Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
Midwest Group Tax Free Trust
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii),
14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
MIDWEST GROUP TAX FREE TRUST
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 28, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
(Name of Fund)
The undersigned hereby appoints Robert H. Leshner and John F. Splain, and each
of them, as Proxies with power of substitution and hereby authorizes each of
them to represent and to vote as provided on the reverse side, all shares of
beneficial interest of the above Fund which the undersigned is entitled to vote
at the special meeting of shareholders to be held on February 28, 1997 or at any
adjournment thereof.
The undersigned acknowledges receipt of the Notice of Special Meeting and Proxy
Statement dated January 10, 1997.
Date: ____________________
NOTE: Please sign exactly as your
name appears on this proxy. If
signing for an estate, trust or
corporation, title or capacity
should be stated. If the shares
are held jointly, both signers
should sign, although the signature
of one will bind the other.
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--------------------------------
Signature(s) PLEASE SIGN IN BOX
ABOVE
<PAGE>
PLEASE INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOXES
BELOW, AS SHOWN, USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT
USE RED INK.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES INDICATED AND FOR THE PROPOSALS
DESCRIBED HEREIN
1. With respect to approval of a new investment advisory
agreement with Midwest Group Financial Services, Inc., to become
effective upon the closing of the proposed acquisition of Leshner
Financial, Inc. by Countrywide Credit Industries, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Authority to vote for the election of all nominees for
trustee as listed below (except as marked to the contrary below).
FOR WITHHOLD
[ ] [ ]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE(S), WRITE THAT NOMINEE'S NAME ON THE LINE BELOW.
D. Bogdon, J. Delfino, H.J. Lerner, R. Leshner, A. Mozilo,
O. Robertson, J. Seymour, S. Sterpa
3. With respect to ratification of the selection of Arthur Andersen LLP as the
Trust's independent public accountants for the current fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
PLEASE MARK YOUR PROXY, DATE AND SIGN IT ON THE REVERSE SIDE, AND
RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
Midwest Group Tax Free Trust
312 Walnut Street
Cincinnati, Ohio 45202
January 20, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Midwest Group Tax Free Trust to be held on Friday, February 28, 1997 at 10:00
a.m., Eastern time, in the 10th Floor Conference Center at 312 Walnut Street,
Cincinnati, Ohio 45202.
We have previously informed you of some recent developments involving
Midwest Group Financial Services, Inc. (the "Adviser"), the Trust's investment
adviser and principal underwriter, and its parent company, Leshner Financial,
Inc. ("LFI"). On December 10, 1996, the shareholders of LFI entered into an
Agreement for Exchange of Stock with Countrywide Credit Industries, Inc.
("CCI"), a publicly-held company and the nation's largest independent mortgage
lender and servicer. Pursuant to the Agreement, CCI will acquire all of the
outstanding stock of LFI.
Widely recognized as a skilled innovator of financial products and
services, CCI offers mortgage products to home buyers. In addition, CCI has a
loan servicing operation and variety of ancillary financial products and
services which augments its mortgage lending and servicing operations.
We view this transaction as very positive for a number of reasons. We
will have access to CCI's broad managerial, financial and technological
resources. Moreover, nothing will change regarding the management of the Trust
or the investment strategies we employ. The full team of investment
professionals assigned to the Trust will remain as it currently exists.
Moreover, founder Robert H. Leshner will continue his role as President of the
Trust and as Chairman of the Adviser.
This transaction with CCI will allow the present management team to stay
active in the Trust's operations without changing the existing corporate culture
or the delivery of client service. We believe that these events will further
strengthen the Trust as we plan for the future.
Under the Investment Company Act of 1940, the stock transaction is
considered an assignment of the investment advisory agreements between the
Adviser and the Trust. The advisory agreements require that we obtain approval
from shareholders of a new investment advisory agreement for each of the Funds
as a result of the transaction. Upon completion of such transaction, the Adviser
will change its name but will
<PAGE>
continue to carry on its business with its current management. You are also
being asked to elect a new slate of trustees and to ratify the selection of
Arthur Andersen LLP as the Trust's independent public accountants for the
current fiscal year.
The Board of Trustees has given full and careful consideration to each of
these matters and has concluded that the proposals are in the best interests of
the Trust and its shareholders. The Board of Trustees therefore recommends that
you vote "FOR" each of the matters discussed herein.
Regardless of the number of shares you own, it is important that they
are represented and voted. If you cannot personally attend the special
shareholders' meeting, we would appreciate your promptly voting, signing and
returning the enclosed proxy in the postage-paid envelope provided.
Very truly yours,
/s/ Robert H. Leshner
Robert H. Leshner
President
<PAGE>
MIDWEST GROUP TAX FREE TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on February 28, 1997
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of
Midwest Group Tax Free Trust (the "Trust") will be held in the 10th Floor
Conference Center at 312 Walnut Street, Cincinnati, Ohio 45202, on Friday,
February 28, 1997 at 10:00 a.m., Eastern time, to consider and vote on the
following matters:
1. To approve or disapprove, with respect to each series of the
Trust, a new investment advisory agreement with Midwest
Group Financial Services, Inc., to become effective upon the
closing of the proposed acquisition of Leshner Financial,
Inc. by Countrywide Credit Industries, Inc. No fee increase is
proposed;
2. To elect eight trustees, each to serve until his successor
is duly elected and shall qualify;
3. To ratify or reject the selection of Arthur Andersen LLP as
the Trust's independent public accountants for the current
fiscal year. No change in accountants is proposed; and
4. To transact any other business, not currently contemplated,
that may properly come before the meeting in the discretion
of the proxies or their substitutes.
Shareholders of record at the close of business on January 3, 1997, are
entitled to notice of and to vote at this meeting or any adjournment thereof.
By order of the Board of Trustees,
/s/ John F. Splain
John F. Splain
January 10, 1997 Secretary
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Please execute the enclosed proxy and return it promptly in the enclosed
envelope, thus avoiding unnecessary expense and delay. No postage is required if
mailed in the United States. The proxy is revocable and will not affect your
right to vote in person if you attend the meeting.
<PAGE>
MIDWEST GROUP TAX FREE TRUST
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on February 28, 1997
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PROXY STATEMENT
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This proxy statement is furnished in connection with the solicitation
by the Board of Trustees of Midwest Group Tax Free Trust ("the Trust") of
proxies for use at the special meeting of shareholders or at any adjournment
thereof. The proxy statement and form of proxy were first mailed to shareholders
on or about January 20, 1997.
The purpose of the meeting is to consider approval of new investment
advisory agreements between Midwest Group Financial Services, Inc. (the
"Adviser") and the Trust as a result of a proposed transaction whereby the
Adviser, by means of an exchange of stock of the Adviser's parent company, will
become a wholly-owned indirect subsidiary of Countrywide Credit Industries, Inc.
