Midwest Group of Funds(R)
MIDWEST TRUST
312 Walnut St., 21st Floor
Cincinnati, Ohio 45202-3874
Nationwide (Toll Free) 800-543-8721
Cincinnati 629-2000
Rate Line 579-0999
Shareholder Services
Nationwide (Toll Free) 800-543-0407
Cincinnati 629-2050
BOARD OF TRUSTEES
Dale P. Brown
Gary W. Heldman
H. Jerome Lerner
Robert H. Leshner
Richard A. Lipsey
Donald J. Rahilly
Fred A. Rappoport
Oscar P. Robertson
Robert B. Sumerel
OFFICERS
Robert H. Leshner, President
John F. Splain, Secretary
Mark J. Seger, Treasurer
INVESTMENT ADVISER/UNDERWRITER
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut St., 21st Floor
Cincinnati, Ohio 45202-3874
TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
This report is authorized for distribution only when it is accompanied
or preceded by a current prospectus of Midwest Trust.
INCOME
TOTAL RETURN
Annual
Report
September 30, 1996
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>
LETTER FROM THE PRESIDENT
==============================================================================
Dear Fellow Shareholders:
We are pleased to present the audited annual report for Midwest Trust for the
fiscal year ended September 30, 1996.
U.S. Government securities continue to represent the investment safety
standard of the world, with the United States issuing more than 35% of the
world's debt securities. In fact, if buying patterns remain stable for the
remainder of the year, 1996 will be the second consecutive year of record
buying, indicating the increasing popularity of U.S. Treasuries with foreign
investors. With an unmatched record of credit quality, U.S. Government bonds
continue to provide opportunities for conservative investors. As in the past,
U.S. Government bond funds within Midwest Trust provide high-quality
alternatives for investors seeking current income consistent with protection
of capital.
The Adjustable Rate U.S. Government Securities Fund has the strongest credit
rating possible from Standard & Poor's Ratings Group, as well as a low risk
rating indicating that the Fund exhibits very low sensitivity to changing
market conditions. As investors begin their year-end tax planning, they may
have proceeds available for reinvestment from the sale of securities. For
those who may be too wary to invest those proceeds back into equities, the
Adjustable Rate U.S. Government Securities Fund may be a good alternative, as
it has the potential to outperform money market rates and the added
possibility of upward movement in share price.
As globalization of the world economies continues, it is important for us to
look at investment opportunities abroad. Continuous innovations in
telecommunications and transportation bring the rest of the world closer to us
every day. International business is no longer the exception; it is the rule.
The Midwest Global Bond Fund provides investors with access to global
diversification. This high-quality Fund invests primarily in government
securities of the United States and foreign countries. As domestic and foreign
markets rarely fluctuate simultaneously, global investing offers the potential
to help minimize portfolio volatility. Opportunities to participate in global
economies will continue to expand as we move toward the next century.
Portfolio exposure through global bond investing may be an excellent way to
diversify while limiting portfolio volatility from a single market.
Midwest Group provides clients with opportunities to generate income through a
variety of options. Whether you are saving for your children's educations,
accumulating money for retirement or seeking current income as a retiree,
Midwest Group can assist you in meeting your investment objectives.
Sincerely,
/s/ Robert H. Leshner
Robert H. Leshner
President
November 18, 1996
Photographic image of Robert H. Leshner.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
INTERMEDIATE TERM GOVERNMENT INCOME FUND
==============================================================================
The fiscal year ended September 30, 1996 was a difficult year for the
fixed-income markets with interest rates generally moving higher. The
benchmark 30-year Treasury bond began the fiscal year yielding 6.47% and ended
the year yielding 6.92%. During the quarter ended December 31, 1995, the
market found tremendous support in constructive budget negotiations between
the Republican Congress and the Clinton Presidency. At the time, it appeared
that a budget resolution would be reached, paving the way for the Federal
Reserve Board to lower interest rates. The market was also aided by a
softening economy and muted inflationary pressures. The yield on the 30-year
Treasury bond reached a low of 5.95% in January 1996.
The next two quarters proved difficult beginning with the budget impasse and
the partial shutdown of the U.S. government in the latter part of January.
Market sentiment worsened, exacerbated by accelerating economic activity.
Gross domestic product climbed to a torrid 4.7% growth rate for the quarter
ended June 30, 1996, well in excess of the economy's long-term potential
growth rate of around 2.5%. The Federal Reserve's bias changed from "easy
money" to "tight money" with many investors wondering when, not if, interest
rates would be raised. Long-term rates peaked in mid-June at 7.20%, then
traded within a well-defined range through fiscal year-end as investors
grappled with questions concerning the strength of the economy and the
potential for inflation. For the twelve months ended September 30, 1996, the
Lehman Brothers Intermediate Government Bond Index returned 5.10%.
The Intermediate Term Government Income Fund, positioned for an advancing
market, performed well through January 1996. However, when market interest
rates abruptly changed direction in February, the Fund suffered a loss of
principal. The Fund underperformed the Lehman Brothers Intermediate Government
Bond Index during the downturn due to its higher duration and convexity
characteristics. Management responded by repositioning the portfolio to take
advantage of the higher interest rate environment. By purchasing callable
bonds with good call protection, the Fund was able to increase its yield while
maintaining better-than-average upside potential. This allowed the Fund to
outperform the Index in the latter part of the fiscal year as interest rates
began trending lower. For the fiscal year ended September 30, 1996, the Fund's
total returns (excluding the impact of applicable sales loads) were 3.55% and
3.03% for Class A shares and Class C shares, respectively.
Our outlook for the next several months remains constructive. Economic
activity appears to be moderating and inflation is nominal -- a boon to bonds.
While the economy may rebound somewhat during the holiday season, our
longer-term outlook is for economic growth at, or near, the economy's
long-term potential. Management has worked to improve the call protection in
the Fund and slightly extend the effective duration which should enhance
performance in a lower interest rate environment. The portfolio remains over
50% invested in callable bonds to provide protection in the event rates move
higher.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
INTERMEDIATE TERM GOVERNMENT INCOME FUND* AND THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT BOND INDEX
<TABLE>
LEHMAN BROTHERS INTERMEDIATE GOVT BOND INDEX: INTERMED TERM GOVT INCOME FUND - CLASS A:
<CAPTION>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
09/30/86 10,000 09/30/86 9,800
12/31/86 2.49% 10,249 12/31/86 2.35% 10,030
03/31/87 1.18% 10,370 03/31/87 0.84% 10,114
06/30/87 -0.83% 10,284 06/30/87 -1.32% 9,981
09/30/87 -1.29% 10,151 09/30/87 -1.17% 9,864
12/31/87 4.60% 10,618 12/31/87 3.91% 10,250
03/31/88 3.13% 10,951 03/31/88 2.50% 10,507
06/30/88 0.97% 11,057 06/30/88 0.47% 10,556
09/30/88 1.56% 11,229 09/30/88 1.64% 10,730
12/31/88 0.60% 11,297 12/31/88 0.27% 10,758
03/31/89 1.04% 11,414 03/31/89 1.05% 10,871
06/30/89 6.64% 12,172 06/30/89 5.40% 11,458
09/30/89 1.13% 12,310 09/30/89 0.93% 11,565
12/31/89 3.41% 12,729 12/31/89 2.88% 11,899
03/31/90 -0.14% 12,711 03/31/90 -1.32% 11,742
06/30/90 3.14% 13,111 06/30/90 2.77% 12,067
09/30/90 1.94% 13,365 09/30/90 0.93% 12,180
12/31/90 4.34% 13,945 12/31/90 4.51% 12,729
03/31/91 2.20% 14,252 03/31/91 1.93% 12,975
06/30/91 1.69% 14,493 06/30/91 1.25% 13,136
09/30/91 4.75% 15,181 09/30/91 5.87% 13,908
12/31/91 4.82% 15,913 12/31/91 5.33% 14,650
03/31/92 -1.05% 15,746 03/31/92 -2.24% 14,321
06/30/92 3.88% 16,357 06/30/92 4.25% 14,931
09/30/92 4.38% 17,073 09/30/92 5.51% 15,754
12/31/92 -0.34% 17,015 12/31/92 -0.87% 15,616
03/31/93 3.74% 17,651 03/31/93 5.09% 16,411
06/30/93 1.96% 17,997 06/30/93 2.76% 16,863
09/30/93 2.11% 18,377 09/30/93 2.90% 17,353
12/31/93 0.15% 18,405 12/31/93 -0.71% 17,230
03/31/94 -1.85% 18,064 03/31/94 -4.07% 16,529
06/30/94 -0.56% 17,963 06/30/94 -1.88% 16,219
09/30/94 0.77% 18,101 09/30/94 -0.24% 16,180
12/31/94 -0.10% 18,083 12/31/94 -0.23% 16,143
03/31/95 4.16% 18,835 03/31/95 5.14% 16,973
06/30/95 4.67% 19,715 06/30/95 5.95% 17,983
09/30/95 1.55% 20,021 09/30/95 1.24% 18,206
12/31/95 3.34% 20,689 12/31/95 3.63% 18,866
03/31/96 -0.68% 20,549 03/31/96 -2.02% 18,484
06/30/96 0.67% 20,686 06/30/96 0.11% 18,504
09/30/96 1.72% 21,042 09/30/96 1.87% 18,851
</TABLE>
Intermediate Term Government Income Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 1.47% 5.84% 6.55% 8.68%
Class C 3.03% N/A N/A 2.67%
Past performance is not predictive of future performance.
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and fees
paid by shareholders in the different classes. The initial public offering of
Class A shares commenced on February 6, 1981, and the initial public offering
of Class C shares commenced on February 1, 1994.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
==============================================================================
The fixed-income markets exhibited a high degree of volatility in the fiscal
year ended September 30, 1996, almost completing a "mini" interest rate cycle.
The year began with a positive tone as Congress and the President appeared to
be nearing agreement on the national budget. This constructive fiscal
backdrop, along with a moderating economy and muted inflation, allowed
interest rates to move lower through the quarter ended December 31, 1995. The
Federal Reserve Board, fearing sluggish economic growth, lowered short-term
interest rates twice, by .25% in December 1995 and by an additional .25% in
January 1996. Short-term rates bottomed-out two weeks later with the 1-year
Treasury bill yielding 4.78%.
February marked a turning point in investor psychology as Congress and the
President failed to reach agreement on the federal budget resulting in a
partial shutdown of the U.S. government. This, combined with a revitalized
economy, sent bond yields sharply higher. Spreads between interest rates on
short-term and long-term Treasuries widened quickly, diminishing the incentive
for mortgage holders to refinance out of adjustable rate mortgages (ARMs) and
into fixed rate mortgages. The resulting slowdown in ARM prepayments allowed
yield spreads to tighten versus U.S. Treasury securities. ARM securities
traded in a relatively narrow range for the rest of the fiscal year,
maintaining tight yield spreads relative to Treasuries. For the twelve months
ended September 30, 1996, the Lehman Brothers ARM Index returned 6.50%.
