trustees of the
Trust who are not affiliated with you, the cost of preparing and
distributing reports and notices to shareholders, the cost of
printing or preparing prospectuses for delivery to the Fund's
shareholders, the cost of printing or preparing stock
certificates or any other documents, statements or reports to
shareholders, expenses of shareholders' meetings and proxy
solicitations, 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, or any other expense not specifically described
above incurred in the performance of the Fund's obligations. All
other expenses not assumed by you herein incurred by the Fund in
connection with the organization, registration of shares and
operations of the Fund will be borne by the Fund.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments made as
provided in this Agreement, the Fund will pay you as of the last
day of each month, a fee equal to the annual rate of:
.75% of the average value of the daily net assets of
the Fund up to $200,000,000; .7% of such assets from
$200,000,000 to and including $500,000,000; and .5% of
such assets in excess of $500,000,000.
The total fees payable during each of the first and second
halves of each fiscal year of the Trust shall not exceed the
semiannual total of the daily fee accruals requested by you
during the applicable six month period. The average value of net
assets shall be determined pursuant to the applicable provisions
of the Declaration of Trust of the Trust or a resolution of the
Board, if required. If, pursuant to such provisions, the
determination of net asset value of the Fund is suspended for any
particular business day, then for the purposes of this paragraph,
- 2 -
<PAGE>
the value of the net assets of the Fund as last determined shall
be deemed to be the value of the net assets as of the close of
the business day, or as of such other time as the value of the
Fund's net assets may lawfully be determined, on that day. If
the determination of the net asset value of the Fund's shares has
been suspended for a period including such month, your
compensation payable at the end of such month shall be computed
on the basis of the value of the net assets of the Fund as last
determined (whether during or prior to such month).
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio
securities for the account of the Fund, it is understood that you
will arrange for the placing of all orders for the purchase and
sale of portfolio securities for the Fund's accounts with brokers
or dealers selected by you, subject to review of this selection
by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and
portfolio brokerage. In the selection of such brokers or dealers
and the placing of such orders, you are directed at all times to
seek for the Fund the best qualitative execution, 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.
You should generally seek favorable prices and commission
rates that are reasonable in relation to the benefits received.
In seeking best qualitative execution, you are authorized to
select brokers or dealers who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which you exercise investment discretion. You are
authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if you determine in good faith that the amount of the
commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker
or dealer. The determination may be viewed in terms of either a
particular transaction or your overall responsibilities with
respect to the Fund and to accounts over which you exercise
investment discretion. The Trust and you understand that,
although the information may be useful to the Fund and you, it is
not possible to place a dollar value on such information. The
Board shall periodically review the commissions paid by the Fund
to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits to the Fund.
- 3 -
<PAGE>
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best qualitative execution, you 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.
If any occasion should arise in which you give any advice to
clients of yours concerning the shares of the Fund, you will act
solely as investment counsel for such client and not in any way
on behalf of the Trust. Your services to the Fund pursuant to
this Agreement are not to be deemed to be exclusive and it is
understood that you may render investment advice, management and
other services to others.
5. LIMITATION OF LIABILITY OF ADVISER
You (including your directors, officers, shareholders,
employees, control persons and affiliates of any thereof) shall
not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from the reckless disregard
by you of your obligations and duties under this Agreement
("disabling conduct"). However, you will not be indemnified for
any liability unless (1) a final decision is made on the merits
by a court or other body before whom the proceeding was brought
that you were 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 you were 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
Trust 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. The
Fund will advance attorneys' fees or other expenses incurred by
you in defending a proceeding, upon the undertaking by or on
behalf of you to repay the advance unless it is ultimately
determined that you are entitled to indemnification, so long as
you meet at least one of the following as a condition to the
advance: (1) you shall provide a security for your undertaking,
(2) the Fund shall be insured against losses arising by reason of
any lawful advances, or (3) 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 you
ultimately will be found entitled to indemnification. Any person
employed by you who may also be or become an employee of the
Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely
for the Trust and not as your employee or agent.
- 4 -
<PAGE>
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective upon its execution, shall
remain in force for a period of two (2) years from that date and
remain in force from year to year thereafter, subject to annual
approval by (i) the Board of the Trust or (ii) a vote of a
majority (as defined in the Investment Company Act of 1940) of
the outstanding voting securities of the Fund, provided that in
either event continuance is also approved by a majority of the
trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of you or of the Trust, by a vote
cast in person at a meeting called for the purpose of voting such
approval.
If the shareholders of the Fund fail to approve the
Agreement in the manner set forth above, upon approval of the
Board, including a majority of the trustees who are not
interested persons of you or of the Trust, you may continue to
serve or act in such capacity for the Fund for the period of time
(not exceeding one hundred and twenty days after the termination
of the Agreement) pending required approval of the Agreement, of
a new agreement with you or a different adviser or other
definitive action; provided that the compensation to be paid by
the Fund to you will be equal to the lesser of your actual costs
incurred in furnishing investment advisory services to the Fund
or the amount you would have received under this Agreement.
This Agreement may, on sixty days' written notice, be
terminated at any time without the payment of any penalty, by the
Board, by a vote of a majority of the outstanding voting
securities of the Fund or by you. This Agreement shall
automatically terminate in the event of its assignment.
7. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the outstanding voting securities of the
Fund and by the Board, including a majority of the trustees who
are not interested persons of you or of the Trust, cast in person
at a meeting called for the purpose of voting on such approval.
8. LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Fund
hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the trust property of the Fund,
as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by
- 5 -
<PAGE>
the trustees of the Trust and the shareholders of the Fund and
signed by the officers of the Trust, acting as such, and neither
such authorization by such trustees and shareholders nor such
execution and delivery by such officers 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 only the trust property
of the Fund as provided in the Trust's Declaration of Trust.
9. MISCELLANEOUS
The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
Agreement.
If you are in agreement with the foregoing, please sign the
form of acceptance on the accompanying counterpart of this letter
and return such counterpart to the Trust, whereupon this letter
shall become a binding contract upon the date thereof.
Yours very truly,
ATTEST: COUNTRYWIDE STRATEGIC TRUST
/s/ John F. Splain By:/s/ Robert H. Leshner
- ------------------- ------------------------
Dated: February 28, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: COUNTRYWIDE INVESTMENTS, INC.
/s/ John F. Splain By: /s/ Robert H. Leshner
- ------------------- ---------------------------
Dated: February 28, 1997
- 6 -
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made this day of , 1997, between
Countrywide Strategic Trust (the "Trust"), a business trust organized under the
laws of the State of Massachusetts, and Countrywide Investments, Inc. (the
"Manager"), a corporation organized under the laws of the State of Ohio.
WHEREAS, the Trust has been organized to operate as an investment
company registered under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust's shares of beneficial interest are divided into
separate series and each such share of a series represents an undivided interest
in the assets, subject to the liabilities, located to that series, and each
series has separate investment objectives and policies; and
WHEREAS, the Growth/Value Fund (the "Fund"), a series of the Trust
has been created for the purpose of investing and reinvesting its assets in
securities pursuant to the investment objectives and policies as set forth in
its registration statements under the Act and the Securities Act of 1933
("Registration Statements"), as heretofore amended and supplemented; and the
Trust desires to avail itself of the services, information, advice, assistance
and facilities of a manager and to have a manager provide or perform for it
various management, statistical, portfolio adviser selection and other services
for the Fund; and
<PAGE>
WHEREAS, the Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended;
NOW, THEREFORE, the Trust and Manager agree as follows:
1. Employment of the Manager. The Trust hereby employs
the Manager to manage the investment and reinvestment of the assets of the Fund
in the manner set forth in subparagraph 2B of this Agreement, subject to the
direction of the Board of Trustees and the officers of the Trust, for the
period, in the manner, and on the terms hereinafter set forth. The Manager
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth. The Manager shall for
all purposes herein be deemed to be an independent contractor and shall, except
as expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. Obligation of and Services to be Provided by the
Manager. The Manager undertakes to provide the services
hereinafter set forth and to assume the following obligations:
A. Corporate Management and Administrative Services.
The Manager shall furnish to the Fund, or retain
another party or parties to furnish, the following
described services to the Fund: (i) office space, which
may be space within the offices of the Manager or in
such other place as may be agreed upon from time to
time, and (ii) office furnishings, facilities and
- 2 -
<PAGE>
equipment as may be reasonably required for managing and
administering the operations and conducting the business of
the Fund, including complying with the securities, tax and
other reporting requirements of the United States and the
various states in which the Fund does business, conducting
correspondence and other communications with the shareholders
of the Fund, and maintaining or supervising the maintenance of
all records in connection with the investment and business
activities of the Fund.
B. Investment Management Services.
(a) The Manager shall have overall supervisory
responsibility for the general management and
investment of the assets and portfolio securities of
the Fund subject to and in accordance with the
investment objectives and policies of the Fund, and
any directions which the Trust's Board of Trustees
may issue to the Manager from time to time.
(b) The Manager shall provide overall investment programs
and strategies for the Fund, shall revise such
programs as necessary and shall monitor and report
periodically to the Board of Trustees concerning the
implementation of the programs.
(c) The Manager, with the approval of the Board of
Trustees of the Trust as to particular
- 3 -
<PAGE>
appointments, intends to (i) appoint one or more
persons or companies (the "Adviser") and, subject to
the terms and conditions of this Agreement, the
Adviser shall have full investment discretion and
shall make all determinations with respect to the
investment of the Fund's assets and the purchase and
sale of portfolio securities with those assets, and
(ii) take such steps as may be necessary to implement
such appointments. The Manager shall be solely
responsible for paying the fees and expenses of the
Adviser for its services to the Fund. The Manager
shall not be responsible or liable for the investment
merits of any decision by the Adviser to purchase,
hold or sell a portfolio security for the Fund.
(d) The Manager shall evaluate advisers and shall
recommend to the Board of Trustees the Adviser
which the Manager believes is best suited to
invest the assets of the Fund; shall monitor and
evaluate the investment performance of the Fund's
Adviser; shall recommend changes in the Adviser
when appropriate; shall coordinate the investment
activities of the Adviser to ensure compliance
with applicable restrictions and limitations
applicable to the Fund; and shall compensate the
Adviser.
- 4 -
<PAGE>
(e) The Manager shall render regular reports to the
Trust, at regular meetings of the Board of Trustees,
of, among other things, the portfolio investments of
the Fund and measurement and analysis of the results
achieved by the Fund.
(f) The Manager shall employ or provide and compensate
the executive, administrative, secretarial and
clerical personnel necessary to provide the
services set forth in this subparagraph 2B, and
shall bear the expense thereof, except as may
otherwise be provided in Section 4 of this
Agreement. The Manager shall also compensate all
officers and employees of the Fund who are
officers or employees of the Manager.
(g) The Manager shall pay all advertising and promotion
expenses incurred in connection with the sale or
distribution of the Fund's shares to the extent such
expenses are not assumed by the Fund under its Plans
of Distribution.
C. Provision of Information Necessary for Preparation of
Securities Registration Statements, Amendments and
Other Materials.
The Manager will make available and provide financial,
accounting and statistical information required by the Fund in
the preparation of registration statements, reports and other
documents required by federal and state securities laws, and
such information as the Fund
- 5 -
<PAGE>
may reasonably request for use in the preparation of
registration statements, reports and other documents required
by federal and state securities laws.
D. Other Obligations and Services.
The Manager shall make available its officers and
employees to the Board of Trustees and officers of the
Trust for consultation and discussions regarding the
administration and management of the Fund and its
investment activities.
3. Execution and Allocation of Portfolio Brokerage Commissions. The
Adviser, subject to the limitations contained in this paragraph 3, shall place,
on behalf of the Fund, orders for the execution of portfolio transactions. The
Adviser is not authorized by the Fund to take any action, including the purchase
or sale of securities for the Fund's account, (a) in contravention of (i) any
investment restrictions set forth in the Act and the rules thereunder, (ii)
specific instructions adopted by the Board of Trustees and communicated to the
Adviser, (iii) the investment objectives, policies and restrictions of the Fund
as set forth in the Trust's Registration Statement, or (iv) instructions from
the Manager communicated to the Adviser, or (b) which would have the effect of
causing the Fund to fail to qualify or to cease to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, or any
succeeding statute.
Subject to the foregoing, the Adviser shall determine the
securities to be purchased or sold by the Fund and will place
- 6 -
<PAGE>
orders pursuant to its determination with or through such persons, brokers or
dealers in conformity with the policy with respect to brokerage as set forth in
the Trust's Registration Statement or as the Board of Trustees may direct from
time to time. It is recognized that, in providing the Fund with investment
supervision of the placing of orders for portfolio transactions, the Adviser
will give primary consideration to securing the best qualitative execution,
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. Consistent with this policy, the
Adviser may select brokers or dealers who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) to other Funds and/or the other accounts over which it exercises
investment discretion. It is understood that neither the Fund, the Manager nor
the Adviser have adopted a formula for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for the Fund
that the Adviser have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Fund with such
- 7 -
<PAGE>
certain brokers, subject to review by the Trust's Board of Trustees from time to
time with respect to the extent and continuation of this practice, provided that
the Adviser determines in good faith that the amount of the commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker or dealer. The determination may be viewed in
terms of either a particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other accounts over which it
exercises investment discretion. It is understood that although the information
may be useful to the Trust and the Adviser, it is not possible to place a dollar
value on such information. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
qualitative execution, 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.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Adviser in the
manner it
- 8 -
<PAGE>
considers to be the most equitable and consistent with its fiduciary obligations
to the Trust with respect to the Fund and to such other clients.
The Adviser will not execute any portfolio transactions for the Fund's
account with a broker or dealer which is an "affiliated person" (as defined in
the Act) of the Trust, the Manager or the Adviser without the prior written
approval of the Manager. The Manager agrees that it will provide the Adviser
with a list of brokers and dealers which are "affiliated persons" of the Trust,
the Manager or the Adviser.
The Adviser shall render regular reports to the Trust of the total
brokerage business placed by the Fund and the manner in which the allocation has
been accomplished.
4. Expenses of the Fund. It is understood that the Fund will pay, or
that the Fund will enter into arrangements that require third parties to pay,
all its expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Fund shall include:
A. Expenses of all audits by independent public
accountants;
B. Expenses of transfer agent, dividend disbursing agent,
accounting and pricing agent and shareholder
recordkeeping services;
C. Expenses of custodial services including recordkeeping
services provided by the custodian;
D. Expenses of obtaining security valuation quotations for
calculating the value of the Fund's net assets;
- 9 -
<PAGE>
E. Salaries and other compensation of any of its executive
officers and employees, if any, who are not officers,
directors, stockholders or employees of the Manager or
the Adviser;
F. Taxes or governmental fees levied against the Fund;
G. Brokerage fees and commissions in connection with the
purchase and sale of the Fund's portfolio securities;
H. Costs, including the interest expense, of borrowing
money;
I. Costs and/or fees incident to Board of Trustee and
shareholder meetings, the preparation and mailings of
prospectuses, reports and notices to the existing
shareholders of the Fund, the filing of reports with
regulatory bodies, the maintenance of the Trust's
existence as a business trust, membership in investment
company organizations, and the registration of shares
with federal and state securities authorities;
J. Legal fees, including the legal fees related to the
registration and continued qualification of the Fund's
shares for sale and legal fees arising from litigation
to which the Trust may be a party and indemnification
of the Trust's officers and trustees with respect
thereto;
K. Costs of printing share certificates (in the event such
certificates are issued) representing shares of the
Fund;
- 10 -
<PAGE>
L. Trustees' fees and expenses of Trustees who are not
directors, officers, employees or stockholders of the
Manager, the Adviser or any of their affiliates; and
M. The Fund's pro rata portion of the fidelity bond
required by Section 17(g) of the Act and other
insurance premiums.
5. Activities and Affiliates of the Manager.
A. The services of the Manager hereunder are not to be
deemed exclusive, and the Manager and any of its affiliates
shall be free to render similar services to others. The
Manager shall use the same skill and care in the management of
the Fund's assets as it uses in the administration of other
accounts to which it provides asset management, consulting and
portfolio manager selection services, but shall not be
obligated to give the Fund more favorable or preferential
treatment vis-a-vis its other clients.