("CCI"). Upon completion of such transaction, it is anticipated that the Adviser
will continue to carry on its business with its current management at its
current location. Shareholders are being asked to elect a new slate of trustees,
subject to consummation of the proposed transaction. Shareholders are also being
asked to ratify the selection of Arthur Andersen LLP as the Trust's independent
public accountants.
A proxy, if properly executed, duly returned and not revoked, will be
voted in accordance with the specifications thereon. A proxy which is properly
executed that has no voting instructions with respect to a proposal will be
voted for that proposal. A shareholder may revoke a proxy at any time prior to
use by filing with the Secretary of the Trust an instrument revoking the proxy,
by submitting a proxy bearing a later date, or by attending and voting at the
meeting.
The Trust has retained Management Information Services Corp. ("MIS") to
solicit proxies for the special meeting. MIS is responsible for printing proxy
cards, mailing proxy material to shareholders, soliciting brokers, custodians,
nominees and fiduciaries, tabulating the returned proxies and performing other
proxy solicitation services. The anticipated cost of such services is
approximately $15,000, and will be paid by LFI. LFI will also pay the printing
and postage costs of the solicitation.
In addition to solicitation through the mail, proxies may be solicited
by officers, employees and agents of the Trust without cost to the Trust. Such
solicitation may be by telephone, facsimile or otherwise. LFI will reimburse
MIS, brokers, custodians, nominees and fiduciaries for the reasonable expenses
incurred by them in connection with forwarding solicitation material to the
beneficial owners of shares held of record by such persons.
<PAGE>
The Trust's annual report for the fiscal year ended June 30, 1996 is
available at no charge by writing to the Trust at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202-4094, or by calling the Trust nationwide toll-free
800-543-0407, in Cincinnati 629-2050.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on January 3,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the special meeting of shareholders or any adjournment
thereof. The Trust is composed of six separate funds, the Tax-Free Money Fund,
the Tax- Free Intermediate Term Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Fund, the California Tax-Free Money Fund and the Royal Palm
Florida Tax-Free Money Fund (individually a "Fund" and collectively, the
"Funds"), each of which is represented by a separate series of the Trust's
shares. The Ohio Tax-Free Money Fund and the Royal Palm Florida Tax-Free Money
Fund series each offer two classes of shares, Class A and Class B shares. The
Tax-Free Intermediate Term Fund and the Ohio Insured Tax-Free Fund series each
offer two classes of shares, Class A and Class C shares. As of the record date
there were 413,203,431.153 shares of beneficial interest, no par value, of the
Trust outstanding, comprised of 37,336,296.190 shares of the Tax-Free Money
Fund, 6,318,671.795 shares of the Tax-Free Intermediate Term Fund, 6,337,259.568
shares of the Ohio Insured Tax-Free Fund, 275,002,715.930 shares of the Ohio
Tax-Free Money Fund, 38,651,042.500 shares of the California Tax-Free Money Fund
and 49,557,445.170 shares of the Royal Palm Florida Tax-Free Money Fund. All
full shares of the Trust are entitled to one vote, with proportionate voting for
fractional shares.
On January 3, 1997, Carole A. Steiger, Anthony B. Ullman Trustees c/o
Island Investor Services, 180 Royal Palm Way, Palm Beach, Florida owned of
record 11.0% of the outstanding shares of the Tax-Free Money Fund; FIRST CINCO,
P.O. Box 640229, Cincinnati, Ohio owned of record 10.7% of the outstanding
shares of the Tax-Free Money Fund; The Charles Lazerwitz Management Trust I,
8901 E. Fifth Avenue, Gary, Indiana owned of record 5.3% of the outstanding
shares of the Tax-Free Money Fund; BHC Securities Inc., 2005 Market Street,
Philadelphia, Pennsylvania owned of record 14.5% and 6.0% of the outstanding
shares of the Ohio Tax-Free Money Fund and the Royal Palm Florida Tax-Free Money
Fund, respectively; Bear, Stearns & Co., Inc. FBO #0338115918, One Metrotech
Center North, Brooklyn, New York owned of record 9.4% of the outstanding shares
of the California Tax- Free Money Fund; and Lawrence B. Taishoff, 3124 Collee
Court, Naples, Florida owned of record 6.0% of the outstanding shares of the
Royal Palm Florida Tax-Free Money Fund. On January 3, 1997, The Fifth Third Bank
Trust Department, 38 Fountain Square Plaza, Cincinnati, Ohio owned of record
24.8% of the Trust's outstanding shares, including 34.8% of the outstanding
shares of the Ohio
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Tax-Free Money Fund and 13.5% of the outstanding shares of the Royal Palm
Florida Tax-Free Money Fund. The Fifth Third Bank may be deemed to control the
Ohio Tax-Free Money Fund by virtue of the fact that it owns of record more than
25% of the outstanding shares of such Fund. On the same date, The Huntington
Trust Company, N.A. Trust Department, 41 S. High Street HC 1024, Columbus, Ohio
owned of record 33.8% of the outstanding shares of the Royal Palm Florida
Tax-Free Money Fund. The Huntington Trust Company may be deemed to control the
Royal Palm Florida Tax-Free Money Fund by virtue of the fact that it owns of
record more than 25% of the outstanding shares of such Fund. No other person
owned of record and, according to information available to the Trust, no other
person owned beneficially, 5% or more of the outstanding shares of the Trust (or
any Fund) on the record date.
If a quorum (more than 50% of the outstanding shares of the Trust and
of each Fund) is represented at the meeting, the vote of a majority of the
outstanding shares of a Fund is required for approval of the new investment
advisory agreement with the Adviser with respect to that Fund (Item I below).
The vote of a majority of the outstanding shares for purposes of Item I means
the vote of the lesser of (1) 67% or more of the shares present or represented
by proxy at the meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or (2) more than 50% of the
outstanding shares. The vote of a plurality of the Trust's shares represented at
the meeting is required for the election of trustees (Item II below). The vote
of a simple majority of the shares voted is required for ratification of the
selection of Arthur Andersen LLP as the independent public accountants for each
Fund (Item III below).
If the meeting is called to order but a quorum is not represented at the
meeting, the persons named as proxies may vote those proxies which have been
received to adjourn the meeting to a later date. If a quorum is present at the
meeting but sufficient votes to approve the proposals described herein are not
received, the persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
meeting in person or by proxy. The persons named as proxies will vote those
proxies received which voted in favor of a proposal in favor of such an
adjournment and will vote those proxies received which voted against a proposal
against any such adjournment. A shareholder vote may be taken on one or more of
the proposals in this proxy statement prior to any such adjournment if
sufficient votes have been received and it is otherwise appropriate. Abstentions
and "broker non-votes" are counted for purposes of determining whether a quorum
is present but do not represent votes cast with respect to a proposal. "Broker
non-votes" are shares held by a broker or nominee for which an executed proxy is
received by the Trust, but are not voted as to one or more proposals because
instructions have not been received from the
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beneficial owners or persons entitled to vote and the broker or nominee does not
have discretionary voting power.
