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. 37
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 37
----
(Check appropriate box or boxes.)
COUNTRYWIDE STRATEGIC TRUST
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(Exact name of Registrant as Specified in Charter)
FILE NOS. 811-3651 and 2-80859
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312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202
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(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code (513) 629-2000
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Robert H. Leshner, 312 Walnut Street, 21st Floor,
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Cincinnati, Ohio 45202
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective
(check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on ___________ pursuant to paragraph (b)
/X/ 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:
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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........................... Risk/Return Summary
Investment Strategies and Related Risks
3........................... Expense Information
4........................... Investment Objectives, Investment Strategies
and Related Risks
5........................... None
6........................... Operation of the Funds
7........................... Calculation of Share Price and Public Offering
Price, How to Purchase Shares, How to Redeem
Shares, Dividends and Distributions, Taxes
Application
8............................ How to Purchase Shares, How to Redeem Shares, How
to Exchange Shares, Distribution Plan(s)
9........................... Financial Highlights
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
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10.......................... Cover Page, Table of Contents
11.......................... The Trust
12.......................... Definitions, Policies and Risk
Considerations, Investment Limitations,
Portfolio Turnover
13.......................... Trustees and Officers
14.......................... Principal Security Holders
15.......................... The Investment Adviser and Underwriter,
Mastrapasqua & Associates, Distribution Plans,
Custodian, Auditors, Transfer Agent
16.......................... Securities Transactions
17.......................... The Trust
18.......................... Calculation of Share Price and Public
Offering Price, Other Purchase
Information, Redemption in Kind
19.......................... Taxes
20.......................... The Investment Adviser and Underwriter
21.......................... Historical Performance Information
22.......................... Annual Report
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PROSPECTUS
August 1, 1999
COUNTRYWIDE STRATEGIC TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
800-543-0407
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EQUITY FUND
UTILITY FUND
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These securities have been registered with the Securities and Exchange
Commission, but the Commission has not approved or disapproved them for
investment merit and has not passed on the accuracy or adequacy of the
information in this Prospectus. Anyone who informs you otherwise is committing a
criminal offense.
This Prospectus has information you should know before you invest. Please
read it carefully and keep it with your investment records.
TABLE OF CONTENTS
RISK/RETURN SUMMARY ...........................................................
EXPENSE INFORMATION...................................................... .....
INVESTMENT OBJECTIVES, INVESTMENT STRATEGIES AND RELATED RISKS.................
HOW TO PURCHASE SHARES...................................................... ..
HOW TO REDEEM SHARES...................................................... ....
HOW TO EXCHANGE SHARES...................................................... ..
DIVIDENDS AND DISTRIBUTIONS....................................................
TAXES...................................................... ...................
OPERATION OF THE FUNDS...................................................... ..
DISTRIBUTION PLANS ............................................................
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE...........................
FINANCIAL HIGHLIGHTS...................................................... ....
For further information or assistance in opening an account, please contact your
broker or call us at the above number.
Countrywide
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Investments
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RISK/RETURN SUMMARY
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WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
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 current income and capital appreciation by investing
primarily in stocks of public utilities.
WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
The Equity Fund will invest in a diversified portfolio of dividend-paying common
stocks of companies having at least three years operating history. Under normal
conditions, at least 65% of the Fund's total assets will be invested in common
stocks.
The Utility Fund will invest in a diversified portfolio of common, preferred and
convertible preferred stocks of public utilities that currently pay dividends.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in the securities of public utilities.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
MARKET RISK - The return on and value of an investment in the Funds
will fluctuate in response to stock market movements. Stocks and other equity
securities are subject to market risks and fluctuations in value due to
earnings, economic conditions and other factors beyond the control of the
Adviser. As a result, there is a risk that you could lose money by investing in
the Funds.
INDUSTRY RISK - Further risks associated with an investment in the
Utility Fund include the risks associated with investments in the public utility
industry, such as rate regulation by government agencies, fuel shortages and
restrictions on operations due to licensing and environmental considerations.
An investment in the Funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
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PERFORMANCE SUMMARY
The bar charts and performance tables shown below provide an indication of the
risks of investing in the Funds by showing the changes in the performance of the
Funds from year to year during the Funds' operations and by showing how the
average annual returns of the Funds compare to those of a broad-based securities
market index. The Funds' past performance is not necessarily an indication of
their future performance.
EQUITY FUND - CLASS C [bar chart]
13.03% 41.63% 11.01% 26.90% 7.32% -2.91%
1999 1998 1997 1996 1995 1994
The total returns shown above do not reflect the sales load on Class C shares
and, if included, returns would be less than those shown.
During the period shown in the bar chart, the highest return for a quarter was
19.92% during the quarter ended December 31, 1998 and the lowest return for a
quarter was -10.57% during the quarter ended September 30, 1998.
UTILITY FUND - CLASS A [bar chart]
- -4.79% 40.92% 5.61% 21.65% 3.68% -2.11% 20.64% 11.84% 9.23% 5.37%
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
The total returns shown above do not reflect the sales load on Class A shares
and, if included, returns would be less than those shown.
During the period shown in the bar chart, the highest return for a quarter was
16.83% during the quarter ended December 31, 1997 and the lowest return for a
quarter was -12.26% during the quarter ended March 31, 1999.
Average Annual Total Returns
For Periods Ended December 31, 1998(1)
One Year Five Years Since Inception(2)
Equity Fund Class A 17.03% 17.57% 16.13%
Equity Fund Class C 20.70% 17.57% 15.65%
Standard & Poor's 500 Index(3) 28.58% 24.06% 22.58%
Utility Fund Class A 12.94% 13.62% 12.32%
Utility Fund Class C 16.41% 13.64% 12.15%
Standard & Poor's Utility Index(4)14.77% 14.02% 12.48%
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(1) The Funds' year-to-date return as of June 30, 1999:
Equity Fund Class A _____%
Equity Fund Class C _____%
Utility Fund Class A _____%
Utility Fund Class C _____%
(2) Inception date for Equity Fund Class A and Utility Fund Class C was August
2, 1993; inception date for Equity Fund Class C was June 7, 1993; inception date
for Utility Fund Class A was August 15, 1989.
(3) The Standard & Poor's 500 Index is a widely recognized, unmanaged index of
common stock prices.
(4) The Standard & Poor's Utility Index is a widely recognized, unmanaged index
consisting of electric power, natural gas and telephone companies.
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EXPENSE INFORMATION
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THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU BUY AND HOLD
SHARES OF THE FUNDS.
SHAREHOLDER FEES (fees paid directly from your investment)
Class A Class C
Shares Shares
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Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . 5.75% 1.25%
Maximum Deferred Sales Load
(as a percentage of original purchase price) . . None* 1%
Sales Load Imposed on Reinvested Dividends . . . None None
Redemption Fee . . . . . . . . . . . . . . . . . None** None**
Exchange Fee . . . . . . . . . . . . . . . . . . None None
* If you purchase $1 million or more shares and do not pay a front-end sales
load, you may be subject to a deferred sales load of 1% if the shares are
redeemed within one year of their purchase and a dealer's commission was
paid on the shares.
** You will be charged $8 for each wire redemption. This fee is
subject to change.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Equity Fund Utility Fund
Class A Class C Class A Class C
Shares Shares Shares Shares
Management Fees .75% .75% .75% .75%
Distribution (12b-1) Fees .25% 1.00% .23% .92%
Other Expenses .31% .66% .35% .83%
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Total Annual Fund Operating Expenses 1.31% 2.41% 1.33% 2.50%
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EXAMPLE
This Example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in a Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that a Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Equity Fund Utility Fund
Class A Class C Class A Class C
Shares Shares Shares Shares
1 Year $ $ $ $
3 Years
5 Years
10 Years
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INVESTMENT OBJECTIVE, INVESTMENT STRATEGIES AND RELATED RISKS
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INVESTMENT OBJECTIVE
Each Fund has its own investment objective. Each Fund's investment
objective may be changed by the Board of Trustees without the approval of
shareholders. You will be notified if there is a change in a Fund's investment
objective and you should then consider whether the Fund will continue to be an
appropriate investment under your circumstances.
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 current income and capital appreciation by investing
primarily in common stocks of public utilities.
INVESTMENT STRATEGIES
In selecting equity investments for the Funds, the Adviser looks for stocks
which have attractive opportunities for growth of principal and dividends, yet
sell at reasonable prices compared to their expected growth rates. The Adviser
uses a database (Standard & Poor's Compustat) to screen for securities having
these qualities. The Adviser then performs a detailed fundamental analysis on
the companies which pass the initial screening. The intent of this analysis is
to:
o Gain a thorough understanding of the company's products and/or services and
its position within the industry. This is accomplished primarily through
discussions with the company and street analysts and by analyzing news and
company reports.
o Assess the strength of competing products and services by researching
competitors, analyzing pricing and margin trends, technology and new
product introductions.
o Determine the actual financial condition of the company by thoroughly
reviewing its financial statements.
o Assess management's talent, succession plans and strategies. The Adviser
believes that the ability of management to successfully implement well
thought-out strategic plans is crucial to the success of any company. This
is especially important in the utility industry due to deregulation and
consolidation.
o Determine competitive strengths and weaknesses, opportunities and threats
to both the company and the industry. The Adviser searches for companies
that have a unique product or niche within an industry which may give them
an advantage over their competitors.
Under normal conditions, the Equity Fund will invest at least 65% of its
assets in common stocks. The Fund will invest in a diversified portfolio of
domestic common
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stocks of companies which have been operating for at least three years.
Under normal conditions, at least 65% of the Utility Fund's assets will be
invested in stocks of public utilities. The Fund will invest in a diversified
portfolio of common, preferred and convertible preferred stocks.
The Utility Fund will invest in the securities of public utilities that
currently pay dividends and which have been operating for at least three years.
The public utilities industry includes companies involved in the production,
supply or distribution of electricity, natural gas, telecommunications (but
not radio or television broadcasters) and water. The Fund may invest in any
combination of public utility companies.
In selecting investments for the Utility Fund, the Adviser will consider
the effects of regulation within the industry. Although the utility industry is
undergoing deregulation, most states still influence pricing and profitability
of certain utilities. The Adviser analyzes local regulation and its influence on
pricing. The Adviser generally prefers those companies that provide services in
a geographic area where the regulatory environment is favorable. The Adviser
will also look for companies with a diversified customer base. The Adviser
favors investments in those companies that do not overly depend on one certain
customer segment (retail, industrial, commercial residential) for a vast
majority of their revenue.
The Adviser expects to hold the Utility Fund's securities for the
long-term, but will sell a security when a serious deterioration in the
fundamental competitive position of the company occurs or when there is a change
in the company's management which the Adviser believes is not in the best
interests of shareholders. The Fund may have a higher portfolio turnover rate
than other mutual funds. High turnover will generally result in higher
transaction costs and higher amounts of taxable realized gains to shareholders.
For defensive purposes, each Fund may temporarily hold all or part 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 Equity Fund may
also temporarily invest all or a portion of its assets in long-term U.S.
Treasury obligations. When taking such a temporary defensive position, a Fund
may not achieve its investment objective.
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<PAGE>
RISK CONSIDERATIONS
EQUITY FUND. The Equity Fund is designed for investors who are investing for the
long term and is not intended for investors seeking assured income or
preservation of capital. Changes in market prices can occur at any time.
Accordingly, there is no assurance that the Fund will achieve its investment
objective. When you redeem your shares, they may be worth more or less than what
you paid for them.
Because the Equity Fund normally invests most, or a substantial portion, of
its assets in stocks, the value of the Fund's portfolio will be affected by
changes in the stock markets. Stock markets and stock prices can be volatile.
Market action will affect the Fund's net asset value per share, which fluctuates
as the values of the Fund's portfolio securities change. Not all stock prices
change uniformly or at the same time and not all stock markets move in the same
direction at the same time. Various factors can affect a stock's price (for
example, poor earnings reports by an issuer, loss of major customers, major
litigation against an issuer, or changes in general economic conditions or in
government regulations affecting an industry). Not all of these factors can be
predicted.
UTILITY FUND. Because the Utility Fund normally invests a substantial portion of
its assets in the securities of public utilities, the value of the Fund's
portfolio will be affected by changes in the public utility market. Stocks of
public utilities may be more sensitive to changes in interest rates than other
types of equity investments. Changes in market prices of public utilities can
occur at any time. Market action will affect the Fund's net asset value per
share, which fluctuates as the values of the Fund's portfolio securities change.
Accordingly, there is no assurance that the Fund will achieve its investment
objective. When you redeem your shares, they may be worth more or less than
what you paid for them.
Investments in securities in the public utility industry are subject to
special risks. These include the possibility of rate regulation by government
agencies, which may make it difficult to obtain an adequate return on invested
capital, pass on cost increases and finance large construction projects. There
are additional risks associated with public utilities which provide power or
other energy related services such as, difficulties in obtaining fuel at
reasonable prices, shortages of fuel, energy conservation measures, restrictions
on operations and increased costs and delays from licensing and environmental
considerations and the special risks of constructing and operating nuclear power
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<PAGE>
generating facilities or other specialized types of facilities.
HOW TO PURCHASE SHARES
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You may open an account with the Funds by investing the minimum amount required
for the type of account you open. You may invest additional amounts in an
existing account at any time. For more information about how to purchase shares,
telephone Countrywide Fund Services, Inc. (the "Transfer Agent") (Nationwide
call toll-free 800-543-0407; in Cincinnati call 629-2050). The different account
options and minimum investment requirements are listed below.
ACCOUNT OPTIONS
Regular Accounts
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Accounts for Countrywide Affiliates
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If you (or anyone in your immediate family) are an employee, shareholder or
customer of Countrywide Credit Industries, Inc. or any of its affiliated
companies, you may open an account for less than the minimum amount required for
regular accounts.
Tax-Deferred Retirement Plans
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INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"). An IRA is a special type of account
that offers different tax advantages. You should consult your financial
professional to help decide which type of IRA is right for you.
Traditional IRA - Assets grow tax-deferred and contributions may be
deductible. Withdrawals and distributions are taxable in the year made.
Spousal IRA - An IRA in the name of a non-working spouse by a working spouse.
Roth IRA - An IRA with tax-free growth of assets and distributions, if
certain conditions are met. Contributions are not deductible.
Education IRA - An IRA with tax-free growth of assets and withdrawals for
qualified higher education expenses. Contributions are not deductible.
KEOGH PLANS. A tax-deferred plan for self-employed individuals.
QUALIFIED PENSION AND PROFIT-SHARING PLANS FOR EMPLOYEES. These
include profit-sharing plans with a 401(k) provision.
403(B)(7) CUSTODIAL ACCOUNTS. A tax-deferred account for employees of public
school systems, hospitals, colleges and other non-profit organizations meeting
certain requirements of the Internal Revenue Code.
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Automatic Investment Plan
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The automatic investment plan allows you to 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 of your transfers, but reserves the
right, upon thirty days' written notice, to make reasonable charges for this
service. Your depository institution may charge you for debiting your account
which would reduce your return from an investment in the Funds.
MINIMUM INVESTMENT REQUIREMENTS
Initial Additional
Regular Accounts $1,000 None
Accounts for Countrywide Affiliates $ 50 None
Tax-Deferred Retirement Plans $ 250 None
Automatic Investment Plans $ 50 $ 50
Direct Deposit Plans
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Your employer may offer a direct deposit plan which will allow you to have all
or a portion of your paycheck transferred automatically to purchase shares of a
Fund. Social security recipients may have all or a portion of their social
security check transferred automatically to purchase shares of a Fund.
InvestPlus Plan
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The InvestPlus Plan provides an easy way for Countrywide mortgage holders to
invest in the Funds by including their investment with their mortgage payment.
If you are a Countrywide mortgage holder, you may write one check for the total
amount.
OPENING A NEW ACCOUNT. You may open an account directly with a Fund or through
your broker-dealer.
To open an account directly with a Fund, please follow the steps outlined below.
1. Complete the Account Application included in this Prospectus. Be sure
to indicate the type of account you wish to open, the amount of money
you wish to invest and which class of shares you want to purchase. If
you do not indicate which class you want to purchase, we will invest
your purchase in Class A shares.
2. Write a check for your initial investment to either the "Equity Fund"
or the "Utility Fund." Mail your completed Account Application and your
check to the following address:
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COUNTRYWIDE FUND SERVICES, INC.
P.O. BOX 5354
CINCINNATI, OHIO 45201-5354
You may also open an account through your broker-dealer. It is the
responsibility of broker-dealers to send properly completed orders. If you open
an account through your broker-dealer, you may be charged a fee by your
broker-dealer.
ADDING TO YOUR ACCOUNT. You may make additional purchases to your account at any
time. Additional purchases may be made by mail to the address listed above, by
wire or through your broker-dealer. For more information about purchases by
wire, please telephone the Transfer Agent (Nationwide call toll-free 800-543-
0407; in Cincinnati call 629-2050). Your bank may charge a fee for sending your
wire. Each additional purchase must contain the account name and number in order
to properly credit your account.
MISCELLANEOUS. In connection with all purchases of Fund shares,
we observe the following policies and procedures:
o We price direct purchases based upon the next public offering
price (net asset value plus any applicable sales load)
after your order is received. Direct purchase orders received
by the Transfer Agent by 4:00 p.m., Eastern time, are
processed at day's public offering price. Direct
investments received by the Transfer Agent after 4:00
p.m., Eastern time, are processed at the public offering
price next determined on the following business
day. Purchase orders received by broker-dealers before
4:00 p.m., Eastern time, and transmitted to the Adviser
by 5:00 p.m., Eastern time, are processed at that day's
public offering price. Purchase orders received
from broker-dealers after 5:00 p.m., Eastern time, are
processed at the public offering price next determined on
the following business day.
o We mail you confirmations of all purchases or redemptions
of Fund shares.
o Certificates for shares are no longer issued.
o We reserve the right to limit the amount of investments
and to refuse to sell to any person.
o If an order to purchase shares is canceled because your check
does not clear, you will be responsible for any resulting losses
or fees incurred by the Fund or the Transfer Agent in the
transaction.
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<PAGE>
o We may open accounts for less than the minimum investment or
change minimum investment requirements at any time.
o There is no fee for purchases made by wire, but we may charge you
for this service upon thirty days' prior notice.
The Funds' account application contains provisions in favor of the
Funds, 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.
Choosing a Share Class
----------------------
Each Fund offers Class A and Class C shares. Each class represents an
interest in the same portfolio of investments and has the same rights, but
differs primarily in sales loads and distribution expense amounts. Shares of the
Utility Fund purchased before August 1, 1993 are Class A shares. Shares of the
Equity Fund purchased before August 1, 1993 are Class C shares. Before choosing
a class, you should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which class of shares is more beneficial to you
depends on the amount of your investment, the intended length of your investment
and the quality and scope of the value-added services provided by financial
advisers who may work with a particular sales load structure as compensation for
their services. If you qualify for reduced sales loads or, in the case of
purchases of $1 million or more, no initial sales load, you may find Class A
shares attractive because similar sales load reductions are not available for
Class C shares. Moreover, Class A shares are subject to lower ongoing expenses
than Class C shares over the term of the investment. As an alternative, Class C
shares are sold with a lower initial sales load so more of the purchase price is
immediately invested in the Fund. If you do not plan to hold your shares in a
Fund for a long time (less than five years), it may be better to purchase Class
C shares so that more of your purchase is invested directly in the Fund,
although you will pay higher distribution fees. If you plan to hold your shares
in a Fund for more than five years, it may be better to purchase Class A shares,
since after five years your accumulated distribution fees may be more than the
sales load paid on your purchase.
When determining which class of shares to purchase, you may want to
consider the services provided by your financial adviser
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and the compensation provided to these financial advisers under each share
class. Countrywide Investments works with many experienced and very qualified
financial advisers throughout the country that may provide valuable assistance
to you through ongoing education, asset allocation programs, personalized
financial planning reviews or other services vital to your long-term success.
Countrywide Investments believes that these value-added services can greatly
benefit you through market cycles and Countrywide will work diligently with your
chosen financial adviser. Countrywide Investments has a financial adviser
referral service available, at no cost, to help you choose a financial adviser
in your area, if you do not have one.
Set forth below is a chart comparing the sales loads and 12b-1 fees
applicable to each class of shares:
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CLASS SALES LOAD 12b-1 FEE
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A Maximum of 5.75% initial 0.25%
sales load reduced for purchases
of $50,000 and over; shares sold
without an initial sales load may
be subject to a 1.00% contingent
deferred sales load during first
year if a commission was paid to
a dealer
C 1.25% initial sales load; 1.00% 1.00%
contingent deferred sales load
during first year
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If you are investing $1 million or more, it is generally more beneficial
for you to buy Class A shares because there is no front-end sales load and the
annual expenses are lower.
Class A Shares
--------------
Class A shares are sold at net asset value ("NAV") plus an initial sales
load. In some cases, reduced initial sales loads for the purchase of Class A
shares may be available, as described below. Investments of $1 million or more
are not subject to a sales load at the time of purchase but may be subject to a
contingent deferred sales load of 1.00% on redemptions made within one year
after purchase if a commission was paid by the Adviser to a participating
unaffiliated dealer. Class A shares are also subject to an annual 12b-1
distribution fee of up to .25% of a Fund's average daily assets allocable to
Class A shares.
The following table illustrates the initial sales load
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<PAGE>
breakpoints for the purchase of Class A shares:
Which Dealer
Percentage Equals this Reallowance
Deducted Percentage as Percentage
for Sales of Your Net of Offering
Amount of Investment Load Investment Price
- -------------------- ---- ---------- ----
Less than $ 50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.50 4.71 3.75
$100,000 but less than $250,000 3.50 3.63 2.75
$250,000 but less than $500,000 2.95 3.04 2.25
$500,000 but less than $1,000,000 2.25 2.30 1.75
$1,000,000 or more None None
Under certain circumstances, the Adviser may increase or decrease the
reallowance to selected dealers. 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 a Fund and/or other funds in the Countrywide Family of
Funds during a specific period of time. Such bonuses or incentives may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and other dealer-sponsored programs or events.