The Adjustable Rate U.S. Government Securities Fund invests primarily in ARM
securities which are fully-indexed to the 1-year Constant Maturity Treasury
(CMT). These generally conservative bonds exhibit very stable prepayment
patterns. The prepayment profile, combined with the adjustable coupon, allows
the fully-indexed ARM security to maintain an above average degree of price
stability. When short-term interest rates moved higher after January 1996,
fully-indexed, 1-year CMT ARMs actually increased in value as investors sought
refuge in short-duration, mortgage-backed securities with stable prepayment
patterns. Valuations on these securities remained attractive through fiscal
year-end. As a result, the Fund was able to achieve total returns comparable
to the Lehman Brothers ARM Index, but with considerably less volatility and
risk. For the fiscal year ended September 30, 1996, the Fund's total returns
(excluding the impact of applicable sales loads) were 6.32% and 5.77% for
Class A shares and Class C shares, respectively.
The Fund currently intends to continue to invest in fully-indexed, 1-year CMT
ARM securities in an effort to maintain a relatively stable net asset value.
Fund management believes that short-term Treasury securities are currently
fully valued in relation to economic fundamentals and that the Federal Reserve
Board is likely to leave short-term interest rates unchanged for the
foreseeable future. We will continue to pursue a conservative strategy for the
Fund, attempting to maximize current yield while minimizing principal
fluctuation.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ADJUSTABLE
RATE U.S. GOVERNMENT SECURITIES FUND* AND THE LEHMAN BROTHERS ARM INDEX
<TABLE>
LEHMAN BROTHERS ARM INDEX: ADJUSTABLE RATE U.S. GOVT SEC FUND - CLASS A:
<CAPTION>
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
02/28/93 10,000 02/28/93 9,800
03/31/93 0.45% 10,045 03/31/93 0.63% 9,862
06/30/93 1.90% 10,236 06/30/93 1.19% 9,980
09/30/93 1.06% 10,345 09/30/93 1.04% 10,084
12/31/93 0.52% 10,398 12/31/93 0.95% 10,180
03/31/94 -0.44% 10,353 03/31/94 0.62% 10,242
06/30/94 -0.39% 10,312 06/30/94 0.32% 10,276
09/30/94 0.69% 10,383 09/30/94 0.19% 10,295
12/31/94 0.15% 10,399 12/31/94 -0.63% 10,230
03/31/95 4.20% 10,836 03/31/95 2.48% 10,484
06/30/95 3.12% 11,174 06/30/95 2.01% 10,695
09/30/95 1.69% 11,363 09/30/95 1.39% 10,844
12/31/95 2.25% 11,618 12/31/95 1.73% 11,032
03/31/96 1.10% 11,746 03/31/96 1.67% 11,216
06/30/96 1.13% 11,879 06/30/96 1.24% 11,355
09/30/96 1.87% 12,102 09/30/96 1.53% 11,529
</TABLE>
Past performance is not predictive of future performance.
Adjustable Rate U.S. Government Securities Fund
Average Annual Total Returns
1 Year Since Inception
Class A 4.19% 3.99%
Class C 5.77% 5.85%
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and
fees paid by shareholders in the different classes. The initial public offering
of Class A shares commenced on February 10, 1993, and the initial public
offering of Class C shares commenced on May 1, 1995.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
GLOBAL BOND FUND
==============================================================================
The Global Bond Fund seeks high total return, through both income and capital
appreciation. The Fund invests primarily in high-grade domestic and foreign
fixed-income securities geographically concentrated in Australia, Belgium,
Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain,
Sweden, the United Kingdom and the United States. The Fund may also invest up
to ten percent of its total assets in global bonds issued in emerging markets.
For the fiscal year ended September 30, 1996, the Fund's total returns
(excluding the impact of applicable sales loads) were 4.88% and 4.10% for
Class A shares and Class C shares, respectively. The Salomon Brothers World
Government Bond Index returned 4.20% during this same period.
Management of the Fund uses an active country/currency allocation in liquid
markets, based on a process of relative value analysis across countries. Focus
is placed on financially healthy countries which management believes have the
potential to produce the highest bond and currency returns on a relative
basis. Careful analysis is made of each country's savings rate, monetary
growth, monetary authorities, fiscal policy and political climate. Optimal
country weightings are then assigned based upon twelve month expectations of
investor confidence and market outlook. The Fund also utilizes various hedging
techniques to reduce short-term volatility resulting from currency exchange
rate fluctuations.
Country selections during the fiscal year generally had a positive impact on
performance relative to the Salomon Brothers World Government Bond Index, as
the Fund was comparatively overweighted in strong markets such as Italy (the
best performing market for the period) and Denmark, while it was comparatively
underweighted in weaker markets including Japan and the U.S. Although
underweighted in U.S. bonds, the Fund typically maintained a neutral currency
position relative to the U.S. dollar and was not hurt by the dollar's rise.
The portfolio's duration position was generally longer than that of the Index
and tended to benefit the Fund, although it did have a negative impact for the
quarter ended March 31, 1996, when bond returns were weak.
Looking forward, management continues to see opportunity in the global bond
markets. Inflation remains subdued globally, which is allowing real interest
rates to come down further. We think that this process can continue given the
tight fiscal policies which are in place throughout Europe and the dollar
block. Monetary policy as well seems relatively tight given the moderate pace
of economic expansion seen in the global economy. Japan remains the least
attractive environment for investment due to its overly loose monetary and
fiscal policies.
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GLOBAL
BOND FUND* AND THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX
<TABLE>
SALOMON BROTHERS WORLD GLOBAL BOND FUND - CLASS A:
GOVERNMENT BOND INDEX:
<CAPTION>
MONTHLY MONTHLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
02/01/95 10,000 02/01/95 9,600
02/28/95 2.56% 10,256 02/28/95 2.00% 9,792
03/31/95 5.94% 10,865 03/31/95 6.47% 10,426
04/30/95 1.85% 11,066 04/30/95 1.30% 10,562
05/31/95 2.81% 11,377 05/31/95 1.93% 10,765
06/30/95 0.59% 11,444 06/30/95 -0.09% 10,756
07/31/95 0.24% 11,472 07/31/95 0.00% 10,756
08/31/95 -3.44% 11,077 08/31/95 -3.41% 10,389
09/30/95 2.23% 11,324 09/30/95 1.53% 10,547
10/31/95 0.75% 11,409 10/31/95 0.94% 10,647
11/30/95 1.13% 11,538 11/30/95 1.12% 10,766
12/31/95 1.05% 11,658 12/31/95 1.91% 10,972
01/31/96 -1.24% 11,514 01/31/96 -0.73% 10,891
02/29/96 -0.51% 11,456 02/29/96 -1.66% 10,711
03/31/96 -0.14% 11,440 03/31/96 -1.03% 10,600
04/30/96 -0.40% 11,394 04/30/96 0.95% 10,701
05/31/96 0.02% 11,397 05/31/96 -0.47% 10,651
06/30/96 0.79% 11,486 06/30/96 0.66% 10,721
07/31/96 1.92% 11,706 07/31/96 1.96% 10,931
08/31/96 0.39% 11,752 08/31/96 0.09% 10,941
09/30/96 0.41% 11,800 09/30/96 1.10% 11,062
</TABLE>
Past performance is not predictive of future performance.
Global Bond Fund
Average Annual Total Returns
1 Year Since Inception
Class A 0.68% 6.25%
Class C 4.10% 8.16%
*The chart above represents performance of Class A shares only, which will vary
from the performance of Class C shares based on the difference in loads and
fees paid by shareholders in the different classes. The initial public
offering of Class A shares and Class C shares each commenced on February 1,
1995.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1996
===================================================================================================================
MONEY MARKET FUNDS
===================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
===================================================================================================================
<S> <C> <C>
ASSETS
Investments in securities:
At acquisition cost................................................... $ 50,749,465 $ 23,166,922
============== ===============
At amortized cost..................................................... $ 50,871,866 $ 23,213,713
============== ===============
At value (Note 2) .................................................... $ 50,871,866 $ 23,213,713
Investments in repurchase agreements (Note 2)............................ 40,278,000 15,957,000
Cash .................................................................... 329 54
Interest receivable...................................................... 374,341 231,551
-------------- ---------------
TOTAL ASSETS.......................................................... 91,524,536 39,402,318
-------------- ---------------
LIABILITIES
Dividends payable........................................................ 5,758 9,480
Payable to affiliates (Note 4)........................................... 67,634 4,150
Other accrued expenses and liabilities................................... 11,660 6,624
-------------- ---------------
TOTAL LIABILITIES .................................................... 85,052 20,254
-------------- ---------------
NET ASSETS ............................................................. $ 91,439,484 $ 39,382,064
============== ===============
Net assets consist of:
Capital shares........................................................... $ 91,436,514 $ 39,406,966
Accumulated net realized gains (losses) from security transactions ...... 2,970 (24,902)
-------------- ---------------
Net assets .............................................................. $ 91,439,484 $ 39,382,064
============== ===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ................................... 91,436,514 39,406,966
============== ===============
Net asset value, offering price and redemption price per share (Note 2) . $ 1.00 $ 1.00
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1996
===================================================================================================================
GOVERNMENT BOND FUNDS
===================================================================================================================
ADJUSTABLE
INTERMEDIATE RATE U.S.