The trustees of the Trust intend to vote all of their shares in favor
of the proposals described herein. On the record date, all nominees for election
of trustees and officers as a group owned of record or beneficially less than 1%
of the outstanding shares of each of the Funds.
I. APPROVAL OR DISAPPROVAL OF NEW INVESTMENT ADVISORY
AGREEMENTS WITH MIDWEST GROUP FINANCIAL SERVICES, INC.
TERMS OF THE ACQUISITION. Pursuant to an Agreement for Exchange of
Stock (the "Acquisition Agreement") dated December 10, 1996 between CCI and the
shareholders of Leshner Financial, Inc. ("LFI"), CCI has agreed to acquire all
of the outstanding common stock of LFI in exchange for newly issued common stock
of CCI (the "Acquisition"). The Adviser is a wholly-owned subsidiary of LFI, of
which Robert H. Leshner is the controlling shareholder. MGF Service Corp.
("MGF"), the Trust's administrator, transfer agent and accounting and pricing
agent, is also a wholly-owned subsidiary of LFI. As a result of the Acquisition,
the Adviser and MGF will become wholly-owned indirect subsidiaries of CCI. The
value of the CCI common stock to be issued in the Acquisition is $18.5 million,
subject to certain adjustments in the event that the trading price of CCI common
stock at the closing is either greater than $29 per share or less than $24 per
share. Pursuant to the Acquisition Agreement, $2.5 million of the purchase price
payable to Mr. Leshner and members of his family will be withheld at closing and
paid over the next five years based on the achievement of specified pre-tax
earnings goals.
The consummation of the Acquisition is subject to the satisfaction of
various conditions subsequent to closing, including, but not limited to,
obtaining shareholder approval of new investment advisory agreements for the
Funds and the other funds within the Midwest Group complex, such that the assets
under management by the Adviser under such new agreements are at least 90% of
the amount of assets managed under the present investment advisory agreements on
the date the Acquisition Agreement was executed; obtaining approval of new
servicing agreements between MGF and its other investment company clients from
each client's board, such that the projected fee income under all such new
agreements is at least 90% of the projected fee income under the present
servicing agreements; obtaining consent to the assignment of non-investment
company advisory contracts of the Adviser, such that projected fee income for
such contracts for which consent has been given is at least 90% of the projected
fee income for all such contracts presently in force;
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<PAGE>
any further consents and regulatory approvals required to consummate the
Acquisition; favorable composition, in the sole discretion of CCI, of the Board
of Trustees of the Trust and the other funds within the Midwest Group complex,
which shall be in compliance with Section 15(f) of the Investment Company Act of
1940 (the "1940 Act"); the execution and delivery of an employment and
non-competition agreement from certain key employees of LFI and its
subsidiaries; the receipt by the parties to the Acquisition Agreement of certain
legal and tax opinions; the absence of any litigation or other event prior to
consummation of the Acquisition that could have a material adverse affect on LFI
or its subsidiaries; and the receipt of an opinion and independent appraisal
which provides that the Acquisition is fair to the participants in LFI's
Employee Stock Ownership Plan and that the fair market value of the LFI shares
held by LFI's Employee Stock Ownership Plan is not greater than the
consideration to be received by the participants in connection with the
Acquisition.
The Acquisition Agreement contemplates that certain key personnel of the
Adviser will enter into employment and non-competition agreements with CCI,
which is intended to assure that the Adviser will continue to operate with its
same investment personnel and officers. Upon completion of the Acquisition, the
Adviser expects to retain the services of all of its current management
personnel, including Robert H. Leshner, who intends to enter into a five-year
employment agreement with CCI. Furthermore, no changes in the Adviser's method
of operation, or the location where it conducts its business, are contemplated.
Under the 1940 Act, a transaction which results in a change of control
or management of an investment adviser may be deemed an "assignment." The 1940
Act further provides that an investment advisory agreement will automatically
terminate in the event of its assignment. The Acquisition constitutes a "change
in control" of the Adviser for purposes of the 1940 Act and will cause the
"assignment" and resulting termination of the present investment advisory
agreements. Accordingly, the Board of Trustees recommends that new investment
advisory agreements (the "New Management Agreements") between the Trust and the
Adviser, on behalf of each Fund, be approved by shareholders of the applicable
Fund.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive any amount or benefit in connection therewith as
long as two conditions are satisfied. First, an "unfair burden" must not be
imposed on the investment company as a result of the transaction relating to the
change of control, or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden"
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includes any arrangement during the two-year period after the change in control
whereby the investment adviser (or predecessor or successor adviser), or any
interested person of any such adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
security holders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from, or on behalf of the investment company
(other than fees for bona fide principal underwriting services). No such
compensation arrangements are contemplated as a result of the Acquisition.
The second condition is that, during the three-year period immediately
following consummation of the transaction, at least 75% of the Trust's Board of
Trustees must not be "interested persons" of the investment adviser or
predecessor investment adviser within the meaning of the 1940 Act. No interested
person of the Adviser within the meaning of the 1940 Act will serve on the Board
of Trustees of the Trust during such period if such service would cause this
condition to be violated.
THE PRESENT MANAGEMENT AGREEMENTS. The Adviser currently provides
investment advisory services to the Funds pursuant to two separate investment
advisory agreements between the Trust and the Adviser, which are substantially
identical to each other in all respects except for different effective and
termination dates. Each of the current investment advisory agreements are
referred to individually as a "Present Management Agreement" and collectively as
the "Present Management Agreements." The Present Management Agreement with
respect to the Tax-Free Money Fund, the Tax-Free Intermediate Term Fund, the
Ohio Insured Tax-Free Fund, the Ohio Tax-Free Money Fund and the California
Tax-Free Money Fund is dated January 30, 1990 and was approved by shareholders
of each Fund on that date. The Present Management Agreement with respect to the
Royal Palm Florida Tax-Free Money Fund is dated November 1, 1992 and was
approved by shareholders of such Fund on January 27, 1994. The Present
Management Agreements were last approved by the Board of Trustees, including a
majority of the Trustees who are not interested persons, as defined in the 1940
Act, of the Adviser or the Trust (the "Independent Trustees"), on December 11,
1996.
THE NEW MANAGEMENT AGREEMENTS. The terms and conditions of the New
Management Agreements are substantially identical in all material respects to
those of the Present Management Agreements with the exception of a change in the
effective date and the termination date and the removal of three provisions
contained in the Present Management Agreements which management of the Trust
believe to be non-material:
(1) The New Management Agreements will not provide, as do
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the Present Management Agreements, that the Funds will pay the
compensation and expenses of the Chief Financial Officer of the Trust
since, in the past, the Funds have not actually paid these expenses.
The removal of this provision will not result in a reduction in the
expenses of any Fund.
(2) The New Management Agreements do not contain a provision requiring
the Adviser to reduce its compensation during any fiscal year in the
event expenses exceed the lowest expense limitations imposed by state
securities administrators in the states where a Fund's shares are
qualified for sale. This language has not been provided for in the New
Management Agreements because of the enactment, in October 1996, of the
National Securities Markets Improvement Act of 1996, which eliminates
substantive state regulation of mutual funds.