For initial purchases of Class A shares of $1 million or more made after
October 1, 1995 and subsequent purchases further increasing the size of the
account, participating unaffiliated dealers will receive first year compensation
of up to 1.00% of such purchases from the Adviser. 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 in the
Countrywide Family of Funds. Dealers should contact the Adviser for more
information on the calculation of the dealer's commission in the case of
combined purchases.
An exchange from other Countrywide Funds will not qualify for payment of
the dealer's commission unless the exchange is from a Countrywide Fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. No commission will be paid if the purchase represents the
reinvestment of a redemption from a Fund made during the previous twelve months.
Redemptions of Class A shares may result in the imposition of a contingent
deferred sales load if the dealer's
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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. You may use the Right of Accumulation to combine the cost
or current NAV (whichever is higher) of your existing Class A shares of any
Countrywide Fund sold with a sales load with the amount of any current purchases
in order to take advantage of the reduced sales loads set forth in the table
above. Purchases made in any Countrywide load fund under 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 Countrywide Funds which are sold with a
sales load are listed in the Exchange Privilege section of this Prospectus. You
should contact the Transfer Agent for information about the Right of
Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. Class A and Class C shares of the Funds may
be purchased at NAV by pension and profit-sharing plans, pension
funds and other company-sponsored benefit plans that (1) have plan assets of
$500,000 or more, or (2) have, at the time of purchase, 100 or more eligible
participants, or (3) certify that they project to have annual plan purchases of
$200,000 or more, or (4) are provided administrative services by certain
third-party administrators that have entered into a special service arrangement
with the Adviser relating to such plan.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may purchase Class A and Class C
shares of the Funds at NAV. To the extent permitted by regulatory
authorities, a bank trust department may charge fees to clients for whose
account it purchases shares at NAV. Federal and state credit unions
may also purchase Class A shares at NAV.
In addition, Class A and Class C shares of the Funds may be purchased at
NAV by broker-dealers who have a sales agreement with the Adviser
and their registered personnel and employees, including members of the immediate
families of such registered personnel and employees.
Clients of investment advisers may also purchase Class A and Class C shares
of the Funds at NAV if their investment adviser or broker-dealer has
made arrangements to permit them to do so with the Trust. The investment adviser
must notify the Transfer Agent that an investment qualifies as a purchase at
NAV.
- 16 -
<PAGE>
Associations and affinity groups and their members may purchase Class A and
Class C shares of the Funds at NAV provided that management of these
groups or their financial adviser has made arrangements with the Trust to permit
them to do so. Investors or their financial adviser must notify the Transfer
Agent that an investment qualifies as a purchase at NAV.
Employees, shareholders and customers of Countrywide Credit Industries,
Inc. or any affiliated company, including members of the immediate families of
such individuals and employee benefit plans established by such entities, may
also purchase Class A shares of the Funds at NAV.
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 NAV 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 one year from the date of purchase. The contingent deferred
sales load will be paid to the Adviser and will be equal to the commission
percentage paid at the time of purchase as applied to the lesser of the (1) NAV
at the time of purchase of the Class A shares being redeemed or (2) the NAV of
such Class A shares at the time of redemption. If a purchase of Class A
shares is subject to the contingent deferred sales load, you will be notified on
the confirmation you receive for your purchase. Redemptions of such Class A
shares of the Funds held for at least one year will not be subject to the
contingent deferred sales load.
Class C Shares
--------------
Class C shares are sold with an initial sales load of 1.25% and are subject
to a contingent deferred sales load of 1.00% on redemptions of Class C shares
made within one year of their purchase. The contingent deferred sales load will
be a percentage of the dollar amount of shares redeemed and will be assessed on
an amount equal to the lesser of (1) the NAV at the time of purchase of the
Class C shares being redeemed or (2) the NAV of such Class C shares being
redeemed. A contingent deferred sales load will not be imposed upon redemptions
of Class C shares held for at least one year. Class C shares are subject to an
annual 12b-1 fee of up to 1.00% of a Fund's average daily net assets allocable
to Class C shares. The Adviser intends to pay a commission of 2.00% of the
purchase amount to your broker at the time you purchase Class C shares.
Additional Information on the Contingent Deferred Sales Load
------------------------------------------------------------
The contingent deferred sales load is 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
- 17 -
<PAGE>
rights of survivorship) from an account in which the deceased or disabled is
named. The Adviser may require documentation prior to waiver of the load,
including death certificates, physicians' certificates, etc.
All sales loads imposed on redemptions are paid to the Adviser. 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.
The following example will illustrate the operation of the contingent
deferred sales load. Assume that you open an account and purchase 1,000 shares
at $10 per share and that six months later the NAV per share is $12 and, during
such time, you have acquired 50 additional shares through reinvestment of
distributions. If at such time you should redeem 450 shares (proceeds of
$5,400), 50 shares will not be subject to the load because of dividend
reinvestment. With respect to the remaining 400 shares, the load is applied only
to the original cost of $10 per share and not to the increase in net asset value
of $2 per share. Therefore, $4,000 of the $5,400 redemption proceeds will be
charged the load. At the rate of 1.00%, 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 your account are aggregated.
HOW TO REDEEM SHARES
- --------------------
To redeem shares of either Fund, send a written request to the Transfer
Agent, with your name, your account number and the amount to be redeemed. You
must sign your request exactly as your name appears on the Trust's account
records. Mail your written request to:
COUNTRYWIDE FUND SERVICES, INC.
P.O. BOX 5354
CINCINNATI, OHIO 45201-5354
If you would like your redemption proceeds deposited free of charge
directly into your account with a commercial bank or other depository
institution via an Automated Clearing House (ACH) transaction, contact the
Transfer Agent for more information.
We redeem shares based on the current NAV on the day we receive a proper
request for redemption, less any contingent
- 18 -
<PAGE>
deferred sales load on the redeemed shares. Be sure to review "How to Purchase
Shares" above to determine whether your redemption is subject to a contingent
deferred sales load.
You may also redeem shares by placing a wire redemption request through
your broker-dealer. Your broker-dealer is responsible for ensuring that
redemption requests are transmitted to us in proper form in a timely manner. If
you request a redemption by wire, you will be charged an $8 processing fee. We
reserve the right to change the processing fee, upon thirty days' notice. All
charges will be deducted from your account by redeeming shares in your account.
Your bank or brokerage firm may also charge you for processing the wire.
Redemption proceeds will only be wired to a commercial bank or brokerage firm in
the United States. If it is impossible or impractical to wire funds, the
redemption proceeds will be sent by mail to the designated account.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
A SIGNATURE GUARANTEE is required for (1) any redemption which is $25,000 or
more (2) any redemption when the name(s) or the address on the account has been
changed within thirty days of your redemption request.
ADDITIONAL INFORMATION ABOUT ACCOUNTS AND REDEMPTIONS
SMALL ACCOUNTS. Due to the high costs of maintaining small accounts, we may ask
that you increase your account balance if your account falls below the minimum
amount required for your account. If the account balance remains below our
minimum requirements for thirty days after we notify you, we may close your
account and send you the proceeds, less any applicable contingent deferred sales
load.
AUTOMATIC WITHDRAWAL PLAN. If the shares in your account have a value of at
least $5,000, you (or another person you have designated) may 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 an initial sales load is
incurred whenever purchases are made.
REINVESTMENT PRIVILEGE. If you have redeemed shares of either Fund, you may
reinvest all or part of the proceeds without paying a sales load. You must make
your reinvestment within ninety days of your redemption and you may only use
this privilege once a year.
- 19 -
<PAGE>
MISCELLANEOUS. In connection with all redemptions of Fund shares, we observe
the following policies and procedures:
o We may refuse any redemption request involving recently
purchased shares until your check for the recently purchased
shares has cleared. To eliminate this delay, you may purchase
shares of the Funds by certified check or wire.
o We may delay mailing redemption proceeds for up to seven days
(redemption proceeds are normally mailed within three days
after receipt of a proper request).
o We will consider all written and verbal instructions as
authentic and will not be responsible for processing
exchange instructions received by telephone which are
reasonably believed to be genuine or for processing
redemption proceeds by wire. We will use reasonable
procedures to determine that telephone instructions are
genuine, such as requiring forms of personal
identification before acting upon telephone
instructions, providing written confirmation of the
transactions and/or tape recording telephone
instructions. If we do not use such procedures, we may
be liable for losses due to unauthorized or fraudulent
instructions.
o If a certificate for shares was issued to you, you may not
exchange those shares by telephone or redeem the shares using
the automatic withdrawal plan. In order to redeem these
shares, you must deliver the share certificate to the Transfer
Agent or your broker-dealer, duly endorsed with your signature
guaranteed.
HOW TO EXCHANGE SHARES
- ----------------------
Shares of either Fund and of any other fund in the Countrywide Family of
Funds may be exchanged for each other.
Shares of the Funds which do not have a contingent deferred sales load may
be exchanged for shares of any other fund and for shares of a fund which offers
only one class of shares (provided these shares do not have a contingent
deferred sales load). If you paid a sales load on the shares being exchanged,
this amount will be credited towards the sales load (if any) on the shares being
acquired.
Shares of the Funds which have a contingent deferred sales load, may be
exchanged, based on their per share NAV, for shares of any other fund which has
a contingent deferred sales load and
- 20 -
<PAGE>
for shares of any fund which is a money market fund. You will receive credit for
the period of time you held the shares being exchanged when determining whether
a contingent deferred sales load will apply, unless your shares were held in a
money market fund.
The Countrywide Family of Funds consists of the following funds. Funds
which may have a front-end or a contingent deferred sales load are marked with
an asterisk.
GROWTH FUNDS GROWTH & INCOME FUNDS
*Growth/Value Fund *Equity Fund
*Aggressive Growth Fund *Utility Fund
TAXABLE BOND FUNDS TAX-FREE BOND FUNDS
*Intermediate Bond Fund *Tax-Free Intermediate Term
*Intermediate Term Government Income Fund
Fund *Ohio Insured Tax-Free Fund
*Adjustable Rate U.S. Government
Securities Fund
TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Short Term Government Income Fund Tax-Free Money Fund
Institutional Government Income Fund Ohio Tax-Free Money Fund
Money Market Fund California Tax-Free Money
Fund
Florida Tax-Free Money
Fund
You may exchange shares by written request or by telephone. You must sign
your written request exactly as your name appears on the Trust's account
records. If you are unable to exchange shares by telephone due to such
circumstances as unusually heavy market activity, you can exchange shares by
mail or in person. Your exchange will be processed at the next determined NAV
(or offering price, if there is a sales load) after the Transfer Agent receives
your request.
You may only exchange shares into a fund which is authorized for sale in
your state of residence and you must meet that fund's minimum initial investment
requirements. The Board of Trustees may change or discontinue the exchange
privilege after giving shareholders 60 days' prior notice. Any gain or loss on
an exchange of shares is a taxable event. Before making an exchange, contact the
Transfer Agent to request information about the other funds in the Countrywide
Family of Funds.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
Each Fund expects to distribute substantially all of its net investment
income quarterly and any net realized long-term capital gains at least annually.
Management will determine when to distribute any net realized short-term capital
gains.
- 21 -
<PAGE>
Your distributions will be paid under one of the following options:
Share Option - all distributions are reinvested
in additional shares.
Income Option - income and short-term capital gains are
paid in cash; long-term capital gains are
reinvested in additional shares.
Cash Option - all distributions are paid in cash.
Please mark on your Account Application the option you have selected. If
you do not select an option, you will receive the Share Option. If you select
the Income Option or the Cash Option and the post office cannot deliver your
checks or if you do not cash your checks within six months, your dividends may
be reinvested in your account at the then-current NAV and your account will be
converted to the Share Option. You will not receive interest on the amount of
your uncashed checks until the checks have been reinvested in your account.
Distributions will be based on a Fund's NAV on the payable date. If you
have received a cash distribution from either Fund, you may reinvest it at NAV
(without paying a sales load) at the next determined NAV on the date of your
reinvestment. You must make your reinvestment within thirty days of the
distribution date and you must notify the Transfer Agent that your distribution
is being reinvested under this provision.
TAXES
- -----
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 (the excess of net long-term capital
gains over net short-term capital losses) by a Fund are taxable to you as
capital gains, without regard to how long you have held your Fund shares.
Capital gains distributions may be taxable at different rates depending on the
length of time a Fund holds its assets. Redemptions of shares of the Funds are
taxable events on which you may realize a gain or loss.
You will receive a statement showing the amount and federal income tax
status of all distributions made during the year. In
- 22 -
<PAGE>
addition to federal taxes, you may be subject to state and local taxes on
distributions. You should consult your tax advisor about the tax effect of
distributions and redemptions from a Fund and the use of the Automatic
Withdrawal Plan and the Exchange Privilege. Your taxes will be the same
regardless of whether you receive your distributions in cash or reinvest them 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. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Funds.
The Trust retains Countrywide Investments, Inc. (the "Adviser"), 312 Walnut
Street, Cincinnati, Ohio 45202 to manage the Funds' investments and their
business affairs. The Adviser was organized in 1974 and is also the investment
adviser to twelve other funds in the Countrywide Family of Funds. 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 at the annual
rate of .75% of its average 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, First Vice President and Chief Investment Officer -
Equities 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. She has been the portfolio manager
of the Utility Fund since July 1993 and the portfolio manager of the Equity Fund
since March 1995.
The Adviser is the principal underwriter for the Funds and the exclusive
agent for the distribution of shares of the Funds. The Adviser receives the
entire sales load on all direct initial investments of shares of the Funds and
on all investments which are not made through a broker.
YEAR 2000 READINESS. Computer users around the world are faced with the dilemma
of the Year 2000 issue, which stems from the use of two digits in most computer
systems to designate the year. When the year advances from 1999 to 2000, many
computers will not recognize "00" as the Year 2000. This issue could potentially
affect every aspect of computer-related activity, on an individual and corporate
level. The Funds could be adversely impacted if the computer systems used by the
Adviser and other service providers have not been converted to meet the
- 23 -
<PAGE>
requirements of the new century. The Adviser has evaluated its internal systems
and expects them to handle the change of millennium. The Adviser is monitoring
on an ongoing basis the progress of the Funds' service providers to convert
their systems to comply with the requirements of the Year 2000. The Adviser
currently has no reason to believe that these service providers will not be
fully and timely compliant. However, you should be aware that there can be no
assurance that all systems will be successfully converted prior to January 1,
2000, in which case it would become necessary for the Funds to enter into
agreements with new service providers or to make other arrangements.
DISTRIBUTION PLANS
- ------------------
Pursuant to Rule 12b-1 under the 1940 Act, the Funds have adopted two
separate plans of distribution under which each Fund's two classes of shares may
directly incur or reimburse the Adviser for certain expenses related to the
distribution of its shares, including payments to securities dealers and other
persons, including the Adviser and its affiliates, who are engaged in the sale
of shares of a Fund and who may be advising investors regarding the purchase,
sale or retention of Fund shares; expenses of maintaining personnel who engage
in or support distribution of shares or who render shareholder support services
not otherwise provided by the Transfer Agent or the Trust; 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 a Fund; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable; and any other expenses related to the
distribution of each class of shares.
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. The
annual limitation for payment of expenses pursuant to the Class C Plan is 1.00%
of each Fund's average daily net assets allocable to Class C shares. The
payments permitted by the Class C Plan fall into two categories. First, the
Class C shares may directly incur or reimburse the Adviser in an amount not to
exceed .75% per year of each Fund's average daily net assets allocable to Class
C shares for certain distribution-related expenses as described above. The Class
C Plan also provides for the payment of an account maintenance fee of up to .25%
per year of each Fund's average daily net assets allocable to Class C shares,
which may be paid to dealers based on the average value of Fund shares owned by
clients of such dealers. Because these fees are paid out of the Funds' assets on
an on-going basis, over time these fees will increase the cost of
- 24 -
<PAGE>
your investment and may cost you more than paying other types of sales loads. In
the event a Plan is terminated by the Trust in accordance with its terms, a Fund
will not be required to make any payments for expenses incurred after the date
the 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.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (NAV 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
(normally 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 NAV might be materially
affected. The NAV per share of a Fund is calculated by dividing the sum of the
value of the securities held by the Fund plus cash or other assets minus all
liabilities (including estimated accrued expenses) by the total number of shares
outstanding of the Fund, rounded to the nearest cent. The price at which a
purchase or redemption of Fund shares is effected is based on the next
calculation of NAV after the order is placed. Each Fund's NAV will fluctuate
with the value of the securities it holds.
The value of the securities held by a Fund is determined as follows: (1)
Securities traded on a stock exchange are priced at their last sale price after
trading on the New York Stock Exchange has closed. If the securities were not
traded on the exchange that day, they are valued at their last bid price; (2)
Securities traded in the over-the counter market are priced at their last sale
price after trading on the New York Stock Exchange has closed. If the last sale
price is not available, the security is valued at the last bid price quoted by
brokers that make markets in that security; (3) Securities that do not have
available market prices are priced at their fair value using consistent
procedures established in good faith by the Board of Trustees.
- 25 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The financial highlights table is intended to help you understand the Funds'
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Funds (assuming reinvestment of all dividends and distributions). This
information has been audited by Arthur Andersen LLP, whose report, along with
the Funds' financial statements, is included in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
EQUITY FUND - CLASS A
Per Share Data for a Share Outstanding Throughout Each Year
==================================================================================================================
Years Ended March 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 19.38 $ 13.76 $ 12.45 $ 9.84 $ 9.26
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.04 0.09 0.12 0.13 0.15
Net realized and unrealized gains
on investments............................. 2.73 5.76 1.35 2.60 0.59
---------- --------- ---------- --------- ----------
Total from investment operations................ 2.77 5.85 1.47 2.73 0.74
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.03) (0.08) (0.12) (0.12) (0.16)
Distributions from net realized gains........ -- (0.15) (0.04) -- --
---------- --------- ---------- --------- ----------
Total distributions............................. (0.03) (0.23) (0.16) (0.12) (0.16)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 22.12 $ 19.38 $ 13.76 $ 12.45 $ 9.84
========== ========= ========== ========= ==========
Total return(A) ................................ 14.30% 42.74% 11.82% 27.90% 8.07%
========== ========= ========== ========= ==========
Net assets at end of year (000's)............... $ 55,561 $ 38,336 $ 14,983 $ 8,502 $ 4,300
========== ========= ========== ========= ==========
Ratio of net expenses to average net
assets(B).................................... 1.31% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment income to average
net asset.................................... 0.18% 0.53% 0.91% 1.06% 1.57%
Portfolio turnover rate......................... 10% 7% 38% 38% 159%
- --------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets would
have been 1.43%, 2.02% and 1.94% for the years ended March 31, 1997, 1996 and 1995, respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND - CLASS C
Per Share Data for a Share Outstanding Throughout Each Year
======================================================================================================================
Years Ended March 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 19.34 $ 13.77 $ 12.46 $ 9.86 $ 9.26
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income (loss)................. (0.19) (0.03) 0.02 0.05 0.10
Net realized and unrealized gains
on investments............................ 2.71 5.75 1.35 2.60 0.57
---------- --------- ---------- --------- ----------
Total from investment operations................ 2.52 5.72 1.37 2.65 0.67
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... -- -- (0.02) (0.05) (0.07)
Distributions from net realized gains........ -- (0.15) (0.04) -- --
---------- --------- ---------- --------- ----------
Total distributions............................. -- (0.15) (0.06) (0.05) (0.07)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 21.86 $ 19.34 $ 13.77 $ 12.46 $ 9.86
========== ========= ========== ========= ==========
Total return(A) ................................ 13.03% 41.63% 11.01% 26.90% 7.32%
========== ========= ========== ========= ==========
Net assets at end of year (000's)............... $ 3,146 $ 3,862 $ 2,770 $ 2,436 $ 1,995
========== ========= ========== ========= ==========
Ratio of net expenses to average net
assets(B).................................... 2.41% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment income (loss) to
average net assets........................... (0.92)% (0.18)% 0.15% 0.38% 0.68%
Portfolio turnover rate......................... 10% 7% 38% 38% 159%
- ---------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets
would have been 2.14%, 2.70% and 2.50% for the years ended March 31, 1997, 1996 and 1995, respectively.