B. Subject to and in accordance with the Declaration of
Trust and Bylaws of the Trust and to Section 10(a) of
the Act, it is understood that Trustees, officers and
agents of the Trust and shareholders of the Fund are or
may be interested in the Manager or its affiliates as
directors, officers, agents or stockholders of the
Manager or its affiliates; that directors, officers,
agents and stockholders of the Manager or its
affiliates are or may be interested in the Trust as
Trustees, officers, agents, shareholders or otherwise;
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<PAGE>
that the Manager or its affiliates may be interested in the
Trust as shareholders or otherwise; and that the effect of any
such interests shall be governed by said Declaration of Trust,
Bylaws and the Act.
6. Compensation of the Manager. For all services to be rendered and
payments made as provided in this Agreement, the Fund will pay the Manager a
daily fee equal to the annual rate of 1% of the value of the daily net assets of
the Fund up to and including $50,000,000, 90/100 of 1% of the next $50 million
of such assets, 80/100 of 1% of the next $100 million of such assets, and 75/100
of 1% of such assets in excess of $200,000,000. Manager's fee shall be payable
monthly and shall be due with respect to any month as of the first business day
following the end of such month. Manager will, until at least ________________,
1999, waive its fee and reimburse expenses to the extent necessary to
limit total operating expenses to 1.66% of the Fund's average net assets.
The value of the daily net assets of the Fund shall be determined
pursuant to the applicable provisions of the Declaration of Trust and to
resolutions of the Board of Trustees of the Trust. If, pursuant to such
provisions, the determination of net asset value is suspended for any particular
business day, then for the purposes of this paragraph 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of the close of business on that day, or as of such other time as the
value of the Fund's net assets may lawfully be determined on that day. If the
determination of
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<PAGE>
the net asset value of the Fund's shares has been suspended for a period
including such month, the Manager's compensation payable for such month shall be
computed on the basis of the value of the net assets of the Fund as last
determined (whether during or prior to such month).
7. Liabilities of the Manager.
Manager (including its directors, officers, shareholders, employees,
control persons and affiliates of any thereof) shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Manager in
the performance of its duties or from the reckless disregard by Manager of its
obligations and duties under this Agreement ("disabling conduct"). However,
Manager will not be indemnified for any liability unless (1) a final decision is
made on the merits by a court or other body before whom the proceeding was
brought that Manager 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 Manager 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 Trust 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. The Fund will advance
attorneys' fees or other expenses incurred by the Manager in
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<PAGE>
defending a proceeding, upon the undertaking by or on behalf of the Manager to
repay the advance unless it is ultimately determined that the Manager is
entitled to indemnification, so long as the Manager meets at least one of the
following as a condition to the advance: (1) the Manager shall provide a
security for its undertaking, (2) the Fund shall be insured against losses
arising by reason of any lawful advances, or (3) 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 Manager ultimately will be found entitled to indemnification. Any
person employed by the Manager who may also be or become an employee of the
Trust shall be deemed, when acting within the scope of his employment by the
Trust, to be acting in such employment solely for the Trust and not as the
Manager's employee or agent.
8. Renewal and Termination.
A. This Agreement shall become effective upon its
execution, shall remain in force for a period of two
(2) years from that date and remain in force from year
to year thereafter, but only so long as such
continuance is specifically approved at least annually
by the vote of a majority of the Trustees who are not
interested persons of the Trust, the Manager or the
Adviser, cast in person at a meeting called for the
- 14 -
<PAGE>
purpose of voting on such approval and by a vote of the Board
of Trustees or of a majority of the outstanding voting
securities. The aforesaid provision that this Agreement may be
continued "annually" shall be construed in a manner consistent
with the Act and the rules and regulations thereunder.
B. This Agreement:
(a) may at any time be terminated without the payment of
any penalty either by vote of the Board of Trustees
of the Trust or by vote of a majority of the
outstanding voting securities of the Fund, on sixty
(60) days' written notice to the Manager;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by the Manager on sixty (60)
days' written notice to the Trust.
C. As used in this Section 8, the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Act and
the rules and regulations thereunder.
D. Any notice under this Agreement shall be given in
writing addressed and delivered or mailed postpaid, to
the other party to this Agreement at its principal
- 15 -
<PAGE>
place of business.
9. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
10. Limitation of Liability. It is expressly agreed that the
obligations of the Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Fund, as provided in the Declaration of
Trust of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and the shareholders of the Fund and
signed by the officers of the Trust, acting as such, and neither such
authorization by such Trustees and shareholders nor such execution and delivery
by such officers 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 only the
trust property of the Fund as provided in the Trust's Declaration of Trust.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of the Fund and by the Board of Trustees,
including a majority of the Trustees who are not interested persons of the
Manager or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
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<PAGE>
12. Governing Law. To the extent that state law has not
been preempted by the provisions of any law of the United States
heretofore or hereafter enacted, as the same may be amended from
time to time, this Agreement shall be administered, construed and
enforced according to the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
COUNTRYWIDE STRATEGIC TRUST
ATTEST: By:
Title: President
COUNTRYWIDE INVESTMENTS, INC.
ATTEST: By:
Title: President
- 17 -
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made this day of , 1997, between
Countrywide Strategic Trust (the "Trust"), a business trust organized under the
laws of the State of Massachusetts, and Countrywide Investments, Inc. (the
"Manager"), a corporation organized under the laws of the State of Ohio.
WHEREAS, the Trust has been organized to operate as an investment
company registered under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust's shares of beneficial interest are divided into
separate series and each such share of a series represents an undivided interest
in the assets, subject to the liabilities, located to that series, and each
series has separate investment objectives and policies; and
WHEREAS, the Aggressive Growth Fund (the "Fund"), a series of the Trust
has been created for the purpose of investing and reinvesting its assets in
securities pursuant to the investment objectives and policies as set forth in
its registration statements under the Act and the Securities Act of 1933
("Registration Statements"), as heretofore amended and supplemented; and the
Trust desires to avail itself of the services, information, advice, assistance
and facilities of a manager and to have a manager provide or perform for it
various management, statistical, portfolio adviser selection and other services
for the Fund; and
<PAGE>
WHEREAS, the Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended;
NOW, THEREFORE, the Trust and Manager agree as follows:
1. Employment of the Manager. The Trust hereby employs
the Manager to manage the investment and reinvestment of the assets of the Fund
in the manner set forth in subparagraph 2B of this Agreement, subject to the
direction of the Board of Trustees and the officers of the Trust, for the
period, in the manner, and on the terms hereinafter set forth. The Manager
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth. The Manager shall for
all purposes herein be deemed to be an independent contractor and shall, except
as expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. Obligation of and Services to be Provided by the
Manager. The Manager undertakes to provide the services
hereinafter set forth and to assume the following obligations:
A. Corporate Management and Administrative Services.
The Manager shall furnish to the Fund, or retain
another party or parties to furnish, the following
described services to the Fund: (i) office space, which
may be space within the offices of the Manager or in
such other place as may be agreed upon from time to
time, and (ii) office furnishings, facilities and
- 2 -
<PAGE>
equipment as may be reasonably required for managing and
administering the operations and conducting the business of
the Fund, including complying with the securities, tax and
other reporting requirements of the United States and the
various states in which the Fund does business, conducting
correspondence and other communications with the shareholders
of the Fund, and maintaining or supervising the maintenance of
all records in connection with the investment and business
activities of the Fund.
B. Investment Management Services.
(a) The Manager shall have overall supervisory
responsibility for the general management and
investment of the assets and portfolio securities of
the Fund subject to and in accordance with the
investment objectives and policies of the Fund, and
any directions which the Trust's Board of Trustees
may issue to the Manager from time to time.
(b) The Manager shall provide overall investment programs
and strategies for the Fund, shall revise such
programs as necessary and shall monitor and report
periodically to the Board of Trustees concerning the
implementation of the programs.
(c) The Manager, with the approval of the Board of
Trustees of the Trust as to particular
- 3 -
<PAGE>
appointments, intends to (i) appoint one or more
persons or companies (the "Adviser") and, subject to
the terms and conditions of this Agreement, the
Adviser shall have full investment discretion and
shall make all determinations with respect to the
investment of the Fund's assets and the purchase and
sale of portfolio securities with those assets, and
(ii) take such steps as may be necessary to implement
such appointments. The Manager shall be solely
responsible for paying the fees and expenses of the
Adviser for its services to the Fund. The Manager
shall not be responsible or liable for the investment
merits of any decision by the Adviser to purchase,
hold or sell a portfolio security for the Fund.
(d) The Manager shall evaluate advisers and shall
recommend to the Board of Trustees the Adviser
which the Manager believes is best suited to
invest the assets of the Fund; shall monitor and
evaluate the investment performance of the Fund's
Adviser; shall recommend changes in the Adviser
when appropriate; shall coordinate the investment
activities of the Adviser to ensure compliance
with applicable restrictions and limitations
applicable to the Fund; and shall compensate the
Adviser.
- 4 -
<PAGE>
(e) The Manager shall render regular reports to the
Trust, at regular meetings of the Board of Trustees,
of, among other things, the portfolio investments of
the Fund and measurement and analysis of the results
achieved by the Fund.
(f) The Manager shall employ or provide and compensate
the executive, administrative, secretarial and
clerical personnel necessary to provide the
services set forth in this subparagraph 2B, and
shall bear the expense thereof, except as may
otherwise be provided in Section 4 of this
Agreement. The Manager shall also compensate all
officers and employees of the Fund who are
officers or employees of the Manager.
(g) The Manager shall pay all advertising and promotion
expenses incurred in connection with the sale or
distribution of the Fund's shares to the extent such
expenses are not assumed by the Fund under its Plans
of Distribution.
C. Provision of Information Necessary for Preparation of
Securities Registration Statements, Amendments and
Other Materials.
The Manager will make available and provide financial,
accounting and statistical information required by the Fund in
the preparation of registration statements, reports and other
documents required by federal and state securities laws, and
such information as the Fund
- 5 -
<PAGE>
may reasonably request for use in the preparation of
registration statements, reports and other documents required
by federal and state securities laws.
D. Other Obligations and Services.
The Manager shall make available its officers and
employees to the Board of Trustees and officers of the
Trust for consultation and discussions regarding the
administration and management of the Fund and its
investment activities.
3. Execution and Allocation of Portfolio Brokerage Commissions. The
Adviser, subject to the limitations contained in this paragraph 3, shall place,
on behalf of the Fund, orders for the execution of portfolio transactions. The
Adviser is not authorized by the Fund to take any action, including the purchase
or sale of securities for the Fund's account, (a) in contravention of (i) any
investment restrictions set forth in the Act and the rules thereunder, (ii)
specific instructions adopted by the Board of Trustees and communicated to the
Adviser, (iii) the investment objectives, policies and restrictions of the Fund
as set forth in the Trust's Registration Statement, or (iv) instructions from
the Manager communicated to the Adviser, or (b) which would have the effect of
causing the Fund to fail to qualify or to cease to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, or any
succeeding statute.
Subject to the foregoing, the Adviser shall determine the
securities to be purchased or sold by the Fund and will place
- 6 -
<PAGE>
orders pursuant to its determination with or through such persons, brokers or
dealers in conformity with the policy with respect to brokerage as set forth in
the Trust's Registration Statement or as the Board of Trustees may direct from
time to time. It is recognized that, in providing the Fund with investment
supervision of the placing of orders for portfolio transactions, the Adviser
will give primary consideration to securing the best qualitative execution,
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. Consistent with this policy, the
Adviser may select brokers or dealers who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) to other Funds and/or the other accounts over which it exercises
investment discretion. It is understood that neither the Fund, the Manager nor
the Adviser have adopted a formula for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for the Fund
that the Adviser have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Fund with such
- 7 -
<PAGE>
certain brokers, subject to review by the Trust's Board of Trustees from time to
time with respect to the extent and continuation of this practice, provided that
the Adviser determines in good faith that the amount of the commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker or dealer. The determination may be viewed in
terms of either a particular transaction or the Adviser's overall
responsibilities with respect to the Fund and to other accounts over which it
exercises investment discretion. It is understood that although the information
may be useful to the Trust and the Adviser, it is not possible to place a dollar
value on such information. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
qualitative execution, 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.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Adviser in the
manner it
- 8 -
<PAGE>
considers to be the most equitable and consistent with its fiduciary obligations
to the Trust with respect to the Fund and to such other clients.
The Adviser will not execute any portfolio transactions for the Fund's
account with a broker or dealer which is an "affiliated person" (as defined in
the Act) of the Trust, the Manager or the Adviser without the prior written
approval of the Manager. The Manager agrees that it will provide the Adviser
with a list of brokers and dealers which are "affiliated persons" of the Trust,
the Manager or the Adviser.
The Adviser shall render regular reports to the Trust of the total
brokerage business placed by the Fund and the manner in which the allocation has
been accomplished.
4. Expenses of the Fund. It is understood that the Fund will pay, or
that the Fund will enter into arrangements that require third parties to pay,
all its expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Fund shall include:
A. Expenses of all audits by independent public
accountants;
B. Expenses of transfer agent, dividend disbursing agent,
accounting and pricing agent and shareholder
recordkeeping services;
C. Expenses of custodial services including recordkeeping
services provided by the custodian;
D. Expenses of obtaining security valuation quotations for
calculating the value of the Fund's net assets;
- 9 -
<PAGE>
E. Salaries and other compensation of any of its executive
officers and employees, if any, who are not officers,
directors, stockholders or employees of the Manager or
the Adviser;
F. Taxes or governmental fees levied against the Fund;
G. Brokerage fees and commissions in connection with the
purchase and sale of the Fund's portfolio securities;
H. Costs, including the interest expense, of borrowing
money;
I. Costs and/or fees incident to Board of Trustee and
shareholder meetings, the preparation and mailings of
prospectuses, reports and notices to the existing
shareholders of the Fund, the filing of reports with
regulatory bodies, the maintenance of the Trust's
existence as a business trust, membership in investment
company organizations, and the registration of shares
with federal and state securities authorities;
J. Legal fees, including the legal fees related to the
registration and continued qualification of the Fund's
shares for sale and legal fees arising from litigation
to which the Trust may be a party and indemnification
of the Trust's officers and trustees with respect
thereto;
K. Costs of printing share certificates (in the event such
certificates are issued) representing shares of the
Fund;
- 10 -
<PAGE>
L. Trustees' fees and expenses of Trustees who are not
directors, officers, employees or stockholders of the
Manager, the Adviser or any of their affiliates; and
M. The Fund's pro rata portion of the fidelity bond
required by Section 17(g) of the Act and other
insurance premiums.
5. Activities and Affiliates of the Manager.
A. The services of the Manager hereunder are not to be
deemed exclusive, and the Manager and any of its affiliates
shall be free to render similar services to others. The
Manager shall use the same skill and care in the management of
the Fund's assets as it uses in the administration of other
accounts to which it provides asset management, consulting and
portfolio manager selection services, but shall not be
obligated to give the Fund more favorable or preferential
treatment vis-a-vis its other clients.
B. Subject to and in accordance with the Declaration of
Trust and Bylaws of the Trust and to Section 10(a) of
the Act, it is understood that Trustees, officers and
agents of the Trust and shareholders of the Fund are or
may be interested in the Manager or its affiliates as
directors, officers, agents or stockholders of the
Manager or its affiliates; that directors, officers,
agents and stockholders of the Manager or its
affiliates are or may be interested in the Trust as
Trustees, officers, agents, shareholders or otherwise;
- 11 -
<PAGE>
that the Manager or its affiliates may be interested in the
Trust as shareholders or otherwise; and that the effect of any
such interests shall be governed by said Declaration of Trust,
Bylaws and the Act.
