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. 62
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /x /
Amendment No. 57
----
(Check appropriate box or boxes)
MIDWEST TRUST FILE NO. 2-52242 and 811-2538
- -------------------------------------------
(Exact name of Registrant as Specified in Charter)
312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202
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(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number (513) 629-2000
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Robert H. Leshner, 312 Walnut Street, 21st Floor,
- -------------------------------------------------
Cincinnati, Ohio 45202
- ----------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
__
/x/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
Registrant registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant's Rule 24f-2 Notice for the fiscal
year ended September 30, 1994 was filed with the Commission on
November 18, 1994.
<PAGE>
CROSS REFERENCE SHEET
FORM N-1A
ITEM SECTION IN PROSPECTUS
1........................... Cover Page
2........................... Expense Information
3........................... Financial Highlights; Performance
Information
4........................... Operation of the Fund; Investment
Objective, Investment Policies and
Risk Considerations
5........................... Operation of the Fund
6........................... Cover Page; Dividends and
Distributions; Taxes; Operation of
the Fund
7........................... How to Purchase Shares; Operation
of the Fund; Calculation of Share
Price and Public Offering Price;
Exchange Privilege; Shareholder
Services; Distribution Plans;
Application
8........................... How to Redeem Shares; Shareholder
Services
9........................... None
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
10.......................... Cover Page
11.......................... Table of Contents
12.......................... The Trust
13.......................... Definitions, Policies and Risk
Considerations; Investment
Limitations; Portfolio Turnover
14.......................... Trustees and Officers
15.......................... Principal Security Holders
16.......................... The Investment Manager and
Underwriter; The Investment
Adviser; Distribution Plans;
Custodian; Accountants; MGF
Service Corp.
17.......................... Securities Transactions
18.......................... The Trust
19.......................... Calculation of Share Price and
Public Offering Price; Other
Purchase Information; Redemption
in Kind
20.......................... Taxes
21.......................... The Investment Manager and
Underwriter
22.......................... Historical Performance Information
23.......................... Semiannual Report
PROSPECTUS
June 2, 1995
Midwest Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
GLOBAL BOND FUND
The Global Bond Fund (the "Fund"), a separate series of
Midwest Trust, seeks high total return, through both income and
capital appreciation. The Fund invests primarily in high-grade
domestic and foreign fixed-income securities.
THE FUND IS A NON-DIVERSIFIED SERIES AND THEREFORE MAY
INVEST MORE THAN 5% OF ITS TOTAL ASSETS IN OBLIGATIONS ISSUED BY
ONE ISSUER.
The Fund offers two classes of shares: Class A shares (sold
subject to a maximum 4% front-end sales load and a 12b-1 fee of
up to .35% of average daily net assets) and Class C shares (sold
subject to a 1% contingent deferred sales load for a one-year
period and a 12b-1 fee of up to 1% of average daily net assets).
Each Class A and Class C share of the Fund represents identical
interests in the Fund's investment portfolio and has the same
rights, except that (i) Class C shares bear the expenses of
higher distribution fees, which will cause Class C shares to have
a higher expense ratio and to pay lower dividends than those
related to Class A shares; (ii) certain other class specific
expenses will be borne solely by the class to which such expenses
are attributable; and (iii) each class has exclusive voting
rights with respect to matters relating to its own distribution
arrangements.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY.
Rogge Global Partners, plc (the "Adviser") manages the
Fund's investments under the supervision of Midwest Group
Financial Services, Inc. (see "Operation of the Fund").
This Prospectus sets forth concisely the information about
the Fund that you should know before investing. Please retain
this Prospectus for future reference. A Statement of Additional
Information dated June 2, 1995 has been filed with the Securities
and Exchange Commission and is hereby incorporated by reference
in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling one of the
numbers listed below.
For Information or Assistance in Opening an Account, Please Call:
Nationwide (Toll-Free) . . . . . . . . . . . . . . 800-543-0407
Cincinnati . . . . . . . . . . . . . . . . . . . 513-629-2050
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE INFORMATION
- ------------------- Class A Class C
Shares Shares
------- -------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price). . . . . .4% None
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price). None 1%
Sales Load Imposed on Reinvested Dividends. . None None
Exchange Fee. . . . . . . . . . . . . . . . . None None
Wire Redemption Processing Fee. . . . . . . . $8.00 $8.00
Annual Fund Operating Expenses (as a percentage of average net
- ------------------------------ assets)
Class A Class C
Shares Shares
------- --------
Management Fees .70% .70%
12b-1 Fees(A) .10% .75%
Other Expenses .55% .55%
---- ----
Total Fund Operating Expenses 1.35% 2.00%
===== =====
(A) Class A shares may incur 12b-1 fees in an amount up to .35%
of its average net assets and Class C shares may incur 12b-1
fees in an amount up to 1.00% of average net assets. Long-
term shareholders may pay more than the economic equivalent
of the maximum front-end sales loads permitted by the
National Association of Securities Dealers.
The purpose of this table is to assist the investor in
understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. The percentages
expressing annual fund operating expenses are based on estimated
amounts for the current fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
- -------
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period:
Class A Class C
Shares Shares
------- --------
1 Year $53 $30
3 Years $81 $63
<PAGE>
FINANCIAL HIGHLIGHTS
The following information is an integral part of the Fund's
unaudited financial statements and should be read in conjunction
with the financial statements. The financial statements as of
March 31, 1995 appear in the Statement of Additional Information
of the Fund, which can be obtained by shareholders at no charge
by calling MGF Service Corp. (Nationwide call toll-free 800-543-
0407, in Cincinnati call 629-2050) or by writing to the Trust at
the address on the front of this Prospectus.
Per Share Data for a Share Outstanding Throughout Each Period(A)
- --------------------------------------------------------------------
Class A Class C
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Net asset value at beginning of period....... $ 10.00 $ 10.00
------- -------
Income from investment operations:
Net investment income..................... 0.12 0.08
Net realized and unrealized gains on
investments and foreign currency
transactions............................ 0.74 0.77
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Total from investment operations............. 0.86 0.85
------- ------
Less distributions:
From net investment income................ (0.06) (0.06)
From net realized gains from foreign
currency transactions................. (0.06) (0.06)
------- ------
Total distributions.......................... (0.12) (0.12)
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Net asset value at end of period............. $ 10.74 $10.73
======= ======
Total return(B)................................ 8.60% 8.50%
======== =======
Net assets at end of period (000's).......... $ 5,586 $ 27
======= ======
Ratio of expenses to average net assets(C)..... 1.27%(D) 1.95%(D)
Ratio of net investment income to average net
assets.................................... 4.47%(D) 3.96%(D)
Portfolio turnover rate...................... 124%(D) 124%(D)
(A) Represents the period from initial public offering of shares (February
1, 1995) through March 31, 1995.
(B) The total returns shown do not include the effect of applicable front-
end sales loads, and are not annualized.
(C) The Adviser has absorbed expenses of the Fund through waiver of the
investment advisory fee and the Manager has reimbursed the Fund for
other operating expenses. The ratio of expenses to average net assets
assuming no waiver of fees or reimbursement of expenses was 3.61% and
330.53% for Class A and Class C, respectively.
(D) Annualized.
INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
- -----------------------------------------------------------------
The Fund is a series of Midwest Trust (the "Trust"). The Fund
seeks high total return, through both income and capital
appreciation. The Fund invests primarily in high-grade domestic
and foreign fixed-income securities. The Fund is not intended to
be a complete investment program, and there is no assurance that
its investment objective can be achieved. The Fund's investment
objective may be changed by the Board of Trustees without
shareholder approval, but only after notification has been given
to shareholders and after this Prospectus has been revised
accordingly. If there is a change in the Fund's investment
objective, shareholders should consider whether the Fund remains
an appropriate investment in light of their then current
financial position and needs. Unless otherwise indicated, all
investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
Under normal circumstances, at least 65% of the Fund's
total assets will be invested in domestic and foreign bonds
issued by governments, corporations and supranational
organizations such as the World Bank, Asian Development Bank,
European Investment Bank and European Economic Community. Bonds
are viewed by the Fund to include fixed-income securities of any
maturity. Investments of the Fund will be geographically
concentrated in the countries included in the Salomon Brothers
World Government Bond Index: Australia, Belgium, Canada, Denmark,
France, Germany, Italy, Japan, the Netherlands, Spain, Sweden,
the United Kingdom and the United States. Under normal market
conditions, investments will be made in a minimum of three
countries, one of which may be the United States. For temporary
defensive purposes, the Fund may invest in securities of only one
country, including the United States. The Fund may invest in
non-U.S. dollar denominated securities. The Fund may utilize a
variety of currency hedging techniques in order to reduce
volatility resulting from currency exchange rate fluctuations.
The Fund may invest up to 10% of its total assets in global
bonds issued by emerging countries. The emerging countries in
which the Fund may invest currently include Argentina, Brazil,
Chile, Columbia, Indonesia, India, Malaysia, Mexico, the
Philippines, Poland, Singapore, Thailand and Venezuela. Such
markets tend to be in the less economically developed regions of
the world. General characteristics of emerging countries also
include lower degrees of political stability, a high demand for
capital investment, a high dependence on export markets for their
major industries, a need to develop basic economic
infrastructures and rapid economic growth. The Adviser believes
that investments in bonds issued in emerging countries offer the
opportunity for significant long-term investment returns,
however, these investments involve certain risks.
<PAGE>
The Fund may engage in various hedging techniques to seek to
hedge all or a portion of its assets against market value changes
resulting from changes in security prices, interest rates,
currency exchange rates or other factors that affect the value of
the Fund's portfolio. Hedging is a means of offsetting, or
neutralizing, the price movement of an investment by making
another investment, the price of which should tend to move in the
opposite direction from the original investment. The imperfect
correlation in price movement between an option and the
underlying security index or futures contract may limit the
effectiveness of the hedging strategy. The hedging techniques
which may be used by the Fund include writing covered put and
covered call options, buying and selling futures contracts and
entering into forward foreign currency exchange contracts.
It is anticipated that under normal circumstances the Fund's
dollar-weighted average maturity will be ten years or less,
although the Fund may invest in securities of any maturity,
provided that such obligations meet the Fund's quality standards.
The Fund's quality standards limit its investments to those rated
within the three highest grades assigned by Moody's Investors
Services, Inc. (Aaa, Aa or A), Standard & Poor's Ratings Group
(AAA, AA or A) or Fitch Investors Services, Inc. (AAA, AA or A),
or unrated securities determined by the Adviser to be of
comparable quality.
For defensive purposes, the Fund may temporarily hold all or a
portion of its assets in short-term obligations such as bank debt
instruments (certificates of deposit, bankers' acceptances and
time deposits), commercial paper, domestic and foreign Government
obligations having a maturity of less than one year or repurchase
agreements collateralized by U.S. Government obligations. The
Fund's quality standards limit its investments in short-term
obligations to those which are rated within the two highest
grades by Moody's (Prime-1 or Prime-2), Standard & Poor's (A-1 or
A-2) or Fitch (Fitch-1 or Fitch-2). The Statement of Additional
Information contains a description of Moody's, Standard & Poor's
and Fitch ratings.
It is anticipated that by investing in a portfolio of foreign
fixed-income securities in markets that have historically had a
low correlation with the U.S. fixed-income market (when
considering the aggregate impact of both fluctuations in
currencies and interest rates), the Fund will achieve a less
volatile net asset value than is characteristic of mutual funds
that invest primarily in fixed-income obligations of a single
market denominated in a single currency. The decision to invest
in a given bond market is normally made in tandem with the
decision to invest in the related currency. Generally, the
factors used to determine the relative attractiveness of one
market (currency) versus another are long-term in nature and,
therefore, the core structure of the Fund's portfolio will remain
relatively stable over time. In order to reduce the volatility
of short-term investment returns, short-term currency risk is
managed through currency hedging.
Hedging Techniques
- ------------------
Unless otherwise indicated, the Fund's Adviser may engage in
the following hedging techniques to seek to hedge all or a
portion of the Fund's assets against market value changes
resulting from changes in securities prices, interest rates and
currency fluctuations. Hedging is a means of offsetting, or
neutralizing, the price movement of an investment by making
another investment, the price of which should tend to move in the
opposite direction from the original investment. The imperfect
correlation in price movement between an option and the
underlying financial instrument may limit the effectiveness of
the hedging strategy.
Covered Put and Covered Call Options. The Fund may write
covered put and covered call options as a means of enhancing its
return and may buy put and call options written by others
covering securities, futures contracts and foreign currencies to
provide protection against the adverse effects of anticipated
changes in the prices of such instruments. The Fund may write
covered call options as a means of enhancing its return through
the receipt of premiums when the Adviser determines that the
underlying securities, futures contracts or foreign currencies
have achieved their potential for appreciation. However, by
writing such options, the Fund foregoes the opportunity to profit
from an increase in the market price of the underlying security,
futures contract or foreign currency above the exercise price
except insofar as the premium represents such a profit. The Fund
may also seek to earn additional income through receipt of
premiums by writing covered put options. The risk involved in
writing such options is that there could be a decrease in the
market value of the underlying security, futures contract or
foreign currency. If this occurred, the option could be
exercised and the underlying instrument would then be sold to the
Fund at a higher price than its then current market value. The
Fund may purchase put and call options to provide protection
against adverse price effects from anticipated changes in
prevailing prices of securities, futures contracts or foreign
currencies. The purchase of a put option protects the value of
portfolio holdings in a falling market, while the purchase of a
call option protects cash reserves from a failure to participate
in a rising market. In purchasing a call option, the Fund would
be in a position to realize a gain if, during the option period,
the price of the security, futures contract or foreign currency
increased by an amount greater than the premium paid. It would
realize a loss if the price of the security, futures contract or
foreign currency decreased or remained the same or did not
increase during the period by more than the amount of the
premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would represent a realized loss to the Fund. When writing put
options the Fund will be required to segregate cash and/or liquid
high-grade debt obligations to meet its obligations. When
writing call options the Fund will be required to own the
underlying financial instrument or own financial instruments or
indices whose returns are closely correlated with the returns of
the financial instrument or futures contracts underlying the
option or segregate with its Custodian cash and/or short-term
high quality securities to meet its obligations under written
calls. By so doing, the Fund's ability to meet current
obligations, to honor redemptions or to achieve its investment
objective may be impaired. The staff of the Securities and
Exchange Commission has taken the position that purchased OTC
options and the assets used as "cover" for written OTC options
are illiquid securities. However, the Fund may treat the
securities it uses as cover for written OTC options as liquid
provided it follows a specified procedure. The Fund may sell OTC
options only to qualified dealers who agree that the Fund may
repurchase any OTC options it writes for a maximum price to be
calculated by a predetermined formula. In such cases, the OTC
option would be considered illiquid only to the extent that the
maximum repurchase price under the formula exceeds the amount
that the option is "in-the-money" (i.e., current market value of
the underlying security minus the option's strike price).
Futures Contracts. The Fund may buy and sell futures
contracts as a hedge to protect the value of the Fund's portfolio
against anticipated changes in interest rates, securities prices
and foreign currencies. There are several risks in using futures
contracts. One risk is that futures prices could correlate
imperfectly with the behavior of cash market prices of the
financial instrument being hedged so that even a correct forecast
of general price trends may not result in a successful
transaction. Another risk is that the Fund's Adviser may be
incorrect in its expectation of future prices of the underlying
financial instrument. There is also a risk that a secondary
market in the obligations that the Fund holds may not exist or
may not be adequately liquid to permit the Fund to close out
positions when it desires to do so. When buying or selling
futures contracts the Fund will be required to segregate cash
and/or liquid high-grade debt obligations to meet its obligations
under these types of financial instruments. By so doing, the
Fund's ability to meet current obligations, to honor redemptions
or to operate in a manner consistent with its investment
objective may be impaired.
Forward Foreign Currency Exchange Contracts. When the Fund's
Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar,
it may attempt to hedge this anticipated risk by entering into a
forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's portfolio
obligations denominated in such foreign currency. It may also
enter into such contracts to protect against loss between trade
and settlement dates resulting from changes in foreign currency
exchange rates. Such contracts will also have the effect of
limiting any gains to the Fund between trade and settlement dates
resulting from changes in such rates.
Risk Factors
- ------------
The market value of investments available to the Fund, and
therefore the Fund's yield and net asset value, will fluctuate
due to changes in interest rates, economic conditions, foreign
exchange conditions, quality ratings and other factors beyond the
control of the Adviser. The value of the Fund's portfolio
securities usually declines when interest rates rise and usually
rises when interest rates decline. In addition, the financial
condition of an issuer or adverse changes in general economic
conditions, or both, may impair the issuer's ability to make
payments of interest and principal.
The Fund may invest in securities which are rated within the
three highest grades assigned by Moody's, Standard & Poor's or
Fitch. Subsequent to its purchase by the Fund, a security may
cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. In the event a security's
rating is reduced below the Fund's minimum requirements, the Fund
will sell the security, subject to market conditions and the
Adviser's assessment of the most opportune time for sale.
Although lower rated securities will generally provide higher
yields than higher rated securities of similar maturities, they
are subject to a greater degree of market fluctuation. In
addition, securities with longer maturities generally offer both
higher yields and greater exposure to market fluctuation from
changes in interest rates. Consequently, investors in the Fund
should be aware that there is a possibility of greater
fluctuation in the Fund's net asset value.
The Fund is a non-diversified fund under the Investment
Company Act of 1940. Thus, its investments may be more
concentrated in fewer issuers than those of a diversified fund.
This concentration may cause greater fluctuation in the Fund's
net asset value. As the Fund intends to comply with Subchapter M
of the Internal Revenue Code, it may invest up to 50% of its
assets at the end of each quarter of its fiscal year in as few as
two issuers, provided that no more than 25% of the assets are
invested in one issuer. With respect to the remaining 50% of its
assets at the end of each quarter, it may invest no more than 5%
in one issuer.
Investments in Foreign Obligations. Where investments in
foreign obligations are made in currencies of foreign countries,
the value of the Fund's assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency exchange
rates, currency restrictions and in exchange control regulations.
While the Fund will attempt to hedge against fluctuations in
exchange rates between the U.S. dollar and other currencies in
which the Fund invests, the Fund may nevertheless incur losses
from currency translation effects. Generally, an increase in the
value of a foreign currency versus the U.S. dollar will have a
positive effect on the Fund's return while a decline in the value
of a foreign currency versus the U.S. dollar will have a negative
impact on the Fund. Foreign investments may be subject to
special risks, including future political and economic
developments and the possibility of seizure or nationalization of
companies, imposition of withholding taxes on income,
establishment of exchange controls or adoption of other
restrictions, less governmental supervision of securities
markets, reduced publicly available information concerning
issuers, and the lack of uniform accounting, auditing and
financial reporting standards that might affect an investment
adversely. Moreover, obligations issued by many foreign
companies may be less liquid and their prices more volatile than
obligations issued by U.S. companies. The settlement practices
in foreign countries may include delays and subject the Fund to
risk of loss not customary in U.S. markets. Investment in
foreign obligations may also result in higher expenses due to the
cost of converting foreign currency into U.S. dollars, the
payment of fixed brokerage commissions on foreign exchanges,
which generally are higher than commissions on U.S. exchanges,
and the expense of maintaining securities with foreign
custodians.
Emerging Countries. The risks of foreign investing are of
greater concern in the case of investments in emerging markets
which may exhibit greater price volatility and have less
liquidity. Furthermore, the economies of emerging market
countries generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, managed adjustments in
relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade.
These emerging market economies also have been and may continue
to be adversely affected by economic conditions in the countries
with which they trade.
Currency Exposure. Because of exchange rate movements, the
net asset value of the Fund is likely to be more volatile than
funds which invest only in U.S. dollar-denominated securities.
As the U.S. dollar strengthens relative to a given foreign
currency, the value of a portfolio security denominated in that
currency will fall. Conversely, when the U.S. dollar weakens
relative to a currency, the value of a portfolio security in that
currency will rise. Therefore, the greater the level of a fund's
currency exposure, the greater its risk and return potential. By
actively managing currency exposure, the Adviser attempts to
insulate portfolios from the effect of currency fluctuations, or
profit from them. There is, of course, no guarantee the Adviser
will be successful in this regard.
Hedging Techniques. The Fund's ability to establish and close
out positions in futures contracts and options will be subject to
the existence of a liquid secondary market. Although the Fund
generally will purchase or sell only those futures contracts and
options for which there appears to be an active secondary market,
there is no assurance that a liquid secondary market on an
exchange will exist for any particular futures contract or option
or at any particular time.
Transactions in options involve special risks. The Fund may
not be able to enter into a closing transaction to cancel its
obligations with respect to the options it has written or
purchased. If an option purchased by the Fund expires
unexercised, the Fund will lose the premium it paid. In
addition, the Fund could suffer a loss if the premium paid by the
Fund in a closing transaction exceeds the premium income it
received. When the Fund writes a call option, its ability to
participate in the capital appreciation of the underlying
obligation is limited.
Other Investment Techniques
- ---------------------------
The Fund may also engage in the following investment
techniques, each of which may involve certain risks:
U.S. Government Obligations. "U.S. Government obligations"
include securities which are issued or guaranteed by the United
States Treasury, by various agencies of the United States
Government, and by various instrumentalities which have been
established or sponsored by the United States Government. U.S.
Treasury obligations are backed by the "full faith and credit" of
the United States Government. Other U.S. Government obligations
may or may not be backed by the "full faith and credit" of the
United States. 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.
Delayed Settlement Transactions. Obligations issued on a
when-issued or to-be-announced basis are settled by delivery and
payment after the date of the transaction, usually within 15 to
45 days. In a to-be-announced transaction, the Fund has
committed to purchasing or selling securities for which all
specific information is not yet known at the time of the trade,
particularly the face amount in transactions involving mortgage-
related securities. The Fund will only make commitments to
purchase obligations on a when-issued or to-be-announced basis
with the intention of actually acquiring the obligations, but the
Fund may sell these securities before the settlement date if it
is deemed advisable as a matter of investment strategy or in
order to meet its obligations, although it would not normally
expect to do so. The Fund will not enter into a delayed
settlement transaction which settles in more than 120 days.
Purchases of securities on a when-issued or to-be-announced
basis are subject to market fluctuations and their current value
is determined in the same manner as other portfolio securities.
When effecting such purchases for the Fund, a segregated account
of cash, U.S. Government obligations or other liquid high-grade
debt obligations of the Fund in an amount sufficient to make
payment for the portfolio securities to be purchased will be
maintained with the Fund's Custodian at the trade date and valued
daily at market for the purpose of determining the adequacy of
the securities in the account. If the market value of segregated
securities declines, additional cash or securities will be
segregated on a daily basis so that the market value of the
Fund's segregated assets will equal the amount of the Fund's
commitments to purchase when-issued obligations and securities on
a to-be-announced basis. The Fund's purchase of securities on a
when-issued or to-be-announced basis may increase its overall
investment exposure and involves a risk of loss if the value of
the securities declines prior to the settlement date or if the
broker-dealer selling the securities fails to deliver after the
value of the securities has risen.
Repurchase Agreements. Repurchase agreements are transactions
by which the Fund purchases a security and simultaneously commits
to resell that security to the seller at an agreed upon time and
price, thereby determining the yield during the term of the
agreement. In the event of a bankruptcy or other default of the
seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying security and losses. To
minimize these possibilities, the Fund intends to enter into
repurchase agreements only with its Custodian, banks having
assets in excess of $10 billion and the largest and, in the Board
of Trustees' judgment, most creditworthy primary U.S. Government
securities dealers. The Fund may only enter into repurchase
agreements collateralized by U.S. Government obligations or other
liquid high-grade debt obligations. Collateral for repurchase
agreements is held in safekeeping in the customer-only account of
the Fund's Custodian. At the time the Fund enters into a
repurchase agreement, the value of the collateral, including
accrued interest, will equal or exceed the value of the
repurchase agreement and, in the case of a repurchase agreement
exceeding one day, the seller agrees to maintain sufficient
collateral so that the value of the underlying collateral,
including accrued interest, will at all times equal or exceed the
value of the repurchase agreement. The Fund will not enter into
a repurchase agreement not terminable within seven days if, as a
result thereof, more than 15% of the value of the net assets of
the Fund would be invested in such securities and other illiquid
securities.
Borrowing and Pledging. As a temporary measure for
extraordinary or emergency purposes, the Fund may borrow money
from banks or other persons in an amount not exceeding 10% of its
total assets. The Fund may pledge assets in connection with
borrowings but will not pledge more than 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. These policies do not preclude the Fund from
entering into reverse repurchase transactions (see below),
provided that the Fund has asset coverage of 300% of all its
reverse repurchase commitments pursuant to such transactions and
all other outstanding borrowings of the Fund. Borrowings of the
Fund, including its current obligations under reverse repurchase
agreements, will not exceed one-third of the current market value
of the Fund's total assets (less all its liabilities other than
obligations under reverse repurchase agreements and other
borrowings).
Borrowing magnifies the potential for gain or loss on the
Fund's portfolio securities and, therefore, if employed,
increases the possibility of fluctuation in its net asset value.
This is the speculative factor known as leverage. To reduce the
risks of borrowing, the Fund will limit its borrowings as
described above. The Fund's policies on borrowing and pledging
are fundamental policies which may not be changed without the
affirmative vote of a majority of its outstanding shares.
Reverse Repurchase Transactions. The Fund may enter into
reverse repurchase transactions. A reverse repurchase
transaction involves the sale of a money market instrument held
by the Fund coupled with an agreement by the Fund to repurchase
the instrument at a stated price, date and interest payment. The
Fund will use the proceeds of a reverse repurchase transaction to
purchase other money market instruments which either mature at a
date simultaneously with or prior to the expiration of the
reverse repurchase agreement or which are held under an agreement
to resell maturing as of that time.