</TABLE>
<PAGE>
UTILITY FUND - CLASS A
<TABLE>
Per Share Data for a Share Outstanding Throughout Each Year
===============================================================================================================
Years Ended March 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 16.76 $ 12.44 $ 12.24 $ 10.47 $ 10.52
---------- --------- ---------- --------- ----------
Income (loss) from investment operations:
Net investment income........................ 0.38 0.43 0.46 0.47 0.43
Net realized and unrealized gains (losses)
on investments............................ (1.16) 4.56 0.22 1.77 (0.05)
---------- --------- ---------- --------- ----------
Total from investment operations................ (0.78) 4.99 0.68 2.24 0.38
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.38) (0.43) (0.46) (0.47) (0.43)
Distributions from net realized gains........ (0.18) (0.24) (0.02) -- --
---------- --------- ---------- --------- ----------
Total distributions............................. (0.56) (0.67) (0.48) (0.47) (0.43)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 15.42 $ 16.76 $ 12.44 $ 12.24 $ 10.47
========== ========= ========== ========= ==========
Total return(A) ................................ (4.79) % 40.92% 5.61% 21.65% 3.68%
========== ========= ========== ========= ==========
Net assets at end of year (000's)............... $ 38,391 $ 42,463 $ 36,087 $ 40,424 $40,012
========== ========= ========== ========= ==========
Ratio of expenses to average net assets......... 1.33% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment income to average
net assets.................................. 2.30% 3.03% 3.65% 3.97% 4.06%
Portfolio turnover rate ........................ 4% 0% 3% 11% 17%
- --------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND - CLASS C
Per Share Data for a Share Outstanding Throughout Each Year
=================================================================================================================
Years Ended March 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 16.74 $ 12.43 $ 12.23 $ 10.46 $ 10.51
---------- --------- ---------- --------- ----------
Income (loss) from investment operations:
Net investment income........................ 0.18 0.31 0.35 0.37 0.35
Net realized and unrealized gains (losses)
on investments............................. (1.16) 4.57 0.24 1.78 (0.04)
---------- --------- ---------- --------- ----------
Total from investment operations................ (0.98) 4.88 0.59 2.15 0.31
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.18) (0.33) (0.37) (0.38) (0.36)
Distributions from net realized gains........ (0.18) (0.24) (0.02) -- --
---------- --------- ---------- --------- ----------
Total distributions............................. (0.36) (0.57) (0.39) (0.38) (0.36)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 15.40 $ 16.74 $ 12.43 $ 12.23 $ 10.46
========== ========= ========== ========= ==========
Total return(A) ................................ (5.92)% 39.91% 4.82% 20.78% 3.00%
---------- --------- ---------- --------- ----------
Net assets at end of year (000's)............... $ 3,215 $ 3,597 $ 3,099 $ 3,686 $ 3,599
========== ========= ========== ========= ==========
Ratio of expenses to average net assets ........ 2.50% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment income to average
net assets.................................. 1.13% 2.28% 2.89% 3.19% 3.41%
Portfolio turnover rate......................... 4% 0% 3% 11% 17%
- ------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
</TABLE>
<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 Family of Funds
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide (Toll-Free) 800-543-8721
Cincinnati 513-629-2000
Board of Trustees
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
Investment Adviser
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Transfer Agent
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Additional information about the Funds is included in the Statement of
Additional Information ("SAI") which is incorporated by reference in its
entirety. Additional information about the Funds' investments is available in
the Funds' annual and semiannual reports to shareholders. In the Funds' annual
report you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during their last
fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Funds, or to make inquiries about the Funds, please call
1-800-543-0407 (Nationwide) or 629-2050 (in Cincinnati).
Information about the Funds (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's public reference room in Washington,
D.C. Information about the operation of the public reference room can be
obtained by calling the Commission at 1-800-SEC-0330. Reports and other
information about the Funds are available on the Commission's Internet site at
http://www.sec.gov. Copies of information on the Commission's Internet site can
be obtained for a fee by writing to: Securities and Exchange Commission, Public
Reference Section, Washington, D.C. 20549-6009.
File No. 811-3651
- 31 -
<PAGE>
PROSPECTUS
August 1, 1999
COUNTRYWIDE STRATEGIC TRUST
312 WALNUT STREET, 21ST FLOOR
CINCINNATI, OHIO 45202
800-543-0407
- -------------------------------------------------------------------------------
GROWTH/VALUE FUND
AGGRESSIVE GROWTH FUND
- -------------------------------------------------------------------------------
These securities have been registered with the Securities and Exchange
Commission, but the Commission has not approved or disapproved them for
investment merit and has not passed on the accuracy or adequacy of the
information in this Prospectus. Anyone who informs you otherwise is committing a
criminal offense.
This Prospectus has information you should know before you invest.
Please read it carefully and keep it with your investment records.
TABLE OF CONTENTS
RISK/RETURN SUMMARY ...........................................................
EXPENSE INFORMATION...................................................... .....
INVESTMENT OBJECTIVES, INVESTMENT STRATEGIES AND RELATED RISKS.................
HOW TO PURCHASE SHARES...................................................... ..
HOW TO REDEEM SHARES...................................................... ....
HOW TO EXCHANGE SHARES...................................................... ..
DIVIDENDS AND DISTRIBUTIONS....................................................
TAXES...................................................... ...................
OPERATION OF THE FUNDS...................................................... ..
DISTRIBUTION PLAN .............................................................
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE...........................
FINANCIAL HIGHLIGHTS...................................................... ....
FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CONTACT YOUR
BROKER OR CALL US AT THE ABOVE NUMBER.
Countrywide
Investments
<PAGE>
RISK/RETURN SUMMARY
- -------------------
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
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.
WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
Each Fund seeks to achieve its investment objective by investing primarily in
common stocks of companies which, in the opinion of the Adviser, are expected to
achieve growth of investment principal over time. The Adviser will purchase
securities of companies which it believes have excellent prospects for earnings
and/or cash flow growth over a three to five year period.
The Growth/Value Fund invests primarily in stocks of large-cap growth companies
which the Adviser believes have a demonstrated record of achievement. The
Aggressive Growth Fund invests primarily in companies selling at value prices
which are likely to benefit from new or innovative products, services or
processes. The Aggressive Growth Fund invests in stocks of various sized
companies, even those with less than $750 million in capitalization.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
The return on and value of an investment in the Funds will fluctuate in response
to stock market movements. Stocks and other equity securities are subject to
market risks and fluctuations in value due to earnings, economic conditions and
other factors beyond the control of the Adviser. As a result, there is a risk
that you could lose money by investing in the Funds.
Generally, the Aggressive Growth Fund will assume a more expanded risk profile
than the Growth/Value Fund. The Aggressive Growth Fund may invest in stocks of
small and medium-sized companies. These companies may have more limited product
lines and financial resources than larger, more established companies. The share
price of small and medium-sized companies may be more volatile than the share
price of larger companies and their securities may be less actively traded. The
Aggressive Growth Fund may also invest in securities of companies which offer
new or innovative products, which may subject the Fund to greater risks and
greater share price fluctuation than an investment in other types of equity
funds.
- 2 -
<PAGE>
Each Fund is a non-diversified fund, which means that it may invest more than 5%
of its assets in the securities of one issuer. This may cause a Fund's net asset
value to be more sensitive to any single economic, business, political or
regulatory occurrence than the net asset value of a diversified fund.
An investment in the Funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
- 3 -
<PAGE>
PERFORMANCE SUMMARY
The bar charts and performance tables shown below provide an indication of
the risks of investing in the Funds by showing the changes in the performance of
the Funds from year to year during the Funds' operations and by showing how the
average annual returns of the Funds compare to those of a broad-based securities
market index. The Funds' past performance is not necessarily an indication of
their future performance.
GROWTH/VALUE FUND (bar chart)
29.89% 36.73% 12.77% 14.50%
1999 1998 1997 1996
The total returns shown above do not reflect sales loads on the Fund's shares
and, if included, returns would be less than those shown.
During the period shown in the bar chart, the highest return for a quarter was
34.03% during the quarter ended December 31, 1998 and the lowest return for a
quarter was -8.50% during the quarter ended September 30, 1998.
AGGRESSIVE GROWTH FUND (bar chart)
15.46% 33.53% 9.46% 8.40%
1999 1998 1997 1996
The total returns shown above do not reflect sales loads on the Fund's shares
and, if included, returns would be less than those shown.
During the period shown in the bar chart, the highest return for a quarter was
34.58% during the quarter ended December 31, 1998 and the lowest return for a
quarter was -17.13% during the quarter ended December 31, 1997.
Average Annual Total Returns
For Periods Ended December 31, 1998(1)
One Year Since Inception
(September 29, 1995)
Growth/Value Fund 33.50% 25.62%
S&P 500 Index(2) 28.58% 27.91%
Aggressive Growth Fund 20.23% 18.55%
NASDAQ Composite Index(3) 40.20% 25.96%
- 4 -
<PAGE>
(1) The Funds' year-to-date return as of June 30, 1999:
Growth/Value Fund _____%
Aggressive Growth Fund _____%
(2) The Standard & Poor's 500 Index is a widely recognized, unmanaged index
of common stock prices.
(3) The 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 system.
- 5 -
<PAGE>
EXPENSE INFORMATION
- -------------------
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU BUY AND HOLD
SHARES OF THE FUNDS.
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . . . 5.75%
Maximum Deferred Sales Load
(as a percentage of original purchase price) . . None*
Sales Load Imposed on Reinvested Dividends . . None
Redemption Fee . . . . . . . . . . . . . . . . . None**
Exchange Fee . . . . . . . . . . . . . . . . . . None
* If you purchase $1 million or more shares and do not pay a front-end
sales load, you may be subject to a deferred sales load of 1% if the
shares are redeemed within one year of their purchase and a dealer's
commission was paid on the shares.
** You will be charged $8 for each wire redemption. This fee
is subject to change.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from
Fund assets)
Growth/Value Aggressive
Fund Growth Fund
---------- ------------
Management Fees 1.00% 1.00%
Distribution (12b-1) Fees .23% .16%
Other Expenses .43% .84%(A)
----- -----
Total Annual Fund Operating Expenses 1.66% 2.00%(B)
===== ========
(A) After reimbursement of operating expenses by the Manager, such fees
were .79% for the fiscal year ended March 31, 1999.
(B) After reimbursement of operating expenses by the Manager, total Fund
operating expenses were 1.95% for the fiscal year ended March 31, 1999.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that a Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Growth/Value Aggressive Growth
Fund Fund
------------ -----------------
1 Year $ $
3 Years
5 Years
10 Years
- 6 -
<PAGE>
INVESTMENT OBJECTIVES, INVESTMENT STRATEGIES AND RELATED RISKS
- --------------------------------------------------------------
INVESTMENT OBJECTIVES
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.
INVESTMENT STRATEGIES
Each Fund seeks to achieve its investment objectives by investing primarily
in common stocks of companies which, in the opinion of the Adviser, are expected
to achieve growth of investment principal over time. In selecting investments
for the Funds, the Adviser looks for securities which it believes are
undervalued, that is, securities which are trading at prices below their true
worth. The Adviser will purchase securities of companies which it believes have
excellent prospects for earnings and/or cash flow growth over a three to five
year period.
The Growth/Value Fund will focus on growth companies which are believed to
have a demonstrated record of achievement. The Aggressive Growth Fund will focus
on 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 and cash flow. The Growth/Value Fund will invest primarily in
large-cap stocks and will not invest more than 10% of its assets in companies
with market capitalizations of less than $750 million at the time of purchase.
The Aggressive Growth Fund will invest in companies of various sizes. Many of
these companies are in the small to medium-sized category, meaning they have
market capitalizations of less than $750 million at the time of purchase. The
Aggressive Growth Fund may also invest up to 15% of its assets in common stocks
which are not actively traded on a national or regional stock exchange.
Each Fund's portfolio is comprised of securities of two basic categories of
companies:
(1) "core" companies which the Adviser believes have shown
above-average and consistent long-term growth in earnings and cash
flow and have excellent prospects for future growth, and
(2) "earnings/cash flow acceleration" companies, which the Adviser believes
are either currently enjoying or are projected to enjoy a dramatic
increase in earnings and/or cash flow.
- 7 -
<PAGE>
The Adviser expects to hold investments in the Growth/Value Fund for an
average of 18 to 36 months. However, changes in the Adviser's outlook and market
conditions may significantly affect the amount of time the Growth/Value Fund
holds a security. The Aggressive Growth Fund may make short-term trades in order
to take advantage of changing market, industry or company conditions. Each
Fund's portfolio turnover may vary greatly from year to year and during a
particular year. High turnover will generally result in higher transaction costs
and higher amounts of taxable realized gains to shareholders. The Adviser does
not set a price target for its holdings in order to determine when to sell an
investment. Rather, the Adviser will generally sell a security in a Fund if one
or more of the following occurs:
(1) a change in the fundamentals of a company or an industry;
(2) excessive valuation;
(3) better risk/reward opportunities may be found in other stocks; or
(4) excessive overweighting.
When the Adviser believes that adverse market conditions exist, including
any period when it believes that the return on certain money market type
instruments would be higher than the return on a Fund's normal investments, a
Fund may temporarily hold, for defensive purposes, up to 100% of its total
assets in cash and/or short-term obligations. Each Fund may invest in short-term
obligations such as variable amount master demand notes, commercial paper,
certificates of deposit, bankers' acceptances, repurchase agreements which
mature in less than seven days and U.S. Government obligations. To the extent
that a Fund's assets are invested in short-term obligations, the Fund will not
be meeting its investment objective.
RISK CONSIDERATIONS
The Funds are designed for investors who are investing for the long term
and are not intended for investors seeking assured income or preservation of
capital. Changes in market prices can occur at any time. Accordingly, there is
no assurance that a Fund will achieve its investment objective. When you redeem
your shares, they may be worth more or less than what you paid for them.
Because the Funds normally invest most, or a substantial portion, of their
assets in stocks, the value of a Fund's portfolio will be affected by changes in
the stock markets. Stock markets and stock prices can be volatile. Market action
will affect a Fund's net asset value per share, which fluctuates as the values
of the Fund's portfolio securities change. Not all stock prices change uniformly
or at the same time and not all stock markets move in the same direction at the
same time. Various factors can affect a stock's price (for example, poor
earnings reports by an issuer, loss of major customers, major litigation against
an issuer, or changes in general economic conditions or in government
regulations affecting an industry). Not all of these factors can be predicted.
- 8 -
<PAGE>
It is intended that the Aggressive Growth Fund may 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.
Each Fund is a non-diversified fund and may invest a significant percentage
of its assets in a single issuer. This may cause its net asset value to be more
sensitive to any single economic, business, political or regulatory occurrence
than the net asset value of a diversified fund.
The Aggressive Growth Fund may invest in securities of small and medium-
sized companies which may involve greater risks since these securities may
have limited marketability and, thus, may be more volatile than securities of
larger, more established companies or the market in general. Because small and
medium-sized companies normally have fewer shares outstanding than larger
companies, it may be more difficult for the Fund to buy or sell significant
amounts of these shares without an unfavorable impact on prevailing prices.
Small-sized companies may have limited product lines, markets or financial
resources and may lack management depth. In addition, small and medium-sized
companies are typically subject to a greater degree of changes in earnings and
business prospects than are larger, more established companies. There is
typically less publicly available information concerning small and medium-sized
companies than for larger, more established ones. Although investing in
securities of small and medium-sized companies offers potential for
above-average returns if the companies are successful, the risk exists that such
companies will not succeed and the prices of their shares could significantly
decline in value.
HOW TO PURCHASE SHARES
- ----------------------
You may open an account with the Funds by investing the minimum amount required
for the type of account you open. You may invest additional amounts in an
existing account at any time. For more information about how to purchase shares,
telephone Countrywide Fund Services, Inc. (the "Transfer Agent") (Nationwide
call toll-free 800-543-0407; in Cincinnati call 629-2050). The different account
options and minimum investment requirements are listed below.
- 9 -
<PAGE>
ACCOUNT OPTIONS
Regular Accounts
- ----------------
Accounts for Countrywide Affiliates
- -----------------------------------
If you (or anyone in your immediate family) are an employee, shareholder or
customer of Countrywide Credit Industries, Inc. or any of its affiliated
companies, you may open an account for less than the minimum amount required for
regular accounts.
Tax-Deferred Retirement Plans
- -----------------------------
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"). An IRA is a special type of account
that offers different tax advantages. You should consult your financial
professional to help decide which type of IRA is right for you.
Traditional IRA - Assets grow tax-deferred and contributions may be
deductible. Withdrawals and distributions are taxable in the year made.
Spousal IRA - An IRA in the name of a non-working spouse by a working spouse.
Roth IRA - An IRA with tax-free growth of assets and distributions, if
certain conditions are met. Contributions are not deductible.
Education IRA - An IRA with tax-free growth of assets and withdrawals for
qualified higher education expenses. Contributions are not deductible.
KEOGH PLANS. A tax-deferred plan for self-employed individuals.
QUALIFIED PENSION AND PROFIT-SHARING PLANS FOR EMPLOYEES. These
include profit-sharing plans with a 401(k) provision.
403(B)(7) CUSTODIAL ACCOUNTS. A tax-deferred account for employees of public
school systems, hospitals, colleges and other non-profit organizations meeting
certain requirements of the Internal Revenue Code.
Automatic Investment Plan
- --------------------------
The automatic investment plan allows you to 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 of your transfers, but reserves the
right, upon thirty days' written notice, to make reasonable charges for this
service. Your depository institution may charge you for debiting your account
which would reduce your return from an investment in the Funds.
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<PAGE>
MINIMUM INVESTMENT REQUIREMENTS
Initial Additional
Regular Accounts $1,000 None
Accounts for Countrywide Affiliates $ 50 None
Tax-Deferred Retirement Plans $ 250 None
Automatic Investment Plans $ 50 $ 50
Direct Deposit Plans
- --------------------
Your employer may offer a direct deposit plan which will allow you to have all
or a portion of your paycheck transferred automatically to purchase shares of a
Fund. Social security recipients may have all or a portion of their social
security check transferred automatically to purchase shares of a Fund.
InvestPlus Plan
- ---------------
The InvestPlus Plan provides an easy way for Countrywide mortgage holders to
invest in the Funds by including their investment with their mortgage payment.
If you are a Countrywide mortgage holder, you may write one check for the total
amount.
OPENING A NEW ACCOUNT. You may open an account directly with a Fund or through
your broker-dealer.
To open an account directly with a Fund, please follow the steps outlined below.
1. Complete the Account Application included in this Prospectus. Be sure to
indicate the type of account you wish to open and the amount of money you wish
to invest.
2. Write a check for your initial investment to either the "Growth/Value Fund"
or the "Aggressive Growth Fund." Mail your completed Account Application and
your check to the following
address:
COUNTRYWIDE FUND SERVICES, INC.
P.O. BOX 5354
CINCINNATI, OHIO 45201-5354
You may also open an account through your broker-dealer. It is the
responsibility of broker-dealers to send properly completed orders. If you open
an account through your broker-dealer, you may be charged a fee by your
broker-dealer.
ADDING TO YOUR ACCOUNT. You may make additional purchases to your account at any
time. Additional purchases may be made by mail to the address listed above, by
wire or through your broker-dealer. For more information about purchases by
wire, please telephone the Transfer Agent (Nationwide call toll-free
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<PAGE>
800-543-0407; in Cincinnati call 629-2050). Your bank may charge a fee for
sending your wire. Each additional purchase must contain the account name and
number in order to properly credit your account.
MISCELLANEOUS. In connection with all purchases of Fund shares,
we observe the following policies and procedures:
o We price direct purchases based upon the next public
offering price (net asset value plus any applicable sales
load) after your order is received. Direct purchase orders
received by the Transfer Agent by 4:00 p.m., Eastern time,
are processed at that day's public offering price. Direct
investments received by the Transfer Agent after 4:00
p.m., Eastern time, are processed at the public offering
price next determined on the following business
day. Purchase orders received by broker-dealers before
4:00 p.m., Eastern time, and transmitted to the Manager
by 5:00 p.m., Eastern time, are processed at that day's
public offering price. Purchase orders received
from broker-dealers after 5:00 p.m., Eastern time, are
processed at the public offering price next determined
on the following business day.
o We mail you confirmations of all purchases or redemptions
of Fund shares.
o Certificates for shares are not issued.
o We reserve the right to limit the amount of investments
and to refuse to sell to any person.
o If an order to purchase shares is canceled because your check does
not clear, you will be responsible for any resulting losses or
fees incurred by the Fund or the Transfer Agent in the
transaction.
o We may open accounts for less than the minimum investment or
change minimum investment requirements at any time.
o There is no fee for purchases made by wire, but we may charge you
for this service upon thirty days' prior notice.
The Funds' account application contains provisions in favor of the
Funds, 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.
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<PAGE>
Shares of the Funds are sold at net asset value ("NAV") plus an initial
sales load. In some cases, reduced initial sales loads for the purchase of
shares may be available, as described below. Investments of $1 million or
more are not subject to a sales load at the time of purchase but may be
subject to a contingent deferred sales load of 1.00% on redemptions made
within one year after purchase if a commission was paid by the Manager to
a participating unaffiliated dealer. Shares of the Funds are also subject to
an annual 12b-1 distribution fee of up to .25% of a Fund's average daily assets.
The following table illustrates the initial sales load breakpoints for
the purchase of shares of the Funds:
Which Dealer
Percentage Equals this Reallowance
Deducted Percentage as Percentage
for Sales of Your Net of Offering
Amount of Investment Load Investment Price
- -------------------- ---- ---------- ----
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.50 4.71 3.75
$100,000 but less than $250,000 3.50 3.63 2.75
$250,000 but less than $500,000 2.95 3.04 2.25
$500,000 but less than $1,000,000 2.25% 2.30 1.75
$1,000,000 or more None None
Under certain circumstances, the Manager may increase or decrease the
reallowance to selected dealers. 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 a Fund and/or other funds in the Countrywide Family of
Funds during a specific period of time. Such bonuses or incentives may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and other dealer-sponsored programs or events.
For initial purchases of $1 million or more and subsequent purchases
further increasing the size of the account, participating unaffiliated dealers
will receive first year compensation of up to 1.00% of such purchases from the
Manager. 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 in the Countrywide Family of Funds. Dealers should contact the
Manager for more information on the calculation of the dealer's commission in
the case of combined purchases.
An exchange from other Countrywide funds will not qualify for payment of
the dealer's commission unless the exchange is from a Countrywide Fund
- 13 -
<PAGE>
with assets as to which a dealer's commission or similar payment has not been
previously paid. No commission will be paid if the purchase represents the
reinvestment of a redemption from a Fund made during the previous twelve months.
Redemptions of shares may result in the imposition of a contingent deferred
sales load if the dealer's commission described in this paragraph was paid in
connection with the purchase of such shares. See "Contingent Deferred Sales Load
for Certain Purchases of Shares" below.