6. Compensation of the Manager. For all services to be rendered and
payments made as provided in this Agreement, the Fund will pay the Manager a
daily fee equal to the annual rate of 1% of the value of the daily net assets of
the Fund up to and including $50,000,000, 90/100 of 1% of the next $50 million
of such assets, 80/100 of 1% of the next $100 million of such assets, and 75/100
of 1% of such assets in excess of $200,000,000. Manager's fee shall be payable
monthly and shall be due with respect to any month as of the first business day
following the end of such month. Manager will, until at least ________________,
1999, waive its fee and reimburse expenses to the extent necessary to
limit total operating expenses to 1.95% of the Fund's average net assets.
The value of the daily net assets of the Fund shall be determined
pursuant to the applicable provisions of the Declaration of Trust and to
resolutions of the Board of Trustees of the Trust. If, pursuant to such
provisions, the determination of net asset value is suspended for any particular
business day, then for the purposes of this paragraph 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of the close of business on that day, or as of such other time as the
value of the Fund's net assets may lawfully be determined on that day. If the
determination of
- 12 -
<PAGE>
the net asset value of the Fund's shares has been suspended for a period
including such month, the Manager's compensation payable for such month shall be
computed on the basis of the value of the net assets of the Fund as last
determined (whether during or prior to such month).
7. Liabilities of the Manager.
Manager (including its directors, officers, shareholders, employees,
control persons and affiliates of any thereof) shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Manager in
the performance of its duties or from the reckless disregard by Manager of its
obligations and duties under this Agreement ("disabling conduct"). However,
Manager will not be indemnified for any liability unless (1) a final decision is
made on the merits by a court or other body before whom the proceeding was
brought that Manager 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 Manager 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 Trust 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. The Fund will advance
attorneys' fees or other expenses incurred by the Manager in
- 13 -
<PAGE>
defending a proceeding, upon the undertaking by or on behalf of the Manager to
repay the advance unless it is ultimately determined that the Manager is
entitled to indemnification, so long as the Manager meets at least one of the
following as a condition to the advance: (1) the Manager shall provide a
security for its undertaking, (2) the Fund shall be insured against losses
arising by reason of any lawful advances, or (3) 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 Manager ultimately will be found entitled to indemnification. Any
person employed by the Manager who may also be or become an employee of the
Trust shall be deemed, when acting within the scope of his employment by the
Trust, to be acting in such employment solely for the Trust and not as the
Manager's employee or agent.
8. Renewal and Termination.
A. This Agreement shall become effective upon its
execution, shall remain in force for a period of two
(2) years from that date and remain in force from year
to year thereafter, but only so long as such
continuance is specifically approved at least annually
by the vote of a majority of the Trustees who are not
interested persons of the Trust, the Manager or the
Adviser, cast in person at a meeting called for the
- 14 -
<PAGE>
purpose of voting on such approval and by a vote of the Board
of Trustees or of a majority of the outstanding voting
securities. The aforesaid provision that this Agreement may be
continued "annually" shall be construed in a manner consistent
with the Act and the rules and regulations thereunder.
B. This Agreement:
(a) may at any time be terminated without the payment of
any penalty either by vote of the Board of Trustees
of the Trust or by vote of a majority of the
outstanding voting securities of the Fund, on sixty
(60) days' written notice to the Manager;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by the Manager on sixty (60)
days' written notice to the Trust.
C. As used in this Section 8, the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Act and
the rules and regulations thereunder.
D. Any notice under this Agreement shall be given in
writing addressed and delivered or mailed postpaid, to
the other party to this Agreement at its principal
- 15 -
<PAGE>
place of business.
9. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
10. Limitation of Liability. It is expressly agreed that the
obligations of the Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Trust, personally,
but bind only the trust property of the Fund, as provided in the Declaration of
Trust of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and the shareholders of the Fund and
signed by the officers of the Trust, acting as such, and neither such
authorization by such Trustees and shareholders nor such execution and delivery
by such officers 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 only the
trust property of the Fund as provided in the Trust's Declaration of Trust.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of the Fund and by the Board of Trustees,
including a majority of the Trustees who are not interested persons of the
Manager or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
- 16 -
<PAGE>
12. Governing Law. To the extent that state law has not
been preempted by the provisions of any law of the United States
heretofore or hereafter enacted, as the same may be amended from
time to time, this Agreement shall be administered, construed and
enforced according to the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
COUNTRYWIDE STRATEGIC TRUST
ATTEST: By:
Title: President
COUNTRYWIDE INVESTMENTS, INC.
ATTEST: By:
Title: President
- 17 -
SUBADVISORY AGREEMENT
Mastrapasqua & Associates, Inc.
814 Church Street
Nashville, TN 37203
Gentlemen:
Countrywide Strategic Trust (the "Trust") is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), and subject to the rules and regulations
promulgated thereunder. The Trust's shares of beneficial interest are divided
into separate series or funds. Each such share of a fund represents an undivided
interest in the assets, subject to the liabilities, allocated to that fund. Each
fund has separate investment objectives and policies. The ___________ Fund (the
"Fund") has been established as a series of the Trust.
Countrywide Investments, Inc. (the "Manager") acts as the investment
manager for the Fund pursuant to the terms of a Management Agreement. The
Manager is responsible for the coordination of investment of the Fund's assets
in portfolio securities. However, specific portfolio purchases and sales for the
investment portfolio of the Fund are to be made by advisory organizations
recommended by the Manager and approved by the Board of Trustees of the Trust.
1. Appointment as an Adviser. The Trust being duly
authorized hereby appoints and employs Mastrapasqua & Associates, Inc.
("the Adviser") as the discretionary portfolio manager of the Fund, on the
terms and conditions set forth herein.
<PAGE>
2. Acceptance of Appointment; Standard of Performance.
The Adviser accepts the appointment as the discretionary portfolio manager and
agrees to use its best professional judgment to make timely investment decisions
for the Fund in accordance with the provisions of this Agreement.
3. Portfolio Management Services of Adviser. The Adviser is hereby
employed and authorized to select portfolio securities for investment by the
Fund, to purchase and sell securities of the Fund, and upon making any purchase
or sale decision, to place orders for the execution of such portfolio
transactions in accordance with paragraphs 5 and 6 hereof. In providing
portfolio management services to the Fund, the Adviser shall be subject to such
investment restrictions as are set forth in the Act and the rules thereunder,
the Internal Revenue Code, applicable state securities laws, the supervision and
control of the Board of Trustees of the Trust, such specific instructions as the
Board of Trustees may adopt and communicate to the Adviser, the investment
objectives, policies and restrictions of the Fund furnished pursuant to
paragraph 4, the provisions of Schedule A hereto and instructions from the
Manager. The Adviser is not authorized by the Fund to take any action, including
the purchase or sale of securities for the Fund, in contravention of any
restriction, limitation, objective, policy or instruction described in the
previous sentence. The Adviser shall maintain on behalf of the Fund the records
listed in Schedule A hereto (as amended from time to time). At the Trust's
reasonable request,
- 2 -
<PAGE>
the Adviser will consult with the Manager with respect to any decision made by
it with respect to the investments of the Fund.
4. Investment Objectives, Policies and Restrictions. The
Trust will provide the Adviser with the statement of investment objectives,
policies and restrictions applicable to the Fund as contained in the Fund's
registration statements under the Act and the Securities Act of 1933, and any
instructions adopted by the Board of Trustees supplemental thereto. The Trust
will provide the Adviser with such further information concerning the investment
objectives, policies and restrictions applicable thereto as the Adviser may from
time to time reasonably request. The Trust retains the right, on written notice
to the Adviser from the Trust or the Manager, to modify any such objectives,
policies or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be consummated by
payment to or delivery by Star Bank, N.A. or any successor custodian (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or securities
due to or from the Fund, and the Adviser shall not have possession or custody
thereof. The Adviser shall advise the Custodian and confirm in writing to the
Trust and to the Manager all investment orders for the Fund placed by it with
brokers and dealers. The Adviser shall issue to the Custodian such instructions
as may be appropriate in connection with the settlement of any transaction
initiated by the Adviser. It shall be the responsibility of the
- 3 -
<PAGE>
Adviser to take appropriate action if the Custodian fails to confirm in writing
proper execution of the instructions.
6. Allocation of Brokerage. The Adviser shall have the
authority and discretion to select brokers and dealers to execute
portfolio transactions initiated by the Adviser, and for the
selection of the markets on or in which the transactions will be
executed.
A. In doing so, the Adviser will give primary consideration to
securing the best qualitative execution, 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. Consistent with this policy, the Adviser may select brokers or dealers
who also provide brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to the other accounts over
which it exercises investment discretion. It is understood that neither the
Fund, the Manager nor the Adviser have adopted a formula for allocation of the
Fund's investment transaction business. It is also understood that it is
desirable for the Fund that the Adviser have access to supplemental investment
and market research and security and economic analyses provided by certain
brokers who may execute brokerage transactions at a higher commission to the
Fund than may result when allocating brokerage to other brokers on the basis of
seeking the lowest
- 4 -
<PAGE>
commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Fund with such certain brokers, subject
to review by the Trust's Board of Trustees from time to time with respect to the
extent and continuation of this practice, provided that the Adviser determines
in good faith that the amount of the commission is reasonable in relation to the
value of the brokerage and research services provided by the executing broker or
dealer. The determination may be viewed in terms of either a particular
transaction or the Adviser's overall responsibilities with respect to the Fund
and to the other accounts over which it exercises investment discretion. It is
understood that although the information may be useful to the Trust and the
Adviser, it is not possible to place a dollar value on such information.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best qualitative execution, 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.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions
- 5 -
<PAGE>
and efficient execution. In such event, allocation of the securities so
purchased or sold, as well as expenses incurred in the transaction, will be made
by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund with respect to the Fund
and to such other clients.
For each fiscal quarter of the Fund, the Adviser shall prepare and
render reports to the Manager and the Trust's Board of Trustees of the total
brokerage business placed and the manner in which the allocation has been
accomplished. Such reports shall set forth at a minimum the information required
to be maintained by Rule 31a-1(b)(9) under the Act.
B. Adviser agrees that it will not execute any portfolio
transactions for the Fund's account with a broker or dealer which is an
"affiliated person" (as defined in the Act) of the Trust, the Manager, the
Adviser or any portfolio manager of the Trust without the prior written approval
of the Manager. The Manager agrees that it will provide the Adviser with a list
of brokers and dealers which are "affiliated persons" of the Trust, the Manager
or the Adviser.
7. Proxies. The Trust will vote all proxies solicited by
or with respect to the issuers of securities in which assets of
the Fund may be invested from time to time. At the Fund's request, the
Adviser shall provide the Trust with its recommendations as to the voting
of such proxies.
- 6 -
<PAGE>
8. Reports to the Adviser. The Trust will provide the
Adviser with such periodic reports concerning the status of the
Fund as the Adviser may reasonably request.
9. Fees for Services. For the services provided to the Fund, the
Manager shall pay the Adviser a fee equal to the annual rate of 60/100 of 1% of
the average value of the daily net assets of the Fund up to and including
$50,000,000, 50/100 of 1% of the next $50 million of such assets, 40/100 of 1%
of the next $100 million of such assets, and 35/100 of 1% of such assets in
excess of $200,000,000. The Adviser agrees to waive all advisory fees for the
first sixty days of the Fund's operations. Thereafter, however, the Adviser
shall not be required to waive any portion of its fees if not required by an
applicable statute or regulation.
The Adviser's fees shall be payable monthly within ten days following
the end of each month. Pursuant to the provisions of the Management Agreement
between the Trust and the Manager, the Manager is solely responsible for the
payment of fees to the Adviser, and the Adviser agrees to seek payment of the
Adviser's fees solely from the Manager.
10. Other Investment Activities of the Adviser. The Trust
acknowledges that the Adviser or one or more of its affiliates may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that the
Adviser, its affiliates or any of its or their directors, officers, agents or
employees may
- 7 -
<PAGE>
buy, sell or trade in any securities for its or their respective accounts
("Affiliated Accounts"). Subject to the provisions of paragraph 2 hereof, the
Trust agrees that the Adviser or its affiliates may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated Accounts which may differ from the advice given or the timing or
nature of action taken with respect to the Fund, provided that the Adviser acts
in good faith, and provided further, that it is the Adviser's policy to
allocate, within its reasonable discretion, investment opportunities to the Fund
over a period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objectives and policies of the Fund
and any specific investment restrictions applicable thereto. The Trust
acknowledges that one or more of the Affiliated Accounts may at any time hold,
acquire, increase, decrease, dispose of or otherwise deal with positions in
investments in which the Fund may have an interest from time to time, whether in
transactions which involve the Fund or otherwise. The Adviser shall have no
obligation to acquire for the Fund a position in any investment which any
Affiliated Account may acquire, and the Trust shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Fund or otherwise.
11. Certificate of Authority. The Trust, the Manager and
the Adviser shall furnish to each other from time to time certified copies of
the resolutions of their Board of Trustees or Board of Directors or executive
committees, as the case may be, evidencing the authority of officers and
employees who are
- 8 -
<PAGE>
authorized to act on behalf of the Trust, the Fund, the Manager and/or the
Adviser.
12. Limitation of Liability. Adviser (including its directors,
officers, shareholders, employees, control persons and affiliates of any
thereof) shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Adviser in the performance of its duties
or from the reckless disregard by Adviser of its obligations and duties under
this Agreement ("disabling conduct"). However, Adviser will not be indemnified
for any liability unless (1) a final decision is made on the merits by a court
or other body before whom the proceeding was brought that Adviser 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
Adviser 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
Trust 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. The Fund will advance attorneys' fees or other
expenses incurred by the Adviser in defending a proceeding, upon the undertaking
by or on behalf of the Adviser to repay the advance unless it is ultimately
determined that the Adviser is entitled to indemnification, so long as the
Adviser meets at least one of
- 9 -
<PAGE>
the following as a condition to the advance: (1) the Adviser shall provide a
security for its undertaking, (2) the Fund shall be insured against losses
arising by reason of any lawful advances, or (3) 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 Adviser ultimately will be found entitled to indemnification. Any
person employed by the Adviser who may also be or become an employee of the
Trust shall be deemed, when acting within the scope of his employment by the
Trust, to be acting in such employment solely for the Trust and not as the
Adviser's employee or agent.
13. Confidentiality. Subject to the duty of the Adviser
and the Trust to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto shall
treat as confidential all information pertaining to the Fund and the actions of
the Adviser and the Trust in respect thereof.
14. Assignment. No assignment of this Agreement shall be made by the
Adviser, and this Agreement shall terminate automatically in the event of such
assignment. The Adviser shall notify the Trust in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Trust to consider whether an assignment will occur, and
to take the steps necessary to enter into a new
- 10 -
<PAGE>
contract with the Adviser.
15. Representations, Warranties and Agreements of the
Trust. The Trust represents, warrants and agrees that:
A. The Adviser has been duly appointed by the Board
of Trustees of the Trust to provide investment services to the
Fund as contemplated hereby.
B. The Trust will deliver to the Adviser a true and complete
copy of its then current prospectus and statement of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Fund and such other information as is necessary for the
Adviser to carry out its obligations under this Agreement.
C. The Trust is currently in compliance and shall at
all times comply with the requirements imposed upon the Fund by
applicable laws and regulations.
16. Representations, Warranties and Agreements of the
Adviser. The Adviser represents, warrants and agrees that:
A. The Adviser is registered as an "investment
adviser" under the Investment Advisers Act of 1940.
B. The Adviser will maintain, keep current and preserve on
behalf of the Fund, in the manner and for the time periods required or permitted
by the Act, the records identified in Schedule A. The Adviser agrees that such
records (unless otherwise indicated on Schedule A) are the property of the
Trust, and will be surrendered to the Trust promptly upon request.
C. The Adviser will complete such reports concerning
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<PAGE>
purchases or sales of securities on behalf of the Fund as the Manager or the
Trust may from time to time require to ensure compliance with the Act, the
Internal Revenue Code and applicable state securities laws.