The Fund will enter into a reverse repurchase transactions
only when the interest income to be earned from the investment of
the proceeds of the transaction is greater than the interest
expense of the transaction. Under the Investment Company Act of
1940, reverse repurchase transactions may be considered to be
borrowings by the seller. The Fund may not enter into a reverse
repurchase transaction if, as a result, its current obligations
under such agreements and all of its other outstanding borrowings
would exceed one-third of the current market value of the Fund's
total assets (less all its liabilities other than obligations
under such agreements and other borrowings). The Fund may enter
into reverse repurchase transactions with banks or broker-
dealers. Entry into such transaction requires the creation and
maintenance of a segregated account with the Fund's Custodian
consisting of cash and/or liquid high-grade debt obligations.
The Fund may also enter into reverse repurchase transactions
in order to hedge against a possible decline in the value of the
foreign currency in which a debt security is denominated. In
these transactions, the Fund sells a debt security denominated in
a foreign currency for delivery in the current month and
simultaneously contracts to repurchase the same security on a
specified future date. The foreign currency cash proceeds from
the sale of the debt security are then converted into U.S.
dollars. Thus, as a result of the transaction, the Fund
continues to be subject to fluctuations in the value of the
security, but not to fluctuations in the value of the currency in
which the security is denominated. Because these reverse
repurchase transactions are entered into to hedge foreign
currency risk and not for leverage purposes, they will not be
treated as borrowing for purposes of the Fund's investment
restriction concerning borrowing.
Lending Portfolio Securities. The Fund may make short-term
loans of its portfolio securities to banks, brokers and dealers.
Lending portfolio securities exposes the Fund to the risk that
the borrower may fail to return the loaned securities or may not
be able to provide additional collateral or that the Fund may
experience delays in recovery of the loaned securities or loss of
rights in the collateral if the borrower fails financially. To
minimize these risks, the borrower must agree to maintain
collateral marked to market daily, in the form of cash and/or
liquid high-grade debt obligations, with the Fund's Custodian in
an amount at least equal to the market value of the loaned
securities. The Fund will limit the amount of its loans of
portfolio securities to no more than 25% of its net assets. This
lending policy may not be changed without the affirmative vote of
a majority of its outstanding shares.
Portfolio Turnover. The Fund does not intend to use short-
term trading as a primary means of achieving its investment
objective. However, the Fund's rate of portfolio turnover will
depend upon market and other conditions, and it will not be a
limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. The portfolio turnover of the Fund
may be greater than that of many other mutual funds. Although
the annual portfolio turnover rate of the Fund cannot be
accurately predicted, it is not expected to exceed 150%, but may
be either higher or lower. High turnover involves
correspondingly greater commission expenses and transaction costs
and increases the possibility that the Fund would not qualify as
a regulated investment company under Subchapter M of the Internal
Revenue Code. The Fund will not qualify as a regulated
investment company if it derives 30% or more of its gross income
from gains (without offset for losses) from the sale or other
disposition of securities held for less than three months. High
turnover may result in the Fund recognizing greater amounts of
income and capital gains, which would increase the amount of
income and capital gains which the Fund must distribute to its
shareholders in order to maintain its status as a regulated
investment company and to avoid the imposition of federal income
or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Fund ordinarily must be at
least $1,000 ($250 for tax-deferred retirement plans). You may
purchase additional shares through the Open Account Program
described below. You may open an account and make an initial
investment through securities dealers having a sales agreement
with the Trust's principal underwriter, Midwest Group Financial
Services, Inc. (the "Manager"). You may also make a direct
initial investment by sending a check and a completed account
application form to MGF Service Corp., P.O. Box 5354, Cincinnati,
Ohio 45201-5354. Checks should be made payable to the "Global
Bond Fund." An account application is included in this
Prospectus.
The Trust mails you confirmations of all purchases or
redemptions of Fund shares. Certificates representing shares are
not ordinarily issued, but you may receive a certificate without
charge by sending a written request to MGF Service Corp.
Certificates for fractional shares will not be issued. If a
certificate has been issued to you, you will not be permitted to
exchange shares by telephone or to use the automatic withdrawal
plan as to those shares. The Trust and the Manager reserve the
rights to limit the amount of investments and to refuse to sell
to any person.
Investors should be aware that the Fund's account application
contains provisions in favor of the Trust, MGF Service Corp. and
certain of their affiliates, excluding such entities from certain
liabilities (including, among others, losses resulting from
unauthorized shareholder transactions) relating to the various
services (for example, telephone exchanges) made available to
investors.
Should an order to purchase shares be canceled because your
check does not clear, you will be responsible for any resulting
losses or fees incurred by the Trust or MGF Service Corp. in the
transaction.
Open Account Program. Please direct inquiries concerning the
services described in this section to MGF Service Corp. at the
address or numbers listed below.
After an initial investment, all investors are considered
participants in the Open Account Program. The Open Account
Program helps investors make purchases of shares of the Fund over
a period of years and permits the automatic reinvestment of
dividends and distributions of the Fund in additional shares
without a sales load.
Under the Open Account Program, you may purchase and add
shares to your account at any time either through your securities
dealer or by sending a check to MGF Service Corp., P.O. Box 5354,
Cincinnati, Ohio 45201-5354. The check should be made payable to
the "Global Bond Fund."
Under the Open Account Program, you may also purchase shares
of the Fund by bank wire. Please telephone MGF Service Corp.
(Nationwide call toll-free 800-543-0407; in Cincinnati call 629-
2050) for instructions. Your bank may impose a charge for
sending your wire. There is presently no fee for receipt of
wired funds, but MGF Service Corp. reserves the right to charge
shareholders for this service upon thirty days' prior notice to
shareholders.
Each additional purchase request must contain the name of your
account and your account number to permit proper crediting to
your account. While there is no minimum amount required for
subsequent investments, the Trust reserves the right to impose
such requirement. All purchases under the Open Account Program
are made at the public offering price next determined after
receipt of a purchase order by the Trust. If a broker-dealer
received concessions for selling shares of the Fund to a current
shareholder, such broker-dealer will receive the concessions
described above with respect to additional investments by the
shareholder.
Sales Load Alternatives
-----------------------
The Fund offers two classes of shares which may be purchased
at the election of the purchaser. The two classes of shares each
represent interests in the same portfolio of investments of the
Fund, have the same rights and are identical in all material
respects except that (i) Class C shares bear the expenses of
higher distribution fees; (ii) certain other class specific
expenses will be borne solely by the class to which such expenses
are attributable, including transfer agent fees attributable to a
specific class of shares, printing and postage expenses related
to preparing and distributing materials to current shareholders
of a specific class, registration fees incurred by a specific
class of shares, the expenses of administrative personnel and
services required to support the shareholders of a specific
class, litigation or other legal expenses relating to a class of
shares, Trustees' fees or expenses incurred as a result of issues
relating to a specific class of shares and accounting fees and
expenses relating to a specific class of shares; and (iii) each
class has exclusive voting rights with respect to matters
relating to its own distribution arrangements. The net income
attributable to Class C shares and the dividends payable on Class
C shares will be reduced by the amount of the incremental
expenses associated with the distribution fee (see "Distribution
Plans").
The Fund's alternative sales arrangements permit investors to
choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold his shares and other relevant circumstances.
Investors should determine whether under their particular
circumstances it is more advantageous to incur a front-end sales
load and be subject to lower ongoing charges, as discussed below,
or to have all of the initial purchase price invested in the Fund
with the investment thereafter being subject to higher ongoing
charges. A salesperson or any other person entitled to receive
any portion of a distribution fee may receive different
compensation for selling Class A or Class C shares.
As an illustration, investors who qualify for significantly
reduced sales loads as described below, might elect the Class A
sales load alternative because similar sales load reductions are
not available for purchases under the Class C sales load
alternative. Moreover, shares acquired under the Class A sales
load alternative would be subject to lower ongoing distribution
fees as described below. Investors not qualifying for reduced
initial sales loads who expect to maintain their investment for
an extended period of time might also elect the Class A sales
load alternative because over time the accumulated continuing
distribution fees on Class C shares may exceed the difference in
initial sales loads between Class A and Class C shares. Again,
however, such investors must weigh this consideration against the
fact that less of their funds will be invested initially under
the Class A sales load alternative. Furthermore, the higher
ongoing distribution fees will be offset to the extent any return
is realized on the additional funds initially invested under the
Class C sales load alternative.
Some investors might determine that it would be more
advantageous to utilize the Class C sales load alternative to
have more of their funds invested initially, although remaining
subject to higher ongoing distribution fees and, for a one-year
period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor
subject to the maximum 4% initial sales load on Class A shares
who elects to reinvest dividends in additional shares would have
to hold the investment in Class A shares approximately 5 1/2
years before the accumulated ongoing distribution fees on the
alternative Class C shares would exceed the initial sales load
plus the accumulated ongoing distribution fees on Class A shares.
In this example and assuming the investment was maintained for
more than 5 1/2 years, the investor might consider purchasing
Class A shares. This example does not take into account the time
value of money which reduces the impact of the higher ongoing
Class C distribution fees, fluctuations in net asset value or the
effect of different performance assumptions.
In addition to the compensation otherwise paid to securities
dealers, the 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 Fund. On
some occasions, such bonuses or incentives may be conditioned
upon the sale of a specified minimum dollar amount of the shares
of the Fund and/or other funds in the Midwest Group 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.
<PAGE>
Class A Shares
- --------------
Class A shares of the Fund are purchased at the public
offering price. The public offering price of Class A shares is
the next determined net asset value per share plus a sales load
as shown in the following table.
Dealer
Sales Load Reallowance
as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
- -------------------- ------------------- -----------
Less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50 3.63 3.30
$250,000 but less than $500,000 2.50 2.56 2.30
$500,000 but less than $1,000,000 2.00 2.04 1.80
$1,000,000 or more None None None
Under certain circumstances, the Manager may increase or
decrease the reallowance to dealers. Dealers engaged in the sale
of shares of the Fund may be deemed to be underwriters under the
Securities Act of 1933. The Manager retains the entire sales
load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
Class A shares of the Fund are sold on a continuous basis at
the public offering price next determined after receipt of a
purchase order by the Trust. Purchase orders received by dealers
prior to 4:00 p.m., Eastern time, on any business day and
transmitted to the Manager by 5:00 p.m., Eastern time, that day
are confirmed at the public offering price determined as of the
close of the regular session of trading on the New York Stock
Exchange on that day. It is the responsibility of dealers to
transmit properly completed orders so that they will be received
by the Manager by 5:00 p.m., Eastern time. Dealers may charge a
fee for effecting purchase orders. Direct purchase orders
received by MGF Service Corp. by 4:00 p.m., Eastern time, are
confirmed at that day's public offering price. Direct
investments received by MGF Service Corp. after 4:00 p.m. and
orders received from dealers after 5:00 p.m. are confirmed at the
public offering price next determined on the following business
day.
Reduced Sales Load. A "purchaser" (defined below) may use the
Right of Accumulation to combine the cost or current net asset
value (whichever is higher) of his existing Class A shares of the
load funds distributed by the Manager with the amount of his
current purchases in order to take advantage of the reduced sales
loads set forth in the table above. Purchases made in any load
fund distributed by the Manager pursuant to a Letter of Intent
may also be eligible for the reduced sales loads. The minimum
initial investment under a Letter of Intent is $10,000. The load
funds currently distributed by the Manager are listed in the
Exchange Privilege section of this Prospectus. Shareholders
should contact MGF Service Corp. for information about the Right
of Accumulation and Letter of Intent.
Purchases at Net Asset Value. You may purchase Class A shares
of the Fund at net asset value when the payment for your
investment represents the proceeds from the redemption of shares
of any other mutual fund which has a front-end sales load and is
not distributed by the Manager. Your investment will qualify for
this provision if the purchase price of the shares of the other
fund included a sales load and the redemption occurred within one
year of the purchase of such shares and no more than sixty days
prior to your purchase of shares of the Fund. To make a purchase
at net asset value pursuant to this provision, you must submit
photocopies of the confirmations (or similar evidence) showing
the purchase and redemption of shares of the other fund. Your
payment may be made with the redemption check representing the
proceeds of the shares redeemed, endorsed to the order of the
"Global Bond Fund." The redemption of shares of the other fund
is, for federal income tax purposes, a sale on which you may
realize a gain or loss. These provisions may be modified or
terminated at any time. Contact your securities dealer or the
Trust for further information.
Banks, bank trust departments and savings and loan
associations, in their fiduciary capacity or for their own
accounts, may also purchase Class A shares of the Fund at net
asset value. To the extent permitted by regulatory authorities,
a bank trust department may charge fees to clients for whose
account it purchases shares at net asset value. Federal and
state credit unions may also purchase Class A shares at net asset
value.
In addition, Class A shares of the Fund may be purchased at
net asset value by broker-dealers who have a sales agreement with
the Manager, and their registered personnel and employees,
including members of the immediate families of such registered
personnel and employees.
Clients of investment advisers and financial planners may also
purchase Class A shares of the Fund at net asset value if their
investment adviser or financial planner has made arrangements to
permit them to do so with the Trust and the Manager. The
investment adviser or financial planner must notify MGF Service
Corp. that an investment qualifies as a purchase at net asset
value.
Trustees, directors, officers and employees of the Trust, the
Manager, the Adviser or MGF Service Corp., including members of
the immediate family of such individuals and employee benefit
plans established by such entities, may also purchase Class A
shares of the Fund at net asset value.
Additional Information. For purposes of determining the
applicable sales load and for purposes of the Letter of Intent
and Right of Accumulation privileges, a purchaser includes an
individual, his spouse and their children under the age of 21,
purchasing shares for his or their own account; or a trustee or
other fiduciary purchasing shares for a single fiduciary account
although more than one beneficiary is involved; or employees of a
common employer, provided that economies of scale are realized
through remittances from a single source and quarterly
confirmation of such purchases; or an organized group, provided
that the purchases are made through a central administration, or
a single dealer, or by other means which result in economy of
sales effort or expense. Contact MGF Service Corp. for
additional information concerning purchases at net asset value or
at reduced sales loads.
Class C Shares
- --------------
Class C shares of the Fund are sold on a continuous basis at
the net asset value next determined after receipt of a purchase
order by the Trust. Purchase orders received by dealers prior to
4:00 p.m., Eastern time, on any business day and transmitted to
the Manager by 5:00 p.m., Eastern time, that day are confirmed at
the net asset value determined as of the close of the regular
session of trading on the New York Stock Exchange on that day.
It is the responsibility of dealers to transmit properly
completed orders so that they will be received by the Manager by
5:00 p.m., Eastern time. Dealers may charge a fee for effecting
purchase orders. Direct purchase orders received by MGF Service
Corp. by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by MGF Service Corp.
after 4:00 p.m. and orders received from dealers after 5:00 p.m.
are confirmed at the net asst value next determined on the
following business day.
A contingent deferred sales load is imposed on Class C shares
if an investor redeems an amount which causes the current value
of the investor's account to fall below the total dollar amount
of purchase payments subject to the deferred sales load, except
that no such charge is imposed if the shares redeemed have been
acquired through the reinvestment of dividends or capital gains
distributions or to the extent the amount redeemed is derived
from increases in the value of the account above the amount of
purchase payments subject to the deferred sales load.
Whether a contingent deferred sales load is imposed will
depend on the amount of time since the investor made a purchase
payment from which an amount is being redeemed. Purchases are
subject to the contingent deferred sales load according to the
following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
------------------- -------------------
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is
payable, it is assumed that the purchase payment from which the
redemption is made is the earliest purchase payment (from which a
redemption or exchange has not already been effected). If the
earliest purchase from which a redemption has not yet been
effected was made within one year before the redemption, then a
deferred sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the
contingent deferred sales load. Assume that an individual opens
an account and purchases 1,000 shares at $10 per share and that
six months later the net asset value per share is $12 and, during
such time, the investor has acquired 50 additional shares through
reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not
be subject to the load because of dividend reinvestment. With
respect to the remaining 400 shares, the load is applied only to
the original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $4,000 of the $5,400
redemption proceeds will be charged the load. At the rate of 1%,
the contingent deferred sales load would be $40. In determining
whether an amount is available for redemption without incurring a
deferred sales load, the purchase payments made for all Class C
shares in the shareholder's account are aggregated, and the
current value of all such shares is aggregated.
All sales loads imposed on redemptions are paid to the
Manager. The Manager intends to pay a commission of 1% of the
purchase amount to participating brokers at the time the investor
purchases Class C shares.
The contingent deferred sales load is currently waived for any
partial or complete redemption following death or disability (as
defined in the Internal Revenue Code of 1986, as amended) of a
shareholder (including one who owns the shares with his or her
spouse as a joint tenant with rights of survivorship) from an
account in which the deceased or disabled is named. The Manager
may require documentation prior to waiver of the charge,
including death certificates, physicians' certificates, etc.
SHAREHOLDER SERVICES
- --------------------
Contact MGF Service Corp. (Nationwide call toll-free 800-543-
0407; in Cincinnati call 629-2050) for additional information
about the shareholder services described below.
Automatic Withdrawal Plan
--------------------------
If the shares in your account have a value of at least $5,000,
you may elect to receive, or may designate another person to
receive, monthly or quarterly payments in a specified amount of
not less than $50 each. There is no charge for this service.
Purchases of additional Class A shares of the Fund while the plan
is in effect are generally undesirable because a sales load is
incurred whenever purchases are made.
Tax-Deferred Retirement Plans
------------------------------
Shares of the Fund are available for purchase in connection
with the following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for individuals
and their non-employed spouses
-- Qualified pension and profit-sharing plans for employees,
including those profit-sharing plans with a 401(k)
provision
-- 403(b)(7) custodial accounts for employees of public
school systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code.
Direct Deposit Plans
---------------------
Shares of the Fund may be purchased through direct deposit
plans offered by certain employers and government agencies.
These plans enable a shareholder to have all or a portion of his
or her payroll or social security checks transferred
automatically to purchase shares of the Fund.
Automatic Investment Plan
--------------------------
You may make automatic monthly investments in the Fund from
your bank, savings and loan or other depository institution
account. The minimum initial and subsequent investments must be
$50 under the plan. MGF Service Corp. pays the costs associated
with these transfers, but reserves the right, upon thirty days'
written notice, to make reasonable charges for this service.
Your depository institution may impose its own charge for
debiting your account which would reduce your return from an
investment in the Fund.
Reinvestment Privilege
-----------------------
If you have redeemed Class A shares of the Fund, you may
reinvest all or part of the proceeds without any additional sales
load. This reinvestment must occur within thirty days of the
redemption and the privilege may only be exercised once per year.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of the Fund on each day that the Trust
is open for business by sending a written request to MGF Service
Corp. The request must state the number of shares or the dollar
amount to be redeemed and your account number. The request must
be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $5,000 or
more, your signature must be guaranteed by any eligible guarantor
institution, including banks, brokers and dealers, municipal
securities brokers and dealers, government securities brokers and
dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings
associations.
You may also redeem shares by placing a wire redemption
request through a securities broker or dealer. Unaffiliated
broker-dealers may impose a fee on the shareholder for this
service. You will receive the net asset value per share next
determined after receipt by the Trust or its agent of your wire
redemption request. It is the responsibility of broker-dealers
to properly transmit wire redemption orders.
If your instructions request a redemption by wire, you will be
charged an $8 processing fee by MGF Service Corp. MGF Service
Corp. reserves the right, upon thirty days' written notice, to
change the processing fee. All charges will be deducted from
your account by redemption of shares in your account. Your bank
or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited
directly in your account with a commercial bank or other
depository institution via an Automated Clearing House (ACH)
transaction. There is currently no charge for ACH transactions.
Contact MGF Service Corp. for more information about ACH
transactions.
If a certificate for the shares was issued, it must be delivered
to MGF Service Corp., or the dealer in the case of a wire
redemption, duly endorsed or accompanied by a duly endorsed stock
power, with the signature guaranteed by any of the eligible
guarantor institutions outlined above.
A contingent deferred sales load may apply to a redemption of
Class C shares. See "How to Purchase Shares - Class C Shares."
Shares are redeemed at their net asset value per share next
determined after receipt by MGF Service Corp. of a proper
redemption request in the form described above, less, in the case
of Class C shares, any applicable contingent deferred sales load.
Payment is normally made within three business days after tender
in such form, provided that payment in redemption of shares
purchased by check will be effected only after the check has been
collected, which may take up to fifteen days from the purchase
date. To eliminate this delay, you may purchase shares of the
Fund by certified check or wire.
The Trust and MGF Service Corp. will consider all written and
verbal instructions as authentic and will not be responsible for
the processing of exchange instructions received by telephone
which are reasonably believed to be genuine or the delivery or
transmittal of the redemption proceeds by wire. The affected
shareholders will bear the risk of any such loss. The privilege
of exchanging shares by telephone is automatically available to
all shareholders. The Trust or MGF Service Corp., or both, will
employ reasonable procedures to determine that telephone
instructions are genuine. If the Trust and/or MGF Service Corp.
do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification
prior to acting upon telephone instructions, providing written
confirmation of the transactions and/or tape recording telephone
instructions.
At the discretion of the Trust or MGF Service Corp., corporate
investors and other associations may be required to furnish an
appropriate certification authorizing redemptions to ensure
proper authorization. The Trust reserves the right to require
you to close your account if at any time the value of your shares
is less than $1,000 (based on actual amounts invested including
any sales load paid, unaffected by market fluctuations), or $250
in the case of tax-deferred retirement plans, or such other
minimum amount as the Trust may determine from time to time.
After notification to you of the Trust's intention to close your
account, you will be given thirty days to increase the value of
your account to the minimum amount.
The Trust reserves the right to suspend the right of
redemption or to postpone the date of payment for more than seven
days under unusual circumstances as determined by the Securities
and Exchange Commission.
<PAGE>
EXCHANGE PRIVILEGE
- ------------------
Shares of the Fund and of any other fund of the Midwest Group
of Funds may be exchanged for each other.
Class A shares of the Fund may be exchanged for Class A shares
of any other fund and for shares of any other fund which offers
only one class of shares (provided such fund does not impose a
contingent deferred sales load). A sales load will be imposed
equal to the excess, if any, of the sales load rate applicable to
the shares being acquired over the sales load rate, if any,
previously paid on the shares being exchanged.
Class C shares of the Fund may be exchanged, on the basis of
relative net asset value per share, for Class C shares of any
other fund, for shares of any fund which is a money market fund,
and for shares of any other fund which offers only one class of
shares and which imposes a contingent deferred sales load. A
fund will "tack" the period for which the shares being exchanged
were held onto the holding period of the acquired shares for
purposes of determining if a contingent deferred sales load is
applicable in the event that the acquired shares are redeemed
following the exchange. The period of time that Class C shares
are held in a money market fund will not count toward the holding
period for determining whether a contingent deferred sales load
is applicable.
The following are the funds of the Midwest Group of Funds
currently offered to the public. Funds sold with a sales load
are indicated by an asterisk.
Midwest Group Tax Free Trust Midwest Strategic Trust
- ---------------------------- -----------------------
Tax-Free Money Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Royal Palm Florida Tax-Free *Treasury Total Return Fund
Money Fund
*Tax-Free Intermediate Term Fund Midwest Trust
*Ohio Insured Tax-Free Fund -------------
Short Term Government Income Fund
Institutional Government Income Fund
*Intermediate Term Government
Income Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
<PAGE>
You may request an exchange by sending a written request to
MGF Service Corp. The request must be signed exactly as your
name appears on the Trust's account records. Exchanges may also
be requested by telephone. If you are unable to execute your
transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202. An exchange will be effected at the next
determined net asset value (or offering price, if sales load is
applicable) after receipt of a request by MGF Service Corp.
Exchanges may only be made for shares of funds then offered
for sale in your state of residence and are subject to the
applicable minimum initial investment requirements. The exchange
privilege may be modified or terminated by the Board of Trustees
upon 60 days' prior notice to shareholders. An exchange results
in a sale of fund shares, which may cause you to recognize a
capital gain or loss. Before making an exchange, contact MGF
Service Corp. to obtain a current prospectus for any of the other
funds in the Midwest Group and more information about exchanges
among the Midwest Group of Funds.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
The Fund expects to distribute substantially all of its net
investment income, if any, on a quarterly basis. The Fund
expects to distribute any net realized long-term capital gains at
least once each year. Management will determine the timing and
frequency of the distributions of any net realized short-term
capital gains.
Distributions are paid according to one of the following
options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application.
If no option is specified on your application, distributions will
automatically be reinvested in additional shares. All
distributions will be based on the net asset value in effect on
the payable date.
If you select the Income Option or the Cash Option and the
U.S. Postal Service cannot deliver your checks or if your checks
remain uncashed for six months, your dividends may be reinvested
in your account at the then-current net asset value and your
account will be converted to the Share Option.
An investor in Class A shares who has received in cash any
dividend or capital gains distribution from the Fund may return
the distribution within thirty days of the distribution date to
MGF Service Corp. for reinvestment at the net asset value next
determined after its return. The investor or his dealer must
notify MGF Service Corp. that a distribution is being reinvested
pursuant to this provision.
TAXES
- -----
The Fund intends to qualify for the special tax treatment
afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes
on income and capital gains distributed to shareholders. The
Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its
shareholders. Distributions of net investment income as well as
from net realized short-term capital gains, if any, are taxable
as ordinary income. Since the Fund's investment income is
derived from interest rather than dividends, no portion of such
distributions is eligible for the dividends received deduction
available to corporations. Distributions resulting from the sale
of foreign currencies and foreign obligations, to the extent of
foreign exchange gains, are taxed as ordinary income or loss. If
these transactions result in reducing the Fund's net income, a
portion of the income may be classified as a return of capital
(which will lower your tax basis). If the Fund pays
nonrefundable taxes to foreign governments during the year, the
taxes will reduce the Fund's net investment income but still may
be included in your taxable income. However, you may be able to
claim an offsetting tax credit or itemized deduction on your
return for your portion of foreign taxes paid by the Fund.
Distributions of net realized long-term capital gains are taxable
as long-term capital gains regardless of how long you have held
your Fund shares.
Under applicable tax law, the Fund may be required to limit
its gains from hedging in foreign currency forwards, futures and
options. Although it is anticipated the Fund will comply with
such limits, the Fund's extensive use of these hedging techniques
involves greater risk of unfavorable tax consequences than funds
not engaging in such techniques. Hedging may also result in the
application of the mark-to-market and straddle provisions of the
Internal Revenue Code. These provisions could result in an
increase (or decrease) in the amount of taxable dividends paid by
the Fund as well as affect whether dividends paid by the Fund are
classified as capital gain or ordinary income.