TERM GOVERNMENT
GOVERNMENT SECURITIES
INCOME FUND FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in securities:
At acquisition cost................................................... $ 55,565,058 $ 11,382,080
============== ===============
At amortized cost .................................................... $ 55,534,106 $ 11,382,080
============== ===============
At value (Note 2) .................................................... $ 55,744,810 $ 11,506,681
Investments in repurchase agreements (Note 2)............................ 226,000 769,000
Cash .................................................................... 756 35
Interest receivable ..................................................... 1,004,718 96,700
Receivable for capital shares sold....................................... 35,498 10,137
Receivable for principal paydowns........................................ -- 62,507
Receivable from Adviser (Note 4)......................................... -- 3,106
Other assets............................................................. 1,194 6,910
-------------- ---------------
TOTAL ASSETS ......................................................... 57,012,976 12,455,076
-------------- ---------------
LIABILITIES
Dividends payable ....................................................... 28,745 4,468
Payable for capital shares redeemed ..................................... 67,151 75,863
Payable to affiliates (Note 4) .......................................... 37,907 6,400
Other accrued expenses and liabilities................................... 13,230 7,900
-------------- ---------------
TOTAL LIABILITIES .................................................... 147,033 94,631
-------------- ---------------
NET ASSETS ............................................................. $ 56,865,943 $ 12,360,445
============== ===============
Net assets consist of:
Capital shares .......................................................... $ 59,554,531 $ 13,484,994
Accumulated net realized losses from security transactions............... (2,899,292) (1,249,150)
Net unrealized appreciation on investments .............................. 210,704 124,601
-------------- ---------------
Net assets .............................................................. $ 56,865,943 $ 12,360,445
============== ===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares ............................... $ 56,094,893 $ 11,731,582
============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) .................. 5,348,350 1,195,580
============== ===============
Net asset value and redemption price per share (Note 2).................. $ 10.49 $ 9.81
============== ===============
Maximum offering price per share (Note 2) ............................... $ 10.70 $ 10.01
============== ===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares ............................... $ 771,050 $ 628,863
============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5)................... 73,518 64,117
============== ===============
Net asset value, offering price and redemption price per share (Note 2).. $ 10.49 $ 9.81
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
===================================================================================================================
GLOBAL BOND
FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities:
At acquisition cost...................................................................... $ 17,784,437
===============
At amortized cost ....................................................................... $ 17,784,437
===============
At value (Note 2) ....................................................................... $ 18,110,218
Cash ....................................................................................... 352,228
Interest receivable ........................................................................ 482,777
Receivable for capital shares sold.......................................................... 555
Receivable for securities sold.............................................................. 1,715,712
Other assets................................................................................ 2,032
---------------
TOTAL ASSETS ............................................................................ 20,663,522
---------------
LIABILITIES
Payable for securities purchased............................................................ 1,874,374
Payable for capital shares redeemed......................................................... 57,997
Payable to affiliates (Note 4) ............................................................. 19,059
Net unrealized depreciation on forward foreign currency exchange contracts (Note 7)......... 7,656
Other accrued expenses and liabilities...................................................... 15,743
---------------
TOTAL LIABILITIES ....................................................................... 1,974,829
---------------
NET ASSETS ................................................................................ $ 18,688,693
===============
Net assets consist of:
Capital shares ............................................................................. $ 17,929,671
Undistributed net investment income......................................................... 287,907
Accumulated net realized gains from security and foreign currency transactions ............. 155,206
Net unrealized appreciation on investments ................................................. 325,781
Net unrealized depreciation on translation of assets and liabilities in foreign currencies.. (9,872)
---------------
Net assets ................................................................................. $ 18,688,693
===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares .................................................. $ 12,841,443
===============
Shares of beneficial interest outstanding (unlimited number of
shares authorized, no par value) (Note 5)................................................. 1,164,325
===============
Net asset value and redemption price per share (Note 2)..................................... $ 11.03
===============
Maximum offering price per share (Note 2) .................................................. $ 11.49
===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares .................................................. $ 5,847,250
===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5)....................................................... 535,423
===============
Net asset value, offering price and redemption price per share (Note 2)..................... $ 10.92
===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 1996
===================================================================================================================
MONEY MARKET FUNDS
===================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ...................................................... $ 4,741,604 $ 1,931,042
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4) .................................... 419,926 70,752
Transfer agent fees (Note 4) ......................................... 183,219 12,862
Distribution expenses (Note 4)........................................ 93,521 2,655
Accounting services fees (Note 4)..................................... 36,000 36,000
Postage and supplies.................................................. 56,667 13,798
Custodian fees ....................................................... 19,169 11,206
Registration fees..................................................... 19,036 7,959
Professional fees .................................................... 11,074 7,074
Insurance expense..................................................... 9,036 4,892
Reports to shareholders .............................................. 11,753 692
Trustees' fees and expenses .......................................... 4,101 4,101
Other expenses ....................................................... 5,333 2,320
-------------- ---------------
TOTAL EXPENSES...................................................... 868,835 174,311
Fees waived by the Adviser (Note 4) .................................. -- (32,783)
-------------- ---------------
NET EXPENSES........................................................ 868,835 141,528
-------------- ---------------
NET INVESTMENT INCOME ................................................... 3,872,769 1,789,514
-------------- ---------------
NET REALIZED GAINS FROM SECURITY TRANSACTIONS .......................... 2,970 3,538
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 3,875,739 $ 1,793,052
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 1996
===================================================================================================================
GOVERNMENT BOND FUNDS
===================================================================================================================
ADJUSTABLE
INTERMEDIATE RATE U.S.
TERM GOVERNMENT
GOVERNMENT SECURITIES
INCOME FUND FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income ...................................................... $ 3,962,313 $ 1,062,482
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4)..................................... 289,680 79,927
Distribution expenses, Class A (Note 4)............................... 93,442 17,500
Distribution expenses, Class C (Note 4)............................... 40 19
Accounting services fees (Note 4)..................................... 51,000 51,000
Transfer agent fees, Class A (Note 4)................................. 52,558 14,221
Transfer agent fees, Class C (Note 4)................................. 12,000 12,000
Postage and supplies.................................................. 38,476 13,286
Registration fees, Common............................................. 4,383 5,268
Registration fees, Class A............................................ 8,167 5,002
Registration fees, Class C............................................ 3,674 1,445
Professional fees..................................................... 13,199 8,605
Standard & Poor's rating expense...................................... -- 20,500
Custodian fees........................................................ 8,123 6,642
Insurance expense..................................................... 6,699 3,160
Trustees' fees and expenses........................................... 4,101 4,101
Reports to shareholders............................................... 4,748 1,371
Other expenses........................................................ 5,817 2,317
-------------- ---------------
TOTAL EXPENSES...................................................... 596,107 246,364
Fees waived and/or expenses reimbursed by the Adviser (Note 4)........ (10,334) (125,377)
-------------- ---------------
NET EXPENSES........................................................ 585,773 120,987
-------------- ---------------
NET INVESTMENT INCOME ................................................... 3,376,540 941,495
-------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ........................ 295,706 72,164
Net change in unrealized appreciation/depreciation on investments .... (1,807,714) (24,764)
-------------- ---------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS .............. (1,512,008) 47,400
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 1,864,532 $ 988,895
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1996
===================================================================================================================
GLOBAL BOND
FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest income (net of foreign withholding taxes of $24,233) ........................... $ 1,239,101
---------------
EXPENSES
Investment advisory fees (Note 4)........................................................ 137,065
Accounting services fees (Note 4)........................................................ 57,000
Custodian fees........................................................................... 36,940
Distribution expenses, Class A (Note 4).................................................. 4,709
Distribution expenses, Class C (Note 4).................................................. 24,181
Transfer agent fees, Class A (Note 4).................................................... 12,000
Transfer agent fees, Class C (Note 4).................................................... 12,000
Registration fees, Common................................................................ 3,794
Registration fees, Class A............................................................... 4,469
Registration fees, Class C............................................................... 2,469
Professional fees........................................................................ 9,474
Postage and supplies..................................................................... 6,406
Trustees' fees and expenses.............................................................. 4,101
Insurance expense........................................................................ 2,793
Reports to shareholders.................................................................. 1,128
Other expenses........................................................................... 5,802
---------------
TOTAL EXPENSES......................................................................... 324,331
Fees waived and expenses reimbursed by the Adviser (Note 4).............................. (23,104)
---------------
NET EXPENSES........................................................................... 301,227
---------------
NET INVESTMENT INCOME ...................................................................... 937,874
---------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCY (NOTE 6)
Net realized losses from:
Security transactions ................................................................. (93,933)
Foreign currency transactions.......................................................... (235,290)
Net change in unrealized appreciation/depreciation on:
Investments ........................................................................... 161,908
Translation of assets and liabilities in foreign currencies............................ 57,520
---------------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENTS AND FOREIGN CURRENCY ................... (109,795)
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................................ $ 828,079
===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
===================================================================================================================
MONEY MARKET FUNDS
===================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income....................... $ 3,872,769 $ 3,888,736 $ 1,789,514 $ 2,286,308
Net realized gains from security transactions 2,970 2,227 3,538 4,844
------------ -------------- ------------- --------------
Net increase in net assets from operations..... 3,875,739 3,890,963 1,793,052 2,291,152
------------ -------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................. (3,872,769) (3,888,736) (1,789,514) (2,286,308)
From net realized gains from security
transactions.............................. (2,227) (4,105) -- --
------------ -------------- ------------- --------------
Decrease in net assets from distributions to
shareholders............................... (3,874,996) (3,892,841) (1,789,514) (2,286,308)
------------ -------------- ------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold .................. 290,338,196 306,531,676 171,325,558 152,663,812
Net asset value of shares issued in
reinvestment of distributions to
shareholders 3,711,242 3,627,273 1,548,806 1,869,015
Payments for shares redeemed................ (289,751,833) (312,723,860) (169,504,468) (160,298,008)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets from
capital share transactions.................. 4,297,605 (2,564,911) 3,369,896 (5,765,181)
------------ -------------- ------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ..... 4,298,348 (2,566,789) 3,373,434 (5,760,337)
NET ASSETS:
Beginning of year........................... 87,141,136 89,707,925 36,008,630 41,768,967
------------ -------------- ------------- --------------
End of year................................. $ 91,439,484 $ 87,141,136 $39,382,064 $36,008,630
============ ============== ============= ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1996 and 1995
===================================================================================================================
GOVERNMENT BOND FUNDS
===================================================================================================================
INTERMEDIATE TERM ADJUSTABLE RATE
GOVERNMENT U.S. GOVERNMENT
INCOME FUND SECURITIES FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ...................... $ 3,376,540 $ 3,691,139 $ 941,495 $ 1,249,966
Net realized gains (losses) from
security transactions 295,706 (932,473) 72,164 (997,493)
Net change in unrealized
appreciation/depreciation on investments.. (1,807,714) 4,287,039 (24,764) 743,284
------------ -------------- ------------- --------------
Net increase in net assets from operations .... 1,864,532 7,045,705 988,895 995,757
------------ -------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ........ (3,339,635) (3,660,758) (930,066) (1,250,247)
From net investment income, Class C ........ (36,905) (30,381) (11,429) (1,540)
------------ -------------- ------------- --------------
Decrease in net assets from distributions