D. The Adviser will adopt a written code of ethics complying
with the requirements of Rule 17j-1 under the Act and will provide the Trust
with a copy of the code of ethics and evidence of its adoption. Within
forty-five (45) days of the end of the last calendar quarter of each year while
this Agreement is in effect, the president or a vice president of the Adviser
shall certify to the Trust that the Adviser has complied with the requirements
of Rule 17j-1 during the previous year and that there has been no violation of
the Adviser's code of ethics or, if such a violation has occurred, that
appropriate action was taken in response to such violation. Upon the written
request of the Trust, the Adviser shall submit to the Trust the reports required
to be made to the Adviser by Rule 17j-1(c)(1).
E. The Adviser will promptly after filing with the
Securities and Exchange Commission an amendment to its Form ADV
furnish a copy of such amendment to the Trust and to the Manager.
F. Upon request of the Trust, the Adviser will provide
assistance to the Custodian in the collection of income due or payable to the
Fund. With respect to income from foreign sources, the Adviser will undertake
any reasonable procedural steps required to reduce, eliminate or reclaim
non-U.S. withholding taxes under the terms of applicable United States income
tax treaties.
- 12 -
<PAGE>
G. The Adviser will immediately notify the Trust and the
Manager of the occurrence of any event which would disqualify the Adviser from
serving as an investment adviser of an investment company pursuant to Section
9(a) of the Act or otherwise.
17. Amendment. This Agreement may be amended at any time, but only by
written agreement between the Adviser and the Trust, which amendment, other than
amendments to Schedule A, is subject to the approval of the Board of Trustees
and the shareholders of the Fund in the manner required by the Act and the rules
thereunder, subject to any applicable exemptive order of the Securities and
Exchange Commission modifying the provisions of the Act with respect to approval
of amendments to this Agreement.
18. Effective Date; Term. This Agreement shall become effective on the
date of its execution and shall remain in force for a period of two (2) years
from that date; and from year to year thereafter but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Trustees who are not interested persons of the Trust, the Manager or the
Adviser, cast in person at a meeting called for the purpose of voting on such
approval, and by a vote of the Board of Trustees or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that this
Agreement may be continued "annually" shall be construed in a manner consistent
with the Act and the rules and regulations thereunder.
- 13 -
<PAGE>
19. Termination. This Agreement may be terminated by either party
hereto, without the payment of any penalty, immediately upon written notice to
the other in the event of a breach of any provision thereof by the party so
notified, or otherwise upon sixty (60) days' written notice to the other, but
any such termination shall not affect the status, obligations or liabilities of
any party hereto to the other.
20. Shareholder Liability. The Adviser is hereby expressly put on
notice of the limitation of shareholder liability as set forth in the
Declaration of Trust of the Trust and agrees that obligations assumed by the
Trust pursuant to this Agreement shall be limited in all cases to the Fund and
its assets. The Adviser agrees that it shall not seek satisfaction of any such
obligations from the shareholders or any individual shareholder of the Fund, nor
from the Trustees or any individual Trustee of the Trust.
21. Definitions. As used in paragraphs 14 and 18 of this
Agreement, the terms "assignment," interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the Act
and the rules and regulations thereunder.
22. Applicable Law. To the extent that state law is not
preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the State
of Ohio.
- 14 -
<PAGE>
COUNTRYWIDE INVESTMENTS, INC. COUNTRYWIDE STRATEGIC TRUST
By: ________________________ By: _________________________
Title: President Title: President
Date: ____________, 1997 Date: ____________, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
MASTRAPASQUA & ASSOCIATES, INC.
By: __________________________
Title:________________________
Date: ____________, 1997
- 15 -
<PAGE>
SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Adviser on behalf of
the Fund for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any
modification or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of
the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers was effected,
and the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(I) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or
dealers to:
(a) The Trust;
(b) the Manager;
(C) the Adviser;
(d) any other portfolio adviser of the Trust;
and
(e) any person affiliated with the foregoing
persons.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as
such.
- 16 -
<PAGE>
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate
memorandum identifying the person or persons, committees or
groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee or
group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as
part of this record: any memorandum, recommendation or
instruction supporting or authorizing the purchase or sale of
portfolio securities and such other information as is
appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rules
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Fund.
*Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation; i.e., buy, sell, hold) or any internal reports
or portfolio adviser reviews.
- 17 -
UNDERWRITING AGREEMENT
This Agreement made as of February 28, 1997 by and between COUNTRYWIDE
STRATEGIC TRUST, a Massachusetts business trust (the "Trust"), and COUNTRYWIDE
INVESTMENTS, INC., an Ohio corporation ("Underwriter").
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the
Securities and Exchange Commission and a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, Underwriter serves as the principal underwriter of shares of
beneficial interest (the "Shares") of each series of shares of the Trust (the
"Series") pursuant to an underwriting agreement dated November 18, 1993, and the
Trust and Underwriter are desirous of continuing such arrangement;
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
-----------
The Trust hereby appoints Underwriter as its exclusive agent
for the distribution of the Shares, and Underwriter hereby accepts such
appointment under the terms of this Agreement. While this Agreement is in force,
the Trust shall not sell any Shares except on the terms set forth in this
Agreement. Notwithstanding any other provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares whenever, in its sole discretion, it
deems such action to be desirable.
<PAGE>
2. Sale and Repurchase of Shares.
-----------------------------
(a) Underwriter will have the right, as agent for the
Trust, to enter into dealer agreements with responsible investment dealers, and
to sell Shares to such investment dealers against orders therefor at the public
offering price (as defined in subparagraph 2(e) hereof) less a discount
determined by Underwriter, which discount shall not exceed the amount of the
sales charge stated in the Trust's effective Registration Statement on Form N-1A
under the Securities Act of 1933, as amended, including the then current
prospectus and statement of additional information (the "Registration
Statement"). Upon receipt of an order to purchase Shares from a dealer with whom
Underwriter has a dealer agreement, Underwriter will promptly cause such order
to be filled by the Trust.
(b) Underwriter will also have the right, as agent for the
Trust, to sell such Shares to the public against orders therefor at the public
offering price.
(c) Underwriter will also have the right, as agent for the
Trust, to sell Shares at their net asset value to such persons as may be
approved by the Trustees of the Trust, all such sales to comply with the
provisions of the Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
(d) Underwriter will also have the right to take, as agent for
the Trust, all actions which, in Underwriter's judgment, are necessary to carry
into effect the distribution of the Shares.
- 2 -
<PAGE>
(e) The public offering price for the Shares of each Series
(and, with respect to each Series offering multiple classes of Shares, the
Shares of each Class of such Series) shall be the respective net asset value of
the Shares of that Series (or Class of that Series) then in effect, plus any
applicable sales charge determined in the manner set forth in the Registration
Statement or as permitted by the Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder. In no event shall any
applicable sales charge exceed the maximum sales charge permitted by the Rules
of Fair Practice of the NASD.
(f) The net asset value of the Shares of each Series (or each
Class of a Series) shall be determined in the manner provided in the
Registration Statement, and when determined shall be applicable to transactions
as provided for in the Registration Statement. The net asset value of the Shares
of each Series (or each Class of a Series) shall be calculated by the Trust or
by another entity on behalf of the Trust. Underwriter shall have no duty to
inquire into or liability for the accuracy of the net asset value per Share as
calculated.
(g) On every sale, the Trust shall receive the applicable net
asset value of the Shares promptly, but in no event later than the tenth
business day following the date on which Underwriter shall have received an
order for the purchase of the Shares. Underwriter shall have the right to retain
the sales charge less any applicable dealer discount.
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<PAGE>
(h) Upon receipt of purchase instructions, Underwriter will transmit
such instructions to the Trust or its transfer agent for registration of the
Shares purchased.
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation
(including other investment companies) or in any way limit or restrict
Underwriter or any such affiliated person from buying, selling or trading any
securities for its or their own account or for the accounts of others for whom
it or they may be acting; provided, however, that Underwriter expressly
represents that it will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations to the Trust under this
Agreement.
(j) Underwriter, as agent of and for the account of the Trust,
may repurchase the Shares at such prices and upon such terms and conditions as
shall be specified in the Registration Statement.
3. Sale of Shares by the Trust.
----------------------------
The Trust reserves the right to issue any Shares at any time
directly to the holders of Shares ("Shareholders"), to sell Shares to its
Shareholders or to other persons approved by Underwriter at not less than net
asset value and to issue Shares in exchange for substantially all the assets of
any corporation or trust or for the shares of any corporation or trust.
- 4 -
<PAGE>
4. Basis of Sale of Shares.
------------------------
Underwriter does not agree to sell any specific number of
Shares. Underwriter, as agent for the Trust, undertakes to sell Shares on a best
efforts basis only against orders therefor.
5. Rules of NASD, etc.
-------------------
(a) Underwriter will conform to the Rules of Fair Practice of
the NASD and the securities laws of any jurisdiction in which it sells, directly
or indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter
has a dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of the Shares,
and neither Underwriter nor any such dealers shall withhold the placing of
purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient
copies of any agreements, plans or other materials it intends to use in
connection with any sales of Shares in adequate time for the Trust to file and
clear them with the proper authorities before they are put in use, and not to
use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or
broker, or otherwise, under all applicable State or federal laws required in
order that Shares may be sold in such States as may be mutually agreed upon by
the parties.
(e) Underwriter shall not make, or permit any
representative, broker or dealer to make, in connection with any
- 5 -
<PAGE>
sale or solicitation of a sale of the Shares, any representations concerning the
Shares except those contained in the then current prospectus and statement of
additional information covering the Shares and in printed information approved
by the Trust as information supplemental to such prospectus and statement of
additional information. Copies of the then effective prospectus and statement of
additional information and any such printed supplemental information will be
supplied by the Trust to Underwriter in reasonable quantities upon request.
6. Records to be Supplied by Trust.
--------------------------------
The Trust shall furnish to Underwriter copies of all
information, financial statements and other papers which Underwriter may
reasonably request for use in connection with the distribution of the Shares,
and this shall include, but shall not be limited to, one certified copy, upon
request by Underwriter, of all financial statements prepared for the Trust by
independent public accountants.
7. Expenses.
---------
In the performance of its obligations under this Agreement,
Underwriter will pay the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with the offering of the Shares will be paid by the Trust or Underwriter in
accordance with agreements between them as permitted by applicable law,
including the Act and rules and regulations promulgated thereunder.
- 6 -
<PAGE>
8. Indemnification of Trust.
--------------------------
Underwriter, to the extent of the net commission received by
it from the sale of Shares but to no greater amount, agrees to indemnify and
hold harmless the Trust, and each person who has been, is, or may hereafter be a
trustee, officer, employee, shareholder or control person of the Trust, against
any loss, damage or expense (including the reasonable costs of investigation)
reasonably incurred by any of them in connection with any claim or in connection
with any action, suit or proceeding to which any of them may be a party, which
arises out of or is alleged to arise out of or is based upon any untrue
statement or alleged untrue statement of a material fact, or the omission or
alleged omission to state a material fact necessary to make the statements not
misleading, on the part of Underwriter or any agent or employee of Underwriter
or any other person for whose acts Underwriter is responsible, unless such
statement or omission was made in reliance upon written information furnished by
the Trust. Underwriter likewise, to the extent of the net commission received by
it from the sale of Shares but to no greater amount, agrees to indemnify and
hold harmless the Trust and each such person in connection with any claim or in
connection with any action, suit or proceeding which arises out of or is alleged
to arise out of Underwriter's failure to exercise reasonable care and diligence
with respect to its services, if any, rendered in connection with investment,
reinvestment, automatic withdrawal and other plans for Shares.
- 7 -
<PAGE>
The term "expenses" for purposes of this and the next paragraph includes amounts
paid in satisfaction of judgments or in settlements which are made with
Underwriter's consent. The foregoing rights of indemnification shall be in
addition to any other rights to which the Trust or each such person may be
entitled as a matter of law.
9. Indemnification of Underwriter.
-------------------------------
Underwriter, its directors, officers, employees,
shareholders and control persons shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
matters to which this 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 Underwriter's duties or from the reckless disregard by any of
such persons of Underwriter's obligations and duties under this Agreement. The
Trust 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. Any person employed by Underwriter who may also be
or become an officer or employee of the Trust shall be deemed, when acting
within the scope of his employment by the Trust, to be acting in such employment
solely for the Trust and not as an employee or agent of Underwriter.
- 8 -
<PAGE>
10. Termination and Amendment of this Agreement.
--------------------------------------------
This Agreement shall automatically terminate, without
the payment of any penalty, in the event of its assignment. This Agreement may
be amended only if such amendment is approved (i) by Underwriter, (ii) either by
action of the Board of Trustees of the Trust or at a meeting of the Shareholders
of the Trust by the affirmative vote of a majority of the outstanding Shares,
and (iii) by a majority of the Trustees of the Trust who are not interested
persons of the Trust or of Underwriter by vote cast in person at a meeting
called for the purpose of voting on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
-----------------------------------
This Agreement shall take effect upon its execution and
shall remain in full force and effect for a period of two (2) years from the
date of its execution (unless terminated automatically as set forth in Section
10), and from year to year thereafter, subject to annual approval (i) by
Underwriter, (ii) by the Board of Trustees of the Trust or a vote of a majority
of the outstanding Shares, and (iii) by a majority of the Trustees of the Trust
who are not interested persons of the Trust or of Underwriter by vote cast in
person at a meeting called for the purpose of voting on such approval.
- 9 -
<PAGE>
12. Limitation on Liability.
-------------------------
The term "Countrywide Strategic Trust" means and refers to
the Trustees from time to time serving under the Trust's Declaration of Trust as
the same may subsequently thereto have been, or subsequently hereto be, amended.
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 bind only the trust property of the
Trust, as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust and
signed by the officers of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officers
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 only the trust property of
the Trust as provided in its Declaration of Trust.
13. New Series.
-----------
The terms and provisions of this Agreement shall become
automatically applicable to any additional series of the Trust established
during the initial or renewal term of this Agreement.
14. Successor Investment Company.
-----------------------------
Unless this Agreement has been terminated in accordance with
Paragraph 10, the terms and provisions of this Agreement shall become
automatically applicable to any investment company which is a successor to the
Trust as a result of a reorganization, recapitalization or change of domicile.
- 10 -
<PAGE>
15. Severability.
-------------
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
16. Questions of Interpretation.
----------------------------
(a) This Agreement shall be governed by the laws of the
State of Ohio.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretation thereof, if any, by the United States courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
17. Notices.
--------
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is
- 11 -
<PAGE>
agreed that the address of the Trust and of Underwriter for this purpose shall
be 312 Walnut Street, Cincinnati, Ohio 45202.
IN WITNESS WHEREOF, the Trust and Underwriter have each
caused this Agreement to be signed in duplicate on its behalf,
all as of the day and year first above written.
ATTEST: COUNTRYWIDE STRATEGIC TRUST
/s/ John F. Splain By: /s/ Robert H. Leshner
- -------------------- ------------------------------
ATTEST: COUNTRYWIDE INVESTMENTS, INC.
/s/ John F. Splain By: /s/ Robert H. Leshner
- --------------------- -------------------------------
- 12 -
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.
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.
<PAGE>
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.
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.
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
U.S. Government Securities Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund - Class A
Adjustable Rate U.S. Government Securities Fund - Class A
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
Global Bond Fund - Class A
Treasury Total Return Fund
Ohio Insured Tax-Free Fund - Class A
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.
Equity Fund - Class C
Utility Fund - Class C
Global Bond Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
Intermediate Term Government Income Fund - Class C
Adjustable Rate U.S. Government Securities 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.
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.
ACCOUNTING AND PRICING SERVICES AGREEMENT
THIS AGREEMENT effective as of February 28, 1997 by and between
COUNTRYWIDE STRATEGIC TRUST, a Massachusetts business trust (the "Trust") and
COUNTRYWIDE FUND SERVICES, INC., an Ohio corporation ("Countrywide").
WITNESSETH THAT:
WHEREAS, the Trust desires to hire Countrywide to provide the Trust
with certain accounting and pricing services, and Countrywide is willing to
provide such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT.
Countrywide is hereby appointed to provide the Trust with
certain accounting and pricing services, and Countrywide accepts such
appointment and agrees to provide such services under the terms and conditions
set forth herein.