The Fund will mail to each of its shareholders a statement
indicating the amount and federal income tax status of all
distributions made during the year. In addition to federal
taxes, shareholders of the Fund may be subject to state and local
taxes on distributions. Shareholders should consult their tax
advisors about the tax effect of distributions and withdrawals
from the Fund and the use of the Automatic Withdrawal Plan and
the Exchange Privilege. The tax consequences described in this
section apply whether distributions are taken in cash or
reinvested in additional shares.
OPERATION OF THE FUND
- ---------------------
The Fund is a non-diversified series of Midwest Trust, an
open-end management investment company organized as a
Massachusetts business trust on December 7, 1980. The Board of
Trustees supervises the business activities of the Trust. Like
other mutual funds, the Trust retains various organizations to
perform specialized services for the Fund.
The Trust retains Midwest Group Financial Services, Inc.,
312 Walnut Street, Cincinnati, Ohio (the "Manager"), to provide
general investment supervisory services to the Fund and to manage
the Fund's business affairs. The Manager was organized in 1974
and is a subsidiary of Leshner Financial, Inc., of which Robert
H. Leshner is the controlling shareholder. The Manager serves as
investment adviser to four other series of the Trust, six series
of Midwest Group Tax Free Trust and four series of Midwest
Strategic Trust. The Fund pays the Manager a fee equal to the
annual rate of .7% of the average value of its daily net assets
up to $100 million and .6% of such assets in excess of $100
million.
Rogge Global Partners, plc, (the "Adviser"), 5-6 St.
Andrew's Hill, London, England, has been retained by the Manager
to manage the Fund's investments. The Adviser was organized in
1984 and specializes in global fixed-income management. The
Manager (not the Fund) pays the Adviser a fee equal to the annual
rate of .35% of the average value of the Fund's daily net assets
up to $100 million and .3% of such assets in excess of $100
million.
Decisions regarding the investment of the Fund's portfolio
will be made by the Adviser's Global Strategy Group, which is
made up of the Adviser's directors of portfolio management: Olaf
Rogge, John Graham and Richard Bell. Mr. Rogge is the founder
and the majority shareholder of the Adviser and has been managing
global investments for approximately twenty-two years.
The Fund is responsible for the payment of all operating
expenses, including fees and expenses in connection with
membership in investment company organizations, brokerage fees
and commissions, legal, auditing and accounting expenses,
expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares
(see "Distribution Plans"), insurance expenses, taxes or
governmental fees, fees and expenses of the custodian, transfer
agent and accounting and pricing agent of the Fund, fees and
expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and
distributing prospectuses, statements, reports and other
documents to shareholders, expenses of shareholders' meetings and
proxy solicitations, and such extraordinary or non-recurring
expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Trust's officers and
Trustees with respect thereto.
The Trust has retained MGF Service Corp., P.O. Box 5354,
Cincinnati, Ohio, a subsidiary of Leshner Financial, Inc., to
serve as the Fund's transfer agent, dividend paying agent and
shareholder service agent.
MGF Service Corp. also provides accounting and pricing
services to the Fund. MGF Service Corp. receives a monthly fee
from the Fund for calculating daily net asset value per share and
maintaining such books and records as are necessary to enable it
to perform its duties.
In addition, MGF Service Corp. has been retained by the
Manager to assist the Manager in providing administrative
services to the Fund. In this capacity, MGF Service Corp.
supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the
preparation of reports to shareholders and reports to and filings
with the Securities and Exchange Commission and state securities
authorities. The Manager (not the Fund) pays MGF Service Corp. a
fee for these administrative services equal to one-fourth of its
advisory fee from the Fund.
The Manager serves as principal underwriter for the Fund
and, as such, is the exclusive agent for the distribution of
shares of the Fund. Robert H. Leshner, Chairman and a director
of the Manager, is President and a Trustee of the Trust. John F.
Splain, Secretary and General Counsel of the Manager, is
Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to its
objective of seeking best execution of portfolio transactions,
the Adviser may give consideration to sales of shares of the Fund
as a factor in the selection of brokers and dealers to execute
portfolio transactions of the Fund. Subject to the requirements
of the Investment Company Act of 1940 and procedures adopted by
the Board of Trustees, the Fund may execute portfolio
transactions through any broker or dealer and pay brokerage
commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or
(iii) an affiliated person of which is an affiliated person of
the Trust, the Manager or the Adviser.
Shares of the Fund have equal voting rights and liquidation
rights. The Fund shall vote separately on matters submitted to a
vote of the shareholders except in matters where a vote of all
series of the Trust in the aggregate is required by the
Investment Company Act of 1940 or otherwise. Each class of
shares of the Fund shall vote separately on matters relating to
its plan of distribution pursuant to Rule 12b-1 (see
"Distribution Plans"). When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional
shares owned. The Trust does not normally hold annual meetings
of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting
upon the removal of any Trustee when requested to do so in
writing by shareholders holding 10% or more of the Trust's
outstanding shares. The Trust will comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 in order to
facilitate communications among shareholders.
DISTRIBUTION PLANS
- ------------------
Class A Shares. Pursuant to Rule 12b-1 under the Investment
Company Act of 1940, the Fund has adopted a plan of distribution
(the "Class A Plan") under which Class A shares may directly
incur or reimburse the Manager for certain distribution-related
expenses, including payments to securities dealers and others who
are engaged in the sale of shares of the 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 MGF Service Corp.; expenses of
formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media
advertising; expenses of preparing, printing and distributing
sales literature and prospectuses and statements of additional
information and reports for recipients other than existing
shareholders of the Fund; expenses of obtaining such information,
analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable;
and any other expenses related to the distribution of the Fund's
Class A shares.
The annual limitation for payment of expenses pursuant to
the Class A Plan is .35% of the Fund's average daily net assets
allocable to Class A shares. Unreimbursed expenditures will not
be carried over from year to year. In the event the Class A Plan
is terminated by the 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 Class A Plan terminates.
Class C Shares. Pursuant to Rule 12b-1 under the Investment
Company Act of 1940, the Fund has adopted a plan of distribution
(the "Class C Plan") which provides for two categories of
payments. First, the Class C Plan provides for the payment to
the Manager of an account maintenance fee, in an amount equal to
an annual rate of .25% of the Fund's average daily net assets
allocable to Class C shares, which may be paid to other dealers
based on the average value of Fund shares owned by clients of
such dealers. In addition, the Class C shares may directly incur
or reimburse the Manager in an amount not to exceed .75% per
annum of the Fund's average daily net assets allocable to Class C
shares for expenses incurred in the distribution and promotion of
the Fund's Class C shares, including payments to securities
dealers and others who are engaged in the sale of shares of the
Fund and who may be advising investors regarding the purchase,
sale or retention of such shares; expenses of maintaining
personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by MGF
Service Corp.; expenses of formulating and implementing marketing
and promotional activities, including direct mail promotions and
mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of
additional information and reports for recipients other than
existing shareholders of the Fund; expenses of obtaining such
information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem
advisable; and any other expenses related to the distribution of
the Fund's Class C shares.
Unreimbursed expenditures will not be carried over from year
to year. In the event the Class C Plan is terminated by the Fund
in accordance with its terms, the Fund will not be required to
make any payments for expenses incurred by the Manager after the
date the Class C Plan terminates. The Manager 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.
<PAGE>
General. Pursuant to the Plans, the Fund may also make
payments to banks or other financial institutions that provide
shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business
of underwriting, selling or distributing securities. Although
the scope of this prohibition under the Glass-Steagall Act has
not been clearly defined by the courts or appropriate regulatory
agencies, management of the Trust believes that the Glass-
Steagall Act should not preclude a bank from providing such
services. However, state securities laws on this issue may
differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register
as dealers pursuant to state law. If a bank were prohibited from
continuing to perform all or a part of such services, management
of the Trust believes that there would be no material impact on
the Fund or its shareholders. Banks may charge their customers
fees for offering these services to the extent permitted by
applicable regulatory authorities, and the overall return to
those shareholders availing themselves of the bank services will
be lower than to those shareholders who do not. The Fund may
from time to time purchase securities issued by banks which
provide such services; however, in selecting investments for the
Fund, no preference will be shown for such securities.
The Securities and Exchange Commission recently adopted
amendments proposed by the National Association of Securities
Dealers to its Rules of Fair Practice relating to asset-based
sales charges of mutual funds. The amendments require fund-level
accounting in which all sales charges - front-end load, 12b-1
fees or contingent deferred load - terminate when a percentage of
gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
On each day that the Trust is open for business, the share
price (net asset value) of Class C shares and the public offering
price (net asset value plus applicable sales load) of Class A
shares of the Fund is determined as of the close of the regular
session of trading on the New York Stock Exchange, currently 4:00
p.m., Eastern time. The Trust is open for business on each day
the New York Stock Exchange is open for business. Obligations
held by the Fund may be primarily listed on foreign exchanges or
traded in foreign markets which are open on days (such as
Saturdays and U.S. holidays) when the New York Stock Exchange is
not open for business. As a result, the net asset value per
share of the Fund may be significantly affected by trading on
days when the Trust is not open for business. The net asset
value per share of the Fund is calculated by dividing the sum of
the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued
expenses) by the total number of shares outstanding of the Fund,
rounded to the nearest cent.
The Fund's portfolio securities for which market quotations
are readily available are valued at their most recent bid prices
as obtained from one or more of the major market makers for such
securities. Foreign securities are valued on the basis of
quotations from the primary market in which they are traded, and
are translated from the local currency into U.S. dollars using
currency exchange rates. Securities (and other assets) for which
market quotations are not readily available are valued at their
fair value as determined in good faith in accordance with
consistently applied procedures established by and under the
general supervision of the Board of Trustees. The net asset
value per share of the Fund will fluctuate with the value of the
securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, the Fund may advertise its "average
annual total return." The Fund may also advertise "yield." Both
yield and average annual total return figures are based on
historical earnings and are not intended to indicate future
performance. Total return and yield are computed separately for
Class A and Class C shares. The yield of Class A shares is
expected to be higher than the yield of Class C shares due to the
higher distribution fees imposed on Class C shares.
The "average annual total return" of the Fund refers to the
average annual compounded rates of return over the most recent 1,
5 and 10 year periods or, where the Fund has not been in
operation for such period, over the life of the Fund (which
periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment. The calculation
of "average annual total return" assumes the reinvestment of all
dividends and distributions and, for Class A shares, the
deduction of the current maximum sales load from the initial
investment. The Fund may also advertise total return (a
"nonstandardized quotation") which is calculated differently from
"average annual total return." A nonstandardized quotation of
total return may be a cumulative return which measures the
percentage change in the value of an account between the
beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains
distributions. A nonstandardized return may also indicate
average annual compounded rates of return over periods other than
those specified for "average annual total return." These
nonstandardized returns do not include the effect of the
applicable sales load which, if included, would reduce total
return. A nonstandardized quotation of total return will always
be accompanied by the Fund's "average annual total return" as
described above.
The "yield" of the Fund is computed by dividing the net
investment income per share earned during a thirty-day (or one
month) period stated in the advertisement by the maximum public
offering price per share on the last day of the period (using the
average number of shares entitled to receive dividends). The
yield formula assumes that net investment income is earned and
reinvested at a constant rate and annualized at the end of a six-
month period.
From time to time, the Fund may advertise its performance
rankings as published by recognized independent mutual fund
statistical services such as Lipper Analytical Services, Inc.
("Lipper"), or by publications of general interest such as
Forbes, Money, The Wall Street Journal, Business Week, Barron's,
Fortune or Morningstar Mutual Fund Values. The Fund may also
compare its performance to that of other selected mutual funds,
averages of the other mutual funds within its category as
determined by Lipper, or recognized indicators such as the
Salomon Brothers World Government Bond Index. In connection with
a ranking, the Fund may provide additional information, such as
the particular category of funds to which the ranking relates,
the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. The Fund may also present its
performance and other investment characteristics, such as
volatility, in light of the Adviser's view of current or
historical trends.
The investment performance of the Adviser in managing all
global fixed-income accounts for its clients during the past ten
years as compared to the Salomon Brothers World Government Bond
Index is illustrated below. The Adviser's investment performance
is net of advisory fees and brokerage fees and commissions.
While the Fund will employ investment objectives and strategies
that are substantially similar to those that were employed by the
Adviser in managing its other accounts, the Fund may be subject
to certain restrictions on its investment activities to which the
Adviser was not previously subject. Examples include limits on
the percentage of assets invested in securities of issuers in a
single industry, and requirements on distributing income to
shareholders. Operating expenses will be incurred by the Fund
which are not incurred by the Adviser in managing its other
accounts. It is not intended that the following performance data
be relied upon by investors as an indication of future
performance of the Fund.
<PAGE>
Total Rates of Return
Rogge Global Salomon Brothers
Partners World Government
Period (Net of Fees) Bond Index
- ------ ------------- -----------------
1985 38.96% 27.27%
1986 28.39% 23.03%
1987 24.93% 18.40%
1988 -0.60% 4.37%
1989 4.87% 4.35%
1990 14.90% 11.97%
1991 20.62% 15.82%
1992 4.80% 5.53%
1993 18.71% 13.31%
1994 -1.96% 2.33%
The annualized total rate of return for the Adviser's global
fixed-income accounts for the ten years 1985-1994 is 14.66% as
compared to 12.35% for the Salomon Brothers World Government Bond
Index.
<PAGE>
Midwest Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Gary W. Heldman
James C. Krumme
H. Jerome Lerner
Robert H. Leshner
Oscar P. Robertson
G. William Rohde
Bruce J. Simpson
OFFICERS
Robert H. Leshner, President
John F. Splain, Secretary
Mark J. Seger, Treasurer
INVESTMENT MANAGER AND UNDERWRITER
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
INVESTMENT ADVISER
ROGGE GLOBAL PARTNERS, plc
5-6 St. Andrew's Hill
London EC4V 5BY England
TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS PAGE
Expense Information . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . .
Investment Objective, Investment
Policies and Risk Considerations. . . . . . . .
How to Purchase Shares. . . . . . . . . . . . . .
Shareholder Services. . . . . . . . . . . . . . .
How to Redeem Shares. . . . . . . . . . . . . . .
Exchange Privilege. . . . . . . . . . . . . . . .
Dividends and Distributions . . . . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . . .
Operation of the Fund . . . . . . . . . . . . . .
Distribution Plans. . . . . . . . . . . . . . . .
Calculation of Share Price and Public
Offering Price. . . . . . . . . . . . . . . . .
Performance Information . . . . . . . . . . . . .
No person has been authorized to give any information or to make
any representations, other than those contained in this
Prospectus, in connection with the offering contained in this
Prospectus, and if given or made, such information or
representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the
Trust to sell shares in any State to any person to whom it is
unlawful for the Trust to make such offer in such State.
<TABLE>
Account Application ACCOUNT
NO.__________________________________
Please mail account application to: (For Fund Use Only)
MGF Service Corp.
P.O. Box 5354 FOR BROKER/DEALER USE ONLY
Cincinnati, Ohio 45201-5354 Firm
Name:_______________________________
Global Bond Fund Home Office
Address:_____________________
[ ] A Shares (12) Branch
Address:__________________________
[ ] C Shares (13) Rep Name &
No.:__________________________
Rep
Signature:___________________________
<S> <C> <C>
Initial Investment of $__________________ ($1,000 minimum)
[ ] Check or draft enclosed payable to the Fund.
[ ] Bank Wire From:
____________________________________________________________________________________________________________
[ ] Exchange From:
____________________________________________________________________________________________________________
(Fund Name) (Fund Account Number)
Account Name S.S. #/Tax l.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. Check box if appropriate:
o I am exempt from backup withholding under the provisions of section 3406(a)(1)(c) of the Internal Revenue Code; or I
am not
subject to backup withholding because I have not been notified that I am subject to backup withholding as a result of a
failure to
report all interest or dividends; or the Internal Revenue Service has notified me that I am no longer subject to
backup
withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me and I have
mailed or
delivered an application to receive a Taxpayer Identification Number to the Internal Revenue Service Center or Social
Security
Administration Office. I understand that if I do not provide a Taxpayer Identification Number within 60 days that 31%
of all
reportable payments will be withheld until I provide a number.
- ------------------------------------------------------------------------------------------------------------------------------
- -----
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.
- ------------------------------------------------------------------------------------------------------------------------------
- -----
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 the Midwest Group of Funds.
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 Midwest 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 the Midwest Group
of
Funds 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 Fund's current Prospectus, that he is of
legal age,
and that he has full authority and legal capacity for himself or the organization named below, to make this investment and
to use
the options selected above. The investor appoints MGF Service Corp. as his agent to enter orders for shares whether by
direct
purchase or exchange, to receive dividends and distributions for automatic reinvestment in additional shares of the Fund for
credit
to the investor's account and to surrender for redemption shares held in the investor's account in accordance with any
of the
procedures elected above or for payment of service charges incurred by the investor. The investor further agrees that MGF
Service
Corp. 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 MGF Service Corp., Midwest Trust, Midwest Group Financial Services, 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.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of Midwest Trust. There is no charge for this
service, and
it offers the convenience of automatic investing on a regular basis. The minimum investment is $50.00 per month. For an
account that
is opened by using this Plan, the minimum initial and subsequent investments must be $50.00. Though a continuous program
of 12
monthly investments is recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________per month in the Fund. ABA Routing
Number_________________________________
FI Account
Number__________________________________
[ ] Checking Account [ ] Savings
Account
_________________________________________________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
[ ] the last business day of each month
_________________________________________________________________________ [ ] the 15th day of each month
City State [ ] both the 15th and last business day
X_________________________________________________________________________
X__________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records) (Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names.
Please sign exactly as signature appears on your FI's records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which MGF Service Corp. ("MGF") has put into effect, by which
amounts,
determined by your depositor, payable to the Fund, for purchase of shares of the Fund, are collected by MGF, MGF hereby
agrees:
MGF will indemnify and hold you harmless from any liability to any person or persons whatsoever arising out of the
payment by
you of any amount drawn by the Fund to its own order on the account of your depositor or from any liability to any person
whatsoever
arising out of the dishonor by you whether with or without cause or intentionally or inadvertently, of any such checks.
MGF 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.
MGF will refund to you any amount erroneously paid by you to the Fund on any such check if the claim for the amount
of such
erroneous payment is made by you within six (6) months from the date of such erroneous payment; your participation
in this
arrangement and that of the Fund may be terminated by thirty (30) days written notice from either party to the other.
- ------------------------------------------------------------------------------------------------------------------------------
- -----
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $______________ from my mutual fund account beginning the last business day
of the month of ____________________.
Please Indicate Withdrawal Schedule (Check One):
[ ] Monthly -- Withdrawals will be made on the last business day of each month.
[ ] Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
[ ] Annually -- Please make withdrawals on the last business day of the month of:____________________.
Please Select Payment Method (Check One):
[ ] Exchange: Please exchange the withdrawal proceeds into another Midwest 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 Midwest 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 MGF Service Corp. 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>
MIDWEST TRUST
STATEMENT OF ADDITIONAL INFORMATION
June 2, 1995
Global Bond Fund
This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Fund's
Prospectus dated June 2, 1995. A copy of the Fund's Prospectus
can be obtained by writing the Trust at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202-4094, or by calling the Trust
nationwide toll-free 800-543-0407, in Cincinnati 629-2050.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
Midwest Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS
------------------ PAGE
----
THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS. . . . . . . . . . 4
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS. . . . . . . . . 6
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . 16
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . 18
THE INVESTMENT MANAGER AND UNDERWRITER . . . . . . . . . . . . 20
THE INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . 22
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . 22
SECURITIES TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 24
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . 26
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE . . . . . 26
OTHER PURCHASE INFORMATION . . . . . . . . . . . . . . . . . . 27
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
REDEMPTION IN KIND . . . . . . . . . . . . . . . . . . . . . . 30
HISTORICAL PERFORMANCE INFORMATION . . . . . . . . . . . . . . 30
PRINCIPAL SECURITY HOLDERS . . . . . . . . . . . . . . . . . . 33
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 33
MGF SERVICE CORP . . . . . . . . . . . . . . . . . . . . . . . 33
SEMIANNUAL REPORT. . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
THE TRUST
- ---------
Midwest Trust (the "Trust"), formerly Midwest Income Trust,
was organized as a Massachusetts business trust on December 7,
1980. The Trust currently offers five series of shares to
investors: the Short Term Government Income Fund (formerly the
Short Term Government Fund), the Intermediate Term Government
Income Fund (formerly the Intermediate Term Government Fund), the
Institutional Government Income Fund (formerly the Institutional
Government Fund), the Adjustable Rate U.S. Government Securities
Fund and the Global Bond Fund. This Statement of Additional
Information provides information relating to the Global Bond Fund
(the "Fund"). Information relating to the Short Term Government
Income Fund, the Intermediate Term Government Income Fund, the
Institutional Government Income Fund and the Adjustable Rate U.S.
Government Securities Fund is provided in a separate Statement of
Additional Information. Each Fund has its own investment
objective(s) and policies.
Each share of a Fund represents an equal proportionate
interest in the assets and liabilities of that Fund with each
other share of that Fund and is entitled to such dividends and
distributions out of the income belonging to the Fund as are
declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or
combine the shares of any Fund into a greater or lesser number of
shares of that Fund so long as the proportionate beneficial
interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any
liquidation of a Fund, the holders of shares of the Fund being
liquidated will be entitled to receive as a class a distribution
out of the assets, net of the liabilities, belonging to that
Fund. Expenses attributable to any Fund are borne by that Fund.
Any general expenses of the Trust not readily identifiable as
belonging to a particular Fund are allocated by or under the
direction of the Trustees in such manner as the Trustees
determine to be fair and equitable. Generally, the Trustees
allocate such expenses on the basis of relative net assets or
number of shareholders. No shareholder is liable to further
calls or to assessment by the Trust without his express consent.
Both Class A shares and Class C shares of the Fund represent
an interest in the same assets of the 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 Trust has received an order from
the Securities and Exchange Commission permitting the issuance
and sale of multiple classes of shares. The Board of Trustees
may classify and reclassify the shares of the Fund into
additional classes of shares at a future date.
Under Massachusetts law, under certain circumstances,
shareholders of a Massachusetts business trust could be deemed to
have the same type of personal liability for the obligations of
the Trust as does a partner of a partnership. However, numerous
investment companies registered under the Investment Company Act
of 1940 have been formed as Massachusetts business trusts and the
Trust is not aware of an instance where such result has occurred.
In addition, the Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust or the Trustees.
The Trust Agreement also provides for the indemnification out of
the Trust property for all losses and expenses of any shareholder
held personally liable for the obligations of the Trust.
Moreover, it provides that the Trust will, upon request, assume
the defense of any claim made against any shareholder for any act
or obligation of the Trust and satisfy any judgment thereon. As
a result, and particularly because the Trust assets are readily
marketable and ordinarily substantially exceed liabilities,
management believes that the risk of shareholder liability is
slight and limited to circumstances in which the Trust itself
would be unable to meet its obligations. Management believes
that, in view of the above, the risk of personal liability is
remote.
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS
- -------------------------------------------
Corporate Bonds.
Moody's Investors Service, Inc. provides the following
- ------------------------------------------------------
descriptions of its corporate bond ratings:
- ------------------------------------------
Aaa - "Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk
and are generally referred to as 'gilt edge.' Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues."
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."
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."
Corporate Notes.
Moody's Investors Service, Inc. provides the following
- ------------------------------------------------------
descriptions of its corporate note ratings:
- ------------------------------------------
MIG-1 "Notes which are rated MIG-1 are judged to be of the
best quality. There is present strong protection by
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing."
MIG-2 "Notes which are rated MIG-2 are judged to be of high
quality. Margins of protection are ample although not
so large as in the preceding group."
MIG-3 "Notes which are rated MIG-3 are judged to be of
favorable quality. All security elements are accounted
for but they are lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection
may be narrow and market access for refinancing is
likely to be less well established."
Standard & Poor's Ratings Group provides the following
- ------------------------------------------------------
descriptions of its corporate note ratings:
- ------------------------------------------
SP-1 "Debt rated SP-1 has very strong or strong capacity to
pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be
given a plus (+) designation."
SP-2 "Debt rated SP-2 has satisfactory capacity to pay
principal and interest."
SP-3 "Debt rated SP-3 has speculative capacity to pay
principal and interest."
Commercial Paper.
Description of Commercial Paper Ratings of Moody's Investors
- ------------------------------------------------------------
Service, Inc.:
- -------------
Prime-1 "Superior capacity for repayment of short-term
promissory obligations."
Prime-2 "Strong capacity for repayment of short-term promissory
obligations."
Prime-3 "Acceptable capacity for repayment of short-term
promissory obligations."
Description of Commercial Paper Ratings of Standard & Poor's
- ------------------------------------------------------------
Ratings Group:
- -------------
A-1 "This designation indicates that the degree of safety
regarding timely payment is very strong."
A-2 "Capacity for timely payment on issues with this
designation is strong. However, the relative degree of
safety is not as overwhelming as for issues designated
A-1."
A-3 "Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however,
somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the
higher designations."
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and
investment policies described in the Prospectus (see "Investment
Objective, Investment Policies and Risk Considerations") appears
below:
Foreign Obligations. The Fund may invest in the debt
obligations of foreign issuers. Because the Fund invests in
foreign obligations, an investment in the Fund involves risks
that are different in some respects from an investment in a fund
which invests only in obligations 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.
Obligations issued by some foreign companies are less liquid or
more volatile than obligations 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 obligations 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.
European Currency Unit Bonds. The European Currency Unit
("ECU") is a basket of European currencies consisting of
specified amounts of the currencies of ten members of the
European community. The ECU is used by members as their
budgetary currency to determine official claims and debts. It
fluctuates with the daily exchange rate changes of the
constituent currencies. The ECU is now defined by the following
ten currencies: German Deutschmark, British Pound, French Franc,
Italian Lira, Dutch Guilder, Belgian Franc, Luxembourg Franc,
Finish Kroner, Irish Pound and Greek Drachma. ECU bonds are
bonds or debentures denominated in ECUs.