to shareholders (3,376,540) (3,691,139) (941,495) (1,251,787)
------------ -------------- ------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold .................. 19,564,015 13,539,608 12,919,191 17,065,780
Net asset value of shares issued in
reinvestment of distributions
to shareholders 2,911,115 3,085,214 816,771 1,122,368
Payments for shares redeemed ............... (21,856,049) (27,372,364) (22,803,135) (34,751,708)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets
from Class A share transactions ............ 619,081 (10,747,542) (9,067,173 (16,563,560)
------------ -------------- ------------- -----------
CLASS C
Proceeds from shares sold .................. 384,845 438,070 617,534 85,878
Net asset value of shares issued in
reinvestment of distributions
to shareholders 35,459 29,534 8,075 1,510
Payments for shares redeemed................ (228,470) (410,675) (84,110) (1,007)
------------ -------------- ------------- --------------
Net increase in net assets
from Class C share transactions ............ 191,834 56,929 541,499 86,381
------------ -------------- ------------- --------------
Net increase (decrease) in net assets
from capital share transactions............. 810,915 (10,690,613) (8,525,674) (16,477,179)
------------ -------------- ------------- --------------
TOTAL DECREASE IN NET ASSETS ................. (701,093) (7,336,047) (8,478,274) (16,733,209)
NET ASSETS:
Beginning of year........................... 57,567,036 64,903,083 20,838,719 37,571,928
------------ -------------- ------------- --------------
End of year................................. $ 56,865,943 $ 57,567,036 $12,360,445 $20,838,719
============ ============== ============= ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET
ASSETS For the Periods Ended September 30, 1996 and 1995
===================================================================================================================
GLOBAL BOND FUND
===================================================================================================================
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................................................ $ 937,874 $ 254,441
Net realized gains (losses) from security transactions ............... (93,933) 157,918
Net realized losses from foreign currency transactions................ (235,290) (106,555)
Net change in unrealized appreciation/depreciation on investments..... 161,908 119,054
Net change in unrealized appreciation/depreciation on translation
of assets and liabilities in foreign currencies..................... 57,520 (22,573)
-------------- ---------------
Net increase in net assets from operations .............................. 828,079 402,285
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A .................................. (173,473) (232,249)
From net investment income, Class C .................................. (51,783) (13,837)
-------------- ---------------
Decrease in net assets from distributions to shareholders ............... (225,256) (246,086)
-------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold ............................................ 2,196,018 13,448,590
Net asset value of shares issued in reinvestment of
distributions to shareholders....................................... 167,215 226,752
Payments for shares redeemed ......................................... (3,249,417) (560,630)
-------------- ---------------
Net increase (decrease) in net assets from Class A share transactions ... (886,184) 13,114,712
-------------- ---------------
CLASS C
Proceeds from shares sold ............................................ 2,001,544 4,554,154
Net asset value of shares issued in reinvestment of
distributions to shareholders 50,833 13,614
Payments for shares redeemed.......................................... (895,367) (23,635)
-------------- ---------------
Net increase in net assets from Class C share transactions .............. 1,157,010 4,544,133
-------------- ---------------
Net increase in net assets from capital share transactions............... 270,826 17,658,845
-------------- ---------------
TOTAL INCREASE IN NET ASSETS ........................................... 873,649 17,815,044
NET ASSETS:
Beginning of period................................................... 17,815,044 --
-------------- ---------------
End of period......................................................... $ 18,688,693 $ 17,815,044
============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME ..................................... $ 720,973 $ 8,355
============== ===============
<FN>
(A)Represents the period from initial public offering of shares (February 1,
1995) through September 30, 1995.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- ---------- --------- -----------
Net investment income .......................... 0.044 0.046 0.027 0.022 0.035
---------- --------- ---------- --------- -----------
Dividends from net investment income............ (0.044) (0.046) (0.027) (0.022) (0.035)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========== ========= ===========
Total return ................................... 4.51% 4.69% 2.72% 2.24% 3.55%
========== ========= ========== ========= ===========
Net assets at end of year (000's) .............. $ 91,439 $ 87,141 $ 89,708 $ 96,962 $91,519
---------- --------- ---------- --------- -----------
Ratio of expenses to average net assets ........ 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to average
net assets 4.42% 4.59% 2.69% 2.22% 3.51%
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED SEPTEMBER 30,
===================================================================================================================
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- ---------- --------- -----------
Net investment income........................... 0.051 0.053 0.034 0.029 0.040
---------- --------- ---------- --------- -----------
Dividends from net investment income............ (0.051) (0.053) (0.034) (0.029) (0.040)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========== ========= ===========
Total return.................................... 5.18% 5.42% 3.43% 2.96% 4.08%
========== ========= ========== ========= ===========
Net assets at end of year (000's) .............. $ 39,382 $ 36,009 $ 41,769 $ 34,610 $43,432
========== ========= ========== ========= ===========
Ratio of expenses to average net assets(A) ..... 0.40% 0.40% 0.40% 0.40% 0.37%
Ratio of net investment income to average
net assets 5.06% 5.30% 3.41% 2.92% 4.04%
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A)Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 0.49%, 0.42%, 0.42%, 0.48% and 0.43% for the years
ended September 30, 1996, 1995, 1994, 1993 and 1992, respectively (Note 4).
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS A
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 10.73 $ 10.14 $ 11.59 $ 11.10 $ 10.45
---------- --------- ---------- --------- -----------
Income from investment operations:
Net investment income........................ 0.61 0.64 0.56 0.60 0.68
Net realized and unrealized gains (losses)
on investments............................. (0.24) 0.59 (1.32) 0.49 0.65
---------- --------- ---------- --------- -----------
Total from investment operations................ 0.37 1.23 (0.76) 1.09 1.33
---------- --------- ---------- --------- -----------
Less distributions:
Dividends from net investment income......... (0.61) (0.64) (0.56) (0.60) (0.68)
Distributions from net realized gains........ -- -- (0.13) -- --
---------- --------- ---------- --------- -----------
Total distributions............................. (0.61) (0.64) (0.69) (0.60) (0.68)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 10.49 $ 10.73 $ 10.14 $ 11.59 $ 11.10
========== ========= ========== ========= ===========
Total return(A) ................................ 3.55% 12.52% (6.76%) 10.15% 13.27%
========== ========= ========== ========= ===========
Net assets at end of year (000's)............... $ 56,095 $ 56,969 $ 64,395 $ 89,666 $59,290
========== ========= ========== ========= ===========
Ratio of expenses to average net assets......... 0.99% 0.99% 0.99% 0.99% 1.00%
Ratio of net investment income to average
net assets................................... 5.75% 6.17% 5.17% 5.31% 6.40%
Portfolio turnover rate......................... 70% 58% 236% 255% 76%
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) The total returns shown do not include the effect of applicable sales
loads.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS C
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
YEAR YEAR PERIOD
ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1994(A)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................. $ 10.73 $ 10.14 $ 11.27
-------------- -------------- ---------------
Income from investment operations:
Net investment income................................ 0.56 0.59 0.34
Net realized and unrealized gains (losses) on
investments........................................ (0.24) 0.59 (1.13)
-------------- -------------- ---------------
Total from investment operations........................ 0.32 1.18 (0.79)
-------------- -------------- ---------------
Less distributions:
Dividends from net investment income................. (0.56) (0.59) (0.34)
-------------- -------------- ---------------
Total distributions..................................... (0.56) (0.59) (0.34)
-------------- -------------- ---------------
Net asset value at end of period........................ $ 10.49 $ 10.73 $ 10.14
============== ============== ===============
Total return(B) ........................................ 3.03% 11.96% (10.38%)(D)
============== ============== ===============
Net assets at end of period (000's)..................... $ 771 $ 598 $ 508
============== ============== ===============
Ratio of expenses to average net assets(C) ............. 1.49% 1.48% 1.46%(D)
Ratio of net investment income to average net assets.... 5.25% 5.60% 4.89%(D)
Portfolio turnover rate................................. 70% 58% 236%(D)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from initial public offering of Class C shares
(February 1, 1994) through September 30, 1994.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 2.96%, 3.57% and
2.41%(D) for the periods ended September 30, 1996, 1995 and 1994,
respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS A
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1994 1993(A)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ........ $ 9.78 $ 9.82 $ 10.01 $ 10.00
------------ -------------- ------------- --------------
Income from investment operations:
Net investment income ...................... 0.57 0.55 0.39 0.28
Net realized and unrealized gains (losses)
on investments 0.03 (0.04) (0.18) 0.01
------------ -------------- ------------- --------------
Total from investment operations .............. 0.60 0.51 0.21 0.29
------------ -------------- ------------- --------------
Less distributions:
Dividends from net investment income........ (0.57) (0.55) (0.39) (0.28)
Distributions from net realized gains....... -- -- (0.01) -
------------ -------------- ------------- --------------
Total distributions ........................... (0.57) (0.55) (0.40) (0.28)
------------ -------------- ------------- --------------
Net asset value at end of period .............. $ 9.81 $ 9.78 $ 9.82 $ 10.01
============ ============== ============= ==============
Total return(B) ............................... 6.32% 5.33% 2.09% 4.56%(D)
============ ============== ============= ==============
Net assets at end of period (000's) ........... $ 11,732 $ 20,752 $ 37,572 $ 24,400
============ ============== ============= ==============
Ratio of expenses to average net assets(C) .... 0.75% 0.75% 0.68% 0.22%(D)
Ratio of net investment income to average net assets 5.91% 5.57% 3.91% 4.17%(D)
Portfolio turnover rate ....................... 44% 115% 81% 170%(D)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of Class A shares
(February 10, 1993) through September 30, 1993.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 1.46%, 1.21%,
0.78% and 1.18%(D) for the periods ended September 30, 1996, 1995, 1994 and
1993, respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
<S> <C> <C>
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- -------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .................................. $ 9.78 $ 9.76
-------------- ---------------
Income from investment operations:
Net investment income ................................................ 0.52 0.22
Net realized and unrealized gains on investments ..................... 0.03 0.02
-------------- ---------------
Total from investment operations ........................................ 0.55 0.24
-------------- ---------------
Less distributions:
Dividends from net investment income.................................. (0.52) (0.22)
-------------- ---------------
Total distributions ..................................................... (0.52) (0.22)
-------------- ---------------
Net asset value at end of period ........................................ $ 9.81 $ 9.78
============== ===============
Total return(B) ......................................................... 5.77% 5.87%(D)
============== ===============
Net assets at end of period (000's) ..................................... $ 629 $ 86
============== ===============
Ratio of expenses to average net assets(C) .............................. 1.24% 1.24%(D)
Ratio of net investment income to average net assets .................... 5.17% 5.38%(D)
Portfolio turnover rate ................................................. 44% 115%(D)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of Class C shares (May 1, 1995) through September
30, 1995.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 7.58% and 18.84%(D) for the
periods ended September 30, 1996 and 1995, respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS - CLASS A
=============================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
=============================================================================================================
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period................................... $ 10.64 $ 10.00
-------------- ---------------
Income from investment operations:
Net investment income................................................. 0.57 0.35
Net realized and unrealized gains (losses) on investments and
foreign currency (0.05) 0.64
-------------- ---------------
Total from investment operations......................................... 0.52 0.99
-------------- ---------------
Less distributions:
Dividends from net investment income.................................. (0.13) (0.35)
-------------- ---------------
Total distributions...................................................... (0.13) (0.35)
-------------- ---------------
Net asset value at end of period......................................... $ 11.03 $ 10.64
============== ===============
Total return(B) ......................................................... 4.88% 14.89%(D)
============== ===============
Net assets at end of period (000's)...................................... $ 12,841 $ 13,297
============== ===============
Ratio of expenses to average net assets(C) .............................. 1.35% 1.33%(D)
Ratio of net investment income to average net assets..................... 4.97% 4.30%(D)
Portfolio turnover rate.................................................. 235% 130%(D)
- ----------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from initial public offering of Class A shares
(February 1, 1995) through September 30, 1995.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 1.50% and 2.47%(D) for
the periods ended September 30, 1996 and 1995, respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
=============================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
=============================================================================================================
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1996 1995(A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period................................... $ 10.59 $ 10.00
-------------- ---------------
Income from investment operations:
Net investment income................................................. 0.51 0.38
Net realized and unrealized gains (losses) on investments and
foreign currency (0.08) 0.57
-------------- ---------------
Total from investment operations......................................... 0.43 0.95
-------------- ---------------
Less distributions:
Dividends from net investment income.................................. (0.10) (0.36)
-------------- ---------------
Total distributions...................................................... (0.10) (0.36)
-------------- ---------------
Net asset value at end of period......................................... $ 10.92 $ 10.59
============== ===============
Total return(B) ......................................................... 4.10% 14.25%(D)
============== ===============
Net assets at end of period (000's)...................................... $ 5,847 $ 4,518
============== ===============
Ratio of expenses to average net assets(C) .............................. 2.00% 1.98%(D)
Ratio of net investment income to average net assets..................... 4.34% 3.70%(D)
Portfolio turnover rate.................................................. 235% 130%(D)
- ----------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from initial public offering of Class C shares
(February 1, 1995) through September 30, 1995.
