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. 36
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 36
----
(Check appropriate box or boxes.)
COUNTRYWIDE STRATEGIC TRUST
- -----------------------------
(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)
/X/ on August 1, 1998 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) 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, 1998 on June 29, 1998.
TOTAL NUMBER OF PAGES:
EXHIBIT INDEX ON PAGE:
<PAGE>
COUNTRYWIDE STRATEGIC TRUST
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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 Highlights, Performance
Information
4........................... Operation of the Funds, Investment
Objectives and Policies
5........................... Operation of the Funds, Financial
Highlights
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(s), Application
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.......................... Definitions, Policies and Risk
Considerations, Investment Limitations,
Portfolio Turnover
14.......................... Trustees and Officers
15.......................... Principal Security Holders
16.......................... The Investment Adviser and Underwriter,
Mastrapasqua & Associates, Distribution Plans,
Custodian, Auditors, Transfer Agent
17.......................... Securities Transactions
18.......................... The Trust
19.......................... Calculation of Share Price and Public
Offering Price, Other Purchase
Information, Redemption in Kind
20.......................... Taxes
21.......................... The Investment Adviser and Underwriter
22.......................... Historical Performance Information
23.......................... Annual Report
<PAGE>
PROSPECTUS
August 1, 1998
COUNTRYWIDE STRATEGIC TRUST
312 WALNUT STREET, 21ST FLOOR
CINCINNATI, OHIO 45202-4094
EQUITY FUND
UTILITY FUND
The Equity Fund and the Utility Fund (individually a "Fund" and
collectively the "Funds") are two separate series of Countrywide Strategic
Trust.
The EQUITY FUND seeks long-term growth of capital, current income and
growth of income by investing primarily in dividend-paying common stocks.
The UTILITY FUND seeks a high level of current income by investing
primarily in securities of public utilities. Capital appreciation is a
secondary objective.
Each Fund offers two classes of shares: Class A shares (sold subject to
a maximum 4% front-end sales load and a 12b-1 fee of up to .25% of average daily
net assets) and Class C shares (sold subject to a 1% contingent deferred sales
load for a one-year period and a 12b-1 fee of up to 1% of average daily net
assets). Each Class A and Class C share of a Fund represents identical interests
in the investment portfolio of such Fund and has the same rights, except that
(i) Class C shares bear the expenses of higher distribution fees, which will
cause Class C shares to have a higher expense ratio and to pay lower dividends
than those related to Class A shares; (ii) certain other class specific expenses
will be borne solely by the class to which such expenses are attributable; and
(iii) each class has exclusive voting rights with respect to matters relating to
its own distribution arrangements.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
Countrywide Investments, Inc. (the "Adviser") manages the Funds'
investments and their business affairs.
This Prospectus sets forth concisely the information about the Funds
that you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated August 1, 1998 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. A copy of the Statement of Additional Information can
be obtained at no charge by calling one of the numbers listed below.
- --------------------------------------------------------------------------------
For Information or Assistance in Opening an Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . . 800-543-0407
Cincinnati . . . . . . . . . . . . . . . . . . . . . 513-629-2050
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- 2 -
<PAGE>
EXPENSE INFORMATION
- -------------------- Class A Class C
Shareholder Transaction Expenses Shares Shares
- --------------------------------- -------- -------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . 4% None
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) . . . None* 1%
Sales Load Imposed on Reinvested Dividends . . . . None None
Exchange Fee . . . . . . . . . . . . . . . . . . . None None
Redemption Fee . . . . . . . . . . . . . . . . . . None** None**
* 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 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)
Equity Fund Utility Fund
------------ -------------
Class A Class C Class A Class C
Shares Shares Shares Shares
------ ------ ------- --------
Management Fees .75% .75% .75% .75%
12b-1 Fees(A) .10% .44% .12% .41%
Other Expenses .40% .81% .38% .84%
----- ----- ---- ----
Total Fund Operating Expenses 1.25% 2.00% 1.25% 2.00%
===== ===== ===== =====
(A) Class A shares may incur 12b-1 fees in an amount up to .25% of average
net assets and Class C shares may incur 12b-1 fees in an amount up to
1.00% of average net assets. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
Class A Class C
Shares Shares
------- ------
1 Year $ 52 $ 30
3 Years 78 63
5 Years 106 108
10 Years 185 233
- 2 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following information, which has been audited by Arthur Andersen LLP, is
an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of March
31, 1998 and related auditors' report appear in the Statement of Additional
Information of the Funds, which can be obtained by shareholders at no charge by
calling Countrywide Fund Services, Inc. (Nationwide call toll-free 800-543-0407,
in Cincinnati call 629-2050) or by writing to the Trust at the address on the
front of this Prospectus.
<TABLE>
<CAPTION>
EQUITY FUND - CLASS A
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Period
Years Ended March 31, Ended
March 31,
1998 1997 1996 1995 1994(A)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 13.76 $ 12.45 $ 9.84 $ 9.26 $ 10.02
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.09 0.12 0.13 0.15 0.08
Net realized and unrealized gains (losses) on
investments 5.76 1.35 2.60 0.59 (0.34 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 5.85 1.47 2.73 0.74 (0.26 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.08) (0.12) (0.12) (0.16 ) (0.08 )
Distributions from net realized gains........ (0.15) (0.04) -- -- (0.42 )
---------- --------- ---------- --------- ----------
Total distributions............................. (0.23) (0.16) (0.12) (0.16 ) (0.50 )
---------- --------- ---------- --------- ----------
Net asset value at end of period................ $ 19.38 $ 13.76 $ 12.45 $ 9.84 $ 9.26
========== ========= ========== ========= ==========
Total return(B) ................................ 42.74% 11.82% 27.90% 8.07% (3.98%)(E)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 38,336 $ 14,983 $ 8,502 $ 4,300 $ 3,346
========== ========= ========== ========= ==========
Ratio of net expenses to average net assets(C) 1.25% 1.25% 1.25% 1.25% 1.24% (E)
Ratio of net investment income to average net assets 0.53% 0.91% 1.06% 1.57% 0.82% (E)
Portfolio turnover rate......................... 7% 38% 38% 159% 109% (E)
Average commission rate per share(D) ........... $ 0.1017 $ 0.1199 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Represents the period from date of public offering (August 2, 1993) through March 31, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets would have been
1.43%, 2.02%, 1.94% and 2.04%(E) for the periods ended March 31, 1997, 1996, 1995 and 1994, respectively.
(D) Beginning with the year ended March 31, 1997, the Fund is required to disclose its average commission rate per share for
security trades on which commissions are charged.
(E) Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND - CLASS C
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Period
Years Ended March 31, Ended
March 31,
1998 1997 1996 1995 1994(A)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 13.77 $ 12.46 $ 9.86 $ 9.26 $ 10.00
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income (loss)................. (0.03 ) 0.02 0.05 0.10 0.03
Net realized and unrealized gains (losses) on
investments 5.75 1.35 2.60 0.57 (0.32 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 5.72 1.37 2.65 0.67 (0.29 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... -- (0.02) (0.05) (0.07 ) (0.03 )
Distributions from net realized gains........ (0.15) (0.04) -- -- (0.42 )
---------- --------- ---------- --------- ----------
Total distributions............................. (0.15) (0.06) (0.05) (0.07 ) (0.45 )
---------- --------- ---------- --------- ----------
Net asset value at end of period................ $ 19.34 $ 13.77 $ 12.46 $ 9.86 $ 9.26
========== ========= ========== ========= ==========
Total return(B) ................................ 41.63% 11.01% 26.90% 7.32% (3.58%)(E)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 3,862 $ 2,770 $ 2,436 $ 1,995 $ 5,857
========== ========= ========== ========= ==========
Ratio of net expenses to average net assets(C) 2.00% 2.00% 2.00% 2.00% 1.94% (E)
Ratio of net investment income (loss) to average
net assets (0.18% ) 0.15% 0.38% 0.68% 0.58% (E)
Portfolio turnover rate......................... 7% 38% 38% 159% 109% (E)
Average commission rate per share(D) ........... $ 0.1017 $ 0.1199 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Represents the period from date of public offering (June 7, 1993) through March 31, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets would have been
2.14%, 2.70%, 2.50% and 2.33%(E) for the periods ended March 31, 1997, 1996, 1995 and 1994, respectively.
(D) Beginning with the year ended March 31, 1997, the Fund is required to disclose its average commission rate per share for
security trades on which commissions are charged.
(E) Annualized.
<PAGE>
</TABLE>
<TABLE>
UTILITY FUND - CLASS A
Per Share Data for a Share Outstanding Throughout Each Period
Period
Year Ended March 31, Ended
------------------------------------------------------------------------ March 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period.....$12.44 $12.24 $10.47 $ 10.52 $ 11.34 $ 10.58 $ 10.01 $ 9.75 $ 9.53
------ -------- --------- --------- --------- --------- --------- --------- -------
Income from investment operations:
Net investment income.....................0.43 0.46 0.47 0.43 0.37 0.48 0.51 0.61 0.43
Net realized and unrealized gains (losses)
on investments..........................4.56 0.22 1.77 (0.05) (0.59) 1.62 0.75 0.30 0.22
----- --------- ------- --------- --------- ------- ------- ----- ------
Total from investment operations.............4.99 0.68 2.24 0.38 (0.22) 2.10 1.26 0.91 0.65
----- ------ ------ ------ ----- ------ ---- ----- ----
Less distributions:
Dividends from net investment income(B) (0.43) (0.46) (0.47) (0.43) (0.37) (0.48) (0.51) (0.61) (0.43)
Distributions from net realized gains(B) (0.24) (0.02) -- -- (0.23) (0.86) (0.18) (0.04) --
----- ------- -------- ------- ------- ------- ------ ------- ------
Total distributions.........................(0.67) (0.48) (0.47) (0.43) (0.60) (1.34) (0.69) (0.65) (0.43)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value at end of period...........$16.76 $12.44 $12.24 $ 10.47 $ 10.52 $ 11.34 $ 10.58 $ 10.01 $ 9.75
====== ======= ======= ======= ===== ====== ===== ====== ======
Total return(C) ........................... 40.92 5.61% 21.65% 3.68% ( 2.11%) 20.64% 11.84% 9.23% 8.56%(F)
====== ===== ====== ===== ======== ====== ====== ====== ======
Net assets at end of period (000's).......$42,463 $ 36,087 $40,424 $40,012 $ 40,373 $ 42,051 $29,398 $11,214 $ 5,752
======= ======== ======= ======= ======== ======== ======= ======= ======
Ratio of expenses to average net assets(D) 1.25% 1.25% 1.25% 1.25% 1.25% 1.40% 1.63% 1.80% 0.57%(F)
Ratio of net investment income to
average net assets(D) ..................3.03% 3.65% 3.97% 4.06% 3.32% 4.41% 4.83% 6.25% 6.87%(F)
Portfolio turnover rate........................0% 3% 11% 17% 91% 137% 33% 61% 119%(F)
Average commission rate per share(E)....... 0.0985 $ 0.1200
<FN>
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Represents the period from the initial public offering of shares (August 15, 1989) through March 31, 1990.
(B) For the periods ended prior to March 31, 1993, the per share data was calculated using average shares outstanding throughout
each period, whereas for the years ended March 31, 1993 and thereafter, the per share data was calculated based upon actual
distributions. Actual distributions per share based upon the actual number of shares outstanding on the ex-dividend dates
of distributions amounted to $.48, $.57, and $.29 from net investment income for the periods ended March 31, 1992, 1991 and
1990, respectively, and $.13 and $.03 from net realized capital gains for the years ended March 31, 1992 and 1991, respectively.
(C) Total returns shown exclude the effect of applicable sales loads.
(D) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets would have been
1.91% and 2.79%(F) for the periods ended March 31, 1991 and 1990, respectively.
(E) Beginning with the year ended March 31, 1997, the Fund is required to disclose its average commission rate per share for
security trades on which commissions are charged.
(F) Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
UTILITY FUND - CLASS C
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Period
Years Ended March 31, Ended
March 31,
1998 1997 1996 1995 1994(A)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 12.43 $ 12.23 $ 10.46 $ 10.51 $ 11.55
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.31 0.35 0.37 0.35 0.23
Net realized and unrealized gains (losses) on
investments 4.57 0.24 1.78 (0.04 ) (0.81 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 4.88 0.59 2.15 0.31 (0.58 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.33) (0.37) (0.38) (0.36 ) (0.23 )
Distributions from net realized gains........ (0.24) (0.02) -- -- (0.23 )
---------- --------- ---------- --------- ----------
Total distributions............................. (0.57) (0.39) (0.38) (0.36 ) (0.46 )
---------- --------- ---------- --------- ----------
Net asset value at end of period................ $ 16.74 $ 12.43 $ 12.23 $ 10.46 $ 10.51
========== ========= ========== ========= ==========
Total return(B) ................................ 39.91% 4.82% 20.78% 3.00% (7.89%)(D)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 3,597 $ 3,099 $ 3,686 $ 3,599 $ 1,742
========== ========= ========== ========= ==========
Ratio of expenses to average net assets ........ 2.00% 2.00% 2.00% 2.00% 2.00% (D)
Ratio of net investment income to average net assets 2.28% 2.89% 3.19% 3.41% 2.19% (D)
Portfolio turnover rate......................... 0% 3% 11% 17% 91% (D)
Average commission rate per share(C) .......... $ 0.0985 $ 0.1200 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Represents the period from date of public offering (August 2, 1993) through March 31, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Beginning with the year ended March 31, 1997, the Fund is required to disclose its average commission rate per share
for security trades on which commissions are charged.
(D) Annualized.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
- -----------------------------------
The Equity Fund and the Utility Fund are two series of Countrywide Strategic
Trust (the "Trust"), each with its own portfolio and investment objective(s).
Neither Fund is intended to be a complete investment program, and there is no
assurance that the investment objectives of either Fund can be achieved. Each
Fund's investment objectives may be changed by the Board of Trustees without
shareholder approval, but only after notification has been given to shareholders
and after this Prospectus has been revised accordingly. If there is a change in
a Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. Unless otherwise indicated, all investment practices and
limitations of the Funds are nonfundamental policies which may be changed by the
Board of Trustees without shareholder approval.
Equity Fund
-------------
The Equity Fund seeks long-term growth of capital, current income and growth
of income by investing primarily in dividend-paying common stocks. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
common stocks. However, the Fund may, in seeking its investment objective,
invest in securities convertible into common stocks (such as convertible bonds,
convertible preferred stocks and warrants) which are rated at the time of
purchase in the four highest grades assigned by Moody's Investors Service, Inc.
(Aaa, Aa, A or Baa) or Standard & Poor's Ratings Group (AAA, AA, A or BBB) or
unrated securities determined by the Adviser to be of comparable quality.
Preferred stocks and bonds rated Baa or BBB have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to pay principal and interest or to pay the preferred stock
obligations than is the case with higher grade securities. Subsequent to its
purchase by the Fund, a security may cease to be rated or its rating may be
reduced below Baa or BBB, and the Adviser will consider such an event to be
relevant in its determination of whether the Fund should continue to hold such
security. The Fund will invest in securities of companies having at least three
years operating history.
The Adviser, in selecting securities for purchase, will employ a quantitative
screening strategy, searching for securities which the Adviser believes offer
above market growth at below market pricing. The Adviser attempts to isolate
such securities, out of its current database of approximately 1,600 securities
which meet its specific criteria, based upon the following characteristics: low
relative price-earnings ratio valuation; consistent profitability; positive
earnings estimate trends; positive market trends; and price neglect.
- 6 -
<PAGE>
The Fund may from time to time invest a portion of its assets in small,
unseasoned companies. While smaller companies generally have potential for rapid
growth, they often involve higher risks because they lack the management
experience, financial resources, product diversification and competitive
strengths of larger corporations. In addition, in many instances, the securities
of smaller companies are traded only over-the-counter or on a regional
securities exchange, and the frequency and volume of their trading is
substantially less than is typical of larger companies. Therefore, the
securities of smaller companies may be subject to wider price fluctuations. When
making large sales, the Fund may have to sell portfolio holdings at discounts
from quoted prices or may have to make a series of small sales over an extended
period of time.
Investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions, quality ratings and
other factors beyond the control of the Adviser. As a result, the yield and net
asset value of the Fund will fluctuate.
The Fund may invest in foreign companies through the purchase of sponsored
American Depository Receipts (certificates of ownership issued by an American
bank or trust company as a convenience to investors in lieu of the underlying
shares which it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. To the extent that the Fund invests in
such securities, such investments may be subject to special risks, including
future political and economic developments and the possibility of seizure or
nationalization of companies, imposition of withholding taxes on income,
establishment of exchange controls or adoption of other restrictions, that might
affect an investment adversely.
When the Adviser believes substantial price risks exist for common stocks and
securities convertible into common stocks because of uncertainties in the
investment outlook or when in the judgment of the Adviser it is otherwise
warranted in selling to manage the Fund's portfolio, the Fund may temporarily
hold for defensive purposes all or a portion of its assets in short-term
obligations such as bank debt instruments (certificates of deposit, bankers'
acceptances and time deposits), commercial paper, U.S. Government obligations
having a maturity of less than one year or repurchase agreements collateralized
by U.S. Government obligations. The Fund may, in seeking its objective,
temporarily invest all or a portion of its assets in long-term U.S. Treasury
obligations.
- 7 -
<PAGE>
Utility Fund
------------
The Utility Fund seeks a high level of current income. Capital appreciation is
a secondary objective. The Fund seeks to achieve its investment objectives by
investing primarily in securities of public utilities. The Fund may invest in
any type of security; however, under normal circumstances, at least 65% of its
total assets will be invested in securities of public utilities.
Under normal market conditions, the Fund will invest primarily in common,
preferred and convertible preferred stocks of public utilities that currently
pay dividends. The Fund may also invest in investment grade bonds of public
utilities. The Fund may purchase preferred stocks and bonds which are rated at
the time of purchase in the four highest grades assigned by Moody's Investors
Service, Inc. (Aaa, Aa, A or Baa) or Standard & Poor's Ratings Group (AAA, AA, A
or BBB) or unrated securities determined by the Adviser to be of comparable
quality. Preferred stocks and bonds rated Baa or BBB have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to pay principal and interest or to
pay the preferred stock obligations than is the case with higher grade
securities. Subsequent to its purchase by the Fund, a security may cease to be
rated or its rating may be reduced below Baa or BBB, and the Adviser will
consider such an event to be relevant in its determination of whether the Fund
should continue to hold such security. The public utilities industry includes
companies that produce or supply electric power, natural gas, water, sanitary
services, telecommunications and other communications services (but not radio or
television broadcasters) for public use or consumption. The Fund may invest in
any combination of public utility companies. The Fund will invest in securities
of companies having at least three years operating history.
Historically, equity securities of public utilities have generated higher
yields than have equity securities of companies in other industries. The public
utilities industry has shown a tendency for steady increases in dividends
because the industry's profits have not been eroded by competition to the same
extent as other industries. In selecting securities for the Fund, the Adviser
will attempt to purchase stocks of public utilities exhibiting the following
characteristics: above average dividend yield; strong potential for dividend
increases; positive cash flow; improving fundamentals; stable financial
condition; and reasonable growth potential.
Investments in equity and debt securities are subject to inherent market risks
and fluctuations in value due to earnings, economic conditions, quality ratings
and other factors beyond the
- 8 -
<PAGE>
control of the Adviser. Debt securities are subject to price fluctuations based
upon changes in the level of interest rates, which will generally result in all
those securities changing in price in the same way, i.e., all those securities
experiencing appreciation when interest rates decline and depreciation when
interest rates rise. As a result, the yield and net asset value of the Fund will
fluctuate.
In addition, the Fund will be subject to the risks associated with the public
utility industry, including rate regulation by governmental agencies, which may
result in difficulties in obtaining an adequate return on invested capital, in
passing on cost increases and in financing large construction projects. Public
utilities furnishing power or other energy related services may encounter
difficulties in obtaining fuel at reasonable prices, shortages of fuel, energy
conservation measures, restrictions on operations and increased costs and delays
attributable to licensing and environmental considerations and the special risks
of constructing and operating nuclear power generating facilities or other
specialized types of facilities. The Fund will limit its investments so that it
will not be a public utility holding company or acquire public utility company
securities in violation of the Public Utility Holding Company Act of 1935.
For defensive purposes, the Fund may temporarily hold all or a portion of its
assets in short-term obligations such as bank debt instruments (certificates of
deposit, bankers' acceptances and time deposits), commercial paper, U.S.
Government obligations having a maturity of less than one year or repurchase
agreements collateralized by U.S. Government obligations. The Fund may, in
seeking its objective, temporarily invest all or a portion of its assets in
long-term U.S. Treasury obligations.
The Utility Fund may also engage in the following investment techniques, each
of which may involve certain risks:
FOREIGN SECURITIES. The Fund may invest up to 10% of its total assets at the
time of purchase in securities of foreign issuers. When selecting foreign
investments, the Adviser will seek to invest in securities that have investment
characteristics and qualities comparable to the kinds of domestic securities in
which the Fund invests. The Fund may invest in securities of foreign issuers
directly or in the form of sponsored American Depository Receipts. American
Depository Receipts are receipts typically issued by an American bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. Where investments in foreign securities are made in currencies of
foreign countries, the value of the Fund's assets as measured in U.S. dollars
may be affected favorably or
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<PAGE>
unfavorably by changes in currency rates and in exchange control regulations.
Foreign investments may be subject to special risks, including future political
and economic developments and the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income, establishment of exchange
controls or adoption of other restrictions, that might affect an investment
adversely. The Fund will not invest in securities of foreign issuers which are
not listed on a recognized domestic or foreign exchange.
OPTIONS. The Fund may write (sell) exchange-listed call options on securities
it owns to earn premium income. When the Fund writes a call option, it may
terminate its obligation by purchasing a call option on the same security in a
closing transaction. For hedging purposes, the Fund may also purchase
exchange-listed put and call options on U.S. Government obligations and
exchange-listed put and call options on interest rate futures contracts (and
sell such options in closing transactions). The aggregate premiums paid for all
options held at any time by the Fund will not exceed 20% of the value of the
Fund's net assets.
Transactions in options involve special risks. The Fund may not be able to
enter into a closing transaction to cancel its obligations with respect to the
options it has written or purchased. If an option purchased by the Fund expires
unexercised, the Fund will lose the premium it paid. In addition, the Fund could
suffer a loss if the premium paid by the Fund in a closing transaction exceeds
the premium income it received. When the Fund writes a call option, its ability
to participate in the capital appreciation of the underlying security is
limited.
In addition to the risks which apply to all options transactions, there are
specific risks relating to options on U.S. Government obligations. Due to the
nature of the market for options on U.S. Government obligations, new expirations
for options on a particular issue held by the Fund may not be available, in
which case the Fund's ability to hedge its portfolio may be limited. Options on
interest rate futures contracts also involve additional risks. For example,
changes in the value of the underlying futures contract will not be fully
reflected in the value of the purchased option. Furthermore, if the Fund engages
in option transactions as part of its hedging strategy, there is the possibility
of imperfect correlation between the movements in prices of the hedging position
and the position being hedged. If a hedge is not fully effective for any reason
including imperfect correlation, the Fund would have been in a better position
if no hedge had been made. In particular, the Fund's ability to hedge with
options on interest rate futures
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<PAGE>
contracts may be impaired due to distortion in the anticipated offsetting
movements resulting from differences in the nature of the market involved. Such
differences include differences in the applicable margin requirements, the
liquidity of the markets and the extent of the participation of speculators in
the markets. The success of any hedge will depend upon the Adviser's ability to
predict the future direction of stock prices or interest rates and incorrect
predictions by the Adviser may have an adverse effect on the Fund. In this
regard, it should be noted that the skills and techniques necessary to arrive at
such predictions are different from those needed to predict price changes in
individual stocks.
Additional Investment Information
---------------------------------
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include securities
which are issued or guaranteed by the United States Treasury, by various
agencies of the United States Government, and by various instrumentalities which
have been established or sponsored by the United States Government. U.S.
Treasury obligations are backed by the "full faith and credit" of the United
States Government. U.S. Treasury obligations include Treasury bills, Treasury
notes, and Treasury bonds. U.S. Treasury obligations also include the separate
principal and interest components of U.S. Treasury obligations which are traded
under the Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Agencies or instrumentalities established by the United
States Government include the Federal Home Loan Banks, the Federal Land Bank,
the Government National Mortgage Association, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, the Student Loan
Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing Bank,
the Federal Farm Credit Banks, the Federal Agricultural Mortgage Corporation,
the Resolution Funding Corporation, the Financing Corporation of America and the
Tennessee Valley Authority. Some of these securities are supported by the full
faith and credit of the United States Government while others are supported only
by the credit of the agency or instrumentality, which may include the right of
the issuer to borrow from the United States Treasury. In the case of securities
not backed by the full faith and credit of the United States, the investor must
look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States in the event the agency or instrumentality does not meet its commitments.
Shares of the Funds are not guaranteed or backed by the United States
Government.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements.
Repurchase agreements are transactions by which a
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Fund purchases a security and simultaneously commits to resell that security to
the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
banks having assets in excess of $10 billion and the largest and, in the Board
of Trustees' judgment, most creditworthy primary U.S. Government securities
dealers. Each Fund will only enter into repurchase agreements which are
collateralized by U.S. Government obligations. Collateral for repurchase
agreements is held in safekeeping in the customer-only account of the Funds'
Custodian at the Federal Reserve Bank. At the time a Fund enters into a
repurchase agreement, the value of the collateral, including accrued interest,
will equal or exceed the value of the repurchase agreement and, in the case of a
repurchase agreement exceeding one day, the seller agrees to maintain sufficient
collateral so the value of the underlying collateral, including accrued
interest, will at all times equal or exceed the value of the repurchase
agreement. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 10% (with respect to the
Utility Fund) or 15% (with respect to the Equity Fund) of the value of the net
assets of the Fund would be invested in such securities and other illiquid
securities.
BORROWING AND PLEDGING. Each Fund may borrow money from banks or other
persons. Borrowing magnifies the potential for gain or loss on the portfolio
securities of the Funds and, therefore, if employed, increases the possibility
of fluctuation in a Fund's net asset value. This is the speculative factor known
as leverage. To reduce the risks of borrowing, the Funds will limit their
borrowings as described below. Each Fund's policies on borrowing and pledging
are fundamental policies which may not be changed without the affirmative vote
of a majority of its outstanding shares.
The Equity Fund may borrow money in an amount not exceeding 10% of its total
assets as a temporary measure for extraordinary or emergency purposes and may
pledge assets in connection with borrowings, but will not pledge more than 10%
of its total assets. The Fund will not make any additional purchases of
portfolio securities if outstanding borrowings exceed 5% of the value of its
total assets.
The Utility Fund may borrow money from banks (provided there is 300% asset
coverage) or from banks or other persons for temporary purposes (in an amount
not exceeding 5% of its total
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<PAGE>
assets). The Fund will not make any borrowing which would cause its outstanding
borrowings to exceed one-third of the value of its total assets. The Fund may
pledge assets in connection with borrowings but will not pledge more than
one-third of its total assets. The Fund will not make any additional purchases
of portfolio securities if outstanding borrowings exceed 5% of the value of its
total assets.
LENDING PORTFOLIO SECURITIES. Each Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes a Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that a Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or liquid securities, with the Funds' Custodian in an amount at
least equal to the market value of the loaned securities. Although each Fund
does have the ability to make loans of all of its portfolio securities, it is
the present intention of each Fund, which may be changed without shareholder
approval, to limit the amount of loans of portfolio securities to no more than
25% of its net assets.
PORTFOLIO TURNOVER. The Funds do not intend to use short-term trading as a
primary means of achieving their investment objectives. However, each Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. The portfolio turnover of the Funds may be greater
than that of many other mutual funds. High turnover involves correspondingly
greater commission expenses and transaction costs and may result in a Fund
recognizing greater amounts of income and capital gains, which would increase
the amount of income and capital gains which the Fund must distribute to its
shareholders in order to maintain its status as a regulated investment company
and to avoid the imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in either Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). However, the minimum initial
investment in Class A shares of either Fund for employees, shareholders and
customers of Countrywide Credit Industries, Inc. or any affiliated company,
including members of the immediate family of such individuals, is $50. You may
purchase additional shares through the Open Account Program described below. You
may open an account and make an initial
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<PAGE>
investment through securities dealers having a sales agreement with the Trust's
principal underwriter, Countrywide Investments, Inc. (the "Adviser"). You may
also make a direct initial investment by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Equity Fund" or the "Utility Fund," whichever is applicable. An account
application is included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of Fund
shares. Certificates representing shares are not issued. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
Investors should be aware that the 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 Countrywide Fund Services, Inc., 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
- 14 -
<PAGE>
sending your wire. There is presently no fee for receipt of wired funds, but the
Transfer Agent reserves the right to charge shareholders for this service upon
thirty days' prior notice to shareholders.
Each additional purchase request must contain the name of your account and
your account number to permit proper crediting to your account. While there is
no minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Funds to a current shareholder, such broker-dealer will receive
the concessions described above with respect to additional investments by the
shareholder.
Sales Load Alternatives
- -----------------------
Each Fund offers two classes of shares which may be purchased at the election
of the purchaser. The two classes of shares each represent interests in the same
portfolio of investments of a Fund, have the same rights and are identical in
all material respects except that (i) Class C shares bear the expenses of higher
distribution fees; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable, including transfer
agent fees attributable to a specific class of shares, printing and postage
expenses related to preparing and distributing materials to current shareholders
of a specific class, registration fees incurred by a specific class of shares,
the expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and expenses relating
to a specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements. The net
income attributable to Class C shares and the dividends payable on Class C
shares will be reduced by the amount of the incremental expenses associated with
the distribution fee. See "Distribution Plans." Shares of the Utility Fund
purchased prior to August 1, 1993 are Class A shares. Shares of the Equity Fund
purchased prior to August 1, 1993 are Class C shares.
The Funds' alternative sales arrangements permit investors to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold his shares and other
relevant circumstances.
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<PAGE>
Investors should determine whether under their particular circumstances it is
more advantageous to incur a front-end sales load and be subject to lower
ongoing charges, as discussed below, or to have all of the initial purchase
price invested in the Funds with the investment thereafter being subject to
higher ongoing charges. A salesperson or any other person entitled to receive
any portion of a distribution fee may receive different compensation for selling
Class A or Class C shares.
As an illustration, investors who qualify for significantly reduced sales
loads as described below, might elect the Class A sales load alternative because
similar sales load reductions are not available for purchases under the Class C
sales load alternative. Moreover, shares acquired under the Class A sales load
alternative would be subject to lower ongoing distribution fees as described
below. Investors not qualifying for reduced initial sales loads who expect to
maintain their investment for an extended period of time might also elect the
Class A sales load alternative because over time the accumulated continuing
distribution fees on Class C shares may exceed the difference in initial sales
loads between Class A and Class C shares. Again, however, such investors must
weigh this consideration against the fact that less of their funds will be
invested initially under the Class A sales load alternative. Furthermore, the
higher ongoing distribution fees will be offset to the extent any return is
realized on the additional funds initially invested under the Class C sales load
alternative.
Some investors might determine that it would be more advantageous to utilize
the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 4% initial sales load on Class A shares who elects to reinvest dividends
in additional shares would have to hold the investment in Class A shares
approximately 5 years before the accumulated ongoing distribution fees on the
alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 5 years, the investor might
consider purchasing Class A shares. This example does not take into account the
time value of money which reduces the impact of the higher ongoing Class C
distribution fees, fluctuations in net asset value or the effect of different
performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Adviser may from time to time pay from its own resources additional cash bonuses
or other incentives to selected dealers in connection with the sale of shares of
the Funds. On some occasions, such bonuses or incentives 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 specific period of time. Such
bonuses or incentives may include financial assistance to dealers in connection
with
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<PAGE>
conferences, sales or training programs for their employees, seminars for the
public, advertising, sales campaigns and other dealer-sponsored programs or
events.
Class A Shares
- ---------------
Class A shares of 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 Class A shares of each Fund 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 with respect to Class A
shares if a commission was paid by the Adviser to a participating
unaffiliated dealer and the shares are redeemed within twelve months from
the date of purchase.
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 Class A shares of $1,000,000 or more made
after October 1, 1995 and subsequent purchases further
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<PAGE>
increasing the size of the account, a dealer's commission of .75% of the
purchase amount may be paid by the Adviser to participating unaffiliated dealers
through whom such purchases are effected. In determining a dealer's eligibility
for such commission, purchases of Class A shares of the Funds may be aggregated
with concurrent purchases of Class A shares of other funds of Countrywide
Investments. Dealers should contact the Adviser concerning the applicability and
calculation of the dealer's commission in the case of combined purchases. An
exchange from other funds of Countrywide Investments will not qualify for
payment of the dealer's commission, unless such exchange is from a Countrywide
fund with assets as to which a dealer's commission or similar payment has not
been previously paid. Redemptions of Class A shares may result in the imposition
of a contingent deferred sales load if the dealer's commission described in this
paragraph was paid in connection with the purchase of such shares. See
"Contingent Deferred Sales Load for Certain Purchases of Class A Shares" below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the table above. Purchases made in any load
fund distributed by the Adviser pursuant to a Letter of Intent may also be
eligible for the reduced sales loads. The minimum initial investment under a
Letter of Intent is $10,000. The load funds currently distributed by the Adviser
are listed in the Exchange Privilege section of this Prospectus. Shareholders
should contact the Transfer Agent for information about the Right of
Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase Class A shares of 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 Adviser. Your investment will
qualify for this provision if the purchase price of the shares of the other fund
included a sales load and the redemption occurred within one year of the
purchase of such shares and no more than sixty days prior to your purchase of
Class A shares of the 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.
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<PAGE>
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase Class A
shares of the 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 Class A shares at net asset value.
In addition, Class A shares of the Funds may be purchased at net asset
value by broker-dealers who have a sales agreement with the Adviser, and their
registered personnel and employees, including members of the immediate families
of such registered personnel and employees.
Clients of investment advisers and financial planners may also purchase
Class A shares of the 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 Adviser. The investment adviser or financial planner must notify the
Transfer Agent that an investment qualifies as a purchase at net asset value.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals and employee benefit plans established by such entities, may
also purchase Class A shares of the Funds at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES.
A contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Funds (or shares into which such Class A shares were exchanged)
purchased at net asset value in amounts totaling $1 million or more, if the
dealer's commission described above was paid by the Adviser and the shares are
redeemed within twelve months from the date of purchase. The contingent deferred
sales load will be paid to the Adviser and will be equal to .75% of the lesser
of (1) the net asset value at the time of purchase of the Class A shares being
redeemed or (2) the net asset value of such Class A shares at the time of
redemption. In determining whether the contingent deferred sales load is
payable, it is assumed that shares not subject to the contingent deferred sales
load are the first redeemed followed by other shares held for the longest period
of time. The contingent deferred sales load will not be imposed upon shares
representing reinvested dividends or capital gains distributions, or upon
amounts representing share appreciation. If a purchase of Class A shares is
subject to the contingent deferred sales load, the investor will be so notified
on the confirmation for such purchase.
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<PAGE>
Redemptions of such Class A 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 Class A shares into another fund of Countrywide Investments is not
treated as a redemption and will not trigger the imposition of the contingent
deferred sales load at the time of such exchange. A fund will "tack" the period
for which such Class A shares being exchanged were held onto the holding period
of the acquired shares for purposes of determining if a contingent deferred
sales load is applicable in the event that the acquired shares are redeemed
following the exchange; however, the period of time that the redemption proceeds
of such Class A shares are held in a money market fund will not count toward the
holding period for determining whether a contingent deferred sales load is
applicable. See "Exchange Privilege".
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the minimum initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21, purchasing shares
for his or their own account; or a trustee or other fiduciary purchasing shares
for a single fiduciary account although more than one beneficiary is involved;
or employees of a common employer, provided that economies of scale are realized
through remittances from a single source and quarterly confirmation of such
purchases; or an organized group, provided that the purchases are made through a
central administration, or a single dealer, or by other means which result in
economy of sales effort or expense. Contact the Transfer Agent for additional
information concerning purchases at net asset value or at reduced sales loads.
Class C Shares
- --------------
Class C shares of the Funds are sold on a continuous basis at the net
asset value next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Adviser by 5:00 p.m., Eastern time, that day
are confirmed at the net asset value determined as of the close
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<PAGE>
of the regular session of trading on the New York Stock Exchange on that day. It
is the responsibility of dealers to transmit properly completed orders so that
they will be received by the Adviser by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by the Transfer Agent after 4:00 p.m.,
Eastern time, and orders received from dealers after 5:00 p.m., Eastern time,
are confirmed at the net asset value next determined on the following business
day.
A contingent deferred sales load is imposed on Class C shares if an
investor redeems an amount which causes the current value of the investor's
account to fall below the total dollar amount of purchase payments subject to
the deferred sales load, except that no such charge is imposed if the shares
redeemed have been acquired through the reinvestment of dividends or capital
gains distributions or to the extent the amount redeemed is derived from
increases in the value of the account above the amount of purchase payments
subject to the deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the
amount of time since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
----------------- ---------------------
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it
is assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent
deferred sales load. Assume that an individual opens an account and purchases
1,000 shares at $10 per share and that six months later the net asset value per
share is $12 and, during such time, the investor has acquired 50 additional
shares through reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not be subject to
the load because of dividend reinvestment. With respect to the remaining 400
shares, the load is applied only to the original cost of $10 per share and not
to the increase in net
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<PAGE>
asset value of $2 per share. Therefore, $4,000 of the $5,400 redemption proceeds
will be charged the load. At the rate of 1%, the contingent deferred sales load
would be $40. In determining whether an amount is available for redemption
without incurring a deferred sales load, the purchase payments made for all
Class C shares in the shareholder's account are aggregated, and the current
value of all such shares is aggregated.