Forward Foreign Currency Exchange Contracts. The value of
the Fund's portfolio securities which are invested in non-U.S.
dollar denominated instruments as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and the Fund may
incur costs in connection with conversions between various
currencies. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through
forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers.
The Fund will not, however, hold foreign currency except in
connection with purchase and sale of foreign portfolio
securities.
The Fund will enter into forward foreign currency exchange
contracts as described hereafter. When the Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, it may desire to establish the cost or proceeds
relative to another currency. The forward contract may be
denominated in U.S. dollars or may be a "cross-currency" contract
where the forward contract is denominated in a currency other
than U.S. dollars. However, this tends to limit potential gains
which might result from a positive change in such currency
relationships.
The forecasting of a short-term currency market movement is
extremely difficult and the successful execution of a short-term
hedging strategy is highly uncertain. The Fund may enter into
such forward contracts if, as a result, not more than 50% of the
value of its total assets would be committed to such contracts.
Under normal circumstances, consideration of the prospect for
currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification
strategies. However, the Trustees believe that it is important
to have the flexibility to enter into forward contracts when the
Adviser determines it to be in the best interests of the Fund.
The Custodian will segregate cash, U.S. Government obligations or
other liquid high-grade debt obligations in an amount not less
than the value of the Fund's total assets committed to foreign
currency exchange contracts entered into under this type of
transaction. If the value of the segregated securities declines,
additional cash or securities will be added on a daily basis,
i.e., "marked to market," so that the segregated amount will not
be less than the amount of the Fund's commitments with respect to
such contracts.
Generally, the Fund will not enter into a forward foreign
currency exchange contract with a term of greater than 90 days.
At the maturity of the contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or
may retain the security and terminate the obligation to deliver
the foreign currency by purchasing an "offsetting" forward
contract with the same currency trader obligating the Fund to
purchase, on the same maturity date, the same amount of the
foreign currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of the
contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security
is less than the amount of foreign currency the Fund is obligated
to deliver and if a decision is made to sell the security and
make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is
obligated to deliver.
If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss (as
described below) to the extent that there has been movement in
forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward
contract to sell the foreign currency. Should forward prices
decline during the period between entering into a forward
contract for the sale of a foreign currency and the date the Fund
enters into an offsetting contract for the purchase of the
foreign currency, the Fund will realize a gain to the extent the
price of the currency the Fund has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the
price of the currency the Fund has agreed to purchase exceeds the
price of the currency the Fund has agreed to sell.
The Fund's dealings in forward foreign currency exchange
contracts will be limited to the transactions described above.
The Fund is not required to enter into such transactions with
regard to its foreign currency-denominated securities and will
not do so unless deemed appropriate by the Adviser. It should
also be realized that this method of protecting the value of the
Fund's portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices
of the securities held by the Fund. It simply establishes a rate
of exchange which one can achieve at some future point in time.
Additionally, although such contracts tend to minimize the risk
of loss due to a decline in the value of the hedged currency, at
the same time, they tend to limit any potential gain which might
result should the value of such currency increase.
Interest Rate Futures Contracts. The Fund may enter into
contracts for the future delivery of fixed-income securities
commonly referred to as "interest rate futures contracts." In
this context, a futures contract is an agreement by the Fund to
buy or sell fixed-income 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 50% of the value of its total assets. The Fund will not
enter into a futures contract if immediately thereafter more than
5% of the fair market value of its assets would be committed to
initial margins.
Writing Covered Call Options. The Fund may write covered
call options on individual bonds and on interest rate futures
contracts 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 or futures contract at a specified
price (the exercise price) at any time until a certain date (the
expiration date). A call option is "covered" if the Fund owns
the underlying security subject to the call option at all times
during the option period. A covered call writer is required to
deposit in escrow the underlying security in accordance with the
rules of the exchanges on which the option is traded and the
appropriate clearing agency.
The writing of covered call options is a conservative
investment technique which the Adviser believes involves
relatively little risk. However, there is no assurance that a
closing transaction can be effected at a favorable price. During
the option period, the covered call writer has, in return for the
premium received, given up the opportunity for capital
appreciation above the exercise price should the market price of
the underlying security increase, but has retained the risk of
loss should the price of the underlying security decline.
The Fund may write covered call options if, immediately
thereafter, not more than 30% of its net assets would be
committed to such transactions. As long as the rules promulgated
under the California Corporate Securities Law prohibit the Fund
from engaging in unlisted covered call transactions, the Fund
will not do so. In addition, as long as the Securities and
Exchange Commission continues to take the position that unlisted
options are illiquid securities, the Fund will not commit more
than 15% of its net assets to unlisted covered call transactions
and other illiquid securities. The ability of the Fund to write
covered call options may be limited by state regulations which
require the Fund to commit no more than a specified percentage of
its assets to such transactions and the tax requirement that less
than 30% of the Fund's gross income be derived from the sale or
other disposition of securities held for less than 3 months.
Writing Covered Put Options. The Fund may write covered put
options on bonds and on interest rate 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
obligations in an amount not less than the exercise price at all
times while the put option is outstanding.
The risks involved in writing put options include the risk
that a closing transaction cannot be effected at a favorable
price and the possibility that the price of the underlying
security may fall below the exercise price, in which case the
Fund may be required to purchase the underlying security at a
higher price than the market price of the security at the time
the option is exercised. The Fund may not write a put option if,
immediately thereafter, more than 25% of its net assets would be
committed to such transactions.
Purchasing Options on Interest Rate Futures Contracts. The
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.
The Fund may purchase put and call options on interest rate
futures contracts which are traded on a national exchange or
board of trade and sell such options to terminate an existing
position. Options on interest rate futures give 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 a security, at a specified
exercise price at any time during the period of the option.
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.
Options Transactions Generally. Option transactions in
which the Fund may engage involve the specific risks described
above as well as the following risks: the writer of an option
may be assigned an exercise at any time during the option period;
disruptions in the markets for underlying instruments could
result in losses for options investors; imperfect or no
correlation between the option and the securities being hedged;
the insolvency of a broker could present risks for the broker's
customers; and market imposed restrictions may prohibit the
exercise of certain options. In addition, the option activities
of the Fund may affect its portfolio turnover rate and the amount
of brokerage commissions paid by the Fund. The success of the
Fund in using the option strategies described above depends,
among other things, on the Adviser's ability to predict the
direction and volatility of price movements in the options,
futures contracts and securities markets and the Adviser's
ability to select the proper time, type and duration of the
options.
When-Issued Securities and Securities Purchased On a To-Be-
Announced Basis. The Fund 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 Fund 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, the Fund will direct the Custodian to
place cash, U.S. Government obligations or other liquid high-
grade debt obligations in a segregated account in an amount
sufficient to make payment for the securities to be purchased.
When a segregated account is maintained because the 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 the Fund's commitments to
purchase securities on a when-issued or TBA basis. To the extent
funds are in a segregated account, they will not be available for
new investment or to meet redemptions. Securities purchased on a
when-issued or TBA basis and the securities held in the 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, the
Fund remains substantially fully invested at the same time that
it has purchased securities on a when-issued or TBA basis, there
will be a possibility that the market value of the Fund's assets
will experience greater fluctuation. The purchase of securities
on a when-issued or TBA basis may involve a risk of loss if the
seller fails to deliver after the value of the securities has
risen.
When the time comes for the 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 the Fund will
only make commitments to purchase securities on a when-issued or
TBA basis with the intention of actually acquiring the
securities, the Fund may sell these securities before the
settlement date if it is deemed advisable by the Adviser as a
matter of investment strategy.
Repurchase Agreements. When the Fund purchases securities,
it may enter into a repurchase agreement with the seller wherein
the seller agrees at the time of sale, to repurchase the security
at a mutually agreed upon time and price. The Fund may enter
into repurchase agreements 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. Although the securities
subject to the repurchase agreement might bear maturities
exceeding one year, settlement for the repurchase would never be
more than one year after the Fund's acquisition of the securities
and normally would be within a shorter period of time. The
resale price will be in excess of the purchase price, reflecting
an agreed upon market rate effective for the period of time the
Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the
time the Fund enters into a repurchase agreement, the value of
the underlying security, including accrued interest, will equal
or exceed the value of the repurchase agreement, and, in the case
of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including
accrued interest, will at all times equal or exceed the value of
the repurchase agreement.
For purposes of the Investment Company Act of 1940, a
repurchase agreement is deemed to be a loan from the Fund to the
seller subject to the repurchase agreement and is therefore
subject to the Fund's investment restriction applicable to loans.
It is not clear whether a court would consider the securities
purchased by the Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund
to the seller. In the event of the commencement of bankruptcy or
insolvency proceedings with respect to the seller of the
securities before repurchase of the security under a repurchase
agreement, the Fund may encounter delay and incur costs before
being able to sell the security. Delays may involve loss of
interest or decline in price of the security. If a court
characterized the transaction as a loan and the Fund has not
perfected a security interest in the security, the Fund may be
required to return the security to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured
creditor, the Fund would be at the risk of losing some or all of
the principal and income involved in the transaction. As with
any unsecured debt obligation purchased for the Fund, the Adviser
seeks to minimize the risk of loss through repurchase agreements
by analyzing the creditworthiness of the obligor, in this case,
the seller. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to
repurchase the security, in which case the Fund may incur a loss
if the proceeds to the 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 will direct the seller of the security to
deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or
exceed the repurchase price. It is possible that the Fund will
be unsuccessful in seeking to enforce the seller's contractual
obligation to deliver additional securities.
Loans of Portfolio Securities. The Fund may lend its
portfolio securities subject to the restrictions stated in its
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral must, on each business
day, at least equal the value of the loaned securities. To be
acceptable as collateral, letters of credit must obligate a bank
to pay amounts demanded by the Fund if the demand meets the terms
of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. The Fund receives amounts equal to the
interest on loaned securities and also receives one or more of
(a) negotiated loan fees, (b) interest on securities used as
collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be
shared with the borrower. The Fund may also pay fees to placing
brokers as well as custodian and administrative fees in
connection with loans. Fees may only be paid to a placing broker
provided that the Trustees determine that the fee paid to the
placing broker is reasonable and based solely upon services
rendered, that the Trustees separately consider the propriety of
any fee shared by the placing broker with the borrower, and that
the fees are not used to compensate the Adviser or any affiliated
person of the Trust or an affiliated person of the Adviser, the
Manager or other affiliated person. The terms of the Fund's
loans must meet applicable tests under the Internal Revenue Code
and permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
Bank Debt Instruments. Bank debt instruments in which the
Fund may invest consist of certificates of deposit, bankers'
acceptances and time deposits issued by national banks and state
banks, foreign branches of national 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. Eurodollar
certificates of deposit are negotiable U.S. dollar denominated
certificates of deposit issued by foreign branches of major U.S.
commercial banks. 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. Eurodollar bankers'
acceptances are U.S. dollar denominated bankers' acceptances
"accepted" by foreign branches of major U.S. commercial banks.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest
rate. The Fund will not invest in time deposits maturing in more
than seven days if, as a result thereof, more than 15% of the
value of its net assets would be invested in such securities and
other illiquid securities.
Commercial Paper. Commercial paper consists of short-term,
(usually from one to two hundred seventy days) unsecured
promissory notes issued by U.S. and foreign corporations in order
to finance their current operations. Eurodollar commercial paper
refers to notes payable by European issuers in U.S. dollars. The
Fund will only invest in commercial paper rated A-1 or A-2 by
Standard & Poor's Ratings Group or Prime-1 or Prime-2 by Moody's
Investors Service, Inc. or unrated paper of issuers who have
outstanding unsecured debt rated A or better by Standard & Poor's
or Moody's. 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 the Fund's restrictions
on illiquid investments (see "Investment Limitations") unless, in
the judgment of the Adviser, such note is liquid.
<PAGE>
Majority. As used in the Prospectus and this Statement of
Additional Information, the term "majority" of the outstanding
shares of the Trust (or of the Fund) means the lesser of (1) 67%
or more of the outstanding shares of the Trust (or the Fund)
present at a meeting, if the holders of more than 50% of the
outstanding shares of the Trust (or the Fund) are present or
represented at such meeting or (2) more than 50% of the
outstanding shares of the Trust (or the Fund).
INVESTMENT LIMITATIONS
- ----------------------
The Trust has adopted certain fundamental investment
limitations designed to reduce the risk of an investment in the
Fund. These limitations may not be changed with respect to the
Fund without the affirmative vote of a majority of the Fund's
outstanding shares.
1. Borrowing Money. The Fund will not borrow money, except
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. This investment limitation does not
preclude the Fund from entering into reverse repurchase
transactions, provided that the Fund has asset coverage of 300%
for all borrowings of the Fund and reverse repurchase commitments
of the Fund pursuant to such transactions. The Fund will not
pledge, mortgage or hypothecate its assets (collateral
arrangements with respect to writing options and initial margin
on futures contracts are not deemed to be a pledge, mortgage or
hypothecation of assets for purposes of this investment
limitation) except in connection with borrowings described in
this investment limitation.
2. Underwriting. The Fund will not act as underwriter of
securities issued by other persons, either directly or through a
majority owned subsidiary. This limitation is not applicable to
the extent that, in connection with the disposition of its
portfolio securities (including restricted securities), the Fund
may be deemed an underwriter under certain federal securities
laws.
3. Illiquid Investments. The Fund will not purchase
securities for which there are legal or contractual restrictions
on resale or enter into a repurchase agreement maturing in more
than seven days if, as a result thereof, more than 15% of the
value of the Fund's net assets would be invested in such
securities.
4. Real Estate. The Fund will not purchase, hold or deal
in real estate, including real estate limited partnerships.
5. Commodities. The Fund will not purchase, hold or deal
in commodities or commodities futures contracts.
6. Loans. The Fund will not make loans to other persons,
except (a) by loaning portfolio securities if the borrower agrees
to maintain collateral marked to market daily in an amount at
least equal to the market value of the loaned securities, or (b)
by engaging in repurchase agreements. For purposes of this
limitation, the term "loans" shall not include the purchase of
marketable bonds, debentures, commercial paper, corporate notes
or similar marketable evidences of indebtedness which are part of
an issue for the public.
7. Investing for Control. The Fund will not invest in
companies for the purpose of exercising control or management.
8. Other Investment Companies. The Fund will not invest
more than 5% of its total assets in the securities of any single
investment company and will not invest more than 10% of its total
assets in securities of other investment companies.
9. Margin Purchases. The Fund will not purchase any
securities or evidences of interest thereon on "margin," except
that it may obtain such short-term credit as may be necessary for
the clearance of purchases and sales or redemption of securities.
10. Common Stocks. The Fund will not invest in common
stocks.
11. Options. The Fund will not purchase or sell puts,
calls, options, futures or straddles except as described in the
Prospectus and Statement of Additional Information.
12. Short Sales. The Fund will not sell any securities
short.
13. When-Issued Purchases. The Fund will not make any
commitment to purchase securities on a when-issued or to-be-
announced basis if more than 25% of the Fund's net assets would
be so committed.
14. 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, its agencies or
instrumentalities or repurchase agreements with respect thereto.
15. Mineral Leases. The Fund will not purchase oil, gas or
other mineral leases or exploration or development programs.
<PAGE>
16. 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. This
limitation is not applicable to arrangements with respect to
transactions involving forward foreign currency exchange
contracts, options, futures contracts and other similar permitted
investments and techniques.
17. Unseasoned Issuers. The Fund will not purchase
securities of unseasoned issuers, including their predecessors,
which have been in operation for less than three years if more
than 5% of the value of the Fund's total assets would be so
committed.
With respect to the percentages adopted by the Trust as
maximum limitations on the Fund's investment policies and
restrictions, an excess above the fixed percentage (except for
the percentage limitations relative to the borrowing of money)
will not be a violation of the policy or restriction unless the
excess results immediately and directly from the acquisition of
any security or the action taken.
The Trust does not intend to pledge, mortgage or hypothecate
the assets of the Fund. The Trust does not intend to acquire
securities issued by any other investment company or investment
trust. As long as the rules promulgated under the California
Corporate Securities Law prohibit the Fund from acquiring or
retaining securities of any open-end investment company, the Fund
will not acquire or retain such securities, unless the
acquisition is part of a merger or acquisition of assets or other
reorganization. The statements of intention in this paragraph
reflect nonfundamental policies which may be changed by the Board
of Trustees without shareholder approval.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive
officers of the Trust and their aggregate compensation from the
Trust and the Midwest complex (consisting of the Trust, Midwest
Group Tax Free Trust and Midwest Strategic Trust) for the fiscal
year ended September 30, 1994. Each Trustee is a Trustee of
Midwest Group Tax Free Trust and Mr. Lerner is also a Trustee of
Midwest Strategic Trust. Each Trustee who is an "interested
person" of the Trust, as defined by the Investment Company Act of
1940, is indicated by an asterisk.
<PAGE>
<TABLE>
<S>
<C> <C> <C> <C> <C>
COMPENSATION
COMPENSATION FROM
NAME AGE POSITION HELD FROM TRUST MIDWEST COMPLEX
*Robert H. Leshner 55 President/Trustee $ 0 $ 0
G. William Rohde + 66 Trustee 2,200 4,400
H. Jerome Lerner + 56 Trustee 2,200 6,800
Oscar P. Robertson 56 Trustee 1,700 3,400
James C. Krumme + 68 Trustee 2,200 4,400
Bruce J. Simpson 69 Trustee 2,200 4,400
Gary W. Heldman 48 Trustee 2,200 4,400
John F. Splain 38 Secretary 0 0
Mark J. Seger 33 Treasurer 0 0
* Mr. Leshner, as an affiliated person of Midwest Group
Financial Services, Inc., the Trust's principal underwriter
and the Fund's investment manager, is an "interested person"
of the Trust within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940.
+ Member of Audit Committee
The principal occupations of the Trustees and executive
officers of the Trust during the past five years are set forth
below:
ROBERT H. LESHNER, 312 Walnut Street, Cincinnati, Ohio is
Chairman of the Board of Midwest Group Financial Services, Inc.
(the investment adviser and the 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 President and a Trustee of Midwest Group Tax Free Trust and
Midwest Strategic Trust, registered investment companies.
G. WILLIAM ROHDE, 7201 Snider Road, Mason, Ohio is Chief
Executive Officer of Basco Company, a manufacturer of aluminum
and plastic products, and has served in that position since 1992
prior to which he served as President since 1955.
H. JEROME LERNER, 7149 Knoll Road, Cincinnati, Ohio is a
principal of HJL Enterprises and is Chairman of Crane
Electronics, a manufacturer of connectors. He is also a Trustee
of Midwest Strategic Trust.
OSCAR P. ROBERTSON, 4293 Muhlhauser Road, Fairfield, Ohio is
President of Orchem, Inc., a chemical specialties distributor.
JAMES C. KRUMME, 2121 Alpine Place, Cincinnati, Ohio is
retired President of Tresler Oil Company, a petroleum terminal
operator and a petroleum distribution company. He was associated
with that company from 1949 to 1985. He is a Director of the
Vulcan Oil and Chemical Company and is a consultant to the
petroleum industry.
BRUCE J. SIMPSON, 1117 Dunstan Road, Geneva, Illinois is a
private investor. He has served as a senior officer of the
National Association of Securities Dealers, Inc., as a consultant
to the Securities and Exchange Commission and as a founder and
senior adviser to the Chicago Board Options Exchange, Inc. He is
a Director and Chairman of the Audit Committee of ABT Utility
Income Fund, Inc. and ABT Investment Series, Inc. and a Trustee
and Chairman of the Audit Committee of ABT Growth and Income
Trust.
GARY W. HELDMAN, 4545 Malsbary Road, Cincinnati, Ohio is the
former President of The Fechheimer Brothers Company, a
manufacturer of uniforms.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is
Secretary and General Counsel of Leshner Financial, Inc., Midwest
Group Financial Services, Inc. and MGF Service Corp. He is also
Secretary of Midwest Group Tax Free Trust, Midwest Strategic
Trust, Brundage, Story and Rose Investment Trust, Leeb Personal
FinanceTM Investment Trust, Markman MultiFund Trust and The
Tuscarora Investment Trust and Assistant Secretary of
Williamsburg Investment Trust, Schwartz Investment Trust and
Fremont Mutual Funds, Inc., all of which are registered
investment companies.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio
is Vice President of Leshner Financial, Inc. and MGF Service
Corp. He is Treasurer of Midwest Group Tax Free Trust, Midwest
Strategic Trust, Brundage, Story and Rose Investment Trust, Leeb
Personal FinanceTM Investment Trust, Williamsburg Investment
Trust and Markman MultiFund Trust, Assistant Treasurer of
Schwartz Investment Trust and The Tuscarora Investment Trust and
Assistant Secretary of Fremont Mutual Funds, Inc.
THE INVESTMENT MANAGER AND UNDERWRITER
- --------------------------------------
Midwest Group Financial Services, Inc. (the "Manager")
performs management, statistical, portfolio adviser selection and
other services for the Fund. The Manager is a subsidiary of
Leshner Financial, Inc., of which Robert H. Leshner is the
controlling shareholder. Mr. Leshner may be deemed to be a
controlling person and an affiliate of the Manager by reason of
his indirect ownership of its shares and his position as the
principal executive officer of the Manager. Mr. Leshner, by
reason of such affiliation, may directly or indirectly receive
benefits from the management fees paid to the Manager.
Under the terms of the management agreement between the
Trust and the Manager, the Fund pays the Manager a fee computed
and accrued daily and paid monthly at an annual rate of .7% of
its average daily net assets up to and including $100,000,000 and
.6% of such assets in excess of $100,000,000.
The Fund is responsible for the payment of all expenses
incurred in connection with the organization, registration of
shares and operations of the Fund, including such extraordinary
or non-recurring expenses as may arise, such as litigation to
which the Trust may be a party. The Fund may have an obligation
to indemnify the Trust's officers and Trustees with respect to
such litigation, except in instances of willful misfeasance, bad
faith, gross negligence or reckless disregard by such officers
and Trustees in the performance of their duties. The Manager
bears promotional expenses in connection with the distribution of
the Fund's shares to the extent that such expenses are not
assumed by the Fund under its 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 Manager are paid by the Manager.
By its terms, the Fund's management agreement will remain in
force until January 30, 1997 and from year to year thereafter,
subject to annual approval by (a) the Board of Trustees or (b) a
vote of the majority of the 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 Fund's management agreement
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 the Fund's outstanding voting
securities, or by the Manager. The management agreement
automatically terminates in the event of its assignment, as
defined by the Investment Company Act of 1940 and the rules
thereunder.
The Manager will reimburse the Fund to the extent that the
expenses of the Fund for any fiscal year exceed the applicable
expense limitations imposed by state securities administrators,
as such limitations may be lowered or raised from time to time.
The most restrictive limitation is presently 2.5% of the first
$30 million of average daily net assets, 2% of the next $70
million of average daily net assets and 1.5% of average daily net
assets in excess of $100 million. If any such reimbursement is
required, the payment of the management fee at the end of any
month will be reduced or postponed or, if necessary, a refund
will be made to the Fund at the end of such month. Certain
expenses such as brokerage commissions, if any, taxes, interest,
extraordinary items and other expenses subject to approval of
state securities administrators are excluded from such
limitations. If the expenses of the Fund approach the applicable
limitation in any state, the Trust will consider the various
actions that are available to it, including suspension of sales
to residents of that state.
<PAGE>
The Manager may use the name "Midwest" in connection with
any registered investment company or other business enterprise
with which it is or may become associated.
The Manager is also the principal underwriter of the Fund
and, as such, the exclusive agent for distribution of shares of
the Fund. The Manager is obligated to sell the shares on a best
efforts basis only against purchase orders for the shares.
Shares of the Fund are offered to the public on a continuous
basis.
The Manager currently allows concessions to dealers who sell
Class A shares of the Fund. The Manager retains the entire sales
load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
The Fund may compensate dealers, including the Manager and
its affiliates, based on the average balance of all accounts in
the Fund for which the dealer is designated as the party
responsible for the account. See "Distribution Plans" below.
THE INVESTMENT ADVISER
- ----------------------
Rogge Global Partners, plc (the "Adviser") has been retained
by the Manager to serve as the discretionary portfolio adviser of
the Fund. The Adviser selects the portfolio securities for
investment by the Fund, purchases and sells securities of the
Fund and places orders for the execution of such portfolio
transactions, subject to the general supervision of the Board of
Trustees and the Manager. The Adviser receives a fee equal to
the annual rate of .35% of the Fund's average daily net assets up
to and including $100,000,000 and .3% of such assets in excess of
$100,000,000. The services provided by the Adviser are paid for
wholly by the Manager. The compensation of any officer, director
or employee of the Adviser who is rendering services to the Fund
is paid by the Adviser.
The employment of the Adviser will remain in force until
January 30, 1997 and from year to year thereafter, subject to
annual approval by (a) the Board of Trustees or (b) a vote of the
majority of the Fund's outstanding voting securities; provided
that in either event continuance is also approved by a majority
of the Trustees who are not interested persons of the Trust, by a
vote cast in person at a meeting called for the purpose of voting
such approval. The employment of the Adviser may be terminated
at any time, on sixty days' written notice, without the payment
of any penalty, by the Board of Trustees, by a vote of the
majority of the Fund's outstanding voting securities, by the
Manger, or by the Adviser. The agreement with the Adviser
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 Fund has
adopted a plan of distribution (the "Class A Plan") pursuant to
Rule 12b-1 under the Investment Company Act of 1940 which permits
the Fund to pay up to a maximum of .35% per annum of the average
daily net assets of the Class A shares for expenses incurred in
the distribution and promotion of the Class A shares, including
but not limited to, the printing of prospectuses, statements of
additional information and reports used for sales purposes,
advertisements, expenses of preparation and printing of sales
literature, promotion, marketing and sales expenses, and other
distribution-related expenses, including any distribution fees
paid to securities dealers or other firms who have executed a
distribution or service agreement with the Manager. Unreimbursed
expenses will not be carried over from year to year.