(B) The total returns shown do not include the effect of applicable sales
loads.
(C) Absent fee waivers and expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 2.03% and 3.45%(D) for
the periods ended September 30, 1996 and 1995, respectively (Note 4).
(D) Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
==============================================================================
1. ORGANIZATION
The Short Term Government Income Fund, the Institutional Government Income
Fund, the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund (collectively, the Funds)
are each a series of Midwest Trust (the Trust). The 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 each Fund.
The Short Term Government Fund invests primarily in short-term U.S. Government
obligations backed by the "full faith and credit" of the United States and
seeks high current income, consistent with protection of capital.
The Institutional Government Income Fund seeks high current income, consistent
with protection of capital, by investing primarily in short-term obligations
issued or guaranteed as to principal and interest by the United States
Government, its agencies or instrumentalities. The Fund is designed primarily
for institutions as an economical and convenient means for the investment of
short-term funds.
The Intermediate Term Government Income Fund invests primarily in U.S.
Government obligations maturing within twenty years or less with a
dollar-weighted average portfolio maturity under normal market conditions of
between three and ten years and seeks high current income, consistent with
protection of capital. To the extent consistent with the Fund's primary
objective, capital appreciation is a secondary objective.
The Adjustable Rate U.S. Government Securities Fund seeks high current income,
consistent with lower volatility of principal, by investing primarily in
mortgage-backed securities created from pools of adjustable rate mortgages
which are issued or guaranteed by the United States Government, its agencies
or instrumentalities.
The Global Bond 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 Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund each offer two classes of
shares: Class A shares (sold subject to a maximum front-end sales load of 2%
for the Intermediate Term Government Income Fund and the Adjustable Rate U.S.
Government Securities Fund and 4% for the Global Bond Fund, and a distribution
fee of up to 0.35% of average daily net assets of each Fund) and Class C
shares (sold subject to a maximum contingent deferred sales load of 1% if
redeemed within a one-year period from purchase, and a distribution fee of up
to 1% of average daily net assets.) Each Class A and Class C share of a Fund
represents identical interests in the investment portfolio of such Fund and
has the same rights, except that (i) Class C shares bear the expenses of
higher distribution fees, which is expected to cause Class C shares to have a
higher expense ratio and to pay lower dividends than Class A shares; (ii)
certain other class specific expenses will be borne solely by the class to
which such expenses are attributable; and (iii) each class has exclusive
voting rights with respect to matters relating to its own distribution
arrangements.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
Securities valuation -- Short Term Government Income Fund securities and
Institutional Government Income Fund securities are valued on the amortized
cost basis, which approximates market value. This involves initially valuing a
security at its original cost and thereafter assuming a constant amortization
to maturity of any discount or premium. This method of valuation is expected
to enable these Funds to maintain a constant net asset value per share.
Intermediate Term Government Income Fund securities, Adjustable Rate U.S.
Government Securities Fund securities and Global Bond Fund 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. Securities for which market quotations are not readily available
are valued at their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general
supervision of the Board of Trustees. The U.S. dollar value of foreign
securities and forward foreign currency exchange contracts in the Global Bond
Fund is determined using spot and forward currency exchange rates,
respectively, supplied by a quotation service.
<PAGE>
Repurchase agreements -- Repurchase agreements, which are collateralized by
U.S. Government obligations, are valued at cost which, together with accrued
interest, approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' custodian, at the
Federal Reserve Bank of Cleveland. At the time each Fund enters into a
repurchase agreement, the seller agrees that the value of the underlying
securities, including accrued interest, will at all times be equal to or
exceed the face amount of the repurchase agreement. In addition, each Fund
actively monitors and seeks additional collateral, as needed. Each Fund enters
into repurchase agreements only with institutions deemed to be creditworthy by
the adviser, including banks having assets in excess of $10 billion and
primary U.S. Government securities dealers.
Share valuation -- The net asset value per share of the Short Term Government
Income Fund and the Institutional Government Income Fund is calculated daily
by dividing the total value of a Fund's assets, less liabilities, by the
number of shares outstanding. The offering price and redemption price per
share is equal to the net asset value per share.
The net asset value per share of each class of shares of the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government Securities Fund
and the Global Bond Fund is also calculated daily by dividing the total value
of a Fund's assets attributable to that class, less liabilities attributable
to that class, by the number of shares of that class outstanding. The maximum
offering price of Class A shares of the Intermediate Term Government Income
Fund and the Adjustable Rate U.S. Government Securities Fund is equal to net
asset value per share plus a sales load equal to 2.04% of the net asset value
(or 2% of the offering price). The maximum offering price of Class A shares of
the Global Bond Fund is equal to net asset value per share plus a sales load
equal to 4.17% of the net asset value (or 4% of the offering price). The
offering price of Class C shares of each Fund is equal to the net asset value
per share.
The redemption price per share of Class A shares and Class C shares of the
Intermediate Term Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund and the Global Bond Fund is equal to the net asset value per
share. However, Class C shares of each Fund are subject to a contingent
deferred sales load of 1% of the original purchase price if redeemed within a
one-year period from the date of purchase.
Investment income -- Interest income is accrued as earned. Discounts and
premiums on securities purchased are amortized in accordance with income tax
regulations which approximate generally accepted accounting principles.
Distributions to shareholders -- Dividends arising from net investment income
are declared daily and paid on the last business day of each month to
shareholders of the Short Term Government Income Fund, the Institutional
Government Income Fund, the Intermediate Term Government Income Fund and the
Adjustable Rate U.S. Government Securities Fund. Dividends arising from net
investment income are declared and paid at the discretion of management to
shareholders of the Global Bond Fund. With respect to each Fund, net realized
short-term capital gains, if any, may be distributed throughout the year and
net realized long-term capital gains, if any, are distributed at least once
each year. Income distributions and capital gain distributions are determined
in accordance with income tax regulations.
Allocations between classes -- Investment income earned by the Intermediate
Term Government Income Fund, the Adjustable Rate U.S. Government Securities
Fund and the Global Bond 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
are allocated daily to each class of shares based upon its proportionate share
of total net assets of the Fund. Class specific expenses are charged directly
to the class incurring the expense. Common expenses which are not attributable
to a specific class are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the
income distributed. Accordingly, no provision for income taxes has been made.
<PAGE>
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ended October 31) plus undistributed amounts from prior
years.
The following information is based upon federal income tax cost of portfolio
investments (excluding repurchase agreements) as of September 30, 1996:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ADJUSTABLE
INTERMEDIATE RATE U.S.
TERM GOVERNMENT GLOBAL
GOVERNMENT SECURITIES BOND
INCOME FUND FUND FUND
<S> <C> <C> <C>
Gross unrealized appreciation........................... $ 858,035 $ 127,545 $ 410,718
Gross unrealized depreciation........................... (647,331) (2,944) (84,937)
-------------- -------------- ---------------
Net unrealized appreciation. ..................... $ 210,704 $ 124,601 $ 325,781
============== ============== ===============
Federal income tax cost................................. $ 55,534,106 $ 11,382,080 $ 17,784,437
============== ============== ===============
- --------------------------------------------------------------------------------------------------------------
</TABLE>
As of September 30, 1996, the Institutional Government Income Fund had capital
loss carryforwards for federal income tax purposes of $24,902, none of which
will expire prior to September 30, 2001. As of September 30, 1996, the
Intermediate Term Government Income Fund and the Adjustable Rate U.S.
Government Securities Fund had capital loss carryforwards for federal income
tax purposes of $2,899,292 and $1,249,150, respectively, none of which will
expire prior to September 30, 2003. These capital loss carryforwards may be
utilized in future years to offset net realized capital gains prior to
distributing such gains to shareholders.
Reclassification of capital accounts -- In accordance with generally accepted
accounting principles, the Global Bond Fund, as of September 30, 1996,
reclassified $433,066 from accumulated net realized losses on foreign currency
transactions to undistributed net investment income. This reclassification,
which has no impact on the net asset value of the Fund, is primarily
attributable to permanent differences between federal income tax regulations
and generally accepted accounting principles regarding the classification of
realized foreign currency gains and losses.
3. INVESTMENT TRANSACTIONS
During the year ended September 30, 1996, purchases and proceeds from sales
and maturities of investment securities, other than short-term investments,
amounted to $40,146,808 and $38,527,439, respectively, for the Intermediate
Term Government Income Fund, $6,594,895 and $14,647,758, respectively, for the
Adjustable Rate U.S. Government Securities Fund and $41,658,696 and
$39,696,182, respectively, for the Global Bond Fund.