REDUCED SALES LOAD. You may use the Right of Accumulation to combine the
cost or current net asset value (whichever is higher) of your existing shares of
any Countrywide Fund sold with a sales load with the amount of any current
purchases in order to take advantage of the reduced sales loads set forth in the
table above. Purchases made in any Countrywide load fund under 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 Countrywide Funds which are
sold with a sales load are listed in the Exchange Privilege section of this
Prospectus. You should contact the Transfer Agent for information about the
Right of Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. Shares of the Funds may be purchased at
NAV by pension and profit-sharing plans, pension funds and other
company-sponsored benefit plans that (1) have plan assets of $500,000 or more,
or (2) have, at the time of purchase, 100 or more eligible participants, or (3)
certify that they project to have annual plan purchases of $200,000 or more, or
(4) are provided administrative services by certain third-party administrators
that have entered into a special service arrangement with the Manager relating
to such plan.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may purchase shares of the Funds
at NAV. To the extent permitted by regulatory authorities, a bank
trust department may charge fees to clients for whose account it purchases
shares at NAV. Federal and state credit unions may also purchase shares at NAV.
In addition, shares of the Funds may be purchased at NAV 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 may also purchase shares of the Funds at
NAV if their investment adviser or broker-dealer has made
arrangements to permit them to do so with the Trust. The investment adviser must
notify the Transfer Agent that an investment qualifies as a purchase at
NAV.
Associations and affinity groups and their members may purchase shares of
the Funds at NAV provided that management of these groups or their
financial adviser has made arrangements with the Trust to permit them to do so.
Investors or their financial adviser must notify the Transfer
- 14 -
<PAGE>
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 families 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 one
year from the date of purchase. The contingent deferred sales load will be paid
to the Manager and will be equal to the commission percentage paid at the time
of purchase as applied to 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. If a purchase of shares is subject to the contingent
deferred sales load, you will be notified on the confirmation you receive for
your purchase. Redemptions of such shares of the Funds held for at least one
year will not be subject to the contingent deferred sales load.
The contingent deferred sales load is 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 Manager may require documentation prior to
waiver of the load, including death certificates, physicians' certificates, etc.
HOW TO REDEEM SHARES
- --------------------
To redeem shares of either Fund, send a written request to the Transfer
Agent, with your name, your account number and the amount to be redeemed. You
must sign your request exactly as your name appears on the Trust's account
records. Mail your written request to:
COUNTRYWIDE FUND SERVICES, INC.
P.O. BOX 5354
CINCINNATI, OHIO 45201-5354
If you would like your redemption proceeds deposited free of charge
directly into your account with a commercial bank or other depository
institution via an Automated Clearing House (ACH) transaction, contact the
Transfer Agent for more information.
We redeem shares based on the current NAV on the day we receive a proper
request for redemption, less any contingent deferred sales load on the redeemed
shares. Be sure to review "How to Purchase Shares" above to determine whether
your redemption is subject to a contingent deferred sales load.
- 15 -
<PAGE>
You may also redeem shares by placing a wire redemption request through
your broker-dealer. Your broker-dealer is responsible for ensuring that
redemption requests are transmitted to us in proper form in a timely manner. If
you request a redemption by wire, you will be charged an $8 processing fee. We
reserve the right to change the processing fee, upon thirty days' notice. All
charges will be deducted from your account by redeeming shares in your account.
Your bank or brokerage firm may also charge you for processing the wire.
Redemption proceeds will only be wired to a commercial bank or brokerage firm in
the United States. If it is impossible or impractical to wire funds, the
redemption proceeds will be sent by mail to the designated account.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
A SIGNATURE GUARANTEE is required for (1) any redemption which is $25,000 or
more (2) any redemption when the name(s) or the address on the account has been
changed within thirty days of your redemption request.
ADDITIONAL INFORMATION ABOUT ACCOUNTS AND REDEMPTIONS
SMALL ACCOUNTS. Due to the high costs of maintaining small accounts, we may ask
that you increase your account balance if your account falls below the minimum
amount required for your account. If the account balance remains below our
minimum requirements for thirty days after we notify you, we may close your
account and send you the proceeds, less any applicable contingent deferred sales
load.
AUTOMATIC WITHDRAWAL PLAN. If the shares in your account have a value of at
least $5,000, you (or another person you have designated) may 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 an initial sales load is
incurred whenever purchases are made.
REINVESTMENT PRIVILEGE. If you have redeemed shares of either Fund, you may
reinvest all or part of the proceeds without paying a sales load. You must make
your reinvestment within ninety days of your redemption and you may only use
this privilege once a year.
MISCELLANEOUS. In connection with all redemptions of Fund shares, we
observe the following policies and procedures:
o We may refuse any redemption request involving recently
purchased shares until your check for the recently purchased
shares has cleared. To eliminate this delay, you may purchase
shares of the Funds by certified check or wire.
o We may delay mailing redemption proceeds for up to seven days
(redemption proceeds are normally mailed within three days
after receipt of a proper request).
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<PAGE>
o We will consider all written and verbal instructions as authentic
and will not be responsible for processing exchange instructions
received by telephone which are reasonably believed to be genuine
or for processing redemption proceeds by wire. We will use
reasonable procedures to determine that telephone instructions
are genuine, such as requiring forms of personal identification
before acting upon telephone instructions, providing written
confirmation of the transactions and/or tape recording telephone
instructions. If we do not use such procedures, we may be liable
for losses due to unauthorized or fraudulent instructions.
HOW TO EXCHANGE SHARES
- ----------------------
Shares of either Fund and of any other fund in the Countrywide Family of
Funds may be exchanged for each other.
Shares of the Funds which do not have a contingent deferred sales load may
be exchanged for shares of any other fund (provided these shares do not have a
contingent deferred sales load). If you paid a sales load on the shares being
exchanged, this amount will be credited towards the sales load (if any) on the
shares being acquired.
Shares of the Funds which have a contingent deferred sales load, may be
exchanged, based on their per share NAV, for shares of any other fund which has
a contingent deferred sales load and for shares of any fund which is a money
market fund. You will receive credit for the period of time you held the shares
being exchanged when determining whether a contingent deferred sales load will
apply, unless your shares were held in a money market fund.
The Countrywide Family of Funds consists of the following funds. Funds
which may have a front-end or a contingent deferred sales load are marked with
an asterisk.
GROWTH FUNDS GROWTH & INCOME FUNDS
*Growth/Value Fund *Equity Fund
*Aggressive Growth Fund *Utility Fund
TAXABLE BOND FUNDS TAX-FREE BOND FUNDS
*Intermediate Bond Fund *Tax-Free Intermediate Term
*Intermediate Term Government Income Fund
Fund *Ohio Insured Tax-Free Fund
*Adjustable Rate U.S. Government
Securities Fund
TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Short Term Government Income Fund Tax-Free Money Fund
Institutional Government Income Fund Ohio Tax-Free Money Fund
Money Market Fund California Tax-Free Money
Fund
Florida Tax-Free Money
Fund
You may exchange shares by written request or by telephone. You must sign
your written request exactly as your name appears
- 17 -
<PAGE>
on the Trust's account records. If you are unable to exchange shares by
telephone due to such circumstances as unusually heavy market activity, you can
exchange shares by mail or in person. Your exchange will be processed at the
next determined NAV (or offering price, if there is a sales load) after the
Transfer Agent receives your request.
You may only exchange shares into a fund which is authorized for sale in
your state of residence and you must meet that fund's minimum initial investment
requirements. The Board of Trustees may change or discontinue the exchange
privilege after giving shareholders 60 days' prior notice. Any gain or loss on
an exchange of shares is a taxable event. Before making an exchange, contact the
Transfer Agent to request information about the other funds in the Countrywide
Family of Funds.
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 annually.
Management will determine when to distribute any net realized short-term capital
gains.
Your distributions will be paid under one of the following options:
Share Option - all distributions are reinvested
in additional shares.
Income Option - income and short-term capital gains are
paid in cash; long-term capital gains are
reinvested in additional shares.
Cash Option - all distributions are paid in cash.
Please mark on your Account Application the option you have selected. If
you do not select an option, you will receive the Share Option. If you select
the Income Option or the Cash Option and the post office cannot deliver your
checks or if you do not cash your checks within six months, your dividends may
be reinvested in your account at the then-current NAV and your account will be
converted to the Share Option. You will not receive interest on the amount of
your uncashed checks until the checks have been reinvested in your account.
Distributions will be based on a Fund's NAV on the payable date. If you
have received a cash distribution from either Fund, you may reinvest it at NAV
(without paying a sales load) at the next determined NAV on the date of your
reinvestment. You must make your reinvestment within thirty days of the
distribution date and you must notify the Transfer Agent that your
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<PAGE>
distribution is being reinvested under this provision.
TAXES
- -----
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 (the excess of net long-term capital
gains over net short-term capital losses) by a Fund are taxable to you as
capital gains, without regard to how long you have held your Fund shares.
Capital gains distributions may be taxable at different rates depending on the
length of time a Fund holds its assets. Redemptions of shares of the Funds are
taxable events on which you may realize a gain or loss.
You will receive a statement showing the amount and federal income tax
status of all distributions made during the year. In addition to federal taxes,
you may be subject to state and local taxes on distributions. You should consult
your tax advisor about the tax effect of distributions and redemptions from a
Fund and the use of the Automatic Withdrawal Plan and the Exchange Privilege.
Your taxes will be the same regardless of whether you receive your distributions
in cash or reinvest them 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. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Funds.
The Trust retains Countrywide Investments, Inc. (the "Manager"), 312 Walnut
Street, Cincinnati, Ohio 45202 to provide general investment supervisory
services and to manage the Funds' business affairs. The Manager was organized in
1974 and is also the investment adviser to twelve other funds in the Countrywide
Family of Funds. 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 at the annual rate of 1.00% of its average 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.
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<PAGE>
The Manager is the principal underwriter for the Funds and the exclusive
agent for the distribution of shares of the Funds. The Manager receives the
entire sales load on all direct initial investments of shares of the Funds and
on all investments which are not made through a broker.
Mastrapasqua & Associates, Inc. (the "Adviser"), 814 Church Street,
Nashville, Tennessee, manages 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 for managing the
Funds' portfolios.
Frank Mastrapasqua, Ph.D, Chairman and Chief Executive Officer of the
Adviser, and Thomas A. Trantum, President of the Adviser, are primarily
responsible for the day-to-day management of the Funds. Mr. Mastrapasqua
founded the Adviser in 1993. Before 1993, he was Director of Research and Chief
Investment Strategist and a partner at J.C. Bradford & Co. Mr. Trantum was
a Senior Security Analyst and a partner at J.C. Bradford & Co. until 1993.
YEAR 2000 READINESS. Computer users around the world are faced with the dilemma
of the Year 2000 issue, which stems from the use of two digits in most computer
systems to designate the year. When the year advances from 1999 to 2000, many
computers will not recognize "00" as the Year 2000. This issue could potentially
affect every aspect of computer-related activity, on an individual and corporate
level. The Funds could be adversely impacted if the computer systems used by the
Adviser and other service providers have not been converted to meet the
requirements of the new century. The Adviser has evaluated its internal systems
and expects them to handle the change of millennium. The Adviser is monitoring
on an ongoing basis the progress of the Funds' service providers to convert
their systems to comply with the requirements of the Year 2000. The Adviser
currently has no reason to believe that these service providers will not be
fully and timely compliant. However, you should be aware that there can be no
assurance that all systems will be successfully converted prior to January 1,
2000, in which case it would become necessary for the Funds to enter into
agreements with new service providers or to make other arrangements.
DISTRIBUTION PLAN
- -----------------
Pursuant to Rule 12b-1 under the 1940 Act, the Funds have adopted a
plan of distribution (the "Plan") which permits the Funds to directly incur or
reimburse the Manager for certain expenses related to the distribution of its
shares, including payments to securities dealers and other persons, including
the Manager and its affiliates, who are engaged in the sale of shares of a Fund
and who may be advising investors regarding the purchase, sale or retention of
Fund shares; expenses of
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maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by the Transfer Agent
or the Trust; 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.
The annual limitation for payment of expenses pursuant to the Plan is
.25% of each Fund's average daily net assets. Because distribution fees are paid
out of a Fund's assets on an on-going basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types of
sales loads. In the event 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 Manager after the date the Plan terminates. Distribution expenses paid by
the Manager which are not reimbursed by the Funds cannot be carried over from
year to year.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the public offering
price (NAV 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
(normally 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 NAV might be materially
affected. The NAV per share of a Fund is calculated by dividing the sum of the
value of the securities held by the Fund plus cash or other assets minus all
liabilities (including estimated accrued expenses) by the total number of shares
outstanding of the Fund, rounded to the nearest cent. The price at which a
purchase or redemption of Fund shares is effected is based on the next
calculation of NAV after the order is placed. Each Fund's NAV will fluctuate
with the value of the securities it holds.
The value of the securities held by a Fund is determined as follows: (1)
Securities traded on a stock exchange are priced at their last sale price after
trading on the New York Stock Exchange has closed. If the securities were not
traded on the exchange that day, they are valued at their last bid price; (2)
Securities traded in the over-the counter market are priced at their last sale
price after trading on the New York Stock Exchange has closed. If the last sale
price is not available,
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<PAGE>
the security is valued at the last bid price quoted by brokers that make markets
in that security; (3) Securities that do not have available market prices are
priced at their fair value using consistent procedures established in good faith
by the Board of Trustees.
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<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The financial highlights table is intended to help you understand the Funds'
financial performance. The table shows the financial performance of each Fund
during its operations. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Funds (assuming
reinvestment of all dividends and distributions). The information for periods
ending after August 31, 1996 has been audited by Arthur Andersen LLP, whose
report, along with the Funds' financial statements, is included in the Statement
of Additional Information and Annual Report, which is available upon request.
Information for the period ending August 31, 1996 was audited by other
independent accountants.
<TABLE>
<CAPTION>
GROWTH/VALUE FUND
Per Share Data for a Share Outstanding Throughout Each Period
======================================================================================================================
Year Seven Months Year Period
Ended Ended Ended Ended
March 31, March 31, August 31, August 31,
1999 1998(A) 1997 1996(B)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 16.30 $ 15.90 $ 11.18 $ 10.00
------------ -------------- ------------- -------------
Income from investment operations:
Net investment loss......................... (0.17) (0.08) (0.13) (0.06)(C)
Net realized and unrealized gains
on investments............................ 4.84 1.05 5.39 1.24
------------ -------------- ------------- -------------
Total from investment operations............... 4.67 0.97 5.26 1.18
------------ -------------- ------------- -------------
Less distributions:
Distributions from net realized gains....... (3.47) (0.57) (0.54) --
------------ -------------- ------------- -------------
Net asset value at end of period............... $ 17.50 $ 16.30 $ 15.90 $ 11.18
============ ============== ============= =============
Total return(D) ............................... 29.89% 6.43% 47.11% 11.80%
============ ============== ============= =============
Net assets at end of period (000's)............ $ 24,664 $ 28,649 $ 26,778 $ 15,108
============ ============== ============= =============
Ratio of net expenses to average net
assets(E)................................... 1.66% 1.66%(F) 1.95% 1.95%(F)
Ratio of net investment loss to average
net assets (F).............................. (0.93)% (0.91)%(F) (1.03)% (0.62)%
Portfolio turnover rate........................ 59% 62%(F) 52% 21%
- ---------------------------------------------------------------------------------------------------------------------
(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
=====================================================================================================================
Year Seven Months Year Period
Ended Ended Ended Ended
March 31, March 31, August 31, August 31,
1999 1998(A) 1997 1996(B)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 15.81 $ 16.29 $ 10.95 $ 10.00
------------ -------------- ------------- -------------
Income (loss) from investment operations:
Net investment loss......................... (0.27) (0.15) (0.17) (0.11)(C)
Net realized and unrealized gains (losses)
on investments................................ 2.67 (0.33) 5.54 1.06
------------ -------------- ------------- -------------
Total from investment operations............... 2.40 (0.48) 5.37 0.95
------------ -------------- ------------- -------------
Less distributions:
Distributions from net realized gains....... (2.48) -- (0.03) --
------------ -------------- ------------- -------------
Net asset value at end of period............... $ 15.73 $ 15.81 $ 16.29 $ 10.95
============ ============== ============= =============
Total return(D) ............................... 15.46% (2.95)% 49.09% 9.50%
============ ============== ============= =============
Net assets at end of period (000's)............ $ 11,402 $ 15,495 $ 13,984 $ 6,550
============ ============== ============= =============
Ratio of net expenses to average net
assets(E)................................... 1.95% 1.95%(F) 1.94% 1.95%(F)
Ratio of net investment loss to average
net assets(F)............................... (1.52)% (1.66)%(F) (1.57)% (1.26)%
Portfolio turnover rate........................ 93% 40%(F) 51% 16%
Amount of debt outstanding at end of period.... $ -- n/a n/a n/a
Average daily amount of debt outstanding during
the period (000's).......................... $ 80 n/a n/a n/a
Average daily number of capital shares outstanding
during the period (000's)................... 818 n/a n/a n/a
Average amount of debt per share during
the period.................................. $ 0.10 n/a n/a n/a
- -----------------------------------------------------------------------------------------------------------------
(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 2.00%, 2.62% and 5.05%(F) for the periods ended March 31, 1999, August 31, 1997 and August 31, 1996,
respectively.
(F) Annualized.
</TABLE>
<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 Family of Funds
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide (Toll-Free) 800-543-8721
Cincinnati 513-629-2000
Board of Trustees
Donald L. Bogdon, M.D.
H. Jerome Lerner
Robert H. Leshner
Howard J. Levine
Angelo R. Mozilo
Fred A. Rappoport
Oscar P. Robertson
John F. Seymour, Jr.
Sebastiano Sterpa
Manager/Underwriter
Countrywide Investments, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
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
Additional information about the Funds is included in the Statement of
Additional Information ("SAI") which is incorporated by reference in its
entirety. Additional information about the Funds' investments is available in
the Funds' annual and semiannual reports to shareholders. In the Funds' annual
report you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during their last
fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Funds, or to make inquiries about the Funds, please call
1-800-543-0407 (Nationwide) or 629-2050 (in Cincinnati).
- 25 -
<PAGE>
Information about the Funds (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's public reference room in Washington,
D.C. Information about the operation of the public reference room can be
obtained by calling the Commission at 1-800-SEC-0330. Reports and other
information about the Funds are available on the Commission's Internet site at
http://www.sec.gov. Copies of information on the Commission's Internet site can
be obtained for a fee by writing to: Securities and Exchange Commission, Public
Reference Section, Washington, D.C. 20549-6009.
File No. 811-3651
- 26 -
<PAGE>
COUNTRYWIDE STRATEGIC TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1999
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, 1999. 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.............................5
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS..............................22
INVESTMENT LIMITATIONS...................................................24
TRUSTEES AND OFFICERS....................................................31
THE INVESTMENT ADVISER AND UNDERWRITER...................................34
MASTRAPASQUA AND ASSOCIATES..............................................36
DISTRIBUTION PLANS.......................................................37
SECURITIES TRANSACTIONS..................................................40
PORTFOLIO TURNOVER.......................................................42
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE.....................43
OTHER PURCHASE INFORMATION...............................................43
TAXES....................................................................44
REDEMPTION IN KIND.......................................................46
HISTORICAL PERFORMANCE INFORMATION.......................................47
PRINCIPAL SECURITY HOLDERS.............................................. 51
CUSTODIAN................................................................52
AUDITORS.................................................................52
TRANSFER AGENT...........................................................52
ANNUAL REPORT............................................................54
- 2 -
<PAGE>
THE TRUST
- ---------
Countrywide Strategic Trust (the "Trust"), formerly Midwest Strategic
Trust, an open-end, diversified management investment company, 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.
Shares of each Fund have equal voting rights and liquidation rights.
Each Fund shall vote separately on matters submitted to a vote of the
shareholders except in matters where a vote of all series of the Trust in the
aggregate is required by the Investment Company Act of 1940 or otherwise. When
matters are submitted to shareholders for a vote, each shareholder is entitled
to one vote for each full share owned and fractional votes for fractional shares
owned. The Trust does not normally hold annual meetings of shareholders. The
Trustees shall promptly call and give notice of a meeting of shareholders for
the purpose of voting upon the removal of any Trustee when requested to do so in
writing by shareholders holding 10% or more of the Trust's outstanding shares.
The Trust will comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 in order to facilitate communications among shareholders.
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
- 3 -
<PAGE>
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 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,
- 4 -
<PAGE>
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
- ---------------------------------------------
Each Fund has its own investment objective, strategies and related risks.
There can be no assurance that the investment objective of a Fund will be met.
The investment objectives of the Utility Fund and the Equity Fund may be changed
by the Board of Trustees without shareholder approval, but only after
notification has been given to shareholders and a Fund's Prospectus has been
revised accordingly. The investment objectives of the Growth/Value Fund and the
Aggressive Growth Fund are fundamental and can only be changed by vote of the
majority of the outstanding shares of the applicable Fund. 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. The investment practices and limitations of the Funds are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval, except in those instances where shareholder approval is
expressly required.