2. CALCULATION OF NET ASSET VALUE.
Countrywide will calculate the net asset value of each series
of the Trust and the per share net asset value of each series of the Trust, in
accordance with the Trust's effective Registration Statement on Form N-1A under
the Securities Act of 1933, as amended, including its current prospectus and
statement of additional information (the "Registration Statement"), once daily
as of the time selected by the Trust's Board of Trustees. Countrywide will
prepare and maintain a daily valuation of all securities and other assets of the
Trust in accordance with instructions from a designated officer of the Trust or
its investment adviser and in the manner set forth in the Registration
Statement. In valuing securities of the Trust, Countrywide may contract with,
and rely upon market quotations provided by, outside services, the cost of which
shall be borne by the Trust.
3. BOOKS AND RECORDS.
Countrywide will maintain such books and records as are
necessary to enable it to perform its duties under this Agreement, and, in
addition, will prepare and maintain complete, accurate and current all records
with respect to the Trust required to be maintained by the Trust under the
Internal Revenue Code, as amended (the "Code") and under the general rules and
<PAGE>
regulations of the Investment Company Act of 1940, as amended (the "Act"), and
will preserve said records in the manner and for the periods prescribed in the
Code and such rules and regulations. The retention of such records shall be at
the expense of the Trust.
All of the records prepared and maintained by Countrywide
pursuant to this Paragraph 3 which are required to be maintained by the Trust
under the Code and the Act ("Required Records") will be the property of the
Trust. In the event this Agreement is terminated, all Required Records shall be
delivered to the Trust or to any person designated by the Trust at the Trust's
expense, and Countrywide shall be relieved of responsibility for the preparation
and maintenance of any Required Records delivered to the Trust or any such
person.
4. COOPERATION WITH ACCOUNTANTS.
Countrywide shall cooperate with the Trust's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
5. FEES AND CHARGES.
For performing its services under this Agreement, the Trust
shall pay Countrywide a fee in accordance with the schedule attached hereto as
Schedule A.
6. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
Except as otherwise provided in this Agreement and except for
the accuracy of information furnished to it by Countrywide, the Trust assumes
full responsibility for the preparation, contents and distribution of each
prospectus and statement of additional information of the Trust, for complying
with all applicable requirements of the Act, the Securities Act of 1933, as
amended, and any laws, rules and regulations of governmental authorities having
jurisdiction.
7. CONFIDENTIALITY.
Countrywide agrees to treat all records and other information
relative to the Trust and its prior, present or potential shareholders
confidentially and Countrywide on behalf of itself and its employees agrees to
keep confidential all such information, except (after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where Countrywide may be exposed to civil or
criminal contempt proceedings for failure to comply) when requested to divulge
such information by duly constituted authorities or when so requested by the
Trust.
- 2 -
<PAGE>
8. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Transfer Agent, Plan Agent, Dividend Disbursing Agent,
Shareholder Service Agent and Accounting and Pricing Services Agent. The Trust
will submit printed matter requiring approval to Countrywide in draft form,
allowing sufficient time for review by Countrywide and its counsel prior to any
deadline for printing.
9. EQUIPMENT FAILURES.
In the event of equipment failures beyond Countrywide's
control, Countrywide shall take all steps necessary to minimize service
interruptions but shall have no liability with respect thereto. Countrywide
shall endeavor to enter into one or more agreements making provision for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available.
10. INDEMNIFICATION OF COUNTRYWIDE.
(a) Countrywide may rely on information reasonably believed by
it to be accurate and reliable. Except as may otherwise be required by the Act
or the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
(b) Any person, even though also a director, officer,
employee, shareholder or agent of Countrywide, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with Countrywide's duties hereunder), to be
rendering such services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or one under the control or
direction of Countrywide, even though paid by it.
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<PAGE>
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which Countrywide may sustain or incur or which may be asserted
against Countrywide by any person by reason of, or as a result of: (i) any
action taken or omitted to be taken by Countrywide in good faith in reliance
upon any certificate, instrument, order or stock certificate believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the oral instructions or written instructions of an authorized
person of the Trust or upon the opinion of legal counsel for the Trust or its
own counsel; or (ii) any action taken or omitted to be taken by Countrywide in
connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
11. MAINTENANCE OF INSURANCE COVERAGE.
At all times during the term of this Agreement, Countrywide
shall be a named insured party on the Trust's Errors & Omissions policy and the
Trust's Fidelity Bond, both of which shall include coverage of Countrywide's
officers and employees. Countrywide shall pay its allocable share of the cost of
such policies in accordance with the provisions of the Act. The scope of
coverage and amount of insurance limits applicable to the Trust on such policies
shall also be made applicable to Countrywide.
12. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
13. TERMINATION.
(a) The provisions of this Agreement shall be effective upon
its execution, shall continue in effect for two years from that date and shall
continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by Countrywide, (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined
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<PAGE>
in the Act) of any such party, and (3) by vote of a majority of the Trust's
Board of Trustees or a majority of the Trust's outstanding voting securities.
(b) Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor.
(c) This Agreement shall automatically terminate in the
event of its assignment.
(d) In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all Required Records and shall cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from Countrywide's cognizant personnel in the establishment of books, records
and other data by such successor.
14. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the Act) of Countrywide from providing services
for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
15. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
16. LIMITATION OF LIABILITY.
The term "Countrywide Strategic Trust" means and refers to the
trustees from time to time serving under the Trust's Declaration of Trust as the
same may subsequently thereto have been, or subsequently hereto may be, amended.
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 bind only the trust property of the
Trust. This Agreement has been authorized by the trustees of the Trust and
signed by an officer of the Trust, acting as such, and neither such
authorization by such trustees nor such execution by such officer shall be
deemed
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<PAGE>
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Trust.
17. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
18. QUESTIONS OF INTERPRETATION.
(a) This Agreement shall be governed by the laws of the
State of Ohio.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretations thereof, if any, by the United States Courts or
in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued pursuant
to said Act. In addition, where the effect of a requirement of the Act,
reflected in any provision of this Agreement is revised by rule, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
19. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
and of Countrywide for this purpose shall be 312 Walnut Street, Cincinnati, Ohio
45202.
20. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
21. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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<PAGE>
22. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
COUNTRYWIDE STRATEGIC TRUST
By: /s/ Robert H. Leshner
------------------------------
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
-------------------------------
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<PAGE>
Schedule A
COMPENSATION
FOR FUND ACCOUNTING AND PORTFOLIO PRICING:
U.S. Government Securities Fund
Asset Size Monthly Fee
-------------------- -----------
$ 0 - $ 50,000,000 $3,250
$ 50,000,000 - $100,000,000 $3,750
$100,000,000 - $250,000,000 $4,250
Over $250,000,000 $4,750
Treasury Total Return Fund
Asset Size Monthly Fee
--------------------- ------------
$ 0 - $ 50,000,000 $2,750
$ 50,000,000 - $100,000,000 $3,250
$100,000,000 - $250,000,000 $3,750
Over $250,000,000 $4,250
Utility Fund
Equity Fund
Asset Size Monthly Fee
------------------------ --------------
$ 0 - $ 50,000,000 $3,500
$ 50,000,000 - $100,000,000 $4,000
$100,000,000 - $150,000,000 $4,500
$150,000,000 - $200,000,000 $5,000
$200,000,000 - $250,000,000 $5,500
Over $250,000,000 $6,500
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TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
THIS AGREEMENT effective as of February 28, 1997 by and between
COUNTRYWIDE STRATEGIC TRUST, a Massachusetts business trust (the "Trust"), and
COUNTRYWIDE FUND SERVICES, INC., an Ohio corporation (the "T/A").
WITNESSETH THAT:
WHEREAS, the Trust desires to appoint the T/A as its transfer agent,
dividend disbursing agent, shareholder service agent, plan agent and shareholder
purchase and redemption agent, and the T/A is willing to act in such capacities
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. APPOINTMENT OF TRANSFER AGENT.
The T/A is hereby appointed transfer agent for the shares of
the Trust and dividend disbursing agent for the Trust and shall also act as plan
agent, shareholder service agent and purchase and redemption agent for
shareholders of the Trust, and the T/A accepts such appointment and agrees to
act in such capacities under the terms and conditions set forth herein.
2. DOCUMENTATION.
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the
Trust authorizing the original issue of its
shares;
B. Each Registration Statement filed with the
Securities and Exchange Commission and amendments
thereof;
C. A certified copy of each amendment to the
Declaration of Trust and the By-Laws of the Trust;
D. Certified copies of each resolution of the Board
of Trustees authorizing officers to give
instructions to the T/A;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions
approving such forms;
<PAGE>
F. Such other certificates, documents or opinions
which the T/A may, in its discretion, deem
necessary or appropriate in the proper performance
of its duties;
G. Copies of all Underwriting and Dealer Agreements
in effect;
H. Copies of all Administration Agreements and
Investment Advisory Agreements in effect;
I. Copies of all documents relating to special
investment or withdrawal plans which are offered
or may be offered in the future by the Trust and
for which the T/A is to act as plan agent.
3. T/A TO RECORD SHARES.
The T/A shall record issues of shares of the Trust and shall
notify the Trust in case any proposed issue of shares by the Trust shall result
in an over-issue as defined by Section 8- 104(2) of the Uniform Commercial Code,
as provided in Article 8 of the Uniform Commercial Code, Ohio Revised Code,
paragraph 1308.01 et. seq., and in case any issue of shares would result in such
an over-issue, shall refuse to credit said shares and shall not countersign and
issue certificates for such shares. Except as provided in Article 8 of said
Uniform Commercial Code and in Section 4 of this Agreement and as specifically
agreed in writing from time to time between the T/A and the Trust, the T/A shall
have no obligation, when countersigning and issuing and/or crediting shares, to
take cognizance of any other laws relating to issue and sale of such shares.
4. T/A TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to the T/A of certificates, if any, in proper form for transfer, the
T/A shall approve such transfer and shall take all necessary steps to effectuate
the transfer as indicated in the transfer request. Upon approval of the
transfer, the T/A shall notify the Trust in writing of each such transaction and
shall make appropriate entries on the shareholder records maintained by the T/A.
5. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificate, the
Trust shall supply the T/A with a sufficient supply of blank share certificates
and from time to time shall renew such supply upon request of the T/A. Such
blank share
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<PAGE>
certificates shall be properly signed, manually or, if authorized by the Trust,
by facsimile; and notwithstanding the death, resignation or removal of any
officers of the Trust authorized to sign share certificates, the T/A may
continue to countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust.
6. LOST OR DESTROYED CERTIFICATES.
In case of the alleged loss or destruction of any share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished an appropriate bond satisfactory to T/A and the Trust,
and issued by a surety company satisfactory to the T/A and the Trust.
7. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Trust or Countrywide Investments, Inc. as underwriter of the Trust (the
"Underwriter"), the T/A shall stamp the check or instrument with the date of
receipt, determine the amount thereof due the Trust and the Underwriter,
respectively, and shall forthwith process the same for collection. Upon receipt
of notification of receipt of funds eligible for share purchases and payment of
sales charges in accordance with the Trust's then current prospectus and
statement of additional information, the T/A shall notify the Trust, at the
close of each business day, in writing of the amounts of said funds credited to
the Trust and deposited in its account with the Custodian, and shall similarly
notify the Underwriter of the amounts of said funds credited to the Underwriter
and deposited in its account with its designated bank.
8. PURCHASE ORDERS.
Upon receipt of a check or other order for the purchase of
shares of the Trust, accompanied by sufficient information to enable the T/A to
establish a shareholder account, the T/A shall, as of the next determination of
net asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the investor,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the investor and/or dealer
of record a notice of such credit when requested to do so by the Trust.
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<PAGE>
9. ISSUE OF SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, the T/A will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased share shall be
mailed to the investor until the cash purchase price of such shares has been
collected and credited to the account of the Trust maintained by the Custodian.
10. RETURNED CHECKS.
In the event that the T/A is notified by the Trust's Custodian
that any check or other order for the payment of money is returned unpaid for
any reason, the T/A will:
A. Give prompt notification to the Trust and the
Underwriter of the non-payment of said check;
B. In the absence of other instructions from the
Trust or the Underwriter, take such steps as may
be necessary to redeem any shares purchased on the
basis of such returned check and cause the
proceeds of such redemption plus any dividends
declared with respect to such shares to be
credited to the account of the Trust and to
request the Trust's Custodian to forward such
returned check to the person who originally
submitted the check;
C. Notify the Trust of such actions and correct the
Trust's records maintained by the T/A pursuant to
this Agreement.
11. SALES CHARGE.
In computing the number of shares to credit to the account of
a shareholder pursuant to Paragraph 8 hereof, the T/A will calculate the total
of the applicable Underwriter and dealer of record sales charges with respect to
each purchase as set forth in the Trust's current prospectus and statement of
additional information and in accordance with any notification filed with
respect to combined and accumulated purchases; the T/A will also determine the
portio of each sales charge payable by the Underwriter to the dealer of record
participating in the sale in accordance with such schedules as are from time to
time
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<PAGE>
delivered by the Underwriter to the T/A; provided, however, the T/A shall have
no liability hereunder arising from the incorrect selection by the T/A of the
gross rate of sales charges except that this exculpation shall not apply in the
event the rate is specified by the Underwriter or the Trust and the T/A fails to
select the rate specified.
12. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish the T/A with appropriate evidence of
trustee action authorizing the declaration of dividends and other distributions.
The T/A shall establish procedures in accordance with the Trust's then current
prospectus and statement of additional information and with other authorized
actions of the Trust's Board of Trustees under which it will have available from
the Custodian of the Trust or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, the T/A shall, as agent for each shareholder
who so requests, invest the dividends and other distributions in full and
fractional shares in accordance with the Trust's then current prospectus and
statement of additional information. If an investor has elected to receive
dividends or other distributions in cash, then the T/A shall prepare checks for
approval and verification by the Trust and signature by an authorized officer or
employee of the T/A in the appropriate amount and shall mail them to the
shareholders of record at their address of record or to such other address as
the shareholder may have designated. The T/A shall, on or before the mailing
date of such checks, notify the Trust and the Custodian of the estimated amount
of cash required to pay such dividend or distribution, and the Trust shall
instruct the Custodian to make available sufficient funds therefore in the
appropriate account of the Trust. The T/A shall mail to the shareholders
periodic statements, as requested by the Trust, showing the number of full and
fractional shares and the net asset value per share of shares so credited.
When requested by the Trust, the T/A shall assist the Trust
(i) with any withholding procedures, shareholder reports and payments, and (ii)
in the preparation and filing with the Internal Revenue Service, and when
required, with the addressing and mailing to shareholders, of such returns and
information relating to dividends and distributions paid by the Trust as are
required to be so prepared, filed and mailed by applicable laws.
13. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
The T/A shall, at least annually, furnish in writing to the
Trust the names and addresses, as shown in the shareholder accounts maintained
pursuant to Paragraph 8, of all investors for
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<PAGE>
which there are, as of the end of the calendar year, dividends, distributions or
redemptions proceeds for which checks or share certificates mailed in payment of
distributions have been returned. The T/A shall use its best efforts to contact
the shareholders affected and to follow any other written instructions received
from the Trust concerning the disposition of any such unclaimed dividends,
distributions or redemption proceeds.
14. REDEMPTIONS AND EXCHANGES.
A. The T/A shall process, in accordance with the Trust's then
current prospectus and statement of additional information, each order for the
redemption of shares accepted by the T/A. Upon its approval of such redemption
transactions, the T/A, if requested by the Trust, shall mail to the investor
and/or dealer of record a confirmation showing trade date, number of full and
fractional shares redeemed, the price per share and the total redemption
proceeds. For such redemption, the T/A shall either: (a) prepare checks in the
appropriate amounts for approval and verification by the Trust and signature by
an authorized officer or employee of the T/A and mail the checks to the
appropriate person, or (b) in the event redemption proceeds are to be wired
through the Federal Reserve Wire system or by bank wire, cause such proceeds to
be wired in federal funds to the commercial bank account designated by the
investor, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by the T/A. If the T/A or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, the T/A shall promptly notify the investor and/or dealer of
record indicating the reason therefor.