All sales loads imposed on redemptions are paid to the Adviser. The
Adviser intends to pay a commission of 1% of the purchase amount to
participating brokers at the time the investor purchases Class C shares.
The contingent deferred sales load is currently waived for any partial
or complete redemption following death or disability (as defined in the Internal
Revenue Code) of a shareholder (including one who owns the shares with his or
her spouse as a joint tenant with rights of survivorship) from an account in
which the deceased or disabled is named. The Adviser may require documentation
prior to waiver of the charge, including death certificates, physicians'
certificates, etc.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 800- 543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
-------------------------
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional Class A shares of the 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, including
Roth IRAs and Education IRAs
-- Qualified pension and profit-sharing plans for
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<PAGE>
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
Direct Deposit Plans
--------------------
Shares of either Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Funds.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in either Fund from your
bank, savings and loan or other depository institution account. The minimum
initial and subsequent investments must be $50 under the plan. The Transfer
Agent pays the costs associated with these transfers, but reserves the right,
upon thirty days' written notice, to make reasonable charges for this service.
Your depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds.
InvestPlus Plan
----------------
If you are a Countrywide Home Loans mortgage holder, you may make
investments in either Fund by including your investment with your monthly
mortgage payment. You may write one check for the total amount.
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
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<PAGE>
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. The Trust reserves the right, upon thirty days' written
notice, to change the processing fee. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
If a certificate for the shares was issued to you, you will not be
permitted to exchange shares by telephone or to use the automatic withdrawal
plan as to those shares. In order to redeem such shares, the certificate must be
delivered to the Transfer Agent, or the dealer in the case of a wire redemption,
duly endorsed or accompanied by a duly endorsed stock power, with the signature
guaranteed by any of the eligible guarantor institutions outlined above.
A contingent deferred sales load may apply to a redemption of Class C
shares or to a redemption of certain Class A shares purchased at net asset
value. See "How to Purchase Shares."
Shares are redeemed at their net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment is
normally made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which
- 24 -
<PAGE>
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.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested including any sales load paid,
unaffected by market fluctuations), or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
- -------------------
Shares of either Fund and of any other fund of Countrywide Investments
may be exchanged for each other.
Class A shares of the Funds which are not subject to a contingent
deferred sales load may be exchanged for Class A shares of any other fund and
for shares of any other fund which offers only one class of shares (provided
such shares are not subject to a contingent deferred sales load). A sales load
will be imposed equal to the excess, if any, of the sales load rate
- 25 -
<PAGE>
applicable to the shares being acquired over the sales load rate, if any,
previously paid on the shares being exchanged.
Class C shares of the Funds, as well as Class A 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.
Countrywide Tax-Free Trust Countrywide Strategic Trust
- ------------------------- ----------------------------
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Growth/Value Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund
*Kentucky Tax-Free Fund
Countrywide Investment Trust
----------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income Fund
*Adjustable Rate U.S. Government
Securities Fund
You may request an exchange by sending a written request to the
Transfer Agent. The request must be signed exactly as your name appears on the
Trust's account records. Exchanges may also be requested by telephone. If you
are unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202. An exchange will be effected at the next determined net asset value (or
offering price, if sales load is applicable) after receipt of a request by the
Transfer Agent.
- 26 -
<PAGE>
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, on a quarterly basis. Each Fund expects to distribute any net
realized long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net realized
short-term capital gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital
gains distributions paid in cash.
You should indicate your choice of option on your application. If no
option is specified on your application, distributions will automatically be
reinvested in additional shares. All distributions will be based on the net
asset value in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed dividend checks.
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
- 27 -
<PAGE>
for reinvestment at the net asset value next determined after its return. The
investor or his dealer must notify the Transfer Agent that a distribution is
being reinvested pursuant to this provision.
TAXES
- -----
Each Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. Each Fund intends
to distribute substantially all of its net investment income and any net
realized capital gains to its shareholders. Distributions of net investment
income as well as from net realized short-term capital gains, if any, are
taxable as ordinary income. 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 capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by a Fund to its shareholders
are taxable to the recipient shareholders as capital gains, without regard to
the length of time a shareholder has held Fund shares. The maximum capital gains
rate for individuals is 28% with respect to assets held for more than 12 months,
but not more than 18 months, and 20% with respect to assets held more than 18
months. The maximum capital gains rate for corporate shareholders is the same as
the maximum tax rate for ordinary income. Redemptions of shares of the 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 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 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.
- 28 -
<PAGE>
The Trust retains Countrywide Investments, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Adviser"), to manage the Funds' investments and
their business affairs. The Adviser was organized in 1974 and is also the
investment adviser to two other series of the Trust, six series of Countrywide
Investment Trust and seven series of Countrywide Tax-Free Trust. The Adviser is
an indirect wholly-owned subsidiary of Countrywide Credit Industries, Inc., a
New York Stock Exchange listed company principally engaged in the business of
residential mortgage lending. Each Fund pays the Adviser a fee equal to the
annual rate of .75% of the average value of its daily net assets up to $200
million; .7% of such assets from $200 million to $500 million; and .5% of such
assets in excess of $500 million.
Susan Flischel, Chief Investment Officer-Equity of the Adviser, is
primarily responsible for managing the portfolio of each Fund. Ms. Flischel has
been employed by the Adviser and affiliated companies in various capacities
since 1986 and has been managing the portfolio of the Utility Fund since July
1993 and the portfolio of the Equity Fund since March 1995.
The Adviser 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, Robert H. Leshner, Robert G. Dorsey and John F. Splain are
officers of both the Trust and the Adviser.
The Funds are responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Funds, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Funds may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., to serve as the Funds' transfer agent,
dividend paying agent and shareholder service agent.
- 29 -
<PAGE>
The Transfer Agent also provides accounting and pricing services to the
Funds. The Transfer Agent receives a monthly fee from each Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained by the Adviser to
assist the Adviser in providing administrative services to the Funds. In this
capacity, the Transfer Agent supplies executive, administrative and regulatory
services, supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings with the
Securities and Exchange Commission and state securities authorities. The Adviser
(not the Funds) pays the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the 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 or the Adviser.
Shares of each Fund have equal voting rights and liquidation rights.
Each Fund shall vote separately on matters submitted to a vote of the
shareholders except in matters where a vote of all series of the Trust in the
aggregate is required by the Investment Company Act of 1940 or otherwise. Each
class of shares of a Fund shall vote separately on matters relating to its plan
of distribution pursuant to Rule 12b-1 (see "Distribution Plans"). When matters
are submitted to shareholders for a vote, each shareholder is entitled to one
vote for each full share owned and fractional votes for fractional shares owned.
The Trust does not normally hold annual meetings of shareholders. The Trustees
shall promptly call and give notice of a meeting of shareholders for the purpose
of voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
- 30 -
<PAGE>
DISTRIBUTION PLANS
- ------------------
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act
of 1940, the Funds have adopted a plan of distribution (the "Class A Plan")
under which Class A shares may directly incur or reimburse the Adviser for
certain distribution- related expenses, including payments to securities dealers
and others who are engaged in the sale of such shares and who may be advising
investors regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer
Agent; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for recipients
other than existing shareholders of the Funds; expenses of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable; and any other
expenses related to the distribution of such shares.
Pursuant to the Class A Plan, the Funds may make payments to dealers
and other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Class A shares. For the
fiscal year ended March 31, 1998, Class A shares of the Utility Fund and the
Equity Fund paid $37,977 and $22,178, respectively, to the Adviser to reimburse
it for payments made to dealers and other persons who may be advising
shareholders in this regard.
The annual limitation for payment of expenses pursuant to the Class A
Plan is .25% of each Fund's average daily net assets allocable to Class A
shares. Unreimbursed expenditures will not be carried over from year to year. In
the event the Class A Plan is terminated by a Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by the
Adviser after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act
of 1940, the Funds have adopted a plan of distribution (the "Class C Plan")
which provides for two categories of payments. First, the Class C Plan provides
for the payment to the Adviser of an account maintenance fee, in an amount equal
to an annual rate of .25% of a Fund's average daily net assets allocable to
Class C shares, which may be paid to other dealers based on the average value of
such shares owned by clients of such dealers. In addition, the Class C shares
may directly incur or reimburse the Adviser in an amount not to
- 31 -
<PAGE>
exceed .75% per annum of a Fund's average daily net assets allocable to Class C
shares for expenses incurred in the distribution and promotion of the Fund's
Class C shares, including payments to securities dealers and others who are
engaged in the sale of such shares and who may be advising investors regarding
the purchase, sale or retention of such shares; expenses of maintaining
personnel who engage in or support distribution of shares or who render
shareholder support services not otherwise provided by the Transfer Agent;
expenses of formulating and implementing marketing and promotional activities,
including direct mail promotions and mass media advertising; expenses of
preparing, printing and distributing sales literature and prospectuses and
statements of additional information and reports for recipients other than
existing shareholders of the Funds; expenses of obtaining such information,
analyses and reports with respect to marketing and promotional activities as the
Trust may, from time to time, deem advisable; and any other expenses related to
the distribution of such shares.
Pursuant to the Class C Plan, the Funds may make payments to dealers
and other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Class C shares. For the
fiscal year ended March 31, 1998, Class C shares of the Utility Fund and the
Equity Fund paid $12,023 and $13,822, respectively, to the Adviser to reimburse
it for payments made to dealers and other persons who may be advising
shareholders in this regard.
Unreimbursed expenditures will not be carried over from year to year.
In the event the Class C Plan is terminated by a Fund in accordance with its
terms, the Fund will not be required to make any payments for expenses incurred
by the Adviser after the date the Class C Plan terminates. The Adviser may make
payments to dealers and other persons in an amount up to .75% per annum of the
average value of Class C shares owned by their clients, in addition to the .25%
account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Funds may also make payments to
banks or other financial institutions that provide shareholder services and
administer shareholder accounts. The Glass-Steagall Act prohibits banks from
engaging in the business of underwriting, selling or distributing securities.
Although the scope of this prohibition under the Glass-Steagall Act has not been
clearly defined by the courts or appropriate regulatory agencies, management of
the Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from
- 32 -
<PAGE>
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 places certain
limitations on asset-based sales charges of mutual funds. These limitations
require fund-level accounting in which all sales charges -- front-end load,
12b-1 fees or contingent deferred load -- terminate when a percentage of gross
sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the share price (net
asset value) of Class C shares and the public offering price (net asset value
plus applicable sales load) of Class A shares of 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 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
- 33 -
<PAGE>
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. Total return and yield are computed separately for
Class A and Class C shares. The yield of Class A shares is expected to be higher
than the yield of Class C shares due to the higher distribution fees imposed on
Class C shares.
The "average annual total return" of 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, for
Class A shares, 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 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.
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<PAGE>
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 Dow Jones Industrial Average, the Standard & Poor's 500
Stock Index and the Standard & Poor's Utility 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.
Further information about the Funds' performance is contained in the
Trust's annual report which can be obtained by shareholders at no charge by
calling the Transfer Agent (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629- 2050) or by writing to the Trust at the address on the
front of this Prospectus.
- 35 -
<PAGE>
<TABLE>
<CAPTION>
ACCOUNT NO. ____________________
Account Application (Check appropriate Fund) (For Fund Use Only)
<S> <C> <C> <C>
[] Equity Fund Class A Shares (29) $_________________ FOR BROKER/DEALER USE ONLY
[] Equity Fund Class C Shares (28) Firm Name: ____________________________
[] Utility Fund Class A Shares (25) $_________________ Home Office Address: ___________________
[] Utility Fund Class C Shares (20) Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
========================================================================================================================
[] Check or draft enclosed payable to the applicable Fund designated above.
[] Bank Wire From: __________________________________________________________________________________________________________
[] Exchange From: ______________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
_________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_______________________________________________________________________________________________ Citizenship: [] U.S.
Name of Joint Tenant, Partner, Custodian [] Other
Address Phone
_____________________________________________________________________________________________ ( )______________________
Street or P.O. Box Business Phone
____________________________________________________________________________________________ ( )_______________________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer Name/Address______________________________________________________________________________________________
Are you an associated person of an NASD member? [] Yes [] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document other than
the certifications required to avoid backup withholding. Check box if appropriate:
[] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
======================================================================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[] Share Option -- Income distributions and capital gains distributions automatically reinvested in additional
shares.
[] Income Option -- Income distributions and short term capital gains distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
[] Cash Option -- Income distributions and capital gains distributions paid in cash.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
========================================================================================================================
REDUCED SALES CHARGES (CLASS A SHARES ONLY)
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of
eligible load funds of Countrywide Investments.
Account Number/Name Account Number/Name
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your Letter of Intent.)
[] l agree to the Letter of Intent in the current Prospectus of Countrywide Stategic Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning _________________
19_______
(Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of Countrywide Investments.
at least equal to (check appropriate box):
[] $100,000 [] $250,000 [] $500,000 [] $1,000,000
========================================================================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the Funds' current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Funds for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further
agrees that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the
address contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for
himself and his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Strategic Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the
performance of the acts instructed herein provided that such entities have exercised due care to determine that the instructions are
genuine.
__________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer,
Trustee, etc. Signature of Joint Owner, if Any
___________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
=========================================================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund(s))
The Automatic Investment Plan is available for all established accounts of Countrywide Strategic Trust. There is no charge for this
service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ ______________ per month in the (check the appropriate Fund.) ABA Routing Number__________________________
[] Equity Fund [] Utility Fund FI Account Number________________________________
[] Checking Account [] Savings Account
- ----------------------------------------------------------------------
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
_________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X______________________________________________________ X__________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account
for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the applicable Fund designated above, for purchase of shares of said Fund, are
collected by CFS, CFS hereby agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Funds to their own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Funds on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Funds may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund(s))
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One):
[] Monthly -- Withdrawals will be made on the last business day of each month.
[] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number:_ _-- _ _ _ _--_
[] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided check for ACH or bank wire
___________________________________________________________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of payee__________________________________________________________________________________________________________________
Please send to:________________________________________________________________________________________________________________
Street address City State Zip
========================================================================================================================
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Strategic Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of
the
________________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws
of__________________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
at which a quorum was present and acting throughout, and that the same are now in full force and effect. I further certify that
the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
__________________________________________________ _________________________________________________________
___________________________________________________ _________________________________________________________
___________________________________________________ _________________________________________________________
Witness my hand and seal of the corporation or organization this_______________________day
of_______________________________________, 19_______
___________________________________________________ _________________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be
signed by another officer.
</TABLE>
- 35 -
<PAGE>
Countrywide Strategic Trust
- ---------------------------
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide (Toll-Free) 800-543-8721
Cincinnati 513-629-2000
Board of Trustees
- ------------------
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
Investment Adviser
- ------------------
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Transfer Agent
- --------------
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
- -------------------
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Countrywide Always Line
- ------------------------
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
- 36 -
<PAGE>
TABLE OF CONTENTS
PAGE
EXPENSE INFORMATION............................................................
FINANCIAL HIGHLIGHTS ..........................................................
INVESTMENT OBJECTIVES AND POLICIES.............................................
HOW TO PURCHASE SHARES........................................................
SHAREHOLDER SERVICES...........................................................
HOW TO REDEEM SHARES...........................................................
EXCHANGE PRIVILEGE ...........................................................
DIVIDENDS AND DISTRIBUTIONS...................................................
TAXES.........................................................................
OPERATION OF THE FUNDS ........................................................
DISTRIBUTION PLANS ............................................................
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>
PROSPECTUS
August 1, 1998
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 BANKING OR DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
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 May 31, 1997, each
Fund, on August 29, 1997, succeeded to the assets and liabilities of another
mutual fund of the same name (the "Predecessor Fund"), which was an investment
series of Trans Adviser Funds, Inc. The investment objective, policies and
restrictions of each Fund and its Predecessor Fund are substantially identical.
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 August 1, 1998 has been
filed with the Securities and Exchange Commission (the "Commission") and is
hereby incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling one of the
numbers listed below.
- -------------------------------------------------------------------------------
For Information or Assistance in Opening an Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . . 800-543-0407
Cincinnati . . . . . . . . . . . . . . . . . . . . . 513-629-2050
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
- --------------------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . . 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
Manager to a participating unaffiliated dealer.
** A wire transfer fee is charged in the case of redemptions made by
wire. Such fee is subject to change and is currently $8. See
"How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
- ------------------------------
Growth/Value Aggressive
Fund Growth Fund
------------ ------------
Management Fees 1.00% 1.00%
12b-1 Fees(A) .24% .21%
Other Expenses .42% .74%
----- -----
Total Fund Operating Expenses 1.66% 1.95%
===== =====
(A) Each Fund may incur 12b-1 fees in an amount up to .25% of its average net
assets. Long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales loads permitted by the National
Association of Securities Dealers.
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred by the Funds during the most recent fiscal year. The Manager
will, until at least August 31, 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.
- 2 -
<PAGE>
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
Growth/Value Aggressive
Fund Growth Fund
------------ -----------
1 Year $56 $ 59
3 Years 90 99
5 Years 127 141
10 Years 229 258
- 3 -
<PAGE>
FINANCIAL HIGHLIGHTS
- ---------------------
The following audited financial information for the Funds for the
fiscal periods ended August 31, 1997 and thereafter has been audited by Arthur
Andersen LLP, independent auditors, and should be read in conjunction with the
financial statements. The audited financial information for the fiscal period
ended August 31, 1996 was audited by other independent accountants. The
financial statements as of March 31, 1998 and related auditors' report appear in
the Statement of Additional Information of the Funds, which can be obtained by
shareholders at no charge by calling Countrywide Fund Services, Inc. (Nationwide
call toll-free 800-543-0407, in Cincinnati call 629-2050) or by writing to the
Trust at the address on the front of this Prospectus.
<TABLE>
<CAPTION>
GROWTH/VALUE FUND
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Seven Months Year Period
Ended Ended Ended
March 31, August 31, August 31,
1998(A) 1997 1996(B)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 15.90 $ 11.18 $ 10.00
-------------- -------------- ---------------
Income from investment operations:
Net investment loss.................................. (0.08) (0.13 ) (0.06)(C)
Net realized and unrealized gains on investments..... 1.05 5.39 1.24
-------------- -------------- ---------------
Total from investment operations........................ 0.97 5.26 1.18
-------------- -------------- ---------------
Less distributions:
Distributions from net realized gains................ (0.57) (0.54 ) --
-------------- -------------- ---------------
Net asset value at end of period........................ $ 16.30 $ 15.90 $ 11.18
============== ============== ===============
Total return(D) ........................................ 6.43% 47.11% 11.80%
============== ============== ===============
Net assets at end of period (000's)..................... $ 28,649 $ 26,778 $ 15,108
============== ============== ===============
Ratio of net expenses to average net assets(E) ......... 1.66%(F) 1.95% 1.95% (F)
Ratio of net investment loss to average net assets...... (0.91%)(F) (1.03% ) (0.62%) (F)
Portfolio turnover rate................................. 62% (F) 52% 21%
Average commission rate per share....................... $ 0.0600 $ 0.0554 $ 0.0700
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end, subsequent to
August 31, 1997, was changed to March 31.
(B) Represents the period from the commencement of operations (September 29, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratio of expenses to average net assets would have been 2.83%(F) for
the period ended August 31, 1996.
(F) Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Seven Months Year Period
Ended Ended Ended
March 31, August 31, August 31,
1998(A) 1997 1996(B)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 16.29 $ 10.95 $ 10.00
-------------- -------------- ---------------
Income from investment operations:
Net investment loss.................................. (0.15) (0.17 ) (0.11)(C)
Net realized and unrealized gains on investments..... (0.33) 5.54 1.06
-------------- -------------- ---------------
Total from investment operations........................ (0.48) 5.37 0.95
-------------- -------------- ---------------
Less distributions:
Distributions from net realized gains................ -- (0.03 ) --
-------------- -------------- ---------------
Net asset value at end of period........................ $ 15.81 $ 16.29 $ 10.95
============== ============== ===============
Total return(D) ........................................ (2.95%) 49.09% 9.50%
============== ============== ===============
Net assets at end of period (000's)..................... $ 15,495 $ 13,984 $ 6,550
============== ============== ===============
Ratio of net expenses to average net assets(E) ......... 1.95% (F) 1.94% 1.95% (F)
Ratio of net investment loss to average net assets...... (1.66%)(F) (1.57% ) (1.26%)(F)
Portfolio turnover rate................................. 40% (F) 51% 16%
Average commission rate per share....................... $ 0.0600 $ 0.0534 $ 0.0800
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end, subsequent to
August 31, 1997, was changed to March 31.
(B) Represents the period from the commencement of operations (September 29, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratios of expenses to average net assets would have been 2.62% and
5.05%(F) for the periods ended August 31, 1997 and 1996, respectively.
(F) Annualized.
</TABLE>
- 4 -
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------
The investment objectives and policies of each Fund are described
below. Specific investment techniques that may be employed by the Funds are also
described in 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
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 Growth/Value 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 Adviser,
are expected to achieve growth of investment principal
- 5 -
<PAGE>
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 of the Aggressive Growth Fund 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 Aggressive Growth 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
- 6 -
<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
- --------------------------
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 this 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
- 7 -
<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, in a segregated account, cash or
liquid portfolio securities equal to the amount of the commitment. Securities
purchased on a "when-issued" basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. 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. Each of the Funds may enter into repurchase agreements.
Under a repurchase agreement, a 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 a Fund's money is invested. Each 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 Funds will require additional collateral. If
the seller defaults and the value of the collateral securing the repurchase
agreement declines, the Funds 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 Funds would be entitled, as against a claim of the seller or
its receiver, trustee in bankruptcy or creditors, to retain the underlying
securities. Repurchase agreements are considered by the staff of the Commission
to be loans by the Funds.
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 or
liquid portfolio 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 of Lower Rated Fixed-
Income Securities" below for a discussion of certain risks.
Differing yields on fixed-income securities of the same maturity are a
function of several factors, including the relative financial strength of the
issuers. Higher yields are generally available from securities in the lower
categories of recognized rating agencies, i.e., Ba or lower by Moody's or BB or
lower by S&P. The 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.
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
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<PAGE>
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 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.
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 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.
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<PAGE>
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.
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 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 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
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<PAGE>
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 holds the interest and principal payments for
the benefit of the
- 14 -
<PAGE>
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 net assets in illiquid 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
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<PAGE>
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Adviser believes that Section 4(2)
commercial paper and possibly certain other restricted securities which meet the
criteria for liquidity established by the Trustees are quite liquid. The Fund
intends therefore, to treat the restricted securities which meet the criteria
for liquidity established by the Trustees, including Section 4(2) commercial
paper, as determined by the Adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Fund does not intend to subject such paper to
the limitation applicable to restricted securities.
The ability of the Board of Trustees to determine the liquidity of
certain restricted securities is permitted under a position of the staff of the
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 the Rule. 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 OF LOWER RATED FIXED-INCOME SECURITIES
Lower quality fixed-income securities generally produce a higher current
yield than do fixed-income securities of higher ratings. However, these
fixed-income securities are considered speculative because they involve greater
price volatility and risk than do higher rated fixed-income securities and
yields on these fixed-income securities will tend to fluctuate over time.
Although the market value of all fixed-income securities varies
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<PAGE>
as a result of changes in prevailing interest rates (e.g., when interest rates
rise, the market value of fixed-income securities can be expected to decline),
values of lower rated fixed-income securities tend to react differently than the
values of higher rated fixed-income securities. The prices of lower rated
fixed-income securities are less sensitive to changes in interest rates than
higher rated fixed-income securities. Conversely, lower rated fixed-income
securities also involve a greater risk of default by the issuer in the payment
of principal and income and are more sensitive to economic downturns and
recessions than higher rated fixed-income securities. The financial stress
resulting from an economic downturn could have a greater negative effect on the
ability of issuers of lower rated fixed-income securities to service their
principal and interest payments, to meet projected business goals and to obtain
additional financing than on more creditworthy issuers. In the event of an
issuer's default in payment of principal or interest on such securities, or any
other fixed-income securities in 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 plays a greater role in
valuation, as there is less reliable, objective data available with respect to
such securities that are thinly traded or illiquid.
Because investors may perceive that there are greater risks associated
with the lower rated fixed-income securities of the type in which a Fund may
invest, the yields and prices of such
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<PAGE>
securities may tend to fluctuate more than those for fixed-income securities
with a higher rating. Changes in perception of issuer's creditworthiness tend to
occur more frequently and in a more pronounced manner in the lower quality
segments of the fixed-income securities market, 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 security 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
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<PAGE>
of purchase of an investment; the sale of securities by a Fund is not required
in the event of a subsequent change in circumstances.
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 each Fund is 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 Internal Revenue Code (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). However, the minimum initial
investment for employees, shareholders and customers of Countrywide Credit
Industries, Inc. or any affiliated company, including members of the immediate
family of such individuals, is $50. You may purchase additional shares through
the Open Account Program described below. You may open an account and make an
initial investment through securities
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<PAGE>
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.
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 Manager by 5:00 p.m., Eastern time, that day
are confirmed at the public offering price determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Manager by 5:00 p.m., Eastern time. Dealers may charge a
fee for effecting purchase orders. Direct purchase orders received by the
Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's public
offering price. Direct investments received by the Transfer Agent after 4:00
p.m., Eastern time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the public offering price next determined on the
following business day.
The public offering price of shares of each Fund 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 Manager 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 Manager 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 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.
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 incentives 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.
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.
- 21 -
<PAGE>
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to 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.
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.
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 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
- 22 -
<PAGE>
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.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate family of
such individuals and employee benefit plans established by such entities, may
also purchase shares of the Funds at net asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF SHARES. A
contingent deferred sales load is imposed upon certain redemptions of shares of
the 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
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<PAGE>
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 Code) of
a shareholder (including one who owns the shares with his or her spouse as a
joint tenant with rights of survivorship) from an account in which the deceased
or disabled is named. The Manager may require documentation prior to waiver of
the charge, including death certificates, physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the initial
investment requirements and the applicable sales load and for purposes of the
Letter of Intent and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21, purchasing shares
for his or their own account; or a trustee or other fiduciary purchasing shares
for a single fiduciary account although more than one beneficiary is involved;
or employees of a common employer, provided that economies of scale are realized
through remittances from a single source and quarterly confirmation of such
purchases; or an organized group, provided that the purchases are made through a
central administration, or a single dealer, or by other means which result in
economy of sales effort or expense. Contact the Transfer Agent for additional
information concerning purchases at net asset value or at reduced sales loads.
- 24 -
<PAGE>
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. 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.
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, including
Roth IRAs and Education IRAs
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
- 25 -
<PAGE>
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
Direct Deposit Plans
--------------------
Shares of either Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Funds.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in either Fund from your
bank, savings and loan or other depository institution account. The minimum
initial and subsequent investments must be $50 under the plan. The Transfer
Agent pays the costs associated with these transfers, but reserves the right,
upon thirty days' written notice, to make reasonable charges for this service.
Your depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds.
InvestPlus Plan
----------------
If you are a Countrywide Home Loans mortgage holder, you may make
monthly investments in either Fund by including your investment with your
mortgage payment. You may write one check for the total amount.
Reinvestment Privilege
----------------------
If you have redeemed shares of 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
- 26 -
<PAGE>
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. The Trust reserves the right, upon thirty days' written
notice, to change the processing fee. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
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
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<PAGE>
instructions are genuine. If the Trust and/or the Transfer Agent do not employ
such procedures, they may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions, providing
written confirmation of the transactions and/or tape recording telephone
instructions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require you to close your account if at any time the value
of your shares is less than the minimum amount required by the Trust for your
account (based on actual amounts invested including any sales load paid,
unaffected by market fluctuations), or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the 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 (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.
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<PAGE>
The following are the funds of Countrywide Investments currently
offered to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
Countrywide Tax-Free Trust Countrywide Strategic Trust
- -------------------------- ----------------------------
Tax-Free Money Fund *Equity Fund
Ohio Tax-Free Money Fund *Utility Fund
California Tax-Free Money Fund *Growth/Value Fund
Florida Tax-Free Money Fund *Aggressive Growth Fund
*Tax-Free Intermediate Term Fund
*Ohio Insured Tax-Free Fund Countrywide Investment Trust
*Kentucky Tax-Free Fund ------------------------------
Short Term Government Income Fund
Institutional Government Income Fund
Money Market Fund
*Intermediate Bond Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
You may request an exchange by sending a written request to the Transfer
Agent. The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are unable
to execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by the Transfer
Agent.
Exchanges may only be made for shares of funds then offered for sale in
your state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated by
the Board of Trustees upon 60 days' prior notice to shareholders. An exchange
results in a sale of fund shares, which may cause you to recognize a capital
gain or loss. Before making an exchange, contact the Transfer Agent to obtain a
current prospectus for any of the other funds of Countrywide Investments and
more information about exchanges among Countrywide Investments.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
Each Fund expects to distribute substantially all of its net investment
income and any net realized long-term capital gains at least once each year.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains.
- 29 -
<PAGE>
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital
gains distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed dividend checks.
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 has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated investment company"
under Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. Each Fund intends
to distribute substantially all of its net investment income and any net
realized capital gains to its shareholders. Distributions of net investment
income as well as from net realized short-term capital gains, if any, are
taxable as ordinary income. 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.
- 30 -
<PAGE>
Distributions of net capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by a Fund to its shareholders
are taxable to the recipient shareholders as capital gains, without regard to
the length of time a shareholder has held Fund shares. The maximum capital gains
rate for individuals is 28% with respect to assets held for more than 12 months,
but not more than 18 months, and 20% with respect to assets held more than 18
months. The maximum capital gains rate for corporate shareholders is the same as
the maximum tax rate for ordinary income. Redemptions of shares of the 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 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 45202 (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 two other
series of the Trust, six 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.
- 31 -
<PAGE>
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, Robert H. Leshner, Robert G. Dorsey and John F. Splain are officers of
both the Trust and the Manager.
Mastrapasqua & Associates, Inc. (the "Adviser"), 814 Church Street,
Nashville, Tennessee 37203, 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. They were also
responsible for managing the portfolios of the Predecessor Funds. Mr.
Mastrapasqua founded the Adviser in 1993, prior to which 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.
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.
- 32 -
<PAGE>
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
Commission and state securities authorities. The Manager (not the Funds) pays
the Transfer Agent a fee for these administrative services.
Consistent with the rules of the National Association of Securities
Dealers, Inc., and subject to its objective of seeking best execution of
portfolio transactions, the Adviser may give consideration to sales of shares of
the Funds as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Funds. Subject to the requirements of the 1940 Act
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 1940 Act or otherwise. When matters are submitted
to shareholders for a vote, each shareholder is entitled to one vote for each
full share owned and fractional votes for fractional shares owned. The Trust
does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
Trans Financial Bank, N.A., P.O. Box 90001, Bowling Green, Kentucky,
may be deemed to control each Fund by virtue of the fact that it owns of record
more than 25% of each Fund's shares as of the date of this Prospectus.
- 33 -
<PAGE>
DISTRIBUTION PLAN
- -----------------
Pursuant to Rule 12b-1 under the 1940 Act, 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.
Pursuant to the Plan, the Funds may make payments to dealers and other
persons, including the Manager and its affiliates, who may be advising investors
regarding the purchase, sale or retention of Fund shares. For the fiscal period
ended March 31, 1998, the Growth/Value Fund and the Aggressive Growth Fund paid
$28,000 and $12,000, respectively, to the Manager to reimburse it for payments
made to dealers and other persons who may be advising shareholders in this
regard.
The annual limitation for payment of expenses pursuant to the Plan is
.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 Manager 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
- 34 -
<PAGE>
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 places certain
limitations on asset-based sales charges of mutual funds. These limitations
require fund-level accounting in which all sales charges -- front-end load,
12b-1 fees or contingent deferred load -- terminate when a percentage of gross
sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (net asset value plus applicable sales load) of the shares of 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 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
- 35 -
<PAGE>
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 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.
- 36 -
<PAGE>
("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.
Further information about the Funds' performance is contained in the
annual report which can be obtained by shareholders at no charge by calling the
Transfer Agent (Nationwide call toll-free 800-543-0407; in Cincinnati call
629-2050) or by writing to the Trust at the address on the front of this
Prospectus.
- 37 -
<PAGE>
<TABLE>
ACCOUNT NO. ____________________
Account Application (Check appropriate Fund) (For Fund Use Only)
<S> <C> <C> <C>
[] Growth/Value Fund (91) $_________________ FOR BROKER/DEALER USE ONLY
Firm Name: ____________________________
[] Aggressive Growth Fund (92) $_________________ Home Office Address: ___________________
Branch Address: ________________________
Rep Name & No.: ________________________
Please mail account application to: Rep Signature: _________________________
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
===============================================================================================================================
[ ] Check or draft enclosed payable to the applicable Fund designated above.
[ ] Bank Wire From: _________________________________________________________________________________________
[ ] Exchange From: __________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax I.D.#
_________________________________________________________________________________________ _____________________________
Name of Individual, Corporation, Organization, or Minor, etc. (In case of custodial account
please list minor's S.S.#)
_______________________________________________________________________________________________ Citizenship: [] U.S.
Name of Joint Tenant, Partner, Custodian [] Other
Address Phone
_____________________________________________________________________________________________ ( )______________________
Street or P.O. Box Business Phone
____________________________________________________________________________________________ ( )_______________________
City State Zip Home Phone
Check Appropriate Box: [] Individual [] Joint Tenant (Right of survivorship presumed)
[] Partnership [] Corporation [] Trust [] Custodial [] Non-Profit [] Other
Occupation and Employer Name/Address______________________________________________________________________________________________
Are you an associated person of an NASD member? [] Yes [] No
========================================================================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the Taxpayer Identification Number listed
above is my correct number. The Internal Revenue Service does not require my consent to any provision of this document other than
the certifications required to avoid backup withholding. Check box if appropriate:
[ ] I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
[ ] I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
======================================================================================================================
<PAGE>
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
[ ] Share Option -- Income distributions and capital gains distributions automatically reinvested in additional
shares.
[ ] Income Option -- Income distributions and short term capital gains distributions paid in cash, long term capital
gains distributions reinvested in additional shares.
[ ] Cash Option -- Income distributions and capital gains distributions paid in cash.
[ ] By Check [ ] By ACH to my bank checking or savings account. Please attach a voided check.
========================================================================================================================
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's confirmation of the following holdings of
eligible load funds of Countrywide Investments.
Account Number/Name Account Number/Name
_______________________________________________________ _______________________________________________________
_______________________________________________________ _______________________________________________________
Letter of Intent: (Complete the Right of Accumulation section if related accounts are being applied to your Letter of Intent.)
[ ] I agree to the Letter of Intent in the current Prospectus of Countrywide Stategic Trust. Although I am not obligated to
purchase, and the Trust is not obligated to sell, I intend to invest over a 13 month period beginning _________________
19_______ (Purchase Date of not more than 90 days prior to this Letter) an aggregate amount in the load funds of Countrywide
Investments at least equal to (check appropriate box):
[] $100,000 [] $250,000 [] $500,000 [] $1,000,000
========================================================================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the Funds' current Prospectus, that he is of legal
age, and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use the options selected above. The investor appoints Countrywide Fund Services, Inc. as his agent to enter orders for shares
whether by direct purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of
the Funds for credit to the investor's account and to surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges incurred by the investor. The investor further
agrees that Countrywide Fund Services, Inc. can cease to act as such agent upon ten days' notice in writing to the investor at the
address contained in this Application. The investor hereby ratifies any instructions given pursuant to this Application and for
himself and his successors and assigns does hereby release Countrywide Fund Services, Inc., Countrywide Strategic Trust, Countrywide
Investments, Inc., and their respective officers, employees, agents and affiliates from any and all liability in the
performance of the acts instructed herein provided that such entities have exercised due care to determine that the instructions are
genuine.
__________________________________________________ ___________________________________________________
Signature of Individual Owner, Corporate Officer,
Trustee, etc. Signature of Joint Owner, if Any
___________________________________________________ ____________________________________________________
Title of Corporate Officer, Trustee, etc. Date
NOTE: Corporations, trusts and other organizations must complete the resolution form on the reverse side.
Unless otherwise specified, each joint owner shall have full authority to act on behalf of the account.
=========================================================================================================================
AUTOMATIC INVESTMENT PLAN (Complete for Investments Into the Fund(s))
The Automatic Investment Plan is available for all established accounts of Countrywide Strategic Trust. There is no charge for this
service, and it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month.
For an account that is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ ______________ per month in the (check the appropriate Fund.) ABA Routing Number__________________________
[] Growth/Value Fund [] Aggressive Growth Fund FI Account Number___________________________
[] Checking Account [] Savings Account
_________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[] the last business day of each month
_________________________________________________________________ [] the 15th day of each month
City State [] both the 15th and last business day
X______________________________________________________ X__________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please sign exactly as signature appears on your FI's
records.)
Please attach a voided check from your checking account or a voided deposit/withdrawal slip from your savings account
for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund Services, Inc. ("CFS") has put into effect, by which
amounts, determined by your depositor, payable to the applicable Fund designated above, for purchase of shares of said Fund, are
collected by CFS, CFS hereby agrees:
CFS will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the payment
by you of any amount drawn by the Funds to their own order on the account of your depositor or from any liability to any person
whatsoever arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such
checks. CFS will defend, at its own cost and expense, any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing request or in any manner arising by reason of your
participation in this arrangement. CFS will refund to you any amount erroneously paid by you to the Funds on any such check if
the claim for the amount of such erroneous payment is made by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Funds may be terminated by thirty (30) days written notice from
either party to the other.