(3) The final provision contained in the Present Management Agreements
but which is not included in the New Management Agreements is one which
permits the Adviser to use the name "Midwest" or "Midwest Group" in
connection with another business enterprise in which the Adviser is, or
may become associated. This provision has been removed because the name
of the Trust will be changed to "Countrywide Tax-Free Trust" upon
completion of the Acquisition. It is contemplated that CCI will retain
all rights to the name "Countrywide" by means of a Licensing Agreement
to be entered into between CCI and the Trust.
Each Fund will separately enter into a New Management Agreement with the
Adviser, each containing substantially identical terms and conditions. Under the
New Management Agreements, the Adviser will select portfolio securities for
investment by the Funds, purchase and sell securities of the Funds, and upon
making any purchase or sale decision, place orders for the execution of such
portfolio transactions, all in accordance with the 1940 Act and any rules
thereunder, the supervision and control of the Board of Trustees of the Trust,
such specific instructions as the Board of Trustees may adopt and communicate to
the Adviser and the investment objectives, policies and restrictions of the
Funds. Under the New Management Agreements, the Adviser will receive from each
Fund a fee, computed and accrued daily and paid monthly, at an annual rate of
.50% of the average daily net assets of such Fund up to $100 million; .45% of
the next $100 million of such assets; .40% of the next $100 million of such
assets; and .375% of such assets in excess of $300 million. This is the same fee
that the Adviser currently receives from each Fund under its Present Management
Agreement. During the fiscal year ended June 30, 1996, the Tax- Free Money Fund,
the Tax-Free Intermediate Term Fund, the Ohio
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Insured Tax-Free Fund, the Ohio Tax-Free Money Fund, the California Tax-Free
Money Fund and the Royal Palm Florida Tax- Free Money Fund paid to the Adviser
advisory fees (net of voluntary fee waivers) of $140,891, $398,576, $394,557,
$1,117,233, $135,543 and $94,379, respectively. There is no assurance that any
fee waivers will continue in the future.
If the New Management Agreements are approved by shareholders of the Funds,
they will become effective upon the consummation of the Acquisition. The New
Management Agreements provide that they will remain in force for an initial term
of two years, and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of a majority (as defined in the 1940
Act) of the outstanding shares of a Fund; provided that in either event
continuance is also approved by a majority of the Independent Trustees, by a
vote cast in person at a meeting called for the purpose of voting such approval.
The New Management Agreements may be terminated at any time, on sixty days'
written notice, without the payment of any penalty, by the Board of Trustees, by
a vote of a majority of the outstanding voting securities of a Fund, or by the
Adviser. The New Management Agreements automatically terminate in the event of
their assignment, as defined by the 1940 Act and the rules thereunder.
The New Management Agreements provide that the Adviser shall not be
liable for any action taken or omitted to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights conferred upon it by such Agreement, or in accordance with
specific instructions from the Trust, provided that such acts or omissions shall
not have resulted from the Adviser's willful misfeasance, bad faith or gross
negligence, a violation of the standard of care established by and applicable to
the Adviser in its actions under such Agreement, or breach of its obligations
thereunder.
The form of the New Management Agreements is attached as Exhibit A. The
description set forth in this Proxy Statement of the New Management Agreements
is qualified in its entirety by reference to Exhibit A.
In the event that shareholders of a Fund do not approve the New
Management Agreement with respect to such Fund and the Acquisition is
consummated, the Board of Trustees will promptly seek to obtain for such Fund
interim advisory services either from the Adviser or from another advisory
organization. Thereafter, the Board of Trustees would either negotiate a new
investment advisory agreement with an advisory organization selected by the
Board or make other appropriate arrangements, in either event subject to
approval by the shareholders of the Fund.
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<PAGE>
In the event the Acquisition is not consummated for any reason, the Adviser will
continue to serve as the investment adviser of the Funds pursuant to the terms
of the Present Advisory Agreements.
INFORMATION CONCERNING CCI. CCI is a New York Stock Exchange listed
company principally engaged in residential mortgage lending. CCI offers a
variety of mortgage products to home buyers, including home equity loans and
subprime credit quality first-lien mortgages. In addition, CCI has a loan
servicing operation which serves over 1.4 million homeowners as well as a
variety of ancillary financial products and services which augment its mortgage
lending and servicing operations. Founded in 1969, CCI is the nation's largest
independent residential mortgage lender and servicer. CCI has more than 5,500
employees and 350 offices across the nation. Angelo R. Mozilo, who has been
nominated to serve as a trustee of the Trust, is the Vice Chairman of the Board
and Executive Vice President of CCI. According to recent reports filed with the
Securities and Exchange Commission, Neuberger & Berman, 605 Third Avenue, New
York, New York 10158, is the beneficial owner of 14.6% of the outstanding shares
of CCI common stock and Oppenheimer Group, Inc., Oppenheimer Tower, World
Financial Center, New York, New York 10281, is the beneficial owner of 15.6% of
the outstanding shares of CCI common stock.
INFORMATION CONCERNING THE ADVISER. The Adviser is a wholly-owned
subsidiary of LFI, of which Robert H. Leshner is the controlling shareholder.
The Adviser also serves as the Trust's principal underwriter. If the Acquisition
is consummated, the Adviser will continue to serve as the Trust's principal
underwriter pursuant to the terms of a new underwriting agreement which was
approved by the Board of Trustees, including a majority of the Independent
Trustees, on December 11, 1996.
Mr. Leshner, his wife and two daughters together own of record and
beneficially 64.2% of the issued and outstanding shares of LFI. Mr. Leshner,
in his capacity as trustee of LFI's Employee Stock Ownership Plan, is the
record owner of an additional 32.2% of the issued and outstanding shares of LFI.
James A. Markley, Jr. and Noretta Markley, as trustees of the Noretta Markley
Trust, are the record owners of 3.6% of the issued and outstanding shares
of LFI.
During LFI's fiscal year ended September 30, 1996, Mr. Leshner
purchased a total of 8,441.75 shares (representing approximately 7.4% of the
outstanding shares) of the common stock of LFI from three officers of LFI.
During such fiscal year, LFI purchased and retired as treasury shares a total of
1,840.5 shares (representing approximately 1.6% of the outstanding shares) of
its common stock from two officers of LFI. The purchase price for each
transaction was $163 per share. Upon
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<PAGE>
consummation of the Acquisition, the current shareholders of LFI will own of
record and beneficially less than 1% of the outstanding common shares of CCI.
The directors and principal executive officers of the Adviser are
Robert H. Leshner, who is Chairman of the Board and a director of the Adviser,
MGF and LFI; Michael F. Andrews, who is President of the Adviser and a director
and Vice President of LFI; and James A. Markley, Jr., who is a director of the
Adviser, MGF and LFI and is also President of LFI. The address of the Adviser
and of each director and principal executive officer is 312 Walnut Street,
Cincinnati, Ohio 45202.
