SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
Pre-Effective Amendment No. ----
Post-Effective Amendment No. 63
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
Amendment No. 58
----
(Check appropriate box or boxes)
MIDWEST TRUST FILE NO. 2-52242 and 811-2538
- -------------------------------------------
(Exact name of Registrant as Specified in Charter)
312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202
- -----------------------------------------------------
(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number (513) 629-2000
--------------
Robert H. Leshner, 312 Walnut Street, 21st Floor,
- -------------------------------------------------
Cincinnati, Ohio 45202
- ----------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
x immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of Rule 485
Registrant registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice
for the fiscal year ended September 30, 1995 was filed with the
Commission on November 16, 1995.
CROSS REFERENCE SHEET
FORM N-1A
ITEM SECTION IN PROSPECTUS
1........................... Cover Page
2........................... Expense Information
3........................... Financial Highlights; Performance
Information
4........................... Operation of the Funds; Investment
Objectives, Investment Policies and
Risk Considerations
5........................... Operation of the Funds
6........................... Cover Page; Dividends and
Distributions; Taxes; Operation of
the Funds
7........................... How to Purchase Shares; Operation
of the Funds; Calculation of Share
Price and Public Offering Price;
Exchange Privilege; Shareholder
Services; Distribution Plans;
Application
8........................... How to Redeem Shares; Shareholder
Services
9........................... None
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
10.......................... Cover Page
11.......................... Table of Contents
12.......................... The Trust
13.......................... Definitions, Policies and Risk
Considerations; Investment
Limitations; Portfolio Turnover
14.......................... Trustees and Officers
15.......................... Principal Security Holders
16.......................... The Investment Adviser and
Underwriter; Distribution Plans;
Custodian; Accountants; MGF
Service Corp.
17.......................... Securities Transactions
18.......................... The Trust
19.......................... Calculation of Share Price and
Public Offering Price; Other
Purchase Information; Redemption
in Kind
20.......................... Taxes
21.......................... The Investment Adviser and
Underwriter
22.......................... Historical Performance Information
23.......................... Annual Report
PROSPECTUS
February 1, 1996
MIDWEST TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
SHORT TERM GOVERNMENT INCOME FUND
INTERMEDIATE TERM GOVERNMENT INCOME FUND
The Short Term Government Income Fund and the Intermediate Term Government
Income Fund (individually a "Fund" and collectively the "Funds") are two
separate series of Midwest Trust.
The Short Term Government Income 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 SHORT TERM GOVERNMENT INCOME FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN
AMORTIZED COST BASIS. FUND SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE
UNITED STATES GOVERNMENT OR ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS
NO ASSURANCE, THAT THE FUND WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE
OF $1.
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 Intermediate Term Government Income Fund offers two classes of shares:
Class A shares (sold subject to a maximum 2% front-end sales load and a 12b-1
fee of up to .35% of average daily net assets) and Class C shares (sold
subject to a 1% contingent deferred sales load for a one-year period and a
12b-1 fee of up to 1% of average daily net assets). Each Class A and Class C
share of the Fund represents identical interests in the Fund's investment
portfolio and has the same rights, except that (i) Class C shares bear the
expenses of higher distribution fees, which will cause Class C shares to have
a higher expense ratio and to pay lower dividends than those related to Class
A shares; (ii) certain other class specific expenses will be borne solely by
the class to which such expenses are attributable; and (iii) each class has
exclusive voting rights with respect to matters relating to its own
distribution arrangements.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Midwest Group Financial Services, Inc. (the "Adviser") manages the Funds'
investments and their business affairs.
This Prospectus sets forth concisely the information about the Funds that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated February 1, 1996 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling one of the
numbers listed below.
<PAGE>
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free) 800-543-0407
Cincinnati 513-629-2050
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
EXPENSE INFORMATION
SHORT TERM GOVERNMENT INCOME FUND
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None*
Check Redemption Processing Fee (per check):
First six checks per month None
Additional checks per month $0.25
<FN>
*A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently $8.
See "How to Redeem Shares."
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<S> <C>
Management Fees .48%
12b-1 Fees .13%(A)
Other Expenses .38%
----
Total Fund Operating Expenses .99%
====
<FN>
(A) The Fund may incur 12b-1 fees in an amount up to .35% of its average net
assets. Long-term shareholders may pay more than the economic equivalent of
the maximum front-end sales loads permitted by the National Association of
Securities Dealers.
</TABLE>
<PAGE>
<TABLE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
<CAPTION>
Class A Class C
Shares Shares
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 2% None
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends None None
Exchange Fee None None
Redemption Fee None** None**
Check Redemption Processing Fee (per check):
First six checks per month None None
Additional checks per month $0.25 $0.25
<FN>
* Purchases at net asset value of amounts totaling $1 million or more may be
subject to a contingent deferred sales load of .50% if a redemption occurred
within 12 months of purchase and a commission was paid by the Adviser to a
participating unaffiliated dealer.
** A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently $8.
See "How to Redeem Shares."