========================================================================================================================
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund(s))
This is an authorization for you to withdraw $_________ from my mutual fund account beginning the last business day of the
month of __________________.
Please Indicate Withdrawal Schedule (Check One): Please indicate which Fund: [ ] Growth/Value Fund [ ] Aggressive Growth Fund
[] Monthly -- Withdrawals will be made on the last business day of each month.
[] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[] Annually -- Please make withdrawals on the last business day of the month of:_____________________.
Please Select Payment Method (Check One):
[] Exchange: Please exchange the withdrawal proceeds into another Countrywide account number:_ _-- _ _ _ _--_
[] Check: Please mail a check for my withdrawal proceeds to the mailing address on this account.
[] ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank checking or savings account as indicated below.
I understand that the transfer will be completed in two to three business days and that there is no charge.
[] Bank Wire: Please send my withdrawal proceeds via bank wire, to the account indicated below. I understand that the wire will
be completed in one business day and that there is an $8.00 fee.
Please attach a voided check for ACH or bank wire
___________________________________________________________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________________________________________________________
Bank ABA# Account # Account Name
[] Send to special payee (other than applicant): Please mail a check for my withdrawal proceeds to the mailing address below:
Name of payee__________________________________________________________________________________________________________________
Please send to:________________________________________________________________________________________________________________
Street address City State Zip
========================================================================================================================
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of Countrywide Strategic Trust (the Trust) and that
________________________________________________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of the corporation or organization and to take any
action for it as may be necessary or appropriate with respect to its shareholder account with the Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign any documents necessary or appropriate to
appoint Countrywide Fund Services, Inc. as redemption agent of the corporation or organization for shares of the applicable series
of the Trust, to establish or acknowledge terms and conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the Charter and By-Laws or other empowering documents of
the
________________________________________________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of_________________________________________________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the organization or corporation duly called and held on
at which a quorum was present and acting throughout, and that the same are now in full force and effect. I further certify that
the following is (are) duly elected officer(s) of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title
__________________________________________________ _________________________________________________________
___________________________________________________ _________________________________________________________
___________________________________________________ _________________________________________________________
Witness my hand and seal of the corporation or organization this_______________________day
of_______________________________________, 19_______
___________________________________________________ _________________________________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above resolutions, this certificate must also be
signed by another officer.
</TABLE>
<PAGE>
COUNTRYWIDE 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.
H. Jerome Lerner
Robert H. Leshner
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
MANAGER/UNDERWRITER
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4004
INVESTMENT ADVISER
Mastrapasqua & Associates, Inc.
814 Church Street, Suite 600
Nashville, Tennessee 37203
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
COUNTRYWIDE ALWAYS LINE
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
- 38 -
<PAGE>
TABLE OF CONTENTS
PAGE
EXPENSE INFORMATION........................................................
FINANCIAL HIGHLIGHTS.......................................................
INVESTMENT OBJECTIVES AND POLICIES.........................................
HOW TO PURCHASE SHARES.....................................................
SHAREHOLDER SERVICES.......................................................
HOW TO REDEEM SHARES.......................................................
EXCHANGE PRIVILEGE ........................................................
DIVIDENDS AND DISTRIBUTIONS................................................
TAXES......................................................................
OPERATION OF THE 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.
- 39 -
<PAGE>
COUNTRYWIDE STRATEGIC TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1998
Utility Fund
Equity Fund
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 applicable Fund of Countrywide
Strategic Trust dated August 1, 1998. A copy of a Fund's Prospectus can be
obtained by writing the Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202-4094, or by calling the Trust nationwide toll-free 800-543-0407, 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.............................................................3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS.........................4
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS..........................15
INVESTMENT LIMITATIONS...............................................18
TRUSTEES AND OFFICERS................................................24
THE INVESTMENT ADVISER AND UNDERWRITER...............................27
MASTRAPASQUA AND ASSOCIATES..........................................30
DISTRIBUTION PLANS...................................................31
SECURITIES TRANSACTIONS..............................................33
PORTFOLIO TURNOVER...................................................36
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE.................36
OTHER PURCHASE INFORMATION...........................................37
TAXES................................................................38
REDEMPTION IN KIND...................................................40
HISTORICAL PERFORMANCE INFORMATION...................................40
PRINCIPAL SECURITY HOLDERS...........................................45
CUSTODIAN............................................................45
AUDITORS.............................................................46
TRANSFER AGENT.......................................................46
ANNUAL REPORT........................................................47
- 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 four series of shares to investors: the Utility Fund, the
Equity Fund, the Growth/Value Fund and the Aggressive Growth Fund (referred to
individually as a "Fund" and collectively as the "Funds"). Each Fund has its own
investment objective(s) and policies.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997, the
Growth/Value Fund and the Aggressive Growth Fund, on August 29, 1997, succeeded
to the assets and liabilities of another mutual fund of the same name (the
"Predecessor Fund"), which was an investment series of Trans Adviser Funds, Inc.
The investment objective, policies and restrictions of each Fund and its
Predecessor Fund are substantially identical and the financial data and
information in this Statement of Additional Information with respect to the
Growth/Value Fund and the Aggressive Growth Fund for periods ended prior to
September 1, 1997 relate to the Predecessor Funds.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
Both Class A shares and Class C shares of the Utility Fund and the
Equity Fund represent an interest in the same assets of such Fund, have the same
rights and are identical in all material respects except that (i) Class C shares
bear the expenses of higher distribution fees; (ii) certain other class specific
expenses will be borne solely by the class to which such expenses
- 3 -
<PAGE>
are attributable, including transfer agent fees attributable to a specific class
of shares, printing and postage expenses related to preparing and distributing
materials to current shareholders of a specific class, registration fees
incurred by a specific class of shares, the expenses of administrative personnel
and services required to support the shareholders of a specific class,
litigation or other legal expenses relating to a class of shares, Trustees' fees
or expenses incurred as a result of issues relating to a specific class of
shares and accounting fees and expenses relating to a specific class of shares;
and (iii) each class has exclusive voting rights with respect to matters
relating to its own distribution arrangements. The Board of Trustees may
classify and reclassify the shares of a Fund into additional classes of shares
at a future date.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of an instance where such result has occurred. In addition, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the Trustees.
The Trust Agreement also provides for the indemnification out of the Trust
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Moreover, it provides that the Trust will,
upon request, assume the defense of any claim made against any shareholder for
any act or obligation of the Trust and satisfy any judgment thereon. As a
result, and particularly because the Trust assets are readily marketable and
ordinarily substantially exceed liabilities, management believes that the risk
of shareholder liability is slight and limited to circumstances in which the
Trust itself would be unable to meet its obligations. Management believes that,
in view of the above, the risk of personal liability is remote.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and investment
policies described in the Prospectuses (see "Investment Objectives and
Policies") appears below:
WHEN-ISSUED SECURITIES AND SECURITIES PURCHASED ON A TO-BE- ANNOUNCED
BASIS. The Funds will only make commitments to purchase securities on a
when-issued or to-be-announced ("TBA") basis with the intention of actually
acquiring the securities. In addition, the Funds may purchase securities on a
when-issued
- 4 -
<PAGE>
or TBA basis only if delivery and payment for the securities takes place within
120 days after the date of the transaction. In connection with these
investments, each Fund will direct the Custodian to place cash or liquid
securities in a segregated account in an amount sufficient to make payment for
the securities to be purchased. When a segregated account is maintained because
a Fund purchases securities on a when-issued or TBA basis, the assets deposited
in the segregated account will be valued daily at market for the purpose of
determining the adequacy of the securities in the account. If the market value
of such securities declines, additional cash or securities will be placed in the
account on a daily basis so that the market value of the account will equal the
amount of a Fund's commitments to purchase securities on a when-issued or TBA
basis. To the extent funds are in a segregated account, they will not be
available for new investment or to meet redemptions. Securities purchased on a
when-issued or TBA basis and the securities held in a Fund's portfolio are
subject to changes in market value based upon changes in the level of interest
rates (which will generally result in all of those securities changing in value
in the same way, i.e., all those securities experiencing appreciation when
interest rates decline and depreciation when interest rates rise). Therefore, if
in order to achieve higher returns, a Fund remains substantially fully invested
at the same time that it has purchased securities on a when-issued or TBA basis,
there will be a possibility that the market value of the Fund's assets will have
greater fluctuation. The purchase of securities on a when-issued or TBA basis
may involve a risk of loss if the broker-dealer selling the securities fails to
deliver after the value of the securities has risen.
When the time comes for a Fund to make payment for securities purchased
on a when-issued or TBA basis, the Fund will do so by using then available cash
flow, by sale of the securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the securities purchased on a when-issued or TBA basis themselves (which
may have a market value greater or less than the Fund's payment obligation).
Although a Fund will only make commitments to purchase securities on a
when-issued or TBA basis with the intention of actually acquiring the
securities, the Funds may sell these securities before the settlement date if it
is deemed advisable by the Adviser as a matter of investment strategy.
STRIPS. STRIPS are U.S. Treasury bills, notes, and bonds that have
been issued without interest coupons or stripped of their unmatured interest
coupons, interest coupons that have been stripped from such U.S. Treasury
securities, and receipts or certificates representing interests in such
stripped U.S. Treasury securities and coupons. A STRIPS security pays no
- 5 -
<PAGE>
interest in cash to its holder during its life although interest is accrued for
federal income tax purposes. Its value to an investor consists of the difference
between its face value at the time of maturity and the price for which it was
acquired, which is generally an amount significantly less than its face value.
Investing in STRIPS may help to preserve capital during periods of declining
interest rates. For example, if interest rates decline, GNMA Certificates owned
by a Fund which were purchased at greater than par are more likely to be
prepaid, which would cause a loss of principal. In anticipation of this, a Fund
might purchase STRIPS, the value of which would be expected to increase when
interest rates decline.
STRIPS do not entitle the holder to any periodic payments of interest
prior to maturity. Accordingly, such securities usually trade at a deep discount
from their face or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt obligations of
comparable maturities which make periodic distributions of interest. On the
other hand, because there are no periodic interest payments to be reinvested
prior to maturity, STRIPS eliminate the reinvestment risk and lock in a rate of
return to maturity. Current federal tax law requires that a holder of a STRIPS
security accrue a portion of the discount at which the security was purchased as
income each year even though the Fund received no interest payment in cash on
the security during the year.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 10% (with respect to the
Utility Fund) or 15% (with respect to the Equity Fund, the Growth/Value Fund and
the Aggressive Growth Fund) 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
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acquisition of the securities and normally would be within a shorter period of
time. The resale price will be in excess of the purchase price, reflecting an
agreed upon market rate effective for the period of time the Fund's money will
be invested in the securities, and will not be related to the coupon rate of the
purchased security. At the time a Fund enters into a repurchase agreement, the
value of the underlying security, including accrued interest, will equal or
exceed the value of the repurchase agreement, and in the case of a repurchase
agreement exceeding one day, the seller will agree that the value of the
underlying security, including accrued interest, will at all times equal or
exceed the value of the repurchase agreement. The collateral securing the
seller's obligation must be of a credit quality at least equal to a Fund's
investment criteria for portfolio securities and will be held by the Custodian
or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Fund to the seller subject to the
repurchase agreement and is therefore subject to that Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by a Fund subject to a repurchase agreement as being
owned by that Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve loss of interest or decline in
price of the security. If a court characterized the transaction as a loan and a
Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for a Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case, the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case a Fund may
incur a loss if the proceeds to that Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund involved will direct the seller of the
security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
enforce the seller's contractual obligation to deliver additional securities.
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LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities subject to the restrictions stated in its Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be 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.
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or of banks or institutions the accounts of which are insured by
the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable certificates
evidencing the indebtedness of a commercial bank to repay funds deposited with
it for a definite period of time (usually from fourteen days to one year) at a
stated or variable interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been drawn on it by
a customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Investments in time deposits maturing
in more than seven days will be subject to each Fund's restrictions on illiquid
investments (see "Investment Limitations").
The Growth/Value Fund and the Aggressive Growth Fund may also invest in
certificates of deposit, bankers' acceptances and time deposits issued by
foreign branches of national banks.
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<PAGE>
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
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.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Service, Inc. Among the factors considered by Moody's in
assigning ratings are the following: valuation of the management of the issuer;
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial strength of the parent company and the relationships which
exist with the issuer; and recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors are all considered in
determining whether the commercial paper is rated Prime-1. Commercial paper
rated A (highest quality) by Standard & Poor's Ratings Group has the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed; the issuer has access to at least two additional
channels of borrowing; basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances; typically, the issuer's industry is
well established and the issuer has a strong position within the industry; and
the reliability and quality of management are unquestioned. The relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated A-1.
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<PAGE>
FOREIGN SECURITIES. Each Fund may invest in the securities (payable in
U.S. dollars) of foreign issuers. The Utility Fund may also invest in non-U.S.
dollar-denominated securities principally traded in financial markets outside
the United States. 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 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 Trustees have approved the use
of the options and futures strategies for the Utility Fund and the Aggressive
Growth Fund described below.
1. FUTURES CONTRACTS AND RELATED OPTIONS: 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
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<PAGE>
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 its net assets would be committed to initial margins.
Options on futures contracts are similar to options on stocks except
that an option on a future gives 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. As with options on stocks, 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 transactions, 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 involves less potential risk to the Fund because the
maximum amount at risk is the premium paid for the options, plus transaction
costs.
2. WRITING COVERED CALL OPTIONS ON EQUITY SECURITIES. The
Utility Fund and 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 is believed to involve relatively little risk. However, there is
no assurance that a closing transaction can be effected at a favorable price.
During the option period, the covered call writer has, in return for the premium
received, given up the opportunity for capital appreciation above the exercise
price should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security decline.
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<PAGE>
The Utility Fund may write covered call options if, immediately
thereafter, not more than 30% of its net assets would be committed to such
transactions. The Aggressive Growth Fund may write covered call options if,
immediately thereafter, not more than 25% of its net assets would be committed
to such transactions. As long as the Securities and Exchange Commission
continues to take the position that unlisted options are illiquid securities,
the Utility Fund will not commit more than 10% of its net assets and the
Aggressive Growth Fund will not commit more than 15% of its net assets to
unlisted covered call transactions and other illiquid securities.
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 securities 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 U.S. GOVERNMENT SECURITIES. The
Utility Fund may purchase put options on U.S. Government securities to protect
against a risk that an anticipated rise in interest rates would result in a
decline in the value of the Fund's portfolio securities. The Fund may purchase
call options on U.S. Government securities as a means of obtaining temporary
exposure to market appreciation when the Fund is not fully invested.
A put option is a short-term contract (having a duration of nine months
or less) which gives the purchaser of the option, in return for a premium, the
right to sell the underlying security at a specified price during the term of
the option. A call option is a short-term contract which gives the purchaser of
the
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<PAGE>
call option, in return for a premium, the right to buy the underlying security
at a specified price during the term of the option. The purchase of put and call
options on U.S. Government securities is analogous to the purchase of puts and
calls on stocks. The Fund will purchase options on U.S. Treasury Bonds, Notes
and Bills only.
There are special considerations applicable to options on U.S. Treasury
Bonds and Notes. Because trading interest in options written on U.S. Treasury
Bonds and Notes tends to center on the most recently auctioned issues, the
Exchanges will not continue indefinitely to introduce options with new
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each issue of U.S. Treasury Bonds and Notes will thus be phased out as new
options are listed on more recent issues, and options representing a full range
of expirations will not ordinarily be available for every issue on which options
are traded.
To terminate its rights with respect to put and call options which it
has purchased, the Fund may sell an option of the same series in a "closing sale
transaction." A profit or loss will be realized depending on whether the sale
price of the option plus transaction costs is more or less than the cost to the
Fund of establishing the position. If an option purchased by the Fund is not
exercised or sold, it will become worthless after its expiration date and the
Fund will experience a loss in the form of the premium and transaction costs
paid in establishing the option position.
The option positions may be closed out only on an exchange which
provides a secondary market for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular option.
The option activities of the Fund may affect its turnover rate and the amount of
brokerage commissions paid by the Fund. The Fund pays a brokerage commission
each time it buys or sells a security in connection with the exercise of an
option. Such commissions may be higher than those which would apply to direct
purchases or sales of portfolio securities.
5. PURCHASING OPTIONS ON INTEREST RATE FUTURES CONTRACTS. The Utility
Fund may purchase put and call options on interest rate futures contracts. The
purchase of put options on interest rate futures contracts hedges the Fund's
portfolio against the risk of rising interest rates. The purchase of call
options on futures contracts is a means of obtaining temporary exposure to
market appreciation at limited risk and is a hedge against a
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<PAGE>
market advance when the Fund is not fully invested. Assuming that any decline in
the securities being hedged is accompanied by a rise in interest rates, the
purchase of options on the futures contracts may generate gains which can
partially offset any decline in the value of the Fund's portfolio securities
which have been hedged. However, if after the Fund purchases an option on a
futures contract, the value of the securities being hedged moves in the opposite
direction from that contemplated, the Fund will tend to experience losses in the
form of premiums on such options which would partially offset gains the Fund
would have.
An interest rate futures contract is a contract to buy or sell
specified debt securities at a future time for a fixed price. The Fund may
purchase put and call options on interest rate futures which are traded on a
national exchange or board of trade and sell such options to terminate an
existing position. The Fund may not enter into interest rate futures contracts.
Options on interest rate futures are similar to options on stocks except that an
option on an interest rate future gives the purchaser the right, in return for
the premium paid, to assume a position in an interest rate futures contract (a
long position if the option is a call and a short position if the option is a
put), rather than to purchase or sell stock, at a specified exercise price at
any time during the period of the option.
As with options on stocks, the holder of an option on an interest rate
futures contract may terminate his position by selling an option of the same
series. There is no guarantee that such closing transactions can be effected. In
addition to the risks which apply to all options transactions, there are several
special risks relating to options on interest rate futures contracts. The
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Compared to the use of interest rate
futures, the purchase of options on interest rate futures involves less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options, plus transaction costs.
6. OPTIONS TRANSACTIONS GENERALLY. Option transactions in which the
Utility Fund and 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 a Fund may affect its portfolio
turnover rate and the amount of brokerage commissions paid by a Fund. The
success of a Fund in using the option strategies described above depends, among
other things, on the
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<PAGE>
investment adviser's ability to predict the direction and volatility of price
movements in the options, futures contracts and securities markets and its
ability to select the proper time, type and duration of the options.
WARRANTS AND RIGHTS. Warrants are options to purchase equity securities
at a specified price and are valid for a specific time period. Rights are
similar to warrants, but normally have a short duration and are distributed by
the issuer to its shareholders. Each Fund may purchase warrants and rights,
provided that no Fund presently intends to invest more than 5% of its net assets
at the time of purchase in warrants and rights other than those that have been
acquired in units or attached to other securities.
MAJORITY. As used in the Prospectuses and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
any Fund) means the lesser of (1) 67% or more of the outstanding shares of the
Trust (or the applicable Fund) present at a meeting, if the holders of more than
50% of the outstanding shares of the Trust (or the applicable Fund) are present
or represented at such meeting or (2) more than 50% of the outstanding shares of
the Trust (or the applicable Fund).
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS
- -------------------------------------------
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."
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<PAGE>
Baa - "Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well."
Ba - "Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterize bonds in this class."
B - "Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small."
Caa - "Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest."
Ca - "Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings."
C - "Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing."
STANDARD & POOR'S RATINGS GROUP PROVIDES THE FOLLOWING DESCRIPTIONS OF ITS
CORPORATE BOND RATINGS:
AAA - "Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong."
AA - "Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree."
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
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<PAGE>
exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories."
BB - "Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating."
B - "Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating."
CCC - "Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial or economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest or repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating."
CC - "The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating."
C - "The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy has been filed but debt service
payments are continued."
CI - "The rating CI is reserved for income bonds on which no interest is
being paid."
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."
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INVESTMENT LIMITATIONS
- -----------------------
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to any Fund without the affirmative vote of a
majority of the outstanding shares of that Fund.
THE LIMITATIONS APPLICABLE TO THE UTILITY FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is asset coverage of
300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that, when made, such temporary borrowings are
in an amount not exceeding 5% of the Fund's total assets. The Fund also will not
make any borrowing which would cause its outstanding borrowings to exceed
one-third of the value of its total assets.
2. Pledging. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings.
3. Margin Purchases. The Fund will not purchase any securities on
"margin" (except such short-term credits as are necessary for the clearance of
transactions or to the extent necessary to engage in transactions described in
the Prospectus and Statement of Additional Information which involve margin
purchases).
4. Short Sales. The Fund will not make short sales of securities.
5. Options. The Fund will not purchase or sell puts, calls, options,
straddles, commodities or commodities futures except as described in the
Prospectus and Statement of Additional Information.
6. Mineral Leases. The Fund will not purchase oil, gas or other mineral
leases, rights or royalty contracts.
7. Underwriting. The Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities, a Fund may be deemed
an underwriter under certain federal securities laws.
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<PAGE>
8. Illiquid Investments. The Fund will not purchase securities which
cannot be readily resold to the public because of legal or contractual
restrictions on resale or for which no readily available market exists or engage
in a repurchase agreement maturing in more than seven days if, as a result
thereof, more than 10% of the value of the net assets of the Fund would be
invested in such securities.
9. Real Estate. The Fund will not purchase, hold or deal in real estate
or real estate mortgage loans, except that the Fund may purchase (a) securities
of companies (other than limited partnerships) which deal in real estate or (b)
securities which are secured by interests in real estate or by interests in
mortgage loans including securities secured by mortgage-backed securities.
10. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
marketable bonds, debentures, commercial paper or corporate notes, and similar
marketable evidences of indebtedness which are part of an issue for the public.
11. Investing for Control. The Fund will not invest in companies for
the purpose of exercising control.
12. Other Investment Companies. The Fund will not invest more than 10%
of its total assets in securities of other investment companies. The Fund will
not invest more than 5% of its total assets in the securities of any single
investment company.
13. Amount Invested in One Issuer. The Fund will not invest more than
5% of its total assets in the securities of any issuer; provided, however, that
there is no limitation with respect to investments and obligations issued or
guaranteed by the United States Government or its agencies or instrumentalities
or repurchase agreements with respect thereto.
14. Voting Securities of Any Issuer. The Fund will not purchase 5% or
more of the outstanding voting securities of any electric or gas utility company
(as defined in the Public Utility Holding Company Act of 1935), or purchase more
than 10% of the outstanding voting securities of any other issuer.
15. Securities Owned by Affiliates. The Fund will not purchase or
retain the securities of any issuers if those officers and Trustees of the Trust
or officers, directors, or partners of its Adviser, owning individually more
than one-half of 1% of the securities of such issuer, own in the aggregate more
than 5% of the securities of such issuer.
- 19 -
<PAGE>
16. Industry Concentration. Under normal market conditions, the Fund
will invest more than 25% of its total assets in the public utilities industry.
The Fund will not invest more than 25% of its total assets in any particular
industry except the public utilities industry. For purposes of this limitation,
the public utilities industry includes companies that produce or supply electric
power, natural gas, water, sanitary services, telecommunications and other
communications services (but not radio or television broadcasters) for public
use or consumption.
17. Senior Securities. The Fund will not issue or sell any senior
security as defined by the Investment Company Act of 1940 except insofar as any
borrowing that the Fund may engage in may be deemed to be an issuance of a
senior security.
THE LIMITATIONS APPLICABLE TO THE EQUITY FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except (a) as a
temporary measure for extraordinary or emergency purposes and then only in
amounts not in excess of 10% of the value of its total assets. While the Fund's
borrowings are in excess of 5% of its total assets, the Fund will not purchase
any additional portfolio securities. The Fund will not pledge, mortgage or
hypothecate its assets except in connection with borrowings described in this
investment limitation.
2. Margin Purchases. The Fund will not purchase any securities on
"margin" (except such short-term credit as are necessary for the clearance of
transactions).
3. Short Sales. The Fund will not make short sales of securities.
4. Options. The Fund will not purchase or sell puts, calls, options,
straddles, commodities or commodities futures.
5. Mineral Leases. The Fund will not purchase oil, gas or other mineral
leases or exploration or development programs.
6. Underwriting. The Fund will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), the
Fund may be deemed an underwriter under certain federal securities laws.
7. Illiquid Investments. The Fund will not purchase securities which
cannot be readily resold to the public because of legal or contractual
restrictions on resale or for which no
- 20 -
<PAGE>
readily available market exists or engage in a repurchase agreement maturing in
more than seven days if, as a result thereof, more than 15% of the value of the
Fund's net assets would be invested in such securities.
8. Concentration. The Fund will not invest more than 25% of its total
assets in the securities of issuers in any particular industry; provided,
however, that there is no limitation with respect to investments in obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities or repurchase agreements with respect thereto.
9. Real Estate. The Fund will not purchase, hold or deal in real
estate, including real estate limited partnerships.
10. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities if the borrower agrees to maintain collateral
marked to market daily in an amount at least equal to the market value of the
loaned securities, or (b) by engaging in repurchase agreements. For purposes of
this limitation, the term "loans" shall not include the purchase of marketable
bonds, debentures, commercial paper or corporate notes, and similar marketable
evidences of indebtedness which are part of an issue for the public.
11. Investing for Control. The Fund will not invest in companies for
the purpose of exercising control.
12. Other Investment Companies. The Fund will not invest more than 10%
of its total assets in securities of other investment companies. The Fund will
not invest more than 5% of its total assets in the securities of any single
investment company.
13. Securities of One Issuer. The Fund will not purchase the securities
of any issuer if such purchase at the time thereof would cause more than 5% of
the value of its total assets to be invested in the securities of such issuer
(the foregoing limitation does not apply to investments in government securities
as defined in the Investment Company Act of 1940).
14. Securities of One Class. The Fund will not purchase the securities
of any issuer if such purchase at the time thereof would cause 10% of any class
of securities of such issuer to be held by the Fund, or acquire more than 10% of
the outstanding voting securities of such issuer. (All outstanding bonds and
other evidences of indebtedness shall be deemed to be a single class of
securities of the issuer).
- 21 -
<PAGE>
15. Securities Owned by Affiliates. The Fund will not purchase or
retain the securities of any issuers if those officers and Trustees of the Trust
or officers, directors, or partners of its Adviser, owning individually more
than one-half of 1% of the securities of such issuer, own in the aggregate more
than 5% of the securities of such issuer.
16. Senior Securities. The Fund will not issue or sell any senior
security. This limitation is not applicable to short-term credit obtained by the
Fund for the clearance of purchases and sales or redemptions of securities, or
to arrangements with respect to transactions involving forward foreign currency
exchange contracts, options, futures contracts, short sales and other similar
permitted investments and techniques.
THE LIMITATIONS APPLICABLE TO THE GROWTH/VALUE FUND AND THE AGGRESSIVE
GROWTH 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.
- 22 -
<PAGE>
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 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. Commodities. Each Fund will not purchase, hold or deal in
commodities and will not invest in oil, gas or other mineral explorative or
development programs.
8. 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.
9. 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.
10. Investing for Control. Each Fund will not invest in companies for
the purpose of exercising control.
11. 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 GROWTH/VALUE FUND AND THE
AGGRESSIVE GROWTH FUND ARE NONFUNDAMENTAL AND MAY BE CHANGED WITHOUT SHAREHOLDER
APPROVAL:
1. Illiquid Investments. Each Fund will not purchase securities for
which there are legal or contractual restrictions on resale or for which no
readily available market exists (or 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.
- 23 -
<PAGE>
3. Short Sales. Each Fund will not make short sales of securities.
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 or investing in illiquid securities) will not be a violation
of the policy or restriction unless the excess results immediately and directly
from the acquisition of any security or the action taken.
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the
Trust, their compensation from the Trust and their aggregate compensation from
the Countrywide complex of mutual funds (consisting of the Trust, Countrywide
Tax-Free Trust and Countrywide Investment Trust) for the fiscal year ended March
31, 1998. 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
COMPENSATION FROM
POSITION FROM COUNTRYWIDE
NAME AGE HELD TRUST COMPLEX
- --------------------- --- -------- ------- -----------
Donald L. Bodgon, MD 67 Trustee $4,000 $12,000
+H. Jerome Lerner 59 Trustee 3,500 10,500
*Robert H. Leshner 58 President/Trustee 0 0
*Angelo R. Mozilo 59 Chairman/Trustee 0 0
Fred A. Rappoport 51 Trustee 1,000 3,000
+Oscar P. Robertson 59 Trustee 4,000 12,000
John F. Seymour, Jr. 60 Trustee 3,500 10,500
+Sebastiano Sterpa 69 Trustee 4,000 12,000
Robert G. Dorsey 41 Vice President 0 0
John F. Splain 41 Secretary 0 0
Mark J. Seger 36 Treasurer 0 0
* Mr. Leshner and Mr. Mozilo, as officers and directors of Countrywide
Investments, Inc., are each an "interested person" of the Trust within
the meaning of Section 2(a)(19) of the Investment Company Act of 1940.
+ Member of Audit Committee.
- 24 -
<PAGE>
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
DONALD L. BOGDON, M.D., 1505 Wilson Terrace, 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.
H. JEROME LERNER, 7149 Knoll Road, Cincinnati, Ohio is a principal of
HJL Enterprises and is Chairman of Crane Electronics, Inc., a manufacturer of
electronic connectors. He is also a director of Slush Puppy Inc., a manufacturer
of frozen beverages, and Peerless Manufacturing, a manufacturer of bakery
equipment.
ROBERT H. LESHNER, 312 Walnut Street, Cincinnati, Ohio is President and
a director of Countrywide Investments, Inc. (the investment adviser and
principal underwriter of the Trust) and Countrywide Financial Services, Inc.
(a financial services company and parent of Countrywide Investments, Inc. and
Countrywide Fund Services, Inc.). He is Vice Chairman and a director of
Countrywide Fund Services, Inc. (a registered transfer agent) and CW Fund
Distributors, Inc. (a registered broker-dealer) and President and a Trustee of
Countrywide Tax-Free Trust and Countrywide Investment Trust, registered
investment companies.
ANGELO R. MOZILO, 4500 Park Granada Boulevard, Calabasas, California is
Vice Chairman, Director and Chief Executive Officer of Countrywide Credit
Industries, Inc. (a holding company). He is a director of Countrywide Home
Loans, Inc. (a residential mortgage lender), CTC Foreclosure Services
Corporation (a foreclosure trustee), CCM Municipal Services, Inc. (a tax lien
purchaser), Countrywide Field Services Corporation (foreclosure property
maintenance), Countrywide Tax Services Corporation (mortgage tax services) and
LandSafe, Inc. (the parent company of various LandSafe entities which provide
property appraisals, credit reporting services, title insurance and/or closing
services for residential mortgages). He is Chairman and a director of
Countrywide Financial Services, Inc., Countrywide Investments, Inc., Countrywide
Fund Services, Inc., CW Fund Distributors, Inc., Countrywide Servicing Exchange
(a loan servicing broker), Countrywide Lending Corporation, Countrywide Capital
Markets, Inc., (parent company), LandSafe Servicing, Inc. (a property surveyor)
and various LandSafe subsidiaries and is Chairman and Chief Executive Officer of
Countrywide Securities Corporation (a registered broker-dealer). He is also Vice
Chairman of CWM Mortgage Holdings, Inc. (a real estate investment trust).
- 25 -
<PAGE>
FRED A. RAPPOPORT, 830 Birchwood Drive, Los Angeles, California is Chairman
of The Fred Rappoport Company, a broadcasting and entertainment company.
OSCAR P. ROBERTSON, 4293 Muhlhauser Road, Fairfield, Ohio is President
of Orchem Corp., a chemical specialties distributor, and Orpack Stone
Corporation, a corrugated box manufacturer.
JOHN F. SEYMOUR, JR., 46-393 Blackhawk Drive, Indian Wells, California is
Chief Executive Officer of the Southern California Housing Development
Corporation (a non-profit affordable housing company). He is a director and a
consultant for Orange Coast Title Insurance Co. and is also a director of Irvine
Apartment Communities (a REIT) and Inco Homes (a home builder). Until
January 1, 1995, he was the Executive Director of the California Housing Finance
Agency. He is a former U.S. Senator, State Senator, California State Legislator
and Mayor of Anaheim, California.
SEBASTIANO STERPA, 200 West Glenoaks Boulevard, Glendale, California is
Chairman of Sterpa Realty, Inc. and Chairman and a director of the California
Housing Finance Agency. He is also a director of Real Estate Business Services
and a director of the SunAmerica Mutual Funds.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio is President and
Treasurer of Countrywide Fund Services, Inc., President of CW Fund Distributors,
Inc., Vice President - Finance and Treasurer of Countrywide Financial Services,
Inc. and Treasurer of Countrywide Investments, Inc. He is also Vice President of
Countrywide Investment Trust, Countrywide Strategic Trust, Brundage, Story and
Rose Investment Trust, Markman MultiFund Trust, Maplewood Investment Trust, a
series company, The Thermo Opportunity Fund, Inc., The Dean Family of Funds, The
New York State Opportunity Funds, the Wells Family of Real Estate Funds, the
Lake Shore Family of Funds, Boyar Value Fund, Inc., Bowes Investment Trust,
Profit Funds Investment Trust and Atalanta/Sosnoff Investment Trust and
Assistant Vice President of Williamsburg Investment Trust, Schwartz Investment
Trust, The Tuscarora Investment Trust, The Gannett Welsh & Kotler Funds,
Firsthand Funds, the Westport Funds and Albermarle Investment Trust, all of
which are registered investment companies.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is Vice President,
Secretary and General Counsel of Countrywide Fund Services, Inc. and CW Fund
Distributors, Inc. and Secretary and General Counsel of Countrywide Investments,
Inc. and Countrywide Financial 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, Maplewood
- 26 -
<PAGE>
Investment Trust, a series company, The Thermo Opportunity Fund, Inc., the Wells
Family of Real Estate Funds, Boyar Value Fund, Inc. and Profit Funds Investment
Trust and Assistant Secretary of Schwartz Investment Trust, The Gannett Welsh &
Kotler Funds, Firsthand Funds, the New York State Opportunity Funds, the Dean
Family of Funds, the Westport Funds, the Lake Short Family of Funds, Bowes
Investment Trust, Albermarle Investment Trust and Atalanta/Sosnoff Investment
Trust.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio is Chief
Operating Officer 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,
Maplewood Investment Trust, a series company, The Thermo Opportunity Fund, Inc.,
the New York State Opportunity Funds, the Dean Family of Funds, the Wells Family
of Real Estate Funds, Bowes Investment Trust and Profit Funds Investment Trust
and Assistant Treasurer of Schwartz Investment Trust, The Tuscarora Investment
Trust, The Gannett Welsh & Kotler Funds, Firsthand Funds, the Westport Funds,
Boyar Value Fund, Inc. and Atalanta/Sosnoff Investment Trust.
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 ADVISER AND UNDERWRITER
- --------------------------------------
Countrywide Investments, Inc. (the "Adviser"), is the Funds' investment
manager. The Adviser is a subsidiary of Countrywide Financial Services, Inc.,
which is a wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New
York Stock Exchange listed company principally engaged in the business of
residential mortgage lending. Messrs. Mozilo and Leshner may be deemed to be
affiliates of the Adviser by reason of their position as Chairman and President,
respectively, of the Adviser. Messrs. Mozilo and Leshner, by reason of such
affiliation, may directly or indirectly receive benefits from the advisory fees
paid to the Adviser.
Under the terms of the investment advisory agreements between the Trust
and the Adviser, the Adviser manages the Funds' investments. The Equity Fund and
the Utility Fund each pay the Adviser a fee computed and accrued daily and paid
monthly at an annual rate of .75% of its average daily net assets up to
$200,000,000, .70% of such assets from $200,000,000 to $500,000,000 and .50% of
such assets in excess of $500,000,000. The Growth/Value Fund and the Aggressive
Growth Fund each pay the
- 27 -
<PAGE>
Adviser 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 Adviser during the applicable six month period.
For the fiscal years ended March 31, 1998, 1997 and 1996, the Utility Fund
paid advisory fees of $303,151, $319,201 and $328,982, respectively. For the
fiscal years ended March 31, 1998, 1997 and 1996, the Equity Fund paid advisory
fees of $221,798, $91,182 (net of voluntary fee waivers of $21,000) and $5,214
(net of voluntary fee waivers of $53,777), respectively; however, in order to
further reduce the operating expenses of the Equity Fund, the Adviser
voluntarily reimbursed the Fund for $5,834 of Class A expenses during the fiscal
year ended March 31, 1997 and $5,308 of Class A expenses during the fiscal year
ended March 31, 1996. For the fiscal period ended March 31, 1998, the
Growth/Value Fund and the Aggressive Growth Fund paid advisory fees of $160,090
and $85,703, respectively. Prior to August 29, 1997, the investment manager of
the Predecessor Funds was Trans Financial Bank, N.A. (the "Predecessor
Manager"). For the fiscal periods ended August 31, 1997 and 1996, the
Predecessor Growth/Value Fund paid advisory fees of $206,612 and $47,638 (net of
voluntary fee waivers of $34,323), respectively; however, for the fiscal period
ended August 31, 1996, the Predecessor Manager reimbursed $37,378 of operating
expenses in order to further reduce the operating expenses of the Predecessor
Growth/Value Fund. For the fiscal periods ended August 31, 1997 and 1996, the
Predecessor Aggressive Growth Fund paid advisory fees of $30,082 (net of
voluntary fee waivers of $64,077) and $0 (net of voluntary fee waivers of
$31,177), respectively; however, the Predecessor Manager reimbursed $65,099 of
operating expenses for the fiscal period ended August 31, 1996 in order to
further reduce the operating expenses of the Predecessor Aggressive Growth Fund.