4. 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 Adviser), 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 SUBADVISORY AGREEMENTS
Each Fund's investments are supervised by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, the Short Term
Government Income Fund, the Intermediate Term Government Income Fund and the
Adjustable Rate U.S. Government Securities Fund each pay the Adviser a fee,
which is computed and accrued daily and paid monthly, at an annual rate of
0.50% of its respective average daily net assets up to $50,000,000; 0.45% of
such net assets from $50,000,000 to $150,000,000; 0.40% of such net assets
from $150,000,000 to $250,000,000; and 0.375% of such net assets in excess of
$250,000,000. The Institutional Government Income Fund pays the Adviser a fee,
which is computed and accrued daily and paid monthly, at an annual rate of
0.20% of its average daily net assets. The Global Bond Fund pays the Adviser a
fee, which is computed and accrued daily and paid monthly, at an annual rate
of 0.70% of its average daily net assets up to $100,000,000 and 0.60% of such
net assets in excess of $100,000,000.
<PAGE>
The Adviser retains Hanover Capital Advisors, Inc. (Hanover) to regularly
review the Adjustable Rate U.S. Government Securities Fund's portfolio
holdings, recommend securities to be purchased for the Fund and confer with
the Adviser regarding the credit and maturity guidelines for investments in
the Fund's portfolio. The Adviser (not the Fund) pays Hanover a fee equal to
an annual rate of 0.25% of the Fund's average daily net assets up to
$50,000,000; 0.225% of such net assets from $50,000,000 to $150,000,000; 0.20%
of such net assets from $150,000,000 to $250,000,000; and 0.1875% of such net
assets in excess of $250,000,000. The fee paid to Hanover is subject to
reduction in the event the Adviser waives or reimburses any portion of its
advisory fee in order to reduce the operating expenses of the Fund.
The Adviser retains Rogge Global Partners, plc (Rogge) to manage the Global
Bond Fund's investments. The Adviser (not the Fund) pays Rogge a fee, which is
computed and accrued daily and paid monthly, at an annual rate of 0.35% of the
Fund's average daily net assets up to $100,000,000 and 0.30% of such net
assets in excess of $100,000,000.
In order to voluntarily reduce operating expenses during the year ended
September 30, 1996, the Adviser waived $32,783 of its advisory fees for the
Institutional Government Income Fund; reimbursed $10,334 of Class C expenses
for the Intermediate Term Government Income Fund; waived its entire advisory
fee of $79,927 and reimbursed $33,564 of common expenses and $11,886 of Class
C expenses for the Adjustable Rate U.S. Government Securities Fund; and waived
$6,473 of its advisory fees and reimbursed $16,631 of Class A expenses for the
Global Bond Fund.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and MGF, MGF maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, MGF receives a monthly fee at an annual
rate of $25.00 per shareholder account from each of the Short Term Government
Income Fund and the Institutional Government Income Fund and $21.00 per
shareholder account from each of the Intermediate Term Government Income Fund,
the Adjustable Rate U.S. Government Securities Fund and the Global Bond Fund,
subject to a $1,000 minimum monthly fee for each Fund, or for each class of
shares of a Fund, as applicable. In addition, each Fund pays out-of-pocket
expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and
MGF, MGF calculates the daily net asset value per share and maintains the
financial books and records of each Fund. For these services, MGF receives a
monthly fee, based on current asset levels, of $3,000 per month from each of
the Short Term Government Income Fund and the Institutional Government Income
Fund, $4,250 per month from each of the Intermediate Term Government Income
Fund and the Adjustable Rate U.S. Government Securities Fund, and $4,750 per
month from the Global Bond Fund. In addition, each Fund pays certain
out-of-pocket expenses incurred by MGF in obtaining valuations of such Fund's
portfolio securities.
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and the Adviser, the Adviser earned
$4,512, $1,049 and $3,490 from underwriting and broker commissions on the sale
of Class A shares of the Intermediate Term Government Income Fund, the
Adjustable Rate U.S. Government Securities Fund and the Global Bond Fund,
respectively, for the year ended September 30, 1996. In addition, the Adviser
collected $913, $600, and $5,973 of contingent deferred sales loads on the
redemption of Class C shares of the Intermediate Term Government Income Fund,
the Adjustable Rate U.S. Government Securities Fund and the Global Bond Fund,
respectively.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of each
Fund having one class of shares and Class A shares of each Fund having two
classes of shares may directly incur or reimburse the Adviser for expenses
related to the distribution and promotion of shares. The annual limitation for
payment of such expenses under the Class A Plan is 0.10% of the Institutional
Government Income Fund's average daily net assets and 0.35% of each of the
other Funds' average daily net assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of each Fund having two classes of shares may directly incur or
reimburse the Adviser for expenses related to the distribution and promotion
of shares. The annual limitation for payment of such expenses under the Class
C Plan is 1% of average daily net assets attributable to Class C shares.
<PAGE>
5. CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold and payments for shares redeemed as shown in the
Statements of Changes in Net Assets are the result of the following capital
share transactions for the periods ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
INTERMEDIATE TERM ADJUSTABLE RATE GLOBAL
GOVERNMENT U.S. GOVERNMENT BOND
INCOME FUND SECURITIES FUND FUND
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1996 1995 1996 1995 1996 1995(A)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold............................ 1,824,629 1,296,111 1,317,967 1,751,161 202,237 1,280,982
Shares issued in reinvestment of
distributions to shareholders........ 274,432 297,350 83,368 115,143 15,285 20,956
Shares redeemed........................ (2,059,645) (2,637,294) (2,327,350) (3,571,519) (302,506) (52,629)
---------- ---------- ----------- -------------- ------------ ---------
Net increase (decrease) in shares
outstanding.......................... 39,416 (1,043,833) (926,015) (1,705,215) (84,984) 1,249,309
Shares outstanding, beginning of period 5,308,934 6,352,767 2,121,595 3,826,810 1,249,309 --
---------- --------- ---------- ------------ ------------- ---------
Shares outstanding, end of period...... 5,348,350 5,308,934 1,195,580 2,121,595 1,164,325 1,249,309
========== ========== =========== ============ ============= =========
CLASS C
Shares sold............................ 36,099 42,546 63,042 8,783 187,748 427,772
Shares issued in reinvestment of
distributions to shareholders........ 3,345 2,836 824 154 4,672 1,259
Shares redeemed........................ (21,699) (39,738) (8,583) (103) (83,836) (2,192)
---------- ---------- ----------- ------------- ----------- ----------
Net increase in shares outstanding..... 17,745 5,644 55,283 8,834 108,584 426,839
Shares outstanding, beginning of period 55,773 50,129 8,834 -- 426,839 --
---------- ---------- ----------- ------------- ----------- ----------
Shares outstanding, end of period...... 73,518 55,773 64,117 8,834 535,423 426,839
========== ========== =========== ============= =========== ==========
- ----------------------------------------------------------------------------------------------------------------------
<FN>
(A) Represents the period from the initial public offering of shares (February
1, 1995) through September 30, 1995.
</FN>
</TABLE>
Share transactions for the Short Term Government Income Fund and the
Institutional Government Income Fund are identical to the dollar value of
those transactions as shown in the Statements of Changes in Net Assets.
6. FOREIGN CURRENCY TRANSLATION
With respect to the Global Bond Fund, amounts denominated in or expected to
settle in foreign currencies are translated into U.S. dollars based on
exchange rates on the following basis:
A. The market values of investment securities and other assets and
liabilities are translated at the closing rate of exchange
each day.
B. Purchases and sales of investment securities and income and
expenses are translated at the rate of exchange prevailing on
the respective dates of such transactions.
C. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates
on investments from those resulting from changes in market
prices of securities held. Such fluctuations are included
with the net realized and unrealized gains or losses from
investments. Reported net realized foreign exchange gains
or losses arise from 1)sales of foreign currencies, 2) currency
gains or losses realized between the trade and settlement dates
on securities transactions, and 3) 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. Reported net unrealized
foreign exchange gains or losses arise from changes in the value
of assets and liabilities, other than investment securities,
resulting from changes in exchange rates.
<PAGE>
7. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Global Bond Fund enters into foreign currency exchange contracts as a way
of managing foreign exchange rate risk. The Fund may enter into these
contracts for the purchase or sale of a specific foreign currency at a fixed
price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. The objective of the Fund's foreign
currency hedging transactions is to reduce the risk that the U.S. dollar value
of the Fund's securities denominated in foreign currency will decline in value
due to changes in foreign currency exchange rates. All foreign currency
exchange contracts are "marked-to-market" daily at the applicable translation
rates resulting in unrealized gains or losses. Realized and unrealized gains
or losses are included in the Fund's Statement of Assets and Liabilities and
Statement of Operations. Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At September 30, 1996, the Global Bond Fund had forward foreign currency
exchange contracts outstanding as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NET
UNREALIZED
SETTLEMENT TO RECEIVE INITIAL MARKET APPRECIATION
DATE (TO DELIVER) VALUE VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO SELL
10/04/96 (1,140,237) DEM $ (749,344) $ (747,774) $ 1,570
=============
11/15/96 (6,009,525) DEM (3,965,080) (3,952,199) 12,881
=============
11/15/96 (4,680,794) DKK (807,033) (801,761) 5,272
=============
11/15/96 (48,000,000) ESP (375,843) (373,787) 2,056
=============
11/15/96 (400,000,000) ITL (260,833) (261,877) (1,044)
=============
11/15/96 (759,192) NLG (450,292) (445,306) 4,986
============= ----------- ----------- ----------
Total sell contracts (6,608,425) (6,582,704) 25,721
----------- ----------- ----------
CONTRACTS TO BUY
10/03/96 766,381 CAD 561,126 562,569 1,443
=============
10/04/96 479,212 GBP 749,344 749,200 (144)
=============
10/08/96 708,716 AUD 561,835 560,554 (1,281)
=============
11/15/96 3,370,000 DKK 579,376 577,239 (2,137)
=============
11/15/96 48,000,000 ESP 375,731 373,787 (1,944)
=============
11/15/96 324,607,794 JPY 2,961,750 2,932,436 (29,314)
============= ------------- ------------- -------------
Total buy contracts 5,789,162 5,755,785 (33,377)
------------- ------------- -------------
NET CONTRACTS $ (819,263) $ (826,919) $ (7,656)
============= ============= =============
- --------------------------------------------------------------------------------------------------------
<FN>
AUD-Australian Dollar DKK-Danish Krone ITL-Italian Lira
CAD-Canadian Dollar ESP-Spanish Peseta JPY-Japanese Yen
DEM-German Deutschemark GBP-British Pound Sterling NLG-Netherlands Guilder
</FN>
</TABLE>
8. SPECIAL MEETING OF GLOBAL BOND FUND SHAREHOLDERS (UNAUDITED)
On August 27, 1996, a Special Meeting of Shareholders of the Global Bond Fund
was held to approve or disapprove a new investment advisory agreement with
Rogge. The approval of the new investment advisory agreement, which has
substantially indentical terms and conditions as the previous agreement, was
made necessary because of the acquisition of Rogge by United Asset Management
Corporation. The total number of shares of the Fund present by proxy
represented 59.9% of the shares entitled to vote at the meeting. The results
of the voting were as follows: 1,073,533.278 shares for approval, no shares
against approval and 3,963.428 shares abstaining.