The Adviser serves as investment adviser to the following affiliated
registered investment companies listed below:
<TABLE>
<C> <C> <C>
Amount of the
Net Assets as of Adviser's Annual
Name of Fund December 31, 1996 Advisory Fees
- ------------ ----------------- -------------
Midwest Trust:
Short Term Government With respect to each
Income Fund $98,489,436 Fund, .50% of average
Intermediate Term 57,617,457 daily net assets up
Government Income Fund to $50 million; .45%
Adjustable Rate U.S. 14,269,802 of next $100 million
Government Securities of such assets; .40%
Fund* of next $100 million
of such assets; and
.375% of such assets
in excess of $250
million
Institutional 39,717,199 .20% of average daily
Government Income Fund* net assets
Global Bond Fund* 19,242,377 .70% of average
daily net assets up
to $100 million and
.60% of such assets in
excess of $100 million
Midwest Strategic
Trust:
U.S. Government With respect to each
Securities Fund* $ 20,574,996 Fund, .75% of average
Treasury Total daily net assets up to
Return Fund* 11,211,196 $200 million; .70% of
Utility Fund 42,381,631 next $300 million of
Equity Fund* 16,714,752 such assets; and .50% of
such assets in excess of
$500 million
</TABLE>
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<PAGE>
* During the 1996 fiscal year, the Adviser waived all or a
portion of its advisory fees for such funds. There is no
assurance that any fee waivers will continue in the future.
INFORMATION CONCERNING MGF. MGF provides transfer agency, shareholder
servicing and accounting and pricing services to the Funds. The address of MGF
is 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. During the fiscal year
ended June 30, 1996, MGF received fees from the Funds for its services as
transfer and shareholder servicing agent and accounting and pricing services
agent as follows:
As Transfer As Accounting
and Shareholder and Pricing
Servicing Agent Services Agent
Tax-Free Money Fund $ 25,208 $39,000
Tax-Free Intermediate Term Fund 84,503 57,000
Ohio Insured Tax-Free Fund 52,277 57,000
Ohio Tax-Free Money Fund 71,194 45,000
California Tax-Free Money Fund 14,237 39,000
Royal Palm Florida Tax-Free Money Fund 13,000 40,000
MGF is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, MGF supplies executive,
administrative and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and reports
to and filings with the Securities and Exchange Commission and state securities
authorities. The Adviser (not the Funds) pays MGF a fee for these services equal
to .1% of the average value of each Fund's daily net assets.
If the Acquisition is consummated, MGF will continue to provide
transfer agent, accounting and pricing and administrative services to the Trust
at the same rates as are currently in effect pursuant to new service agreements
which were approved by the Board of Trustees, including a majority of the
Independent Trustees, on December 11, 1996.
EVALUATION BY THE BOARD OF TRUSTEES. On December 11, 1996, the Board of
Trustees, including a majority of the Independent Trustees, by vote cast in
person, unanimously approved, subject to the required shareholder approval
described herein, the New Management Agreements. Prior to such approval, the
Independent Trustees met separately with their counsel, which did not represent
either LFI or CCI, for the purpose of assisting them in reaching a determination
with respect to the New Management Agreements.
In considering approval of the New Management Agreements,
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<PAGE>
the Board of Trustees carefully evaluated information they deemed necessary to
enable them to determine whether the New Management Agreements will be in the
best interests of each Fund and its shareholders. In making this recommendation,
the Trustees evaluated the experience of the Adviser's key personnel in
investing, the quality of services the Adviser is expected to provide to the
Funds and the compensation proposed to be paid to the Adviser. The Trustees have
given careful consideration to all factors deemed to be relevant to the Trust,
including, but not limited to: (1) the fees and expense ratios of comparable
mutual funds; (2) the performance of the Funds as compared to similar mutual
funds; (3) the nature and quality of the services expected to be rendered to the
Trust by the Adviser; (4) the distinct investment objective and policies of each
Fund; (5) the research services received by the Adviser from brokers as a result
of placement of the Funds' brokerage, which may benefit the Funds; (6) that the
compensation payable to the Adviser under the New Management Agreements will be
at the same rate as the compensation now payable to the Adviser under the
Present Management Agreements; (7) that the terms of the New Management
Agreements are substantially identical in all material respects as the terms of
the Present Management Agreements except for different effective and termination
dates and the removal of several non-material provisions; (8) the history,
reputation, qualification and background of the Adviser and CCI and their
respective financial conditions, as well as the qualifications of their
personnel; (9) the commitment of LFI to pay or reimburse the Trust for the
expenses incurred in connection with the Acquisition; and (10) the substantial
benefits expected to be realized as a result of the Adviser's ownership by CCI,
such as the potential for increasing Fund assets and the opportunity to gain
access to CCI's managerial and technological resources.
In making the determination to recommend approval of the New Management
Agreements to shareholders of the Trust, the Board of Trustees gave substantial
weight to the Adviser's representations that (i) the Acquisition should benefit
the Adviser and the Funds by preserving the Adviser's independent management
structure and portfolio management style, while providing stability from a
strengthening balance sheet, more attractive financial incentives to the
Adviser's employees and increased resources for the Adviser's operations; (ii)
the Acquisition will not materially affect the advisory operations of the
Adviser or the level or quality of advisory services provided to the Funds;
(iii) the same personnel of the Adviser who currently provide services to the
Trust will continue to do so after the Acquisition; (iv) the Trust will not be
subject to any unfair burden as a result of the Acquisition; (v) access to CCI's
broad managerial, financial and technological resources should allow the Adviser
to increase the range and quality of services provided to the Trust; and (vi)
the
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<PAGE>
Acquisition could potentially result in an increase in assets of the Funds,
thereby possibly reducing the effective rate of the Adviser's fees and other
expenses of the Funds. In considering approval of the New Management Agreements,
the Board of Trustees reviewed the most recent audited financial statements of
the Adviser and of CCI. The Board of Trustees believes that the Acquisition
should benefit the Adviser and the Funds and that the Funds should receive
investment advisory services under the New Management Agreements equal or
superior to those currently received under the Present Management Agreements, at
the same fee levels. The Board of Trustees therefore unanimously recommends
approval of the New Management Agreements by shareholders of each Fund.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS APPROVE THE NEW
MANAGEMENT AGREEMENTS.
II. ELECTION OF TRUSTEES TO SERVE UPON CONSUMMATION OF THE ACQUISITION
On January 8, 1997, the Board of Trustees, including a majority of the
Independent Trustees, met to review pertinent information on the nominees for
election to the Board of Trustees and unanimously determined to nominate each of
the individuals named below to serve on the Board, subject to the required
shareholder approval. At such meeting, the Independent Trustees were represented
by their counsel for the purpose of assisting them in reaching a determination
with respect to the nominees.