A more detailed discussion of some of the terms used and investment
policies described in the Prospectuses (see "Investment Objectives, Investment
Strategies and Related Risks") appears below:
WHEN-ISSUED SECURITIES AND SECURITIES PURCHASED ON A TO-BE- ANNOUNCED
BASIS. The Funds will only make commitments to purchase securities on a
when-issued or to-be-announced ("TBA") basis with the intention of actually
acquiring the securities. In addition, the Funds may purchase securities on a
when-issued or TBA basis only if delivery and payment for the securities takes
place within 120 days after the date of the transaction. In connection with
these investments, each Fund will direct the Custodian to place cash or liquid
securities in a segregated account in an amount sufficient to make payment for
the securities to be purchased. When a segregated account is maintained because
a Fund purchases securities on a when-issued or TBA basis, the assets deposited
in the segregated account will be valued daily at market for the purpose of
determining the adequacy of the securities in the account. If the market value
of such securities declines, additional cash or securities will be placed in the
account on a daily basis so that the market value of the account will equal the
amount of a Fund's commitments to purchase securities on a when-issued or TBA
basis. To the extent funds are in a segregated account, they will not be
- 5 -
<PAGE>
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.
RECEIPTS. The Growth/Value Fund may purchase separately traded interest and
principal component parts of such obligations that are transferable through the
federal book entry system, known as Separately Traded Registered Interest and
Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES"). These instruments are issued by banks and brokerage firms and are
created by depositing Treasury notes and Treasury bonds into a special account
at a custodian bank. The Custodian holds the interest and principal payments for
the benefit of the registered owner of the certificates or receipts. The
Custodian arranges for the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts include Treasury Receipts
("TRs"), Treasury Investment Growth Receipts ("TIGRs") and Certificates of
Accrual on Treasury Securities ("CATS").
STRIPS, CUBES, TRs, TIGRs and CATS are sold as zero coupon securities,
which means that they are sold at a substantial discount and redeemed at face
value at their maturity date without interim cash payments of interest or
principal. This discount is amortized over the life of the security, and such
- 6 -
<PAGE>
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 Growth/Value Fund will limit its investment in such instruments
to 20% of its total assets.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities to banks, broker-dealers or institutional borrowers of securities.
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
Fund's investment adviser (or manager) or any affiliated person of the Trust or
an affiliated person of the adviser or manager 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. It is the present intention of the
Equity Fund and the Utility Fund to limit the amount of loans of portfolio
securities to no more than 25% of a Fund's net assets.
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. The Investment Company Act of 1940 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 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
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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.
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 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.
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 Growth/Value Fund may borrow money from banks (provided there is 300%
asset coverage) or from banks or other persons for temporary purposes (in an
amount not exceeding 5% of its total assets). The Fund will not make any
borrowing which would cause its outstanding borrowings to exceed one-third of
the value of its total assets.
The 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 Fund or its
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.
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
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<PAGE>
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. Each of the Utility Fund, the Growth/Value Fund and
the Aggressive Growth Fund may invest up to 10% of its total assets at the time
of purchase in securities of foreign issuers.
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 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.
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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.
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
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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 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
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<PAGE>
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 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.
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<PAGE>
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 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
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other than those that have been acquired in units or attached to other
securities.
REPURCHASE AGREEMENTS. Each Fund may invest all or a portion of its
assets in repurchase agreements for temporary defensive purposes. 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 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
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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
Fund's investment 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.
BANK DEBT INSTRUMENTS. Each Fund may invest all or a portion of its assets
in bank debt instruments for temporary defensive purposes. 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
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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. 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. Each Fund may invest all or a portion of its assets
in commercial paper for temporary defensive purposes. 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 investment 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
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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.
U.S. GOVERNMENT OBLIGATIONS. Each Fund may invest all or a portion of
its assets in U.S. Government obligations for temporary defensive purposes.
"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.
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
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trading would increase the turnover rate of the Aggressive Growth Fund and its
transaction costs.
VARIABLE AND FLOATING RATE SECURITIES. The Growth/Value Fund and the
Aggressive Growth Fund 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 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.
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 Investment Company Act of
1940.
CONVERTIBLE SECURITIES. The Growth/Value Fund and the Aggressive Growth
Fund 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,
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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 investment 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. 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.
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 investment 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 section "Quality Ratings of Fixed-Income Obligations."
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
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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.
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 investment
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 investment
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.
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
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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.
PRIVATE PLACEMENT INVESTMENTS. The Aggressive Growth Fund may invest in
commercial paper issued in reliance on the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933. Section 4(2) commercial paper is
restricted as to disposition under federal securities laws and is generally sold
to institutional investors who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The investment 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 investment adviser, as liquid and not
subject to the investment limitation applicable to illiquid securities. In
addition, because Section 4(2) commercial paper is liquid, the Fund does not
intend to subject such paper to the limitation applicable to restricted
securities.
The ability of the Board of Trustees to determine the liquidity of
certain restricted securities is permitted under a position of the staff of the
Securities and Exchange Commission set forth in the adopting release for Rule
144A under the Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive
safe-harbor for certain secondary market transactions involving securities
subject to restrictions on resale under federal securities laws. The Rule
provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule was expected to further
enhance the liquidity of the secondary market for securities eligible for resale
under the Rule. The staff of the Securities and Exchange Commission has left the
question of determining the liquidity of all restricted securities to the
Trustees. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities (including Section
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<PAGE>
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 investment 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 investment adviser's
selection of Rule 144A and Section 4(2) commercial paper as well as any
determinations as to their liquidity.
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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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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<PAGE>
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 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
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.
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
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<PAGE>
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.
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
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<PAGE>
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 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.
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<PAGE>
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).
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.
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<PAGE>
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 this
Statement of Additional Information.
4. Mineral Leases. Each Fund will not purchase oil, gas or other
mineral leases, rights or royalty contracts.
5. Underwriting. Each Fund will not act as underwriters of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of its portfolio securities, a Fund may be
deemed an underwriter under certain federal securities laws.
6. Concentration. Each Fund will not invest more than 25% of its total
assets in the securities of issuers in any particular industry; provided,
however, that there is no 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.
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<PAGE>
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.
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
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<PAGE>
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.
The Utility 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.
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, 1999. 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 68 Trustee $4,000 $12,000
+H. Jerome Lerner 60 Trustee 4,000 12,000
*Robert H. Leshner 59 President/Trustee 0 0
Howard J. Levine 63 Trustee 3,000 9,000
*Angelo R. Mozilo 60 Chairman/Trustee 0 0
Fred A. Rappoport 52 Trustee 4,000 12,000
+Oscar P. Robertson 60 Trustee 4,000 12,000
John F. Seymour, Jr. 61 Trustee 4,000 12,000
+Sebastiano Sterpa 70 Trustee 4,000 12,000
Maryellen Peretzky 46 Vice President 0 0
William E. Hortz 41 Vice President 0 0
Tina D. Hosking 30 Secretary 0 0
Theresa M. Samocki 29 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.
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<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., 1551 Hillcrest Avenue, Glendale, California is
a physician with Hematology Oncology Consultants and a Director of Verdugo VNA
(a hospice facility). Until 1996 he was President of Western
Hematology/Oncology.
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), Countrywide Financial Services, Inc.
(a financial services company and parent of Countrywide Investments, Inc.,
Countrywide Fund Services, Inc. and CW Fund Distributors, Inc.), Countrywide
Fund Services, Inc. (a registered transfer agent) and CW Fund Distributors, Inc.
(a registered broker-dealer). He is also President and a Trustee of Countrywide
Tax-Free Trust and Countrywide Investment Trust, registered investment
companies.
HOWARD J. LEVINE, 26901 Agoura Road, Calabasas Hills, California is
President of ARCS Commercial Mortgage Co., L.P.
ANGELO R. MOZILO, 4500 Park Granada Boulevard, Calabasas,
California is Chairman, Director and Chief Executive Officer of Countrywide
Credit Industries, Inc. (a holding company). He is Chairman and a director of
Countrywide Home Loans, Inc. (a residential mortgage lender), 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 and Countrywide
Capital Markets, Inc. (parent company). He is also a director of CCM Municipal
Services, Inc. (a tax lien purchaser), CTC Real Estate Services Corporation
(a foreclosure trustee), LandSafe, Inc. (parent company) and various LandSafe,
Inc. subsidiaries which provide property appraisals, credit reporting
services, home inspection services, flood zone determination services, title
insurance and/or closing services for residential mortgages.
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,
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<PAGE>
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.
MARYELLEN PERETZKY, 312 Walnut Street, Cincinnati, Ohio is Senior Vice
President, Chief Operating Officer and Secretary of Countrywide Investments,
Inc. and Senior Vice President and Secretary of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc. and CW Fund Distributors, Inc. She is
also Vice President of Countrywide Investment Trust and Countrywide
Tax-Free Trust.
WILLIAM E. HORTZ, 312 Walnut Street, Cincinnati, Ohio is Executive Vice
President and Director of Sales of Countrywide Investments, Inc. and Countrywide
Financial Services, Inc. He is also Vice President of Countrywide Investment
Trust and Countrywide Tax-Free Trust. From 1996 until 1998, he was President of
Peregrine Asset Management (an investment adviser). From 1991 until 1996, he was
Regional Director of Neuberger & Berman Management (an investment adviser).
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio is Assistant Vice
President of Countrywide Fund Services, Inc. and CW Fund Distributors, Inc. She
is also Secretary of Countrywide Investment Trust, Countrywide Tax-Free Trust,
The Dean Family of Funds, The New York State Opportunity Funds, Atalanta/Sosnoff
Investment Trust, The Tuscarora Investment Trust, The Thermo Opportunity Fund,
Inc., Brundage, Story and Rose Investment Trust and Markman MultiFund Trust and
Assistant Secretary of The Gannett Welsh & Kotler Funds, the Westport Funds, the
Wells Family of Real Estate Funds, the Lake Shore Family of Funds, Boyar Value
Fund, Profit Funds Investment Trust, The James Advantage Funds, UC Investment
Trust, Albemarle Investment Trust, The Winter Harbor Fund, The Bjurman Funds and
Schwartz Investment Trust.
THERESA M. SAMOCKI, 312 Walnut Street, Cincinnati, Ohio is
Assistant Vice President of Countrywide Fund Services, Inc. and
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CW Fund Distributors, Inc. She is also Treasurer of Countrywide Investment
Trust and Countrywide Tax-Free Trust and Assistant Treasurer of Profit Funds
Investment Trust, UC Investment Trust and Boyar Value Fund.
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
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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 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, 1999, 1998 and 1997, the Utility Fund
paid advisory fees of $326,576, $303,151 and $319,201, respectively. For the
fiscal years ended March 31, 1999, 1998 and 1997, the Equity Fund paid advisory
fees of $375,212, $221,798 and $91,182 (net of voluntary fee waivers of
$21,000), 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
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fiscal year ended March 31, 1997. For the fiscal periods ended March 31, 1999
and 1998, the Growth/Value Fund paid advisory fees of $254,571 and $160,090,
respectively. For the fiscal periods ended March 31, 1999 and 1998, the
Aggressive Growth Fund paid advisory fees of $125,575 (net of voluntary fee
waivers of $6,473) 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 year ended August 31, 1997, the
Predecessor Growth/Value Fund paid advisory fees of $206,612 and the Predecessor
Aggressive Growth Fund paid advisory fees of $30,082 (net of voluntary fee
waivers of $64,077).
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 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, 2000 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.
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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, 1999, the aggregate underwriting commissions on sales of the
Trust's shares were $90,474 of which the Adviser paid $69,549 to unaffiliated
broker-dealers in the selling network, earned $12,602 as a broker-dealer in the
selling network and retained $8,323 in underwriting commissions. 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.
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, 1999, the
Adviser collected $457 and $693 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, 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
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Mastrapasqua & Associates, Inc. ("Mastrapasqua") has been
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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 sells securities of the
Funds and places orders for the execution of such portfolio transactions,
subject to the general supervision of the Board of Trustees and the 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 year ended March 31, 1999, the Adviser paid fees of
$232,545 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, 2000
and from year to year thereafter, subject to annual approval by (a) the Board of
Trustees or (b) a vote of the majority of a Fund's outstanding voting
securities; provided that in either event continuance is also approved by a
majority of the Trustees who are not interested persons of the Trust, by a vote
cast in person at a meeting called for the purpose of voting such approval. The
employment of 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
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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 year ended March 31, 1999, 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
$92,716, $117,348, $57,474 and $19,824, 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.. $ 5,546 $ 6,175 $ 5,719 $ 2,878
Payments to broker-dealers
and others for the sale or
retention of assets........ 87,170 111,173 51,755 16,946
------- -------- ------- -------
$92,716 $117,348 $57,474 $19,824
======= ======== ======= =======
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 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, 1999, the aggregate
distribution-related expenditures of the Utility Fund and the Equity Fund under
the Class C Plan were $31,159 and $30,890, respectively. Of these amounts, the
Utility Fund spent $30,870 on payments to broker-dealers and $289 on printing
and mailing of prospectuses and reports to prospective shareholders; and the
Equity Fund spent $30,606 on payments to broker-dealers and $284 on printing and
mailing of prospectuses and reports to
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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 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
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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 spread), the execution capability, financial responsibility and
responsiveness of the broker or dealer and the brokerage and research services
provided by the broker or dealer. The Adviser (or Mastrapasqua) generally seeks
favorable prices and commission rates that are reasonable in relation to the
benefits received. For the fiscal years ended March 31, 1999, 1998 and 1997, the
Utility Fund paid brokerage commissions of $10,031, $10,445 and $25,345,
respectively. For the fiscal years ended March 31, 1999, 1998 and 1997, the
Equity Fund paid brokerage commissions of $34,209, $36,486 and $34,257,
respectively. For the fiscal periods ended March 31, 1999 and 1998, the
Growth/Value Fund paid brokerage commissions of $51,665 and $20,459,
respectively. For the fiscal periods ended March 31, 1999 and 1998, the
Aggressive Growth Fund paid brokerage commissions of $36,619 and $8,388,
respectively. The higher commissions paid by the Aggressive Growth Fund during
the fiscal year ended March 31, 1999 are due to the Fund's higher portfolio
turnover rate.
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)
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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, 1999,
the amount of brokerage transactions and related commissions for the Utility
Fund directed to brokers due to research services provided were $5,133,620 and
$10,031, respectively. During the fiscal year ended March 31, 1999, the amount
of brokerage transactions and related commissions for the Equity Fund directed
to brokers due to research services provided were $17,970,437 and $34,209,
respectively. During the fiscal year ended March 31, 1999, the amount of
brokerage transactions and related commissions for the Growth/Value Fund
directed to brokers due to research services provided were $19,690,373 and
$30,666, respectively. During the fiscal year ended March 31, 1999, the amount
of brokerage transactions and related commissions for the Aggressive Growth Fund
directed to brokers due to research services provided were $15,052,360 and
$25,294, 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 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
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Funds with other brokers.
During the fiscal year ended March 31, 1999, 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: Banc One Capital Markets,
Inc., Bankers Trust Company, Fifth Third Securities, Inc., Goldman, Sachs & Co.,
Lehman Brothers Inc., Morgan Stanley Dean Witter, Inc. and Nesbitt-Burns
Securities, Inc.
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. 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.
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, 1999, 1998 and 1997, the Utility Fund experienced
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portfolio turnover of 4%, 0% and 3%, respectively. For the fiscal years ended
March 31, 1999, 1998 and 1997, the Equity Fund experienced portfolio turnover of
10%, 7% 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, 1999, 1998 and August 31, 1997, the
Growth/Value Fund experienced annualized portfolio turnover of 59%, 62% and 52%,
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, 1999, 1998 and August 31, 1997, the Aggressive Growth Fund
experienced annualized portfolio turnover of 93%, 40% and 51%, 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, 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 below) 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
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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 below) of
shares of a Fund who submits a Letter of Intent to the Transfer Agent. The
Letter must state an intention to invest within a thirteen month period in
any load fund distributed by the Adviser a specified amount which, if made at
one time, would qualify for a reduced sales load. A Letter of Intent may be
submitted with a purchase at the beginning of the thirteen month period or
within ninety days of the first purchase under the Letter of Intent. Upon
acceptance of this Letter, the purchaser becomes eligible for the reduced sales
load applicable to the level of investment covered by such Letter of Intent as
if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
PURCHASER. 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
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other means which result in economy of sales effort or expense.
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 "How to Exchange Shares" sections
in the Prospectus because such purchases require minimal sales effort by the
Adviser. Purchases described in the "Purchases at Net Asset Value" section may
be made for investment only, and the shares may not be resold except through
redemption by or on behalf of the Trust.
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
Each Fund has qualified and intends to qualify annually for the special
tax treatment afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; and (ii) diversify its holdings so that at the
end of each quarter of its taxable year the following two conditions are met:
(a) at least 50% of the value of the Fund's total assets is represented by cash,
U.S. Government securities, securities of other regulated investment companies
and other securities (for this purpose such other securities will qualify only
if the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. 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.
- 45 -
<PAGE>
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.
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.
- 46 -
<PAGE>
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. 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. The Trust has filed an irrevocable election with the Securities and
Exchange Commission under Rule 18f-1 of the Investment Company Act of 1940
wherein the Funds are committed to pay redemptions in cash, rather than in kind,
to any shareholder of record of a Fund who redeems during any ninety day period,
the lesser of $250,000 or 1% of a Fund's net assets at the beginning of such
period.
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)
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, 1999 are as follows:
- 47 -
<PAGE>
Utility Fund (Class A)
1 Year -8.60%
5 Years 11.40%
Since inception (August 15, 1989) 10.46%
Utility Fund (Class C)
1 Year -5.92%
5 Years 11.41%
Since inception (August 2, 1993) 8.98%
Equity Fund (Class A)
1 Year 9.73%
5 Years 19.34%
Since inception (August 2, 1993) 16.35%
Equity Fund (Class C)
1 Year 13.03%
5 Years 19.34%
Since inception (June 7, 1993) 15.82%
Growth/Value Fund
1 Year 24.69%
Since inception (September 29, 1995) 25.00%
Aggressive Growth Fund
1 Year 10.85%
Since inception (September 29, 1995) 17.46%
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:
- 48 -
<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%
March 31, 1999 -4.79% -5.92% +14.30% +13.03% +29.89% +15.46%
</TABLE>
(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
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, 1999 are as follows:
Utility Fund (Class A)
1 Year -4.79%
3 Years +12.32%
5 Years +12.32%
Since inception (August 15, 1989) +10.93%
Utility Fund (Class C)
1 Year -5.92%
3 Years +11.33%
5 Years +11.41%
Since inception (August 2, 1993) +8.98%
Equity Fund (Class A)
1 Year +14.30%
3 Years +22.19%
5 Years +20.32%
Since inception (August 2, 1993) +17.19%
Equity Fund (Class C)
1 Year +13.03%
3 Years +21.13%
5 Years +19.34%
Since inception (June 7, 1993) +15.82%
Growth/Value Fund
1 Year +29.89%
3 Years +25.69%
Since inception (September 29, 1995) +26.46%
Aggressive Growth Fund
1 Year +15.46%
3 Years +19.06%
Since inception (September 29, 1995) +18.84%
- 49 -
<PAGE>
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.
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 Fund performance to performance as reported by
- 50 -
<PAGE>
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 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 ________, 1999 [insert 5% shareholders]
- 51 -
<PAGE>
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, is
the Custodian for the Utility Fund and the Equity Fund and Firstar 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,
safekeep their portfolio securities, collect all income and other payments with
respect thereto, disburse funds as instructed and maintain records in connection
with their 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.
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent
auditors for the Trust for the fiscal year ending March 31, 2000. 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 a fee for its services as transfer
agent 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
- 52 -
<PAGE>
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.
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, 1999 appear in the
Trust's annual report which is attached to this Statement of Additional
Information.
- 55 -
<PAGE>
ANNUAL REPORT
MARCH 31, 1999
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 total return by investing primarily
in securities of public utilities. Capital appreciation is a secondary
objective. The Fund's total returns for the fiscal year ended March 31, 1999
(excluding the impact of applicable sales loads) were -4.79% and -5.92% for
Class A and Class C shares, respectively.
During fiscal 1999, the markets again enjoyed strong domestic growth with
minimal inflationary threats. Record low unemployment, high consumer confidence
and gains in real wages contributed to higher levels of consumer spending,
providing a boost to Gross Domestic Product (GDP). Despite the favorable
domestic economic conditions, stock market gains were very narrow, with
investors preferring higher growth industries such as technology,
pharmaceuticals and communications. The movement toward higher growth names came
largely at the expense of the utility, basic materials and energy sectors, which
are deemed to be more value-oriented areas. The rotation from value to growth
was magnified by rising interest rates during the second half of the fiscal
year. After bottoming out at 4.71% in early October, the yield on the 30-year
U.S. Treasury bond rose to 5.60% at the end of March. Since many investors
consider utility stocks to be an alternative to bonds, utilities fell along with
the bond market. As a result, the S&P Utility Index returned -1.51% for the
fiscal year, compared to the 13.19% return of the Dow Jones Industrial Average
and the 18.47% return of the S&P 500 Index.
Once again, the best performing sector within the Fund was telecommunications.
Our holdings in Bell Atlantic, AT&T and Lucent Technologies performed very well
as the power of data and Internet communications became available to a record
number of individuals and businesses. Almost all of the traditional electric
utilities in the Fund performed below expectations due to the overall industry
sell-off. As has been the case over the last few years, utility funds again did
not participate in the record amounts of new money flowing into the equity
markets. As a result, very few new names were added to the portfolio and
portfolio turnover again was minimal.
Our outlook for the utility sector remains optimistic. We expect the backup in
interest rates to be temporary, thus providing a more positive environment for
utility stocks. Deregulation and consolidation should continue to be positive
for the industry. The demand for telecommunications should continue to boom as
the Internet grows and high speed access to the world wide web becomes more
commonplace and affordable. The Fund will continue to concentrate on owning
those companies that can provide attractive total returns, and are well
positioned to increase their revenues and earnings in the upcoming period of
deregulation.