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
===========================================================================================================
PAR YIELD TO MARKET
VALUE U.S. TREASURY OBLIGATIONS-- 55.6% MATURITY(1) VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,000,000 U.S. Treasury Bills, 11/14/96............................. 5.349% $ 4,968,344
5,000,000 U.S. Treasury Notes, 4.375%, 11/15/96..................... 5.495% 4,993,196
3,000,000 U.S. Treasury Notes, 6.50%, 11/30/96...................... 5.309 to 5.544% 3,004,781
5,000,000 U.S. Treasury Bills, 12/12/96............................. 5.254% 4,948,200
5,000,000 U.S. Treasury Bills, 12/19/96............................. 5.214% 4,943,548
7,000,000 U.S. Treasury Notes, 8.00%, 1/15/97....................... 5.594 to 5.770% 7,044,513
5,000,000 U.S. Treasury Bills, 1/23/97.............................. 5.344% 4,917,113
4,000,000 U.S. Treasury Notes, 4.75%, 2/15/97....................... 5.657% 3,986,443
12,000,000 U.S. Treasury Notes, 6.75%, 2/28/97....................... 5.380 to 5.399% 12,065,728
- --------------- ---------------
$ 51,000,000 TOTAL U.S. TREASURY OBLIGATIONS
===============
(Amortized Cost $50,871,866).............................. $ 50,871,866
---------------
<CAPTION>
==============================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(2) -- 44.1% VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 978,000 Nesbitt Burns Securities, Inc., 4.50%, dated 9/30/96, due 10/1/96,
repurchase proceeds $978,122............................................ $ 978,000
13,500,000 Fuji Securities, Inc., 5.77%, dated 9/30/96, due 10/1/96,
repurchase proceeds $13,502,164......................................... 13,500,000
12,300,000 Daiwa Securities, Inc., 5.60%, dated 9/30/96, due 10/1/96,
repurchase proceeds $12,301,913......................................... 12,300,000
13,500,000 Dean Witter Reynolds, Inc., 5.15%, dated 9/26/96, due 10/3/96,
repurchase proceeds $13,513,519........................................ 13,500,000
- --------------- ---------------
$ 40,278,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 40,278,000
=============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.7% .............. $ 91,149,866
OTHER ASSETS AND LIABILITIES, NET-- 0.3% .................................. 289,618
---------------
NET ASSETS-- 100.0% ....................................................... $ 91,439,484
===============
<FN>
(1) Yield to maturity at date of purchase.
(2) Repurchase agreements are fully collateralized by U.S. Government obilgations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
===========================================================================================================
PAR YIELD TO MARKET
VALUE U.S. GOVERNMENT AGENCY ISSUES-- 59.0% MATURITY(1) VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,000,000 Federal Home Loan Bank Notes, 5.59%, 10/16/96.................... 5.403% $ 1,000,070
2,000,000 Federal Home Loan Mortgage Corp. Notes, 5.53%, 11/1/96........... 5.453% 2,000,117
2,000,000 Federal National Mortgage Assoc. Notes, 4.50% 11/1/96............ 5.399% 1,998,339
250,000 Federal Home Loan Mortgage Corp. Notes, 4.625%, 11/15/96......... 5.390% 249,749
1,000,000 Tennessee Valley Authority Notes, 8.25%, 11/15/96................ 5.480% 1,003,210
2,000,000 Federal National Mortgage Assoc. Discount Notes, 12/19/96........ 5.430% 1,976,475
2,815,000 Student Loan Marketing Assoc. Floating Rate Notes, 12/20/96..... -- 2,814,786
400,000 Federal National Mortgage Assoc. Notes, 7.60%, 1/10/97........... 5.709% 402,004
2,500,000 Federal Home Loan Mortgage Corp. Notes, 7.91%, 1/13/97........... 5.460% 2,516,788
1,000,000 Federal Home Loan Bank Discount Notes, 1/13/97................... 5.444% 984,891
350,000 Tennessee Valley Authority Notes, 6.00%, 1/15/97................. 5.793% 350,193
1,000,000 Federal National Mortgage Assoc. Discount Notes, 1/30/97......... 5.479% 982,354
250,000 Federal Home Loan Bank Notes, 4.505%, 1/31/97.................... 5.650% 249,075
2,000,000 Federal Home Loan Mortgage Corp. Notes, 4.78%, 2/10/97........... 5.540% 1,994,661
2,000,000 Federal Home Loan Bank Discount Notes, 2/21/97................... 5.422% 1,958,053
278,533 Federal Home Loan Mortgage Corp. #M12937, 6.50%, 3/1/97.......... 6.500% 278,533
2,000,000 Federal Home Loan Bank Notes, 9.15%, 3/25/97..................... 5.668% 2,032,723
202,555 Federal Home Loan Mortgage Corp. #M14862, 6.50%, 8/1/97.......... 6.565% 202,450
219,120 Federal Home Loan Mortgage Corp. #M15133, 6.50%, 9/1/97.......... 6.437% 219,242
- --------------- ---------------
$ 23,265,208 TOTAL U.S. GOVERNMENT AGENCY ISSUES
===============
(Amortized Cost $23,213,713)..................................... $ 23,213,713
---------------
<CAPTION>
============================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(2)-- 40.5% VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 2,957,000 Nesbitt Burns Securities, Inc., 4.50%, dated 9/30/96, due 10/1/96,
repurchase proceeds $2,957,370.......................................... $ 2,957,000
5,000,000 Fuji Securities, Inc., 5.77%, dated 9/30/96, due 10/1/96,
repurchase proceeds $5,000,801.......................................... 5,000,000
3,000,000 Daiwa Securities, Inc., 5.60%, dated 9/30/96, due 10/1/96,
repurchase proceeds $3,000,467.......................................... 3,000,000
5,000,000 Dean Witter Reynolds, Inc., 5.15%, dated 9/26/96, due 10/3/96,
repurchase proceeds $5,005,007.......................................... 5,000,000
- --------------- ---------------
$ 15,957,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 15,957,000
=============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.5% .............. $ 39,170,713
OTHER ASSETS AND LIABILITIES, NET-- 0.5% .................................. 211,351
---------------
NET ASSETS-- 100.0% ....................................................... $ 39,382,064
===============
<FN>
(1) Yield to maturity at date of purchase.
(2) Repurchase agreements are fully collateralized by U.S. Government obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
==========================================================================================================
PAR MARKET
VALUE INVESTMENTS -- 98.0% VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 12.9%
$ 1,000,000 U.S. Treasury Notes, 7.75%, 2/15/01........................................ $ 1,048,750
1,000,000 U.S. Treasury Notes, 8.00%, 5/15/01........................................ 1,060,625
3,000,000 U.S. Treasury Notes, 7.875%, 8/15/01....................................... 3,173,439
2,000,000 U.S. Treasury Notes, 7.50%, 11/15/01....................................... 2,086,874
- --------------- ---------------
$ 7,000,000 TOTAL U.S. TREASURY OBLIGATIONS
- ---------------
(Amortized Cost $7,084,664)................................................ $ 7,369,688
---------------
U.S. GOVERNMENT AGENCY ISSUES -- 85.1%
$ 1,000,000 Federal National Mortgage Assoc. Notes, 7.89%, 2/23/00..................... $ 1,024,210
2,000,000 Student Loan Marketing Assoc. Notes, 6.05%, 9/14/00........................ 1,969,014
1,500,000 Federal National Mortgage Assoc. Notes, 6.35%, 10/19/00.................... 1,476,885
2,000,000 Federal Home Loan Bank Notes, 5.58%, 2/23/01............................... 1,919,962
1,000,000 Federal National Mortgage Assoc. Notes, 6.45%, 3/26/01..................... 988,910
2,000,000 Federal National Mortgage Assoc. Notes, 6.83%, 4/23/01..................... 1,997,560
3,000,000 Federal National Mortgage Assoc. Notes, 6.74%, 5/7/01...................... 2,995,049
1,000,000 Student Loan Marketing Assoc. Medium Term Notes, 7.50%, 7/2/01............. 1,034,020
3,000,000 Federal Home Loan Bank Notes, 7.31%, 7/6/01................................ 3,084,099
3,000,000 Federal Home Loan Bank Medium Term Notes, 8.43%, 8/1/01.................... 3,214,770
2,300,000 Federal Home Loan Bank Notes, 6.25%, 9/27/01............................... 2,254,388
1,410,000 Federal National Mortgage Assoc. Strips, 3/9/02............................ 1,373,166
2,000,000 Federal National Mortgage Assoc. Notes, 7.55%, 4/22/02..................... 2,077,688
1,000,000 Federal Home Loan Mortgage Corp. Notes, 6.07%, 2/5/03...................... 957,725
1,000,000 Federal National Mortgage Assoc. Notes, 6.72%, 2/25/03..................... 983,140
3,000,000 Federal National Mortgage Assoc. Notes, 6.20%, 7/10/03..................... 2,873,985
2,000,000 Federal National Mortgage Assoc. Notes, 6.25%, 8/12/03..................... 1,912,284
2,000,000 Federal Home Loan Mortgage Corp. Notes, 8.19%, 10/6/04..................... 2,065,110
2,000,000 Federal Home Loan Mortgage Corp. Notes, 8.53%, 11/18/04.................... 2,080,774
1,000,000 Federal National Mortgage Assoc. Notes, 8.50%, 2/1/05...................... 1,040,804
1,000,000 Federal National Mortgage Assoc. Notes, 8.00%, 4/13/05..................... 1,006,810
1,000,000 Federal Home Loan Mortgage Corp. Notes, 7.83%, 4/13/05..................... 1,021,172
1,000,000 Federal Home Loan Mortgage Corp. Notes, 7.65%, 5/10/05..................... 1,008,546
2,000,000 Federal National Mortgage Assoc. Medium Term Notes, 6.85%, 8/22/05......... 1,981,480
2,000,000 Federal National Mortgage Assoc. Notes, 6.77%, 9/1/05...................... 1,969,699
1,000,000 Federal Home Loan Mortgage Corp. Notes, 6.75%, 1/19/06..................... 957,018
3,000,000 Federal Home Loan Mortgage Corp. Notes, 8.57%, 10/26/09.................... 3,106,854
- --------------- ---------------
$ 48,210,000 TOTAL U.S. GOVERNMENT AGENCY ISSUES
- --------------
(Amortized Cost $48,449,442) .............................................. $ 48,375,122
---------------
$ 55,210,000 TOTAL INVESTMENTS AT VALUE
===============
(Amortized Cost $55,534,106)............................................... $ 55,744,810
---------------
<PAGE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND (continued)
==========================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(1)-- 0.4% VALUE
- -----------------------------------------------------------------------------------------------------------
$ 226,000 Nesbitt Burns Securities, Inc., 4.50%, dated 9/30/96, due 10/1/96
repurchase proceeds $226,028............................................ $ 226,000
- --------------- ---------------
$ 226,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 226,000
=============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 98.4% .............. $ 55,970,810
OTHER ASSETS AND LIABILITIES, NET-- 1.6% .................................. 895,133
---------------
NET ASSETS-- 100.0% ....................................................... $ 56,865,943
===============
<FN>
(1) Repurchase agreements are fully collateralized by U.S. Government obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
=========================================================================================================
PAR MARKET