B. If shares of the Trust are eligible for exchange with
shares of any other investment company, the T/A, in accordance with the then
current prospectus and statement of additional information and exchange rules of
the Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
- 6 -
<PAGE>
C. The T/A shall notify the Custodian, the Underwriter and the
Trust on each business day of the amount of cash required to meet payments made
pursuant to the provisions of this Paragraph 14, and, on the basis of such
notice, the Trust shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Trust.
D. Procedures for effecting redemption orders accepted from
investors or dealers of record by telephone or other methods shall be
established by mutual agreement between the T/A and the Trust consistent with
the then current prospectus and statement of additional information.
E. The authority of the T/A to perform its responsibilities
under Paragraph 8, Paragraph 12 and this Paragraph 14 shall be suspended upon
receipt of notification by it of the suspension of the determination of the
Trust's net asset value.
15. AUTOMATIC WITHDRAWAL PLANS.
The T/A will process automatic withdrawal orders pursuant to
the provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the trust.
Payments upon such withdrawal order shall be made by the T/A from the
appropriate account maintained by the Trust with the Custodian approximately the
last business day of each month in which a payment has been requested, and the
T/A will withdraw from a shareholder's account and present for repurchase or
redemption as many shares as shall be sufficient to make such withdrawal payment
pursuant to the provisions of the shareholder's withdrawal plan and the current
prospectus and statement of additional information of the Trust. From time to
time on new automatic withdrawal plans a check for payment date already past may
be issued upon request by the shareholder.
16. LETTERS OF INTENT.
The T/A will process such letters of intent for investing in
shares of the Trust as are provided for in the Trust's current prospectus and
statement of additional information. The T/A will make appropriate deposits to
the account of the Underwriter for the adjustment of sales charges as therein
provided and will currently report the same to the Underwriter.
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<PAGE>
17. WIRE-ORDER PURCHASES.
The T/A will send written confirmations to the dealers of
record containing all details of the wire-order purchases placed by each such
dealer by close of business on the business day following receipt of such orders
by the T/A or the Underwriter, with copies to the Underwriter. Upon receipt of
any check drawn or endorsed to the Trust (or the T/A, as agent) or otherwise
identified as being payment of an outstanding wire- order, the T/A will stamp
said check with the date of its receipt and deposit the amount represented by
such check to the T/A's deposit accounts maintained with the Custodian. The T/A
will compute the respective portions of such deposit which represent the sales
charge and the net asset value of the shares so purchased, will cause the
Custodian to transfer federal funds in an amount equal to the net asset value of
the shares so purchased to the Trust's account at the Custodian, and will notify
the Trust and the Underwriter before noon of each business day of the total
amount deposited in the Trust's deposit accounts, and in the event that payment
for a purchase order is not received by the T/A or the Custodian on the tenth
business day following receipt of the order, prepare an NASD "notice of failure
of dealer to make payment" and forward such notification to the Underwriter.
18. OTHER PLANS.
The T/A will process such accumulation plans, group programs
and other plans or programs for investing in shares of the Trust as are now
provided for in the Trust's current prospectus and statement of additional
information and will act as plan agent for shareholders pursuant to the terms of
such plans and programs duly executed by such shareholder.
19. BOOKS AND RECORDS.
The T/A shall maintain records for each investor's account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record;
C. Number of shares held of each series, if
applicable;
D. Historical information regarding the account of
each shareholder, including dividends and
distributions distributed in cash or invested in
shares;
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<PAGE>
E. Information with respect to the source of all
dividends and distributions allocated among
income, realized short-term gains and realized
long-term gains;
G. Information with respect to withholdings on
foreign accounts;
H. Any instructions from a shareholder including all
forms furnished by the Trust and executed by a
shareholder with respect to (i) dividend or
distribution elections and (ii) elections with
respect to payment options in connection with the
redemption of shares;
I. Any dividend address and correspondence relating
to the current maintenance of a shareholder's
account;
J. Certificate numbers and denominations for any
shareholder holding certificates;
K. Any information required in order for the T/A to
perform the calculations contemplated under this
Agreement;
L. The date and number of shares of the Trust purchased,
the date and number of shares of the Trust held, the
date and number of shares reinvested as dividends and
the date and number of shares redeemed.
All of the records prepared and maintained by the T/A pursuant
to this Paragraph 19 will be the property of the Trust. In the event this
Agreement is terminated, all records shall be delivered to the Trust or to any
person designated by the Trust at the Trust's expense, and the T/A shall be
relieved of responsibility for the preparation and maintenance of any such
records delivered to the Trust or any such person.
20. TAX RETURNS AND REPORTS.
The T/A will prepare, file with the Internal Revenue Service
and, if required, mail to shareholders such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations; and the T/A will withhold such
sums as are required to be withheld under applicable federal and state tax law,
rules and regulations.
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<PAGE>
21. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
the T/A will also maintain such records as shall be necessary to furnish to the
Trust the following: annual shareholder meeting lists, proxy lists and mailing
materials, shareholder reports and confirmations, checks for disbursing
redemption proceeds, dividends and other distributions or expense disbursements,
portfolio printouts and general ledger printouts.
22. FORM N-SAR.
The T/A shall maintain such records within its control and as
shall be requested by the Trust to assist the Trust in fulfilling the
requirements of Form N-SAR.
23. COOPERATION WITH ACCOUNTANTS.
The T/A shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
24. SHAREHOLDER SERVICE AND CORRESPONDENCE.
The T/A will provide and maintain adequate personnel, records
and equipment to receive and answer all shareholder and dealer inquiries
relating to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders.
The T/A will answer written correspondence from shareholders
relating to their share accounts and such other written or oral inquiries as may
from time to time be mutually agreed upon, and the T/A will notify the Trust of
any correspondence or inquiries which may require an answer from the Trust.
25. PROXIES.
The T/A shall assist the Trust in the mailing of proxy cards
and other material in connection with shareholder meetings of the Trust, shall
receive, examine and tabulate returned proxies and shall, if requested by the
Trust, provide at lest one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
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<PAGE>
26. FEES AND CHARGES.
For performing its services under this Agreement, the Trust
shall pay the T/A a fee in accordance with the schedule attached hereto as
Schedule A and shall promptly reimburse the T/A for any out of pocket expenses
and advances which are to be paid by the Trust in accordance with Paragraph
27(b).
27. EXPENSES.
The expenses connected with the performance of this Agreement
shall be allocated between the Trust and the T/A as follows:
(a) The T/A shall furnish, at its expense and without cost to
the Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment.
(b) All costs and expenses not expressly assumed by the T/A
under Paragraph 27(a) of this Agreement shall be paid by the Trust, including,
but not limited to costs and expenses for postage, envelopes, checks, drafts,
continuous forms, reports, communications, statements and other materials,
telephone, telegraph and remote transmission lines, use of outside mailing
firms, necessary outside record storage, media for storage or records (e.g.,
microfilm, microfiche, computer tapes), printing, confirmations and any other
shareholder correspondence and any and all assessments, taxes or levies assessed
on the T/A for services provided under this Agreement. Postage for mailings of
dividends, proxies, reports and other mailings to all shareholders shall be
advanced to the T/A three business days prior to the mailing date of such
materials.
28. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
Except as otherwise provided in this Agreement and except for
the accuracy of information furnished to it by the T/A, the Trust assumes full
responsibility for the preparation, contents and distribution of each prospectus
and statement of additional information of the Trust, for complying with all
applicable requirements of the Investment Company Act of 1940 (the "Act"), the
Securities Act of 1933, as amended, and any laws, rules and regulations of
governmental authorities having jurisdiction.
- 11 -
<PAGE>
29. CONFIDENTIALITY.
The T/A agrees to treat all records and other information
relative to the Trust and its prior, present or potential shareholders
confidentially and the T/A on behalf of itself and its employees agrees to keep
confidential all such information, except (after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the T/A may be exposed to civil or
criminal contempt proceedings for failure to comply) when requested to divulge
such information by duly constituted authorities or when so requested by the
Trust.
30. REFERENCES TO THE T/A.
The Trust shall not circulate any printed matter which
contains any reference to the T/A without the prior written approval of the T/A,
excepting solely such printed matter as merely identifies the T/A as Transfer
Agent, Plan Agent, Dividend Disbursing Agent, Shareholder Service Agent and
Accounting and Pricing Services Agent. The Trust will submit printed matter
requiring approval to the T/A in draft form, allowing sufficient time for review
by the T/A and its counsel prior to any deadline for printing.
31. EQUIPMENT FAILURES.
In the event of equipment failures beyond the T/A's control,
the T/A shall take all steps necessary to minimize service interruptions but
shall have no liability with respect thereto. The T/A shall endeavor to enter
into one or more agreements making provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
32. INDEMNIFICATION OF THE T/A.
(a) The T/A may rely on information reasonably believed by it
to be accurate and reliable. Except as may otherwise be required by the Act or
the rules thereunder, neither the T/A nor its shareholders, officers, directors,
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Trust
in connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of any such persons in the performance of the duties of the T/A under this
Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of the T/A under this Agreement.
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<PAGE>
(b) Any person, even though also a director, officer,
employee, shareholder or agent of the T/A, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the trust (other than
services or business in connection with the T/A's duties hereunder), to be
rendering such services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or one under the control or
direction of the T/A, even though paid by it.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless the T/A, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which the T/A may sustain or incur or which may be asserted
against the T/A by any person by reason of, or as a result of: (i) any action
taken or omitted to be taken by the T/A in good faith in reliance upon any
certificate, instrument, order or share certificate believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized person, upon
the oral instructions or written instructions of an authorized person of the
Trust or its own counsel; or (ii) any action taken or omitted to be taken by the
T/A in connection with its appointment in good faith in reliance upon any law,
act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed. However,
indemnification under this subparagraph shall not apply to actions or omissions
of the T/A or its directors, officers, employees, shareholders or agents in
cases of its or their own gross negligence, willful misconduct, bad faith, or
reckless disregard of its or their own duties hereunder.
33. MAINTENANCE OF INSURANCE COVERAGE.
At all times during the term of this Agreement, the T/A shall
be a named insured party on the Trust's Errors & Omissions policy and the
Trust's Fidelity Bond, both of which shall include coverage of the T/A's
officers and employees. The T/A shall pay its allocable share of the cost of
such policies in accordance with the provisions of the Act. The scope of
coverage and amount of insurance limits applicable to the Trust on such policies
shall also be made applicable to the T/A.
34. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
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<PAGE>
35. TERMINATION.
(a) The provisions of this Agreement shall be effective upon
its execution, shall continue in effect for two years from that date and shall
continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by the T/A, (2) by vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this Agreement or interested persons (as defined in the Act) of any
such party, and (3) by vote of a majority of the Trust's Board of Trustees or a
majority of the Trust's outstanding voting securities.
(b) Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days prior written notice of such
termination specifying the date fixed therefor.
(c) Upon termination of this Agreement, the Trust shall pay to
the T/A such compensation as may be due as of the date of such termination, and
shall likewise reimburse the T/A for any out-of-pocket expenses and
disbursements reasonably incurred by the T/A to such date, and for the T/A's
costs, expenses and disbursements reasonably incurred by the T/A to such date,
and for the T/A's costs, expenses and disbursements as contemplated by this
Agreement.
(d) In the event that in connection with termination of this
Agreement a successor to any of the T/A's duties or responsibilities under this
Agreement is designated by the Trust by written notice to the T/A, the T/A
shall, promptly upon such termination and at the expense of the Trust, transfer
to such successor a certified list of the shareholders of the Trust (with name,
address and tax identification or Social Security number), a record of the
accounts of such shareholders and the status thereof, and all other relevant
books, records and other data established or maintained by the T/A under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from the T/A's cognizant
personnel in the establishment of books, records and other data by such
successor.
36. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent the T/A or any
affiliated person (as defined in the Act) of the T/A from providing services for
any other person, firm or corporation (including other investment companies);
provided, however, that the T/A expressly represents that it will undertake no
activities
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<PAGE>
which, in its judgment, will adversely affect the performance of its obligations
to the Trust under this Agreement.
37. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
38. LIMITATION ON LIABILITY.
The term "Countrywide Strategic Trust" means and refers to the
trustees from time to time serving under the Trust's Declaration of Trust as the
same may subsequently thereto have been, or subsequently hereto may be, amended.
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 bind only the trust property of the
Trust. The execution and delivery of this Agreement have been authorized by the
trustees of the Trust and signed by an officer of the Trust, acting as such, and
neither such authorization by such 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 only the trust
property of the Trust.
39. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
40. QUESTIONS OF INTERPRETATION.
(a) This Agreement shall be governed by the laws of
the State of Ohio.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretations thereof, if any, by the States Courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
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<PAGE>
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
41. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
and of the T/A for this purpose shall be 312 Walnut Street, Cincinnati, Ohio
45202.
42. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
43. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
44. FORCE MAJEURE.
If the T/A shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
COUNTRYWIDE STRATEGIC TRUST
By /s/ Robert H. Leshner
----------------------------
COUNTRYWIDE FUND SERVICES, INC.
By /s/ Robert G. Dorsey
---------------------------
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<PAGE>
Schedule A
Compensation
Services Fee
As Transfer Agent and Shareholder
Servicing Agent:
U.S. Government Securities Fund payable monthly at
rate of $21.00 per
account per year
Treasury Total Return Fund payable monthly at
rate of $21.00 per
account per year
Utility Fund payable monthly at
rate of $17.00 per
account per year
Equity Fund payable monthly at
rate of $17.00 per
account per year
Each Fund offering a single class of shares will be subject to a minimum charge
of $1,000 per month. Each class of shares of a Fund offering multiple classes
will be subject to a minimum charge per class of $1,000 per month.
ADMINISTRATION AGREEMENT
AGREEMENT entered into as of February 28, 1997, between Countrywide
Investments, Inc. ("Adviser") and Countrywide Fund Services, Inc. ("CFS"),
both of which are Ohio corporations having their principal place of business
at 312 Walnut Street, Cincinnati, Ohio 45202.
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 and provides investment management services
under the terms of an investment advisory agreement (the "Management Agreement")
with Countrywide Strategic Trust (the "Trust"); and
WHEREAS, the Trust has been organized as a Massachusetts business trust
to operate as an investment company registered under the Investment Company Act
of 1940 (the "Act"); and
WHEREAS, the Adviser manages the business affairs of the
Trust pursuant to the Management Agreement; and
WHEREAS, the Adviser wishes to avail itself of the information, advice,
assistance and facilities of CFS to perform on behalf of the Trust the services
as hereinafter described; and
WHEREAS, CFS wishes to provide such services to the Adviser
under the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Adviser and CFS agree as follows:
1. Employment. The Adviser, being duly authorized, hereby
employs CFS to perform those services described in this Agreement. CFS shall
perform the obligations thereof upon the terms and conditions hereinafter set
forth.
2. Trust Administration. Subject to the direction and control of the
Adviser, CFS shall assist the Adviser in supervising the Trust's business
affairs not otherwise supervised by other agents of the Trust. To the extent not
otherwise the primary responsibility of, or provided by, other agents of the
Trust, CFS shall supply (i) non-investment related statistical and research
data, (ii) internal regulatory compliance services, and (iii) executive and
administrative services. CFS shall supervise the preparation of (i) tax returns,
(ii) reports to shareholders of the Trust, (iii) reports to and filings with the
Securities and Exchange Commission, state securities commissions and Blue Sky
authorities including preliminary and definitive proxy materials and
post-effective amendments to the Trust's registration statement, and (iv)
necessary materials for meetings of the Trust's Board of Trustees unless
prepared by other parties under agreement.
- 1 -
<PAGE>
3. Recordkeeping and Other Information. CFS shall create and maintain
all necessary records in accordance with all applicable laws, rules and
regulations, including but not limited to records required by Section 31(a) of
the Act and the rules thereunder, as the same may be amended from time to time,
pertaining to the various functions performed by it and not otherwise created
and maintained by another party pursuant to contract with the Trust. Where
applicable, such records shall be maintained by CFS for the periods and in the
places required by Rule 31a-2 under the Act.