The Adviser has agreed that, until at least August 31, 1999, it will waive
fees and reimburse expenses in order to limit the total operating expenses of
the Growth/Value Fund and the Aggressive Growth Fund to 1.95% of each Fund's
average daily net assets.
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
- 28 -
<PAGE>
to indemnify the Trust's officers and Trustees with respect to such litigation,
except in instances of willful misfeasance, bad faith, gross negligence or
reckless disregard by such officers and Trustees in the performance of their
duties. The Adviser bears promotional expenses in connection with the
distribution of the Funds' shares to the extent that such expenses are not
assumed by the Funds under their plans of distribution (see below). The
compensation and expenses of any officer, Trustee or employee of the Trust who
is an officer, director, employee or stockholder of the Adviser are paid by the
Adviser.
By their terms, the Funds' investment advisory agreements 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' investment advisory agreements may be
terminated at any time, on sixty days' written notice, without the payment of
any penalty, by the Board of Trustees, by a vote of the majority of a Fund's
outstanding voting securities, or by the Adviser. The investment advisory
agreements automatically terminate in the event of their assignment, as defined
by the Investment Company Act of 1940 and the rules thereunder.
The Adviser is also the principal underwriter of the Funds and, as
such, the exclusive agent for distribution of shares of the Funds. The Adviser
is obligated to sell the shares on a best efforts basis only against purchase
orders for the shares. Shares of each Fund are offered to the public on a
continuous basis.
The Adviser currently allows concessions to dealers who sell shares of
the Funds. The Adviser receives that portion of the sales load which is not
reallowed to the dealers who sell shares of the Funds. The Adviser retains the
entire sales load on all direct initial investments in the Funds and on all
investments in accounts with no designated dealer of record. For the fiscal year
ended March 31, 1998, the aggregate underwriting commissions on sales of the
Trust's shares were $70,717 of which the Adviser paid $51,599 to unaffiliated
broker-dealers in the selling network, earned $12,478 as a broker-dealer in the
selling network and retained $6,640 in underwriting commissions. For the fiscal
year ended March 31, 1997, the aggregate underwriting commissions on sales of
the Trust's shares were $70,478 of which the Adviser paid $60,141 to
unaffiliated broker-dealers in the selling network, earned $3,617 as a
broker-dealer in the selling network and retained $6,720 in underwriting
commissions. For the fiscal year ended March 31, 1996, the aggregate
underwriting commissions
- 29 -
<PAGE>
on sales of the Trust's shares were $136,764 of which the Adviser paid $121,645
to unaffiliated broker-dealers in the selling network, earned $8,240 as a
broker-dealer in the selling network and retained $6,879 in underwriting
commissions.
The Adviser retains the contingent deferred sales load on redemptions
of shares of the Utility Fund and the Equity Fund which are subject to a
contingent deferred sales load. For the fiscal year ended March 31, 1998, the
Adviser collected $1,756 and $957 of contingent deferred sales loads on
redemptions of Class C shares of the Utility Fund and the Equity Fund,
respectively. For the fiscal year ended March 31, 1997, the Adviser collected
$1,141 and $505 of contingent deferred sales loads on redemptions of Class C
shares of the Utility Fund and the Equity Fund, respectively.
The Funds may compensate dealers, including the Adviser and its affiliates,
based on the average balance of all accounts in the Funds for which the dealer
is designated as the party responsible for the account. See "Distribution Plans"
below.
MASTRAPASQUA & ASSOCIATES
- -------------------------
Mastrapasqua & Associates, Inc. ("Mastrapasqua") has been retained by the
Adviser to serve as the discretionary portfolio manager of the Growth/Value Fund
and the Aggressive Growth Fund. Mastrapasqua also served as investment adviser
to the Predecessor Funds. Mastrapasqua selects the portfolio securities for
investment by the Funds, purchases and sell 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 Adviser. Mastrapasqua receives a
fee equal to the annual rate of .60% of each Fund's average daily net assets up
to $50,000,000, .50% of such assets from $50,000,000 to $100,000,000, .40% 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 Mastrapasqua are paid for wholly by
the Adviser. The compensation of any officer, director or employee of
Mastrapasqua who is rendering services to the Fund is paid by Mastrapasqua. For
the fiscal period ended March 31, 1998, the Adviser paid fees of $148,854 to
Mastrapasqua for serving as discretionary portfolio manager to the Growth/Value
Fund and the Aggressive Growth Fund.
The employment of Mastrapasqua 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
- 30 -
<PAGE>
approval. The employment of Mastrapasqua 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 Adviser, or by Mastrapasqua. The agreement with Mastrapasqua automatically
terminates in the event of its assignment, as defined by the Investment Company
Act of 1940 and the rules thereunder.
DISTRIBUTION PLANS
- ------------------
CLASS A SHARES -- As stated in the Prospectus, the Funds have adopted a
plan of distribution (the "Class A Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 which permits each Fund to pay for expenses
incurred in the distribution and promotion of the Funds' shares, including but
not limited to, the printing of prospectuses, statements of additional
information and reports used for sales purposes, advertisements, expenses of
preparation and printing of sales literature, promotion, marketing and sales
expenses, and other distribution-related expenses, including any distribution
fees paid to securities dealers or other firms who have executed a distribution
or service agreement with the Adviser. The Class A Plan expressly limits payment
of the distribution expenses listed above in any fiscal year to a maximum of
.25% of the average daily net assets of Class A shares of the Utility Fund and
the Equity Fund and .25% of the average daily net assets of the Growth/Value
Fund and the Aggressive Growth Fund. Unreimbursed expenses will not be carried
over from year to year.
For the fiscal period ended March 31, 1998, the aggregate
distribution-related expenditures of the Utility Fund, the Equity Fund, the
Growth/Value Fund and the Aggressive Growth Fund under the Class A Plan were
$45,189, $27,099, $38,951 and $17,888, respectively. Amounts were spent as
follows:
Growth/ Aggressive
Utility Equity Value Growth
Fund Fund Fund Fund
------- ------ ------- --------
Printing and mailing of
prospectuses and reports
to prospective shareholders... $ 7,212 $ 4,921 $10,951 $5,888
Payments to broker-dealers
and others for the sale or
retention of assets........ 37,977 22,178 28,000 12,000
------- ------- ------- -------
$45,189 $27,099 $38,951 $17,888
======= ======= ======= =======
CLASS C SHARES (Utility Fund and Equity Fund) -- The Utility Fund and
the Equity Fund have also adopted a plan of distribution (the "Class C Plan")
with respect to the Class C shares of such Funds. The Class C Plan provides for
two categories of payments. First, the Class C Plan provides for the payment to
the Adviser of an account maintenance fee, in an amount equal to an annual
- 31 -
<PAGE>
rate of .25% of the average daily net assets of the Class C shares, which may be
paid to other dealers based on the average value of Class C shares owned by
clients of such dealers. In addition, a Fund may pay up to an additional .75%
per annum of the daily net assets of the Class C shares for expenses incurred in
the distribution and promotion of the shares, including prospectus costs for
prospective shareholders, costs of responding to prospective shareholder
inquiries, payments to brokers and dealers for selling and assisting in the
distribution of Class C shares, costs of advertising and promotion and any other
expenses related to the distribution of the Class C shares. Unreimbursed
expenditures will not be carried over from year to year. The Funds may make
payments to dealers and other persons in an amount up to .75% per annum of the
average value of Class C shares owned by their clients, in addition to the .25%
account maintenance fee described above.
For the fiscal year ended March 31, 1998, the aggregate
distribution-related expenditures of the Utility Fund and the Equity Fund under
the Class C Plan were $12,633 and $14,470, respectively. Of these amounts, the
Utility Fund spent $12,023 on payments to broker-dealers and $610 on printing
and mailing of prospectuses and reports to prospective shareholders; and the
Equity Fund spent $13,822 on payments to broker-dealers and $648 on printing and
mailing of prospectuses and reports to prospective shareholders.
GENERAL INFORMATION -- Agreements implementing the Plans (the
"Implementation Agreements"), including agreements with dealers wherein such
dealers agree for a fee to act as agents for the sale of the Funds' shares, are
in writing and have been approved by the Board of Trustees. All payments made
pursuant to the Plans are made in accordance with written agreements.
The continuance of the Plans and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plans or any
Implementation Agreement (the "Independent Trustees") at a meeting called for
the purpose of voting on such continuance. A Plan may be terminated at any time
by a vote of a majority of the Independent Trustees or by a vote of the holders
of a majority of the outstanding shares of a Fund or the applicable class of a
Fund. In the event a Plan is terminated in accordance with its terms, the
affected Fund (or class) will not be required to make any payments for expenses
incurred by the Adviser after the termination date. Each Implementation
Agreement terminates automatically in the event of its assignment and may be
terminated at any time by a vote of a majority of the Independent Trustees or by
a vote of the holders of a majority of the
- 32 -
<PAGE>
outstanding shares of a Fund (or the applicable class) on not more than 60 days'
written notice to any other party to the Implementation Agreement. The Plans may
not be amended to increase materially the amount to be spent for distribution
without shareholder approval. All material amendments to the Plans must be
approved by a vote of the Trust's Board of Trustees and by a vote of the
Independent Trustees.
In approving the Plans, the Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties as Trustees, that
there is a reasonable likelihood that the Plans will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plans should assist in the growth of
the Funds which will benefit the Funds and their shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plans will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plans. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plans are in effect, all amounts spent by the Funds pursuant
to the Plans and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. Distribution
expenses attributable to the sale of more than one class of shares of a Fund
will be allocated at least annually to each class of shares based upon the ratio
in which the sales of each class of shares bears to the sales of all the shares
of such Fund. In addition, the selection and nomination of those Trustees who
are not interested persons of the Trust are committed to the discretion of the
Independent Trustees during such period.
Angelo R. Mozilo and Robert H. Leshner, as interested persons of the
Trust, may be deemed to have a financial interest in the operation of the Plans
and the Implementation Agreements.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of
the Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser (or Mastrapasqua, with respect to the
Growth/Value Fund and the Aggressive Growth Fund) and are subject to review by
the Board of Trustees of the Trust. In the purchase and sale of portfolio
securities, the Adviser (or Mastrapasqua, with respect to the Growth/Value Fund
and the Aggressive Growth Fund) seeks best execution for the Funds, taking into
account such factors as price (including the applicable brokerage commission or
dealer
- 33 -
<PAGE>
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. Mastrapasqua (or Mastrapasqua) generally seeks favorable
prices and commission rates that are reasonable in relation to the benefits
received. For the fiscal years ended March 31, 1998, 1997 and 1996, the Utility
Fund paid brokerage commissions of $10,445, $25,345 and $43,560, respectively.
For the fiscal years ended March 31, 1998, 1997 and 1996, the Equity Fund paid
brokerage commissions of $36,486, $34,257 and $23,064, respectively. For the
fiscal period ended March 31, 1998, the Growth/Value Fund and the Aggressive
Growth Fund paid brokerage commissions of $20,459 and $8,388, respectively.
The Adviser (or Mastrapasqua, with respect to the Growth/Value Fund and
the Aggressive Growth Fund) is specifically authorized to select brokers who
also provide brokerage and research services to the Funds and/or other accounts
over which the Adviser (or Mastrapasqua) exercises investment discretion and to
pay such brokers a commission in excess of the commission another broker would
charge if the Adviser (or Mastrapasqua) determines in good faith that the
commission is reasonable in relation to the value of the brokerage and research
services provided. The determination may be viewed in terms of a particular
transaction or the Adviser's (or Mastrapasqua's) overall responsibilities with
respect to the Funds and to accounts over which it exercises investment
discretion. During the fiscal year ended March 31, 1998, the amount of brokerage
transactions and related commissions for the Utility Fund directed to brokers
due to research services provided were $3,355,694 and $8,745, respectively.
During the fiscal year ended March 31, 1998, the amount of brokerage
transactions and related commissions for the Equity Fund directed to brokers due
to research services provided were $16,860,965 and $36,486, respectively. During
the fiscal period ended March 31, 1998, the amount of brokerage transactions and
related commissions for the Growth/Value Fund directed to brokers due to
research services provided were $9,346,338 and $10,949, respectively. During the
fiscal period ended March 31, 1998, the amount of brokerage transactions and
related commissions for the Aggressive Growth Fund directed to brokers due to
research services provided were $2,565,328 and $4,188, respectively.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds, the
Adviser and Mastrapasqua, it is not possible to place a dollar value on it.
Research services furnished by brokers through whom the Funds effect securities
transactions may
- 34 -
<PAGE>
be used by the Adviser and Mastrapasqua in servicing all of its accounts and not
all such services may be used by the Adviser and Mastrapasqua 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 Mastrapasqua may effect securities transactions
which are executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. No Fund will effect any
brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Funds do not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Adviser nor
affiliates of the Trust, the Adviser or Mastrapasqua will receive reciprocal
brokerage business as a result of the brokerage business transacted by the Funds
with other brokers.
During the fiscal year ended March 31, 1998, the Funds entered into
repurchase transactions with the following of the Trust's regular broker-dealers
as defined under the Investment Company Act of 1940: Dean Witter Reynolds Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Nesbitt-Burns Securities,
Inc., Prudential Securities, Inc. and Zions First National Bank Capital Markets.
CODE OF ETHICS. The Trust, the Adviser and Mastrapasqua have each adopted a Code
of Ethics under Rule 17j-1 of the Investment Company Act of 1940. The Code
significantly restricts the personal investing activities of all employees of
the Adviser and Mastrapasqua and, as described below, imposes additional, more
onerous, restrictions on investment personnel of the Adviser and Mastrapasqua.
The Code requires that all employees of the Adviser and Mastrapasqua preclear
any personal securities investment (with limited exceptions, such as U.S.
Government obligations). The preclearance requirement and associated procedures
are designed to identify any substantive prohibition or limitation applicable to
the proposed investment. In addition, no employee may purchase or sell any
security which at the time is being purchased or sold (as the case may be), or
to the knowledge of the employee is being considered for purchase or sale, by
any Fund. The substantive restrictions applicable to investment personnel of the
Adviser and Mastrapasqua include a ban on acquiring any securities in an initial
public offering and a prohibition from profiting on short-term trading in
securities. Furthermore, the Code provides for trading "blackout periods" which
prohibit trading by investment personnel of the Adviser and Mastrapasqua within
periods of trading by the Funds in the same (or equivalent) security.
- 35 -
<PAGE>
PORTFOLIO TURNOVER
- ------------------
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.
Generally the Utility Fund and the Equity Fund intend to invest for
long-term purposes. 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. For the fiscal years
ended March 31, 1998, 1997 and 1996, the Utility Fund experienced portfolio
turnover of 0%, 3% and 11%, respectively. For the fiscal years ended March 31,
1998, 1997 and 1996, the Equity Fund experienced portfolio turnover of 7%, 38%
and 38%, respectively.
The Growth/Value Fund expects that the average holding period of its
equity securities will be between eighteen and thirty-six months. Because the
Fund is actively managed in light of Mastrapasqua's investment outlook for
common stocks, there may be a very substantial turnover of the Fund's portfolio.
For the fiscal periods ended March 31, 1998, August 31, 1997 and August 31,
1996, the Growth/Value Fund experienced annualized portfolio turnover of 62%,
52% and 21%, respectively.
If warranted by market conditions, the Aggressive Growth Fund may
engage in short-term trading if Mastrapasqua 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. For the fiscal periods
ended March 31, 1998, August 31, 1997 and August 31, 1996, the Aggressive Growth
Fund experienced annualized portfolio turnover of 40%, 51% and 16%,
respectively.
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, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day,
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<PAGE>
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.
OTHER PURCHASE INFORMATION
- --------------------------
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of Class A
shares of the Utility Fund and the Equity Fund and shares of the Growth/Value
Fund and the Aggressive Growth Fund 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 Adviser with the amount of his current purchases in order to take advantage
of the reduced sales loads set forth in the tables in the Prospectus. The
purchaser or his dealer must notify the Transfer Agent that an investment
qualifies for a reduced sales load. The reduced load will be granted upon
confirmation of the purchaser's holdings by the Transfer Agent.
LETTER OF INTENT. The reduced sales loads set forth in the tables in
the Prospectus may also be available to any "purchaser" (as defined in the
Prospectus) of shares of 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.
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<PAGE>
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose a front-end sales load or
imposes a reduced sales load in connection with purchases of shares of 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
Adviser. Purchases described in the "Purchases at Net Asset Value" section may
be made for investment only, and the shares may not be resold except through
redemption by or on behalf of the Trust.
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
Each Fund has qualified and intends to qualify annually for the special
tax treatment afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; and (ii) diversify its holdings so that at the
end of each quarter of its taxable year the following two conditions are met:
(a) at least 50% of the value of the Fund's total assets is represented by cash,
U.S. Government securities, securities of other regulated investment companies
and other securities (for this purpose such other securities will qualify only
if the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
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<PAGE>
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction. As of March 31, 1998, the Aggressive Growth Fund had
capital loss carryforwards for federal income tax purposes of $114,898.
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.
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, which are applicable to straddles. If the Fund makes any
of the elections, the amount, character and timing of the recognition of gains
or losses from the affected straddle positions will be determined under rules
that vary according to the elections made. The rules applicable under certain of
the elections operate to accelerate the recognition of gains or losses from the
affected straddle positions. Because application of the straddle rules may
affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle positions, the amount
which must be distributed to shareholders, and which will be taxed to
shareholders as ordinary income or long-term capital gain in any year, may be
increased or decreased substantially as compared to a fund that did not engage
in such hedging transactions.
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<PAGE>
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)
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<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. The average annual total
returns of the Funds for the periods ended March 31, 1998 are as follows:
Utility Fund (Class A)
- ----------------------
1 Year 35.28%
5 Years 12.02%
Since inception (August 15, 1989) 12.39%
Utility Fund (Class C)
- ----------------------
1 Year 39.91%
Since inception (August 2, 1993) 12.47%
Equity Fund (Class A)
- --------------------
1 Year 37.03%
Since inception (August 2, 1993) 16.80%
Equity Fund (Class C)
- --------------------
1 Year 41.63%
Since inception (June 7, 1993) 16.42%
Growth/Value Fund
- -----------------
1 Year 31.26%
Since inception (September 29, 1995) 23.11%
Aggressive Growth Fund
- ----------------------
1 Year 28.19%
Since inception (September 29, 1995) 18.29%
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. The total returns of the Funds as calculated in this manner for each of
the last ten fiscal years (or since inception) are as follows:
- 41 -
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Utility Utility Equity Equity Growth/ Aggressive
Fund Fund Fund Fund Value Growth
Class A Class C Class A Class C Fund Fund
------- ------- ------- ------- ------- ----
Period Ended
- ------------
March 31, 1990 + 5.37%(1)
March 31, 1991 + 9.23%
March 31, 1992 +11.84%
March 31, 1993 +20.64%
March 31, 1994 - 2.11% - 5.21%(2) - 2.63%(2) - 2.91%(3)
March 31, 1995 + 3.68% + 3.00% + 8.07% + 7.32%
March 31, 1996 +21.65% +20.78% +27.90% +26.90% +14.50%(4) +8.40%(4)
March 31, 1997 + 5.61% + 4.82% +11.82% +11.01% +12.77% +9.46%
March 31, 1998 +40.92% +39.91% +42.74% +41.63% +36.73% +33.53%
(1) From date of initial public offering on August 15, 1989
(2) From date of initial public offering on August 2, 1993
(3) From date of initial public offering on June 7, 1993
(4) From date of initial public offering on September 29, 1995
</TABLE>
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. The average annual
compounded rates of return for the Funds (excluding sales loads) for the periods
ended March 31, 1998 are as follows:
Utility Fund (Class A)
- ----------------------
1 Year 40.92%
3 Years 21.88%
5 Years 12.94%
Since inception (August 15, 1989) 12.92%
Utility Fund (Class C)
- ----------------------
1 Year 39.91%
3 Years 20.99%
Since inception (August 2, 1993) 12.47%
Equity Fund (Class A)
- ---------------------
1 Year 42.74%
3 Years 26.86%
Since inception (August 2, 1993) 17.83%
Equity Fund (Class C)
- --------------------
1 Year 41.63%
3 Years 25.89%
Since inception (June 7, 1993) 16.42%
Growth/Value Fund
- -----------------
1 Year 36.73%
Since inception (September 29, 1995) 25.13%
- 42 -
<PAGE>
Aggressive Growth Fund
- -----------------------
1 Year 33.53%
Since inception (September 29, 1995) 20.24%
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
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. Average annual
total return and yield are computed separately for Class A and Class C shares of
the Utility Fund and the Equity Fund. The yield of Class A shares is expected to
be higher than the yield of Class C shares due to the higher distribution fees
imposed on Class C shares.
- 43 -
<PAGE>
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 ranks individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Utility Funds may provide
comparative performance information appearing in the Utility Funds category and
the Equity Fund may provide comparative performance information appearing in the
Growth & Income Funds category. 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.
Dow Jones Industrial Average is a measurement of general market price
movement for 30 widely held stocks listed on the New York Stock Exchange.
S&P Utility Index is an unmanaged index consisting of three utility
groups totaling 40 companies -- 21 electric power companies, 11 natural gas
distributors and pipelines and 8 telephone companies.
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
- 44 -
<PAGE>
performance. In addition, there can be no assurance that the Funds will continue
this performance as compared to such other averages.
PRINCIPAL SECURITY HOLDERS
- ---------------------------
As of July 2, 1998, Trans Financial Bank, N.A., 500 Main Street,
Bowling Green, Kentucky owned of record 56.89% of the outstanding shares of the
Growth/Value Fund and 15.94% of the outstanding shares of the Aggressive Growth
Fund. Trans Financial Bank may be deemed to control the Growth/Value Fund by
virtue of the fact that it owned of record more than 25% of the outstanding
shares of the Fund as of such date.
As of July 2, 1998, Charles Schwab & Co., Inc. Mutual Funds Special
Custody Account for the Exclusive Benefit of Its Customers, 101 Montgomery
Street, San Francisco, California owned of record 22.50% of the outstanding
shares of the Growth/Value Fund and 15.94% of the outstanding shares of the
Aggressive Growth Fund; Merrill Lynch, Pierce, Fenner & Smith Incorporated, For
the Sole Benefit of its Customers, 4800 Deer Lake Drive East, Jacksonville,
Florida owned of record 5.12% and 20.16% of the outstanding Class A and Class C
shares, respectively, of the Utility Fund; Citizens Business Bank, Trustee FBO
Countrywide Credit Industries, Inc., P.O. Box 671, Pasadena, California, Ohio
owned of record 24.59% of the outstanding Class A shares of the Equity Fund;
Martin S. Goldfarb, M.D., 919 N. Crescent, Beverly Hills, California owned of
record 10.31% of the outstanding Class A shares of the Equity Fund; Clifford G.
Neill Trust/Clifford G. Neill, DDS P.C. Profit Sharing Plan, 307 S. University,
Carbondale, Illinois owned of record 14.56% of the outstanding Class C shares of
the Equity Fund; and Bear Stearns Securities Corp., FBO a customer's account,
One Metrotech Center North, Brooklyn, New York owned of record 5.57% of the
outstanding Class C shares of the Equity Fund.
As of July 2, 1998, the Trustees and officers of the Trust as a group
owned of record or beneficially 1.92% of the outstanding Class A shares and
4.75% of the outstanding Class C shares of the Equity Fund and less than 1% of
the outstanding shares of the Trust and of each other Fund (or class thereof).
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, is
the Custodian for the Utility Fund and the Equity Fund and Star Bank, N.A., 425
Walnut Street, Cincinnati, Ohio is the Custodian for the Growth/Value and the
Aggressive Growth Fund. The Custodians act as the Funds' depository, safekeeps
their portfolio securities, collects all income and other payments with respect
thereto, disburses funds as instructed and maintains records in connection with
its duties. As compensation, each Custodian receives from a Fund a base fee
equal to a percentage of that Fund's net assets plus a charge for each security
transaction, subject to a minimum annual fee.
- 45 -
<PAGE>
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent
auditors for the Trust for the fiscal year ending March 31, 1999. 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 class of
shares of a Fund. In addition, the Funds pay out-of-pocket expenses, including
but not limited to, postage, envelopes, checks, drafts, forms, reports, record
storage and communication lines.
CFS also provides accounting and pricing services to the 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, the Utility Fund
and the Equity Fund each pay CFS a fee in accordance with the following
schedule:
Asset Size of Fund 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
The Growth/Value Fund and the Aggressive Growth Fund each pay CFS a fee in
accordance with the following schedule:
Asset Size of Fund Monthly Fee
------------------ -----------
$ 0 - $ 50,000,000 $2,000
50,000,000 - 100,000,000 2,500
100,000,000 - 200,000,000 3,000
200,000,000 - 300,000,000 3,500
Over 300,000,000 4,500
In addition, each Fund pays all costs of external pricing services.
- 46 -
<PAGE>
CFS is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, CFS supplies
non-investment related statistical and research data, internal regulatory
compliance services and executive and administrative services. CFS supervises
the preparation of tax returns, reports to shareholders of the Funds, reports to
and filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For the
performance of these administrative services, CFS receives a fee from the
Adviser. The Adviser is solely responsible for the payment of these
administrative fees to CFS, and CFS has agreed to seek payment of such fees
solely from the Adviser.
ANNUAL REPORT
- --------------
The Funds' financial statements as of March 31, 1998 appear in the
Trust's annual report which is attached to this Statement of Additional
Information.
- 47 -
<PAGE>
ANNUAL REPORT
MARCH 31, 1998
...............
UTILITY
FUND
.......
EQUITY
FUND
........
GROWTH/VALUE
FUND
.............
AGGRESSIVE GROWTH
FUND
..................
<PAGE>
UTILITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
The Utility Fund seeks a high level of current income by investing primarily in
securities of public utilities. The Fund's total returns for the fiscal year
ended March 31, 1998 (excluding the impact of applicable sales loads) were
40.92% and 39.91% for Class A shares and Class C shares, respectively.
During fiscal 1998, the continued strength in the U.S. economy and lack of
inflationary threats contributed to the strong performance of both the stock and
bond markets. Although most equity indices reached new record highs during the
fiscal year, the stock market's ascent was not without a fairly large setback
that occurred in October 1997 due to concerns over the Asian currency and
economic problems. These problems, while negative for the overall stock market,
were positive for utility stocks as investors flocked to stocks that were
defensive in nature and had very little international exposure. The powerful
rally in utility stocks in the last half of the fiscal year pushed the total
return of these stocks to levels almost equal to that of the overall equity
market. For the fiscal year, the S&P Utility Index returned 36.42%, compared to
the 36.05% return of the Dow Jones Industrial Average and the 48.00% return of
the S&P 500 Index.
While all utility sectors represented in the Fund performed well during the
fiscal year, especially strong performance was seen in the telecommunications
sector as consolidation swept through the industry and the regional bell
operating companies became more aggressive in addressing top line growth and
market share expansion. As a result, our holdings in BellSouth, Ameritech and
Bell Atlantic all enjoyed total returns in excess of 60%. Many of our electric
utility holdings also performed very well, as evidenced by the almost 50% return
of FPL Group. However, despite strong performance, utility funds again did not
participate in the record amounts of new money flowing into the equity markets.
As a result, very few new holdings were added and portfolio turnover has been
minimal over the past two fiscal years.
Our outlook for the utility sector remains optimistic. Favorable levels of
inflation and interest rates, additional industry consolidation and deregulation
should be positive for the industry. With dividend yields on the major indices
hitting record low levels, the higher yields available on utility stocks should
add to their relative attractiveness. The Fund will continue to include in its
portfolio those companies that are well-positioned to increase their revenues
and earnings during the upcoming period of deregulation, with strong management
teams and the ability to increase dividend payouts.
<PAGE>
Comparison of the Change in Value of a $10,000 Investment in the Utility
Fund* and the Standard & Poor's Utility Index
STANDARD & POOR'S UTILITY INDEX: UTILITY FUND (CLASS A):
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
08/16/89 10,000 08/16/89 9,600
09/30/89 2.43% 10,243 09/30/89 0.73% 9,671
12/31/89 11.42% 11,412 12/31/89 6.72% 10,320
03/31/90 -7.45% 10,562 03/31/90 -1.99% 10,115
06/30/90 0.53% 10,618 06/30/90 0.28% 10,144
09/30/90 -4.50% 10,140 09/30/90 -2.86% 9,854
12/31/90 9.67% 11,120 12/31/90 7.19% 10,562
03/31/91 2.22% 11,367 03/31/91 4.61% 11,049
06/30/91 -4.20% 10,889 06/30/91 0.60% 11,115
09/30/91 7.90% 11,749 09/30/91 9.26% 12,144
12/31/91 8.49% 12,746 12/31/91 6.72% 12,960
03/31/92 -9.34% 11,556 03/31/92 -4.66% 12,356
06/30/92 7.79% 12,457 06/30/92 4.44% 12,905
09/30/92 7.88% 13,438 09/30/92 3.82% 13,398
12/31/92 2.53% 13,777 12/31/92 4.14% 13,953
03/31/93 10.79% 15,264 03/31/93 6.84% 14,906
06/30/93 1.86% 15,548 06/30/93 1.50% 15,130
09/30/93 6.70% 16,589 09/30/93 2.82% 15,556
12/31/93 -5.76% 15,634 12/31/93 -3.11% 15,073
03/31/94 -8.50% 14,305 03/31/94 -3.20% 14,591
06/30/94 -0.00% 14,304 06/30/94 -0.83% 14,469
09/30/94 0.45% 14,369 09/30/94 1.32% 14,660
12/31/94 -0.10% 14,355 12/31/94 0.74% 14,769
03/31/95 6.93% 15,349 03/31/95 2.43% 15,128
06/30/95 7.44% 16,491 06/30/95 5.03% 15,890
09/30/95 11.28% 18,350 09/30/95 6.90% 16,986
12/31/95 11.22% 20,409 12/31/95 9.96% 18,677
03/31/96 -4.78% 19,434 03/31/96 -1.46% 18,404
06/30/96 5.01% 20,408 06/30/96 4.77% 19,283
09/30/96 -3.31% 19,732 09/30/96 -3.27% 18,651
12/31/96 6.62% 21,038 12/31/96 5.92% 19,755
03/31/97 -3.38% 20,326 03/31/97 -1.61% 19,437
06/30/97 5.89% 21,524 06/30/97 6.93% 20,784
09/30/97 4.87% 22,573 09/30/97 4.05% 21,626
12/31/97 16.28% 26,248 12/31/97 16.83% 25,266
03/31/98 5.64% 27,729 03/31/98 8.41% 27,390
Past performance is not predictive of future performance.
Utility Fund
Average Annual Total Returns
1 Year 5 Years Since Inception*
Class A 35.28% 12.02% 12.39%
Class C 39.91% -- 12.47%
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. The initial public offering of
Class A shares commenced on August 15, 1989, and the initial public offering of
Class C shares commenced on August 2, 1993.
<PAGE>
EQUITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
The Equity Fund seeks long-term growth of capital, current income and growth of
income by investing primarily in dividend-paying common stocks. The Fund's total
returns for the fiscal year ended March 31, 1998 (excluding the impact of
applicable sales loads) were 42.74% and 41.63% for Class A shares and Class C
shares, respectively.
The continued strength in the U.S. economy contributed to a powerful rally in
the stock market throughout the fiscal year. Record low levels of unemployment,
high consumer confidence and spending, rising wages and record low levels of
inflation led to a surge in the sales of both durable and non-durable items and
corresponding growth in Gross Domestic Product. As expected, the strong economic
growth led to higher corporate profits and stock prices.
Unlike the prior fiscal year, the current market rally has been broad-based. The
S&P's small, mid and large-cap indices all returned over 47%, with the S&P 500
Index up 48%. The Dow Jones Industrial Average, comprised strictly of large-cap
Blue Chip stocks, gained 36%, and the small-cap Russell 2000 Index was up over
40%. The fear of a slowdown in corporate profits resulting from the problems in
Asia, and the lack of pricing power among many companies and industries, has
redirected investors' interest to those stocks with the potential to provide
solid growth in revenues and earnings, regardless of the size of market
capitalization.
The Fund remained well-diversified throughout the fiscal year. Holdings in the
financial and health care sectors exhibited very strong performance. The
financial services industry benefited from low interest rates, consolidation,
cost cutting and the bull market in both the stock and bond markets. Health care
stocks enjoyed the positive fundamentals brought on by an aging population,
advances in drug therapies and the introduction of new treatments that showed
success in battling some of the most widespread diseases. Cyclical holdings also
performed well as they benefited from the strong economy and increased consumer
spending on items such as entertainment and clothing. The performance of
technology stocks was mixed due to concerns over Asian demand, a slowdown in the
growth rate of personal computer sales and excess inventory of many computer
components. Our holdings in the energy sector performed below expectations as
oil prices plunged over 30% on concerns of excess supply and weakening demand
resulting from the Asian economic crisis. However, longer-term favorable
supply/demand fundamentals and recent technology gains allowing for lower cost
exploration and production should have a positive impact on the energy industry.
We remain optimistic on the longer-term fundamentals facing the market --
falling inflation, accommodating interest rates and moderating economic growth
and corporate profits. Management continues to focus on companies that are
leaders in their industries and can offer growth in revenues, cash flows and
earnings. Emphasis will be placed on those companies that are low cost
producers, as the lack of pricing power, brought on by lower rates of inflation,
global competition and excess capacity, should remain a key concern facing the
stock market.
<PAGE>
Comparison of the Change in Value of a $10,000 Investment in the Equity Fund*
and the Standard & Poor's 500 Index
STANDARD & POOR'S 500 INDEX: EQUITY FUND (CLASS C):
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/07/93 10,000 06/07/93 10,000
06/30/93 0.78% 10,078 06/30/93 0.10% 10,010
09/30/93 2.58% 10,338 09/30/93 1.20% 10,130
12/31/93 2.32% 10,578 12/31/93 -1.34% 9,994
03/31/94 -3.79% 10,177 03/31/94 -2.85% 9,709
06/30/94 0.42% 10,220 06/30/94 -4.04% 9,317
09/30/94 4.88% 10,718 09/30/94 5.05% 9,787
12/31/94 -0.02% 10,716 12/31/94 -0.37% 9,751
03/31/95 9.74% 11,760 03/31/95 6.86% 10,419
06/30/95 9.55% 12,883 06/30/95 6.48% 11,095
09/30/95 7.95% 13,907 09/30/95 7.19% 11,893
12/31/95 6.02% 14,744 12/31/95 7.43% 12,776
03/31/96 5.37% 15,535 03/31/96 3.49% 13,222
06/30/96 4.49% 16,232 06/30/96 4.35% 13,797
09/30/96 3.09% 16,734 09/30/96 2.23% 14,105
12/31/96 8.34% 18,129 12/31/96 2.74% 14,491
03/31/97 2.68% 18,615 03/31/97 1.29% 14,678
06/30/97 17.46% 21,865 06/30/97 14.09% 16,746
09/30/97 7.49% 23,503 09/30/97 6.30% 17,801
12/31/97 2.87% 24,178 12/31/97 4.50% 18,603
03/31/98 13.95% 27,550 03/31/98 11.75% 20,788
Past performance is not predictive of future performance.
Equity Fund
Average Annual Total Returns
1 Year Since Inception*
Class A 37.03% 16.80%
Class C 41.63% 16.42%
*The chart above represents performance of Class C shares only, which will
vary from the performance of Class A shares based on the differences in loads
and fees paid by shareholders in the different classes. The initial public
offering of Class C shares commenced on June 7, 1993, and the initial
public offering of Class A shares commenced on August 2, 1993.
<PAGE>
GROWTH/VALUE FUND
AGGRESSIVE GROWTH FUND
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
The Growth/Value Fund seeks long-term capital appreciation primarily through
equity investments in companies whose valuations may not yet reflect the
prospects for accelerated earnings/cash flow growth. For the seven months ended
March 31, 1998, the Fund's total return (excluding the impact of applicable
sales loads) was 6.43%, as compared to 23.64% for the S&P 500 Index. For the
twelve months ended August 31, 1997, the Fund's total return was 47.11% versus
40.65% for the S&P 500 Index.
The Aggressive Growth Fund seeks long-term capital appreciation primarily
through equity investments. The Fund will seek growth opportunities among
companies of various sizes. For the seven months ended March 31, 1998, the
Fund's total return (excluding the impact of applicable sales loads) was
(2.95)%, as compared to 15.95% for the NASDAQ Composite Index. For the twelve
months ended August 31, 1997, the Fund's total return was 49.09% versus 39.54%
for the NASDAQ Composite Index.
The fundamentals of the U.S. economy continue to support a positive long-term
outlook for the equity market. The strength of the European and North American
economies appears to have largely offset the negative implications of the weak
Asian economies. Investor focus on corporate earnings supported by a strong U.S.
economy continued to attract capital to domestic equity markets, leading several
stock market indices to new highs during the period ended March 31, 1998.
Our concentrated sectors each have distinct characteristics supporting long-term
growth. Health care is bolstered by the aging population and productivity gains
stemming from enlightened government reforms. Technology continues to alter
fundamental production and service delivery systems that increase productivity
significantly. Energy demand continues to grow faster than new found reserves
and technological advances are making vast headway in finding and servicing new
oil and gas reserves at costs never imagined even four or five years ago.