Class C Shares -- The Fund has also adopted a plan of
distribution (the "Class C Plan") with respect to its Class C
shares. 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, the 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 Fund may make payments to dealers and other persons in
an amount up to .75% per annum of the average value of Class C
shares owned by their clients, in addition to the .25% account
maintenance fee described above.
General 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 Fund's shares, are in writing and have been
approved by the Board of Trustees. All payments made pursuant to
the Plan are made in accordance with written agreements.
The continuance of the 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 Plan 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 the applicable class of the 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 Manager after the
termination date. Each Implementation Agreement terminates
automatically in the event of its assignment and may be
terminated at any time by a vote of a majority of the Independent
Trustees or by a vote of the holders of a majority of the
outstanding shares of the 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 Fund and its
shareholders. The Board of Trustees believes that expenditure of
the Fund's assets for distribution expenses under the Plans
should assist in the growth of the Fund which will benefit the
Fund and its 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 Fund's assets for distribution will be
realized. While the Plans are in effect, all amounts spent by
the Fund pursuant to the Plans and the purposes for which such
expenditures were made must be reported quarterly to the Board of
Trustees for its review. 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. Distribution expenses attributable
to the sale of more than one class of shares of the 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 the Fund.
By reason of his indirect ownership of shares of the
Manager, Robert H. Leshner may be deemed to have a financial
interest in the operation of the Plans and the Implementation
Agreements.
<PAGE>
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Fund and the
placing of the Fund's securities transactions and negotiation of
commission rates where applicable are made by the Adviser and are
subject to review by the Board of Trustees of the Trust. In the
purchase and sale of portfolio securities, the Adviser seeks best
execution for the Fund, taking into account such factors as price
(including the applicable brokerage commission or dealer spread),
the execution capability, financial responsibility and
responsiveness of the broker or dealer and the brokerage and
research services provided by the broker or dealer. The Adviser
generally seeks favorable prices and commission rates that are
reasonable in relation to the benefits received.
Generally, the Fund attempts to deal directly with the
dealers who make a market in the securities involved unless
better prices and execution are available elsewhere. Such
dealers usually act as principals for their own account. On
occasion, portfolio securities for the Fund may be purchased
directly from the United States Treasury. Because the portfolio
securities of the Fund are generally traded on a net basis and
transactions in such securities do not normally involve brokerage
commissions, the cost of portfolio securities transactions of the
Fund will consist primarily of dealer or underwriter spreads.
The Adviser is specifically authorized to select brokers who
also provide brokerage and research services to the Fund and/or
other accounts over which the Adviser exercises investment
discretion and to pay such brokers a commission in excess of the
commission another broker would charge if the Adviser determines
in good faith that the commission is reasonable in relation to
the value of the brokerage and research services provided. The
determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the
Fund and to accounts over which it exercises investment
discretion.
Research services include securities and economic analyses,
reports on issuers' financial conditions and future business
prospects, newsletters and opinions relating to interest trends,
general advice on the relative merits of possible investment
securities for the Fund 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 Fund and the Adviser, it is not possible to place a dollar
value on it. Research services furnished by brokers through whom
the Fund effects securities transactions may be used by the
Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Fund.
<PAGE>
The Fund has no obligation to deal with any broker or dealer
in the execution of securities transactions. However, the
Manager and other affiliates of the Trust, the Manager or the
Adviser may effect securities transactions which are executed on
a national securities exchange or transactions in the over-the-
counter market conducted on an agency basis. The Fund will not
effect any brokerage transactions in its portfolio securities
with the Manager 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 Fund does not anticipate any
ongoing arrangements with other brokerage firms, brokerage
business may be transacted from time to time with other firms.
Neither the Adviser, the Manager nor affiliates of the Trust, the
Manager or the Adviser will receive reciprocal brokerage business
as a result of the brokerage business transacted by the Fund with
other brokers.
PORTFOLIO TURNOVER
- ------------------
The Fund does not intend to purchase securities for short
term trading; however, a security may be sold in anticipation of
a market decline, or purchased in anticipation of a market rise
and later sold. Securities will be purchased and sold in
response to the Adviser's evaluation of an issuer's ability to
meet its debt obligations in the future. A security may be sold
and another purchased when, in the opinion of the Adviser, a
favorable yield spread exists between specific issues or
different market sectors.
The 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 Fund. A 100% turnover rate would occur if all of
the Fund's portfolio securities were replaced once within a one
year period.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
- ----------------------------------------------------
The share price (net asset value) and the public offering
price (net asset value plus applicable sales load) of the Class A
shares and Class C shares of the Fund are determined as of the
close of the regular session of trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time), on each day the
Trust is open for business. The Trust is open for business on
every day except Saturdays, Sundays and the following holidays:
New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. The
Trust may also be open for business on other days in which there
is sufficient trading in the Fund's portfolio securities that its
net asset value might be materially affected. The Fund's net
asset value may be materially affected on a day when the Trust is
not open for business because trading in foreign exchanges may
take place at times other than the times trading occurs on the
New York Stock Exchange. In addition, foreign exchange trading
may not take place on each day the Trust is open for business.
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.
Portfolio securities held by the Fund for which market
quotations are readily available are generally valued at their
most recent bid prices as obtained from one or more of the major
market makers for such securities. However, certain foreign
fixed-income securities are valued at the last quoted sale price.
Securities (and other assets) for which market quotations are not
readily available are valued at their fair value as determined in
good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of
Trustees.
The value of non-dollar denominated portfolio instruments
held by the Fund will be determined by converting all assets and
liabilities initially expressed in foreign currency values into
U.S. dollar values at the mean between the bid and offered
quotations of such currencies against U.S. dollars as last quoted
by any recognized dealer. If such quotations are not available,
the rate of exchange will be determined in accordance with
policies established in good faith by the Board of Trustees.
Gains or losses between trade and settlement dates resulting from
changes in exchange rates between the U.S. dollar and a foreign
currency are borne by the Fund. To protect against such losses,
the Fund may enter into forward foreign currency exchange
contracts, which will also have the effect of limiting any such
gains.
OTHER PURCHASE INFORMATION
- --------------------------
The Prospectus describes generally how to purchase shares of
the Fund. Additional information with respect to certain types
of purchases of Class A shares of the Fund is set forth below.
Right of Accumulation. A "purchaser" (as defined in the
Prospectus) of Class A shares of the Fund has the right to
combine the cost or current net asset value (whichever is higher)
of his existing shares of the load funds distributed by the
Manager with the amount of his current purchases in order to take
advantage of the reduced sales loads set forth in the table in
the Prospectus. The purchaser or his dealer must notify MGF
Service Corp. that an investment qualifies for a reduced sales
load. The reduced load will be granted upon confirmation of the
purchaser's holdings by MGF Service Corp.
Letter of Intent. The reduced sales loads set forth in the
table in the Prospectus may also be available to any "purchaser"
(as defined in the Prospectus) of Class A shares of the Fund who
submits a Letter of Intent to MGF Service Corp. The Letter must
state an intention to invest within a thirteen month period in
any load fund distributed by the Manager 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.
The purchaser or his dealer must notify MGF Service Corp.
that an investment is being made pursuant to an executed Letter
of Intent.
Other Information. The Trust does not impose a sales load
or imposes a reduced sales load in connection with purchases of
the Fund's shares made under the reinvestment privilege or the
purchases described in the "Reduced Sales Load," "Purchases at
Net Asset Value" or "Exchange Privilege" sections in the
Prospectus because such purchases require minimal sales effort by
the Manager. Purchases described in the "Purchases at Net Asset
Value" section may be made for investment only, and the shares
may not be resold except through redemption by or on behalf of
the Trust.
TAXES
- -----
The Prospectus describes generally the tax treatment of
distributions by the Fund. This section of the Statement of
Additional Information includes additional information concerning
federal taxes.
The 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.
The Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its
shareholders. Distributions of net investment income and net
realized short-term capital gains are taxable as ordinary income.
Investments by the Fund in certain options, futures contracts and
options on futures contracts are "section 1256 contracts." Any
gains or losses on section 1256 contracts are generally
considered 60% long-term and 40% short-term capital gains or
losses ("60/40"). Section 1256 contracts held by the Fund at the
end of each taxable year are treated for federal income tax
purposes as being sold on such date for their fair market value.
The resultant paper gains or losses are also treated as 60/40
gains or losses. When the section 1256 contract is subsequently
disposed of, the actual gain or loss will be adjusted by the
amount of any preceding year-end gain or loss. The use of
section 1256 contracts may force the Fund to distribute to
shareholders paper gains that have not yet been realized in order
to avoid federal income tax liability.
Foreign currency gains or losses on non-U.S. dollar
denominated bonds and other similar debt instruments and on any
non-U.S. dollar denominated futures contracts, options and
forward contracts that are not section 1256 contracts generally
will be treated as ordinary income or loss.
Certain hedging transactions undertaken by the Fund may
result in "straddles" for federal income tax purposes. The
straddle rules may affect the character of gains (or losses)
realized by the Fund. In addition, losses realized by the Fund
on positions that are part of a straddle may be deferred, rather
than being taken into account in calculating taxable income for
the taxable year in which such losses are realized. Because only
a few regulations implementing the straddle rules have been
promulgated, the tax consequences of hedging transactions to the
Fund are not entirely clear. The hedging transactions may
increase the amount of short-term capital gain realized by the
Fund which is taxed as ordinary income when distributed to
shareholders. The Fund may make one or more of the elections
available under the Internal Revenue Code of 1986, as amended,
which are applicable to straddles. If the Fund makes any of the
elections, the amount, character and timing of the recognition of
gains or losses from the affected straddle positions will be
determined under rules that vary according to the elections made.
The rules applicable under certain of the elections operate to
accelerate the recognition of gains or losses from the affected
straddle positions. Because application of the straddle rules
may affect the character of gains or losses, defer losses and/or
accelerate the recognition of gains or losses from the affected
straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain in any year, may be increased or
decreased substantially as compared to a fund that did not engage
in such hedging transactions.
The 30% limit on gains from the sale of certain assets held
for less than three months and the diversification requirements
applicable to the Fund's assets may limit the extent to which the
Fund will be able to engage in transactions in options, futures
contracts or options on futures contracts.
The Fund may be subject to a tax on interest income received
from securities of a non-U.S. issuer withheld by a foreign
country at the source. The United States has entered into tax
treaties with many foreign countries which entitle the Fund to a
reduced rate of tax or exemption from tax on such income. It is
impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested
within various countries is not known.
A federal excise tax at the rate of 4% will be imposed on
the excess, if any, of the Fund's "required distribution" over
actual distributions in any calendar year. Generally, the
"required distribution" is 98% of the 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 Fund
intends to make distributions sufficient to avoid imposition of
the excise tax.
The Trust is required to withhold and remit to the U.S.
Treasury a portion (31%) of dividend income on any account unless
the shareholder provides a taxpayer identification number and
certifies that such number is correct and that the shareholder is
not subject to backup withholding.
REDEMPTION IN KIND
- ------------------
Under unusual circumstances, when the Board of Trustees
deems it in the best interests of the Fund's shareholders, the
Fund may make payment for shares repurchased or redeemed in whole
or in part in securities of the Fund taken at current value. If
any such redemption in kind is to be made, the Fund intends to
make an election pursuant to Rule 18f-1 under the Investment
Company Act of 1940. This election will require the Fund to
redeem shares solely in cash up to the lesser of $250,000 or 1%
of the Fund's net asset value during any 90 day period for any
one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in
converting such securities to cash. Portfolio securities which
are issued in an in-kind redemption will be readily marketable.
<PAGE>
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
From time to time, the 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 the 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 Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from average annual
total return. A nonstandardized quotation of total return may be
a cumulative return which measures the percentage change in the
value of an account between the beginning and end of a period,
assuming no activity in the account other than reinvestment of
dividends and capital gains distributions. This computation does
not include the effect of the applicable sales load which, if
included, would reduce total return. A nonstandardized quotation
may also indicate average annual compounded rates of return
without including the effect of the applicable sales load or over
periods other than those specified for average annual total
return. A nonstandardized quotation of total return will always
be accompanied by the Fund's average annual total return as
described above.
From time to time, the 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:
<PAGE>
Yield = 2[a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Generally, interest earned (for the purpose of "a" above) on debt
obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation
(including actual accrued interest) at the close of business on
the last business day prior to the start of the 30-day (or one
month) period for which yield is being calculated, or, with
respect to obligations purchased during the month, the purchase
price (plus actual accrued interest). With respect to the
treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject
to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an
increase or decrease to interest income during the period and
discount or premium on the remaining security is not amortized.
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 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 the
Fund might satisfy their investment objective, advertisements
regarding the Fund may discuss various measures of Fund
performance, including current performance ratings and/or
rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements
may also compare performance (using the calculation methods set
forth in the Prospectus) to performance as reported by other
investments, indices and averages. When advertising current
ratings or rankings, the Fund may use the following publications
or indices to discuss or compare Fund performance:
Donoghue's Bond Fund Report provides a comparative analysis
of performance for various categories of bond funds. The Fund
may compare performance rankings with bond funds appearing in the
Global and International Long-Term Funds category. Lipper Fixed
Income Fund Performance Analysis measures total return and
average current yield for the mutual fund industry and ranks
individual mutual fund performance over specified time periods
assuming reinvestment of all distributions, exclusive of sales
loads. The Fund may provide comparative performance information
appearing in the General World Income Funds category. In
addition, the Fund may also use comparative performance
information of relevant indices, including the Salomon Brothers
World Government Bond Index.
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 Fund's
portfolio, 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 Fund to calculate its
performance. In addition, there can be no assurance that the
Fund will continue this performance as compared to such other
averages.
PRINCIPAL SECURITY HOLDERS
- --------------------------
As of May 12, 1995, Martin S. Goldfarb, M.D., 919 N.
Crescent, Beverly Hills, California owned of record 27.42% of the
outstanding Class A shares of the Fund; Queen City Urology
Association, Inc., 400 Martin Luther King Drive, Cincinnati, Ohio
owned of record 10.15% of the outstanding Class A shares of the
Fund; Saxon & Co. FBO P. Niehoff #7070001-0168765 Mutual Fund
Processing, P.O. Box 7780-1888, Philadelphia, Pennsylvania owned
of record 7.51% of the outstanding Class A shares of the Fund;
Donaldson, Lufkin & Jenrette Securities Corporation, P.O. Box
2052, Jersey City, New Jersey owned of record 43.69% of the
outstanding Class C shares of the Fund; Gruntal & Co. FBO 304-
73948-16, 14 Wall Street, New York, New York owned of record
36.40% of the outstanding Class C shares of the Fund; Ella B.
Cobb, 401 Metairie Road #208, Metairie, Louisiana owned of record
12.34% of the outstanding Class C shares of the Fund; and Donald
F. and Ruth E. Dougherty, 1721 New London Road, Hamilton, Ohio
owned of record 6.06% of the outstanding Class C shares of the
Fund.
As of May 12, 1995, the Trustees and officers of the Trust
as a group owned of record and beneficially less than 1% of the
outstanding shares of the Trust and of the Fund.
CUSTODIAN
- ---------
The Northern Trust Company, 50 South LaSalle Street,
Chicago, Illinois 60675, has been retained to act as Custodian
for the Fund's investments. The Northern Trust Company acts as
the Fund's depository, safekeeps its portfolio securities,
collects all income and other payments with respect thereto,
disburses funds as instructed and maintains records in connection
with its duties.
ACCOUNTANTS
- -----------
The firm of Arthur Andersen LLP has been selected as
independent public accountants for the Trust for the fiscal year
ending September 30, 1995. Arthur Andersen LLP, 425 Walnut
Street, Cincinnati, Ohio, performs an annual audit of the Trust's
financial statements and provides financial and accounting
consulting services as requested.
MGF SERVICE CORP.
- ----------------
The Trust's transfer agent, MGF Service Corp. ("MGF"),
maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend
and distribution disbursing agent and performs other shareholder
service functions. MGF is an affiliate of the Manager by reason
of common ownership. MGF receives for its services as transfer
agent a fee payable monthly at an annual rate of $21 per account,
provided, however, that the minimum fee is $1,000 per month with
respect to each class of shares. In addition, the Fund pays out-
of-pocket expenses, including but not limited to, postage,
envelopes, checks, drafts, forms, reports, record storage and
communication lines.
MGF also provides accounting and pricing services to the
Trust. For calculating daily net asset value per share and
maintaining such books and records as are necessary to enable MGF
to perform its duties, the Fund pays MGF a fee in accordance with
the following schedule:
Asset Size of Fund Monthly Fee
--------------------------- -----------
$ 0 - $ 50,000,000 $4,750
$ 50,000,000 - $100,000,000 $5,250
$100,000,000 - $250,000,000 $5,750
Over $250,000,000 $6,750
In addition, the Fund pays all costs of external pricing
services.
MGF has been retained by the Manager to assist the Manager
in providing administrative services to the Fund. In this
capacity, MGF supplies non-investment related statistical and
research data, internal regulatory compliance services and
executive and administrative services. MGF supervises the
preparation of tax returns, reports to shareholders of the Fund,
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, MGF receives a fee from the Manager
equal to one-fourth of the fee payable from the Fund to the
Manager pursuant to the Fund's management agreement with the
Manager. The Manager is solely responsible for the payment of
these administrative fees to MGF, and MGF has agreed to seek
payment of such fees solely from the Manager.
SEMIANNUAL REPORT
- -----------------
The unaudited financial statements as of March 31, 1995
appear in the Fund's semiannual report which is attached to this
Statement of Additional Information.
TOTAL RETURN
SEMI-ANNUAL
REPORT
MARCH 31, 1995
(UNAUDITED)
GLOBAL BOND
FUND
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995 (Unaudited)
ASSETS
<S> <C>
Investments in securities:
At acquisition cost......................................................................... $ 4,439,480
==============
At amortized cost .......................................................................... $ 4,439,480
==============
At value (Note 1) .......................................................................... $ 4,686,605
Receivable for open forward exchange contracts, net (Note 6)................................... 660,538
Cash .......................................................................................... 953,288
Interest receivable ........................................................................... 107,369
Receivable for Fund shares sold................................................................ 55,652
Receivable for securities sold................................................................. 1,938,541
Receivable from affiliates (Note 3)............................................................ 5,445
Other assets................................................................................... 10,660
--------------
TOTAL ASSETS ............................................................................... 8,418,098
--------------
LIABILITIES
Dividends payable ............................................................................. 1,099
Payable for securities purchased............................................................... 2,782,300
Payable to affiliates (Note 3) ................................................................ 8,000
Other accrued expenses and liabilities......................................................... 14,460
--------------
TOTAL LIABILITIES .......................................................................... 2,805,859
--------------
NET ASSETS ................................................................................... $ 5,612,239
==============
Net assets consist of:
Capital shares ................................................................................ $ 5,284,885
Undistributed net investment income............................................................ 2,060
Accumulated net realized gains from security transactions and foreign currency transactions.... 8,648
Net unrealized appreciation on investments and foreign currencies............................. 316,646
--------------
Net assets .................................................................................... $ 5,612,239
==============
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares ....................................................... $ 5,585,682
==============
Shares of beneficial interest outstanding (unlimited number of shares authorized,
no par value) (Note 4) ...................................................................... 519,878
==============
Net asset value and redemption price per share (Note 1)........................................ $ 10.74
==============
Maximum offering price per share (Note 1) ..................................................... $ 11.19
==============
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares ....................................................... $ 26,557
==============
Shares of beneficial interest outstanding (unlimited number of shares authorized,
no par value) (Note 4) ...................................................................... 2,475
==============
Net asset value and redemption price per share (Note 1)........................................ $ 10.73
==============
Maximum offering price per share (Note 1) ..................................................... $ 10.73
==============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
STATEMENT OF OPERATIONS
For the Period Ended March 31, 1995(A) (Unaudited)
<S> <C>
INVESTMENT INCOME
Interest income (net of withholding taxes of $228) ......................................... $ 40,833
--------------
EXPENSES
Accounting and pricing fees (Note 3)........................................................ 12,000
Professional fees........................................................................... 5,617
Investment advisory fees (Note 3)........................................................... 4,693
Distribution expenses, Class A (Note 3)..................................................... 2,313
Transfer agent fees, Class A (Note 3)....................................................... 2,000
Transfer agent fees, Class C (Note 3)....................................................... 2,000
Custodian fees.............................................................................. 1,800
Trustees' fees and expenses................................................................. 734
Registration fees, Common................................................................... 167
Registration fees, Class A.................................................................. 322
Registration fees, Class C.................................................................. 322
Postage and supplies........................................................................ 439
--------------
TOTAL EXPENSES............................................................................ 32,407
Less fees waived by the Adviser and expenses reimbursed by the Manager (Note 3)............. (23,352)
--------------
NET EXPENSES.............................................................................. 9,055
--------------
NET INVESTMENT INCOME ......................................................................... 31,778
--------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENTS AND FOREIGN CURRENCY
Net realized gain from:
Security transactions ...................................................................... 8,648
Foreign currency transactions............................................................... 32,250
Net change in unrealized appreciation/depreciation on:
Investments ................................................................................ 41,494
Translation of assets and liabilities in foreign currencies................................. 275,152
--------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENTS AND FOREIGN CURRENCY ....................... 357,544
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................................... $ 389,322
==============
<FN>
(A)Represents the period from the start of business (February 1, 1995) through
March 31, 1995.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended March 31, 1995(A) (Unaudited)
<S> <C>
FROM OPERATIONS:
Net investment income ...................................................................... $ 31,778
Net realized gains from security transactions .............................................. 8,648
Net realized gains from foreign currency transactions....................................... 32,250
Net change in unrealized appreciation/depreciation on investments........................... 41,494
Net change in unrealized appreciation/depreciation on translation of assets
and liabilities in foreign currencies..................................................... 275,152
--------------
Net increase in net assets from operations .................................................... 389,322
--------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ........................................................ (29,574)
From net investment income, Class C ........................................................ (144)
From net realized gains from foreign currency transactions, Class A......................... (32,094)
From net realized gains from foreign currency transactions, Class C......................... (156)
--------------
Decrease in net assets from distributions to shareholders ..................................... (61,968)
--------------
FROM FUND SHARE TRANSACTIONS (Note 4):
CLASS A
Proceeds from shares sold .................................................................. 5,198,016
Net asset value of shares issued in reinvestment of distributions to shareholders .......... 60,578
Payments for shares redeemed ............................................................... --
--------------
Increase in net assets from Class A share transactions ........................................ 5,258,594
--------------
CLASS C
Proceeds from shares sold .................................................................. 26,000
Net asset value of shares issued in reinvestment of distributions to shareholders........... 291
Payments for shares redeemed................................................................ --
--------------
Increase in net assets from Class C share transactions ........................................ 26,291
--------------
Net increase in net assets from fund share transactions........................................ 5,284,885
--------------
TOTAL INCREASE IN NET ASSETS ................................................................. 5,612,239
NET ASSETS:
Beginning of period......................................................................... --
--------------
End of period (including undistributed net investment income of $2,060)..................... $ 5,612,239
==============
<FN>
(A)Represents the period from the start of business (February 1, 1995) through
March 31, 1995.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS
For the Period Ended March 31, 1995(A) (Unaudited)
Per Share Data for a Share Outstanding Throughout Each Period
Class A Class C
--------------- ---------------
<S> <C> <C>
Net asset value at beginning of period.................................... $ 10.00 $ 10.00
--------------- ---------------
Income from investment operations:
Net investment income.................................................. 0.12 0.08
Net realized and unrealized gains on investments and
foreign currency transactions ....................................... 0.74 0.77
--------------- ---------------
Total from investment operations.......................................... 0.86 0.85
--------------- ---------------
Less distributions:
From net investment income............................................. (0.06) (0.06)
From net realized gains from foreign currency transactions............. (0.06) (0.06)
--------------- ---------------
Total distributions....................................................... (0.12) (0.12)
--------------- ---------------
Net asset value at end of period.......................................... $ 10.74 $ 10.73
=============== ===============
Total return(B) .......................................................... 8.60% 8.50%
=============== ===============
Net assets at end of period (000's)....................................... $ 5,586 $ 27
=============== ===============
Ratio of expenses to average net assets(C) ............................... 1.27%(D) 1.95%(D)
Ratio of net investment income to average net assets...................... 4.47%(D) 3.96%(D)
Portfolio turnover rate................................................... 124%(D) 124%(D)
<FN>
(A)Represents the period from initial public offering of shares (February 1,
1995) through March 31, 1995.
(B)The total returns shown do not include the effect of applicable front-end
sales loads, and are not annualized.
(C)The Adviser has absorbed expenses of the Fund through waiver of the
investment advisory fee and the Manager has reimbursed the Fund for other
operating expenses. The ratio of expenses to average net assets assuming no
waiver of fees or reimbursement of expenses was 3.61% and 330.53% for Class A
and Class C, respectively (Note 3).
(D)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
GLOBAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1995 (Unaudited)
1. Significant Accounting Policies
The Global Bond Fund (the Fund) is a non-diversified series of shares of Midwest
Trust (the Trust). The Trust (formerly Midwest Income Trust) is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust was organized as a Massachusetts business trust on
December 7, 1980. The Declaration of Trust, as amended, permits the Trustees to
issue an unlimited number of shares of the Fund. The Fund commenced operations
on February 1, 1995.
The Fund offers two classes of shares: Class A shares (sold subject to a maximum
front-end sales load of 4%) and Class C shares (sold subject to a maximum
contingent deferred sales load of 1% if redeemed within a one year period from
purchase.) Each Class A and Class C share of the Fund represents identical
interests in the Fund's investment portfolio and has the same rights, except
that (i) Class C shares bear the expenses of higher distribution fees, which
will cause Class C shares to have a higher expense ratio and to pay lower
dividends than 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.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's securities are valued at their most recent
bid prices as obtained from one or more of the major market makers for such
securities. The U.S. dollar value of forward foreign currency contracts is
determined using forward currency exchange rates supplied by a quotation
service.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The maximum offering price per share of Class A
shares of the Fund is equal to the net asset value per share plus a sales load
of 4.17% of the net asset value (or 4% of the offering price). The maximum
offering price per share of Class C shares of the Fund is equal to the net asset
value per share. The redemption price per share of each class is equal to the
net asset value per share. Class C shares 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 and distributions to shareholders -- Interest income is
accrued as earned. Dividends arising from net investment income are declared and
paid quarterly. Net realized short-term capital gains, if any, may be
distributed during the year and net realized long-term capital gains, if any,
are distributed at least once each year.