4. Audit, Inspection and Visitation. CFS shall make available to the
Adviser during regular business hours all records and other data created and
maintained pursuant to the foregoing provisions of this Agreement for reasonable
audit and inspection by the Trust or any regulatory agency having authority over
the Trust.
5. Compensation. For the performance of its obligations under this
Agreement, the Adviser shall pay CFS, with respect to ech series of the Trust, a
fee each month equal to the annual rate of .1% of the average value of such
series' daily net assets. The Adviser is solely responsible for the payment of
fees to CFS, and CFS agrees to seek payment of its fees solely from the Adviser.
6. Limitation of Liability. CFS shall not be liable for any action
taken, omitted or suffered to be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement, or in accordance with instructions
from the Adviser, provided, however, that such acts or omissions shall not have
resulted from CFS's willful misfeasance, bad faith or gross negligence.
7. Compliance with the Investment Company Act of 1940. The parties
hereto acknowledge and agree that nothing contained herein shall be construed to
require CFS to perform any services for the Adviser which services could cause
CFS to be deemed an "investment adviser" of the Trust within the meaning of
Section 2(a)(20) of the Act or to supercede or contravene the Prospectus or
Statement of Additional Information of the Trust or any provisions of the Act
and the rules thereunder.
8. Termination. The provisions of this Agreement shall be effective
upon its execution, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by CFS, (2) by vote, cast in person at a meeting
called for the purpose, of a majority of the Trust's trustees who are not
parties to this Agreement or interested persons (as defined in
- 2 -
<PAGE>
the Act) of any such party, and (3) by vote of a majority of the Trust's Board
of Trustees or a majority of the Trust's outstanding voting securities. This
Agreement may be terminated by either party upon sixty (60) days' written notice
to the other party. This Agreement shall terminate automatically in the event of
termination of the Management Agreement. Upon the termination of this Agreement,
the Adviser shall pay CFS such compensation as may be payable for the period
prior to the effective date of such termination.
9. No Trust Liability. CFS is hereby expressly put on notice that the
Trust is not a contracting party to this Agreement and assumes no obligations
pursuant to this Agreement. CFS shall seek satisfaction of any obligations
arising out of this Agreement only from the Adviser, and not from the Trust nor
its Trustees, officers, employees or shareholders. CFS shall not act as agent
for or bind either the Adviser or the Trust in any matter.
10. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the 28th day of February, 1997.
COUNTRYWIDE INVESTMENTS, INC.
By: /s/ Robert H. Leshner
---------------------------
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
-----------------------------
- 3 -
LICENSE AGREEMENT
THIS LICENSE AGREEMENT, made as of this 28th day of
February, 1997, by and between COUNTRYWIDE CREDIT INDUSTRIES, INC., a
Delaware corporation ("Licensor"), and COUNTRYWIDE INVESTMENT TRUST, COUNTRYWIDE
TAX-FREE TRUST and COUNTRYWIDE STRATEGIC TRUST (the "Licensees"), each a
business trust organized under the laws of the Commonwealth of Massachusetts.
WHEREAS, Licensor has a proprietary interest in the name
"Countrywide" and in the logo to be used on the Licensees' prospectuses (the
"Logo"), which interests are recognized by Licensees; and
WHEREAS, Licensor wishes to permit use of the name
"Countrywide" and the Logo by Licensees, subject to the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and of other
good and valuable consideration, it is hereby understood and agreed as follows:
1. Licensees acknowledge that they adopted their corporate
names and Logo through the permission of Licensor, which consents to the
non-exclusive use by each Licensee of the name "Countrywide" and the Logo only
as long as an affiliate or affiliates of Licensor serve as such Licensee's
investment advisor.
2. Licensees recognize that their right to use the name
"Countrywide" is non-exclusive and that Licensor may from time to time permit
other entities, including entities engaged in the same or similar business as
the Licensee, to use the name "Countrywide".
3. Each Licensee covenants and agrees to protect, exonerate,
defend, indemnify and hold harmless Licensor and its directors, agents, officers
and employees from and against any and all costs, losses, claims, damages or
liabilities, joint or several, including all legal expenses, which may arise or
have arisen out of Licensee's use or misuse of the name "Countrywide" or out of
any breach of or failure to comply with this Agreement.
4. If affiliate(s) of Licensor shall cease to serve as any
Licensee's investment advisor, such Licensee:
(a) As promptly as practicable, will take all
necessary director or shareholder action to
cause its Agreement and Declaration of Trust
to be amended to accomplish a change of its
name and change of logo; and
<PAGE>
(b) Within 90 days after the termination of this
agreement or such similar contractual
arrangement, shall cease to use in any other
manner, including but not limited to use in
any prospectus, sales literature or
promotional material, the name "Countrywide"
or any name, mark or logotype derived from
it or similar to it or indicating that the
Licensee is advised by or otherwise
associated with Licensor or any affiliate(s)
of Licensor.
5. This Agreement shall be binding upon the parties hereto and
their respective successors and assigns, including any successors to the
business now or thereafter conducted by them.
IN WITNESS WHEREOF, the Licensor and each of the Licensees
have caused this Agreement to be executed by a duly authorized officer and
attested by its Secretary as of the day and year first herein written.
ATTEST: COUNTRYWIDE CREDIT INDUSTRIES, INC.
/s/ John F. Splain By: /s/ Angelo R. Mozilo
- ------------------- ----------------------------------
ATTEST: COUNTRYWIDE INVESTMENT TRUST
/s/ John F. Splain By: /s/ Robert H. Leshner
- -------------------- -----------------------------------
ATTEST: COUNTRYWIDE TAX-FREE TRUST
/s/ John F. Splain By: /s/ Robert H. Leshner
- ---------------------- -----------------------------------
ATTEST: COUNTRYWIDE STRATEGIC TRUST
/s/ John F. Splain By: /s/ Robert H. Leshner
- ---------------------- -----------------------------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our name
and to all references to our Firm included in or made a part of this
Post-Effective Amendment No. 32.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
June 13, 1997
Consent of Independent Auditors
The Board of Directors
Trans Adviser Funds, Inc.:
We consent to the use of our report dated October 18, 1996 included herein and
to the reference to our Firm under the heading "Financial Highlights" in the
Prospectus.
KPMG Peat Marwick LLP
Boston, Massachusetts
June 18, 1997
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1 FOR
CLASS A SHARES OF MULTIPLE CLASS SERIES
AND FOR SINGLE CLASS SERIES OF
COUNTRYWIDE STRATEGIC TRUST
WHEREAS, Countrywide Strategic Trust (the "Trust"), an unincorporated
business trust organized under the laws of The Commonwealth of Massachusetts, is
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest without par value (the "Shares"), which are divided into
separate Series of Shares; and
WHEREAS, the Trust issues shares of certain Series in Sub- Series (one
of which may be designated as Class A Shares), whereas other Series will operate
with a single class of Shares, which Shares will be considered for purposes of
this Plan as Class A Shares; and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit each Series and the holders of
its Class A Shares, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the current Rule 12b-1 distribution plan of each Series
is hereby amended as it pertains to the Class A Shares of each Series in
accordance with Rule 12b-1 under the 1940 Act, on the following terms and
conditions:
1. Distribution Activities. Subject to the supervision of the Trustees
of the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Class A Shares, which activities may include, but
are not limited to, the following: (a) maintenance fees or other payments to the
Trust's principal underwriter and to securities dealers and others who are
engaged in the sale of Class A Shares and who may be advising shareholders of
the Trust regarding the purchase, sale or retention of Class A Shares; (b)
expenses of maintaining personnel (including personnel of organizations with
which the Trust has entered into agreements related to this Plan) who engage in
or support distribution of Class A Shares or who render shareholder support
services not otherwise provided by the
<PAGE>
Trust's transfer agent, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding the Trust, processing shareholder transactions, and providing such
other shareholder services as the Trust may reasonably request; (c) formulating
and implementing of marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio, newspaper, magazine
and other mass media advertising; (d) preparing, printing and distributing sales
literature; (e) preparing, printing and distributing prospectuses and statements
of additional information and reports of the Trust for recipients other than
existing shareholders of the Trust; and (f) obtaining such information, analyses
and reports with respect to marketing and promotional activities as the Trust
may, from time to time, deem advisable. The Trust is authorized to engage in the
activities listed above, and in any other activities related to the distribution
of Class A Shares, either directly or through other persons with which the Trust
has entered into agreements related to this Plan.
2. Maximum Expenditures. The expenditures to be made pursuant to this
Plan and the basis upon which payment of such expenditures will be made shall be
determined by the Trustees of the Trust, but in no event may such expenditures
exceed in any fiscal year an amount calculated at the rate of .25% of the
average daily net asset value of the Class A Shares of any Series of the Trust.
Such payments for distribution activities may be made directly by the Class A
Shares or the Trust's investment adviser or principal underwriter may incur such
expenses and obtain reimbursement from the Class A Shares.
3. Term and Termination. This Plan shall become effective on the date
hereof. Unless terminated as herein provided, this Plan shall continue in effect
for one year from the date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such approval. This Plan may be terminated with respect
to any Series at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority (as defined in the 1940 Act) of the outstanding Class A
Shares of such Series of the Trust. In the event this Plan is terminated by any
Series in accordance with its terms, the obligations of the Class A Shares of
such Series to make payments to the Trust's principal underwriter pursuant to
this Plan will cease and such Series will not be required to make any payments
for expenses incurred after the date of termination.
- 2 -
<PAGE>
4. Amendments. This Plan may not be amended with respect to any Series
to increase materially the amount of expenditures provided for in Section 2
hereof unless such amendment is approved by a vote of the majority (as defined
in the 1940 Act) of the outstanding Class A Shares of such Series, and no
material amendment to this Plan shall be made unless approved in the manner
provided for annual renewal of this Plan in Section 3 hereof.
5. Selection and Nomination of Trustees. While this Plan
is in effect, the selection and nomination of Trustees who are
not interested persons (as defined in the 1940 Act) of the Trust
shall be committed to the discretion of the Trustees who are not
interested persons of the Trust.
6. Quarterly Reports. The Treasurer of the Trust and the principal
underwriter shall provide to the Trustees and the Trustees shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and any related agreement, the purposes for which such expenditures were made
and the allocation of such expenditures as provided for in Section 7.
7. Allocating Expenditures Between Classes. Only distribution
expenditures properly attributable to the sale of a particular class of Shares
may be used to support the distribution fee charged to shareholders of such
class of Shares. Distribution expenses attributable to the sale of more than one
class of Shares of a Series will be allocated at least annually to each class of
Shares based upon the ratio in which the sales of each class of Shares bears to
the sales of all the Shares of such Series. For this purpose, Shares issued upon
reinvestment of dividends or distributions will not be considered sales.
8. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
9. Limitation of Liability. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this Plan is executed on behalf of
the Trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon the Trustees or shareholders
of the Trust individually but are binding only upon the assets and property of
the Trust.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the date set forth below.
Dated: February 28, 1997
Attest:
By: /s/ John F. Splain By: /s/ Robert H. Leshner
- ------------------- -----------------------
Secretary President
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1 FOR
CLASS C SHARES OF COUNTRYWIDE STRATEGIC TRUST
WHEREAS, Countrywide Strategic Trust (the "Trust"), an unincorporated
business trust organized under the laws of The Commonwealth of Massachusetts, is
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest without par value (the "Shares"), which are divided into
separate Series of Shares; and
WHEREAS, the Trust issues shares of certain Series in Sub- Series (one
of which may be designated as Class C Shares); and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit each Series and the holders of
its Class C Shares, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the current Rule 12b-1 distribution plan of each Series
is hereby amended as it pertains to the Class C Shares of each Series in
accordance with Rule 12b-1 under the 1940 Act, on the following terms and
conditions:
1. Distribution Activities. Subject to the supervision of the Trustees
of the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Class C Shares, which activities may include, but
are not limited to, the following: (a) maintenance fees or other payments to the
Trust's principal underwriter and to securities dealers and others who are
engaged in the sale of Class C Shares and who may be advising shareholders of
the Trust regarding the purchase, sale or retention of Class C Shares; (b)
expenses of maintaining personnel (including personnel of organizations with
which the Trust has entered into agreements related to this Plan) who engage in
or support distribution of Class C Shares or who render shareholder support
services not otherwise provided by the Trust's transfer agent, including, but
not limited to, office space and equipment, telephone facilities and expenses,
answering routine inquiries regarding the Trust, processing shareholder
- 1 -
<PAGE>
transactions, and providing such other shareholder services as the Trust may
reasonably request; (c) formulating and implementing of marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (d)
preparing, printing and distributing sales literature; (e) preparing, printing
and distributing prospectuses and statements of additional information and
reports of the Trust for recipients other than existing shareholders of the
Trust; and (f) obtaining such information, analyses and reports with respect to
marketing and promotional activities as the Trust may, from time to time, deem
advisable. The Trust is authorized to engage in the activities listed above, and
in any other activities related to the distribution of Class C Shares, either
directly or through other persons with which the Trust has entered into
agreements related to this Plan.
2. Maximum Expenditures. The expenditures to be made pursuant to
Section 1 and the basis upon which payment of such expenditures will be made
shall be determined by the Trustees of the Trust, but in no event may such
expenditures exceed in any fiscal year an amount calculated at the rate of .75%
of the average daily net asset value of the Class C Shares of any Series of the
Trust. Such payments for distribution activities may be made directly by the
Class C Shares or the Trust's investment adviser or principal underwriter may
incur such expenses and obtain reimbursement from the Class C Shares.
3. Maintenance Fee. In addition to the payments of compensation
provided for in Section 2 and in order to further enhance the distribution of
its Class C Shares, the Trust shall pay the principal underwriter a maintenance
fee, accrued daily and paid monthly, in an amount equal to an annual rate of
.25% of the daily net assets of the Class C Shares of the Trust. When requested
by and at the direction of the principal underwriter, the Trust shall pay a
maintenance fee to dealers based on the amount of Class C Shares sold by such
dealers and remaining outstanding for specified periods of time, if any,
determined by the principal underwriter, in amounts up to .25% per annum of the
average daily net assets of the Class C Shares of the Trust. Any maintenance
fees paid to dealers shall reduce the maintenance fees otherwise payable to the
principal underwriter.
4. Term and Termination. This Plan shall become effective on the date
hereof. Unless terminated as herein provided, this Plan shall continue in effect
for one year from the date hereof and shall continue in effect for successive
periods of one year thereafter, but only so long as each such continuance is
specifically approved by votes of a majority of both (i) the Trustees of the
Trust and (ii) the Rule 12b-1 Trustees, cast in person at a meeting called for
the purpose of voting on such
- 2 -
<PAGE>
approval. This Plan may be terminated with respect to any Series at any time by
vote of a majority of the Rule 12b-1 Trustees or by vote of a majority (as
defined in the 1940 Act) of the outstanding Class C Shares of such Series of the
Trust. In the event this Plan is terminated by any Series in accordance with its
terms, the obligations of the Class C Shares of such Series to make payments to
the Trust's principal underwriter pursuant to this Plan will cease and such
Series will not be required to make any payments for expenses incurred after the
date of termination.
5. Amendments. This Plan may not be amended with respect to any Series
to increase materially the amount of expenditures provided for in Sections 2 and
3 hereof unless such amendment is approved by a vote of the majority (as defined
in the 1940 Act) of the outstanding Class C Shares of such Series, and no
material amendment to this Plan shall be made unless approved in the manner
provided for annual renewal of this Plan in Section 4 hereof.
6. Selection and Nomination of Trustees. While this Plan
is in effect, the selection and nomination of Trustees who are not interested
persons (as defined in the 1940 Act) of the Trust shall be committed to the
discretion of the Trustees who are not interested persons of the Trust.
7. Quarterly Reports. The principal underwriter and the Treasurer of
the Trust shall provide to the Trustees and the Trustees shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
any related agreement, the purposes for which such expenditures were made and
the allocation of such expenditures as provided for in Section 8.