Financial services continues to restructure itself with new technology-enabled
systems and the gradual unfolding of regulatory freedoms that allow more
competition and greater responsiveness to fulfilling consumer needs.
We attempt to position the Growth/Value Fund to participate in the bull market
and simultaneously limit the risk profile in such a way as to minimize relative
market losses during downturns. The Aggressive Growth Fund also emphasizes
buying growth at value, but the average capitalization size is much smaller than
that of the Growth/Value Fund. The smaller, and usually younger, aggressive
growth companies add somewhat to the risk/return profile of the Aggressive
Growth Fund.
For the seven month period ended March 31, 1998, our health care and financial
services investments performed strongly. Health care was buoyed by
pharmaceuticals which are continuing to launch new products at an increased pace
in order to meet the growing demands of an aging population. Profit growth and
increased consolidation have bolstered the performance of the financial services
sector. Unfortunately, the energy and technology sectors significantly
underperformed the market indices during this period as both sectors were
plagued by fears stemming from the Asian currency crisis. The energy sector also
dealt with falling oil prices which peaked in October 1997. Since March 31,
1998, these sectors have recovered much of their losses as it appears the market
exaggerated the impact of Asia's problems on U.S. companies. In addition, oil
prices have recovered and stabilized above their recent lows.
Asia's economic slowdown has yet to show a significant impact on the world's
end-user demand. The U.S. economy and financial markets continue to benefit from
low inflation and sustainable moderate growth as corporations remain driven by
competitive forces to innovate and to implement new technologies designed to
enhance productivity. We continue to invest in U.S.-based equities, attempting
to buy quality growth companies at reasonable valuations.
<PAGE>
GROWTH/VALUE FUND
AGGRESSIVE GROWTH FUND
MANAGEMENT DISCUSSION AND ANALYSIS (continued)
================================================================================
Comparison of the Change in Value of a $10,000 Investment in the Growth/Value
Fund and the Standard & Poor's 500 Index
S&P 500 INDEX: (w/ reinvested divds) GROWTH/VALUE FUND:
MONTHLY MONTHLY
DATE RETURN BALANCE DATE RETURN BALANCE
09/29/95 10,000 09/29/95 9,600
12/31/95 5.76% 10,576 12/31/95 5.20% 10,099
03/31/96 5.37% 11,143 03/31/96 8.84% 10,992
06/30/96 4.49% 11,643 06/30/96 0.96% 11,098
09/30/96 3.09% 12,003 09/30/96 1.73% 11,290
12/31/96 8.34% 13,004 12/31/96 7.93% 12,185
03/31/97 2.68% 13,352 03/31/97 0.87% 12,291
06/30/97 17.46% 15,684 06/30/97 17.46% 14,437
09/30/97 7.49% 16,858 09/30/97 13.15% 16,335
12/31/97 2.87% 17,342 12/31/97 -7.67% 15,083
03/31/98 13.95% 19,762 03/31/98 11.41% 16,805
Past performance is not predictive of future performance.
Growth/Value Fund
Average Annual Total Returns
1 Year Since Inception*
31.26% 23.11%
*Fund inception was September 29, 1995.
Comparison of the Change in Value of a $10,000 Investment in the Aggressive
Growth Fund and the NASDAQ Index
NASDAQ: (w/ reinvested divds) AGGRESSIVE GROWTH FUND:
MONTHLY MONTHLY
DATE RETURN BALANCE DATE RETURN BALANCE
09/29/95 10,000 09/29/95 9,600
12/31/95 0.64% 10,064 12/31/95 -0.50% 9,552
03/31/96 4.78% 10,545 03/31/96 8.94% 10,406
06/30/96 7.66% 11,353 06/30/96 3.41% 10,762
09/30/96 3.59% 11,761 09/30/96 2.05% 10,982
12/31/96 5.28% 12,382 12/31/96 7.92% 11,853
03/31/97 -5.32% 11,723 03/31/97 -3.90% 11,391
06/30/97 18.23% 13,860 06/30/97 17.99% 13,440
09/30/97 17.00% 16,216 09/30/97 24.55% 16,740
12/31/97 -6.73% 15,125 12/31/97 -17.13% 13,873
03/31/98 17.02% 17,700 03/31/98 9.64% 15,210
Past performance is not predictive of future performance.
Aggressive Growth Fund
Average Annual Total Returns
1 Year Since Inception*
28.19% 18.29%
*Fund inception was September 29, 1995.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1998
<TABLE>
====================================================================================================================================
Utility Equity
Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment securities:
At acquisition cost................................................... $ 26,049,170 $ 29,760,506
============== ===============
At amortized cost..................................................... $ 26,035,278 $ 29,761,358
============== ===============
At market value (Note 2).............................................. $ 45,035,446 $ 42,165,777
Repurchase agreements (Note 2)........................................... 925,000 --
Cash .................................................................... 2,389 5,731
Receivable for capital shares sold ...................................... 77,589 57,788
Dividends and interest receivable........................................ 147,453 27,320
Other assets............................................................. 3,010 2,091
-------------- ---------------
TOTAL ASSETS.......................................................... 46,190,887 42,258,707
-------------- ---------------
LIABILITIES
Distributions payable.................................................... 39,526 1,936
Payable for capital shares redeemed...................................... 38,419 15,623
Payable to affiliates (Note 4)........................................... 41,692 31,594
Other accrued expenses and liabilities .................................. 11,859 11,558
-------------- ---------------
TOTAL LIABILITIES..................................................... 131,496 60,711
-------------- ---------------
NET ASSETS .............................................................. $ 46,059,391 $ 42,197,996
-------------- ---------------
Net assets consist of:
Paid-in capital.......................................................... $ 27,059,170 $ 29,793,481
Accumulated net realized gains from security transactions................ 53 96
Net unrealized appreciation on investments .............................. 19,000,168 12,404,419
-------------- ---------------
Net assets .............................................................. $ 46,059,391 $ 42,197,996
============== ===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares ............................... $ 42,462,857 $ 38,336,423
============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5).......................... 2,533,479 1,978,069
============== ===============
Net asset value and redemption price per share (Note 2).................. $ 16.76 $ 19.38
============== ===============
Maximum offering price per share (Note 2)................................ $ 17.46 $ 20.19
============== ===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares ............................... $ 3,596,534 $ 3,861,573
============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5).......................... 214,888 199,685
============== ===============
Net asset value, offering price and redemption price per share (Note 2).. $ 16.74 $ 19.34
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1998
====================================================================================================================================
Growth/ Aggressive
Value Growth
Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment securities:
At acquisition cost................................................... $ 20,435,726 $ 11,208,129
============== ===============
At amortized cost..................................................... $ 20,435,726 $ 11,208,150
============== ===============
At market value (Note 2).............................................. $ 28,547,955 $ 15,463,566
Cash .................................................................... -- 3,403
Receivable for capital shares sold....................................... 89,684 40,607
Receivable for securities sold........................................... 935,800 --
Dividends and interest receivable........................................ 14,488 1,990
Organization costs, net (Note 2)......................................... 15,876 15,876
Other assets............................................................. 2,068 1,230
-------------- ---------------
TOTAL ASSETS.......................................................... 29,605,871 15,526,672
-------------- --------------
LIABILITIES
Bank overdraft........................................................... 914,312 --
Payable for capital shares redeemed...................................... 675 2,990
Payable to affiliates (Note 4)........................................... 32,558 23,326
Other accrued expenses and liabilities................................... 9,073 4,992
-------------- ---------------
TOTAL LIABILITIES..................................................... 956,618 31,308
-------------- ---------------
NET ASSETS .............................................................. $ 28,649,253 $ 15,495,364
============== ===============
Net assets consist of:
Paid-in capital.......................................................... $ 20,133,868 $ 11,354,846
Accumulated net realized gains (losses) from security transactions....... 403,156 (114,898 )
Net unrealized appreciation on investments............................... 8,112,229 4,255,416
-------------- ---------------
Net assets............................................................... $ 28,649,253 $ 15,495,364
============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5).......................... 1,757,393 980,105
============== ===============
Net asset value and redemption price per share (Note 2).................. $ 16.30 $ 15.81
============== ===============
Maximum offering price per share (Note 2)................................ $ 16.98 $ 16.47
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended March 31, 1998
====================================================================================================================================
Utility Equity
Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends ............................................................ $ 1,492,949 $ 291,509
Interest ............................................................. 240,402 237,569
-------------- ---------------
TOTAL INVESTMENT INCOME ............................................ 1,733,351 529,078
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4) .................................... 303,151 221,798
Accounting services fees (Note 4) .................................... 40,500 40,500
Distribution expenses, Class A (Note 4)............................... 45,189 27,099
Distribution expenses, Class C (Note 4) .............................. 12,633 14,470
Transfer agent fees, Class A (Note 4)................................. 34,182 15,011
Transfer agent fees, Class C (Note 4)................................. 12,000 12,000
Postage and supplies.................................................. 22,868 11,857
Professional fees .................................................... 16,027 15,238
Registration fees, Common ............................................ 3,462 2,539
Registration fees, Class A ........................................... 5,604 8,060
Registration fees, Class C ........................................... 4,544 4,150
Trustees' fees and expenses .......................................... 7,868 7,868
Custodian fees ....................................................... 5,926 4,418
Reports to shareholders .............................................. 5,832 2,721
Insurance expense .................................................... 4,670 2,826
Other expenses ....................................................... 5,138 4,225
-------------- ---------------
TOTAL EXPENSES ..................................................... 529,594 394,780
-------------- ---------------
NET INVESTMENT INCOME ................................................... 1,203,757 134,298
-------------- ---------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ........................ 396,431 131,522
Net change in unrealized appreciation/depreciation on investments..... 12,365,467 9,717,678
-------------- ---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ........................ 12,761,898 9,849,200
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 13,965,655 $ 9,983,498
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Periods Ended March 31, 1998 and August 31, 1997
====================================================================================================================================
Growth/Value Fund Aggressive Growth Fund
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Seven Months Year Seven Months Year
Ended Ended Ended Ended
March 31, August 31, March 31, August 31,
1998(A) 1997 1998(A) 1997
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends................................... $ 108,061 $ 153,095 $ 16,540 $ 14,849
Interest.................................... 12,255 36,676 8,332 19,827
------------ -------------- ------------- -------------
TOTAL INVESTMENT INCOME................... 120,316 189,771 24,872 34,676
------------ -------------- ------------- -------------
EXPENSES
Investment advisory fees (Note 4)........... 160,090 206,612 85,703 94,159
Accounting services fees (Note 4)........... 16,000 36,000 16,000 36,000
Shareholder service fees (Note 4)........... -- 51,654 -- 23,540
Professional fees........................... 11,477 25,081 8,477 24,383
Transfer agent fees (Note 4)................ 6,450 28,000 6,725 27,079
Distribution expenses (Note 4).............. 38,951 -- 17,888 --
Administration fees (Note 4)................ -- 30,995 -- 24,866
Registration fees........................... 10,007 2,666 13,709 2,522
Custodian fees.............................. 8,636 5,121 4,785 3,192
Amortization of organization costs (Note 2). 3,708 6,351 3,708 6,351
Trustees' fees and expenses................. 3,498 1,646 3,498 734
Reports to shareholders..................... 542 2,885 605 1,282
Insurance expense........................... 1,076 1,619 794 686
Other expenses.............................. 5,903 5,765 5,311 2,838
------------ -------------- ------------- -------------
TOTAL EXPENSES............................ 266,338 404,395 167,203 247,632
Fees waived by the Adviser (Note 4)......... -- -- -- (64,077 )
------------ -------------- ------------- -------------
NET EXPENSES.............................. 266,338 404,395 167,203 183,555
------------ -------------- ------------- -------------
NET INVESTMENT LOSS ........................... (146,022) (214,624) (142,331) (148,879)
------------ -------------- ------------- -------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from
security transactions 1,566,803 894,909 241,580 (356,478 )
Net change in unrealized appreciation/
depreciation on investments .............. 437,753 7,431,395 (458,321 ) 4,653,168
------------ -------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS ............. 2,004,556 8,326,304 (216,741 ) 4,296,690
------------ -------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ........................... $ 1,858,534 $ 8,111,680 $ (359,072 ) $ 4,147,811
============ ============== ============= =============
A)Effective as of the close of business on August 29, 1997, the Growth/Value Fund and Aggressive Growth Fund
were reorganized and the fiscal year-end of each Fund, subsequent to August 31, 1997, was changed to March 31 (Note 6).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended March 31, 1998 and 1997
===================================================================================================================================
Utility Equity
Fund Fund
---------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1998 1997 1998 1997
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income....................... $ 1,203,757 $ 1,528,551 $ 134,298 $ 116,042
Net realized gains from security transactions 396,431 349,605 131,522 482,875
Net change in unrealized appreciation/
depreciation on investments............... 12,365,467 517,054 9,717,678 952,569
------------ -------------- ------------- -------------
Net increase in net assets from operations..... 13,965,655 2,395,210 9,983,498 1,551,486
------------ -------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A......... (1,131,462) (1,429,043) (134,305 ) (112,251)
From net investment income, Class C......... (72,537) (99,266) -- (3,811)
From net realized gains on security
transactions, Class A...................... (598,344) (62,089) (266,654) (43,452)
From net realized gains on security
transactions, Class C...................... (49,575) (5,448) (29,203) (9,121)
------------ -------------- ------------- -------------
Decrease in net assets from distributions
to shareholders (1,851,918) (1,595,846) (430,162 ) (168,635)
------------ -------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold................... 6,395,680 3,695,972 27,157,778 7,488,016
Net asset value of shares issued in
reinvestment of distributions to shareholders 1,560,076 1,310,464 393,608 149,729
Payments for shares redeemed................ (12,764,160) (10,075,932) (12,645,062) (2,279,007)
------------ -------------- ------------- -------------
Net increase (decrease) in net assets from
Class A share transactions.................. (4,808,404) (5,069,496) 14,906,324 5,358,738
------------ -------------- ------------- -------------
CLASS C
Proceeds from shares sold................... 343,251 978,844 386,194 665,009
Net asset value of shares issued in
reinvestment of distributions to shareholders 112,220 90,743 29,105 12,637
Payments for shares redeemed................ (887,840) (1,723,275) (429,754) (604,567)
------------ -------------- ------------- -------------
Net increase (decrease) in net assets from
Class C share transactions.................. (432,369) (653,688) (14,455 ) 73,079
------------ -------------- ------------- -------------
Net increase (decrease) from capital share
transactions (5,240,773) (5,723,184) 14,891,869 5,431,817
------------ -------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....... 6,872,964 (4,923,820) 24,445,205 6,814,668
NET ASSETS:
Beginning of year........................... 39,186,427 44,110,247 17,752,791 10,938,123
------------ -------------- ------------- -------------
End of year................................. $ 46,059,391 $ 39,186,427 $42,197,996 $17,752,791
============ ============== ============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ......... $ -- $ 242 $ -- $ 7
============ ============== ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended March 31, 1998
and August 31, 1997 and 1996
===================================================================================================================================
Growth/Value Fund Aggressive Growth Fund
----------------------------------------------------------------------
Seven Months Year Period Seven Months Year Period
Ended Ended Ended Ended Ended Ended
March 31, August 31, August 31, March 31, August 31, August 31,
1998(A) 1997 1996(B) 1998(A) 1997 1996(B)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment loss..................... $(146,022) $(214,624) $(50,747) $(142,331) $(148,879) $(39,525)
Net realized gains (losses) from
security transactions 1,566,803 894,909 89,352 241,580 (356,478) 43,284
Net change in unrealized appreciation/
depreciation on investments........... 437,753 7,431,395 243,081 (458,321) 4,653,168 60,569
---------- ---------- --------- --------- --------- ---------
Net increase (decrease) in net assets
from operations....................... 1,858,534 8,111,680 281,686 (359,072) 4,147,811 64,328
---------- ---------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on security
transactions...................... (1,021,333) (888,542) -- -- (16,180) --
---------- ---------- --------- --------- --------- ------
FROM CAPITAL SHARE TRANSACTIONS (Note 5):
Proceeds from shares sold .............. 6,013,814 9,367,824 15,471,301 4,724,918 5,211,479 7,269,024
Net asset value of shares issued in
reinvestment of distributions to
shareholders......................... 348,462 260,810 -- -- 4,532 --
Payments for shares redeemed .............. (5,328,293) (5,181,368) (645,322) (2,854,217) (1,913,821) (783,438)
---------- ---------- --------- --------- ---------- ---------
Net increase in net assets from capital
share transactions..................... 1,033,983 4,447,266 14,825,979 1,870,701 3,302,190 6,485,586
---------- ---------- ---------- --------- --------- ---------
TOTAL INCREASE IN NET ASSETS ............. 1,871,184 11,670,404 15,107,665 1,511,629 7,433,821 6,549,914
NET ASSETS:
Beginning of period..................... 26,778,069 15,107,665 -- 13,983,735 6,549,914 --
---------- ---------- --------- --------- --------- ---------
End of period........................... $28,649,253 $26,778,069 $15,107,665 $15,495,364 $13,983,735 $6,549,914
============ =========== =========== =========== =========== ===========
(A)Effective as of the close of business on August 29, 1997, the Growth/Value Fund and Aggressive Growth Fund were reorganized
and the fiscal year-end of each Fund, subsequent to August 31, 1997, was changed to March 31 (Note 6).
(B)Represents the period from the commencement of operations (September 29, 1995) through August 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND
FINANCIAL HIGHLIGHTS - CLASS A
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
====================================================================================================================================
Years Ended March 31,
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 12.44 $ 12.24 $ 10.47 $ 10.52 $ 11.34
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.43 0.46 0.47 0.43 0.37
Net realized and unrealized gains (losses) on
investments 4.56 0.22 1.77 (0.05 ) (0.59 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 4.99 0.68 2.24 0.38 (0.22 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.43) (0.46) (0.47) (0.43 ) (0.37 )
Distributions from net realized gains........ (0.24) (0.02) -- -- (0.23 )
---------- --------- ---------- --------- ----------
Total distributions............................. (0.67) (0.48) (0.47) (0.43 ) (0.60 )
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 16.76 $ 12.44 $ 12.24 $ 10.47 $ 10.52
========== ========= ========== ========= ==========
Total return(A) ................................ 40.92% 5.61% 21.65% 3.68% (2.11% )
========== ========= ========== ========= ==========
Net assets at end of year (000's)............... $ 42,463 $ 36,087 $ 40,424 $ 40,012 $40,373
========== ========= ========== ========= ==========
Ratio of expenses to average net assets......... 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment income to average net assets 3.03% 3.65% 3.97% 4.06% 3.32%
Portfolio turnover rate ........................ 0% 3% 11% 17% 91%
Average commission rate per share(B) ........... $ 0.0985 $ 0.1200 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Beginning with the year ended March 31, 1997, the Fund is required to disclose its average commission rate per share for
security trades on which commissions are charged.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Period
Years Ended March 31, Ended
March 31,
1998 1997 1996 1995 1994(A)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 12.43 $ 12.23 $ 10.46 $ 10.51 $ 11.55
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.31 0.35 0.37 0.35 0.23
Net realized and unrealized gains (losses) on
investments 4.57 0.24 1.78 (0.04 ) (0.81 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 4.88 0.59 2.15 0.31 (0.58 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.33) (0.37) (0.38) (0.36 ) (0.23 )
Distributions from net realized gains........ (0.24) (0.02) -- -- (0.23 )
---------- --------- ---------- --------- ----------
Total distributions............................. (0.57) (0.39) (0.38) (0.36 ) (0.46 )
---------- --------- ---------- --------- ----------
Net asset value at end of period................ $ 16.74 $ 12.43 $ 12.23 $ 10.46 $ 10.51
========== ========= ========== ========= ==========
Total return(B) ................................ 39.91% 4.82% 20.78% 3.00% (7.89%)(D)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 3,597 $ 3,099 $ 3,686 $ 3,599 $ 1,742
========== ========= ========== ========= ==========
Ratio of expenses to average net assets ........ 2.00% 2.00% 2.00% 2.00% 2.00% (D)
Ratio of net investment income to average net assets 2.28% 2.89% 3.19% 3.41% 2.19% (D)
Portfolio turnover rate......................... 0% 3% 11% 17% 91% (D)
Average commission rate per share(C) .......... $ 0.0985 $ 0.1200 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Represents the period from date of public offering (August 2, 1993) through March 31, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Beginning with the year ended March 31, 1997, the Fund is required to disclose its average commission rate per share
for security trades on which commissions are charged.
(D) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS A
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Period
Years Ended March 31, Ended
March 31,
1998 1997 1996 1995 1994(A)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 13.76 $ 12.45 $ 9.84 $ 9.26 $ 10.02
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.09 0.12 0.13 0.15 0.08
Net realized and unrealized gains (losses) on
investments 5.76 1.35 2.60 0.59 (0.34 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 5.85 1.47 2.73 0.74 (0.26 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.08) (0.12) (0.12) (0.16 ) (0.08 )
Distributions from net realized gains........ (0.15) (0.04) -- -- (0.42 )
---------- --------- ---------- --------- ----------
Total distributions............................. (0.23) (0.16) (0.12) (0.16 ) (0.50 )
---------- --------- ---------- --------- ----------
Net asset value at end of period................ $ 19.38 $ 13.76 $ 12.45 $ 9.84 $ 9.26
========== ========= ========== ========= ==========
Total return(B) ................................ 42.74% 11.82% 27.90% 8.07% (3.98%)(E)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 38,336 $ 14,983 $ 8,502 $ 4,300 $ 3,346
========== ========= ========== ========= ==========
Ratio of net expenses to average net assets(C) 1.25% 1.25% 1.25% 1.25% 1.24% (E)
Ratio of net investment income to average net assets 0.53% 0.91% 1.06% 1.57% 0.82% (E)
Portfolio turnover rate......................... 7% 38% 38% 159% 109% (E)
Average commission rate per share(D) ........... $ 0.1017 $ 0.1199 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Represents the period from date of public offering (August 2, 1993) through March 31, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets would have been
1.43%, 2.02%, 1.94% and 2.04%(E) for the periods ended March 31, 1997, 1996, 1995 and 1994, respectively.
(D) Beginning with the year ended March 31, 1997, the Fund is required to disclose its average commission rate per share for
security trades on which commissions are charged.
(E) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Period
Years Ended March 31, Ended
March 31,
1998 1997 1996 1995 1994(A)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.......... $ 13.77 $ 12.46 $ 9.86 $ 9.26 $ 10.00
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income (loss)................. (0.03 ) 0.02 0.05 0.10 0.03
Net realized and unrealized gains (losses) on
investments 5.75 1.35 2.60 0.57 (0.32 )
---------- --------- ---------- --------- ----------
Total from investment operations................ 5.72 1.37 2.65 0.67 (0.29 )
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... -- (0.02) (0.05) (0.07 ) (0.03 )
Distributions from net realized gains........ (0.15) (0.04) -- -- (0.42 )
---------- --------- ---------- --------- ----------
Total distributions............................. (0.15) (0.06) (0.05) (0.07 ) (0.45 )
---------- --------- ---------- --------- ----------
Net asset value at end of period................ $ 19.34 $ 13.77 $ 12.46 $ 9.86 $ 9.26
========== ========= ========== ========= ==========
Total return(B) ................................ 41.63% 11.01% 26.90% 7.32% (3.58%)(E)
========== ========= ========== ========= ==========
Net assets at end of period (000's)............. $ 3,862 $ 2,770 $ 2,436 $ 1,995 $ 5,857
========== ========= ========== ========= ==========
Ratio of net expenses to average net assets(C) 2.00% 2.00% 2.00% 2.00% 1.94% (E)
Ratio of net investment income (loss) to average
net assets (0.18% ) 0.15% 0.38% 0.68% 0.58% (E)
Portfolio turnover rate......................... 7% 38% 38% 159% 109% (E)
Average commission rate per share(D) ........... $ 0.1017 $ 0.1199 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Represents the period from date of public offering (June 7, 1993) through March 31, 1994.
(B) Total returns shown exclude the effect of applicable sales loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets would have been
2.14%, 2.70%, 2.50% and 2.33%(E) for the periods ended March 31, 1997, 1996, 1995 and 1994, respectively.
(D) Beginning with the year ended March 31, 1997, the Fund is required to disclose its average commission rate per share for
security trades on which commissions are charged.
(E) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GROWTH/VALUE FUND
FINANCIAL HIGHLIGHTS
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Seven Months Year Period
Ended Ended Ended
March 31, August 31, August 31,
1998(A) 1997 1996(B)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 15.90 $ 11.18 $ 10.00
-------------- -------------- ---------------
Income from investment operations:
Net investment loss.................................. (0.08) (0.13 ) (0.06)(C)
Net realized and unrealized gains on investments..... 1.05 5.39 1.24
-------------- -------------- ---------------
Total from investment operations........................ 0.97 5.26 1.18
-------------- -------------- ---------------
Less distributions:
Distributions from net realized gains................ (0.57) (0.54 ) --
-------------- -------------- ---------------
Net asset value at end of period........................ $ 16.30 $ 15.90 $ 11.18
============== ============== ===============
Total return(D) ........................................ 6.43% 47.11% 11.80%
============== ============== ===============
Net assets at end of period (000's)..................... $ 28,649 $ 26,778 $ 15,108
============== ============== ===============
Ratio of net expenses to average net assets(E) ......... 1.66%(F) 1.95% 1.95% (F)
Ratio of net investment loss to average net assets...... (0.91%)(F) (1.03% ) (0.62%) (F)
Portfolio turnover rate................................. 62% (F) 52% 21%
Average commission rate per share....................... $ 0.0600 $ 0.0554 $ 0.0700
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end, subsequent to
August 31, 1997, was changed to March 31 (Note 6).
(B) Represents the period from the commencement of operations (September 29, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratio of expenses to average net assets would have been 2.83%(F) for
the period ended August 31, 1996.
(F) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
====================================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
====================================================================================================================================
Seven Months Year Period
Ended Ended Ended
March 31, August 31, August 31,
1998(A) 1997 1996(B)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 16.29 $ 10.95 $ 10.00
-------------- -------------- ---------------
Income from investment operations:
Net investment loss.................................. (0.15) (0.17 ) (0.11)(C)
Net realized and unrealized gains on investments..... (0.33) 5.54 1.06
-------------- -------------- ---------------
Total from investment operations........................ (0.48) 5.37 0.95
-------------- -------------- ---------------
Less distributions:
Distributions from net realized gains................ -- (0.03 ) --
-------------- -------------- ---------------
Net asset value at end of period........................ $ 15.81 $ 16.29 $ 10.95
============== ============== ===============
Total return(D) ........................................ (2.95%) 49.09% 9.50%
============== ============== ===============
Net assets at end of period (000's)..................... $ 15,495 $ 13,984 $ 6,550
============== ============== ===============
Ratio of net expenses to average net assets(E) ......... 1.95% (F) 1.94% 1.95% (F)
Ratio of net investment loss to average net assets...... (1.66%)(F) (1.57% ) (1.26%)(F)
Portfolio turnover rate................................. 40% (F) 51% 16%
Average commission rate per share....................... $ 0.0600 $ 0.0534 $ 0.0800
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Effective as of the close of business on August 29, 1997, the Fund was reorganized and its fiscal year-end, subsequent to
August 31, 1997, was changed to March 31 (Note 6).
(B) Represents the period from the commencement of operations (September 29, 1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Total returns shown exclude the effect of applicable sales loads.
(E) Absent fee waivers and/or expense reimbursements, the ratios of expenses to average net assets would have been 2.62% and
5.05%(F) for the periods ended August 31, 1997 and 1996, respectively.
(F) Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
================================================================================
1. ORGANIZATION
The Utility Fund, Equity Fund, Growth/Value Fund and Aggressive Growth Fund
(collectively, the Funds) are each a series of Countrywide Strategic Trust (the
Trust). The Trust is registered under the Investment Company Act of 1940 as an
open-end management investment company. The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated November 18,
1982. The Declaration of Trust, as amended, permits the Trustees to issue an
unlimited number of shares of each Fund.
The Growth/Value Fund and Aggressive Growth Fund were originally organized as
series of Trans Adviser Funds, Inc. The periods ended March 31, 1998, referred
to within the Notes to Financial Statements, represent the year then ended,
except for the Growth/Value Fund and Aggressive Growth Fund which represent the
seven months then ended (Note 6).
The Utility Fund seeks a high level of current income. Capital appreciation is a
secondary objective. The Fund invests primarily in common, preferred and
convertible preferred stocks of public utilities that currently pay dividends.
The Fund also invests in investment grade bonds of public utilities. The public
utilities industry includes companies that produce or supply electric power,
natural gas, water, sanitary services, telecommunications and other
communications services (but not radio or television broadcasters) for public
use or consumption.
The Equity Fund seeks long-term growth of capital, current income and growth of
income by investing primarily in dividend-paying common stocks. The Fund's
investment adviser, in selecting securities for purchase, employs a quantitative
screening strategy, searching for securities believed to offer above market
growth at below market pricing.
The Growth/Value Fund seeks long-term capital appreciation primarily through
equity investments in companies whose valuations may not 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. Investments are largely made in companies of greater than $750 million
capitalization.
The Aggressive Growth Fund seeks long-term capital appreciation primarily
through equity investments. The Fund seeks 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 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).
The Utility Fund and Equity Fund each offer two classes of shares: Class A
shares (sold subject to a maximum front-end sales load of 4% and a distribution
fee of up to 0.25% of average daily net assets) and Class C shares (sold subject
to a maximum contingent deferred sales load of 1% if redeemed within a one-year
period from purchase and a distribution fee of up to 1% of average daily net
assets). Each Class A and Class C share of a Fund represents identical interests
in the investment portfolio of such Fund and has the same rights, except that
(i) Class C shares bear the expenses of higher distribution fees, which is
expected to cause Class C shares to have a higher expense ratio and to pay lower
dividends than Class A shares; (ii) certain other class specific expenses will
be borne solely by the class to which such expenses are attributable; and (iii)
each class has exclusive voting rights with respect to matters relating to its
own distribution arrangements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
<PAGE>
Security valuation -- The Funds' portfolio securities are valued as of the close
of the regular session of trading on the New York Stock Exchange (currently 4:00
p.m., Eastern time). Portfolio securities traded on stock exchanges and
securities traded in the over-the-counter market are valued at their last sales
price as of the close of the regular session of trading on the day the
securities are being valued. Securities not traded on a particular day, or for
which the last sale price is not readily available, are valued at their last
broker-quoted bid prices as obtained from one or more of the major market makers
for such securities by an independent pricing service. Securities for which
market quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
Repurchase agreements -- Repurchase agreements, which are collateralized by U.S.
Government obligations, are valued at cost which, together with accrued
interest, approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' custodian, at the Federal
Reserve Bank of Cleveland. At the time each Fund enters into a repurchase
agreement, the seller agrees that the value of the underlying securities,
including accrued interest, will at all times be equal to or exceed the face
amount of the repurchase agreement.
Share valuation -- The net asset value per share of each class of shares of the
Utility Fund and Equity Fund is calculated daily by dividing the total value of
the Fund's assets attributable to that class, less liabilities attributable to
that class, by the number of shares of that class outstanding. The maximum
offering price per share of Class A shares of each Fund is equal to the net
asset value per share plus a sales load equal to 4.17% of the net asset value
(or 4% of the offering price). The offering price of Class C shares of each Fund
is equal to the net asset value per share.
The net asset value per share of the Growth/Value Fund and Aggressive Growth
Fund is calculated daily by dividing the total value of each Fund's assets, less
liabilities, by the number of shares outstanding. The maximum offering price per
share of the Growth/Value Fund and Aggressive Growth Fund is equal to the net
asset value per share plus a sales load equal to 4.17% of the net asset value
(or 4% of the offering price).
The redemption price per share of each Fund, including each class of shares with
respect to the Utility Fund and Equity Fund, is equal to the net asset value per
share. However, Class C shares of the Utility Fund and Equity Fund are subject
to a contingent deferred sales load of 1% of the original purchase price if
redeemed within a one-year period from the date of purchase.
Investment income -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date. Discounts and premiums on securities purchased
are amortized in accordance with income tax regulations which approximate
generally accepted accounting principles.
Distributions to shareholders -- Dividends arising from net investment income,
if any, are declared and paid quarterly to shareholders of the Utility Fund and
Equity Fund and annually to shareholders of the Growth/Value Fund and Aggressive
Growth Fund. With respect to each Fund, net realized short-term capital gains,
if any, may be distributed throughout the year and net realized long-term
capital gains, if any, are distributed at least once each year. Income dividends
and capital gain distributions are determined in accordance with income tax
regulations.
Allocations between classes -- Investment income earned, realized capital gains
and losses, and unrealized appreciation and depreciation for the Utility Fund
and Equity Fund are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund. Class specific expenses are
charged directly to the class incurring the expense. Common expenses which are
not attributable to a specific class are allocated daily to each class of shares
based upon its proportionate share of total net assets of the Fund.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
<PAGE>
Organization costs -- Costs incurred by the Growth/Value Fund and Aggressive
Growth Fund in connection with their organization and registration of shares,
net of certain expenses, have been capitalized and are being amortized on a
straight-line basis over a five year period beginning with each Fund's
commencement of operations.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
twelve months ending October 31) plus undistributed amounts from prior years.
<TABLE>
<CAPTION>
The following information is based upon the federal income tax cost of portfolio
investments (excluding repurchase agreements) as of March 31, 1998:
- -----------------------------------------------------------------------------------------------------------------------------------
Growth/ Aggressive
Utility Equity Value Growth
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized appreciation.................. $ 19,000,168 $ 12,718,395 $ 9,124,199 $ 4,708,202
Gross unrealized depreciation.................. -- (313,976) (1,011,970 ) (452,786 )
------------ -------------- ------------- -------------
Net unrealized appreciation.................... $ 19,000,168 $ 12,404,419 $ 8,112,229 $ 4,255,416
------------ -------------- ------------- -------------
Federal income tax cost........................ $ 26,035,278 $ 29,761,358 $20,435,726 $11,208,150
------------ -------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of March 31, 1998, the Aggressive Growth Fund had capital loss carryforwards
for federal income tax purposes of $114,898. The Fund intends to utilize these
capital loss carryforwards in future years to offset net realized capital gains
prior to distributing such gains to shareholders.
Reclassification of capital accounts -- For the period ended March 31, 1998, the
Growth/Value Fund reclassified $142,314 of its $146,022 net investment loss
against accumulated net realized gains from security transactions and $3,708
against paid-in capital on the Statements of Assets and Liabilities. The
Aggressive Growth Fund reclassified its entire $142,331 net investment loss
against paid-in capital. Such reclassifications, the result of permanent
differences between financial statement and income tax reporting requirements,
have no effect on each Fund's net assets or net asset value per share.
<TABLE>
<CAPTION>
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) were as follows for
the periods ended March 31, 1998:
- -----------------------------------------------------------------------------------------------------------------------------------
Growth/ Aggressive
Utility Equity Value Growth
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of investment securities............. $ -- $ 15,209,475 $ 9,782,142 $ 5,177,534
============ ============== ============= =============
Proceeds from sales and maturities of investment
securities $ 4,177,640 $ 1,678,969 $10,444,800 $ 3,361,596
============ ============== ============= =============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
4. TRANSACTIONS WITH AFFILIATES
The Chairman and the President of the Trust are also officers of Countrywide
Financial Services, Inc., whose subsidiaries include Countrywide Investments,
Inc. (the Adviser), the Trust's investment adviser and principal underwriter,
and Countrywide Fund Services, Inc. (CFS), the Trust's transfer agent,
shareholder service agent and accounting services agent. Countrywide Financial
Services, Inc. is a wholly-owned subsidiary of Countrywide Credit Industries,
Inc., a New York Stock Exchange listed company principally engaged in the
business of residential mortgage lending.
MANAGEMENT AGREEMENTS
Each Fund's investments are managed by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, the Utility Fund and
Equity Fund each pay the Adviser a fee, which is computed and accrued daily and
paid monthly, at an annual rate of 0.75% of its respective average daily net
assets up to $200 million; 0.70% of such net assets from $200 million to $500
million; and 0.50% of such net assets in excess of $500 million. The
Growth/Value Fund and Aggressive Growth Fund each pay the Adviser a fee, which
is computed and accrued daily and paid monthly, at an annual rate of 1.00% of
its respective average daily net assets up to $50 million; 0.90% of such net
assets from $50 million to $100 million; 0.80% of such net assets from $100
million to $200 million; and 0.75% of such net assets in excess of $200 million.
Mastrapasqua and Associates, Inc. (Mastrapasqua) has been retained by the
Adviser to manage the investments of the Growth/Value Fund and Aggressive Growth
Fund. The Adviser (not the Funds) pays Mastrapasqua a fee, which is computed and
accrued daily and paid monthly, at an annual rate of 0.60% of each Fund's
respective average daily net assets up to $50 million; 0.50% of such net assets
from $50 million to $100 million; 0.40% of such net assets from $100 million to
$200 million; and 0.35% of such net assets in excess of $200 million.
The Adviser has agreed, until at least August 31, 1999, to waive fees and
reimburse expenses to the extent necessary to limit total operating expenses of
the Growth/Value Fund and Aggressive Growth Fund to 1.95% of each Fund's average
daily net assets.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and CFS, CFS maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, CFS receives a monthly fee at an annual
rate of $17 per shareholder account from each Fund, subject to a $1,000 minimum
monthly fee for each Fund, or for each class of shares of a Fund, as applicable.