Five individuals not currently serving on the Board of Trustees have
been nominated to serve as trustees, effective upon the consummation of the
Acquisition. If elected by shareholders, the five nominees will serve together
with three members of the present Board of Trustees, Robert H. Leshner, H.
Jerome Lerner and Oscar P. Robertson. Upon consummation of the Acquisition,
Dale P. Brown, Gary W. Heldman, Richard A. Lipsey, Donald J. Rahilly, Fred A.
Rappoport and Robert B. Sumerel intend to resign from the Board of Trustees.
In the event the Acquisition is not consummated for any reason, the members of
the present Board of Trustees will continue to serve as trustees. Consummation
of the Acquisition is conditioned upon satisfactory composition of the
Board of Trustees, in the sole discretion of CCI.
Eight nominees are to be elected, each to serve until his or her
successor is duly elected and shall qualify. The current Independent Trustees
reserve the right to substitute another person or persons of their choice as
nominee or nominees if a nominee is unable to serve as a trustee at the time of
the meeting for any reason. Nothing, however, indicates that such a situation
will arise. The following table sets forth certain
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<PAGE>
information regarding each nominee for election as a trustee by
shareholders.
Compensation During
Amount of the Fiscal Year
Name and Principal Occupation Beneficial Ended June 30, 1996
During the Past Five Years Ownership From:
and Directorships of Trustee of Shares of The The Midwest
Public Companies Age Since the Trust (1) Trust Complex(2)
- ---------------------- --- ------- ------------- ----- ---------
DONALD L. BOGDON, M.D. 66 Nominee None -- --
Physician with Hematology
Oncology Consultants and
director of Verdugo VNA
(a hospice facility). He
was formerly President of
Western Hematology/Oncology
(1971-1996) and Chairman of
the Board of Glendale
Memorial Hospital (1991-1993).
JOHN R. DELFINO 63 Nominee None -- --
President of Concorde Capital
Corporation (an investment firm).
He was formerly a director of
Cypress Financial (1984-1993)
and Chairman of Rancho Santa
Margarita (1989-1993), mortgage
banking firms.
H. JEROME LERNER 58 1981 31,760.11 $2,467 $7,500
Principal of HJL Enterprises shares of
and Chairman of Crane the Tax-Free
Electronics, Inc. (a Money Fund;
manufacturer of electronic 184,352.18
connectors). He is also shares of the
a trustee of Midwest Trust Ohio Tax-Free
and Midwest Strategic Trust. Money Fund
- 14 -
<PAGE>
*ROBERT H. LESHNER 57 1981 214,947.42 $0 $0
Chairman of the Board shares of
of Midwest Group the Ohio
Financial Services, Inc. Tax-Free
(the investment adviser Money Fund
and principal underwriter
of the Trust), MGF
Service Corp. (a
registered transfer
agent) and Leshner
Financial, Inc. (a
financial services
company and parent of
Midwest Group
Financial Services, Inc.
and MGF Service Corp.).
He is also President and
a trustee of Midwest
Trust and Midwest
Strategic Trust.
**ANGELO R. MOZILO 58 Nominee None -- --
Vice Chairman of the
Board and Executive
Vice President of
Countrywide Credit
Industries, Inc. He is
also President and a
director of CWM Mortgage
Holdings, Inc. (a publicly-
held real estate investment
trust managed by CCI).
OSCAR P. ROBERTSON 57 1981 None $2,267 $5,700
President of Orchem Corp.
(a chemical specialties
distributor) and Orpack
Stone Corporation (a
corrugated box
manufacturer). He is also
a trustee of Midwest
Trust and Midwest
Strategic Trust.
JOHN F. SEYMOUR, JR. 59 Nominee None -- --
Chief Executive Officer
of the Southern California
Housing Development Agency
and a consultant for Orange
Coast Title Co. (a mortgage
title insurance company).
He is also a director of
Irvine Apartment Communities
(a real estate investment
trust) and Inco Homes (a
- 15 -
<PAGE>
home builder). He was
formerly a Senator in
the United States
Congress (1991-2)
and a director of the
California Housing
Finance Agency (1993-4).
SEBASTIANO STERPA 67 Nominee None -- --
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.
(1) Voting and investment power as of January 3, 1997. Unless otherwise
indicated, the percentage of shares of a Fund owned beneficially by any nominee
does not exceed one percent of the outstanding shares of such Fund.
(2) The Midwest Complex consists of the Trust, Midwest Trust and
Midwest Strategic Trust.
* Robert H. Leshner, as an affiliated person of Midwest Group Financial
Services, Inc., the Trust's investment adviser and principal
underwriter, is an "interested person" of the Trust within the meaning
of Section 2(a)(19) of the 1940 Act. Mr. Leshner may directly or
indirectly receive benefits from the New Management Agreements as a
result of such affiliation.
** Angelo R. Mozilo, as an affiliated person of Countrywide Credit Industries,
Inc., will be an "interested person" of the Trust within the meaning of
Section 2(a)(19) of the 1940 Act. Mr. Mozilo may directly or indirectly
receive benefits from the New Management Agreements as a result of such
affiliation.
*** On February 2, 1996, an involuntary petition under Chapter 7 of the U.S.
Bankruptcy Code was filed by creditors against Orchem, Inc., of which
Mr. Robertson was the chief executive officer. The case was subsequently
converted to a Chapter 11 bankruptcy and is still pending in the U.S.
Bankruptcy Court.
Dr. Bogdon and Messrs. Delfino and Sterpa currently have outstanding
mortgage loans through CCI. Each mortgage loan was entered into as a result of
an arm's length transaction at competitive interest rates. Each of such loans
was placed prior to the beginning of the last two completed fiscal years of the
Trust. The outstanding aggregate balances of such loans are approximately
$315,000 for Dr. Bogdon, $950,000 for Mr. Delfino and $954,000 for Mr. Sterpa.
In addition, since April 15, 1989, CCI has leased a commercial property from Mr.
Sterpa at a competitive monthly rate of approximately $2,520.
All nominees have consented to being named in this proxy statement and
have agreed to serve if elected. Each nominee is also standing for election as a
trustee of Midwest Trust and Midwest Strategic Trust. Trustees on the Board who
are not
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<PAGE>
interested persons of the Trust will receive a quarterly retainer of $1,000 plus
$750 for each Board meeting attended. Such fees are split equally among the
Trust, Midwest Trust and Midwest Strategic Trust.
The Trust has an Audit Committee currently consisting of Dale P. Brown,
H. Jerome Lerner and Richard A. Lipsey. If all of the nominees to serve on the
Board are elected by shareholders, it is anticipated that the Audit Committee
will consist of Mr. Lerner and two nominees for election as trustees who are not
interested persons of the Trust or the Adviser. The Audit Committee makes
recommendations to the Board of Trustees concerning the selection of the Trust's
independent public accountants, reviews with such accountants the scope and
results of the Trust's annual audit, reviews the semiannual financial reports of
the Trust and considers any comments which the accountants may have regarding
the Trust's financial statements or books of account. Audit Committee members
will each receive $300 ($100 payable by each of the Trust, Midwest Trust and
Midwest Strategic Trust) for attending an Audit Committee meeting.