Chart:
Comparison of the Change in Value of a $10,000 Investment in the
Utility Fund - Class A* and the Standard & Poor's Utility Index
Utility Fund
Average Annual Total Returns
1 Year 5 Years Since Inception*
Class A (8.60%) 11.40% 10.47%
Class C (5.92%) 11.41% 8.98%
Standard & Poor's Utility Index Utility Fund - Class A
10000 9600
10243 9671
11412 10320
3/90 10562 10115
10618 10144
10140 9854
11120 10562
3/91 11367 11049
10889 11115
11749 12144
12746 12960
3/92 11556 12356
12457 12905
13438 13398
13777 13953
3/93 15264 14906
15548 15130
16589 15556
15634 15073
3/94 14305 14591
14304 14469
14369 14660
14355 14769
3/95 15349 15128
16491 15890
18350 16986
20409 18677
3/96 19434 18404
20408 19283
19732 18651
21038 19755
3/97 20326 19437
21524 20784
22573 21626
26248 25266
3/98 27729 27390
28066 25933
29371 26862
30128 29724
3/99 27297 26079
Past performance is not predictive of future performance.
*The chart above represents performance of Class A shares only, which will
vary from the performance of Class C shares based on the difference in loads and
fees paid by shareholders in the different classes. The initial public offering
of Class A shares commenced on August 15, 1989, and the initial public offering
of Class C shares commenced on August 2, 1993.
3
<PAGE>
EQUITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
The Equity Fund seeks long-term capital appreciation by investing primarily in
common stocks of companies that offer attractive total returns through potential
growth of both share price and dividends. The Fund's total returns for the
fiscal year ended March 31, 1999 (excluding the impact of applicable sales
loads) were 14.30% and 13.03% for Class A and Class C shares, respectively.
During the fiscal year, the continued strength in the U.S. economy combined with
low inflation to push the major large-cap stock indices to new highs. Record low
unemployment, high consumer confidence and gains in real wages contributed to
higher levels of consumer spending, providing a larger than expected boost to
Gross Domestic Product (GDP). Stability in much of Asia toward the end of the
fiscal year allowed corporate profits to post their largest gains in almost two
years.
Market gains were very narrow in the latest fiscal year, with investors
preferring to own those very few large-cap growth-oriented names that were
responsible for most of the gains in the market. Toward the end of the fiscal
year, value and cyclical stocks began to rally on the expectations of continued
strong U.S. economic growth, low inflation and recoveries in the economies of
many emerging markets. Although returns were down from the unsustainable levels
seen in fiscal year 1998, most indices still managed to post double-digit
increases as evidenced by the 18.47% return of the S&P 500 Index, the 13.19%
gain in the Dow Jones Industrial Average and the 34.09% rise in the NASDAQ
Composite Index. Mid-cap stocks managed to post a gain of only 0.46% and
small-cap stocks lost 17.28% during the same time period.
The Fund remained well-diversified throughout the fiscal year. Holdings in the
technology, healthcare and communications sectors enjoyed very strong
performance. Technology stocks benefited from the growth of the Internet, the
demand for personal computers and the continued move to networking of computer
systems. Healthcare 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.
Communications stocks were the beneficiaries of increased need for high speed
Internet access and the boom in data communications.
Management continues to focus on those companies that are leaders in their
industries and can offer growth in revenues, cash flows and earnings. We remain
optimistic on the longer term fundamentals facing the market -- low inflation,
an expectation for lower interest rates and continued economic growth. We will
continue to seek to own companies that have a competitive advantage and have the
capability to expand their profit margins.
Chart:
Comparison of the Change in Value of a $10,000 Investment in the
Equity Fund - Class C* and the Standard & Poor's 500 Index
Equity Fund
Average Annual Total Returns
1 Year 5 Years Since Inception*
Class A 9.73% 19.34% 16.36%
Class C 13.03% 19.34% 15.83%
Standard & Poor's 500 Index Equity Fund - Class C
10000 10000
10078 10010
10338 10130
10578 9994
3/94 10177 9709
10220 9317
10718 9787
10716 9751
3/95 11760 10419
12883 11095
13907 11893
14744 12776
3/96 15535 13222
16232 13797
16734 14105
18129 14491
3/97 18615 14678
21865 16746
23503 17801
24178 18603
3/98 27550 20788
28460 20938
25629 18724
31087 22454
3/99 32636 23497
Past performance is not predictive of future performance.
*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.
4
<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 fiscal year ended
March 31, 1999, the Fund's total return (excluding the impact of applicable
sales loads) was 29.89%, as compared to 18.47% for the S&P 500 Index.
The Aggressive Growth Fund seeks long-term capital appreciation primarily
through equity investments in companies of various sizes. For the fiscal year
ended March 31, 1999, the Fund's total return (excluding the impact of
applicable sales loads) was 15.46%, as compared to the 34.09% return for the
NASDAQ Composite Index.
Volatility has once again intensified within the equity market over the past
year. Growth stocks, after having dominated the bull market since the October
lows of last year, have recently retreated somewhat as lagging cyclical sectors
regained some investor interest. Although a "corrective phase" can be
unsettling, as evidenced most vividly in the Internet stocks, the broadening of
market participation is a positive development for the longevity of the bull
market.
Maintaining a focus on long-term secular developments that are impacting the
investment landscape should provide investor comfort that an exciting period of
innovation, technological creativity and revolutionary healthcare products and
therapies lie before us.
Despite Wall Street's preoccupation with short-term trading strategies, sector
rotation and rearview analysis, strong secular dynamics are still unfolding that
should provide a thrust to equity prices for some time. For example,
preoccupation with Y2K's potential short-term effect on PC demand can cause
investors to lose sight of the explosive demand for productivity enhancing
software and hardware in the year 2000 as new technologies enter the scene.
As corporate earnings of the market leading technology stocks are reported, the
robust condition of their industry and the overall economy have significantly
increased investor comfort with the earnings prospects of these companies.
Corporate earnings growth has not been limited to the technology sector. Based
on the companies in the S&P 500 Index that have reported earnings for the
quarter ended March 31, 1999, operating earnings per share are up substantially
versus last year's decline of 1.6% and are above most analysts' expectations.
The fundamentals of the U.S. economy continue to support a positive
long-term outlook for the equity market and continue to benefit from low
inflation, low unemployment and a favorable interest rate environment. As a
result, U.S. consumers, the main drivers behind the demand for U.S. goods and
services, are participating in the rewards of a healthy and growing U.S.
economy. Going on the ninth consecutive year of an economic expansion, we remain
positive on 1999 Gross Domestic Product (GDP) growth.
In addition to the continuing strong domestic consumer spending trends, the
international economy appears to be improving. Based on many U.S. companies'
observations, demand is increasing in Asia for U.S. goods and services. This
incremental factor, which is helping to drive the U.S. economy, has eased
investor fears of moderating U.S. GDP growth. The recent recovery of cyclical
stocks is evidence of the improving outlook for international economies,
especially in Asia. In addition to creating an impetus for higher demand and
profitability for the large U.S. multinational conglomerates, it should also
lead to additional cash flow available for technology spending.
With early signs of recovery emerging in Asia and a need to encourage growth in
Europe, the balance of economic policy worldwide cannot risk undoing the
delicate recovery underway. Consequently, we remain encouraged that the policy
background should be supportive to growth and liquidity, the foundation of
higher market valuations.
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.
5
<PAGE>
GROWTH/VALUE FUND
AGGRESSIVE GROWTH FUND
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
================================================================================
We attempt to position the Growth/Value Fund to participate in bull markets 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.
Chart:
Comparison of the Change in Value of a $10,000 Investment in the
Growth/Value Fund and the Standard & Poor's 500 Index
Growth/Value Fund
Average Annual Total Returns
1 Year Since Inception*
24.69% 25.02%
Standard & Poor's 500 Index Growth/Value Fund
10000 9600
10576 10099
3/96 11143 10992
11643 11098
12003 11290
13004 12185
3/97 13352 12291
15684 14437
16858 16335
17342 15083
3/98 19762 16805
20414 17104
18383 15650
22299 20975
3/99 23410 21828
Past performance is not predictive of future performance.
*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 Composite Index*
Aggressive Growth Fund
Average Annual Total Returns
1 Year Since Inception*
10.85% 17.48%
NASDAQ Composite Index Aggressive Growth Fund
10000 9600
10064 9552
3/96 10545 10406
11353 10762
11761 10982
12382 11853
3/97 11723 11391
13860 13440
16216 16740
15125 13873
3/98 17700 15210
18287 14373
16365 12911
21206 17375
3/99 23823 17562
Past performance is not predictive of future performance.
Fund inception was September 29, 1995.
6
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1999
=============================================================================================================
Utility Equity
Fund Fund
- -------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
<S> <C> <C>
At acquisition cost................................................... $ 27,869,108 $ 34,520,209
============== ===============
At amortized cost..................................................... $ 27,852,815 $ 34,520,209
============== ===============
At market value (Note 2).............................................. $ 41,623,274 $ 53,815,963
Repurchase agreements (Note 2)........................................... -- 5,420,000
Cash..................................................................... 2,991 78
Dividends and interest receivable........................................ 122,963 27,875
Receivable for capital shares sold ...................................... 17,314 39,210
Other assets............................................................. 13,098 27,036
-------------- ---------------
TOTAL ASSETS.......................................................... 41,779,640 59,330,162
-------------- ---------------
LIABILITIES
Dividends payable........................................................ 24,844 --
Payable for capital shares redeemed...................................... 87,747 533,072
Payable to affiliates (Note 4)........................................... 34,333 57,193
Other accrued expenses and liabilities .................................. 26,890 33,658
-------------- ---------------
TOTAL LIABILITIES..................................................... 173,814 623,923
-------------- ---------------
NET ASSETS .............................................................. $ 41,605,826 $ 58,706,239
-------------- ---------------
Net assets consist of:
Paid-in capital.......................................................... $ 26,304,587 $ 39,337,704
Accumulated net realized gains from security transactions................ 1,530,780 72,781
Net unrealized appreciation on investments .............................. 13,770,459 19,295,754
-------------- ---------------
Net assets .............................................................. $ 41,605,826 $ 58,706,239
============== ===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares ............................... $ 38,390,936 $ 55,560,703
============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5).......................... 2,488,896 2,511,439
============== ===============
Net asset value and redemption price per share (Note 2).................. $ 15.42 $ 22.12
============== ===============
Maximum offering price per share (Note 2)................................ $ 16.06 $ 23.04
============== ===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares ............................... $ 3,214,890 $ 3,145,536
============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5).......................... 208,694 143,890
============== ===============
Net asset value, offering price and redemption price per share (Note 2).. $ 15.40 $ 21.86
============== ===============
See accompanying notes to financial statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1999
=============================================================================================================
Growth/ Aggressive
Value Growth
Fund Fund
- -------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
<S> <C> <C>
At acquisition cost................................................... $ 15,111,560 $ 8,087,571
============== ===============
At amortized cost..................................................... $ 15,111,808 $ 8,087,609
============== ===============
At market value (Note 2).............................................. $ 24,662,044 $ 11,406,341
Cash..................................................................... 20,191 6,509
Dividends receivable..................................................... 6,641 800
Receivable for capital shares sold....................................... 9,087 6,708
Organization costs, net (Note 2)......................................... 9,521 9,521
Other assets............................................................. 9,571 8,361
-------------- ---------------
TOTAL ASSETS.......................................................... 24,717,055 11,438,240
-------------- --------------
LIABILITIES
Payable for capital shares redeemed...................................... 5,564 14,166
Payable to affiliates (Note 4)........................................... 29,120 8,470
Other accrued expenses and liabilities................................... 18,644 13,494
-------------- ---------------
TOTAL LIABILITIES..................................................... 53,328 36,130
-------------- ---------------
NET ASSETS .............................................................. $ 24,663,727 $ 11,402,110
============== ===============
Net assets consist of:
Paid-in capital.......................................................... $ 15,113,491 $ 8,083,378
Net unrealized appreciation on investments............................... 9,550,236 3,318,732
-------------- ---------------
Net assets............................................................... $ 24,663,727 $ 11,402,110
============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5).......................... 1,409,641 724,665
============== ===============
Net asset value and redemption price per share (Note 2).................. $ 17.50 $ 15.73
============== ===============
Maximum offering price per share (Note 2)................................ $ 18.23 $ 16.39
============== ===============
See accompanying notes to financial statements.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended March 31, 1999
=============================================================================================================
Utility Equity
Fund Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C>
Dividends ............................................................ $ 1,364,429 $ 455,841
Interest ............................................................. 215,761 290,044
-------------- ---------------
TOTAL INVESTMENT INCOME ............................................ 1,580,190 745,885
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4) .................................... 326,576 375,212
Distribution expenses, Class A (Note 4)............................... 92,716 117,348
Distribution expenses, Class C (Note 4) .............................. 31,159 30,890
Transfer agent fees, Class A (Note 4)................................. 33,695 24,679
Transfer agent fees, Class C (Note 4)................................. 12,000 12,000
Accounting services fees (Note 4) .................................... 36,000 39,000
Postage and supplies.................................................. 24,800 20,140
Professional fees .................................................... 17,721 22,721
Registration fees, Common ............................................ 2,174 2,064
Registration fees, Class A ........................................... 6,023 6,213
Registration fees, Class C ........................................... 5,611 5,336
Trustees' fees and expenses .......................................... 10,309 10,309
Custodian fees ....................................................... 6,671 7,679
Reports to shareholders .............................................. 5,253 4,159
Insurance expense .................................................... 3,995 3,295
Other expenses ....................................................... 3,945 8,244
-------------- ---------------
TOTAL EXPENSES ..................................................... 618,648 689,289
-------------- ---------------
NET INVESTMENT INCOME ................................................... 961,542 56,596
-------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ........................ 2,008,632 72,685
Net change in unrealized appreciation/depreciation on investments..... (5,229,709) 6,891,335
-------------- ---------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS ............... (3,221,077) 6,964,020
-------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .................. $ (2,259,535) $ 7,020,616
============== ===============
See accompanying notes to financial statements.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended March 31, 1999
=============================================================================================================
Growth/ Aggressive
Value Growth
Fund Fund
- -------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C>
Dividends............................................................. $ 163,717 $ 41,149
Interest.............................................................. 23,256 13,153
-------------- ---------------
TOTAL INVESTMENT INCOME............................................. 186,973 54,302
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4)..................................... 254,571 125,575
Distribution expenses (Note 4)........................................ 57,474 19,824
Accounting services fees (Note 4)..................................... 24,000 24,000
Professional fees..................................................... 16,540 12,940
Transfer agent fees (Note 4).......................................... 12,491 12,250
Trustees' fees and expenses........................................... 11,241 11,241
Postage and supplies.................................................. 11,098 10,405
Registration fees..................................................... 8,889 8,678
Custodian fees........................................................ 8,923 5,926
Amortization of organization costs (Note 2)........................... 6,355 6,355
Insurance expense..................................................... 3,135 2,085
Reports to shareholders............................................... 2,347 2,293
Other expenses........................................................ 5,674 9,769
-------------- ---------------
TOTAL EXPENSES...................................................... 422,738 251,341
Expenses reimbursed by the Adviser (Note 6)........................... -- (6,473)
-------------- ---------------
NET EXPENSES ....................................................... 422,738 244,868
-------------- ---------------
NET INVESTMENT LOSS ..................................................... (235,765) (190,566)
-------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ........................ 3,987,680 1,735,380
Net change in unrealized appreciation/depreciation on investments .... 1,438,007 (936,684)
-------------- ---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ........................ 5,425,687 798,696
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 5,189,922 $ 608,130
-------------- ---------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended March 31, 1999 and 1998
=============================================================================================================
Utility Equity
Fund Fund
Year Year Year Year
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income....................... $ 961,542 $ 1,203,757 $ 56,596 $ 134,298
Net realized gains from
security transactions..................... 2,008,632 396,431 72,685 131,522
Net change in unrealized appreciation/depreciation
on investments............................ (5,229,709) 12,365,467 6,891,335 9,717,678
------------ -------------- ------------- -------------
Net increase (decrease) in net
assets from operations...................... (2,259,535) 13,965,655 7,020,616 9,983,498
------------ -------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A......... (923,626) (1,131,462) (56,596) (134,305)
From net investment income, Class C......... (37,916) (72,537) -- --
Return of capital, Class A.................. -- -- (7,701) --
From net realized gains on security
transactions, Class A..................... (441,346) (598,344) -- (266,654)
From net realized gains on security
transactions, Class C..................... (36,559) (49,575) -- (29,203)
------------ -------------- ------------- -------------
Decrease in net assets from distributions
to shareholders............................. (1,439,447) (1,851,918) (64,297) (430,162)
------------ -------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold................... 4,525,134 6,395,680 16,146,962 27,157,778
Net asset value of shares issued in
reinvestment of distributions
to shareholders........................... 1,225,189 1,560,076 63,426 393,608
Payments for shares redeemed................ (6,425,371) (12,764,160) (5,648,244) (12,645,062)
------------ -------------- ------------- -------------
Net increase (decrease) in net assets from
Class A share transactions.................. (675,048) (4,808,404) 10,562,144 14,906,324
------------ -------------- ------------- -------------
CLASS C
Proceeds from shares sold................... 424,245 343,251 566,536 386,194
Net asset value of shares issued in
reinvestment of distributions
to shareholders........................... 69,533 112,220 -- 29,105
Payments for shares redeemed................ (573,313) (887,840) (1,576,756) (429,754)
------------ -------------- ------------- -------------
Net decrease in net assets from Class C
share transactions.......................... (79,535) (432,369) (1,010,220) (14,455)
------------ -------------- ------------- -------------
Net increase (decrease) in net assets from
capital share transaction................... (754,583) (5,240,773) 9,551,924 14,891,869
------------ -------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....... (4,453,565) 6,872,964 16,508,243 24,445,205
NET ASSETS:
Beginning of year........................... 46,059,391 39,186,427 42,197,996 17,752,791
------------ -------------- ------------- -------------
End of year................................. $ 41,605,826 $ 46,059,391 $58,706,239 $42,197,996
============ ============== ============= =============
See accompanying notes to financial statements.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended March 31,1999 and 1998
and August 31, 1997
====================================================================================================================
Growth/Value Fund Aggressive Growth Fund
Year Seven Months Year Year Seven Months Year
Ended Ended Ended Ended Ended Ended
March 31, March 31, August 31, March 31, March 31, August 31,
1999 1998(A) 1997 1999 1998(A) 1997
- --------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment loss..................... $(235,765) $(146,022) $(214,624) $(190,566) $(142,331) $(148,879)
Net realized gains (losses) from
security transactions................. 3,987,680 1,566,803 894,909 1,735,380 241,580 (356,478)
Net change in unrealized
appreciation/depreciation
on investments........................ 1,438,007 437,753 7,431,395 (936,684) (458,321) 4,653,168
---------- ---------- --------- --------- --------- ---------
Net increase (decrease) in net assets
from operations.......................... 5,189,922 1,858,534 8,111,680 608,130 (359,072) 4,147,811
---------- ---------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on
security transactions................ (4,390,836) (1,021,333) (888,542) (1,620,482) -- (16,180)
---------- ---------- --------- --------- --------- ---------
FROM CAPITAL SHARE TRANSACTIONS (Note 5):
Proceeds from shares sold .............. 4,555,639 6,013,814 9,367,824 3,396,790 4,724,918 5,211,479
Net asset value of shares issued in
reinvestment of distributions to
shareholders.......................... 2,552,347 348,462 260,810 978,542 -- 4,532
Payments for shares redeemed............ (11,892,598) (5,328,293) (5,181,368) (7,456,234) (2,854,217) (1,913,821)
---------- ---------- --------- --------- --------- ---------
Net increase (decrease) in net assets from
capital share transactions.............. (4,784,612) 1,033,983 4,447,266 (3,080,902) 1,870,701 3,302,190
---------- ---------- --------- --------- --------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS .. (3,985,526) 1,871,184 11,670,404 (4,093,254) 1,511,629 7,433,821
NET ASSETS:
Beginning of period..................... 28,649,253 26,778,069 15,107,665 15,495,364 13,983,735 6,549,914
---------- ---------- --------- --------- --------- ---------
End of period........................... $24,663,727 $28,649,253 $26,778,069 $11,402,110 $15,495,364 $13,983,735
=========== =========== =========== =========== =========== ===========
(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>
12
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND
FINANCIAL HIGHLIGHTS - CLASS A
===============================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
===============================================================================================================
Years Ended March 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 16.76 $ 12.44 $ 12.24 $ 10.47 $ 10.52
---------- --------- ---------- --------- ----------
Income (loss) from investment operations:
Net investment income........................ 0.38 0.43 0.46 0.47 0.43
Net realized and unrealized gains (losses)
on investments............................ (1.16) 4.56 0.22 1.77 (0.05)
---------- --------- ---------- --------- ----------
Total from investment operations................ (0.78) 4.99 0.68 2.24 0.38
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.38) (0.43) (0.46) (0.47) (0.43)
Distributions from net realized gains........ (0.18) (0.24) (0.02) -- --
---------- --------- ---------- --------- ----------
Total distributions............................. (0.56) (0.67) (0.48) (0.47) (0.43)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 15.42 $ 16.76 $ 12.44 $ 12.24 $ 10.47
========== ========= ========== ========= ==========
Total return(A) ................................ (4.79) % 40.92% 5.61% 21.65% 3.68%
========== ========= ========== ========= ==========
Net assets at end of year (000's)............... $ 38,391 $ 42,463 $ 36,087 $ 40,424 $40,012
========== ========= ========== ========= ==========
Ratio of expenses to average net assets......... 1.33% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment income to average
net assets.................................. 2.30% 3.03% 3.65% 3.97% 4.06%
Portfolio turnover rate ........................ 4% 0% 3% 11% 17%
- --------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
=================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
=================================================================================================================
Years Ended March 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 16.74 $ 12.43 $ 12.23 $ 10.46 $ 10.51
---------- --------- ---------- --------- ----------
Income (loss) from investment operations:
Net investment income........................ 0.18 0.31 0.35 0.37 0.35
Net realized and unrealized gains (losses)
on investments............................. (1.16) 4.57 0.24 1.78 (0.04)
---------- --------- ---------- --------- ----------
Total from investment operations................ (0.98) 4.88 0.59 2.15 0.31
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.18) (0.33) (0.37) (0.38) (0.36)
Distributions from net realized gains........ (0.18) (0.24) (0.02) -- --
---------- --------- ---------- --------- ----------
Total distributions............................. (0.36) (0.57) (0.39) (0.38) (0.36)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 15.40 $ 16.74 $ 12.43 $ 12.23 $ 10.46
========== ========= ========== ========= ==========
Total return(A) ................................ (5.92)% 39.91% 4.82% 20.78% 3.00%
---------- --------- ---------- --------- ----------
Net assets at end of year (000's)............... $ 3,215 $ 3,597 $ 3,099 $ 3,686 $ 3,599
========== ========= ========== ========= ==========
Ratio of expenses to average net assets ........ 2.50% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment income to average
net assets.................................. 1.13% 2.28% 2.89% 3.19% 3.41%
Portfolio turnover rate......................... 4% 0% 3% 11% 17%
- ------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS A
==================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
==================================================================================================================
Years Ended March 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 19.38 $ 13.76 $ 12.45 $ 9.84 $ 9.26
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income........................ 0.04 0.09 0.12 0.13 0.15
Net realized and unrealized gains
on investments............................. 2.73 5.76 1.35 2.60 0.59
---------- --------- ---------- --------- ----------
Total from investment operations................ 2.77 5.85 1.47 2.73 0.74
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... (0.03) (0.08) (0.12) (0.12) (0.16)
Distributions from net realized gains........ -- (0.15) (0.04) -- --
---------- --------- ---------- --------- ----------
Total distributions............................. (0.03) (0.23) (0.16) (0.12) (0.16)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 22.12 $ 19.38 $ 13.76 $ 12.45 $ 9.84
========== ========= ========== ========= ==========
Total return(A) ................................ 14.30% 42.74% 11.82% 27.90% 8.07%
========== ========= ========== ========= ==========
Net assets at end of year (000's)............... $ 55,561 $ 38,336 $ 14,983 $ 8,502 $ 4,300
========== ========= ========== ========= ==========
Ratio of net expenses to average net
assets(B).................................... 1.31% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment income to average
net asset.................................... 0.18% 0.53% 0.91% 1.06% 1.57%
Portfolio turnover rate......................... 10% 7% 38% 38% 159%
- --------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets
would have been 1.43%, 2.02% and 1.94% for the years ended March 31, 1997, 1996 and 1995, respectively.