In addition, each Fund pays out-of-pocket expenses including, but not limited
to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and CFS,
CFS calculates the daily net asset value per share and maintains the financial
books and records of each Fund. For these services, CFS receives a monthly fee,
based on current asset levels, of $3,000 from each of the Utility Fund and
Equity Fund and $2,000 from each of the Growth/Value Fund and Aggressive Growth
Fund. In addition, each Fund pays certain out-of-pocket expenses incurred by CFS
in obtaining valuations of such Fund's portfolio securities.
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as the
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and the Adviser, the Adviser earned
$3,922, $2,156, $6,482 and $6,558 from underwriting and broker commissions on
the sale of shares of the Utility Fund, Equity Fund, Growth/Value Fund and
Aggressive Growth Fund, respectively, for the periods ended March 31, 1998. In
addition, the Adviser collected $1,756 and $957 of contingent deferred sales
loads on the redemption of Class C shares of the Utility Fund and Equity Fund,
respectively.
<PAGE>
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of each
Fund having one class of shares and Class A shares of each Fund having two
classes of shares may directly incur or reimburse the Adviser for expenses
related to the distribution and promotion of shares. The annual limitation for
payment of such expenses under the Class A Plan is 0.25% of average daily net
assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of each Fund having two classes of shares may directly incur or reimburse
the Adviser for expenses related to the distribution and promotion of shares.
The annual limitation for payment of such expenses under the Class C Plan is 1%
of average daily net assets attributable to Class C shares.
PRIOR AFFILIATE AGREEMENTS
Prior to August 30, 1997, the investment adviser of the Growth/Value Fund and
Aggressive Growth Fund was Trans Financial Bank, N.A.; Forum Financial Corp.
served as the transfer agent and dividend disbursing agent and performed
portfolio accounting services; Forum Financial Services, Inc. acted as
distributor of each Fund's shares; and Forum Administrative Services, LLC
supervised the administration of all aspects of each Fund's operations.
Contractual amounts paid by the Funds for the performance of these services are
reflected in each Fund's Statement of Operations for the year ended August 31,
1997. As of March 31, 1998, Trans Financial Bank, N.A. was a significant
shareholder of record of the Growth/Value Fund and Aggressive Growth Fund.
<TABLE>
<CAPTION>
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes in
Net Assets are the result of the following capital share transactions for the
periods shown:
- ------------------------------------------------------------------------------------------------------------------------------------
Utility Equity
Fund Fund
Year Year Year Year
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................... 441,718 295,396 1,675,833 562,866
Shares issued in reinvestment of distributions
to shareholders............................. 105,777 104,692 22,496 11,085
Shares redeemed................................ (914,263) (802,704) (808,858 ) (168,288)
------------ -------------- ------------- -------------
Net increase (decrease) in shares outstanding.. (366,768) (402,616) 889,471 405,663
Shares outstanding, beginning of year.......... 2,900,247 3,302,863 1,088,598 682,935
------------ -------------- ------------- -------------
Shares outstanding, end of year................ 2,533,479 2,900,247 1,978,069 1,088,598
============ ============== ============= =============
CLASS C
Shares sold.................................... 23,316 79,210 23,254 50,018
Shares issued in reinvestment of distributions
to shareholders............................. 7,595 7,261 1,642 930
Shares redeemed................................ (65,381) (138,592) (26,402) (45,330)
------------ -------------- ------------- -------------
Net increase (decrease) in shares outstanding.. (34,470) (52,121) (1,506) 5,618
Shares outstanding, beginning of year.......... 249,358 301,479 201,191 195,573
------------ -------------- ------------- -------------
Shares outstanding, end of year................ 214,888 249,358 199,685 201,191
============ ============== ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Growth/Value Aggressive Growth
Fund Fund
Seven Months Year Period Seven Months Year Period
Ended Ended Ended Ended Ended Ended
March 31, Aug. 31, Aug. 31, March 31, Aug. 31, Aug. 31,
1998 1997 1996 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold................................ 392,494 751,684 1,408,416 304,821 418,585 668,440
Shares issued in reinvestment of
distributions to shareholders........... 23,529 16,584 -- -- 376 --
Shares redeemed............................ (343,315 ) (434,401) (57,598 ) (183,404 )(158,580 ) (70,133)
---------- ---------- --------- --------- --------- ---------
Net increase in shares outstanding......... 72,708 333,867 1,350,818 121,417 260,381 598,307
Shares outstanding, beginning of period.... 1,684,685 1,350,818 -- 858,688 598,307 --
---------- ---------- --------- --------- --------- ---------
Shares outstanding, end of period.......... 1,757,393 1,684,685 1,350,818 980,105 858,688 598,307
---------- ---------- --------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6. AGREEMENT AND PLAN OF REORGANIZATION
The Growth/Value Fund and Aggressive Growth Fund were originally organized as
series of Trans Adviser Funds, Inc. (Trans Adviser), an open-end management
investment company incorporated under the laws of the State of Maryland.
Pursuant to an Agreement and Plan of Reorganization dated May 31, 1997, each
Fund, on August 29, 1997, succeeded to the assets and liabilities of a series of
Trans Adviser with the same name (the Predecessor Fund). The investment
objective, policies and restrictions of each Fund and its Predecessor Fund are
substantially identical.
For federal income tax purposes, the reorganization of the Growth/Value Fund and
Aggressive Growth Fund qualifies as a tax-free reorganization with no tax
consequences to either Fund, its Predecessor Fund or their shareholders. In
connection with the reorganization, the fiscal year-end of each Fund, subsequent
to August 31, 1997 has been changed from August 31 to March 31.
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
===================================================================================================================================
Market
COMMON STOCKS -- 93.0% Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRIC UTILITIES -- 44.5%
Baltimore Gas & Electric Co.............................................. 50,050 $ 1,636,009
Central Louisiana Electric............................................... 30,000 1,027,500
Cinergy Corp............................................................. 50,000 1,850,000
CMS Energy Corp.......................................................... 60,000 2,816,250
DPL, Inc................................................................. 75,000 1,462,500
Duke Power Co............................................................ 42,000 2,501,625
FPL Group, Inc........................................................... 45,000 2,891,250
Kansas City Power & Light Co............................................. 60,000 1,890,000
Northern States Power Co................................................. 38,000 2,242,000
Scana Corp............................................................... 70,000 2,165,625
---------------
$ 20,482,759
---------------
TELECOMMUNICATIONS -- 33.2%
Ameritech Corp........................................................... 70,000 $ 3,460,625
AT&T Corp................................................................ 30,000 1,968,750
Bell Atlantic Corp....................................................... 25,000 2,562,500
BellSouth Corp........................................................... 50,000 3,378,125
GTE Corp................................................................. 45,000 2,694,375
Lucent Technologies, Inc................................................. 9,722 1,243,201
---------------
$ 15,307,576
---------------
GAS COMPANIES -- 10.5%
MCN Corp................................................................. 70,000 $ 2,616,250
Oneok, Inc............................................................... 25,000 1,018,750
Wicor, Inc............................................................... 25,000 1,209,375
---------------
$ 4,844,375
---------------
WATER COMPANIES -- 4.8%
American Water Works, Inc................................................ 70,000 $ 2,209,375
---------------
TOTAL COMMON STOCKS (Cost $23,947,380)................................... $ 42,844,085
---------------
===================================================================================================================================
Par Market
CORPORATE BONDS -- 4.8% Value Value
- -----------------------------------------------------------------------------------------------------------------------------------
Dayton Power & Light Co., 8.40%, 12/01/22................................ $ 1,000,000 $ 1,067,646
New York Telephone Co., 9.375%, 7/15/31.................................. 1,000,000 1,123,715
-------------- ---------------
TOTAL CORPORATE BONDS (Amortized Cost $2,087,898)........................ $ 2,000,000 $ 2,191,361
============== ---------------
TOTAL INVESTMENT SECURITIES-- 97.8% (Amortized Cost $26,035,278)......... $ 45,035,446
-------------
<PAGE>
UTILITY FUND (continued)
====================================================================================================================================
Face Market
REPURCHASE AGREEMENTS(1) -- 2.0% Value Value
- -----------------------------------------------------------------------------------------------------------------------------------
Dean Witter Reynolds, Inc., 5.50%, dated 3/31/98, due 4/01/98,
repurchase proceeds $925,141.......................................... $ 925,000 $ 925,000
============= ---------------
TOTAL INVESTMENT SECURITIES AND REPURCHASE
AGREEMENTS-- 99.8% ................................................... $ 45,960,446
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.2% ............................ 98,945
---------------
NET ASSETS-- 100.0% ..................................................... $ 46,059,391
===============
(1) Repurchase agreements are fully collateralized by U.S. Government obligations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
====================================================================================================================================
Market
COMMON STOCKS -- 87.0% Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER, NON-CYCLICAL -- 29.6%
Albertson's, Inc......................................................... 15,000 $ 789,375
Johnson & Johnson........................................................ 12,000 879,750
Merck & Co., Inc......................................................... 10,000 1,283,750
Newell Co................................................................ 25,000 1,210,937
PepsiCo, Inc............................................................. 25,000 1,067,188
Pfizer, Inc.............................................................. 20,000 1,993,750
Procter & Gamble Co...................................................... 20,000 1,687,500
Sara Lee Corp............................................................ 17,000 1,047,625
Schering-Plough Corp..................................................... 12,000 980,250
United Healthcare Corp................................................... 24,000 1,554,000
---------------
$ 12,494,125
---------------
FINANCIAL SERVICES -- 16.2%
AFLAC, Inc............................................................... 20,000 $ 1,265,000
American General Corp.................................................... 8,600 556,313
American International Group............................................. 11,000 1,385,312
Bank of New York Co., Inc................................................ 22,000 1,381,875
Freddie Mac.............................................................. 30,000 1,423,125
Norwest Corp............................................................. 20,000 831,250
---------------
$ 6,842,875
---------------
CONSUMER, CYCLICAL -- 12.6%
Gap, Inc................................................................. 30,000 $ 1,350,000
Mattel, Inc.............................................................. 30,000 1,188,750
McDonald's Corp.......................................................... 23,000 1,380,000
The Walt Disney Co....................................................... 13,000 1,387,750
---------------
$ 5,306,500
---------------
INDUSTRIAL -- 8.6%
Deere & Co............................................................... 18,000 $ 1,114,875
Diebold, Inc............................................................. 20,000 880,000
Emerson Electric Co...................................................... 17,000 1,108,188
Millipore Corp........................................................... 15,000 521,250
---------------
$ 3,624,313
---------------
TECHNOLOGY -- 8.4%
Compaq Computer Corp. ................................................... 40,000 $ 1,035,000
Hewlett-Packard Co....................................................... 10,000 633,750
Intel Corp............................................................... 10,000 780,625
Loral Space & Communications* ........................................... 11,000 307,312
Lucent Technologies, Inc................................................. 1,944 248,589
Motorola, Inc............................................................ 9,000 545,625
---------------
$ 3,550,901
---------------
ENERGY -- 8.2%
Apache Corp.............................................................. 35,000 $ 1,286,250
Baker Hughes, Inc........................................................ 25,000 1,006,250
Enron Corp............................................................... 25,000 1,159,375
---------------
$ 3,451,875
---------------
CONGLOMERATES -- 3.4%
General Electric Co...................................................... 17,000 $ 1,465,188
---------------
TOTAL COMMON STOCKS (Cost $24,331,358)................................... $ 36,735,777
---------------
<PAGE>
EQUITY FUND (continued)
====================================================================================================================================
Par Market
U.S. GOVERNMENT AGENCY ISSUES-- 12.9% Value Value
- -----------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Discount Note, 4/01/98
(Amortized Cost $5,430,000) $ 5,430,000 $ 5,430,000
-------------- ---------------
TOTAL INVESTMENT SECURITIES-- 99.9% (Amortized Cost $29,761,358)......... $ 42,165,777
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.1% ........................... 32,219
---------------
NET ASSETS-- 100.0% ..................................................... $ 42,197,996
===============
* Non-income producing security.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GROWTH/VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
====================================================================================================================================
Market
COMMON STOCKS -- 99.6% Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE -- 28.2%
AmeriSource Health Corp. - Class A*...................................... 10,000 $ 601,250
Amgen, Inc.*............................................................. 8,000 487,000
Becton, Dickinson and Co................................................. 5,000 340,313
Beverly Enterprises, Inc.*............................................... 20,000 266,250
Bristol-Myers Squibb Co.................................................. 8,000 834,500
Columbia/HCA Healthcare Corp............................................. 17,000 548,250
Health Management Associates, Inc. - Class A*............................ 11,250 322,031
Integrated Health Services, Inc.......................................... 12,000 471,750
Manor Care, Inc.......................................................... 15,000 555,000
PharMerica, Inc.*........................................................ 34,702 516,192
PhyCor, Inc.*............................................................ 15,000 338,438
Quorum Health Group, Inc.*............................................... 11,250 378,281
Schering-Plough Corp..................................................... 20,000 1,633,750
Sybron International Corp.*.............................................. 30,000 783,750
---------------
$ 8,076,755
---------------
FINANCIAL SERVICES -- 20.6%
Ace, Ltd................................................................. 30,000 $ 1,130,625
Capital One Financial Corp............................................... 24,500 1,932,437
Centura Banks, Inc....................................................... 10,000 712,500
Chase Manhattan Corp..................................................... 7,500 1,011,563
First Republic Bank*..................................................... 7,500 270,000
Mid Ocean Ltd............................................................ 7,000 542,500
Penncorp Financial Group, Inc............................................ 11,000 317,625
---------------
$ 5,917,250
---------------
TECHNOLOGY -- 16.2%
EMC Corp.*............................................................... 14,000 $ 529,375
International Business Machines Corp..................................... 7,000 727,125
Novell, Inc.*............................................................ 50,000 535,938
Oracle Corp.*............................................................ 22,500 710,156
QLogic Corp.*............................................................ 12,500 443,750
Sun Microsystems, Inc.*.................................................. 20,000 834,375
VERITAS Software Corp.*.................................................. 4,000 236,500
Western Digital Corp.*................................................... 35,000 614,687
---------------
$ 4,631,906
---------------
ENERGY -- 15.1%
Anadarko Petroleum Corp.................................................. 10,600 $ 731,400
Baker Hughes, Inc........................................................ 15,000 603,750
Barrett Resources Corp.*................................................. 10,000 349,375
Halter Marine Group, Inc.*............................................... 21,000 333,375
McDermott International, Inc............................................. 10,000 413,125
Pride International, Inc.*............................................... 24,500 584,937
Schlumberger, Ltd........................................................ 12,000 909,000
Stone Energy Corp.*...................................................... 10,000 390,625
---------------
$ 4,315,587
---------------
<PAGE>
GROWTH/VALUE FUND (continued)
====================================================================================================================================
Market
COMMON STOCKS -- 99.6% (continued) Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
RETAIL -- 5.7%
International Home Foods, Inc.*.......................................... 5,000 $ 166,250
Safeway, Inc.*........................................................... 15,000 554,063
Walgreen Co.............................................................. 4,600 161,863
Wal-Mart Stores, Inc..................................................... 15,000 762,187
---------------
$ 1,644,363
---------------
ENTERTAINMENT -- 5.5%
Carnival Corp. - Class A................................................. 12,500 $ 871,875
Host Marriott Corp.*..................................................... 15,000 284,063
Promus Hotel Corp.*...................................................... 9,250 441,687
---------------
$ 1,597,625
---------------
UTILITIES -- 3.3%
The Williams Companies, Inc.............................................. 30,000 $ 960,000
---------------
TELECOMMUNICATIONS -- 2.5%
Sprint Corp.............................................................. 10,500 $ 710,719
---------------
ENVIRONMENTAL -- 1.5%
U.S. Filter Corp.*....................................................... 7,500 $ 263,438
Waste Management, Inc.................................................... 5,000 154,062
---------------
$ 417,500
---------------
TRANSPORTATION -- 1.0%
MotivePower Industries, Inc.*............................................ 10,000 $ 276,250
---------------
TOTAL COMMON STOCKS (Cost $20,435,726)................................... $ 28,547,955
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.4% ............................ 101,298
---------------
NET ASSETS-- 100.0% ..................................................... $ 28,649,253
---------------
* Non-income producing security.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
====================================================================================================================================
Market
COMMON STOCKS -- 98.9% Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE -- 31.8%
Alternative Living Services, Inc.*....................................... 10,000 $ 331,250
AmeriSource Health Corp. - Class A*...................................... 7,500 450,937
Amgen, Inc.*............................................................. 6,200 377,425
Atria Communities, Inc.*................................................. 20,000 385,000
Captial Senior Living Corp.*............................................. 17,000 235,875
Columbia/HCA Healthcare Corp............................................. 12,000 387,000
Health Management Associates, Inc. - Class A*............................ 15,000 429,375
Integrated Health Services, Inc.......................................... 8,000 314,500
Manor Care, Inc.......................................................... 10,000 370,000
PharMerica, Inc.*........................................................ 31,850 473,769
PhyCor, Inc.*............................................................ 1,500 33,844
Quorum Health Group, Inc.*............................................... 7,500 252,188
Sun Healthcare Group, Inc.*.............................................. 5,000 93,125
Sunrise Assisted Living, Inc.*........................................... 6,000 268,500
Sybron International Corp.*.............................................. 20,000 522,500
---------------
$ 4,925,288
---------------
TECHNOLOGY -- 24.1%
EMC Corp.*............................................................... 6,000 $ 226,875
Novell, Inc.*............................................................ 55,000 589,531
Oracle Corp.*............................................................ 11,250 355,078
QLogic Corp.*............................................................ 12,500 443,750
Semtech Corp.*........................................................... 24,000 612,000
SMART Modular Technologies, Inc.*........................................ 30,000 684,375
Sun Microsystems, Inc.*.................................................. 10,000 417,188
VERITAS Software Corp.*.................................................. 1,000 59,125
Western Digital Corp.*................................................... 20,000 351,250
---------------
$ 3,739,172
---------------
ENERGY -- 13.8%
Anadarko Petroleum Corp.................................................. 4,600 $ 317,400
Domain Energy Corp.*..................................................... 10,000 140,000
Halter Marine Group, Inc.*............................................... 9,750 154,781
McDermott International, Inc............................................. 7,000 289,187
Pride International, Inc.*............................................... 15,000 358,125
St. Mary Land & Exploration Co........................................... 5,000 191,094
Stone Energy Corp.*...................................................... 7,500 292,969
Tuboscope, Inc.*......................................................... 10,000 190,000
Vintage Petroleum, Inc................................................... 10,000 210,000
---------------
$ 2,143,556
---------------
FINANCIAL SERVICES -- 12.4%
Ace, Ltd................................................................. 18,000 $ 678,375
Capital One Financial Corp............................................... 10,000 788,750
First Republic Bank*..................................................... 3,000 108,000
Horace Mann Educators Corp............................................... 5,000 175,625
Penncorp Financial Group, Inc............................................ 6,000 173,250
---------------
$ 1,924,000
<PAGE>
---------------
AGGRESSIVE GROWTH FUND (continued)
====================================================================================================================================
Market
COMMON STOCKS -- 98.9% (continued) Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 6.9%
Carnival Corp. - Class A................................................. 5,000 $ 348,750
Host Marriott Corp.*..................................................... 15,000 284,063
Promus Hotel Corp.*...................................................... 9,250 441,687
---------------
$ 1,074,500
---------------
RETAIL -- 3.8%
Food Lion, Inc. - Class A................................................ 15,000 $ 160,312
International Home Foods, Inc.*.......................................... 5,000 166,250
Walgreen Co.............................................................. 7,400 260,388
---------------
$ 586,950
---------------
UTILITIES -- 2.9%
Hagler Bailly, Inc.*..................................................... 5,000 $ 125,000
The Williams Companies, Inc.............................................. 10,000 320,000
---------------
$ 445,000
---------------
TELECOMMUNICATIONS -- 2.3%
Sprint Corp.............................................................. 5,200 $ 351,975
---------------
TRANSPORTATION -- 0.9%
MotivePower Industries, Inc.*............................................ 5,000 $ 138,125
---------------
TOTAL COMMON STOCKS (Cost $11,073,150) .................................. $ 15,328,566
---------------
====================================================================================================================================
Par Market
U.S. GOVERNMENT AGENCY ISSUES-- 0.9% Value Value
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Discount Note, 4/01/98
(Amortized Cost $135,000) $ 135,000 $ 135,000
-------------- ---------------
TOTAL INVESTMENT SECURITIES-- 99.8% (Amortized Cost $11,208,150)......... $ 15,463,566
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.2% ............................ 31,798
---------------
NET ASSETS-- 100.0% ..................................................... $ 15,495,364
---------------
* Non-income producing security.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ------------------------------------------
ARTHUR ANDERSEN LLP
To the Shareholders and Board of Trustees of Countrywide Strategic Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments of Countrywide Strategic Trust (comprising,
respectively, the Utility Fund, Equity Fund, Growth/Value Fund and Aggressive
Growth Fund) as of March 31, 1998, and (i) for the Utility Fund and Equity
Fund the related statements of operations, statements of changes in net assets
and the financial highlights for the periods indicated thereon and (ii) for the
Growth/Value Fund and Aggressive Growth Fund the related statements of
operations, statements of changes in net assets and the financial highlights
for the seven-month period ended March 31, 1998 and the year ended August 31,
1997. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial statements and financial highlights of the Growth/Value
Fund and Aggressive Growth Fund for the period ended August 31, 1996 were
audited by other auditors whose report dated October 18, 1996, expressed an
unqualified opinion on those financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence suppporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights audited by us
and referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting the Countrywide
Strategic Trust as of March 31, 1998, the results of their operations, the
changes in their net assets, and their financial highlights for the periods
referred to above, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
April 24, 1998
<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, March
31, 1998
Statements of Operations For the Year Ended
March 31, 1998
Statements of Changes in Net Assets For the
Years Ended March 31, 1998 and 1997
Financial Highlights
Notes to Financial Statements, March 31, 1998
Portfolio of Investments, March 31, 1998
(b) Exhibits:
(1)(i) Registrant's Restated Agreement and
Declaration of Trust is filed herewith.
(ii) Amendment No. 1, dated May 24, 1994, to
Registrant's Restated Agreement and
Declaration of Trust is filed herewith.
(iii) Amendment No. 2, dated February 28, 1997,
to Registrant's Restated Agreement and
Declaration of Trust is filed herewith.
(iv) Amendment No. 3, dated August 11, 1997, to
Registrant's Restated Agreement and
Declaration of Trust is filed herewith.
<PAGE>
(2) (i) Registrant's Bylaws are filed herewith.
(ii) Amendments to Registrant's Bylaws adopted
July 17, 1984 are filed herewith.
(iii) Amendment to Registrant's Bylaws adopted
April 5, 1989 are filed herewith.
(3) Voting Trust Agreements - None.
(4) Specimen Share Certificate - None.
(5)
(i) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Utility Fund, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No.
32, is hereby incorporated by reference.
(ii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Equity Fund, which was filed as an Exhibit
to Registrant's Post-Effective Amendment
No. 32, is hereby incorporated by reference.
(iii) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Growth/Value Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 34, is hereby incorporated by
reference.
(iv) Registrant's Management Agreement with
Countrywide Investments, Inc. for the
Aggressive Growth Fund, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 34, is hereby incorporated by
reference.
(v) Subadvisory Agreement between Countrywide
Investments, Inc. and Mastrapasqua &
Associates, Inc. for the Growth/Value Fund,
which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 34, is hereby
incorporated by reference.
<PAGE>
(vi) Subadvisory Agreement between Countrywide
Investments, Inc. and Mastrapasqua &
Associates, Inc. for the Aggressive Growth
Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 34,
is hereby incorporated by reference.
(6)(i) Registrant's Underwriting Agreement with
Countrywide Investments, Inc., which was
filed as an Exhibit to Registrant's Post-
Effective Amendment No. 32, is hereby
incorporated by reference.
(ii) Form of Underwriter's Dealer Agreement is
filed herewith.
(7) Bonus, Profit Sharing, Pension or Similar
Contracts for the benefit of Directors or
Officers - None.
(8)(i) Custody Agreement with The Fifth Third Bank,
the Custodian for the Utility Fund and the
Equity Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No.
31, is hereby incorporated by reference.
(ii) Custody Agreement with Star Bank, the
Custodian for the Growth/Value Fund and
the Aggressive Growth Fund, which was
filed as an Exhibit to Registrant's Post-
Effective Amendment No. 35, is hereby
incorporated by reference.
<PAGE>
(9)(i) Registrant's Accounting and Pricing Services
Agreement with Countrywide Fund Services,
Inc., which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 35,
is hereby incorporated by reference.
(ii) Registrant's Transfer, Dividend Disbursing,
Shareholder Service and Plan Agency
Agreement with Countrywide Fund Services,
Inc., which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 34,
is hereby incorporated by reference.
(iii) Administration Agreement between Countrywide
Investments, Inc. and Countrywide Fund
Services, Inc., which was filed as an Exhibit
to Registrant's Post-Effective Amendment No.
35, is hereby incorporated by reference.
(iv) License Agreement with Countrywide Credit
Industries, Inc., which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 32, is hereby incorporated by
reference.
(10) Opinion and Consent of Counsel, which was
filed as an Exhibit to Registrant's Pre-
Effective Amendment No. 1, is hereby
incorporated by reference.
(11) Consent of Independent Auditors is 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.
<PAGE>
(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, which were filed as Exhibits
to Registrant's Post-Effective Amendment No.
32, are hereby incorporated by reference.
(ii) Form of Administration Agreement with respect
to the administration of shareholder accounts
is filed herewith.
(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) Financial Data Schedules for Utility Fund,
Equity Fund, 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.
33, is hereby incorporated by reference.
Item 25. Persons Controlled by or Under Common Control with the
Registrant
-------------------------------------------------------
None
<PAGE>
Item 26. Number of Holders of Securities (as of June 30, 1998)
- ------- -----------------------------------------------------
Title of Class Number of Record Holders
-------------- ------------------------
Utility Fund
Class A Shares 1,701
Class C Shares 165
Equity Fund
Class A Shares 1,229
Class C Shares 138
Growth/Value Fund 547
Aggressive Growth Fund 540
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
<PAGE>
the duties involved in the conduct of such Covered Person's
office ("disabling conduct"). Anything herein contained to the
contrary notwithstanding, no Covered Person shall be
indemnified for any liability to the Trust or its Shareholders
to which such Covered Person would otherwise be subject unless
(1) a final decision on the merits is made by a court or other
body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of disabling
conduct or, (2) in the absence of such a decision, a
reasonable determination is made, based upon a review of the
facts, that the Covered Person was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum
of Trustees who are neither "interested persons" of the
Company as defined in the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
Trustees"), or (b) an independent legal counsel in a written
opinion.
Section 6.5 Advances of Expenses.
----------- --------------------
The Trust shall advance attorneys' fees or other expenses
incurred by a Covered Person in defending a proceeding, upon
the undertaking by or on behalf of the Covered Person to repay
the advance unless it is ultimately determined that such
Covered Person is entitled to indemnification, so long as one
of the following conditions is met: (i) the Covered Person
shall provide security for his undertaking, (ii) the Trust
shall be insured against losses arising by reason of any
lawful advances, or (iii) a majority of a quorum of the
disinterested non-party Trustees of the Trust, or an
independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the Covered Person ultimately will be found
entitled to indemnification.
Section 6.6 Indemnification Not Exclusive, etc.
----------- -----------------------------------
The right of indemnification provided by this Article VI shall
not be exclusive of or affect any other rights to which any
such Covered Person may be entitled. As used in this Article
VI, "Covered Person" shall include such person's heirs,
executors and administrators, an "interested Covered Person"
is one against whom the action, suit or other proceeding in
question or another action, suit or other proceeding on the
same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against
whom none of such actions, suits or other proceedings or
another action, suit or other proceeding on the same or
similar grounds is then or has been pending or threatened.
Nothing contained in this article shall affect any
<PAGE>
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
which protects the Trustees and officers against liabilities
rising from action involving willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved
in the conduct of their offices.
The Advisory Agreements and the Subadvisory Agreements provide
that the Adviser (or Subadvisor) shall not be liable for any
error of judgment or mistake of law or for any loss suffered
by the Registrant in connection with the matters to which the
Agreements relate, except a loss resulting from willful
misfeasance, bad faith or gross negligence of the Adviser (or
Subadvisor) in the performance of its duties or from the
reckless disregard by the Adviser (or Subadvisor) of its
obligations under the Agreement. Registrant will advance
attorneys' fees or other expenses incurred by the Adviser (or
Subadvisor) in defending a proceeding, upon the undertaking by
or on behalf of the Adviser (or Subadvisor) to repay the
advance unless it is ultimately determined that the Adviser is
entitled to indemnification.
The Underwriting Agreement with the 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
<PAGE>
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
Advisers
------------------------------------------------
A. Countrywide Investments, Inc. (the "Adviser") is a
registered investment adviser providing investment
advisory services to the Registrant. The Adviser
acts as the investment adviser to seven series of
Countrywide Tax-Free Trust and six series of
Countrywide Investment Trust, both of which are
registered investment companies. The Adviser
provides investment advisory services to individual
and institutional accounts and is a registered
broker-dealer.
The following list sets forth the business and other
connections of the directors and executive officers of the
Adviser. Unless otherwise noted with an asterisk(*), the
address of the corporations listed below is 312 Walnut
Street, Cincinnati, Ohio 45202.
*The address of each corporation is 4500 Park Granada
Road, Calabasas, California 91302.
(1) Angelo R. Mozilo - Chairman and a Director of the
Adviser.
(a) Chairman and a Trustee of Countrywide
Strategic Trust, Countrywide Investment Trust
and Countrywide Tax-Free Trust, registered
investment companies.
(b) Chairman and a Director of Countrywide
Financial Services, Inc., a financial
services company, Countrywide Fund Services,
Inc., a registered transfer agent,
CW Fund Distributors, Inc., a registered broker-
dealer, Countrywide Servicing Exchange,* a loan
servicing broker, Countrywide Capital
Markets, Inc.,* a holding company and Countrywide
Securities Corporation*, a registered broker-
dealer.
(c) Vice Chairman, Director and Chief Executive
Officer of Countrywide Credit Industries,
Inc.,* a holding company which provides
residential mortgages and ancillary
financial products and services.
<PAGE>
(d) A Director of Countrywide Home Loans, Inc.,*
a residential mortgage lender, CTC Foreclosure
Services Corporation,* a foreclosure trustee,
CCM Municipal Services, Inc.,* a tax lien
purchaser and Countrywide Field Services
Corporation*, a foreclosure property maintenance
provider.
(e) A Director of LandSafe, Inc.* and Chairman
and a director of various Landsafe
subsidiaries which provide residential
mortgage title and closing services.
(2) Robert H. Leshner - President and a Director of the
Adviser.
(a) President and a Trustee of Countrywide
Strategic Trust, Countrywide Investment Trust
and Countrywide Tax-Free Trust.
(b) President and a Director of Countrywide
Financial Services, Inc.
(c) Vice Chairman and a Director of Countrywide
Fund Services, Inc. and CW Fund Distributors, Inc.
(3) Andrew S. Bielanski - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc., CW Fund
Distributors, Inc., Countrywide Agency,
Inc.* and Countrywide Insurance Services, Inc.,*
insurance agencies.
(b) Managing Director - Marketing of Countrywide
Credit Industries, Inc. and Countrywide Home
Loans, Inc.
(4) Thomas H. Boone - A Director of the Adviser.
(a) A Director of Countrywide Financial
Services, Inc., Countrywide Fund Services,
Inc., CW Fund Distributors, Inc., Countrywide
Agency, Inc.,* Countrywide Tax Services
Corporation,* a residential mortgage tax service
provider, Countrywide Lending Corporation,* a
lending institution, Countrywide Agency, Inc.,
Countrywide Insurance Agency of Massachusetts*,
and Countrywide Insurance Services, Inc.
(b) Managing Director - Portfolio Services of
Countrywide Credit Industries,
Inc. and Managing Director - Chief Loan
Administration Officer of Countrywide Home
Loans, Inc.
<PAGE>
(c) A Director and Executive Vice President of
CWABS, Inc.,* an asset-backed securities
issuer and CWMBS, Inc.,* a mortgage-backed
securities issuer.
(d) CEO and a Director of CTC Foreclosure
Services Corporation.
(e) Chairman and Chief Executive Officer of
Countrywide Field Services Corporation.
(f) Chairman and Director of Countrywide Realty
Partners, Inc.,* a real estate marketing firm.
(5) Marshall M. Gates - A Director of the Adviser.
(a) A Director of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc., CW Fund
Distributors, Inc., Countrywide Agency, Inc. and
Countrywide Insurance Services, Inc.
(b) Managing Director - Developing Markets of
Countrywide Credit Industries, Inc. and
Countrywide Home Loans, Inc.
(c) President and a Director of Second Charter
Reinsurance Corporation,* a mortgage,
property and casualty reinsurance agency and
Charter Reinsurance Corporation,* a mortgage
reinsurance agency.
(d) Chief Operating Officer and Director of Landsafe,
Inc. and various LandSafe subsidiaries.
(6) William E. Hortz - Executive Vice President and Director
of Sales of the Adviser.
(a) Executive Vice President of Countrywide Financial
Services, Inc. and Countrywide Fund Services, Inc.
(b) President of Peregrine Asset Management (USA),
4 Embarcadero Center, San Francisco, California,
94111, an investment adviser until 1998.
<PAGE>
(7) Maryellen Peretzky - Senior Vice President and Chief
Operating Officer of the Adviser.
(a) Senior Vice President-Administration of
Countrywide Financial Services, Inc. and
Countrywide Fund Services, Inc.
(b) Vice President of CW Fund Distributors, Inc.
(c) Assistant Secretary of The Gannett Welsh & Kotler
Funds, Firsthand Funds and the Dean Family of
Funds.
(8) John J. Goetz - First Vice President and Chief
Investment Officer- Tax-Free Fixed Income of the Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(9) Susan F. Flischel - First Vice President and Chief
Investment Officer - Equity of the Adviser
(10) Margaret D. Weinblatt - First Vice President and
Chief Investment Officer - Taxable Fixed Income and
Pension of the Adviser
(a) President and Chief Investment Officer of
Copernicus Asset Management, Ltd., 730 Fifth
Avenue, 9th Floor, New York, New York, an
investment adviser until 1998.
(11) Sharon L. Karp - First Vice President-Marketing of
the Adviser.
(a) Vice President of Countrywide Financial
Services, Inc. until February 1997.
(12) John F. Splain - Secretary and General Counsel of the
Adviser.
(a) First Vice President, Secretary and General
Counsel of Countrywide Fund Services, Inc. and
CW Fund Distributors, 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, Maplewood Investment Trust,
The Thermo Opportunity Fund, Inc., the
Wells Family of Real Estate Funds, the Boyar
Value Fund and Profit Funds Investment Trust,
registered investment companies.
<PAGE>
(d) Assistant Secretary of Schwartz Investment
Trust, The Gannett Welsh & Kotler Funds,
Firsthand Funds, Dean Family of Funds,
The New York State Opportunity Funds,
The Westport Funds, Lake Shore Family of Funds,
Bowes Investment Trust, Albermarle Investment
Trust and Atalanta/Sosnoff Investment Trust,
registered investment companies.
(e) Secretary of PRAGMA Investment Trust, a registered
investment company, until January 1998.
(f) Assistant Secretary of Fremont Mutual Funds,
Inc. and Capitol Square Funds, registered
investment companies, until September 1997.
(g) Secretary of Leeb Personal Finance(TM)
Investment Trust, a registered investment
company, until November 1996.
(13) Robert G. Dorsey - Treasurer of the Adviser.
(a) President and Treasurer of Countrywide Fund
Services, Inc.
(b) President of CW Fund Distributors, Inc.
(c) First Vice President-Finance and Treasurer of
Countrywide Financial Services, Inc.
(d) Vice President of Countrywide Tax-Free Trust,
Countrywide Investment Trust, Countrywide
Strategic Trust, Brundage, Story and Rose
Investment Trust, Markman MultiFund Trust,
Maplewood Investment Trust, The Thermo
Opportunity Fund, Inc., Dean Family of Funds,
The New York State Opportunity Funds, Wells Family
of Real Estate Funds, Lake Shore Family of Funds,
Boyar Value Fund, Profit Funds Investment
Trust, Bowes Investment Trust and Atalanta/Sosnoff
Investment Trust.
(e) Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust,
The Gannett Welsh & Kotler Funds, The
Tuscarora Investment Trust, Firsthand Funds,
The Westport Funds and Albermarle Investment
Trust.
(f) Vice President of PRAGMA Investment Trust until
January 1998.
(g) Vice President of Capitol Square Funds and
Assistant Vice President of Fremont Mutual
Funds, Inc. until September 1997.
(h) Vice President of Leeb Personal Finance(TM)
Investment Trust until November 1996.
<PAGE>
(14) Terrie A. Wiedenheft - Vice President and Controller
of the Adviser.
(a) First Vice President and Chief Financial
Officer of Countrywide Financial Services,
Inc.
(b) First Vice President and Controller of Countrywide
Fund Services, Inc.
(c) Treasurer of CW Fund Distributors, Inc.
(15) 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:
(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 and
Countrywide Investment Trust. Unless otherwise
noted with an asterisk(*), the address of the
persons named below is 312 Walnut Street,
Cincinnati, Ohio 45202.
*The address is 4500 Park Granada Road, Calabasas,
California 91302.