Allocations between classes -- Investment income earned by the Fund is allocated
daily to each class of shares based on the percentage of the net asset value of
settled shares of such class to the total of the net asset value of settled
shares of both classes of shares. Realized capital gains and losses and
unrealized appreciation and depreciation is 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 based upon its proportionate share of total net assets of
the Fund.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which the 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 the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
<PAGE>
The following information is based upon federal income tax cost of investment
securities and foreign currencies as of March 31, 1995:
<TABLE>
<S> <C>
Gross unrealized appreciation.......................... $ 385,457
Gross unrealized depreciation ......................... (68,811)
-----------
Net unrealized depreciation......................... $ 316,646
===========
Federal income tax cost................................ $ 4,439,480
===========
</TABLE>
2. Investment Transactions
During the period ended March 31, 1995, purchases and proceeds from sales and
maturities of investment securities, other than short-term investments, amounted
to $4,935,709 and $769,107, respectively, for the Fund.
3. Transactions with Affiliates
The President of the Trust is the controlling shareholder of Leshner Financial,
Inc., whose subsidiaries include Midwest Group Financial Services, Inc., the
Trust's investment manager and principal underwriter, and MGF Service Corp.
(MGF), the shareholder servicing and transfer agent and accounting and pricing
agent for the Trust.
MANAGEMENT AND INVESTMENT ADVISORY AGREEMENTS
The Trust retains Midwest Group Financial Services, Inc., (the Manager), to
provide general investment supervisory services to the Fund and to manage the
Fund's business affairs. The Fund pays the Manager a fee, which is computed and
accrued daily and paid monthly, equal to the annual rate of .7% of its average
daily net assets up to $100 million and .6% of such assets in excess of $100
million. The Fund's investments are managed by Rogge Global Partners, plc, (the
Adviser), under the terms of an Investment Advisory Agreement. Under the
Investment Advisory Agreement, the Manager pays the Adviser a fee, which is
computed and accrued daily and paid monthly, at an annual rate of .35% of the
Fund's average daily net assets up to $100 million, and .3% of such assets in
excess of $100 million.
States in which shares of the Fund are offered may impose an expense limitation
based upon net assets. The Manager has agreed to reimburse the Fund yearly for
expenses which exceed the most restrictive applicable expense limitation of any
state. No reimbursement was required from the Adviser with respect to the Fund
for the period ended March 31, 1995. In order to reduce the operating expenses
of the Fund, the Adviser voluntarily waived $4,693 of its advisory fees and the
Manager reimbursed $16,346 of common operating expenses and $2,313 of Class C
expenses during the period ended March 31, 1995.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement (the Agreement) between the Fund and MGF, MGF maintains
the records of each shareholder's account, answers shareholders' inquiries
concerning their accounts, processes purchases and redemptions of the Fund's
shares, acts as dividend and distribution disbursing agent and performs other
shareholder service functions. Under the terms of the Agreement, MGF receives
for its services a fee, payable monthly, at an annual rate of $21.00 per
shareholder account subject to a $1,000 minimum monthly fee for each class of
shares. In addition, the Fund pays out-of-pocket expenses including, but not
limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and MGF,
MGF calculates the daily net asset value per share and maintains the financial
books and records of the Fund. For these services, MGF receives a monthly fee of
$6,000 from the Fund.
UNDERWRITING AGREEMENT
Under the terms of the Underwriting Agreement, the Manager serves as the
principal underwriter for the Fund, and is the exclusive agent for distribution
of shares of the Fund. The Manager earned $763 of underwriting and broker
commissions on sales of shares of the Fund for the period ended March 31, 1995.
<PAGE>
PLANS OF DISTRIBUTION
The Fund, on behalf of its Class A shares, has adopted a plan of distribution
(Class A Plan) under which such shares may directly incur or reimburse the
Manager for expenses related to the promotion and sale of shares. The annual
limitation for payment of such expenses under the Class A Plan is .35% of
average daily net assets attributable to Class A shares.
The Fund also has adopted a plan of distribution (Class C Plan) under which its
Class C shares may directly incur or reimburse the Manager for expenses related
to the promotion and sale of such 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.
4. Fund Share Transactions
Proceeds from shares sold and payments for shares redeemed as shown in the
Statement of Changes in Net Assets are the result of the following share
transactions for the period ended March 31, 1995(A):
<TABLE>
Class A Class C
--------------- ---------------
<S> <C> <C>
Shares sold............................................................... 514,238 2,448
Shares issued in reinvestment of
distributions to shareholders........................................... 5,640 27
Less shares redeemed...................................................... -- --
--------------- ---------------
Net increase in shares outstanding........................................ 519,878 2,475
Shares outstanding, beginning of period................................... -- --
--------------- ---------------
Shares outstanding, end of period......................................... 519,878 2,475
=============== ===============
<FN>
(A)Represents the period from the initial public offering of shares (February 1,
1995) through March 31, 1995.
</FN>
</TABLE>
5. Foreign Currency Translation
Amounts denominated in or expected to settle in foreign currencies are
translated into United States dollars based on exchange rates on the following
basis:
A. The market values of investment securities, other assets and
liabilities are translated at the closing rate of exchange each day.
B. Purchases and sales of investment securities, income and expenses are
translated at the rate of exchange prevailing on the respective dates
of such transactions.
C. The Fund isolates that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Reported net realized foreign exchange gains or losses arise from 1) sales of
portfolio securities, 2) sales of foreign currencies, 3) currency gains or
losses realized between the trade and settlement dates on securities
transactions, and 4) the difference between the amounts of dividends, interest,
and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities including investments in securities, resulting from changes in the
exchange rate.
<PAGE>
6. Forward Foreign Currency Contracts
A forward foreign currency contract is an obligation to purchase or sell a
currency against another currency at a future date and price as agreed upon by
the parties. A forward currency contract is traded over-the-counter and not on
organized commodities or securities exchanges. The Fund may either accept or
make delivery of the currency at the maturity of the forward contract or, prior
to maturity, enter into a closing transaction involving the purchase or sale of
an offsetting contract. The Fund engages in a forward currency contract in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
forward currency contract is recorded at market value which fluctuates with
changes in currency exchange rates. When a forward currency contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. Risks may arise from the potential inability of a counterparty to meet
the terms of a contract and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
At March 31, 1995 the Fund had forward currency contracts outstanding as
follows:
<TABLE>
Net
Unrealized
Settlement To Receive Initial Market Appreciation
Date (To Deliver) Value Value (Depreciation)
---------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
SELL CONTRACTS
4/10/95 (278,620) DEM $ (200,000) $ (203,457) $ (3,457)
4/10/95 (137,510) DEM (100,000) (100,414) (414)
4/11/95 (553,820) DEM (400,000) (404,390) (4,390)
4/27/95 (200,000) DEM (142,914) (145,977) (3,063)
4/28/95 (561,996) DEM (400,000) (409,883) (9,883)
------------- ------------- -------------- -------------
(1,731,946) DEM $ (1,242,914) $ (1,264,121) $ (21,207)
------------- ------------- -------------- -------------
4/3/95 (38,424,800) JPY $ (430,000) $ (444,835) $ (14,835)
4/3/95 (3,025,050) JPY (33,649) (35,020) (1,371)
------------- ------------- -------------- -------------
(41,449,850) JPY $ (463,649) $ (479,855) $ (16,206)
------------- ------------- -------------- -------------
TOTAL SELL CONTRACTS $ (1,706,563) $ (1,743,976) $ (37,413)
------------- -------------- -------------
BUY CONTRACTS
4/6/95 584,152 DEM $ 400,000 $ 426,683 $ 26,683
4/10/95 138,355 DEM 100,000 101,031 1,031
4/11/95 546,720 DEM 400,000 399,206 (795)
4/28/95 559,058 DEM 400,000 407,740 7,741
------------- ------------- -------------- -------------
1,828,285 DEM $ 1,300,000 $ 1,334,660 $ 34,660
------------- ------------- -------------- -------------
4/3/95 41,449,850 JPY $ 430,000 $ 479,855 $ 49,855
4/27/95 12,600,000 JPY 142,914 146,026 3,112
5/8/95 38,270,000 JPY 430,000 443,973 13,973
------------- ------------- -------------- -------------
92,319,850 JPY $ 1,002,914 $ 1,069,854 $ 66,940
------------- ------------- -------------- -------------
TOTAL BUY CONTRACTS $ 2,302,914 $ 2,404,514 $ 101,600
------------- -------------- -------------
NET CONTRACTS $ 596,351 $ 660,538 $ 64,187
============= ============== =============
<FN>
DEM-German mark
JPY-Japanese yen
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1995 (Unaudited)
Par Market
Value INVESTMENTS -- 100.0% Value
------ --------------------- --------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS -- 23.8%
$ 125,000 U.S. Treasury Notes, 7.875%, 11/15/04.................................... $ 130,430
930,000 U.S. Treasury Notes, 7.50%, 2/15/05...................................... 948,890
35,000 U.S. Treasury Bond, 7.625%, 2/15/25...................................... 35,787
--------------
TOTAL U.S. TREASURY OBLIGATIONS ......................................... $ 1,115,107
(Amortized Cost $1,115,525) --------------
FOREIGN GOVERNMENT ISSUES -- 71.1%
France -- 7.2%
FRF 1,600,000 Government of France, 7.75%, 4/12/00..................................... $ 336,024
--------------
Italy -- 4.0%
ITL 420,000,000 Government of Italy, 8.50%, 8/1/04...................................... 188,086
--------------
Japan -- 16.9%
JPY 64,000,000 Government of Japan, #174, 4.60%, 9/20/04................................ 793,333
--------------
Germany -- 31.0%
DEM 1,400,000 Federal Republic of Germany, 7.50%, 11/11/04............................ 1,043,894
DEM 550,000 Federal Republic of Germany, 7.375%, 1/3/05............................. 407,328
--------------
1,451,222
--------------
Great Britain -- 6.9%
GBP 200,000 U.K. Gilt, 8.50%, 12/7/05................................................ 325,556
--------------
Netherlands -- 5.1%
NLG 369,000 Government of Netherlands, 7.50%, 4/15/10............................... 236,860
--------------
TOTAL FOREIGN GOVERNMENT ISSUES ......................................... $ 3,331,081
(Amortized Cost $3,083,538) --------------
TIME DEPOSITS -- 5.1%
NLG 367,799 Netherlands Guilder Time Deposit, 4.3125%, 4/20/95....................... $ 240,417
--------------
TOTAL TIME DEPOSITS ..................................................... $ 240,417
(Amortized Cost $240,417) --------------
TOTAL INVESTMENTS AT VALUE--100.0% ...................................... $ 4,686,605
(Amortized Cost $4,439,480) ==============
<FN>
FRF-French franc
ITL-Italian lira
JPY-Japanese yen
DEM-German mark
GBP-British pound sterling
NLG-Netherlands guilder
See accompanying notes to financial statements.
</FN>
</TABLE>
MIDWEST TRUST
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) (i) Financial Statements included in Part A:
Financial Highlights
(ii) Financial Statements included in Part B:
Portfolio of Investments, March 31, 1995
Statement of Assets and Liabilities, March
31, 1995
Statements of Operations for the Period Ended
March 31, 1995
Statements of Changes in Net Assets for the
Period Ended March 31, 1995
Financial Highlights
Notes to Financial Statements, March 31, 1995
(b) Exhibits:
(1) (i) Copy of Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 58, is hereby incorporated by
reference.
(ii) Copy of Amendment No. 1, dated December 8,
1994, to Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 60, is hereby incorporated by
reference.
(iii) Copy of Amendment No. 2, dated January 31,
1995, to Registrant's Restated Agreement and
Declaration of Trust, which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 61, is hereby incorporated by
reference.
(2) (i) Copy of Registrant's Bylaws, which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 26, is hereby incorporated by
reference.
(ii) Copy of Amendment to Registrant's Bylaws
adopted on January 10, 1984, which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 35, is hereby incorporated by
reference.
(3) Voting Trust Agreements - None.
(4) Specimen of Share Certificate, which was filed as
an Exhibit to Registrant's Post-Effective
Amendment No. 38, is hereby incorporated by
reference.
(5) (i) Copy of Registrant's Management Agreement
with Midwest Group Financial Services, Inc.
for the Short Term Government Income Fund and
the Intermediate Term Government Income Fund
is filed herewith.
(ii) Copy of Registrant's Management Agreement
with Midwest Group Financial Services, Inc.
for the Institutional Government Income Fund
is filed herewith.
(iii) Copy of Registrant's Management Agreement
with Midwest Group Financial Services, Inc.
for the Adjustable Rate U.S. Government
Securities Fund is filed herewith.
(iv) Copy of Subadvisory Agreement between Midwest
Group Financial Services, Inc. and Hanover
Capital Advisors Inc. for the Adjustable Rate
U.S. Government Securities Fund is filed
herewith.
(v) Copy of Registrant's Management Agreement
with Midwest Group Financial Services, Inc.
for the Global Bond Fund, which was filed as
an Exhibit to Registrant's Post-Effective
Amendment No. 61, is hereby incorporated by
reference.
(vi) Copy of Advisory Agreement between Midwest
Group Financial Services, Inc. and Rogge
Global Partners, plc for the Global Bond
Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 61,
is hereby incorporated by reference.
<PAGE>
(6) (i) Copy of Registrant's Underwriting Agreement
with Midwest Group Financial Services, Inc.,
which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 58, is hereby
incorporated by reference.
(ii) Form of Underwriter's Dealer Agreement is
filed herewith.
(7) Bonus, Profit Sharing, Pension or Similar
Contracts for the benefit of Directors or Officers
- None.
(8) (i) Copy of Custody Agreement with The Fifth
Third Bank, the custodian for the Short Term
Government Income Fund, the Intermediate Term
Government Income Fund, the Institutional
Government Income Fund and the Adjustable
Rate U.S. Government Securities Fund, which
was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 49, is hereby
incorporated by reference.
(ii) Copy of Custody Agreement with The Northern
Trust Company, the custodian for the Global
Bond Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 61,
is hereby incorporated by reference.
(9) (i) Copy of Transfer Agency, Dividend Disbursing,
Shareholder Service and Plan Agency Agreement
with MGF Service Corp., which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 61, is hereby incorporated by
reference.
(ii) Copy of Accounting and Pricing Services
Agreement with MGF Service Corp., which was
filed as an Exhibit to Registrant's Post-
Effective Amendment No. 61, is hereby
incorporated by reference.
(iii) Copy of Administration Agreement between
Midwest Group Financial Services, Inc.
(formerly Midwest Advisory Services, Inc.)
and MGF Service Corp., which was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 44, is hereby incorporated by
reference.
(10) Opinion and Consent of Goodwin, Procter & Hoar,
which was filed with Registrant's Rule 24f-2
Notice for the fiscal year ended September 30,
1994, is hereby incorporated by reference.
(11) Consent of Arthur Andersen LLP is filed herewith.
(12) Financial Statements Omitted from Item 23 - None.
(13) Agreements or understandings concerning initial
capital - None.
(14) (i) Copy of the Midwest Group Individual
Retirement Account Plan, including Schedule
of Fees, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 45,
is hereby incorporated by reference.
(ii) Copy of the Midwest Group 403(b) Plan,
including Schedule of Fees, which was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 49, is hereby incorporated by
reference.
(iii) Copy of the Midwest Group Prototype Defined
Contribution Plan, which was filed as an
Exhibit to Post-Effective Amendment No. 4 of
Leeb Personal FinanceTM Investment Trust
(File No. 811-6374), is hereby incorporated
by reference.
(15) (i) Copy of Registrant's Plans of Distribution,
which were filed as an Exhibit to Post-
Effective Amendment No. 58, is hereby
incorporated by reference.
(ii) Form of Sales Agreement for Sales of No-Load
Mutual Funds, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No.
61, is hereby incorporated by reference.
(iii) Form of Administration Agreement with respect
to the administration of shareholder accounts
is filed herewith.
(16) Computations of each performance quotation
provided in response to Item 22 - None.
Item 25. Persons Controlled by or Under Common Control with the
- ------- ------------------------------------------------------
Registrant
----------
None.
<PAGE>
Item 26. Number of Holders of Securities (as of May 10, 1995)
- ------- ----------------------------------------------------
Title of Class Record Holders
Short Term Government Income Fund 5,812
Intermediate Term Government
Income Fund
Class A Shares 2,436
Class C Shares 44
Institutional Government Income Fund 155
Adjustable Rate U.S. Government
Securities Fund
Class A Shares 622
Class C Shares 4
Global Bond Fund
Class A Shares 125
Class C Shares 7
Item 27. Indemnification
- ------- ---------------
Article VI of Registrant's Restated Agreement and
Declaration of Trust provides for indemnification of
officers and Trustees as follows:
"Section 6.4 Indemnification of Trustees,
----------- ---------------------------
Officers, etc. The Trust shall indemnify each of its
-------------
Trustees and officers (including persons who serve at
the Trust's request as directors, officers or trustees
of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise, and
including persons who served as directors or officers
of Midwest Income Investment Company) (hereinafter
referred to as a "Covered Person") against all
liabilities, including but not limited to amounts paid
in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or
legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or
with which such person may be or may have been
threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer,
director or trustee, and except that no Covered Person
shall be indemnified against any liability to the Trust
or its Shareholders to which such Covered Person would
otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered
Person's office ("disabling conduct"). Anything herein
contained to the contrary notwithstanding, no Covered
Person shall be indemnified for any liability to the
Trust or its Shareholders to which such Covered Person
would otherwise be subject unless (1) a final decision
on the merits is made by a court or other body before
whom the proceeding was brought that the Covered Person
to be indemnified was not liable by reason of disabling
conduct or, (2) in the absence of such a decision, a
reasonable determination is made, based upon a review
of the facts, that the Covered Person was not liable by
reason of disabling conduct, by (a) the vote of a
majority of a quorum of Trustees who are neither
"interested persons" of the Company as defined in the
Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party Trustees"), or
(b) an independent legal counsel in a written opinion.
Section 6.5 Advances of Expenses. The Trust
----------- --------------------
shall advance attorneys' fees or other expenses
incurred by a Covered Person in defending a proceeding,
upon the undertaking by or on behalf of the Covered
Person to repay the advance unless it is ultimately
determined that such Covered Person is entitled to
indemnification, so long as one of the following
conditions is met: (i) the Covered Person shall
provide security for his undertaking, (ii) the Trust
shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of a quorum of
the disinterested non-party Trustees of the Trust, or
an independent legal counsel in a written opinion,
shall determine, based on a review of readily available
facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
Section 6.6 Indemnification Not Exclusive, etc. The
----------- -----------------------------------
right of indemnification provided by this Article VI
shall not be exclusive of or affect any other rights to
which any such Covered Person may be entitled. As used
in this Article VI, "Trust" shall include Midwest
Income Investment Company, "Covered Person" shall
include such person's heirs, executors and
administrators, an "interested Covered Person" is one
against whom the action, suit or other proceeding in
question or another action, suit or other proceeding on
the same or similar grounds is then or has been pending
or threatened, and a "disinterested" person is a person
against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been
pending or threatened. Nothing contained in this
article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract
or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of
any such person."
The Registrant maintains a standard mutual fund and
investment advisory professional and directors and
officers liability policy. The policy provides
coverage to the Registrant, its Trustees and officers
and Midwest Group Financial Services, Inc. (the
"Adviser"), in its capacity as investment adviser and
principal underwriter, among others. Coverage under
the policy includes losses by reason of any act, error,
omission, misstatement, misleading statement, neglect
or breach of duty. The Registrant may not pay for
insurance which protects the Trustees and officers
against liabilities rising from action involving
willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the
conduct of their offices.
The Advisory Agreements provide that each investment
adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Registrant in connection with the matters to which the
Agreements relate, except a loss resulting from willful
misfeasance, bad faith or gross negligence of an
investment adviser in the performance of its duties or
from the reckless disregard by the investment adviser
of its obligations under the Agreement. Registrant
will advance attorneys' fees or other expenses incurred
by an investment adviser in defending a proceeding,
upon the undertaking by or on behalf of the investment
adviser to repay the advance unless it is ultimately
determined that the investment adviser is entitled to
indemnification.
The Underwriting Agreement with the Adviser provides
that the Adviser, its directors, officers, employees,
shareholders and control persons shall not be liable
for any error of judgment or mistake of law or for any
loss suffered by Registrant in connection with the
matters to which the Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross
negligence on the part of any of such persons in the
performance of the Adviser's duties or from the
reckless disregard by any of such persons of the
Adviser's obligations and duties under the Agreement.
Registrant will advance attorneys' fees or other
expenses incurred by any such person in defending a
proceeding, upon the undertaking by or on behalf of
such person to repay the advance if it is ultimately
determined that such person is not entitled to
indemnification.
Item 28. Business and Other Connections of the Investment
- ------- ------------------------------------------------
Advisers
--------
A. Midwest Group Financial Services, Inc. ("MGFS") is a
registered investment adviser providing investment
advisory services to the Short Term Government Income
Fund, the Intermediate Term Government Income Fund, the
Institutional Government Income Fund and the Adjustable
Rate U.S. Government Securities Fund and investment
management supervisory services to the Global Bond
Fund. MGFS also acts as the investment adviser to
seven series of Midwest Group Tax Free Trust and to
four series of Midwest Strategic Trust, both of which
are registered investment companies. MGFS provides
investment advisory services to individual and
institutional accounts and is a registered broker-
dealer.
The following list sets forth the business and other
connections of the directors and officers of MGFS.
Unless otherwise noted, the address of the corporations
listed below is 312 Walnut Street, Cincinnati, Ohio
45202.
(1) Robert H. Leshner - Chairman of the Board and a
Director of MGFS.
(a) President and a Trustee of Midwest Strategic
Trust, Midwest Trust and Midwest Group Tax
Free Trust, registered investment companies.
(b) Chairman of the Board and a Director of
Leshner Financial, Inc., a financial services
company.
(c) Chairman of the Board and a Director of MGF
Service Corp., a registered transfer agent.
(d) President and a Director of Leshner Financial
Services, Inc., a registered investment
adviser and registered broker-dealer until
December 1994.
(e) Chairman of the Board and a Director of
Midwest Advisory Services, Inc., a registered
investment adviser, until September 1993.
(2) James A. Markley, Jr. - President and a Director
of MGFS.
(a) President and a Director of Leshner
Financial, Inc.
(b) A Director of MGF Service Corp.
(c) A Director of Sycamore National Bank, 3209
West Galbraith Road, Cincinnati, Ohio 45239.
(d) President of MGF Service Corp. until December
1994.
(e) A Director of Leshner Financial Services,
Inc. until December 1994.
(f) President and a Director of Midwest Advisory
Services, Inc. until September 1993.
(3) John J. Goetz - Chief Investment Officer-Fixed-
Income of MGFS.
(a) Vice President of Leshner Financial, Inc.
(b) Vice President-Investments of Leshner
Financial Services, Inc. until December 1994.
(4) Maryellen Peretzky - Vice President, Assistant
Secretary and a Director of MGFS.
(a) Vice President of Leshner Financial, Inc. and
MGF Service Corp.
(b) Assistant Secretary of The Tuscarora
Investment Trust
(c) Vice President and a Director of Leshner
Financial Services, Inc. until December 1994.
(5) Sharon L. Karp - Vice President of MGFS.
(a) Vice President of Leshner Financial, Inc.
<PAGE>
(6) John F. Splain - Secretary and General Counsel of
MGFS.
(a) Secretary and General Counsel of Leshner
Financial, Inc. and MGF Service Corp.
(b) Secretary of Midwest Group Tax Free Trust,
Midwest Trust, Midwest Strategic Trust,
Brundage, Story and Rose Investment Trust,
Leeb Personal FinanceTM Investment Trust,
Markman MultiFund Trust and The Tuscarora
Investment Trust, registered investment
companies.
(c) Assistant Secretary of Williamsburg
Investment Trust, Fremont Mutual Funds, Inc.
and Schwartz Investment Trust, registered
investment companies.
(d) Secretary and General Counsel of Leshner
Financial Services, Inc. until December 1994.
(e) Secretary and General Counsel of Midwest
Advisory Services, Inc. until September 1993.
(7) Robert G. Dorsey - Treasurer of MGFS.
(a) President of MGF Service Corp.
(b) Treasurer of Leshner Financial, Inc.
(c) Vice President of Brundage, Story and Rose
Investment Trust, Leeb Personal FinanceTM
Investment Trust and Markman MultiFund Trust.
(d) Assistant Vice President of Williamsburg
Investment Trust, Schwartz Investment Trust,
Fremont Mutual Funds, Inc. and The Tuscarora
Investment Trust
(e) Treasurer of Leshner Financial Services, Inc.
until December 1994.
(f) Treasurer of Midwest Advisory Services, Inc.
until September 1993.
(8) Bruce Chaiken - Assistant Vice President-
Investments of MGFS.
(a) Assistant Vice President-Investments of
Leshner Financial Services, Inc. until June
1994.
(9) Susan F. Flischel - Assistant Vice President-
Investments of MGFS.
(a) Assistant Vice President-Investments of
Leshner Financial Services, Inc. until
December 1994.
(10) Michele McClellan Hawkins - Assistant Vice
President of MGFS.
(11) Dara Abel - Assistant Portfolio Manager of MGFS.
(12) Scott Weston - Assistant Portfolio Manager of
MGFS.
(13) Elizabeth A. Santen - Assistant Secretary of MGFS.
(a) Assistant Secretary of Leshner Financial,
Inc.
(b) Assistant Vice President of MGF Service Corp.
(c) Assistant Secretary of Midwest Trust, Midwest
Group Tax Free Trust, Midwest Strategic Trust
and The Tuscarora Investment Trust.