See accompanying notes to financial statements.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
======================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Year
======================================================================================================================
Years Ended March 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 19.34 $ 13.77 $ 12.46 $ 9.86 $ 9.26
---------- --------- ---------- --------- ----------
Income from investment operations:
Net investment income (loss)................. (0.19) (0.03) 0.02 0.05 0.10
Net realized and unrealized gains
on investments............................ 2.71 5.75 1.35 2.60 0.57
---------- --------- ---------- --------- ----------
Total from investment operations................ 2.52 5.72 1.37 2.65 0.67
---------- --------- ---------- --------- ----------
Less distributions:
Dividends from net investment income......... -- -- (0.02) (0.05) (0.07)
Distributions from net realized gains........ -- (0.15) (0.04) -- --
---------- --------- ---------- --------- ----------
Total distributions............................. -- (0.15) (0.06) (0.05) (0.07)
---------- --------- ---------- --------- ----------
Net asset value at end of year.................. $ 21.86 $ 19.34 $ 13.77 $ 12.46 $ 9.86
========== ========= ========== ========= ==========
Total return(A) ................................ 13.03% 41.63% 11.01% 26.90% 7.32%
========== ========= ========== ========= ==========
Net assets at end of year (000's)............... $ 3,146 $ 3,862 $ 2,770 $ 2,436 $ 1,995
========== ========= ========== ========= ==========
Ratio of net expenses to average net
assets(B).................................... 2.41% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment income (loss) to
average net assets........................... (0.92)% (0.18)% 0.15% 0.38% 0.68%
Portfolio turnover rate......................... 10% 7% 38% 38% 159%
- ---------------------------------------------------------------------------------------------------------------------
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios of expenses to average net assets
would have been 2.14%, 2.70% and 2.50% for the years ended March 31, 1997, 1996 and 1995, respectively.
See accompanying notes to financial statements.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
GROWTH/VALUE FUND
FINANCIAL HIGHLIGHTS
======================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
======================================================================================================================
Year Seven Months Year Period
Ended Ended Ended Ended
March 31, March 31, August 31, August 31,
1999 1998(A) 1997 1996(B)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 16.30 $ 15.90 $ 11.18 $ 10.00
------------ -------------- ------------- -------------
Income from investment operations:
Net investment loss......................... (0.17) (0.08) (0.13) (0.06)(C)
Net realized and unrealized gains
on investments............................ 4.84 1.05 5.39 1.24
------------ -------------- ------------- -------------
Total from investment operations............... 4.67 0.97 5.26 1.18
------------ -------------- ------------- -------------
Less distributions:
Distributions from net realized gains....... (3.47) (0.57) (0.54) --
------------ -------------- ------------- -------------
Net asset value at end of period............... $ 17.50 $ 16.30 $ 15.90 $ 11.18
============ ============== ============= =============
Total return(D) ............................... 29.89% 6.43% 47.11% 11.80%
============ ============== ============= =============
Net assets at end of period (000's)............ $ 24,664 $ 28,649 $ 26,778 $ 15,108
============ ============== ============= =============
Ratio of net expenses to average net
assets(E)................................... 1.66% 1.66%(F) 1.95% 1.95%(F)
Ratio of net investment loss to average
net assets(F)............................... (0.93)% (0.91)%(F) (1.03)% (0.62)%
Portfolio turnover rate........................ 59% 62%(F) 52% 21%
- ---------------------------------------------------------------------------------------------------------------------
(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 7).
(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>
17
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
=====================================================================================================================
Year Seven Months Year Period
Ended Ended Ended Ended
March 31, March 31, August 31, August 31,
1999 1998(A) 1997 1996(B)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 15.81 $ 16.29 $ 10.95 $ 10.00
------------ -------------- ------------- -------------
Income (loss) from investment operations:
Net investment loss......................... (0.27) (0.15) (0.17) (0.11)(C)
Net realized and unrealized gains (losses)
on investments................................ 2.67 (0.33) 5.54 1.06
------------ -------------- ------------- -------------
Total from investment operations............... 2.40 (0.48) 5.37 0.95
------------ -------------- ------------- -------------
Less distributions:
Distributions from net realized gains....... (2.48) -- (0.03) --
------------ -------------- ------------- -------------
Net asset value at end of period............... $ 15.73 $ 15.81 $ 16.29 $ 10.95
============ ============== ============= =============
Total return(D) ............................... 15.46% (2.95)% 49.09% 9.50%
============ ============== ============= =============
Net assets at end of period (000's)............ $ 11,402 $ 15,495 $ 13,984 $ 6,550
============ ============== ============= =============
Ratio of net expenses to average net
assets(E)................................... 1.95% 1.95%(F) 1.94% 1.95%(F)
Ratio of net investment loss to average
net assets(F)............................... (1.52)% (1.66)%(F) (1.57)% (1.26)%
Portfolio turnover rate........................ 93% 40%(F) 51% 16%
Amount of debt outstanding at end of period.... $ -- n/a n/a n/a
Average daily amount of debt outstanding during
the period (000's).......................... $ 80 n/a n/a n/a
Average daily number of capital shares outstanding
during the period (000's)................... 818 n/a n/a n/a
Average amount of debt per share during
the period.................................. $ 0.10 n/a n/a n/a
- -----------------------------------------------------------------------------------------------------------------
(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 7).
(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 2.00%, 2.62% and 5.05%(F) for the periods ended March 31, 1999, August 31, 1997 and August 31, 1996,
respectively (Note 6).
(F) Annualized.
See accompanying notes to financial statements.
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
================================================================================
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.
(Note 7).
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.
19
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
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.
20
<PAGE>
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Organization costs -- Costs incurred by the 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.
The following information is based upon the federal income tax cost of portfolio
investments (excluding repurchase agreements) as of March 31, 1999:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Growth/ Aggressive
Utility Equity Value Growth
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized appreciation.................. $ 14,044,227 $ 21,522,301 $ 9,754,046 $ 3,705,151
Gross unrealized depreciation.................. (273,768) (2,226,547) (203,810) (386,419)
------------ -------------- ------------- -------------
Net unrealized appreciation.................... $ 13,770,459 $ 19,295,754 $ 9,550,236 $ 3,318,732
------------ -------------- ------------- -------------
Federal income tax cost........................ $ 27,852,815 $ 34,520,209 $15,111,808 $ 8,087,608
------------ -------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Reclassification of capital accounts -- For the year ended March 31, 1999, the
Growth/Value Fund and Aggressive Growth Fund reclassified net investment losses
of $235,765 and $190,566, respectively, against paid-in capital on the
Statements of Assets and Liabilities. The Equity Fund reclassified $7,701 of
overdistributed net investment income 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.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) were as follows for
the year ended March 31, 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Growth/ Aggressive
Utility Equity Value Growth
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of investment securities............. $ 1,721,320 $ 14,471,647 $14,983,235 $11,641,423
============ ============== ============= =============
Proceeds from sales and maturities of
investment securities....................... $ 3,409,806 $ 4,355,481 $26,159,764 $16,642,244
============ ============== ============= =============
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
4. TRANSACTIONS WITH AFFILIATES
The Chairman, President and certain other officers of the Trust are also
officers of Countrywide Financial Services, Inc., or its subsidiaries which
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 CFS 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
$5,789, $4,158, $3,390 and $7,588 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 year ended March 31, 1999. In
addition, the Adviser collected $457 and $693 of contingent deferred sales loads
on the redemption of Class C shares of the Utility Fund and Equity Fund,
respectively.
22
<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.
CUSTODIAN AGREEMENTS
Firstar Bank, N.A., which serves as the custodian for the Growth/Value Fund and
Aggressive Growth Fund, was a significant shareholder of record of each Fund as
of March 31, 1999. Under the terms of its Custodian Agreements, Firstar Bank
receives from each Fund an asset-based fee plus certain transaction charges.
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:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Utility Equity
Fund Fund
Year Year Year Year
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C>
Shares sold.................................... 275,492 441,718 818,011 1,675,833
Shares issued in reinvestment of distributions
to shareholders............................. 75,229 105,777 3,351 22,496
Shares redeemed................................ (395,304) (914,263) (287,992) (808,858)
------------ -------------- ------------- -------------
Net increase (decrease) in shares outstanding.. (44,583) (366,768) 533,370 889,471
Shares outstanding, beginning of year.......... 2,533,479 2,900,247 1,978,069 1,088,598
------------ -------------- ------------- -------------
Shares outstanding, end of year................ 2,488,896 2,533,479 2,511,439 1,978,069
============ ============== ============= =============
CLASS C
Shares sold.................................... 25,825 23,316 28,644 23,254
Shares issued in reinvestment of distributions
to shareholders............................. 4,271 7,595 -- 1,642
Shares redeemed................................ (36,290) (65,381) (84,439) (26,402)
------------ -------------- ------------- -------------
Net decrease in shares outstanding............. (6,194) (34,470) (55,795) (1,506)
Shares outstanding, beginning of year.......... 214,888 249,358 199,685 201,191
------------ -------------- ------------- -------------
Shares outstanding, end of year................ 208,694 214,888 143,890 199,685
============ ============== ============= =============
- ----------------------------------------------------------------------------------------------------------------
23
<PAGE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Growth/Value Aggressive Growth
Fund Fund
Year Seven Months Year Year Seven Months Year
Ended Ended Ended Ended Ended Ended
March 31, March 31, Aug. 31, March 31, March 31, Aug. 31,
1999 1998 1997 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................ 263,603 392,494 751,684 216,290 304,821 418,585
Shares issued in reinvestment of distributions
to shareholders......................... 150,161 23,529 16,584 63,418 -- 376
Shares redeemed............................ (761,516) (343,315) (434,401) (535,148) (183,404) (158,580)
---------- ---------- --------- --------- --------- ---------
Net increase (decrease) in shares
outstanding............................. (347,752) 72,708 333,867 (255,440) 121,417 260,381
Shares outstanding, beginning of period.... 1,757,393 1,684,685 1,350,818 980,105 858,688 598,307
---------- ---------- --------- --------- --------- ---------
Shares outstanding, end of period.......... 1,409,641 1,757,393 1,684,685 724,665 980,105 858,688
---------- ---------- --------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
6. BORROWINGS
The Growth/Value Fund and Aggressive Growth Fund each have a Loan Agreement with
Firstar Bank, N.A., to be used for temporary or emergency purposes, including
the financing of capital share redemption requests that might otherwise require
the untimely disposition of securities. The Loan Agreements permit borrowings up
to a maximum principal amount outstanding not to exceed the lesser of $1,500,000
for the Growth/Value Fund and $3,000,000 for the Aggressive Growth Fund or
certain other amounts which are calculated based upon the amounts and
composition of assets in each Fund as defined in the Loan Agreement. Each Fund
agrees to pay interest on any unpaid principal balance at prevailing market
rates as defined in the Loan Agreement.
As of March 31, 1999, neither Fund had outstanding borrowings under the Loan
Agreement. The maximum amount outstanding during the year for the Aggressive
Growth Fund was $1,400,000 at a weighted average interest rate of 7.75%. For the
year ended March 31, 1999, the Aggressive Growth Fund incurred, and the Adviser
reimbursed, $6,473 of interest expense on such borrowings.
7. 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 qualified 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.
8. FEDERAL TAX INFORMATION (UNAUDITED)
In accordance with federal tax requirements, the following provides shareholders
with information concerning distributions from net realized gains, if any, made
by the Funds during the year ended March 31, 1999. On October 30, 1998, the
Utility Fund declared and paid a long-term capital gain distribution of $0.1820
per share. On November 16, 1998 and March 19, 1999, the Growth/Value Fund
declared and paid long-term capital gain distributions of $0.5450 and $2.9234
per share, respectively. On March 19, 1999, the Aggressive Growth Fund declared
and paid a long-term capital gain distribution of $2.4768 per share. As required
by federal regulations, shareholders will receive notification of their portion
of a Fund's taxable capital gain distribution, if any, paid during the 1999
calendar year early in 2000.
24
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
============================================================================================================
Market
COMMON STOCKS -- 91.2% Shares Value
- ------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 42.0%
<S> <C> <C>
AES Corp.*............................................................... 45,000 $ 1,676,250
Baltimore Gas & Electric Co.............................................. 50,050 1,270,019
Cinergy Corp............................................................. 50,000 1,375,000
Cleco Corp............................................................... 30,000 885,000
CMS Energy Corp.......................................................... 60,000 2,403,750
DPL, Inc................................................................. 75,000 1,237,500
Duke Power Co............................................................ 42,000 2,294,250
FPL Group, Inc........................................................... 45,000 2,396,250
Kansas City Power & Light Co............................................. 50,000 1,231,250
Northern States Power Co................................................. 60,000 1,391,250
Scana Corp............................................................... 60,000 1,301,250
---------------
$ 17,461,769
---------------
TELECOMMUNICATIONS -- 37.7%
Ameritech Corp........................................................... 50,000 $ 2,893,750
AT&T Corp................................................................ 30,000 2,394,375
Bell Atlantic Corp....................................................... 50,000 2,584,375
BellSouth Corp........................................................... 75,000 3,004,687
GTE Corp................................................................. 45,000 2,722,500
Lucent Technologies, Inc................................................. 19,444 2,095,091
---------------
$ 15,694,778
---------------
GAS COMPANIES -- 6.6%
MCN Corp................................................................. 70,000 $ 1,124,375
Oneok, Inc............................................................... 25,000 618,750
Wicor, Inc............................................................... 50,000 1,012,500
---------------
$ 2,755,625
---------------
WATER COMPANIES -- 4.9%
American Water Works, Inc................................................ 70,000 $ 2,034,375
---------------
TOTAL COMMON STOCKS (Cost $24,267,526)................................... $ 37,946,547
---------------
<CAPTION>
=============================================================================================================
Par Market
CORPORATE BONDS -- 5.2% Value Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dayton Power & Light Co., 8.40%, 12/01/22................................ $ 1,000,000 $ 1,056,165
New York Telephone Co., 9.375%, 7/15/31.................................. 1,000,000 1,120,562
-------------- ---------------
TOTAL CORPORATE BONDS (Amortized Cost $2,085,289)........................ $ 2,000,000 $ 2,176,727
============== ---------------
25
<PAGE>
<CAPTION>
UTILITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999 (continued)
=============================================================================================================
Par Market
COMMERCIAL PAPER -- 3.6% Value Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BP America, 4/01/99 (Amortized Cost $1,500,000).......................... $ 1,500,000 $ 1,500,000
============== ---------------
TOTAL INVESTMENT SECURITIES-- 100.0% (Amortized Cost $27,852,815)........ $ 41,623,274
LIABILITIES IN EXCESS OF OTHER ASSETS-- 0.0% ............................ (17,448)
---------------
NET ASSETS-- 100.0% ..................................................... $ 41,605,826
===============
* Non-income producing security.
See accompanying notes to financial statements.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
=============================================================================================================
Market
COMMON STOCKS -- 91.7% Shares Value
- -------------------------------------------------------------------------------------------------------------
CONSUMER, NON-CYCLICAL -- 28.5%
<S> <C> <C>
Abbott Laboratories...................................................... 30,000 $ 1,404,375
Albertson's, Inc......................................................... 15,000 814,687
American Home Products Corp.............................................. 20,000 1,305,000
Johnson & Johnson........................................................ 22,000 2,061,125
Merck & Co., Inc......................................................... 20,000 1,603,750
Newell Rubbermaid, Inc................................................... 30,000 1,425,000
PepsiCo, Inc............................................................. 35,000 1,371,563
Pfizer, Inc.............................................................. 20,000 2,775,000
Procter & Gamble Co...................................................... 25,000 2,448,438
Sara Lee Corp............................................................ 34,000 841,500
Schering-Plough Corp..................................................... 12,000 663,750
---------------
$ 16,714,188
---------------
TECHNOLOGY -- 20.3%
Compaq Computer Corp. ................................................... 40,000 $ 1,267,500
Hewlett-Packard Co....................................................... 17,500 1,186,719
Intel Corp............................................................... 20,000 2,382,500
Lucent Technologies, Inc................................................. 3,888 418,932
MCI Worldcom*............................................................ 22,000 1,948,375
Motorola, Inc............................................................ 9,000 659,250
Northern Telecom Limited................................................. 15,000 931,875
Sun Microsystems, Inc.*.................................................. 25,000 3,123,437
---------------
$ 11,918,588
---------------
FINANCIAL SERVICES -- 17.1%
AFLAC, Inc............................................................... 40,000 $ 2,177,500
American International Group............................................. 16,500 1,990,312
Bank of New York Co., Inc................................................ 60,000 2,156,250
Freddie Mac.............................................................. 30,000 1,713,750
Horace Mann Educators Corp............................................... 40,000 927,500
Wells Fargo Co........................................................... 30,000 1,051,875
---------------
$ 10,017,187
---------------
CONSUMER, CYCLICAL -- 13.1%
Gap, Inc................................................................. 45,000 $ 3,029,063
Mattel, Inc.............................................................. 55,000 1,368,125
McDonald's Corp.......................................................... 46,000 2,084,375
The Walt Disney Co....................................................... 39,000 1,213,875
---------------
$ 7,695,438
---------------
ENERGY -- 4.3%
Apache Corp.............................................................. 35,000 $ 912,187
Enron Corp............................................................... 25,000 1,606,250
---------------
$ 2,518,437
---------------
CONGLOMERATES -- 3.2%
General Electric Co...................................................... 17,000 $ 1,880,625
---------------
INDUSTRIAL -- 2.7%
Diebold, Inc............................................................. 30,000 $ 720,000
Emerson Electric Co...................................................... 17,000 899,937
---------------
$ 1,619,937
---------------
27
<PAGE>
<CAPTION>
EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999 (continued)
================================================================================================================
Market
COMMON STOCKS -- 91.7% Shares Value
- ----------------------------------------------------------------------------------------------------------------
BASIC MATERIALS -- 2.5%
<S> <C> <C>
duPont (E.I.) de Nemours & Co............................................ 25,000 $ 1,451,563
---------------
TOTAL COMMON STOCKS (Cost $34,520,209)................................... $ 53,815,963
---------------
================================================================================================================
Face Market
REPURCHASE AGREEMENTS (1)-- 9.2% Value Value
- ----------------------------------------------------------------------------------------------------------------
Bank One, N.A., 4.95%, dated 3/31/99, due 4/01/99,
repurchase proceeds $5,420,745......................................... $ 5,420,000 $ 5,420,000
-------------- ---------------
TOTAL COMMON STOCKS AND REPURCHASE AGREEMENTS-- 100.9% .................. $ 59,235,963
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.9%) ......................... (529,724)
---------------
NET ASSETS-- 100.0% ..................................................... $ 58,706,239
===============
* Non-income producing security.
(1)Repurchase agreements are fully collateralized by U.S. Government obligations.