8. Allocating Expenditures Between Classes. Only distribution
expenditures properly attributable to the sale of a particular class of Shares
may be used to support the distribution fee charged to shareholders of such
class of Shares. Distribution expenses attributable to the sale of more than one
class of Shares of a Series will be allocated at least annually to each class of
Shares based upon the ratio in which the sales of each class of Shares bears to
the sales of all the Shares of such Series. For this purpose, Shares issued upon
reinvestment of dividends or distributions will not be considered sales.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
- 3 -
<PAGE>
10. Limitation of Liability. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this Plan is executed on behalf of
the Trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon the Trustees or shareholders
of the Trust individually but are binding only upon the assets and property of
the Trust.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the date set forth below.
Dated: February 28, 1997
Attest:
/s/ John F. Splain By: /s/ Robert H. Leshner
- ------------------------- -------------------------
Secretary President
- 4 -
COUNTRYWIDE INVESTMENTS, INC.
312 WALNUT STREET
CINCINNATI, OHIO 45202
800-543-8721
513-629-2000
Administration Agreement
This Agreement is made between _______________________________________
("Administrator") and Countrywide Investment Trust, Countrywide Tax-Free Trust
and Countrywide Strategic Trust (collectively the "Trusts" and individually the
"Trust"), the issuer of shares of beneficial interest ("Shares") of the mutual
funds set forth on Schedule A to this Agreement (collectively the "Funds" and
individually the "Fund"). In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Trusts hereby appoint Administrator to render or cause to be
rendered administrative support services to each Fund and its shareholders,
which services may include, without limitation: aggregating and processing
purchase and redemption requests and placing net purchase and redemption orders
with the Fund's transfer agent; answering client inquiries about the Fund and
referring to the Trusts those inquiries which the Administrator is unable to
answer; assisting clients in changing dividend options, account designations and
addresses; performing sub-accounting; establishing, maintaining and closing
shareholder accounts and records; investing client account cash balances
automatically in Shares of the Fund; providing periodic statements showing a
client's account balance, integrating such statements with those of other
transactions and balances in the client's other accounts serviced by the
Administrator and performing such other recordkeeping as is necessary for the
Fund's transfer agent to comply with all the recordkeeping requirements of the
Investment Company Act of 1940 and the regulations promulgated thereunder;
arranging for bank wires; and providing such other information and services as
the Trusts reasonably may request, to the extent the Administrator is permitted
by applicable statute, rule or regulation to provide these services.
2. Administrator shall provide such office space and equipment,
telephone facilities and personnel (which may be all or any part of the space,
equipment and facilities currently used in Administrator's business, or all or
any personnel employed by Administrator) as is necessary or beneficial for
providing information and services to shareholders of each Fund, and to assist
each Trust in servicing accounts of clients. Administrator shall transmit
promptly to clients all communications sent to it for transmittal to clients by
or on behalf of a Trust, a Fund, or a Trust's investment adviser, custodian or
transfer agent or dividend disbursing agent.
3. For each account in certain Funds for which the Administrator is to
render administrative support services, Administrator will receive a fee, as set
forth on Schedule B, equal to the normal dealer's discount from the public
offering price on the Shares purchased by such accounts. During the term of this
Agreement, each Trust or the Trust's underwriter will also pay to the
Administrator quarterly one-fourth of the annual administration fees set forth
in Schedule B hereto. Administrator shall notify the Trust if Administrator
directly charges a fee to Fund shareholders for its administrative support
services as described in this Agreement.
4. Administrator agrees to comply with the requirements of all laws
applicable to it, including but not limited to, ERISA, federal and state
securities laws and the rules and regulations promulgated thereunder.
Administrator agrees to provide services to each Trust in compliance with the
then current Prospectus and Statement of Additional Information of the Trust and
the operating procedures and policies established by the Trust, including, but
not limited to, required minimum investment and minimum account size.
5. No person is authorized to make any representations concerning a
Fund or its Shares except those contained in the current Prospectus or Statement
of Additional Information of the applicable Fund and any such information as may
be officially designated as information supplemental to the Prospectus.
Additional copies of any Prospectus and any printed information officially
designated as supplemental to such Prospectus will be supplied by the Trusts to
Administrator in reasonable quantities on request.
6. Administrator agrees that it will provide administrative support
services only to those persons who reside in any jurisdiction in which a Fund's
Shares are registered for sale and in which the Administrator may lawfully
provide such services. Upon request, the Trusts shall provide the Administrator
with a list of the states in which each Fund's Shares are registered for sale
and shall keep such list updated.
<PAGE>
7. In no transaction shall Administrator have any authority whatsoever
to act as agent for any Trust, any Fund or any person affiliated with any Trust
or Fund.
8. The Administrator agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Trust in opposition to proxies solicited by management of the
Trust, unless a court of competent jurisdiction shall have determined that the
conduct of a majority of the Board of Trustees of the Trust constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties.
This paragraph 8 will survive the term of this Agreement.
9. The Administrator shall prepare such quarterly reports for each
Trust as shall reasonably be requested by the Trust. In addition, the
Administrator will furnish the Trust or its designees with such information as
the Trust or they may reasonably request (including, without limitation,
periodic certifications confirming the provision to clients of the services
described herein), and will otherwise cooperate with the Trust and its designees
(including and without limitation, any auditors designated by the Trust), in
connection with the preparation of reports to the Trust's Board of Trustees
concerning this Agreement and the monies paid or payable by the Trust or the
Trust's underwriter pursuant hereto, as well as any other reports or filings
that may be required by law.
10. The Administrator acknowledges that any Trust may enter into
similar agreements with others without the consent of the Administrator.
11. Each Trust reserves the right, at its discretion and without
notice, to suspend the sale of Shares or withdraw the sale of Shares of any
Fund.
12. The Trust's underwriter has adopted compliance standards, attached
hereto as Schedule C, as to when Class A and Class C Shares of the Dual Pricing
Funds may appropriately be sold to particular investors. The Administrator
agrees that all persons associated with it will conform to such standards.
13. With respect to each Fund, this Agreement shall continue in effect
for one year from the date of its execution, and thereafter for successive
periods of one year if the form of this Agreement is approved as to the Fund at
least annually by the Trustees of the applicable Trust, including a majority of
the members of the Board of Trustees of the Trust who are not interested persons
("Disinterested Trustees") of the Trust and have no direct or indirect financial
interest in the operations of the Trust's Rule 12b-1 Plan ("Plan") or in any
documents related to the Plan cast in person at a meeting for that purpose. In
the event this Agreement, or any part thereof, is found invalid or is ordered
terminated by any regulatory or judicial authority, or the Administrator shall
fail to perform the shareholder servicing and administrative functions
contemplated hereby, this Agreement is terminable effective upon receipt of
notice thereof by the Administrator.
14. Notwithstanding paragraph 13, this Agreement may be
terminated with respect to any Fund as follows:
(a) at any time, without the payment of any penalty, by the
vote of a majority of the Disinterested Trustees of the applicable
Trust or by a vote of a majority of the outstanding voting securities
of the Fund on not more than thirty (30) days written notice to the
parties to this Agreement;
(b) automatically in the event of the Agreement's assignment
as defined in the Investment Company Act of 1940; or
(c) by any party to the Agreement without cause by giving the
other parties at least thirty (30) days written notice of its intention
to terminate.
15. Any termination of this Agreement shall not affect the provisions
of paragraph 18, which shall survive the termination of this Agreement and
continue to be enforceable thereafter.
16. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors.
17. This Agreement is not intended to, and shall not, create any rights
against any party hereto by any third person solely on account of this
Agreement.
<PAGE>
18. The Administrator shall provide such security as is necessary to
prevent unauthorized use of any computer hardware or software provided to it by
or on behalf of the Trusts, if any. The Administrator agrees to release,
indemnify and hold harmless each Fund, each Trust, each Trust's transfer agent,
custodian and underwriter, and their respective principals, directors, trustees,
officers, employees and agents from any and all direct or indirect liabilities
or losses resulting from requests, directions, actions or inactions of or by the
Administrator, its officers, employees or agents regarding the purchase,
redemption, transfer or registration of Shares for accounts of the
Administrator, its clients and other shareholders. Such indemnity shall also
cover any losses and liabilities incurred by and resulting from the
Administrator's performance of or failure to perform its obligations or its
breach of any representations or warranties under this Agreement. Principals of
the Administrator will be available to consult from time to time with each Trust
concerning the administration and performance of the services contemplated by
this Agreement.
19. This Agreement may be amended only by an agreement in writing
signed by the Administrator and the Trusts.
20. The obligations of each Trust under this Agreement shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of such Trust, personally, but shall bind only the property of such
Trust, as provided in such 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 by such officer
of the Trusts 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 only the
property of the Trusts as provided in their Agreement and Declaration of Trust.
21. This Agreement does not authorize the Administrator to participate
in any activities relating to the sale or distribution of the Shares, and the
Administrator agrees that it shall not participate in such activities.
22. If any provision of this Agreement, or any covenant, obligation or
agreement contained herein, is determined by a court to be invalid or
unenforceable, the parties agree that (a) such determination shall not affect
any other provision, covenant, obligation or agreement contained herein, each of
which shall be construed and enforced to the full extent permitted by law, and
(b) such invalid or unenforceable portion shall be deemed to be modified to the
extent necessary to permit its enforcement to the maximum extent permitted by
applicable law.
23. This Agreement shall be construed in accordance with the laws
of the State of Ohio.
THIS AGREEMENT WILL BECOME EFFECTIVE UPON THE CLOSING DATE OF THE
ACQUISITION OF LESHNER FINANCIAL, INC. BY COUNTRYWIDE CREDIT INDUSTRIES, INC.
PURUSANT TO THE AGREEMENT DATED 12/10/96 FOR THE EXCHANGE OF STOCK BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, this Agreement has been executed for the Trusts and
the Administrator by their duly authorized officers, on this _____ day of
_________________, 1997.
ACCEPTED BY ADMINISTRATOR COUNTRYWIDE INVESTMENT TRUST
By: _________________________________ By: ____________________________
Authorized Signature
_____________________________________ COUNTRYWIDE TAX-FREE TRUST
Type or Print Name, Position
_____________________________________ By: ____________________________
Administrator Name
_____________________________________ COUNTRYWIDE STRATEGIC TRUST
Address
_____________________________________ By: ____________________________
Address
_____________________________________ Date: __________________________
Phone
<PAGE>
Schedule A
SCHEDULE OF MUTUAL FUNDS
Countrywide Investment Trust
* Short Term Government Income Fund
** Adjustable Rate U.S. Government Securities Fund
** Global Bond Fund
** Intermediate Term Government Income Fund
Countrywide Tax-Free Trust
* Ohio Tax-Free Money Fund
* Tax-Free Money Fund
* California Tax-Free Money Fund
* Royal Palm Florida Tax-Free Money Fund
** Tax-Free Intermediate Term Fund
** Ohio Insured Tax-Free Fund
Countrywide Strategic Trust
U.S. Government Securities Fund
Treasury Total Return Fund
** Equity Fund
** Utility Fund
* No-load Fund
** Dual Pricing Fund
<PAGE>
Schedule B
COUNTRYWIDE INVESTMENTS
COMMISSION SCHEDULE
U.S. Government Securities Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund - Class A
Adjustable Rate U.S. Government Securities Fund - Class A
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
Global Bond Fund - Class A
Treasury Total Return Fund
Ohio Insured Tax-Free Fund - Class A
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.
Equity Fund - Class C
Utility Fund - Class C
Global Bond Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
Intermediate Term Government Income Fund - Class C
Adjustable Rate U.S. Government Securities 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 C
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.
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.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAIN SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRANS ADVISER
FUNDS, INC. SEMI-ANNUAL REPORT DATED FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000947789
<NAME> TRANS ADVISER FUNDS, INC.
<SERIES>
<NUMBER> 001
<NAME> GROWTH/VALUE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 17,159,330
<INVESTMENTS-AT-VALUE> 20,628,880
<RECEIVABLES> 88,372
<ASSETS-OTHER> 22,760
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,740,012
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,625
<TOTAL-LIABILITIES> 54,625
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,439,553
<SHARES-COMMON-STOCK> 1,554,603
<SHARES-COMMON-PRIOR> 1,350,818
<ACCUMULATED-NII-CURRENT> (90,354)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (133,362)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,469,550
<NET-ASSETS> 20,685,387
<DIVIDEND-INCOME> 65,970
<INTEREST-INCOME> 16,937
<OTHER-INCOME> 0
<EXPENSES-NET> 173,261
<NET-INVESTMENT-INCOME> (90,354)
<REALIZED-GAINS-CURRENT> (133,362)
<APPREC-INCREASE-CURRENT> 3,226,469
<NET-CHANGE-FROM-OPS> 3,002,753
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 44,429
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,624,904
<NUMBER-OF-SHARES-REDEEMED> 2,016,385
<SHARES-REINVESTED> 10,879
<NET-CHANGE-IN-ASSETS> 5,577,722
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 44,429
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 89,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 185,889
<AVERAGE-NET-ASSETS> 17,947,490
<PER-SHARE-NAV-BEGIN> 11.18
<PER-SHARE-NII> (.06)
<PER-SHARE-GAIN-APPREC> 2.22
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.31
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAIN SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRANS ADVISER
FUNDS, INC. SEMI-ANNUAL REPORT DATED FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000947789
<NAME> TRANS ADVISER FUNDS, INC.
<SERIES>
<NUMBER> 002
<NAME> AGGRESSIVE GROWTH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 8,115,391
<INVESTMENTS-AT-VALUE> 9,393,258
<RECEIVABLES> 26,131
<ASSETS-OTHER> 22,760
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,442,149
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,041
<TOTAL-LIABILITIES> 18,041
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,411,427
<SHARES-COMMON-STOCK> 755,681
<SHARES-COMMON-PRIOR> 598,307
<ACCUMULATED-NII-CURRENT> (63,130)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (202,056)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,277,867
<NET-ASSETS> 9,424,108
<DIVIDEND-INCOME> 5,885
<INTEREST-INCOME> 7,330
<OTHER-INCOME> 0
<EXPENSES-NET> 76,345
<NET-INVESTMENT-INCOME> (63,130)
<REALIZED-GAINS-CURRENT> (201,524)
<APPREC-INCREASE-CURRENT> 1,217,298
<NET-CHANGE-FROM-OPS> 952,644
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 16,181
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,810,182
<NUMBER-OF-SHARES-REDEEMED> 876,983
<SHARES-REINVESTED> 4,532
<NET-CHANGE-IN-ASSETS> 2,874,194
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 15,649
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 39,197
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 115,542
<AVERAGE-NET-ASSETS> 7,907,401
<PER-SHARE-NAV-BEGIN> 10.95
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> 1.63
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.47
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC 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 19th
day of May, 1997.
/s/ Donald L. Bodgon, M.D.
--------------------------------
DONALD L. BODGON, M.D.
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 19th day of May, 1997, personally appeared before me, DONALD L.
BOGDON, M.D., 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 19th day of May, 1997.
/s/ Elizabeth A. Santen
----------------------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC 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 the Chairman and 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 19th
day of May, 1997.
/s/ Angelo R. Mozilo
--------------------------------
ANGELO R. MOZILO
Chairman and Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 19th day of May, 1997, personally appeared before me, ANGELO R.
MOZILO, 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 19th day of May, 1997.
/s/ Elizabeth A. Santen
----------------------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC 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 19th
day of May, 1997.
/s/ John F. Seymour, Jr.
--------------------------------
JOHN F. SEYMOUR, JR.
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 19th day of May, 1997, personally appeared before me, JOHN F.
SEYMOUR, JR., 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 19th day of May, 1997.
/s/ Elizabeth A. Santen
----------------------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC 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 19th
day of May, 1997.
/s/ Sebastiano Sterpa
--------------------------------
SEBASTIANO STERPA
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 19th day of May, 1997, personally appeared before me, SEBASTIANO
STERPA, 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 19th day of May, 1997.
/s/ Elizabeth A. Santen
----------------------------------
Notary Public