(d) Assistant Secretary of Leshner Financial
Services, Inc. until December 1994.
(e) Assistant Secretary of Midwest Advisory
Services, Inc. until September 1993.
B. Hanover Capital Advisors Inc. ("Hanover") is a
registered investment advisor providing investment
management services to a number of institutional
clients in addition to the Adjustable Rate U.S.
Government Securities Fund. The following officers of
Hanover hold the same position with Hanover Capital
Partners Ltd., an investment banking firm and the
parent company of Hanover. The address of Hanover and
Hanover Capital Partners Ltd. is 90 West Street, Suite
1508, New York, New York 10006.
(1) John A. Burchett - President
(2) George J. Ostendorf - Managing Director
(3) Joyce S. Mizerak - Senior Vice President
(4) Irma N. Tavares - Senior Vice President
<PAGE>
C. Rogge Global Partners, plc ("Rogge") is a registered
investment adviser providing investment advisory
services to The Managers Funds, a registered investment
company, and other institutional clients. The
following are the directors of Rogge and its U.S.
affiliate, Rogge Global Partners, Inc. The address of
Rogge is 5-6 St. Andrew's Hill, London, England EC4V-
5BY.
(1) Olaf Rogge
(2) John Graham
(3) Richard Bell
(4) Julie Cochran
Item 29. Principal Underwriters
- ------- ----------------------
(a) Midwest Group Financial Services, Inc. also acts as
underwriter for Midwest Group Tax Free Trust, Midwest
Strategic Trust and Brundage, Story and Rose Investment
Trust.
Position With Position With
(b) Name Underwriter Registrant
---- ------------- -------------
Robert H. Leshner Chairman of the President and
Board and Director Trustee
James A. Markley, President and None
Jr. Director
John J. Goetz Chief Investment None
Officer-Fixed-Income
Maryellen Peretzky Vice President, None
Assistant Secretary
and Director
Sharon L. Karp Vice President None
John F. Splain Secretary and Secretary
General Counsel
Robert G. Dorsey Treasurer None
Susan F. Flischel Assistant Vice None
President-Investments
Bruce Chaiken Assistant Vice None
President-Investments
Michele M. Hawkins Assistant Vice None
President
Dara Abel Assistant Portfolio None
Manager
Scott Weston Assistant Portfolio None
Manager
Elizabeth A. Santen Assistant Secretary Assistant
Secretary
The address of all of the above-named persons is 312 Walnut
Street, Cincinnati, Ohio 45202.
Item 30. Location of Accounts and Records
- ------- --------------------------------
Accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder will
be maintained by the Registrant.
Item 31. Management Services Not Discussed in Parts A or B
- ------- -------------------------------------------------
None.
Item 32. Undertakings
- ------- ------------
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes that, if so requested,
it will furnish each person to whom a prospectus
is delivered with a copy of Registrant's latest
annual report without charge.
(d) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to trustees, officers and controlling persons of
Midwest Trust pursuant to the provisions of
Massachusetts law and the Restated Agreement and
Declaration of Trust of Midwest Trust or the
Bylaws of Midwest Trust, or otherwise, the
Registrant has been advised that in the opinion of
the Securities and Exchange Commission such
indemnification is against public policy as
expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other
than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or
controlling person of Midwest Trust in the
successful defense of any action, suit or
proceeding) is asserted by such trustee, officer
or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the
question whether such indemnification by it is
against public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.
(e) The Registrant undertakes that, within five
business days after receipt of a written
application by shareholders holding in the
aggregate at least 1% of the shares then
outstanding or shares then having a net asset
value of $25,000, whichever is less, each of whom
shall have been a shareholder for at least six
months prior to the date of application
(hereinafter the "Petitioning Shareholders"),
requesting to communicate with other shareholders
with a view to obtaining signatures to a request
for a meeting for the purpose of voting upon
removal of any Trustee of the Registrant, which
application shall be accompanied by a form of
communication and request which such Petitioning
Shareholders wish to transmit, Registrant will:
(i) provide such Petitioning Shareholders with
access to a list of the names and addresses
of all shareholders of the Registrant; or
(ii) inform such Petitioning Shareholders of the
approximate number of shareholders and the
estimated costs of mailing such
communication, and to undertake such mailing
promptly after tender by such Petitioning
Shareholders to the Registrant of the
material to be mailed and the reasonable
expenses of such mailing.<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cincinnati, State of
Ohio, on the 2nd day of June, 1995.
MIDWEST TRUST
/s/ John F. Splain
By:---------------------------
John F. Splain,
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/ Robert H. Leshner
- --------------------- President June 2, 1995
ROBERT H. LESHNER and Trustee
/s/ Mark J. Seger
- --------------------- Treasurer June 2, 1995
MARK J. SEGER
*H. JEROME LERNER Trustee
*OSCAR P. ROBERTSON Trustee
*GARY W. HELDMAN Trustee
*JAMES C. KRUMME Trustee
*G. WILLIAM ROHDE Trustee
*BRUCE J. SIMPSON Trustee
By:/s/ John F. Splain
-------------------------
JOHN F. SPLAIN
Attorney-in-Fact*
June 2, 1995
EXHIBIT INDEX
- -------------
1. Management Agreement with Midwest Group
Financial Services, Inc. for the
Short Term Government Income Fund and the
Intermediate Term Government Income Fund. . .
2. Management Agreement with Midwest Group
Financial Services, Inc. for the
Institutional Government Income Fund. . . . .
3. Management Agreement with Midwest Group
Financial Services, Inc. for the
Adjustable Rate U.S. Government Securities
Fund. . . . . . . . . . . . . . . . . . . . .
4. Subadvisory Agreement between Midwest Group
Financial Services, Inc. and Hanover Capital
Advisors Inc. for the Adjustable Rate
U.S. Government Securities Fund. . . . . . .
5. Form of Underwriter's Dealer Agreement . . .
6. Consent of Independent Public Accountants. .
7. Form of Administration Agreement with respect
to the Administration of Shareholder Accounts
MANAGEMENT AGREEMENT
TO: MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Midwest Income Trust (hereinafter referred to as the
"Trust") herewith confirms our agreement with you.
The Trust has been organized to engage in the business of an
investment company. The Short Term Government Income Fund and
the Intermediate Term Government Income Fund (the "Funds") have
been established as two series of the Trust. You have been
selected to act as the investment adviser of the Funds 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 Funds with such investment
advice as you in your discretion deem advisable and will furnish
a continuous investment program for each of the Funds consistent
with their respective investment objectives and policies. You
will determine what securities shall be purchased for each Fund,
what portfolio securities shall be held or sold by each Fund, and
what portion of each Fund's assets shall be held uninvested,
subject always to the Funds' 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 Funds who are officers, directors,
stockholders or employees of your corporation and will make
available, without expense to the Funds, 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. Notwithstanding the foregoing, the
Funds will pay the compensation and expenses of the Chief
Financial Officer of the Trust. The compensation and expenses of
any officers, trustees and employees of the Trust who are not
officers, directors, employees or stockholders of your
corporation will be paid by the Funds.
You will pay all advertising and promotion expenses incurred
in connection with the sale or distribution of the Funds' shares
to the extent such expenses are not assumed by the Funds under
the Trust's Distribution Expense Plan. You will reimburse the
Trust's principal underwriter for any expenses incurred by it in
the performance of its obligations under the Underwriting
Agreement with the Trust.
The Funds will also be responsible for the payment of all
other operating expenses of the Trust, including fees and
expenses incurred by the Trust 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 Funds, expenses
including clerical expenses of issue, sale, redemption or
repurchase of shares of the Funds, 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 Funds' 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 nonrecurring
expenses as may arise, including litigation to which the Trust
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
Trust's obligations. All other expenses not assumed by you
herein incurred by the Funds in connection with the organization,
registration of shares and operations of the Funds will be borne
by the Funds.
3. COMPENSATION OF THE ADVISER
---------------------------
For all of the services to be rendered and payments made as
provided in this Agreement, each 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 $50,000,000; 45/100 of 1% of
such assets from $50,000,000 to $150,000,000; 40/100 of
1% of such assets from $150,000,000 to and including
$250,000,000 and 37.5/100 of 1% of such assets in
excess of $250,000,000.
The total fees payable during each of the first and second
halves of each fiscal year of the Trust shall not exceed the
semiannual total of the daily fee accruals requested by you
during the applicable six month period. The average value of net
assets shall be determined pursuant to the applicable provisions
of the Declaration of Trust of the Trust or a resolution of the
Board, if required. If, pursuant to such provisions, the
determination of net asset value of a Fund is suspended for any
particular business day, then for the purposes of this paragraph,
the value of the net assets of such 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
Funds' net assets may lawfully be determined, on that day. If
the determination of the net asset value of a 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).
You agree that your compensation during any fiscal year
shall be reduced by an amount, if any, which the expenses of the
Trust or a Fund for such fiscal year exceed the lowest applicable
expense limitation applicable to the Trust or a Fund imposed by
state securities administrators in states where the Funds' shares
are qualified for sale, as such limitations may be lowered or
raised from time to time. The payment of your compensation at
the end of any month will be reduced or postponed or, if
necessary, a refund will be made to the Funds at the end of such
month, so that at no time will there be any accrued but unpaid
liability in excess of the above expense limitation. You shall
refund to the Funds at the close of each year, the amount of any
additional reduction of your compensation pursuant to this
paragraph, provided, however, that you will not be required to
pay any Fund an amount greater than the fee paid to you by such
Fund in respect of such year pursuant to this Agreement. As used
in this paragraph "expenses" shall mean those expenses included
in the applicable expense limitation and "expense limitation"
means a limit on the maximum annual expenses which may be
incurred by an investment company or a series of an investment
company determined by multiplying a fixed percentage by the
average or multiplying more than one such percentage by different
specified amounts of the average of the values of the daily net
assets of the investment company or the series for a fiscal year.
The words "lowest expense limitation" shall be construed to
result in the largest reduction of your compensation for any
fiscal year of the Trust.
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 Funds, it is understood that
you will arrange for the placing of all orders for the purchase
and sale of portfolio securities for the Funds' 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 Funds 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 Funds and/or the other
accounts over which you exercise investment discretion. You are
authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction if you determine in good faith that the amount of the
commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker
or dealer. The determination may be viewed in terms of either a
particular transaction or your overall responsibilities with
respect to the Funds and to accounts over which you exercise
investment discretion. The Trust and you understand that,
although the information may be useful to the Trust and you, it
is not possible to place a dollar value on such information. The
Board shall periodically review the commissions paid by the Funds
to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits to the Funds.
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 a Fund as a factor in the selection of brokers and
dealers to execute portfolio transactions of that Fund.
If any occasion should arise in which you give any advice to
clients of yours concerning the shares of the Funds, you will act
solely as investment counsel for such client and not in any way
on behalf of the Trust. Your services to the Trust 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.
<PAGE>
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 Trust 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
Trust will advance attorneys' fees or other expenses incurred by
you in defending a proceeding, upon the undertaking by or on
behalf of you to repay the advance unless it is ultimately
determined that you are entitled to indemnification, so long as
you meet at least one of the following as a condition to the
advance: (1) you shall provide a security for your undertaking,
(2) the Trust shall be insured against losses arising by reason
of any lawful advances, or (3) a majority of a quorum of the
disinterested, nonparty 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 remain in force for a period of two (2)
years from the date of its execution and from year to year
thereafter as to each Fund, 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 such Fund, provided that in either event
continuance is also approved by a majority of the trustees who
are not interested persons 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 any Fund fail to approve the
Agreement in the manner set forth above, upon approval of the
Board, you may continue to serve or act in such capacity for that
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 Trust or by you. This Agreement shall
automatically terminate in the event of its assignment.
7. USE OF NAME
-----------
It is expressly understood that you may use the name
"Midwest..." and "Midwest Income" or any derivation thereof in
connection with another business enterprise, including any
registered investment company with which you are, or may become
associated, so long as such use is permitted under the Investment
Company Act of 1940 and other applicable law.
8. AMENDMENT OF THIS AGREEMENT
---------------------------
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the outstanding voting securities of the
Fund to which the amendment relates 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.
9. LIMITATION OF LIABILITY
-----------------------
The term "Midwest Income Trust" means and refers to the
Trustees from time to time serving under the Trust's Declaration
of Trust as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any
of the trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the trust
property of the Trust, as provided in the Declaration of Trust of
the Trust. The execution and delivery of this Agreement have
been authorized by the trustees and shareholders of the Trust 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 Trust as provided in its Declaration of Trust.
10. 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 INCOME TRUST
/s/ John F. Splain /s/ Robert H. Leshner
- ------------------------ By:--------------------------
Dated: January 30, 1990
Revised December 31, 1994
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: MIDWEST GROUP FINANCIAL
SERVICES, INC.
/s/ John F. Splain /s/ Robert H. Leshner
- --------------------- By: ----------------------------
Dated: January 30, 1990
Revised December 31, 1994
MANAGEMENT AGREEMENT
TO: MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Midwest Income Trust (hereinafter referred to as the
"Trust") herewith confirms our agreement with you.
The Institutional Government Income Fund (hereinafter
referred to as the "Fund") has been established as a series
of the Trust. You have been selected to act as the sole
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 the Fund's 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 Fund.
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. Notwithstanding the foregoing, the Fund will pay
the compensation and expenses of the Chief Financial Officer
of the Trust. The compensation and expenses of any
officers, trustees and employees of the Trust who are not
officers, directors, employees or stockholders of your
corporation will be paid by the Fund. <PAGE>
You will pay all advertising and promotion expenses
incurred in connection with the sale or distribution of the
Fund's shares to the extent such expenses are not assumed by
the Fund under the Trust's Distribution Expense Plan.
The Fund will also be responsible for the payment of
all 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 Trust, the fees and expenses of trustees of
the Fund 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 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 .20% of the average value of the daily net assets of
the Fund.
The average value of net assets shall be determined
pursuant to the applicable provisions of the Declaration of
Trust of the Trust or a resolution of the Board, if
required. If, pursuant to such provisions, the
determination of net asset value 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).
You agree that your compensation during any fiscal year
shall be reduced by an amount, if any, by which the expenses
of the Fund for such fiscal year exceed the lowest
applicable expense limitation applicable to the Fund imposed
by state securities administrators in states where the
Fund's shares are qualified for sale, as such limitations
may be lowered or raised from time to time. The payment of
your compensation at the end of any month will be reduced or
postponed or, if necessary, a refund will be made to the
Fund at the end of such month, so that at no time will there
be any accrued but unpaid liability in excess of the above
expense limitation. You shall refund to the Fund at the
close of each year, the amount of any additional reduction
of your compensation pursuant to this paragraph, provided,
however, that you will not be required to pay the Fund an
amount greater than the fee paid to you by the Fund in
respect of such year pursuant to this Agreement. As used in
this paragraph "expenses" shall mean those expenses included
in the applicable expense limitation and "expense
limitation" means a limit on the maximum annual expenses
which may be incurred by an investment company or a series
of an investment company determined by multiplying a fixed
percentage by the average or multiplying more than one such
percentage by different specified amounts of the average of
the values of the daily net assets of the investment company
or the series for a fiscal year. The words "lowest expense
limitation" shall be construed to result in the largest
reduction of your compensation for any fiscal year of the
Trust.
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 Fund portfolio
transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting
that transaction if you determine in good faith that the
amount of the commission is reasonable in relation to the
value of the brokerage and research services provided by the
executing broker or dealer. The determination may be viewed
in terms of either a particular transaction or your overall
responsibilities with respect to the Fund and to accounts
over which you exercise investment discretion. The Fund 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 Fund
portfolio transactions.
If any occasion should arise in which you give any
advice to clients of yours concerning the shares of the
Fund, you will act solely as investment counsel for such
client and not in any way on behalf of the Trust. Your
services to the Fund pursuant to this Agreement are not to
be deemed to be exclusive and it is understood that you may
render investment advice, management and other services to
others.
5. LIMITATION OF LIABILITY OF ADVISER
You (including your directors, officers, shareholders,
employees, control persons and affiliates of any thereof)
shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross
negligence on your part in the performance of your duties or
from the reckless disregard by you of your obligations and
duties under this Agreement ("disabling conduct"). However,
you will not be indemnified for any liability unless (1) a
final decision is made on the merits by a court or other
body before whom the proceeding was brought that you were
not liable by reason of disabling conduct, or (2) in the
absence of such a decision, a reasonable determination is
made, based upon a review of the facts, that you were not
liable by reason of disabling conduct, by (a) the vote of a
majority of a quorum of trustees who are neither "interested
persons" of the Trust as defined in the Investment Company
Act of 1940 nor parties to the proceeding ("disinterested,
non-party trustees"), or (b) an independent legal counsel in
a written opinion. The Fund will advance attorneys' fees or
other expenses incurred by you in defending a proceeding,
upon the undertaking by or on behalf of you to repay the
advance unless it is ultimately determined that you are
entitled to indemnification, so long as you meet at least
one of the following as a condition to the advance: (1) you
shall provide a security for your undertaking, (2) the Fund
shall be insured against losses arising by reason of any
lawful advances, or (3) a majority of a quorum of the
disinterested, non-party trustees of the Trust, or an
independent legal counsel in a written opinion, shall
determine, based on a review of the 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 remain in force for a period of
two (2) years from the date of its execution and 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 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 request of the
Board, you may continue to serve or act in such capacity for
the Fund for the period of time 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. USE OF NAME
It is expressly understood that you may use the name
"Midwest..." or "Midwest Income..." or any derivation
thereof in connection with another business enterprise,
including any registered investment company with which you
are, or may become associated, so long as such use is
permitted under the Investment Company Act of 1940, as
amended, and other applicable law.
8. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the outstanding voting securities
of the Fund and by the Board, including a majority of the
trustees who are not interested persons of you or of the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
9. LIMITATION OF LIABILITY
The term "Midwest Income Trust" means and refers to the
Trustees from time to time serving under the Trust's
Declaration of Trust as the same may subsequently thereto
have been, or subsequently hereto be, amended. It is
expressly agreed that the obligations of the 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 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.
10. 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 INCOME TRUST
/s/ John F. Splain By: /s/ Robert H. Leshner
Dated: January 30, 1990
Revised December 31, 1994
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: MIDWEST GROUP FINANCIAL
SERVICES, INC.
/s/ John F. Splain By: /s/ Robert H. Leshner
Dated: January 30, 1990
Revised December 31, 1994
MANAGEMENT AGREEMENT
---------------------
TO: MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Midwest Income Trust (hereinafter referred to as the
"Trust") herewith confirms our agreement with you.
The Adjustable Rate U.S. Government Securities Fund
(hereinafter referred to as 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 Fund.
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. Notwithstanding the foregoing, the
Fund will pay the compensation and expenses of the Chief
Financial Officer of the Trust. The compensation and expenses of
any officers, trustees and employees of the Trust who are not
officers, directors, employees or stockholders of your
corporation will be paid by the Fund.
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 Distribution Expense Plan. You will reimburse the
Trust's principal underwriter for any expenses incurred by it in
the performance of its obligations under the Underwriting
Agreement with the Trust.
The Fund will also be responsible for the payment of all
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 nonrecurring expenses as may
arise, including litigation to which the Fund may be a party and
indemnification of the Trust's officers 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% of the
average value of the daily net assets of the Fund up to
$50,000,000; .45% of such assets from $50,000,000 to
$150,000,000; .40% of such assets from $150,000,000 to and
including $250,000,000 and .375% of such assets in excess of
$250,000,000.
The total fees payable during each of the first and second
halves of each fiscal year of the Trust shall not exceed the
semiannual total of the daily fee accruals requested by you
during the applicable six month period. The average value of net
assets shall be determined pursuant to the applicable provisions
of the Declaration of Trust of the Trust or a resolution of the
Board, if required. If, pursuant to such provisions, the
determination of net asset value 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).
You agree that your compensation during any fiscal year
shall be reduced by an amount, if any, by which the expenses of
the Fund for such fiscal year exceed the lowest applicable
expense limitation applicable to the Fund imposed by state
securities administrators in states where the Fund's shares are
qualified for sale, as such limitations may be lowered or raised
from time to time. The payment of your compensation at the end
of any month will be reduced or postponed or, if necessary, a
refund will be made to the Fund at the end of such month, so that
at no time will there be any accrued but unpaid liability in
excess of the above expense limitation. You shall refund to the
Fund at the close of each year, the amount of any additional
reduction of your compensation pursuant to this paragraph,
provided, however, that you will not be required to pay the Fund
an amount greater than the fee paid to you by the Fund in respect
of such year pursuant to this Agreement. As used in this
paragraph "expenses" shall mean those expenses included in the
applicable expense limitation and "expense limitation" means a
limit on the maximum annual expenses which may be incurred by an
investment company or a series of an investment company
determined by multiplying a fixed percentage by the average or
multiplying more than one such percentage by different specified
amounts of the average of the values of the daily net assets of
the investment company or the series for a fiscal year. The
words "lowest expense limitation" shall be construed to result in
the largest reduction of your compensation for any fiscal year of
the Trust.
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
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 Trust 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 Fund portfolio transactions.
If any occasion should arise in which you give any advice to
clients of yours concerning the shares of the Fund, you will act
solely as investment counsel for such client and not in any way
on behalf of the Trust. Your services to the Fund pursuant to
this Agreement are not to be deemed to be exclusive and it is
understood that you may render investment advice, management and
other services to others.
5. LIMITATION OF LIABILITY OF ADVISER
----------------------------------
You (including your directors, officers, shareholders,
employees, control persons and affiliates of any thereof) shall
not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from the reckless disregard
by you of your obligations and duties under this Agreement
("disabling conduct"). However, you will not be indemnified for
any liability unless (1) a final decision is made on the merits
by a court or other body before whom the proceeding was brought
that you were not liable by reason of disabling conduct, or (2)
in the absence of such a decision, a reasonable determination is
made, based upon a review of the facts, that you were not liable
by reason of disabling conduct, by (a) the vote of a majority of
a quorum of trustees who are neither "interested persons" of the
Trust as defined in the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party trustees"),
or (b) an independent legal counsel in a written opinion. The
Fund will advance attorneys' fees or other expenses incurred by
you in defending a proceeding, upon the undertaking by or on
behalf of you to repay the advance unless it is ultimately
determined that you are entitled to indemnification, so long as
you meet at least one of the following as a condition to the
advance: (1) you shall provide a security for your undertaking,
(2) the Fund shall be insured against losses arising by reason of
any lawful advances, or (3) a majority of a quorum of the
disinterested, nonparty trustees of the Trust, or an independent
legal counsel in a written opinion, shall determine, based on a
review of the 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 remain in force until January 30, 1994,
and 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 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 request of the
Board, 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. USE OF NAME
-----------
It is expressly understood that you may use the name
"Midwest..." or "Midwest Income..." or any derivation thereof in
connection with another business enterprise, including any
registered investment company with which you are, or may become
associated, so long as such use is permitted under the Investment
Company Act of 1940 and other applicable law.
8. AMENDMENT OF THIS AGREEMENT
---------------------------
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the outstanding voting securities of the
Fund and by the Board, including a majority of the trustees who
are not interested persons of you or of the Trust, cast in person
at a meeting called for the purpose of voting on such approval.
9. LIMITATION OF LIABILITY
-----------------------
The term "Midwest Income Trust" means and refers to the
Trustees from time to time serving under the Trust's Declaration
of Trust as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that the
obligations of the 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 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.
10. 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 INCOME TRUST
/s/ John F. Splain /s/ Robert H. Leshner
- ------------------------- By: --------------------------
Dated: November 30, 1992
Revised December 31, 1994
ACCEPTANCE
-----------
The foregoing Agreement is hereby accepted.
ATTEST: MIDWEST GROUP FINANCIAL
SERVICES, INC.
/s/ John F. Splain /s/ Robert H. Leshner
- -------------------------- By: ---------------------------
Dated: November 30, 1992
Revised December 31, 1994
SUBADVISORY AGREEMENT
---------------------
TO: Hanover Capital Advisors Inc.
90 West Street
New York, New York 10006
Dear Sirs:
Midwest Group Financial Services, Inc. (hereinafter referred
to as the "Adviser") herewith confirms our agreement with you.
The Adjustable Rate U.S. Government Securities Fund
(hereinafter referred to as the "Fund") has been established as
an additional series of Midwest Income Trust (the "Trust"). The
Adviser has been selected to act as the investment adviser of the
Fund, and you are willing to perform subadvisory services under
the terms and conditions hereinafter set forth. Accordingly, the
Adviser agrees with you as follows upon the date of the execution
of this Agreement.
1. SUBADVISORY SERVICES
--------------------
You will regularly review the Fund's portfolio holdings
and overall investment strategy. Based upon your review (which
shall be performed as frequently as considered appropriate but no
less frequently than monthly), you will confer periodically with
the Adviser to make recommendations concerning the investment
program of the Fund. Such recommendations may include (i) the
specific securities to be held by the Fund and the proportion of
the Fund's assets that should be allocated to such investments
during particular market cycles, (ii) the specific issuers whose
securities should be purchased or sold by the Fund, (iii) credit
guidelines for the issuers of securities in the Fund's portfolio,
(iv) the maximum maturity of the Fund's portfolio investments and
(v) the appropriate average weighted maturity of the Fund's
portfolio in light of current market conditions. All such
recommendations will be consistent with the investment policies
and limitations set forth in the Fund's registration statement.
2. COMPENSATION
------------
For the services to be rendered by you, the Adviser
will pay you a daily fee equal to 1/365th of .25% of the Fund's
net assets up to $50 million; .225% of such assets from $50
million to $150 million; .2% of such assets from $150 to $250
million; and .1875% of such assets in excess of $250 million.
The Fund's net assets on any day will be valued as of the close
of business on such day, or if such day is not a business day of
the Trust, at the close of business on the business day
immediately preceding such day. The fee shall be payable monthly
and shall be due with respect to any month as of the first
business day following the end of such month. If the Adviser
waives or reimburses any portion of its advisory fee in order to
reduce the operating expenses of the Fund, then the fee payable
by the Adviser to you for such period will be reduced by an
amount equal to fifty percent (50%) of such waiver or
reimbursement. Under no circumstance will you be required to
reduce your fee or reimburse the Adviser an amount greater than
the fee paid or payable to you by the Adviser in respect of each
fiscal year.