See accompanying notes to financial statements.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
GROWTH/VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
================================================================================================================
Market
COMMON STOCKS -- 92.4% Shares Value
- ----------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 52.9%
<S> <C> <C>
Applied Materials, Inc.*................................................. 21,000 $ 1,295,438
Compuware Corp.*......................................................... 20,000 477,500
EMC Corp.*............................................................... 11,000 1,405,250
Intel Corp............................................................... 11,000 1,310,375
International Business Machines Corp..................................... 7,000 1,240,750
Lexmark International Group, Inc. - Class A*............................. 9,500 1,061,625
Novell, Inc.*............................................................ 89,000 2,241,688
Oracle Corp.*............................................................ 57,750 1,523,156
Sun Microsystems, Inc.*.................................................. 20,000 2,498,750
---------------
$ 13,054,532
---------------
HEALTH CARE -- 20.2%
Amgen, Inc.*............................................................. 10,000 $ 748,750
Baxter International, Inc................................................ 11,000 726,000
Becton, Dickinson and Co................................................. 10,000 383,125
Bristol-Myers Squibb Co.................................................. 16,000 1,029,000
Pharmacia & Upjohn, Inc.................................................. 16,000 998,000
Schering-Plough Corp..................................................... 20,000 1,106,250
---------------
$ 4,991,125
---------------
ENTERTAINMENT -- 6.3%
Carnival Corp. - Class A................................................. 25,000 $ 1,214,062
Marriott International, Inc. - Class A................................... 10,000 336,250
---------------
$ 1,550,312
---------------
RETAIL -- 4.0%
CVS Corp................................................................. 15,000 $ 712,500
Walgreen Co.............................................................. 9,200 259,900
---------------
$ 972,400
---------------
FINANCIAL SERVICES -- 3.3%
Concord EFS, Inc.*....................................................... 29,700 $ 818,606
---------------
AEROSPACE/DEFENSE -- 2.9%
General Dynamics Corp.................................................... 11,200 $ 719,600
---------------
TRANSPORTATION -- 2.8%
AMR Corp.*............................................................... 7,500 $ 439,219
MotivePower Industries, Inc.*............................................ 10,000 251,250
---------------
$ 690,469
---------------
TOTAL COMMON STOCKS (Cost $13,246,808)................................... $ 22,797,044
---------------
29
<PAGE>
<CAPTION>
GROWTH/VALUE FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999 (continued)
===================================================================================================================
Par Market
U. S. GOVERNMENT AGENCY ISSUES-- 7.6% Value Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Agricultural Mortgage Corp. Discount Note, 4/01/99
(Amortized Cost $1,865,000)........................................... $ 1,865,000 $ 1,865,000
-------------- ---------------
TOTAL INVESTMENT SECURITIES-- 100.0% (Amortized Cost $15,111,808) ....... $ 24,662,044
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.0% ............................ 1,683
---------------
NET ASSETS-- 100.0% ..................................................... $ 24,663,727
---------------
* Non-income producing security.
See accompanying notes to financial statements.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
================================================================================================================
Market
COMMON STOCKS -- 97.6% Shares Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY -- 52.3%
Compuware Corp.*......................................................... 25,000 $ 596,875
EMC Corp.*............................................................... 5,000 638,750
Intel Corp............................................................... 4,500 536,063
Lexmark International Group, Inc. - Class A*............................. 4,500 502,875
Novell, Inc.*............................................................ 50,000 1,259,375
Oracle Corp.*............................................................ 16,875 445,078
Seagate Technology, Inc.*................................................ 18,000 532,125
SMART Modular Technologies, Inc.*........................................ 30,000 448,125
Sun Microsystems, Inc.*.................................................. 5,000 624,688
Teradyne, Inc.*.......................................................... 7,000 381,937
---------------
$ 5,965,891
---------------
HEALTH CARE -- 24.0%
Alternative Living Services, Inc.*....................................... 10,000 $ 200,000
Amgen, Inc.*............................................................. 6,000 449,250
Biogen, Inc.*............................................................ 4,000 457,250
Capital Senior Living Corp.*............................................. 14,800 104,525
Chiron Corp.*............................................................ 13,000 285,188
Elan Corp. plc - ADR*.................................................... 3,000 209,250
Pharmacia & Upjohn, Inc.................................................. 9,000 561,375
Sunrise Assisted Living, Inc.*........................................... 6,000 273,375
Watson Pharmaceuticals, Inc.*............................................ 4,400 194,150
---------------
$ 2,734,363
---------------
RETAIL -- 8.2%
CVS Corp................................................................. 5,500 $ 261,250
Shop At Home, Inc.*...................................................... 20,000 251,250
Walgreen Co.............................................................. 14,800 418,100
---------------
$ 930,600
---------------
ENTERTAINMENT -- 4.3%
Carnival Corp. - Class A................................................. 10,000 $ 485,625
---------------
TRANSPORTATION -- 3.5%
MotivePower Industries, Inc.*............................................ 5,000 $ 125,625
Southwest Airlines Co.................................................... 9,000 272,250
---------------
$ 397,875
---------------
TELECOMMUNICATIONS -- 2.9%
Uniphase Corp.*.......................................................... 2,900 $ 333,862
---------------
FINANCIAL SERVICES -- 2.4%
Viad Corp................................................................ 10,000 $ 278,125
---------------
TOTAL COMMON STOCKS (Cost $7,807,609) ................................... $ 11,126,341
---------------
31
<PAGE>
<CAPTION>
AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999 (continued)
================================================================================================================
Par Market
U.S. GOVERNMENT AGENCY ISSUES-- 2.4% Value Value
- ----------------------------------------------------------------------------------------------------------------
<S> <S> <S>
Federal Agricultural Mortgage Corp. Discount Note, 4/01/99
(Amortized Cost $280,000)............................................. $ 280,000 $ 280,000
-------------- ---------------
TOTAL INVESTMENT SECURITIES-- 100.0% (Amortized Cost $8,087,609) ........ $ 11,406,341
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.0%) .......................... (4,231)
---------------
NET ASSETS-- 100.0% ..................................................... $ 11,402,110
---------------
* Non-income producing security.
ADR - American depositary receipt.
See accompanying notes to financial statements.
</TABLE>
32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
Logo 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, 1999, 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 year ended March 31, 1999, 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 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 highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, 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 Countrywide Strategic
Trust as of March 31, 1999, the results of their operations for the year then
ended, 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 30, 1999
33
<PAGE>
PART C. OTHER INFORMATION
- ------ -----------------
Item 23. Exhibits
- ------- --------
(a) ARTICLES OF INCORPORATION
Registrant's Restated Agreement and
Declaration of Trust with Amendment No. 1,
dated May 24, 1994, Amendment No. 2, dated
February 28, 1997 and Amendment No. 3, dated
August 11, 1997, which were filed as Exhibits
to Registrant's Post-Effective Amendment No. 36,
are hereby incorporated by reference.
(b) BYLAWS
Registrant's Bylaws with Amendments
adopted July 17, 1984 and April 5, 1989, which were
filed as Exhibits to Registrant's Post-Effective
Amendment No. 36, are hereby incorporated by
reference.
(c) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
Article IV Of Registrant's Restated Agreement and
Declaration of Trust provides the following rights for
security holders:
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.
VOTING. All shares of all Series shall have "equal
voting rights" as such term is defined in the Investment
Company Act of 1940 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 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.
<PAGE>
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.
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.
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.
Article V of Registrant's Restated Agreement and
Declaration of Trust provides the following rights
for security holders:
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)
in 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.
<PAGE>
(d) INVESTMENT ADVISORY CONTRACTS
(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.
(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.
(e) UNDERWRITING CONTRACTS
(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, which was filed as
an Exhibit to Registrant's Post-Effective Amendment No. 36,
is hereby incorporated by reference.
(f) BONUS OR PROFIT SHARING CONTRACTS
None.
(g) CUSTODIAN AGREEMENTS
(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 Firstar Bank (formerly 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>
(h) OTHER MATERIAL CONTRACTS
(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.
(i) LEGAL OPINION
Opinion and Consent of Counsel, which was filed as an Exhibit
to Registrant's Pre-Effective Amendment No. 1, is hereby
incorporated by reference.
(j) OTHER OPINIONS
Consent of Independent Auditors is filed herewith.
(k) OMITTED FINANCIAL STATEMENTS
None.
(l) INITIAL CAPITAL AGREEMENTS
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.
(m) RULE 12B-1 PLAN
(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 is filed herewith.
(n) FINANCIAL DATA SCHEDULE
Financial Data Schedules for the Utility Fund (Class A and
Class C), the Equity Fund (Class A and Class C), the
Growth/Value Fund and the Aggressive Growth Fund, which were
filed as Exhibits to Registrant's Form N-SAR are hereby
incorporated by reference.
(o) RULE 18f-3 PLAN
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.
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the
- ------- Registrant
-------------------------------------------------------
None
Item 25. INDEMNIFICATION
- ------- ---------------
(a) Article VI of the Registrant's Restated Agreement and
Declaration of Trust provides for indemnification of officers
and Trustees as follows:
Section 6.4 Indemnification of Trustees, Officers, etc.
----------- ------------------------------------------
The Trust shall indemnify each of its Trustees and officers,
including persons who serve at the Trust's request as
directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise (hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable accountants'
and counsel fees, incurred by any Covered Person in connection
with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being
or having been such a Trustee or officer, director or trustee,
and except that no Covered Person shall be indemnified against
any liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's
office ("disabling conduct"). Anything herein contained to the
contrary notwithstanding, no Covered Person shall be
indemnified for any liability to the Trust or its Shareholders
to which such Covered Person would otherwise be subject unless
(1) a final decision on the merits is made by a court or other
body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of disabling
conduct or, (2) in the absence of such a decision, a
reasonable determination is made, based upon a review of the
facts, that the Covered Person was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum
of Trustees who are neither "interested persons" of the
Company as defined in the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
Trustees"), or (b) an independent legal counsel in a written
opinion.
<PAGE>
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
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 mutual fund and investment
advisory professional and directors and officers liability
policy. The policy provides coverage to the Registrant, its
trustees and officers and Countrywide Investments, Inc.
(the "Adviser") in its capacity as investment adviser and
principal underwriter, among others. Coverage under the policy
includes losses by reason of any act, error, omission,
misstatement, misleading statement, neglect or breach of duty.
The Registrant may not pay for insurance which protects the
Trustees and officers against liabilities rising from action
involving willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
their offices.
<PAGE>
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 such person to repay the advance if it is ultimately
determined that such person is not entitled to
indemnification.
Item 26. 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 six series of
Countrywide Tax-Free Trust and six series of
Countrywide Investment Trust, both of which are
registered investment companies. The Adviser
acts as the subadviser to the Huntington Florida Tax-Free
Money Fund series of The Huntington Funds. The Adviser
provides investment advisory services to individual
and institutional accounts and is a registered
broker-dealer.
<PAGE>
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 Home
Loans, Inc.,* a residential mortgage lender,
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 and Countrywide Capital
Markets, Inc.,* a holding company.
(c) Chairman, Director and Chief Executive
Officer of Countrywide Credit Industries,
Inc.,* a holding company which provides
residential mortgages and ancillary
financial products and services.
(d) A Director of CTC Real Estate Services
Corporation,* a foreclosure trustee and
CCM Municipal Services, Inc.,* a tax lien
purchaser.
(e) A Director of LandSafe, Inc.* and Chairman
and a director of various subsidiaries of
LandSafe, Inc. 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., Countrywide Fund
Services, Inc. and CW Fund Distributors, Inc.
<PAGE>
(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., Directnet Insurance Agency,
Inc.,* an insurance agency, Countrywide Insurance
Services, Inc.,* an insurance agency and
Countrywide Insurance Group,* an insurance
services holding company.
(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., Directnet Insurance
Agency, Inc., Countrywide Tax Services
Corporation,* a residential mortgage tax service
provider, Countrywide Lending Corporation,* a
lending institution, Countrywide Insurance
Services, Inc. and Countrywide Insurance Group,
Inc.
(b) Managing Director - Portfolio Services of
Countrywide Credit Industries,
Inc. and Managing Director - Chief Loan
Administration Officer of Countrywide Home
Loans, Inc.
(c) A Director and Executive Vice President of
CWABS, Inc.,* an asset-backed securities
issuer and CWMBS, Inc.,* a mortgage-backed
securities issuer.
(d) CEO and a Director of CTC Real Estate
Services Corporation.
(e) Chairman and Chief Executive Officer of
Countrywide Field Services Corporation,* a
foreclosure property maintenance provider.
(f) Chairman and Director of Countrywide Realty
Partners, Inc.,* a real estate marketing firm.
(g) President and Director of Countrywide
International Holdings, Inc.,* a holding company.
<PAGE>
(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., Directnet Insurance Agency,
Inc., Countrywide Insurance Services, Inc. and
Countrywide Insurance Group, 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) Vice President of Countrywide Strategic Trust,
Countrywide Investment Trust and Countrywide
Tax-Free Trust
(b) Executive Vice President of Countrywide Financial
Services, Inc.
(c) President of Peregrine Asset Management (USA),
4 Embarcadero Center, San Francisco, California,
94111, an investment adviser, until 1998.
(7) Maryellen Peretzky - Senior Vice President, Chief
Operating Officer and Secretary of the Adviser.
(a) Vice President of Countrywide Strategic Trust,
Countrywide Investment Trust and Countrywide
Tax-Free Trust
(b) Senior Vice President and Secretary of Countrywide
Financial Services, Inc., Countrywide Fund
Services, Inc. and CW Fund Distributors, Inc.
(c) Assistant Secretary of The Gannett Welsh & Kotler
Funds, Firsthand Funds and the Dean Family of
Funds.
<PAGE>
(8) John J. Goetz - First Vice President and Chief
Investment Officer- Tax-Free Fixed Income of the Adviser.
(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 of the Adviser.
(a) President and Chief Investment Officer of
Copernicus Asset Management, Ltd., 730
Fifth Avenue, New York, New York until 1998.
(11) Sharon L. Karp - First Vice President-Marketing of
the Adviser.
(12) Terrie A. Wiedenheft - First Vice President, Chief
Financial Officer and Treasurer of the Adviser.
(a) First Vice President, Chief Financial Officer
and Treasurer of Countrywide Financial Services,
Inc., Countrywide Fund Services, Inc. and CW
Fund Distributors, Inc.
(13) Scott Weston - Assistant Vice President-Investments of
the Adviser.
B. Mastrapasqua & Associates, Inc. ("Mastrapasqua")
is a registered investment adviser providing
investment advisory services to institutions and
individuals as well as the Growth/Value Fund and
the Aggressive Growth Fund. The address of
Mastrapasqua and its officers and directors is 814
Church Street, Suite 600, Nashville, Tennessee.
The following are officers and directors of
Mastrapasqua:
(1) Frank Mastrapasqua - Chairman and Chief Executive
Officer
(a) Chairman of Management Plus Associates, Inc., a
sports agency.
(2) Thomas A. Trantum - President
<PAGE>
Item 27 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.
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 Vice
President & President
Secretary
William E. Hortz Executive Vice Vice
President & 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 &
Chief Investment
Officer - Taxable
Fixed Income
<PAGE>
Sharon L. Karp First Vice None
President-
Marketing
Terrie A. Wiedenheft First Vice None
President
& Treasurer
Scott Weston Assistant Vice None
President-
Investments
(c) None
Item 28. 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 29. MANAGEMENT SERVICES NOT DISCUSSED IN PART A OR PART B
- ------- -----------------------------------------------------
None.
<PAGE>
Item 30. UNDERTAKINGS
- ------- ------------
(a) 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
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.
(b) 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, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, duly authorized, in the
City of Cincinnati, State of Ohio, on the 1st day of June, 1999.
COUNTRYWIDE STRATEGIC TRUST
/s/ Tina D. Hosking
By:---------------------------
Tina D. Hosking,
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 1st day of June, 1999.
*ANGELO R. MOZILO Chairman
and Trustee
/s/ Robert H. Leshner
- --------------------- President
ROBERT H. LESHNER and Trustee
/s/ Theresa M. Samocki
- ---------------------- Treasurer
THERESA M. SAMOCKI
*DONALD L. BOGDON, M.D. Trustee
*HOWARD J. LEVINE Trustee
*H. JEROME LERNER Trustee
*FRED A. RAPPOPORT Trustee
*OSCAR P. ROBERTSON Trustee
*JOHN F. SEYMOUR, JR. Trustee
*SEBASTIANO STERPA Trustee
By: /s/ Tina D. Hosking
-----------------
TINA D. HOSKING
Attorney-in-Fact*
June 1, 1999
EXHIBIT INDEX
- -------------
1. Consent of Independent Auditors
2. Form of Administration Agreement
3. Powers of Attorney for Donald L. Bogdon, H. Jerome Lerner,
Howard J. Levine, Angelo R. Mozilo, Fred A. Rappoport,
Oscar P. Robertson, John F. Seymour, Jr. and Sebastiano
Sterpa
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated April 30, 1999 and to all references to our Firm included in or made a
part of this Post-Effective Amendment No. 37.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
May 28, 1999
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,
payable quarterly, equal to one-fourth of the annual administration fees set
forth in Schedule A hereto. Administrator shall notify the Trust if
Administrator directly charges a fee to Fund shareholders for its administrative
support services as described in this Agreement.
4. Administrator agrees to comply with the requirements of all laws
applicable to it, including but not limited to, ERISA, federal and state
securities laws and the rules and regulations promulgated thereunder.
Administrator agrees to provide services to each Trust in compliance with the
then current Prospectus and Statement of Additional Information of the Trust
and the operating procedures and policies established by the Trust, including,
but not limited to, required minimum investment and minimum account size.
<PAGE>
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.
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.
<PAGE>
12. 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 the 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 of 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.
13. Notwithstanding paragraph 12, 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.
14. Any termination of this Agreement shall not affect the provisions
of paragraph 17, which shall survive the termination of this Agreement and
continue to be enforceable thereafter.
15. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors.
16. 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.
17. 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.
<PAGE>
18. This Agreement may be amended only by an agreement in writing
signed by the Administrator and the Trusts.
19. 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.
20. 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.
21. 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.
22. 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
_________________, 1999.
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
________________________________________ ____________________________________
Phone Date
<PAGE>
Schedule A
SCHEDULE OF MUTUAL FUNDS
Countrywide Investment Trust
Intermediate Bond Fund
* Short Term Government Income Fund
* Money Market Fund
Adjustable Rate U.S. Government Securities Fund
Intermediate Term Government Income Fund
Countrywide Tax-Free Trust
* Ohio Tax-Free Money Fund - Retail
* Tax-Free Money Fund
* California Tax-Free Money Fund - Retail
* Florida Tax-Free Money Fund - Retail
** Tax-Free Intermediate Term Fund
** Ohio Insured Tax-Free Fund
Countrywide Strategic Trust
Growth/Value Fund
Aggressive Growth Fund
** Equity Fund
** Utility Fund
Compensation
25 basis points per annum, paid quarterly, on the average daily balance of all
accounts in the Funds set forth above. No trailing commission will be paid to
the Administrator for any calendar quarter in which the average daily balance
of all accounts in the Funds is less than $1,000,000.
* No-load Money Market Fund
** Dual Pricing Fund
Countrywide
-------------
Investments, Inc.
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 TINA D.
HOSKING 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 25th
day of MAY, 1999.
/s/ Donald L. Bogdon
--------------------------------
DONALD L. BOGDON
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 25th day of May, 1999, personally appeared before me, DONALD
L. BOGDON, 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 25th day of May, 1999.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints TINA D.
HOSKING 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 25th
day of MAY, 1999.
/s/ H. Jerome Lerner
--------------------------------
H. JEROME LERNER
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 25th day of May, 1999, personally appeared before me, H. JEROME
LERNER, 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 25th day of May, 1999.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints TINA D.
HOSKING 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 25th
day of MAY, 1999.
/s/ Howard J. Levine
--------------------------------
HOWARD J. LEVINE
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 25th day of May, 1999, personally appeared before me, HOWARD
J. LEVINE, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 25th day of May, 1999.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints TINA D.
HOSKING 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 25th
day of MAY, 1999.
/s/ Angelo R. Mozilo
--------------------------------
ANGELO R. MOZILO
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 25th day of May, 1999, personally appeared before me, ANGELO
R. MOZILO, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 25th day of May, 1999.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints TINA D.
HOSKING 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 25th
day of MAY, 1999.
/s/ Fred A. Rappoport
--------------------------------
FRED A. RAPPOPORT
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 25th day of May, 1999, 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 25th day of May, 1999.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints TINA D.
HOSKING 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 25th
day of MAY, 1999.
/s/ Oscar P. Robertson
--------------------------------
OSCAR P. ROBERTSON
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 25th day of May, 1999, personally appeared before me, OSCAR P.
ROBERTSON, 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 25th day of May, 1999.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints TINA D.
HOSKING 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 25th
day of MAY, 1999.
/s/ John F. Seymour, Jr.
--------------------------------
JOHN F. SEYMOUR, JR.
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 25th day of May, 1999, personally appeared before me, JOHN F.
SEYMOUR, JR. known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 25th day of May, 1999.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, COUNTRYWIDE STRATEGIC TRUST, a business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter referred to as the
"Trust"), has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended, a registration statement with respect to the issuance and sale of
the shares of the Trust; and
WHEREAS, the undersigned is a Trustee of the Trust, as indicated beside
his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints TINA D.
HOSKING 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 25th
day of MAY, 1999.
/s/ Sebastiano Sterpa
--------------------------------
SEBASTIANO STERPA
Trustee
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
On the 25th day of May, 1999, personally appeared before me, SEBASTIANO
STERPA, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that he executed and delivered
the same for the purposes therein expressed.
WITNESS my hand and official seal this 25th day of May, 1999.
/s/ Elizabeth A. Santen
-----------------------------
Notary Public
Elizabeth Ann Santen
Notary Public, State of Ohio
My Commmission Expires April 6, 2002