<PAGE>
POSITION POSITION
WITH WITH
(b) NAME UNDERWRITER REGISTRANT
----- ----------- ----------
* Angelo R. Mozilo Chairman and Chairman/
Director Trustee
Robert H. Leshner President President/
and Director Trustee
* Andrew S. Bielanski Director None
* Thomas H. Boone Director None
* Marshall M. Gates Director None
Maryellen Peretzky Senior Vice None
President &
Chief Operating
Officer
William E. Hortz Executive Vice None
President &
Director of Sales
John J. Goetz First Vice None
President and
Chief
Investment
Officer - Tax-Free
Fixed Income
Susan F. Flischel First Vice None
President &
Chief Investment
Officer - Equity
Margaret D. Weinblatt First Vice None
President and
Chief Investment
Officer - Taxable
Fixed Income
Sharon L. Karp First Vice None
President-
Marketing
<PAGE>
John F. Splain Secretary and Secretary
General Counsel
Robert G. Dorsey Treasurer Vice
President
Terrie A. Wiedenheft First Vice None
President
& Controller
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 Part A or Part B
- ------- -----------------------------------------------------
None.
Item 32. Undertakings
- ------- ------------
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of its latest
annual report to shareholders, upon request and
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 the
Registrant pursuant to the provisions of Massachusetts
law and the Agreement and Declaration of Trust of the
Registrant or the Bylaws of the Registrant, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
<PAGE>
liabilities (other than the payment by the Registrant
of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the
successful defense of any action, suit or proceeding)
is asserted by such trustee, officer or controlling
person in connection with the securities being
registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
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) 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 this Registration Statement
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cincinnati, State of Ohio, on the
31st day of July, 1998.
COUNTRYWIDE STRATEGIC TRUST
/s/ John F. Splain
By:---------------------------
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 31st day of July, 1998.
*ANGELO R. MOZILO Chairman
and Trustee
/s/ Robert H. Leshner
- --------------------- President
ROBERT H. LESHNER and Trustee
/s/ Mark J. Seger
- --------------------- Treasurer
MARK J. SEGER
*DONALD L. BOGDON, M.D. Trustee
*H. JEROME LERNER Trustee
*FRED A. RAPPOPORT Trustee
*OSCAR P. ROBERTSON Trustee
*JOHN F. SEYMOUR, JR. Trustee
*SEBASTIANO STERPA Trustee
By: /s/ John F. Splain
------------------
JOHN F. SPLAIN
Attorney-in-Fact*
July 31, 1998
EXHIBIT INDEX
1. Restated Agreeement and Declaration of Trust
2. Amendment No. 1 to Restated Agreement and Declaration of Trust
3. Amendment No. 2 to Restated Agreement and Declaration of Trust
4. Amendment No. 3 to Restated Agreement and Declaration of Trust
5. Bylaws
6. Amendment to Bylaws adopted July 17, 1984
7. Amendments to Bylaws adopted April 5, 1989
8. Form of Underwriter's Dealer Agreement
9. Consent of Independent Auditors
10. Form of Administration Agreement
11. Financial Data Schedule for Utility Fund - Class A
12. Financial Data Schedule for Utility Fund - Class C
13. Financial Data Schedule for Equity Fund - Class A
14. Financial Data Schedule for Equity Fund - Class C
15. Financial Data Schedule for Growth/Value Fund
16. Financial Data Schedule for Aggressive Growth Fund
17. Power of Attorney for Fred A. Rappoport
MIDWEST STRATEGIC TRUST
RESTATED AGREEMENT AND DECLARATION OF TRUST
MAY 19, 1993
<PAGE>
MIDWEST STRATEGIC TRUST
RESTATED AGREEMENT AND DECLARATION OF TRUST
PAGE
ARTICLE I. NAME AND DEFINITIONS......................... 1
- --------- --------------------
Section 1.1 Name......................................... 1
Section 1.2 Definitions.................................. 1
(a) "Trust"........................... 1
(b) "Trustees"........................ 1
(c) "Shares".......................... 1
(d) "Series".......................... 1
(e) "Shareholder"..................... 2
(f) "1940 Act"........................ 2
(g) "Commission"...................... 2
(h) "Restated Declaration of Trust"... 2
(i) "Bylaws".......................... 2
ARTICLE II. PURPOSE OF TRUST............................. 2
- ---------- ----------------
ARTICLE III. THE TRUSTEES................................. 2
- ----------- ------------
Section 3.1 Number, Designation, Election, Term, etc..... 2
(a) Initial Trustees.................. 2
(b) Number............................ 2
(c) Term.............................. 3
(d) Resignation and Retirement........ 3
(e) Removal........................... 3
(f) Vacancies......................... 3
(g) Effect of Death, Resignation, etc. 4
(h) No Accounting..................... 4
Section 3.2 Powers of the Trustees....................... 4
(a) Investments....................... 5
(b) Disposition of Assets............. 5
(c) Ownership Powers.................. 5
(d) Subscription...................... 5
(e) Form of Holding................... 5
(f) Reorganizations, etc.............. 6
(g) Voting Trusts, etc................ 6
(h) Compromise........................ 6
(i) Partnerships, etc................. 6
(j) Borrowing and Security............ 6
(i)
<PAGE>
PAGE
(k) Guarantees, etc..................... 6
(l) Insurance........................... 6
(m) Pensions, etc....................... 7
Section 3.3 Certain Contracts............................ 7
(a) Advisory............................ 8
(b) Administration...................... 8
(c) Distribution........................ 8
(d) Custodian and Depository............ 8
(e) Transfer and Dividend Disbursing
Agency.............................. 8
(f) Shareholder Servicing............... 8
(g) Accounting.......................... 8
Section 3.4 Payment of Trust Expenses and Compensation
of Trustees.................................. 9
Section 3.5 Ownership of Assets of the Trust............. 10
ARTICLE IV. SHARES....................................... 10
Section 4.1 Description of Shares........................ 10
Section 4.2 Establishment and Designation of Series...... 12
(a) Assets Belonging to Series.......... 12
(b) Liabilities Belonging to Series..... 13
(c) Dividends........................... 13
(d) Liquidation......................... 14
(e) Voting.............................. 14
(f) Redemption by Shareholder........... 15
(g) Redemption by Trust................. 15
(h) Net Asset Value..................... 15
(i) Transfer............................ 16
(j) Equality............................ 16
(k) Fractions........................... 17
(l) Conversion Rights................... 17
Section 4.3 Ownership of Shares.......................... 17
Section 4.4 Investments in the Trust..................... 17
Section 4.5 No Preemptive Rights......................... 17
Section 4.6 Status of Shares and Limitation of Personal
Liability.................................... 17
<PAGE>
PAGE
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS...... 18
Section 5.1 Voting Powers................................ 18
Section 5.2 Meetings..................................... 18
Section 5.3 Record Dates................................. 19
Section 5.4 Quorum and Required Vote..................... 19
Section 5.5 Action by Written Consent.................... 20
Section 5.6 Inspection of Records........................ 20
Section 5.7 Additional Provisions........................ 20
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION...... 20
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice................................ 20
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety............................. 21
Section 6.3 Indemnification of Shareholders.............. 21
Section 6.4 Indemnification of Trustees, Officers, etc... 22
Section 6.5 Advances of Expenses......................... 22
Section 6.6 Indemnification Not Exclusive, etc........... 23
Section 6.7 Liability of Third Persons Dealing with
Trustees..................................... 23
ARTICLE VII. MISCELLANEOUS................................. 23
Section 7.1 Duration and Termination of Trust............. 23
Section 7.2 Reorganization................................ 23
Section 7.3 Amendments................................... 24
Section 7.4 Filing of Copies; References; Headings....... 25
Section 7.5 Applicable Law............................... 25
<PAGE>
MIDWEST STRATEGIC TRUST
RESTATED AGREEMENT AND DECLARATION OF TRUST
The Agreement and Declaration of Trust initially made and declared in
Boston, Massachusetts on November 18, 1982 under the name "The Vintage Trust"
and restated as of October 31, 1984 under the name "LG Investment Trust," as
heretofore amended, is hereby restated in its entirety this 19th day of May,
1993 to provide as follows:
WITNESSETH:
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 NAME AND ADDRESS. This Trust shall be known as "Midwest
Strategic Trust" and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine. Until
otherwise determined, the principal place of business of the Trust is 312 Walnut
Street, Cincinnati, Ohio 45202. The Trust's resident agent in Massachusetts is
CT Corporation System, 2 Oliver Street, Boston, Massachusetts 02109.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust
established by this Restated Agreement and Declaration of
Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article III;
(c) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust or any Series of
the Trust (as the context may require) shall be divided from
time to time;
(d) "Series" refers to Series of Shares established and
designated under or in accordance with the provisions of
Article IV;
<PAGE>
(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time;
(g) "Commission" shall have the meaning given it in the 1940 Act;
(h) "Restated Declaration of Trust" shall mean this Restated
Agreement and Declaration of Trust as amended or restated from
time to time; and
(i) "Bylaws" shall mean the Bylaws of the Trust as amended from
time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company, to
offer Shareholders one or more investment programs primarily in securities and
debt instruments and to transact any or all lawful business.
ARTICLE III
THE TRUSTEES
Section 3.1 Number, Designation, Election, Term, etc.
(a) INITIAL TRUSTEES. Upon execution of this Restated Declaration
of Trust or a counterpart hereof, each of the following has
agreed to continue to be a Trustee of the Trust and to be
bound by the provisions hereof:
Robert Betagole, 10340 Evendale Drive, Cincinnati, OH 45241
Margaret S. Hansson, 5650 York Street, Commerce City, CO 80022
H. Jerome Lerner, 4700 Smith Road, Suite Q, Cincinnati, OH 45212
Robert H. Leshner, 312 Walnut Street, Cincinnati, OH 45202
Richard A. Lipsey, 11478 Rue Concord, Baton Rouge, LA 70810
Donald J. Rahilly, 9933 Alliance Road, Cincinnati, OH 45242
Fred A. Rappoport, 830 Birchwood Drive, Los Angeles, CA 90024
(b) NUMBER. The Trustees serving as such, whether named above or
hereafter becoming a Trustee, may increase or decrease (to not
less than two) the number of Trustees to a number other than
the number theretofore determined. No decrease in the number
of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 3.1.
- 2 -
<PAGE>
(c) TERM. Each Trustee shall serve as a Trustee during the lifetime of
the Trust and until its termination as hereinafter provided or until
such Trustee sooner dies, resigns, retires or is removed. The
Trustees may elect their own successors and may, pursuant to Section
3.1(f) hereof, appoint Trustees to fill vacancies; provided that,
immediately after filling a vacancy, at least 2/3 of the Trustees then
holding office shall have been elected to such office by the
Shareholders at an annual or special meeting. If at any time less
than a majority of the Trustees then holding office were so
elected, the Trustees shall forthwith cause to be held as promptly as
possible, and in any event within 60 days, a meeting of Shareholders
for the purpose of electing Trustees to fill any existing vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust or retire
as a Trustee, by written instrument signed by him and delivered to the
other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later
date as is specified in such instrument.
(e) REMOVAL. Any Trustees may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date upon
which such removal shall become effective, (ii) by vote of the
Shareholders holding not less than two-thirds of the Shares then
outstanding, cast in person or by proxy at any meeting called for
the purpose, or (iii) by a declaration in writing signed by
Shareholders holding not less than two-thirds of the Shares then
outstanding and filed with the Trust's Custodian.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or
resulting from an increase in the number of Trustees by the
Trustees may (but so long as there are at least three remaining
Trustees, need not unless required by the 1940 Act) be filled
either by a majority of the remaining Trustees through the
appointment in writing of such other person as such remaining
Trustees in their discretion shall determine (unless a shareholder
election is required by the 1940 Act) or by the election by the
Shareholders, at a meeting called for the purpose, of a person to
fill such vacancy, and such appointment or election shall be effective
upon the written acceptance of the person named therein to serve as
a Trustee and agreement by such person to be bound by the provisions
of this Restated Declaration of Trust, except that any such
appointment or election in anticipation of a vacancy to occur by
reason
<PAGE>
of retirement, resignation, or increase in number of Trustees
to be effective at a later date shall become effective only at
or after the effective date of said retirement, resignation, or
increase in number of Trustees. As soon as any Trustee
so appointed or elected shall have accepted such appointment or
election and shall have agreed in writing to be bound by this
Restated Declaration of Trust and the appointment or election is
effective, the Trust estate shall vest in the new Trustee, together
with the continuing Trustees, without any further act or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation, retirement,
removal, or incapacity of the Trustees, or any one of them, shall not
operate to annul or terminate the Trust or to revoke or terminate any
existing agency or contract created or entered into pursuant to the
terms of this Declaration of Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or under
circumstances which would justify his removal for cause, no person
ceasing to be a Trustee as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person)
shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
SECTION 3.2 POWERS OF THE TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with this Restated
Declaration of Trust providing for the conduct of the business and affairs of
the Trust and may amend and repeal them to the extent that such Bylaws do not
reserve that right to the Shareholders; they may as they consider appropriate
elect and remove officers and appoint and terminate agents and consultants and
hire and terminate employees, any one or more of the foregoing of whom may be a
Trustee, and may provide for the compensation of all of the foregoing; they may
appoint from their own number, and terminate, any one or more committees
consisting of two or more Trustees, including without implied limitation an
executive committee, which may, when the Trustees are not in session and subject
to the 1940 Act, exercise some or all of the power and authority of the Trustees
as the Trustees may determine; in accordance with Section 3.3 they may employ
one or more Advisers, Administrators, Depositories and Custodians and may
authorize any Depository or Custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of securities and debt instruments, retain transfer, dividend,
accounting or Shareholder servicing agents or any of the foregoing, provide for
the distribution of
<PAGE>
Shares by the Trust through one or more distributors, principal
underwriters or otherwise, set record dates or times for the
determination of Shareholders or various of them with respect to various
matters; they may compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem appropriate;
and in general they may delegate to any officer of the Trust, to any committee
of the Trustees and to any employee, adviser, administrator, distributor,
depository, custodian, transfer and dividend disbursing agent, or any other
agent or consultant of the Trust such authority, powers, functions and duties as
they consider desirable or appropriate for the conduct of the business and
affairs of the Trust, including without implied limitation the power and
authority to act in the name of the Trust and of the Trustees, to sign documents
and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority:
(a) Investments. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being
bound or limited by any present or future law or custom in regard to
investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of
the Trust;
(c) Ownership Powers. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments
or property; and to execute and deliver proxies or powers of attorney
to such person or persons as the Trustees shall deem proper, granting
to such person or persons such power and discretion with relation to
securities, debt instruments or property as the Trustees shall deem
proper;
(d) Subscription. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or
debt instruments;
(e) Form of Holding. To hold any security, debt instrument or property in
a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust
or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
<PAGE>
(f) Reorganization, etc. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or
issuer, any security or debt instrument of which is or was held
in the Trust; to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or issuer, and to pay calls
or subsctiptions with respect to any security or debt instrument held
in the Trust;
(g) Voting Trusts, etc. To join with other holders of any securities or
debt instruments in acting through a committee, depository, voting
trustee or otherwise, and in that connection to deposit any security
or debt instrument with, or transfer any security or debt
instrument to, any such committee, depository or trustee, and to
delegate to them such power and authority with relation to any
security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay,
and to pay, such portion of the expenses and compensation of such
committee, depository or trustee as the Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including
but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) Borrowing and Security. To borrow funds and to mortgage and pledge the
assets of the Trust or any part thereof to secure obligations arising
in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure
any of or all such obligations;
(l) Insurance. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
consultants, investment advisers, managers, administrators,
distributors, principal underwriters, or independent contractors,
or any thereof (or any person connected
<PAGE>
therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person in any such
capacity, including any action taken or omitted that may be
determined to constitute negligence; provided, however, that insurance
which protects the Trustees and officers against liabilities rising
from action involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duries involved in the conduct
of their offices may not be purchased; and
(m) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and
annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and
agents of the Trust.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the Bylaws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum, consisting of at least a majority of the Trustees then in
office, being present), within or without Massachusetts, including any meeting
held by means of a conference telephone or other communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time and participation by such means shall constitute presence in
person at a meeting, or by written consents of a majority of the Trustees then
in office (or such larger or different number as may be required by the 1940
Act or other applicable law).
SECTION 3.3 CERTAIN CONTRACTS. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, other type of organizations, or individuals ("Contracting
Party") to provide for the performance and assumption of some or all of the
following services, duties and responsibilities to, for or of the Trust and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties and responsibilities in addition to those set forth below as
the Trustees may determine appropriate:
<PAGE>
(a) Advisory. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Series of
Shares of the Trust (as that phrase is defined in subsection (a) of
Section 4.2), to manage such investments and assets, make investment
decisions with respect thereto, and to place purchase and sale orders
for portfolio transactions relating to such investments and assets;
(b) Administration. Subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with respect to
the operations of the Trust, to supervise all or any part of the
operations of the Trust, and to provide all or any part of the
administrative and clerical personnel, office space and
office equipment and services appropriate for the efficient
administration and operations of the Trust;
(c) Distribution. To distribute the Shares of the Trust, to be principal
underwriter of such Shares, and/or to act as agent of the Trust in the
sale of Shares and the acceptance or rejection of orders for the
purchase of Shares;
(d) Custodian and Depository. To act as depository for and to maintain
custody of the property of the Trust and accounting records in
connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or
the instructions of any particular Shareholder to reinvest any such
dividends;
(f) Shareholder Servicing. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect
to Shareholders and their Shares, and similar matters; and
(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties,
Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
<PAGE>
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into subcontractual arrangements relative to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or has other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or its Shareholders, provided that in the case of any relationship or
interest referred to in the preceding clause (i) on the part of any Trustee or
officer of the Trust either (1) the material facts as to such relationship or
interest have been disclosed to or are known by the Trustees not having any such
relationship or interest and the contract involved is approved in good faith by
a majority of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of all of
the Trustees), (2) the material facts as to such relationship or interest and as
to the contract have been disclosed to or are known by the Shareholders entitled
to vote thereon and the contract involved is specifically approved in good faith
by vote of the Shareholders, or (3) the specific contract involved is fair to
the Trust as of the time it is authorized, approved or ratified by the Trustees
or by the Shareholders.
SECTION 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and to
charge or allocate the same to, between or among such one or more of the Series
that may be established and designated pursuant to Article IV, as the Trustees
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to,
<PAGE>
the Trustees' compensation and such expenses and charges for the services
of the Trust's officers, employees, investment adviser, administrator,
distributor, principal underwriter, auditor, counsel, depository, custodian,
transfer agent, dividend disbursing agent, accounting agent, Shareholder
servicing agent, and such other agents, consultants, and independent
contractors and such other expenses and charges as the Trustees may deem
necessary or proper to incur. Without limiting the generality of any other
provision hereof, the Trustees shall be entitled to reasonable compensation
from the Trust for their services as Trustees and may fix the amount of such
compensation.
SECTION 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV
SHARES
SECTION 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value and of one class, but the
Trustees shall have the authority from time to time to divide the class of
Shares into two or more Series of Shares (including without limitation those
Series specifically established and designated in Section 4.2), as they deem
necessary or desirable, to establish and designate such Series, and to fix and
determine the relative rights and preferences as between the different Series of
Shares as to right of redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the several Series shall have separate voting rights or
no voting rights. Except as aforesaid all Shares of the different Series shall
be identical.
The Shares of each Series may be issued or reissued from time to time in
one or more sub-series ("Sub-Series"), as determined by the Board of Trustees
pursuant to resolution. Each Sub-Series shall be appropriately designated, prior
to the issuance of any shares thereof, by some distinguishing letter, number or
title. All Shares within a Sub-Series shall be alike in every particular. All
Shares of each Series shall be of equal rank and have the same powers,
preferences and rights, and shall be subject to the same qualifications,
limitations and restrictions without distinction between the shares of different
Sub-Series thereof, except with respect to such differences among such
Sub-Series as the Board of Trustees shall from time to time determine to be
necessary to comply with the 1940 Act or other applicable laws, including
differences in the rate or rates of dividends or distributions. The Board of
Trustees may from time to time increase
<PAGE>
the number of Shares allocated to any Sub-Series already created by providing
that any unissued Shares of the applicable Series shall constitute part of
such Sub-Series, or may decrease the number of Shares allocated to any
Sub-Series already created by providing that any unissued Shares previously
assigned to such Sub-Series shall no longer constitute part thereof. The
Board of Trustees is hereby empowered to classify or reclassify from time to
time any unissued Shares of each Series by fixing or altering the terms thereof
and by assigning such unissued shares to an existing or newly created
Sub-Series. Notwithstanding anything to the contrary in this paragraph the
Board of Trustees is hereby empowered (i) to redesignate any issued Shares
of any Series by assigning a distinguishing letter, number or title to such
shares and (ii) to reclassify all or any part of the issued Shares of any Series
to make them part of an existing or newly created Sub-Series.
The number of authorized Shares and the number of shares of each series
that may be issued is unlimited, and the Trustees may issue Shares of any
Series for such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without action
or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and non-assessable (but may be
subject to mandatory contribution back to the Trust as provided in subsection
(h) of Section 4.2). The Trustees may classify or reclassify any unissued
Shares or any Shares previously issued and reacquired of any Series into one or
more Series that may be established and designated from time to time. The
Trustees may hold as treasury Shares (of the same or some other Series),
reissue for such consideration and on such terms as they may determine,
or cancel, at their discretion from time to time, any Shares of any Series
reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
5.3.
The establishment and designation of any Series of Shares in addition to
those established and designated in Section 4.2, or of any Sub-Series of shares,
shall be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such Series or Sub-Series, or as otherwise provided in
such instrument. At any time that there are no Shares outstanding of any
particular Series or Sub-Series previously established and designated the
Trustees may by an instrument executed by a majority of their number abolish
that Series or Sub-Series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an amendment
to this Restated Declaration of Trust.
<PAGE>
Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire, own, hold and
dispose of Shares of any Series of the Trust to the same extent as if such
person were not a Trustee, officer or other agent of the Trust; and the Trust
may issue and sell or cause to be issued and sold and may purchase Shares of any
Series from any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or purchase
of Shares of such Series generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES. Without
limiting the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Series, the Trustees hereby establish and designate six
Series of Shares: The "Growth Fund," the "U.S. Government Securities Fund," the
"Leshner Financial Treasury Total Return Fund," the "U.S. Government Long
Maturity Fund," the "Leshner Financial Utility Fund" and the "Leshner Financial
Equity Fund". The Growth Fund Shares, the U.S. Government Securities Fund
Shares, the Leshner Financial Treasury Total Return Fund Shares, the U.S.
Government Long Maturity Fund Shares, the Leshner Financial Utility Fund Shares,
the Leshner Financial Equity Fund Shares and any Shares of any further Series
that may from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some further Series or
Sub- Series at the time of establishing and designating the same) have the
following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by
the Trust for the issue or sale of Shares of a particular
Series, together with all assets in which such consideration
is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to
that Series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account
of the Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any
General Items allocated to that Series as provided in the
following sentence, are herein referred to as "assets
belonging to" that Series. In the event that there are any
assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as
belonging to any particular Series (collectively "General
Items"), the Trustees shall allocate such General Items to and
among any one or more of the Series established and designated
from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable; and any
General Items so allocated to a particular Series shall belong
to that Series. Each such allocation by the Trustees shall be
conclusive and
<PAGE>
binding upon the Shareholders of all Series for all purposes.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust
in respect of that Series and all expenses, costs, charges and
reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to and among any one or more
of the Series established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion
deem fair and equitable. The liabilities, expenses, costs, charges
and reserves allocated and so charged to a Series are herein referred
to as "liabilities belonging to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all Series for
all purposes.
(c) Dividends. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees
may determine, to the holders of Shares of that Series, from such of
the income and capital gains, accrued or realized, from the assets
belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that
Series. All dividends and distributions on Shares of a particular
Series shall be distributed pro rata to the holders of that Series
in proportion to the number of Shares of that Series held by such
holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection
with any dividend or distribution program or procedure the Trustees
may determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or payment
have not been received by the time or times established by the
Trustees under such program or procedure, and except that if Sub-
Series have been established for any Series, the rate of dividends
or distributions may vary among such Sub-Series pursuant to
resolution, which may be a standing resolution, of the Board of
Trustees. Such dividends and
<PAGE>
distributions may be made in cash or Shares or a combination thereof
as determined by the Trustees or pursuant to any program that the
Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution
to that Shareholder. Any such dividend or distribution paid in Shares
will be paid at the net asset value thereof as determined in
accordance with subsection (h) of Section 4.2.
The Trust intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1954, as amended, or any successor or
comparable statute thereto, and regulations promulgated thereunder.
Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books of the
Trust, the Board of Trustees shall have the power, in its sole
discretion, to distribute in any fiscal year as dividends, including
dividends designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion of the Board of
Trustees, to enable the Trust to qualify as a regulated investment
company and to avoid liability of the Trust for federal income tax in
respect of that year. However, nothing in the foregoing shall limit
the authority of the Board of Trustees to make distributions greater
than or less than the amount necessary to qualify as a regulated
investment company and to avoid liability of the Trust for such tax.
(d) Liquidation. In event of the liquidation or dissolution of the
Trust, the Shareholders of each Series that has been established and
designated shall be entitled to receive, as a Series, when and as
declared by the Trustees, the excess of the assets belonging to that
Series over the liabilities belonging to that Series. The assets so
distributable to the Shareholders of any particular Series shall be
distributed among such Shareholders in proportion to the number of
Shares of that Series held by them and recorded on the books of the
Trust. The liquidation of any particular Series may be authorized
by vote of a majority of the Trustees then in office subject to the
approval of a majority of the outstanding voting Shares of that
Series, as defined in the 1940 Act.
(e) Voting. All shares of all Series shall have "equal voting rights"
as such term is defined in the 1940 Act and except as otherwise
provided by that Act or rules, regulations or orders promulgated
thereunder. On each matter submitted to a vote of the Shareholders,
all shares of each Series shall vote as a single class except as to
any matter with respect to which a vote of all Series voting as a
single series is required by the 1940 Act or rules and regulations
promulgated thereunder, or
<PAGE>
would be required under the Massachusetts Business Corporation Law if
the Trust were a Massachusetts business corporation. As to any matter
which does not affect the interest of a particular Series, only the
holders of Shares of the one or more affected Series shall be entitled
to vote.
(f) Redemption by Shareholder. Each holder of Shares of a particular
Series shall have the right at such times as may be permitted by the
Trust, but no less frequently than once each week, to require the
Trust to redeem all or any part of his Shares of that Series at a
redemption price equal to the net asset value per Share of that
Series next determined in accordance with subsection (h) of this
Section 4.2 after the Shares are properly tendered for redemption.
Payment of the redemption price shall be in cash; provided, however,
that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash
unwise or undesirable, the Trust may make payment wholly or partly
in securities or other assets belonging to the Series of which the
Shares being redeemed are part at the value of such securities or
assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of
any Series to require the Trust to redeem Shares of that Series during
any period or at any time when and to the extent permissible under the
1940 Act, and such redemption is conditioned upon the Trust having
funds or property legally available therefor.
(g) Redemption by Trust. Each Share of each Series that has been
established and designated is subject to redemption by the Trust at
the redemption price which would be applicable if such Share was
then being redeemed by the Shareholder pursuant to subsection (f)
of this Section 4.2 (a) at any time, if the Trustees determine in
their sole discretion that failure to so redeem may have materially
adverse consequences to all or any of the holders of the Shares, or
any Series thereof, of the Trust, or (b) upon such other conditions
as may from time to time be determined by the Trustees and set forth
in the then current Prospectus of the Trust with respect to
maintenance of Shareholder accounts of a minimum amount. Upon such
redemption the holders of the Shares so redeemed shall have no further
right with respect thereto other than to receive payment of such
redemption price.
(h) Net Asset Value. The net asset value per Share of any Series shall be
the quotient obtained by dividing the value of the net assets of that
Series (being the value of the
<PAGE>
assets belonging to that Series less the liabilities belonging to that
Series) by the total number of Shares of that Series outstanding, all
determined in accordance with the methods and procedures, including
without limitation those with respect to rounding, established by the
Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share
of any Series at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declarations of income attributable to that Series as
dividends payable in additional Shares of that Series at the
designated constant dollar amount and for the handling of any losses
attributable to that Series. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed
to the capital of the Trust attributable to that Series his pro rata
portion of the total number of Shares required to be canceled in order
to permit the net asset value per Share of that Series to be
maintained, after reflecting such loss, at the designated constant
dollar amount. Each Shareholder of the Trust shall be deemed to have
agreed, by his investment in any Series with respect to which the
Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any
such loss.
(i) Transfer. All Shares of each particular Series shall be transferable,
but transfers of Shares of a particular Series will be recorded on the
Share transfer records of the Trust applicable to that Series
only at such times as Shareholders shall have the right to require
the Trust to redeem Shares of that Series and at such other times as
may be permitted by the Trustees.
(j) Equality. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to that Series), and each Share
of any particular Series shall be equal to each other Share of
that Series; but the provisions of this sentence shall not restrict
any distinctions permissible under subsection (c) of this Section 4.2
that may exist with respect to dividends and distributions on Shares
of the same Series. The Trustees may from time to time divide or
combine the Shares of any particular Series into a greater or lesser
number of Shares of that Series without thereby changing the
proportionate beneficial interest in the assets belonging to that
Series or in any way affecting the rights of Shares of any other
Series.
<PAGE>
(k) Fractions. Any fractional Share of any Series or Sub- Series, if any
such fractional Share is outstanding, shall carry proportionately all
the rights and obligations of a whole Share of that Series or Sub-
Series, including with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(l) Conversion Rights. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Series shall have the right to convert said
Shares into Shares of one or more other Series of Shares in accordance
with such requirements and procedures as may be established by the
Trustees.
SECTION 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Series that has been
established and designated. No certificates certifying the ownership of Shares
need be issued except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for the issuance
of Share certificates, the use of facsimile signatures, the transfer of Shares
and similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders and as to the number of Shares of each Series and Sub-Series
held from time to time by each such Shareholder.
SECTION 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept investments
in the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase of
Shares that conform to such authorized terms and to reject any purchase orders
for Shares whether or not conforming to such authorized terms.
SECTION 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
SECTION 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust nor entitle the representative of
any deceased Shareholder to an accounting
<PAGE>
or to take any action in court or elsewhere against the Trust or the Trustees,
but only to the rights of said decedent under this Trust. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or division of the same or
for an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind personally any Shareholder,
nor except as specifically provided herein to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever other than such
as the Shareholder may at any time personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 5.1 VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in Section 3.3
as to which Shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust or any Series to the extent
and as provided in Sections 7.1 and 7.2, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section 7.3,
(v) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or the Shareholders, and (vi) with respect to such additional
matters relating to the Trust as may be required by the 1940 Act, this
Declaration of Trust, the Bylaws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. There shall be no cumulative voting in the
election of any Trustee or Trustees. Shares may be voted in person or by proxy.
A proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to be taken by
Shareholders.
SECTION 5.2 MEETINGS. Meetings (including meetings involving only the
holders of Shares of one or more but less than all Series) of Shareholders may
be called by the Trustees from time
<PAGE>
to time for the purpose of taking action upon any matter requiring the
vote or authority of the Shareholders as herein provided or upon any other
matter deemed by the Trustees to be necessary or desirable. Written notice
of any meeting of Shareholders shall be given or caused to be given by the
Trustees by mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the
Trust when requested to do so in writing by Shareholders holding not less
than 10% of the Shares then outstanding. If the Trustees shall fail to call or
give notice of any meeting of Shareholders (including a meeting involving only
the holders of Shares of one or more but less than all Series) for a period of
30 days after written application by Shareholders holding at least 25% of the
Shares then outstanding requesting a meeting be called for any other purpose
requiring action by the Shareholders as provided herein or in the Bylaws, then
Shareholders holding at least 25% of the Shares then outstanding may call and
give notice of such meeting, and thereupon the meeting shall be held in the
manner provided for herein in case of call thereof by the Trustees."
SECTION 5.3 RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or (subject to any provisions permissible
under subsection (c) of Section 4.2 with respect to dividends or distributions
on Shares that have not been ordered and/or paid for by the time or times
established by the Trustees under the applicable dividend or distribution
program or procedure then in effect) to be treated as a Shareholder of record
for purposes of such other action, even though he has since that date
and time disposed of his Shares, and no Shareholder becoming such after
that date and time shall be so entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
SECTION 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be
<PAGE>
sufficient for adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original meeting without
the necessity of further notice. A majority of the Shares voted, at a
meeting of which a quorum is present, shall decide any questions and a
plurality shall elect a Trustee, except when a different vote is required
or permitted by any provision of the 1940 Act or other applicable law or
by this Declaration of Trust or the Bylaws.
SECTION 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such other proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
SECTION 5.6 INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted stockholders of
a Massachusetts business corporation under the Massachusetts Business
Corporation Law.
SECTION 5.7 ADDITIONAL PROVISIONS. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Trust for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future, shall be
personally liable therefor. Every note, bond, contract, instrument, certificate
or undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only by or for the
Trust or the Trustees and not personally. Nothing in this Declaration of Trust
shall protect any Trustee or officer against any liability to the Trust or the
Shareholders to which such Trustee or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee or of
such officer.
<PAGE>
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or
made by or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust, but the omission
thereof shall not operate to bind any Trustees or Trustee or officers or officer
or Shareholders or Shareholder individually.
SECTION 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (a) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, consultant,
adviser, administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, Shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties.
SECTION 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or
former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the Shareholder)
shall assume the defense against such charge and satisfy any judgment thereon,
and the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
<PAGE>
the assets of the Trust estate to be held harmless from and indemnified against
all loss and expense arising from such liability.
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify each of its Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all liabilities,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been threatened, while in
office or thereafter, by reason of being or having been such a Trustee or
officer, director or trustee, and except that no Covered Person shall be
indemnified against any liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office ("disabling conduct"). Anything
herein contained to the contrary notwithstanding, no Covered Person shall be
indemnified for any liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject unless (1) a final decision on the
merits is made by a court or other body before whom the proceeding was brought
that the Covered Person to be indemnified was not liable by reason of disabling
conduct or, (2) in the absence of such a decision, a reasonable determination is
made, based upon a review of the facts, that the Covered Person was not liable
by reason of disabling conduct, by (a) the vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Company as defined in the
Investment Company Act of 1940 nor parties to the proceeding ("disinterested,
non-party Trustees"), or (b) an independent legal counsel in a written opinion.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys' fees
or other expenses incurred by a Covered Person in defending a proceeding, upon
the undertaking by or on behalf of the Covered Person to repay the advance
unless it is ultimately determined that such Covered Person is entitled to
indemnification, so long as one of the following conditions is met: (i) the
Covered Person shall provide security for his undertaking, (ii) the Trust shall
be insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the disinterested non-party Trustees of the Trust, or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
<PAGE>
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.
SECTION 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to a favorable vote of a majority of the outstanding voting securities,
as defined in the 1940 Act, of each Series voting separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
SECTION 7.2 REORGANIZATION. The Trustees may sell, convey and transfer the
assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
<PAGE>
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting Securities, as defined in
the 1940 Act, of that Series. Following such transfer, the Trustees shall
istribute such cash, shares or other securities (giving due effect to the
assets and liabilities belonging to and any other differences among the various
Series the assets belonging to which have so been transferred) among the
Shareholders of the Series the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so transferred, the
Trust shall be terminated.
SECTION 7.3 AMENDMENTS. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right
to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any
Shareholder or Trustee or repeal the prohibition of assessment upon the
Shareholders without the express consent of each Shareholder or Trustee
involved. Subject to the foregoing, the provisions of this Declaration of
Trust (whether or not related to the rights of Shareholders) may be amended
at any time by an instrument in writing signed by a majority of the then
Trustees (or by any officer of the Trust pursuant to the vote of a majority of
such Trustees), when authorized so to do by the vote in accordance with
subsection (e) of Section 4.2 of Shareholders holding a majority of the Shares
entitled to vote, except that amendments either (a) establishing and designating
any new Series of Shares not established and designated in Section 4.2, or any
Sub-Series or (b) having the purpose of changing the name of the Trust or the
name of any Shares theretofore established and designated or of supplying any
omission, curing any ambiguity or curing, correcting or supplementing any
provision hereof which is internally inconsistent with any other provision
hereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code and applicable regulations for the
Trust's obtaining the most favorable treatment thereunder available to regulated
investment companies, shall not require authorization by Shareholder vote.
Subject to the foregoing, any such amendment shall be effective as provided in
the instrument containing the terms of such amendment or, if there is no
provision therein with respect to effectiveness, upon the execution of such
instrument and of a certificate (which may be a part of such instrument)
executed by a Trustee or officer of the Trust to the effect that such amendment
has been duly adopted.
<PAGE>
SECTION 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk,
as well as any other governmental office where such filing may from time to time
be required, but the failure to make any such filing shall not impair the
effectiveness of this instrument or any such amendment. Anyone dealing with the
Trust may rely on a certificate by an officer of the Trust as to whether or not
any such amendments have been made, as to the identities of the Trustees and
officers, and as to any matters in connection with the Trust hereunder; and,
with the same effect as if it were the original, may rely on a copy certified
by an officer of the Trust to be a copy of this instrument or of any such
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein," "hereof" and "hereunder" shall
be deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. The masculine gender shall include the
feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect
the meaning, construction or effect of this instrument. This instrument may
be executed in any number of counterparts each of which shall be deemed an
original.