The daily net assets of the Fund shall be determined
pursuant to the applicable provisions of the Declaration of Trust
and to resolutions of the Trustees of the Trust. If, pursuant to
such provisions, the determination of net asset value is
suspended for any particular business day, then for the purposes
of this paragraph, the value of the net assets of the Fund as
last determined shall be deemed to be the value of its net assets
as of the close of business on that day, or as of such other time
as the value of the Fund's net assets may lawfully be determined,
on that day. If the determination of 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.)
You will pay the compensation of any persons rendering
any services to the Fund who are officers, directors or employees
of Hanover Capital Advisors Inc.
3. DURATION AND TERMINATION OF THIS AGREEMENT
------------------------------------------
This Agreement shall remain in force until January 30,
1994, and from year to year thereafter, subject to annual
approval by (i) the Board of Trustees 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.
This Agreement may, on sixty days written notice, be
terminated at any time without the payment of any penalty, by the
Board of Trustees of the Trust, 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.
<PAGE>
4. AMENDMENT OF THIS AGREEMENT
---------------------------
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the
holders of a majority of the outstanding voting securities of the
Fund and by the Board of Trustees of the Trust, 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.
5. LIMITATION OF LIABILITY
-----------------------
The Adviser hereby indemnifies you (including your
directors, officers, employees, control persons and affiliates of
any thereof) for any loss suffered by the Fund or the Adviser
arising from any act or omission of the Adviser or you in
connection with your contractual obligations to the Adviser, or
the Adviser's contractual obligations to the Fund, 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.
For all purposes herein, you shall be deemed to be an
independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to
act for or represent the Trust in any way or otherwise be deemed
an agent of the Trust.
6. OTHER SERVICES
--------------
It is understood that your services to the Fund
hereunder are not to be deemed exclusive, and you and any of your
affiliates shall be free to render similar services to others.
You will use the same skill and care in the management of the
Fund's assets as you use in the administration of other accounts
to which you provide asset management and consulting services,
but shall not be obligated to give the Fund more favorable or
preferential treatment vis-a-vis your other clients.
7. SEVERABILITY
------------
If any provision of this Agreement shall be held or
made invalid by a final court decision (after exhaustion of all
appeals), statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
<PAGE>
8. GOVERNING LAW
-------------
To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time,
this Agreement shall be administered, construed and enforced
according to the laws of the State of Ohio.
9. MISCELLANEOUS
-------------
The captions in this Agreement are included for
convenience of reference only and in no way define or limit any
of the provisions hereof or otherwise affect their construction
or effect. This Agreement may be executed in 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 below and return it to the Adviser,
whereupon this Agreement shall become a binding contract upon the
date thereof.
Yours very truly,
ATTEST: MIDWEST GROUP FINANCIAL
SERVICES,INC.
/s/ John F. Splain /s/ Robert H. Leshner
- ------------------------- By:--------------------------
Title: Chairman of the Board
Dated: November 30, 1992
Revised December 31, 1994
ACCEPTANCE
-----------
The foregoing Agreement is hereby accepted.
ATTEST: HANOVER CAPITAL ADVISORS INC.
/s/ Irma R. Tavares By: /s/ John Burchett
- ------------------------ -----------------------------
Title: President
Dated: November 30, 1992
Revised December 31, 1994
DEALER'S AGREEMENT
------------------
Midwest Group Financial Services, Inc. ("Underwriter") invites
you, as a selected dealer, to participate as principal in the
distribution of shares (the "Shares") of the mutual funds set forth
on Schedule A to this Agreement (the "Funds"), of which it is the
exclusive underwriter. Underwriter agrees to sell to you, subject
to any limitations imposed by the Funds, Shares issued by the Funds
and to promptly confirm each sale to you. All sales will be made
according to the following terms:
1. All offerings of any of the Shares by you must be made at
the public offering prices, and shall be subject to the conditions
of offering, set forth in the then current Prospectus of the Funds
and to the terms and conditions herein set forth, and you agree to
comply with all requirements applicable to you of all applicable
laws, including federal and state securities laws, the rules and
regulations of the Securities and Exchange Commission, and the
Rules of Fair Practice of the National Association of Securities
Dealers, inc. (the "NASD"), including Section 24 of the Rules of
Fair Practice of the NASD. You will not offer the Shares for sale
in any state or other jurisdiction where they are not qualified for
sale under the Blue Sky Laws and regulations of such state or
jurisdiction, or where you are not qualified to act as a dealer.
Upon application to Underwriter, Underwriter will inform you as to
the states or other jurisdictions in which Underwriter believes the
Shares may legally be sold.
2. (a) You will receive a discount from the public offering
price ("concession") on all Shares purchased by you from
Underwriter as indicated on Schedule A, as it may be amended by
Underwriter from time to time.
(b) In all transactions in open accounts in which you
are designated as Dealer of Record, you will receive the
concessions as set forth on Schedule A. You hereby authorize
Underwriter to act as your agent in connection with all
transactions in open accounts in which you are designated as Dealer
of Record. All designations as Dealer of Record, and all
authorizations of Underwriter to act as your Agent pursuant
thereto, shall cease upon the termination of this Agreement or upon
the investor's instructions to transfer his open account to another
Dealer of Record. No dealer concessions will be allowed on
purchases generating less than $1.00 in dealer concessions.
(c) As the exclusive underwriter of the Shares,
Underwriter reserves the privilege of revising the discounts
specified on Schedule A at any time by written notice.
<PAGE>
3. Concessions will be paid to you at the address of your
principal office, as indicated below in your acceptance of this
Agreement.
4. Underwriter reserves the right to cancel this Agreement
at any time without notice if any Shares shall be offered for sale
by you at less than the then current public offering prices
determined by, or for, the Funds.
5. All orders are subject to acceptance or rejection by
Underwriter in its sole discretion. We reserve the right, in our
discretion, without notice, to suspend sales or withdraw the
offering of Shares entirely.
6. Payment shall be made to the Funds and shall be received
by its Transfer Agent within five (5) business days after the
acceptance of your order or such shorter time as may be required by
law. With respect to all Shares ordered by you for which payment
has not been received, you hereby assign and pledge to Underwriter
all of your right, title and interest in such Shares to secure
payment therefor. You appoint Underwriter as your agent to execute
and deliver all documents necessary to effectuate any of the
transactions described in this paragraph. If such payment is not
received within the required time period, Underwriter reserves the
right, without notice, and at its option, forthwith (a) to cancel
the sale, (b) to sell the Shares ordered by you back to the Funds,
or (c) to assign your payment obligation, accompanied by all
pledged Shares, to any person. You agree that Underwriter may hold
you responsible for any loss, including loss of profit, suffered by
the Funds, its Transfer Agent or Underwriter, resulting from your
failure to make payment within the required time period.
7. No person is authorized to make any representations
concerning Shares of the Funds except those contained in the
current applicable Prospectus and Statement of Additional
Information and in sales literature issued and furnished by
Underwriter supplemental to such Prospectus. Underwriter will
furnish additional copies of the current Prospectus and Statement
of Additional Information and such sales literature and other
releases and information issued by Underwriter in reasonable
quantities upon request.
8. Under this Agreement, you act as principal and are not
employed by Underwriter as broker, agent or employee. You are not
authorized to act for Underwriter nor to make any representation on
its behalf; and in purchasing or selling Shares hereunder, you rely
only upon the current Prospectus and Statement of Additional
Information furnished to you by Underwriter from time to time and
upon such written representations as may hereafter be made by
Underwriter to you over its signature.
<PAGE>
9. You appoint the transfer agent for the Funds as your
agent to execute the purchase transactions of Shares in accordance
with the terms and provisions of any account, program, plan or
service established or used by your customers and to confirm each
purchase to your customers on your behalf, and you guarantee the
legal capacity of your customers so purchasing such Shares and any
co-owners of such Shares.
10. You will (a) maintain all records required by law
relating to transactions in the Shares, and upon the request of
Underwriter, or the request of the Funds, promptly make such of
these records available to Underwriter or to the Funds as are
requested, and (b) promptly notify Underwriter if you experience
any difficulty in maintaining the records required in the foregoing
clause in an accurate and complete manner. In addition, you will
establish appropriate procedures and reporting forms and schedule,
approved by Underwriter and by the Funds, to enable the parties
hereto and the Funds to identify all accounts opened and maintained
by your customers.
11. Underwriter has adopted compliance standards, attached
hereto as Schedule B, as to when Class A and Class C Shares of the
Dual Pricing Funds may appropriately be sold to particular
investors. You agree that all persons associated with you will
conform to such standards when selling Shares.
12. Each party hereto represents that it is presently, and at
all times during the term of this Agreement will be, a member in
good standing of the NASD and agrees to abide by all its Rules of
Fair Practice including, but not limited to, the following
provisions:
(a) You shall not withhold placing customers' orders for
any Shares so as to profit yourself as a result of such
withholding. You shall not purchase any Shares from
Underwriter other than for investment, except for the purpose
of covering purchase orders already received.
(b) All conditional orders received by Underwriter must
be at a specified definite price.
(c) If any Shares purchased by you are repurchased by
the Funds (or by Underwriter for the account of the Funds) or
are tendered for redemption within seven business days after
confirmation of the original sale of such Shares (1) you agree
to forthwith refund to Underwriter the full concession allowed
to you on the original sale, such refund to be paid by
Underwriter to the Funds, and (2) Underwriter shall forthwith
pay to the Funds that part of the discount retained by
Underwriter on the original sale. Notice will be given to you
of any such repurchase or redemption within ten days of the
date on which the repurchase or redemption request is made.
(d) Neither Underwriter, as exclusive underwriter for
the Funds, nor you as principal, shall purchase any Shares
from a record holder at a price lower than the net asset value
then quoted by, or for, the Funds. Nothing in this sub-
paragraph shall prevent you from selling Shares for the
account of a record holder to Underwriter or the Funds at the
net asset value currently quoted by, or for, the Funds and
charging the investor a fair commission for handling the
transaction.
(e) You warrant on behalf of yourself and your
registered representatives and employees that any purchase of
Shares at net asset value by the same pursuant to the terms of
the Prospectus of the applicable Fund is for investment
purposes only and not for purposes of resale. Shares so
purchased may be resold only to the Fund which issued them.
13. You agree that you will indemnify Underwriter, the Funds,
the Funds' transfer agent, the Funds' investment adviser, and the
Funds' custodians and hold such persons harmless from any claims or
assertions relating to the lawfulness of your company's
participation in this Agreement and the transactions contemplated
hereby or relating to any activities of any persons or entities
affiliated with your company which are performed in connection with
the discharge of your responsibilities under this Agreement. If
any such claims are asserted, the indemnified parties shall have
the right to engage in their own defense, including the selection
and engagement of legal counsel of their choosing, and all costs of
such defense shall be borne by you.
14. This Agreement will automatically terminate in the event
of its assignment. Either party hereto may cancel this Agreement
without penalty upon ten days' written notice. This Agreement may
also be terminated as to any Fund at any time without penalty by
the vote of a majority of the members of the Board of Trustees of
the terminating Fund who are not "interested persons" (as such term
is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the applicable Fund's
Distribution Expense Plan or any agreement relating to such Plan,
including this Agreement, or by a vote of a majority of the
outstanding voting securities of the terminating Fund on ten days'
written notice.
15. All communications to Underwriter should be sent to
Midwest Group Financial Services, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202, or at such other address as Underwriter may
designate in writing. Any notice to you shall be duly given if
mailed or telegraphed to you at the address of your principal
office, as indicated below in your acceptance of this Agreement.
<PAGE>
16. This Agreement supersedes any other agreement with you
relating to the offer and sale of the Shares, and relating to any
other matter discussed herein.
17. This Agreement shall be binding (i) upon placing your
first order with Underwriter for the purchase of Shares, or (ii)
upon receipt by Underwriter in Cincinnati, Ohio of a counterpart of
this Agreement duly accepted and signed by you, whichever shall
occur first. This Agreement shall be construed in accordance with
the laws of the State of Ohio.
18. The undersigned, executing this Agreement on behalf of
Dealer, hereby warrants and represents that he is duly authorized
to so execute this Agreement on behalf of Dealer.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us one copy of this
Agreement.
MIDWEST GROUP FINANCIAL
SERVICES, INC.
/s/ Robert H. Leshner
By: --------------------------
ACCEPTED BY DEALER:
------------------------------
Firm Name
By:---------------------------
Authorized Signature,
Position
------------------------------
Type or Print Name
ADDRESS (Principal Office):
------------------------------
------------------------------
Date:-------------------------
<PAGE>
SCHEDULE A
-----------
Midwest Group of Funds Commission Schedule
U.S. Government Securities Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund - Class A
Adjustable Rate U.S. Government Securities Fund - Class A
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over None None
25 basis points annual trailing commission effective
immediately, paid quarterly.
- ------------------------------------------------------------------
Equity Fund - Class A
Utility Fund - Class A
Global Bond Fund - Class A
Treasury Total Return Fund
Ohio Insured Tax-Free Fund - Class A
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over None None
25 basis points annual trailing commission effective
immediately, paid quarterly.
- -------------------------------------------------------------------
Equity Fund - Class C
Utility Fund - Class C
Global Bond Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
Intermediate Term Government Income Fund - Class C
Adjustable Rate U.S. Government Securities Fund - Class C
The Funds will be offered to clients at net asset value. A
commission of 1% of the purchase amount of Class C shares
will be paid to participating brokers at the time of
purchase. Purchases of Class C shares are subject to a
contingent deferred sales load, according to the following
schedule:
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid
quarterly beginning in the thirteenth month.
- -------------------------------------------------------------------
*As a percentage of offering price.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any
calendar quarter in which the average daily balance of all
accounts in the Midwest Group of Funds (including no-load
money market funds) is less than $1,000,000.<PAGE>
SCHEDULE B
----------
Policies and Procedures
With Respect to Sales
Of Dual Pricing Fund
------------------------
As certain Funds within the Midwest Group (the "Dual Pricing
Funds") offer two classes of Shares subject to different levels of
front-end sales charges, it is important for an investor not only
to choose the Fund that best suits his investment objectives, but
also to choose the sales financing method which best suits his
particular situation. To assist investors in these decisions, we
are instituting the following policy:
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1 million
is subject to approval by a registered principal of the
Underwriter, who must approve the purchase order for
either Class A Shares or Class C Shares in light of the
relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold the
Shares; and
(c) any other relevant circumstances, such as the
availability of purchases under a Letter of Intent.
3. Any order to exchange Class A Shares of a Dual Pricing
Fund (or Shares of another Fund having a maximum sales
load equal to or greater than Class A Shares of the Dual
Pricing Funds) for Shares of another Dual Pricing Fund
will be for Class A Shares only. Class C Shares of a
Dual Pricing Fund may be exchanged for either Class A or
Class C Shares of another Dual Pricing Fund, provided
that an exchange of Class C Shares for Class A Shares is
subject to approval by a registered principal of
Underwriter, who must approve the exchange in light of
the relevant facts and circumstances.
<PAGE>
There are instances when one financing method may be more
appropriate than the other. For example, investors who would
qualify for a significant discount from the maximum sales charge on
Class A Shares may determine that payment of such a reduced front-
end sales charge is superior to payment of the higher ongoing
distribution fee applicable to Class C Shares. On the other hand,
an investor whose order would not qualify for such a discount may
wish to pay a lower sales charge and have more of his funds
invested in Class C Shares. If such an investor anticipates that
he will redeem his Shares within a short period of time, the
investor may, depending on the amount of his purchase, choose to
bear higher distribution expenses than if he had purchased Class A
Shares.
In addition, investors who intend to hold their Shares for a
significantly long time may wish to purchase Class A Shares in
order to avoid the higher ongoing distribution expenses of Class C
Shares.
The appropriate supervisor must ensure that all employees
receiving investor inquiries about the purchase of Shares of Dual
Pricing Funds advise the investor of the available financing
methods offered by mutual funds, and the impact of choosing one
method over another. It may be appropriate for the supervisor to
discuss the purchase with the investor.
This policy is effective immediately with respect to any order
for the purchase of Shares of all Dual Pricing Funds. Questions
relating to this policy should be directed to Sharon Karp, Vice
President of the Underwriter, at 513/629-2000.
<PAGE>
MIDWEST GROUP FINANCIAL SERVICES, INC.
Addendum to Dealer's Agreement
--------------------------------------
In addition to the concessions as indicated in Schedule A to the
Dealer's Agreement, you will receive a trailing commission of .25%
per annum (payable quarterly) of the average balance during each
calendar quarter of all accounts in the Funds (excluding Class C
Shares of the Dual Pricing Funds) for which you are the dealer of
record.
Beginning one year from the date of the purchase of Class C Shares
of the Dual Pricing Funds, a trailing commission (payable
quarterly) is also paid with respect to such accounts (equal to
.75% per annum of the average balance during each calendar quarter
of all accounts in the Ohio Insured Tax-Free Fund, the Intermediate
Term Government Income Fund and the Tax-Free Intermediate Term Fund
and 1.00% per annum of the average balance during each calendar
quarter of all accounts in the Equity Fund, the Utility Fund and
the Global Bond Fund).
However, no trailing commissions will be paid to a dealer for any
calendar quarter in which the average daily balance of all accounts
in the Midwest Group of Funds (including no-load money market
funds) is less than $1,000,000.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use
in this Post-Effective Amendment No. 62 of our name and to all
references to our Firm included in or made a part of this Post-
Effective Amendment.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
June 1, 1995
ADMINISTRATION AGREEMENT
-------------------------
This Agreement is made between -----------------------
("Administrator") and Midwest Trust, Midwest Group Tax Free Trust
and Midwest 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 Trust 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 Trust
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 or dividend disbursing agent.
3. On each account in certain Funds for which the
Administrator is to render administrative support services,
Administrator will receive a fee, as set forth on Schedule B,
equal to the normal dealer's discount from the public offering
price on the Shares purchased by such accounts. During the term
of this Agreement, each Trust or the Trust's investment adviser
or underwriter will also pay to the Administrator quarterly one-
fourth of the annual administration fees set forth in Schedule B
hereto. Administrator shall notify the Trust if Administrator
directly charges a fee to Fund shareholders for its
administrative support services as described in this Agreement.
4. Administrator agrees to comply with the requirements of
all laws applicable to it, including but not limited to, ERISA,
federal and state securities laws and the rules and regulations
promulgated thereunder. Administrator agrees to provide services
to each Trust in compliance with the then current Prospectus and
Statement of Additional Information of the Trust and the
operating procedures and policies established by the Trust,
including, but not limited to, required minimum investment and
minimum account size.
5. No person is authorized to make any representations
concerning a Fund or its Shares except those contained in the
current Prospectus or Statement of Additional Information of the
applicable Trust 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 Trust 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, 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 investment adviser or underwriter pursuant
hereto, as well as any other reports or filings that may be
required by law.
10. The Administrator acknowledges that any Trust may enter
into similar agreements with others without the consent of the
Administrator.
11. Each Trust reserves the right, at its discretion and
without notice, to suspend the sale of Shares or withdraw the
sale of Shares of any Fund.
12. The Trust's underwriter has adopted compliance
standards, attached hereto as Schedule C, as to when Class A and
Class C Shares of the Dual Pricing Funds may appropriately be
sold to particular investors. The Administrator agrees that all
persons associated with it will conform to such standards.
13. With respect to each Fund, this Agreement shall
continue in effect for one year from the date of its execution,
and thereafter for successive periods of one year if the form of
this Agreement is approved as to the Fund at least annually by
the Trustees of the applicable Trust, including a majority of the
members of the Board of Trustees of the Trust who are not
interested persons ("Disinterested Trustees") of the Trust and
have no direct or indirect financial interest in the operations
of the Trust's Rule 12b-1 Plan ("Plan") or in any documents
related to the Plan cast in person at a meeting for that purpose.
In the event this Agreement, or any part thereof, is found
invalid or is ordered terminated by any regulatory or judicial
authority, or the Administrator shall fail to perform the
shareholder servicing and administrative functions contemplated
hereby, this Agreement is terminable effective upon receipt of
notice thereof by the Administrator.
14. Notwithstanding paragraph 13, this Agreement may be
terminated with respect to any Fund as follows:
(a) at any time, without the payment of any penalty,
by the vote of a majority of the Disinterested Trustees of
the applicable Trust or by a vote of a majority of the
outstanding voting securities of the Fund on not more than
thirty (30) days' written notice to the parties to this
Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940;
or
(c) by any party to the Agreement without cause by
giving the other parties at least thirty (30) days' written
notice of its intention to terminate.
15. Any termination of this Agreement shall not affect the
provisions of paragraph 18, which shall survive the termination
of this Agreement and continue to be enforceable thereafter.
16. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors.
17. This Agreement is not intended to, and shall not,
create any rights against any party hereto by any third person
solely on account of this Agreement.
18. The Administrator shall provide such security as is
necessary to prevent unauthorized use of any computer hardware or
software provided to it by or on behalf of the Trusts, if any.
The Administrator agrees to release, indemnify and hold harmless
each Fund, each Trust, each Trust's transfer agent, custodian,
investment adviser and underwriter, and their respective
principals, directors, trustees, officers, employees and agents
from any and all direct or indirect liabilities or losses
resulting from requests, directions, actions or inactions of or
by the Administrator, its officers, employees or agents regarding
the purchase, redemption, transfer or registration of Shares for
accounts of the Administrator, its clients and other
shareholders. Such indemnity shall also cover any losses and
liabilities incurred by and resulting from the Administrator's
performance of or failure to perform its obligations or its
breach of any representations or warranties under this Agreement.
Principals of the Administrator will be available to consult from
time to time with each Trust concerning the administration and
performance of the services contemplated by this Agreement.
19. This Agreement may be amended only by an agreement in
writing signed by the Administrator and the Trusts.
20. The obligations of each Trust under this Agreement
shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally,
but shall bind only the property of the Trust, as provided in the
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 Trust, acting as
such, and neither the authorization by the Trustees nor the
execution and delivery by such officer of the Trust 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 Trust as provided in its Agreement and
Declaration of Trust.
21. This Agreement does not authorize the Administrator to
participate in any activities relating to the sale or
distribution of the Shares, and the Administrator agrees that it
shall not participate in such activities.
22. If any provision of this Agreement, or any covenant,
obligation or agreement contained herein, is determined by a
court to be invalid or unenforceable, the parties agree that (a)
such determination shall not affect any other provision,
covenant, obligation or agreement contained herein, each of which
shall be construed and enforced to the full extent permitted by
law, and (b) such invalid or unenforceable portion shall be
deemed to be modified to the extent necessary to permit its
enforcement to the maximum extent permitted by applicable law.
23. This Agreement shall be construed in accordance with
the laws of the State of Ohio.
IN WITNESS WHEREOF, this Agreement has been executed for the
Trusts and the Administrator by their duly authorized officers,
on this --- day of ------------, 199--.
- ----------------------------- MIDWEST TRUST
Administrator
By: ---------------------- By: /s/ Robert H. Leshner
Authorized Siganture ---------------------
Authorized Signature
MIDWEST GROUP TAX FREE TRUST
By: /s/ Robert H. Leshner
----------------------
Authorized Signature
MIDWEST STRATEGIC TRUST
By: /s/ Robert H. Leshner
----------------------
Authorized Signature
Schedule A
- ----------
SCHEDULE OF MUTUAL FUNDS
-------------------------
Midwest Trust
- -------------
Intermediate Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
* Short Term Government Income Fund
Global Bond Fund
Midwest Group Tax Free Trust
- ----------------------------
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
* Ohio Tax-Free Money Fund
* Tax-Free Money Fund
* California Tax-Free Money Fund
* Royal Palm Florida Tax-Free Money Fund
Midwest Strategic Trust
- -----------------------
U.S. Government Securities Fund
Treasury Total Return Fund
Utility Fund
Equity Fund
* No-load money market fund.
<PAGE>
Schedule B
- ----------
Midwest Group of Funds Commission Schedule
U.S. Government Securities Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund - Class A
Adjustable Rate U.S. Government Securities Fund - Class A
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over None None
25 basis points annual trailing commission effective
immediately, paid quarterly.
Equity Fund - Class A
Utility Fund - Class A
Global Bond Fund - Class A
Treasury Total Return Fund
Ohio Insured Tax-Free Fund - Class A
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over None None
25 basis points annual trailing commission effective
immediately, paid quarterly.
Equity Fund - Class C
Utility Fund - Class C
Global Bond Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
Intermediate Term Government Income Fund - Class C
Adjustable Rate U.S. Government Securities Fund - Class C
The Funds will be offered to clients at net asset value. A
commission of 1% of the purchase amount of Class C shares
will be paid to participating brokers at the time of
purchase. Purchases of Class C shares are subject to a
contingent deferred sales load, according to the following
schedule:
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid
quarterly beginning in the thirteenth month.
*As a percentage of offering price.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any
calendar quarter in which the average daily balance of all
accounts in the Midwest Group of Funds (including no-load
money market funds) is less than $1,000,000.
<PAGE>
Schedule C
- ----------
Administration Fees
-------------------
You will receive a quarterly fee of .25% per annum (payable
quarterly) of the average balance during each calendar quarter of
all accounts in the Midwest Group Funds set forth on Schedule A
for which you provide administrative services. However, no fee
will be paid to you for any calendar quarter in which the average
daily balance of such accounts is less than $1,000,000,000.
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST (FORMERLY KNOWN AS MIDWEST INCOME TRUST)
<SERIES>
<NUMBER> 73
<NAME> GLOBAL BOND FUND CLASS C
<S> <C>
<PERIOD-TYPE> 2-MOS
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<OTHER-ITEMS-LIABILITIES> 23,559
<TOTAL-LIABILITIES> 2,805,859
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<PAID-IN-CAPITAL-COMMON> 5,284,885
<SHARES-COMMON-STOCK> 2,475
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<DISTRIBUTIONS-OF-INCOME> 144
<DISTRIBUTIONS-OF-GAINS> 156
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