During the fiscal year ended June 30, 1996, the Board of Trustees and
the Audit Committee each held four meetings. During such fiscal year, each
trustee attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Trustees (held during the period during which he has
been a trustee) and (ii) the total number of meetings held by the committee of
the Board of Trustees on which he served.
EXECUTIVE OFFICERS. The Trust's executive officers are set forth
below. The business address of each officer is 312 Walnut Street, Cincinnati,
Ohio 45202.
Name and Principal Occupation Officer Position with
During the Past Five Years Age Since the Trust
- ---------------------------- ---- ------- --------------
ROBERT H. LESHNER 57 1981 President
(See page 14) and Trustee
JOHN F. SPLAIN 40 1988 Secretary
Secretary and General Counsel
of Leshner Financial, Inc.,
Midwest Group Financial
Services, Inc. and MGF Service
Corp. He is also Secretary of
Midwest Trust, Midwest Strategic
Trust, Brundage, Story and Rose
Investment Trust, Williamsburg
Investment Trust, Markman
MultiFund Trust, The Tuscarora
- 17 -
<PAGE>
Investment Trust, PRAGMA
Investment Trust, Maplewood
Investment Trust and The Thermo
Opportunity Fund, Inc. and Assistant
Secretary of Fremont Mutual Funds,
Inc., Schwartz Investment
Trust, The Gannett Welsh & Kotler
Funds and Capitol Square Funds
(all of which are registered
investment companies).
MARK J. SEGER, C.P.A. 35 1989
Treasurer
Vice President of Leshner
Financial, Inc. and MGF
Service Corp. He is also
Treasurer of Midwest
Trust, Midwest Strategic
Trust, Brundage, Story
and Rose Investment
Trust, Williamsburg Investment
Trust, Markman MultiFund
Trust, PRAGMA Investment Trust,
Maplewood Investment Trust, The
Thermo Opportunity Fund, Inc. and
Capitol Square Funds; Assistant
Treasurer of Schwartz Investment
Trust, The Tuscarora Investment
Trust and The Gannett Welsh and
Kotler Funds; and Assistant
Secretary of Fremont Mutual Funds, Inc.
John F. Splain and Mark J. Seger, as participants in LFI's Employee
Stock Ownership Plan, own beneficially less than 1% of the outstanding shares of
LFI and, as a result, have an interest in the approval of the New Management
Agreements. It is expected that Mr. Splain and Mr. Seger will enter into
employment and non-competition agreements with CCI prior to consummation of the
Acquisition.
III. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been selected as the Trust's independent public
accountants for the current fiscal year by vote of the Board of Trustees,
including a majority of the Independent Trustees. The employment of Arthur
Andersen LLP is conditional upon the right of the Trust, by a vote of a majority
of its outstanding shares, to terminate the employment without any penalties.
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<PAGE>
Arthur Andersen LLP has acted as the Trust's independent public
accountants since 1981. If the Trust's shareholders do not ratify the selection
of Arthur Andersen LLP, other certified public accountants will be considered
for selection by the Board of Trustees.
Representatives of Arthur Andersen LLP are not expected to be present
at the meeting although they will have an opportunity to attend and to make a
statement, if they desire to do so. If representatives of Arthur Andersen LLP
are present, they will be available to respond to appropriate questions from
shareholders.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS RATIFY THE SELECTION
OF ARTHUR ANDERSEN LLP. Adoption of this Proposal is not conditioned upon
consummation of the Acquisition.
IV. OTHER BUSINESS
The proxy holders have no present intention of bringing any matter
before the meeting other than those specifically referred to above or matters in
connection with or for the purpose of effecting the same. Neither the proxy
holders nor the Board of Trustees are aware of any matters which may be
presented by others. If any other business shall properly come before the
meeting, the proxy holders intend to vote thereon in accordance with their best
judgment.
Any shareholder proposal intended to be presented at the next
shareholder meeting must be received by the Trust for inclusion in its Proxy
Statement and form of Proxy relating to such meeting at a reasonable time before
the solicitation of proxies for the meeting is made.
By Order of the Board of Trustees,
/s/ John F. Splain
John F. Splain
Secretary
Date: January 10, 1997
Please complete, date and sign the enclosed Proxy and return it promptly in the
enclosed reply envelope. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- 19 -
<PAGE>
Exhibit A
FORM OF
MANAGEMENT AGREEMENT
TO: MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Midwest Group Tax Free Trust (hereinafter referred to as the "Trust")
herewith confirms its agreement with you.
The Trust has been organized to engage in the business of an investment
company. The [ ] Fund (the "Fund") has been established as a series of the
Trust. You have been selected to act as the investment adviser of the Fund and
to provide certain other services, as more fully set forth below, and you are
willing to act as such investment adviser and to perform such services under the
terms and conditions hereinafter set forth. Accordingly, the Trust agrees with
you as follows upon the date of the execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment advice as you
in your discretion deem advisable and will furnish a continuous investment
program for the Fund consistent with its investment objectives and policies. You
will determine what securities shall be purchased for the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of the Fund's
assets shall be held uninvested, subject always to the Fund's investment
objectives, policies and restrictions, as each of the same shall be from time to
time in effect, and subject further, to such policies and instructions as the
Board of Trustees (the "Board") of the Trust may from time to time establish and
supply to you copies thereof. You will advise and assist the officers of the
Trust in taking such steps as are necessary or appropriate to carry out the
decisions of the Board and the appropriate committees of the Board regarding the
conduct of the business of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay the compensation and expenses of any persons rendering any
services to the Fund who are officers, directors, stockholders or employees of
your corporation and will make available, without expense to the Fund, the
services of such of your employees as may duly be elected officers or trustees
of the Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any
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<PAGE>
officers, trustees and employees of the Trust who are not officers, directors,
employees or stockholders of your corporation will be paid by the Trust.
You will pay all advertising and promotion expenses incurred in
connection with the sale or distribution of the Fund's shares to the extent such
expenses are not assumed by the Fund under the Trust's Plans of Distribution
Pursuant to Rule 12b-1.