SECTION 7.5 APPLICABLE LAW. This Declaration of Trust is made in
The Commonwealth of Massachusetts, and it is created under and is to be governed
by and construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in Massachusetts,
but the reference to said Business Corporation Law is not intended to give the
Trust, the Trustees, the Shareholders or any other person any right, power,
authority or responsibility available only to or in connection with an entity
organized in corporate form. The Trust shall be of the type referred to in
Section 1 of Chapter 182 of the Massachusetts General Laws and of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
IN WITNESS WHEREOF, the undersigned Trustees, for themselves and their
respective successors and assigns, have executed one or
<PAGE>
more counterparts of this Restated Agreement and Declaration of Trust under seal
as of the day and year first above written.
/s/ Robert H. Leshner
-----------------
ROBERT H. LESHNER
/s/ Robert Betagole
-----------------
ROBERT BETAGOLE
/s/ Margaret S. Hansson
--------------------
MARGARET S. HANSSON
/s/ H. Jerome Lerner
-----------------
H. JEROME LERNER
/s/ Richard A. Lipsey
--------------------
RICHARD A. LIPSEY
/s/ Donald J. Rahilly
--------------------
DONALD J. RAHILLY
/s/ Fred A. Rappoport
---------------------
FRED A. RAPPOPORT
MIDWEST STRATEGIC TRUST
AMENDMENT NO. 1 TO RESTATED AGREEMENT AND DECLARATION
OF TRUST DATED MAY 19, 1993
Pursuant to Section 7.3 of the Restated Agreement and Declaration of
Trust of Midwest Strategic Trust and effective as of August 1, 1994, the
undersigned, being a majority of the Trustees of Midwest Strategic Trust, hereby
adopt the following resolutions:
RESOLVED, that the names of the Leshner Financial Treasury Total Return
Fund, the Leshner Financial Utility Fund and the Leshner Financial
Equity Fund, three series of Midwest Strategic Trust, be changed to the
"Treasury Total Return Fund," the "Utility Fund" and the "Equity Fund,"
respectively; and
FURTHER RESOLVED, that the Trust's Restated Agreement and Declaration
of Trust and other Trust documents and records, as necessary or
appropriate, be amended to reflect the name change of these series; and
FURTHER RESOLVED, that the officers of the Trust be, and they hereby
are, authorized to take such further actions as necessary to effect the
purpose of these resolutions.
IN WITNESS WHEREOF, the undersigned Trustees have executed one or more
counterparts of this instrument on May 24, 1994.
/s/ Robert Betagole /s/ Robert H. Leshner
------------------------ -----------------------
Robert Betagole Robert H. Leshner
/s/ Dale P. Brown /s/ Richard A. Lipsey
------------------------ -----------------------
Dale P. Brown Richard A. Lipsey
/s/ Margaret S. Hansson /s/ Donald J. Rahilly
------------------------ -----------------------
Margaret S. Hansson Donald J. Rahilly
/s/ H. Jerome Lerner /s/ Fred A. Rappoport
------------------------ -----------------------
H. Jerome Lerner Fred A. Rappoport
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
COUNTRYWIDE STRATEGIC TRUST
Amendment No. 3 to Restated Agreement and Declaration of Trust
The undersigned hereby certifies that he is the duly elected Secretary
of Countrywide Strategic Trust and that pursuant to Section 7.3 of the Restated
Agreement and Declaration of Trust dated May 19, 1993 the Trustees, by means of
an instrument in writing signed as of July 16, 1997 by a majority of such
Trustees, adopted the following resolutions:
RESOLVED, that the name of the U.S. Government Securities
Fund, a series of Countrywide Strategic Trust, be
changed to the "Government Mortgage Fund"; and
FURTHER RESOLVED, that the Trust's Restated Agreement and
Declaration of Trust and other Trust documents and records, as
necessary or appropriate, be amended to reflect the name
change of such series; and
FURTHER RESOLVED, that the officers of the Trust be, and they
hereby are, 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 August 1, 1997 and
that he is causing this Certificate to be signed and filed as provided in
Section 7.4 of this Agreement.
Witness my hand this 11th day of August, 1997.
/s/ John F. Splain
-----------------------------
John F. Splain, Secretary
BYLAWS
OF
LG INVESTMENT TRUST
ARTICLE 1
---------
Agreement and Declaration of Trust and Offices
1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of LG Investment Trust, the Massachusetts business
trust established by the Declaration of Trust (the "Trust").
1.2 OFFICES. The Trust shall maintain an office of record in Boston,
Massachusetts, which office may be the office of any resident agent appointed by
the Trust if located in that city. The Trust may maintain one or more other
offices, including its principal office, outside of Massachusetts, in such
cities as the Trustees may determine from time to time. Unless the Trustees
otherwise determine, the principal office of the Trust shall be located in
Cincinnati, Ohio.
ARTICLE 2
---------
Meetings of Trustees
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice immediately after and
at the same place as the annual meeting of the shareholders.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the President or the Treasurer or by two or more Trustees, sufficient notice
thereof being given to each Trustee by the Secretary or an Assistant Secretary
or by the officer or the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by
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<PAGE>
him or her before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him or her. Neither notice
of a meeting nor a waiver of a notice need specify the purposes of the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting except as
otherwise provided by the Investment Company Act of 1940.
2.6 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Trustees or any committee thereof may be taken without a
meeting, if a written consent of such action is signed by a majority of the
Trustees then in office or a majority of the members of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Trustees or such committee.
ARTICLE 3
----------
Officers
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
Chairman of the Board, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, if any, as the Trustees from time to time
may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of the
Board and the President of the Trust shall be a Trustee and may but need not be
a shareholder; and any other officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same person.
3.2 ELECTION. The Chairman of the Board, the President, the Treasurer
and the Secretary shall be elected annually by the Trustees at their first
meeting following the annual meeting of shareholders. Other officers, if any,
may be elected or appointed by the Trustees at said meeting or at any other
time. Vacancies in any office may be filled at any time.
- 2 -
<PAGE>
3.3 TENURE. The Chairman of the Board, the President, the Treasurer and
the Secretary shall hold office until the first meeting of the Trustees
following the next annual meeting of the shareholders and until their respective
successors are chosen and qualified, or in each case until he or she sooner
dies, resigns, is removed or becomes disqualified. Each other officer shall hold
office and each agent shall retain authority at the pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these Bylaws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 CHAIRMAN OF THE BOARD AND PRESIDENT. Unless the Trustees otherwise
provide, the Chairman of the Board of Trustees, or in the absence of the
Chairman of the Board, the President, or in the absence of the President, any
other Trustee chosen by the Trustees, shall preside at all meetings of the
shareholders and of the Trustees. The President shall be the chief executive
officer.
3.6 TREASURER. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.7 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
or officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
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<PAGE>
ARTICLE 4
----------
Committees
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these Bylaws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these Bylaws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its action to the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect.
ARTICLE 5
---------
Reports
5.1 GENERAL. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
---------
Fiscal Year
6.1 GENERAL. The fiscal year of the Trust shall be fixed, and shall be
subject to change by the Trustees.
ARTICLE 7
---------
Seal
7.1 GENERAL. If required by applicable law, the seal of the Trust shall
consist of a flat-faced die with the word "Massachusetts," together with the
name of the Trust and the year of its organization cut or engraved thereon, but,
unless otherwise required by the Trustees, the seal shall not be necessary to be
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<PAGE>
placed on, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
---------
Execution of Papers
8.1 GENERAL. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the Chairman of the Board, the President, any Vice President or by the Treasurer
and need not bear the seal of the Trust, but shall state the substance of or
make reference to the provisions of Section 6.1 of the Declaration of Trust.
ARTICLE 9
---------
Issuance of Share Certificates
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance
of share certificates. In that event, each shareholder shall be entitled to a
certificate stating the number of shares owned by him, in such form as shall be
prescribed from time to time by the Trustees. Such certificate shall be signed
by the Chairman of the Board, the President or a Vice President and by the
Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. In the event certificates
have been issued, a pledgee of shares
- 5 -
<PAGE>
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it is
held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder, and entitled to vote
thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
-----------
Custodian
10.1 GENERAL. The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at least Five Hundred
Thousand ($500,000) Dollars as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such basis
as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 11
----------
Dealings with Trustees and Officers
11.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which he is interested.
ARTICLE 12
-----------
Shareholders
12.1 ANNUAL MEETING. The annual meeting of the shareholders of the
Trust shall be held not more than 120 days after the end of each fiscal year, or
such other day as the Trustees shall select, at such time as the President or
the Trustees may fix in the notice of the meeting.
12.2 RECORD DATES. For the purpose of determining the shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time
- 6 -
<PAGE>
to time fix a time, which shall be not more than 60 days before the date of any
meeting of shareholders or the date for the payment of any dividend or of any
other distribution, as the record date for determining the shareholders having
the right to notice of and to vote at such meeting and any adjournment thereof
or the right to receive such dividend or distribution, and in such case only
shareholders of record on such record date shall have such right,
notwithstanding any transfer of shares on the books of the Trust after the
record date; or without fixing such record date the Trustees may for any such
purposes close the register or transfer books for all or any part of such
period.
ARTICLE 13
-----------
Amendments to the Bylaws
13.1 GENERAL. These Bylaws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
- 7 -
LG INVESTMENT TRUST
RESOLUTIONS OF BOARD OF TRUSTEES
AMENDING THE BYLAWS
"RESOLVED, that Section 2.1 of Article 2 of the Bylaws of LG Investment Trust be
amended to read as follows:
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held without call
or notice at such places and at such times as the Trustees may from time to time
determine, provided that notice of the first regular meeting following any such
determination shall be given to absent Trustees. A regular meeting of the
Trustees may be held without call or notice immediately after and at the same
place as any meeting of the shareholders.
FURTHER RESOLVED, that Section 3.2 of Article 3 of the Bylaws of LG Investment
Trust be amended to read as follows:
3.2 ELECTION. The Chairman of the Board, the President, the Treasurer and the
Secretary shall be elected annually by the Trustees. Other officers, if any, may
be elected or appointed by the Trustees at any time. Vacancies in any office may
be filled at any time.
FURTHER RESOLVED, that Section 3.3 of Article 3 of the Bylaws of LG Investment
Trust be amended to read as follows:
3.3 TENURE. The Chairman of the Board, the President, the Treasurer and the
Secretary shall hold office for one year and until their respective successors
are chosen and qualified, or in each case until he or she sooner dies, resigns,
is removed or becomes disqualified. Each other officer shall hold office and
each agent shall retain authority at the pleasure of the Trustees.
FURTHER RESOLVED, that Section 12.1 of Article 12 of the Bylaws of LG Investment
Trust be amended to read as follows:
12.1. MEETINGS. A meeting of the shareholders of the Trust shall be held
whenever called by the Trustees, whenever election of a Trustee or Trustees by
shareholders is required by the provisions of Section 16(a) of the Investment
Company Act of 1940 for that purpose or whenever otherwise required pursuant to
the Declaration of Trust. Any meeting shall be held on such day and at such time
as the President or the Trustees may fix in the notice of the meeting."
AMENDMENT TO
FINANCIAL INDEPENDENCE TRUST BYLAWS
April 5, 1989
ARTICLE 3
---------
Officers
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including Vice
Presidents, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The President of the Trust shall be a Trustee and
may but need not be a shareholder; and any other officer may be but none need be
a Trustee or shareholder. Any two or more offices may be held by the same
person.
3.2 ELECTION. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees at their first meeting following the annual
meeting of shareholders. Other officers, if any, may be elected or appointed by
the Trustees at said meeting or at any other time. Vacancies in any office may
be filled at any time.
3.3 TENURE. The President, the Treasurer and the Secretary shall hold
office until the first meeting of the Trustees following the next annual meeting
of the shareholders and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these Bylaws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 PRESIDENT. Unless the Trustees otherwise provide, the President, or
in the absence of the President, any other Trustee chosen by the Trustees, shall
preside at all meetings of the shareholders and of the Trustees. The President
shall be the chief executive officer.
3.6 TREASURER. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provision of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of
<PAGE>
the valuable papers, books of account and accounting records of the Trust, and
shall have such other duties and powers as may be designated from time to time
by the Trustees or by the President.
3.7 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
or officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
Dealer #________
COUNTRYWIDE INVESTMENTS, INC.
312 WALNUT STREET
CINCINNATI, OHIO 45202
800-543-8721
513-629-2000
DEALER'S AGREEMENT
Countrywide Investments, Inc. ("Underwriter") invites you, as a
selected dealer, to participate as principal in the distribution of shares (the
"Shares") of the mutual funds set forth on Schedule A to this Agreement (the
"Funds"), of which it is the exclusive underwriter. Underwriter agrees to sell
to you, subject to any limitations imposed by the Funds, Shares issued by the
Funds and to promptly confirm each sale to you. All sales will be made according
to the following terms:
1. All offerings of any of the Shares by you must be made at the public
offering prices, and shall be subject to the conditions of offering, set forth
in the then current Prospectus of the Funds and to the terms and conditions
herein set forth, and you agree to comply with all requirements applicable to
you of all applicable laws, including federal and state securities laws, the
rules and regulations of the Securities and Exchange Commission, and the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. (the
"NASD"), including Section 24 of the Rules of Fair Practice of the NASD. You
will not offer the Shares for sale in any state or other jurisdiction where they
are not qualified for sale under the Blue Sky Laws and regulations of such state
or jurisdiction, or where you are not qualified to act as a dealer. Upon
application to Underwriter, Underwriter will inform you as to the states or
other jurisdictions in which Underwriter believes the Shares may legally be
sold.
2. (a) You will receive a discount from the public offering
price ("concession") on all Shares purchased by you from Underwriter as
indicated on Schedule A, as it may be amended by Underwriter from time to time.
(b) In all transactions in open accounts in which you are
designated as Dealer of Record, you will receive the concessions as set forth on
Schedule A. You hereby authorize Underwriter to act as your agent in connection
with all transactions in open accounts in which you are designated as Dealer of
Record. All designations as Dealer of Record, and all authorizations of
Underwriter to act as your Agent pursuant thereto, shall cease upon the
termination of this Agreement or upon the investor's instructions to transfer
his open account to another Dealer of Record. No dealer concessions will be
allowed on purchases generating less than $1.00 in dealer concessions.
(c) As the exclusive underwriter of the Shares, Underwriter
reserves the privilege of revising the discounts specified on Schedule A at any
time by written notice.
3. Concessions will be paid to you at the address of your
principal office, as indicated below in your acceptance of this Agreement.
<PAGE>
4. Underwriter reserves the right to cancel this Agreement at any time
without notice if any Shares shall be offered for sale by you at less than the
then current public offering prices determined by, or for, the Funds.
5. All orders are subject to acceptance or rejection by Underwriter in
its sole discretion. The Underwriter reserves the right, in its discretion,
without notice, to suspend sales or withdraw the offering of Shares entirely.
6. Payment shall be made to the Funds and shall be received by its
Transfer Agent within three (3) business days after the acceptance of your order
or such shorter time as may be required by law. With respect to all Shares
ordered by you for which payment has not been received, you hereby assign and
pledge to Underwriter all of your right, title and interest in such Shares to
secure payment therefor. You appoint Underwriter as your agent to execute and
deliver all documents necessary to effectuate any of the transactions described
in this paragraph. If such payment is not received within the required time
period, Underwriter reserves the right, without notice, and at its option,
forthwith (a) to cancel the sale, (b) to sell the Shares ordered by you back to
the Funds, or (c) to assign your payment obligation, accompanied by all pledged
Shares, to any person. You agree that Underwriter may hold you responsible for
any loss, including loss of profit, suffered by the Funds, its Transfer Agent or
Underwriter, resulting from your failure to make payment within the required
time period.
7. No person is authorized to make any representations concerning
Shares of the Funds except those contained in the current applicable Prospectus
and Statement of Additional Information and in sales literature issued and
furnished by Underwriter supplemental to such Prospectus. Underwriter will
furnish additional copies of the current Prospectus and Statement of Additional
Information and such sales literature and other releases and information issued
by Underwriter in reasonable quantities upon request.
8. Under this Agreement, you act as principal and are not employed by
Underwriter as broker, agent or employee. You are not authorized to act for
Underwriter nor to make any representation on its behalf; and in purchasing or
selling Shares hereunder, you rely only upon the current Prospectus and
Statement of Additional Information furnished to you by Underwriter from time to
time and upon such written representations as may hereafter be made by
Underwriter to you over its signature.
9. You appoint the transfer agent for the Funds as your agent to
execute the purchase transactions of Shares in accordance with the terms and
provisions of any account, program, plan or service established or used by your
customers and to confirm each purchase to your customers on your behalf, and you
guarantee the legal capacity of your customers purchasing such Shares and any
co-owners of such Shares.
<PAGE>
10. You will (a) maintain all records required by law relating to
transactions in the Shares, and upon the request of Underwriter, or the request
of the Funds, promptly make such records available to Underwriter or to the
Funds as are requested, and (b) promptly notify Underwriter if you experience
any difficulty in maintaining the records required in the foregoing clause in an
accurate and complete manner. In addition, you will establish appropriate
procedures and reporting forms and schedules, approved by Underwriter and by the
Funds, to enable the parties hereto and the Funds to identify all accounts
opened and maintained by your customers.
11. Underwriter has adopted compliance standards, attached hereto as
Schedule B, as to when Class A and Class C Shares of the Dual Pricing Funds may
appropriately be sold to particular investors. You agree that all persons
associated with you will conform to such standards when selling Shares.
12. Each party hereto represents that it is presently, and, at all
times during the term of this Agreement, will be, a member in good standing of
the NASD and agrees to abide by all its Rules of Fair Practice including, but
not limited to, the following provisions:
(a) You shall not withhold placing customers' orders for any Shares so
as to profit yourself as a result of such withholding. You shall not purchase
any Shares from Underwriter other than for investment, except for the purpose of
covering purchase orders already received.
(b) All conditional orders received by Underwriter must be at a
specified definite price.
(c) If any Shares purchased by you are repurchased by the Funds (or by
Underwriter for the account of the Funds) or are tendered for redemption within
seven business days after confirmation of the original sale of such Shares (1)
you agree to forthwith refund to Underwriter the full concession allowed to you
on the original sale, such refund to be paid by Underwriter to the Funds, and
(2) Underwriter shall forthwith pay to the Funds that part of the discount
retained by Underwriter on the original sale. Notice will be given to you of any
such repurchase or redemption within ten days of the date on which the
repurchase or redemption request is made.
<PAGE>
(d) Neither Underwriter, as exclusive underwriter for the Funds, nor
you as principal, shall purchase any Shares from a record holder at a price
lower than the net asset value then quoted by, or for, the Funds. Nothing in
this sub-paragraph shall prevent you from selling Shares for the account of a
record holder to Underwriter or the Funds at the net asset value currently
quoted by, or for, the Funds and charging the investor a fair commission for
handling the transaction.
(e) You warrant on behalf of yourself and your registered
representatives and employees that any purchase of Shares at net asset value by
the same pursuant to the terms of the Prospectus of the applicable Fund is for
investment purposes only and not for purposes of resale. Shares so purchased may
be resold only to the Fund which issued them.
13. You agree that you will indemnify Underwriter, the Funds, the
Funds' transfer agent and the Funds' custodians and hold such persons harmless
from any claims or assertions relating to the lawfulness of your company's
participation in this Agreement and the transactions contemplated hereby or
relating to any activities of any persons or entities affiliated with your
company which are performed in connection with the discharge of your
responsibilities under this Agreement. If any such claims are asserted, the
indemnified parties shall have the right to engage in their own defense,
including the selection and engagement of legal counsel of their choosing, and
all costs of such defense shall be borne by you.
<PAGE>
14. This Agreement will automatically terminate in the event of its
assignment. Either party hereto may cancel this Agreement without penalty upon
ten days' written notice. This Agreement may also be terminated as to any Fund
at any time without penalty by the vote of a majority of the members of the
Board of Trustees of the terminating Fund who are not "interested persons" (as
such term is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the applicable Fund's Distribution
Expense Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 or
any agreement relating to such Plan, including this Agreement, or by a vote of a
majority of the outstanding voting securities of the terminating Fund on ten
days' written notice.
15. All communications to Underwriter should be sent to Countrywide
Investments, Inc., 312 Walnut Street, Cincinnati, Ohio 45202, or at such other
address as Underwriter may designate in writing. Any notice to you shall be duly
given if mailed or telegraphed to you at the address of your principal office,
as indicated below in your acceptance of this Agreement.
16. This Agreement supersedes any other agreement with you relating
to the offer and sale of the Shares, and relating to any other matter discussed
herein.
17. This Agreement shall be binding (i) upon placing your first order
with Underwriter for the purchase of Shares, or (ii) upon receipt by Underwriter
in Cincinnati, Ohio of a counterpart of this Agreement duly accepted and signed
by you, whichever shall occur first. This Agreement shall be construed in
accordance with the laws of the State of Ohio.
18. The undersigned, executing this Agreement on behalf of Dealer,
hereby warrants and represents that he is duly authorized to so execute this
Agreement on behalf of Dealer.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return all copies of this Agreement to the
Underwriter.
ACCEPTED BY DEALER
By:________________________________________
Authorized Signature
___________________________________________
Type or Print Name, Position
___________________________________________
Dealer Name
___________________________________________
Address
____________________________________________
Address
____________________________________________
Phone
_____________________________________________
Date
COUNTRYWIDE INVESTMENTS, INC.
By: __________________________________________________
_______________________________________________________
Date
<PAGE>
Schedule A
COUNTRYWIDE INVESTMENTS
COMMISSION SCHEDULE
Intermediate Bond Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
- -----------------------------------------------------------------
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
Equity Fund - Class A
Utility Fund - Class A
Growth/Value Fund
Aggressive Growth Fund
Ohio Insured Tax-Free Fund - Class A
Kentucky Tax-Free Fund
- ---------------------------------------------------------------
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
*As a percentage of offering price.
** Broker/Dealers are entitled to a commission of 75 basis points at the time
the investor purchases Class A shares at NAV in amounts totaling $1 million or
more. However, the investor is subject to a contingent deferred sales load of
75 basis points if a redemption occurs within one year of purchase.
See specific Fund prospectus for details.
<PAGE>
Equity Fund - Class C
Utility Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
The Funds will be offered to clients at net asset value. A commission of 1% of
the purchase amount of Class C shares will be paid to participating brokers at
the time of purchase. Purchases of Class C shares are subject to a contingent
deferred sales load, according to the following schedule:
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
-------------------- --------------------
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid quarterly beginning in
the thirteenth month.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any calendar quarter in
which the average daily balance of all accounts in Countrywide Investments
funds (including no-load money market funds) is less than $1,000,000.
FOR BROKER/DEALER USE ONLY
<PAGE>
Schedule B
POLICIES AND PROCEDURES
WITH RESPECT TO SALES
OF DUAL PRICING FUND
As certain Funds within Countrywide Investments (the "Dual Pricing
Funds") offer two classes of Shares subject to different levels of front-end
sales charges, it is important for an investor not only to choose the Fund that
best suits his investment objectives, but also to choose the sales financing
method which best suits his particular situation. To assist investors in these
decisions, we are instituting the following policy:
1. Any purchase order for $1 million or more must be for Class A
Shares.
2. Any purchase order for $100,000 but less than $1 million is
subject to approval by a registered principal of the
Underwriter, who must approve the purchase order for either
Class A Shares or Class C Shares in light of the relevant
facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold the
Shares; and
(c) any other relevant circumstances, such as the
availability of purchases under a Letter of Intent.
3. Any order to exchange Class A Shares of a Dual Pricing Fund
(or Shares of another Fund having a maximum sales load equal
to or greater than Class A Shares of the Dual Pricing Funds)
for Shares of another Dual Pricing Fund will be for Class A
Shares only. Class C Shares of a Dual Pricing Fund may be
exchanged for either Class A or Class C Shares of another Dual
Pricing Fund, provided that an exchange of Class C Shares for
Class A Shares is subject to approval by a registered
principal of Underwriter, who must approve the exchange in
light of the relevant facts and circumstances.
There are instances when one financing method may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales charge on Class A Shares may determine that
payment of such a reduced front-end sales charge is superior to payment of the
higher ongoing distribution fee applicable to Class C Shares. On the other hand,
an investor whose order would not qualify for such a discount may wish to pay a
lower sales charge and have more of his funds invested in Class C Shares. If
such an investor anticipates that he will redeem his Shares within a short
period of time, the investor may, depending on the amount of his purchase,
choose to bear higher distribution expenses than if he had purchased Class A
Shares.
<PAGE>
In addition, investors who intend to hold their Shares for a
significantly long time may wish to purchase Class A Shares in order to avoid
the higher ongoing distribution expenses of Class C Shares.
The appropriate supervisor must ensure that all employees receiving
investor inquiries about the purchase of Shares of Dual Pricing Funds advise the
investor of the available financing methods offered by mutual funds, and the
impact of choosing one method over another. It may be appropriate for the
supervisor to discuss the purchase with the investor.
This policy is effective immediately with respect to any order for the
purchase of Shares of all Dual Pricing Funds. Questions relating to this policy
should be directed to Sharon Karp, Vice President of the Underwriter, at
513/629-2000.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------
As independent public accountants, we hereby consent to the use of our
report dated April 24, 1998 and to all references to our Firm included
in or made a part of this Post-Effective Amendment No. 36.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
July 31, 1998
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.
<PAGE>
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.
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.
<PAGE>
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.
<PAGE>
23. This Agreement shall be construed in accordance with the laws
of the State of Ohio.
IN WITNESS WHEREOF, this Agreement has been executed for the Trusts and
the Administrator by their duly authorized officers, on this _____ day of
_________________, 1998.
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
Intermediate Term Government Income Fund
* Money Market Fund
Intermediate Bond Fund
Countrywide Tax-Free Trust
* Ohio Tax-Free Money Fund
* Tax-Free Money Fund
* California Tax-Free Money Fund
* Florida Tax-Free Money Fund
** Tax-Free Intermediate Term Fund
** Ohio Insured Tax-Free Fund
Kentucky Tax-Free Fund
Countrywide Strategic Trust
** Equity Fund
** Utility Fund
Growth/Value Fund
Aggressive Growth Fund
* No-load Fund
** Dual Pricing Fund
<PAGE>
Schedule B
COUNTRYWIDE INVESTMENTS
COMMISSION SCHEDULE
Intermediate Bond Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
Equity Fund - Class A
Utility Fund - Class A
Growth/Value Fund
Aggressive Growth Fund
Ohio Insured Tax-Free Fund - Class A
Kentucky Tax-Free Fund
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
* As a percentage of offering price.
** Broker/Dealers are entitled to a commission of 75 basis points at the time
the investor purchases Class A shares at NAV in amounts totaling $1 million or
more. However, the investor is subject to a contingent deferred sales load of
75 basis points if a redemption occurs within one year of purchase.
See specific Fund prospectus for details.
<PAGE>
Equity Fund - Class C
Utility Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
The Funds will be offered to clients at net asset value. A commission of 1% of
the purchase amount of Class C shares will be paid to participating brokers at
the time of purchase. Purchases of Class C shares are subject to a contingent
deferred sales load, according to the following schedule:
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid quarterly beginning in
the thirteenth month.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any calendar quarter in
which the average daily balance of all accounts in Countrywide Investments
funds (including no-load money market funds) is less than $1,000,000.
FOR BROKER/DEALER USE ONLY
<PAGE>
Schedule 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.
<PAGE>
In addition, investors who intend to hold their Shares for a
significantly long time may wish to purchase Class A Shares in order to avoid
the higher ongoing distribution expenses of Class C Shares.
The appropriate supervisor must ensure that all employees receiving
investor inquiries about the purchase of Shares of Dual Pricing Funds advise the
investor of the available financing methods offered by mutual funds, and the
impact of choosing one method over another. It may be appropriate for the
supervisor to discuss the purchase with the investor.
This policy is effective immediately with respect to any order for the
purchase of Shares of all Dual Pricing Funds. Questions relating to this policy
should be directed to Sharon Karp, Vice President of the Underwriter, at
513/629-2000.
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> COUNTRYWIDE STRATEGIC TRUST
<SERIES>
<NUMBER> 51
<NAME> UTILITY FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 26,960,278
<INVESTMENTS-AT-VALUE> 45,960,446
<RECEIVABLES> 225,042
<ASSETS-OTHER> 2,389
<OTHER-ITEMS-ASSETS> 3,010
<TOTAL-ASSETS> 46,190,887
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 131,496
<TOTAL-LIABILITIES> 131,496
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,059,170
<SHARES-COMMON-STOCK> 2,533,479
<SHARES-COMMON-PRIOR> 2,900,247
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 53
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,000,168
<NET-ASSETS> 42,462,857
<DIVIDEND-INCOME> 1,492,949
<INTEREST-INCOME> 240,402
<OTHER-INCOME> 0
<EXPENSES-NET> 529,594
<NET-INVESTMENT-INCOME> 1,203,757
<REALIZED-GAINS-CURRENT> 396,431
<APPREC-INCREASE-CURRENT> 12,365,467
<NET-CHANGE-FROM-OPS> 13,965,655
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,131,462
<DISTRIBUTIONS-OF-GAINS> 598,344
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 441,718
<NUMBER-OF-SHARES-REDEEMED> 914,263
<SHARES-REINVESTED> 105,777
<NET-CHANGE-IN-ASSETS> 6,375,617
<ACCUMULATED-NII-PRIOR> 242
<ACCUMULATED-GAINS-PRIOR> 251,541
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 303,151
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 529,594
<AVERAGE-NET-ASSETS> 37,424,466
<PER-SHARE-NAV-BEGIN> 12.44
<PER-SHARE-NII> .43
<PER-SHARE-GAIN-APPREC> 4.56
<PER-SHARE-DIVIDEND> .43
<PER-SHARE-DISTRIBUTIONS> .24
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.76
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<SERIES>
<NUMBER> 53
<NAME> UTILITY FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 26,960,278
<INVESTMENTS-AT-VALUE> 45,960,446
<RECEIVABLES> 225,042
<ASSETS-OTHER> 2,389
<OTHER-ITEMS-ASSETS> 3,010
<TOTAL-ASSETS> 46,190,887
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 131,496
<TOTAL-LIABILITIES> 131,496
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,059,170
<SHARES-COMMON-STOCK> 214,888
<SHARES-COMMON-PRIOR> 249,358
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 53
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,000,168
<NET-ASSETS> 3,596,534
<DIVIDEND-INCOME> 1,492,949
<INTEREST-INCOME> 240,402
<OTHER-INCOME> 0
<EXPENSES-NET> 529,594
<NET-INVESTMENT-INCOME> 1,203,757
<REALIZED-GAINS-CURRENT> 396,431
<APPREC-INCREASE-CURRENT> 12,365,467
<NET-CHANGE-FROM-OPS> 13,965,655
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 72,537
<DISTRIBUTIONS-OF-GAINS> 49,575
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,316
<NUMBER-OF-SHARES-REDEEMED> 65,381
<SHARES-REINVESTED> 7,595
<NET-CHANGE-IN-ASSETS> 497,347
<ACCUMULATED-NII-PRIOR> 242
<ACCUMULATED-GAINS-PRIOR> 251,541
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 303,151
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 529,594
<AVERAGE-NET-ASSETS> 3,101,704
<PER-SHARE-NAV-BEGIN> 12.43
<PER-SHARE-NII> .31
<PER-SHARE-GAIN-APPREC> 4.57
<PER-SHARE-DIVIDEND> .33
<PER-SHARE-DISTRIBUTIONS> .24
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.74
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711080
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<SERIES>
<NUMBER> 71
<NAME> EQUITY FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 29,761,358
<INVESTMENTS-AT-VALUE> 42,165,777
<RECEIVABLES> 85,108
<ASSETS-OTHER> 5,731
<OTHER-ITEMS-ASSETS> 2,091
<TOTAL-ASSETS> 42,258,707
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,711
<TOTAL-LIABILITIES> 60,711
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,793,481
<SHARES-COMMON-STOCK> 1,978,069
<SHARES-COMMON-PRIOR> 1,088,598
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 96
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,404,419
<NET-ASSETS> 38,336,423
<DIVIDEND-INCOME> 291,509
<INTEREST-INCOME> 237,569
<OTHER-INCOME> 0
<EXPENSES-NET> 394,780
<NET-INVESTMENT-INCOME> 134,298
<REALIZED-GAINS-CURRENT> 131,522
<APPREC-INCREASE-CURRENT> 9,717,678
<NET-CHANGE-FROM-OPS> 9,983,498
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 134,305
<DISTRIBUTIONS-OF-GAINS> 266,654
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,675,833
<NUMBER-OF-SHARES-REDEEMED> 808,858
<SHARES-REINVESTED> 22,496
<NET-CHANGE-IN-ASSETS> 23,353,785
<ACCUMULATED-NII-PRIOR> 7
<ACCUMULATED-GAINS-PRIOR> 164,431
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 221,798
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 394,780
<AVERAGE-NET-ASSETS> 26,360,854
<PER-SHARE-NAV-BEGIN> 13.76
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> 5.76
<PER-SHARE-DIVIDEND> .08
<PER-SHARE-DISTRIBUTIONS> .15
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.38
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 73
<NAME> EQUITY FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 29,761,358
<INVESTMENTS-AT-VALUE> 42,165,777
<RECEIVABLES> 85,108
<ASSETS-OTHER> 5,731
<OTHER-ITEMS-ASSETS> 2,091
<TOTAL-ASSETS> 42,258,707
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,711
<TOTAL-LIABILITIES> 60,711
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,793,481
<SHARES-COMMON-STOCK> 199,685
<SHARES-COMMON-PRIOR> 201,191
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 96
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,404,419
<NET-ASSETS> 3,861,573
<DIVIDEND-INCOME> 291,509
<INTEREST-INCOME> 237,569
<OTHER-INCOME> 0
<EXPENSES-NET> 394,780
<NET-INVESTMENT-INCOME> 134,298
<REALIZED-GAINS-CURRENT> 131,522
<APPREC-INCREASE-CURRENT> 9,717,678
<NET-CHANGE-FROM-OPS> 9,983,498
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 29,203
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,254
<NUMBER-OF-SHARES-REDEEMED> 26,402
<SHARES-REINVESTED> 1,642
<NET-CHANGE-IN-ASSETS> 1,091,420
<ACCUMULATED-NII-PRIOR> 7
<ACCUMULATED-GAINS-PRIOR> 164,431
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 221,798
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 394,780
<AVERAGE-NET-ASSETS> 3,279,246
<PER-SHARE-NAV-BEGIN> 13.77
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 5.75
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .15
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.34
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711080
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<SERIES>
<NUMBER> 8
<NAME> GROWTH/VALUE FUND
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 20,435,726
<INVESTMENTS-AT-VALUE> 28,547,955
<RECEIVABLES> 1,039,972
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 17,944
<TOTAL-ASSETS> 29,605,871
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 956,618
<TOTAL-LIABILITIES> 956,618
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,133,868
<SHARES-COMMON-STOCK> 1,757,393
<SHARES-COMMON-PRIOR> 1,684,685
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 403,156
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,112,229
<NET-ASSETS> 28,649,253
<DIVIDEND-INCOME> 108,061
<INTEREST-INCOME> 12,255
<OTHER-INCOME> 0
<EXPENSES-NET> 266,338
<NET-INVESTMENT-INCOME> (146,022)
<REALIZED-GAINS-CURRENT> 1,566,803
<APPREC-INCREASE-CURRENT> 437,753
<NET-CHANGE-FROM-OPS> 1,858,534
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,021,333
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 392,494
<NUMBER-OF-SHARES-REDEEMED> 343,315
<SHARES-REINVESTED> 23,529
<NET-CHANGE-IN-ASSETS> 1,871,184
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (142,314)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 160,090
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 266,338
<AVERAGE-NET-ASSETS> 27,571,527
<PER-SHARE-NAV-BEGIN> 15.90
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> 1.05
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .57
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.30
<EXPENSE-RATIO> 1.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711080
<NAME> COUNTRYWIDE STRATEGIC TRUST
<SERIES>
<NUMBER> 9
<NAME> AGGRESSIVE GROWTH FUND
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 11,208,150
<INVESTMENTS-AT-VALUE> 15,463,566
<RECEIVABLES> 42,597
<ASSETS-OTHER> 3,403
<OTHER-ITEMS-ASSETS> 17,106
<TOTAL-ASSETS> 15,526,672
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,308
<TOTAL-LIABILITIES> 31,308
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,354,846
<SHARES-COMMON-STOCK> 980,105
<SHARES-COMMON-PRIOR> 858,688
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (114,898)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,255,416
<NET-ASSETS> 15,495,364
<DIVIDEND-INCOME> 16,540
<INTEREST-INCOME> 8,332
<OTHER-INCOME> 0
<EXPENSES-NET> 167,203
<NET-INVESTMENT-INCOME> (142,331)
<REALIZED-GAINS-CURRENT> 241,580
<APPREC-INCREASE-CURRENT> (458,321)
<NET-CHANGE-FROM-OPS> (359,072)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 304,821
<NUMBER-OF-SHARES-REDEEMED> 183,404
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,511,629
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (356,478)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 85,703
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 167,203
<AVERAGE-NET-ASSETS> 14,762,670
<PER-SHARE-NAV-BEGIN> 16.29
<PER-SHARE-NII> (.15)
<PER-SHARE-GAIN-APPREC> (.33)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.81
<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 26th
day of February, 1998.
/s/ Fred A. Rappoport
--------------------------------
FRED A. RAPPOPORT
Trustee
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On the 26th day of February, 1998, personally appeared before me, FRED
A. RAPPOPORT, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 26 day of February, 1998.
/s/ Scott C. Hendrickson
-----------------------------
Notary Public
Scott C. Hendrickson
Commission #1140043
Notary Public - California
Los Angeles County
My Comm. Expires May 16, 2001