VALUE ADJUSTABLE RATE U.S. GOVERNMENT AGENCY ISSUES-- 93.1% VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 1,458,589 Federal National Mortgage Assoc. #70907, 7.28%, 3/1/18..................... $ 1,508,159
1,438,922 Federal Home Loan Mortgage Corp. #605793, 7.27%, 5/1/18.................... 1,468,593
1,841,468 Federal National Mortgage Assoc. #70614, 7.08%, 10/1/18.................... 1,887,016
2,043,443 Federal Home Loan Mortgage Corp. #846013, 7.72%, 6/1/22.................... 2,108,472
78,766 Government National Mortgage Assoc. #8182, 7.13%,4/20/23................... 79,799
967,807 Federal Home Loan Mortgage Corp. #846303, 7.46%, 6/24/26................... 1,000,115
1,206,404 Federal National Mortgage Assoc. #70176, 7.33%, 8/1/27..................... 1,245,110
2,143,611 Federal National Mortgage Assoc. #70243, 7.33%, 3/1/28..................... 2,209,417
- --------------- ---------------
$ 11,179,010 TOTAL ADJUSTABLE RATE U.S. GOVERNMENT AGENCY ISSUES
===============
(Amortized Cost $11,382,080)............................................... $ 11,506,681
---------------
<CAPTION>
============================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(1)-- 6.2% VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 769,000 Nesbitt Burns Securities, Inc., 4.50%, dated 9/30/96, due 10/1/96,
repurchase proceeds $769,096............................................ $ 769,000
- --------------- ---------------
$ 769,000 TOTAL REPURCHASE AGREEMENTS ............................................... $ 769,000
=============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.3% ............. $ 12,275,681
OTHER ASSETS AND LIABILITIES, NET-- 0.7% .................................. 84,764
---------------
NET ASSETS-- 100.0% ....................................................... $ 12,360,445
===============
<FN>
(1) Repurchase agreements are fully collateralized by U.S. Government obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1996
==========================================================================================================
PAR MARKET
VALUE INVESTMENTS -- 96.9% VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 20.3%
USD 805,000 U.S. Treasury Notes, 7.50%, 11/15/01.................................. $ 839,967
USD 1,490,000 U.S. Treasury Notes, 6.375%, 8/15/02.................................. 1,479,290
USD 1,158,000 U.S. Treasury Notes, 7.00%, 7/15/06................................... 1,181,521
USD 300,000 U.S. Treasury Bonds, 6.75%, 8/15/26................................... 293,156
---------------
TOTAL U.S. TREASURY OBLIGATIONS
(Amortized Cost $3,766,894)........................................... $ 3,793,934
---------------
ASSET-BACKED SECURITIES -- 1.0%
USD 195,000 American Express Credit Account Master Trust #1996-1, 6.80%, 12/15/03. $ 195,956
---------------
TOTAL ASSET-BACKED SECURITIES
(Amortized Cost $196,645)............................................. $ 195,956
---------------
FOREIGN GOVERNMENT ISSUES -- 75.6%
AUD 610,000 Government of Australia, 10.00%, 10/15/07............................. $ 559,733
---------------
CAD 1,890,000 Government of Canada, 7.00%, 12/1/06.................................. 1,373,360
CAD 766,000 Government of Canada, 7.25%, 6/1/07................................... 564,173
---------------
1,937,533
---------------
DEM 575,000 Federal Republic of Germany, 6.50%, 3/15/00.......................... 400,885
DEM 1,880,000 Federal Republic of Germany, 5.875%, 5/15/00......................... 1,285,450
DEM 595,000 Treuhandanstalt, 7.75%, 10/1/02...................................... 434,840
DEM 1,410,000 Treuhandanstalt, 7.125%, 1/29/03..................................... 284,306
DEM 1,036,000 Federal Republic of Germany, 6.50%, 7/15/03.......................... 709,859
---------------
3,115,340
---------------
DKK 3,050,000 Government of Denmark, 8.00%, 3/15/06................................. 557,762
---------------
ESP 44,030,000 Government of Spain, 10.15%, 1/31/06................................. 392,486
ESP 44,300,000 Government of Spain, 8.80%, 4/30/06.................................. 354,921
---------------
747,407
---------------
GBP 765,000 U.K. Gilt, 8.50%, 12/7/05............................................. 1,265,891
GBP 673,000 U.K. Gilt, 7.50%, 12/7/06............................................. 1,039,673
---------------
2,305,564
---------------
ITL 590,000,000 Government of Italy, 9.50%, 2/1/99................................... 403,024
ITL 315,000,000 Government of Italy, 10.50%, 4/1/05.................................. 232,538
ITL 360,000,000 Government of Italy, 10.50%, 9/1/05.................................. 265,828
ITL 1,745,000,000 Government of Italy, 9.50%, 2/1/06................................... 1,225,243
---------------
2,126,633
---------------
NLG 1,380,000 Government of Netherlands, 8.50%, 3/15/01............................ 921,909
---------------
<PAGE>
<CAPTION>
GLOBAL BOND FUND (continued)
============================================================================================================
PAR MARKET
VALUE INVESTMENTS -- 96.9% VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SEK 9,100,000 Government of Sweden, 6.00%, 2/9/05.................................. $ 1,257,166
SEK 3,800,000 Government of Sweden, 8.00%, 8/15/07................................. 591,281
---------------
1,848,447
---------------
TOTAL FOREIGN GOVERNMENT ISSUES
(Amortized Cost $13,820,898).......................................... $ 14,120,328
---------------
TOTAL INVESTMENTS AT VALUE
(Amortized Cost $17,784,437).......................................... $ 18,110,218
OTHER ASSETS AND LIABILITIES, NET-- 3.1% ............................. 578,475
---------------
NET ASSETS-- 100.0% .................................................. $ 18,688,693
===============
<FN>
AUD-Australian Dollar GBP-British Pound Sterling
CAD-Canadian Dollar ITL-Italian Lira
DEM-German Deutschemark NLG-Netherlands Guilder
DKK-Danish Krone SEK-Swedish Krona
ESP-Spanish Peseta USD-U.S. Dollar
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
==============================================================================
Arthur Andersen LLP
To the Shareholders and Board of Trustees of Midwest Trust:
We have audited the accompanying statements of assets and liabilities of the
Short Term Government Income Fund, the Institutional Government Income Fund,
the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund of Midwest Trust (a
Massachusetts business trust), including the portfolios of investments, as of
September 30, 1996, and the related statements of operations, the statements
of changes in net assets, and the financial highlights for the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of September 30, 1996, by correspondence with custodians and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Short Term Government Income Fund, the Institutional Government Income Fund,
the Intermediate Term Government Income Fund, the Adjustable Rate U.S.
Government Securities Fund and the Global Bond Fund of Midwest Trust as of
September 30, 1996, the results of their operations, the changes in their net
assets, and their financial highlights for the periods indicated thereon, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
November 6, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 1
<NAME> SHORT TERM GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 91,149,866
<INVESTMENTS-AT-VALUE> 91,149,866
<RECEIVABLES> 374,341
<ASSETS-OTHER> 329
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 91,524,536
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85,052
<TOTAL-LIABILITIES> 85,052
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 91,436,514
<SHARES-COMMON-STOCK> 91,436,514
<SHARES-COMMON-PRIOR> 87,138,909
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,970
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 91,439,484
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,741,604
<OTHER-INCOME> 0
<EXPENSES-NET> 868,835
<NET-INVESTMENT-INCOME> 3,872,769
<REALIZED-GAINS-CURRENT> 2,970
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,875,739
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,872,769
<DISTRIBUTIONS-OF-GAINS> 2,227
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 290,338,196
<NUMBER-OF-SHARES-REDEEMED> 289,751,833
<SHARES-REINVESTED> 3,711,242
<NET-CHANGE-IN-ASSETS> 4,298,348
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,227
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 419,926
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 868,835
<AVERAGE-NET-ASSETS> 87,708,310
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .044
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .044
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 31
<NAME> INTERMEDIATE TERM GOVERNMENT INCOME FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 55,760,106
<INVESTMENTS-AT-VALUE> 55,970,810
<RECEIVABLES> 1,040,216
<ASSETS-OTHER> 1,950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,012,976
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 147,033
<TOTAL-LIABILITIES> 147,033
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,554,531
<SHARES-COMMON-STOCK> 5,348,350
<SHARES-COMMON-PRIOR> 5,308,934
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,899,292)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 210,704
<NET-ASSETS> 56,094,893
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,962,313
<OTHER-INCOME> 0
<EXPENSES-NET> 585,773
<NET-INVESTMENT-INCOME> 3,376,540
<REALIZED-GAINS-CURRENT> 295,706
<APPREC-INCREASE-CURRENT> (1,807,714)
<NET-CHANGE-FROM-OPS> 1,864,532
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,339,635
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,824,629
<NUMBER-OF-SHARES-REDEEMED> 2,059,645
<SHARES-REINVESTED> 274,432
<NET-CHANGE-IN-ASSETS> (873,675)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,194,998)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 289,680
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 596,107
<AVERAGE-NET-ASSETS> 58,090,575
<PER-SHARE-NAV-BEGIN> 10.73
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> (.24)
<PER-SHARE-DIVIDEND> .61
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.49
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 33
<NAME> INTERMEDIATE TERM GOVERNMENT INCOME FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 55,760,106
<INVESTMENTS-AT-VALUE> 55,970,810
<RECEIVABLES> 1,040,216
<ASSETS-OTHER> 1,950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,012,976
<PAYABLE-FOR-SECURITIES> 0
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<NAME> ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND CLASS A
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<NAME> ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND CLASS C
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<NAME> GLOBAL BOND FUND CLASS A
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<NAME> MIDWEST TRUST
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<NAME> GLOBAL BOND FUND CLASS C
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