The Fund will also be responsible for the payment of all other
operating expenses of the Fund, including fees and expenses incurred by the Fund
in connection with membership in investment company organizations, brokerage
fees and commissions, legal, auditing and accounting expenses, expenses of
registering shares under federal and state securities laws, insurance expenses,
taxes or governmental fees, fees and expenses of the custodian, transfer,
shareholder service and dividend disbursing agent and accounting and pricing
agent of the Fund, expenses including clerical expenses of issue, sale,
redemption or repurchase of shares of the Fund, the fees and expenses of
trustees of the Trust who are not affiliated with you, the cost of preparing and
distributing reports and notices to shareholders, the cost of printing or
preparing prospectuses for delivery to the Fund's shareholders, the cost of
printing or preparing stock certificates or any other documents, statements or
reports to shareholders, expenses of shareholders' meetings and proxy
solicitations, such extraordinary or non-recurring expenses as may arise,
including litigation to which the Fund may be a party and indemnification of the
Trust's officers and trustees with respect thereto, or any other expense not
specifically described above incurred in the performance of the Fund's
obligations. All other expenses not assumed by you herein incurred by the Fund
in connection with the organization, registration of shares and operations of
the Fund will be borne by the Fund.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments made as provided in
this Agreement, the Fund will pay you as of the last day of each month, a fee
equal to the annual rate of:
50/100 of 1% of the average value of the daily net assets of the Fund
up to $100,000,000; 45/100 of 1% of such assets from $100,000,000 to
$200,000,000; 40/100 of 1% of such assets from $200,000,000 to and
including $300,000,000; and 37.5/100 of 1% of such assets in excess of
$300,000,000.
The total fees payable during each of the first and second halves of
each fiscal year of the Trust shall not exceed the semiannual total of the daily
fee accruals requested by you during the applicable six month period. The
average value of net assets shall be determined pursuant to the applicable
provisions
- 21 -
<PAGE>
of the Declaration of Trust of the Trust or a resolution of the Board, if
required. If, pursuant to such provisions, the determination of net asset value
of the Fund is suspended for any particular business day, then for the purposes
of this paragraph, the value of the net assets of the Fund as last determined
shall be deemed to be the value of the net assets as of the close of the
business day, or as of such other time as the value of the Fund's net assets may
lawfully be determined, on that day. If the determination of the net asset value
of the Fund's shares has been suspended for a period including such month, your
compensation payable at the end of such month shall be computed on the basis of
the value of the net assets of the Fund as last determined (whether during or
prior to such month).
Your compensation with respect to each additional series of the Trust
effectively registered for sale in a public offering after the date of this
Agreement shall be determined by the Board, including a majority of the Trustees
who are not "interested persons" (as defined in the Investment Company Act of
1940) of you or of the Trust, and approved pursuant to the provisions of Section
15 of the Investment Company Act of 1940.
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio securities for the
account of the Fund, it is understood that you will arrange for the placing of
all orders for the purchase and sale of portfolio securities for the Fund's
accounts with brokers or dealers selected by you, subject to review of this
selection by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and portfolio brokerage. In
the selection of such brokers or dealers and the placing of such orders, you are
directed at all times to seek for the Fund the best qualitative execution,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer.
You should generally seek favorable prices and commission rates that
are reasonable in relation to the benefits received. In seeking best qualitative
execution, you are authorized to select brokers or dealers who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which you exercise investment discretion. You are authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
you determine in good faith that the amount of the
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<PAGE>
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker or dealer. The determination may be
viewed in terms of either a particular transaction or your overall
responsibilities with respect to the Fund and to accounts over which you
exercise investment discretion. The Trust and you understand that, although the
information may be useful to the Fund and you, it is not possible to place a
dollar value on such information. The Board shall periodically review the
commissions paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits to
the Fund.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best qualitative execution,
you may give consideration to sales of shares of the Fund as a factor in the
selection of brokers and dealers to execute portfolio transactions of the Fund.
If any occasion should arise in which you give any advice to clients of
yours concerning the shares of the Fund, you will act solely as investment
counsel for such client and not in any way on behalf of the Trust. Your services
to the Fund pursuant to this Agreement are not to be deemed to be exclusive and
it is understood that you may render investment advice, management and other
services to others.
5. LIMITATION OF LIABILITY OF ADVISER
You (including your directors, officers, shareholders, employees,
control persons and affiliates of any thereof) shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from the reckless disregard by you of your
obligations and duties under this Agreement ("disabling conduct"). However, you
will not be indemnified for any liability unless (1) a final decision is made on
the merits by a court or other body before whom the proceeding was brought that
you were not liable by reason of disabling conduct, or (2) in the absence of
such a decision, a reasonable determination is made, based upon a review of the
facts, that you were not liable by reason of disabling conduct, by (a) the vote
of a majority of a quorum of trustees who are neither "interested persons" of
the Trust as defined in the Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party trustees"), or (b) an independent legal
counsel in a written opinion. The Fund will advance attorneys' fees or other
expenses incurred by you in defending a proceeding, upon the undertaking by or
on behalf of you to repay the advance unless it is ultimately determined that
you are entitled to indemnification, so long as
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you meet at least one of the following as a condition to the advance: (1) you
shall provide a security for your undertaking, (2) the Fund shall be insured
against losses arising by reason of any lawful advances, or (3) a majority of a
quorum of the disinterested, non-party trustees of the Trust, or an independent
legal counsel in a written opinion, shall determine, based on a review of
readily available facts (as opposed to a full trial- type inquiry), that there
is reason to believe that you ultimately will be found entitled to
indemnification. Any person employed by you who may also be or become an
employee of the Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely for the Trust
and not as your employee or agent.
6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective upon its execution, shall remain in
force for a period of two (2) years from that date and remain in force from year
to year thereafter, subject to annual approval by (i) the Board of the Trust or
(ii) a vote of a majority (as defined in the Investment Company Act of 1940) of
the outstanding voting securities of the Fund, provided that in either event
continuance is also approved by a majority of the trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of you
or of the Trust, by a vote cast in person at a meeting called for the purpose of
voting such approval.
If the shareholders of the Fund fail to approve the Agreement in the
manner set forth above, upon approval of the Board, including a majority of the
trustees who are not interested persons of you or of the Trust, you may continue
to serve or act in such capacity for the Fund for the period of time (not
exceeding one hundred and twenty days after the termination of the Agreement)
pending required approval of the Agreement, of a new agreement with you or a
different adviser or other definitive action; provided that the compensation to
be paid by the Fund to you will be equal to the lesser of your actual costs
incurred in furnishing investment advisory services to the Fund or the amount
you would have received under this Agreement.
This Agreement may, on sixty days' written notice, be terminated at any
time without the payment of any penalty, by the Board, by a vote of a majority
of the outstanding voting securities of the Fund or by you. This Agreement shall
automatically terminate in the event of its assignment.
7. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, and no amendment of this
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Agreement shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of the Fund and by the Board, including a
majority of the trustees who are not interested persons of you or of the Trust,
cast in person at a meeting called for the purpose of voting on such approval.
8. LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Fund, as provided in the Declaration of Trust of the Trust. The execution
and delivery of this Agreement have been authorized by the trustees of the Trust
and the shareholders of the Fund and signed by the officers of the Trust, acting
as such, and neither such authorization by such trustees and shareholders nor
such execution and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Fund as provided in
the Trust's Declaration of Trust.
9. MISCELLANEOUS
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same Agreement.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
upon the date thereof.
Yours very truly,
ATTEST: MIDWEST GROUP TAX FREE TRUST
________________________ By:___________________________
Dated: , 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: MIDWEST GROUP FINANCIAL SERVICES, INC.
________________________ By:_________________________________
Dated: , 1997
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