<CAPTION>
Annual Fund Operating Expenses (as a percentage of average net assets)
Class A Class C
Shares Shares
<S> <C> <C>
Management Fees .49% .49%
12b-1 Fees(A) .14% .00%
Other Expenses .36% .99%(B)
---- -----
Total Fund Operating Expenses .99% 1.48%(C)
==== =====
<FN>
(A) Class A shares may incur 12b-1 fees in an amount up to .35% of average
net assets and Class C shares may incur 12b-1 fees in an amount up to 1.00% of
average net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the National
Association of Securities Dealers.
(B) Absent expense reimbursements by the Adviser, other expenses of Class C
shares would have been 3.08% for the fiscal year ended September 30, 1995.
(C) Absent expense reimbursements by the Adviser, total Fund operating
expenses of Class C shares would have been 3.57% for the fiscal year ended
September 30, 1995.
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages expressing annual fund operating expenses are
based on amounts incurred during the most recent fiscal year. THE EXAMPLE
BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
</TABLE>
<PAGE>
<TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<CAPTION>
Intermediate Intermediate
Short Term Term Govt Term Govt
Government Income Fund Income Fund
Income Fund (Class A Shares) (Class C Shares)
<S> <C> <C> <C>
1 Year $ 10 $ 30 $ 25
3 Years 32 51 47
5 Years 55 74 81
10 Years 121 139 177
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
The following information, which has been audited by Arthur Andersen LLP, is
an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
September 30, 1995 and related auditors' report appear in the Statement of
Additional Information of the Funds, which can be obtained by shareholders at
no charge by calling MGF Service Corp. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
SHORT TERM GOVERNMENT INCOME FUND
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR(A)
<CAPTION>
Year Ended September 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income 0.046 0.027 0.022 0.035 0.059 0.073 0.079 0.058 0.051 0.061
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Dividends from net
investment income (0.046) (0.027) (0.022) (0.035) (0.059) (0.073) (0.079) (0.058) (0.051) (0.061)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value at
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ====== ======= ======= ======== ======== ======== ======== ======== ========
Total return 4.69% 2.72% 2.24% 3.55% 6.06% 7.50% 8.22% 6.08% 5.22% 6.28%
======= ====== ======= ======= ======== ======== ======== ======== ======== ========
Net assets at end
of year (000's) $87,141 $89,708 $96,962 $91,519 $101,535 $101,835 $104,956 $110,156 $142,083 $145,908
======= ====== ======= ======= ======== ======== ======== ======== ======== ========
Ratio of expenses to
average net assets 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 1.01% 1.00% 1.01% 1.01%
Ratio of net investment
income to average
net assets 4.59% 2.69% 2.22% 3.51% 5.90% 7.25% 7.91% 5.84% 5.09% 6.09%
<FN>
(A)All per share data has been restated to reflect the effect of a 10 for 1
share split on February 28, 1990.
</TABLE>
<PAGE>
<TABLE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND - CLASS A
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year $10.14 $11.59 $11.10 $10.45 $9.85 $10.09 $10.12 $10.02 $10.71 $10.22
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.64 0.56 0.60 0.68 0.75 0.76 0.79 0.76 0.77 0.90
Net realized and
unrealized gains
(losses)on investments 0.59 (1.32) 0.49 0.65 0.60 (0.24) (0.03) 0.10 (0.69) 0.49
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations 1.23 (0.76) 1.09 1.33 1.35 0.52 0.76 0.86 0.08 1.39
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.64) (0.56) (0.60) (0.68) (0.75) (0.76) (0.79) (0.76) (0.77) (0.90)
Distributions from
net realized gains -- (0.13) -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.64) (0.69) (0.60) (0.68) (0.75) (0.76) (0.79) (0.76) (0.77) (0.90)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value at
end of year $10.73 $10.14 $11.59 $11.10 $10.45 $9.85 $10.09 $10.12 $10.02 $10.71
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return(A) 12.52% (6.76%) 10.15% 13.27% 14.19% 5.31% 7.79% 8.77% 0.66% 14.11%
Net assets at end
of year (000's) $56,969 $64,395 $89,666 $59,290 $40,896 $37,800 $40,391 $52,405 $56,084 $52,853
Ratio of expenses to
average net assets 0.99% 0.99% 0.99% 1.00% 1.00% 1.02% 1.03% 1.04% 1.03% 1.10%
Ratio of net investment
income to average
net assets 6.17% 5.17% 5.31% 6.40% 7.39% 7.57% 7.83% 7.43% 7.30% 8.51%
Portfolio turnover rate 58% 236% 255% 76% 74% 92% 161% 88% 54% 33%
<FN>
(A)The total returns shown do not include the effect of applicable sales
loads.
</TABLE>
<PAGE>
<TABLE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
YEAR PERIOD
ENDED ENDED
SEPT. 30, SEPT. 30,
1995 1994(A)
<S> <C> <C>
Net asset value at beginning of period $10.14 $11.27
------ ------
Income from investment operations:
Net investment income 0.59 0.34
Net realized and unrealized gains (losses) on investments 0.59 (1.13)
------ ------
Total from investment operations 1.18 (0.79)
------ ------
Less distributions:
Dividends from net investment income (0.59) (0.34)
------ ------
Total distributions (0.59) (0.34)
------ ------
Net asset value at end of period $10.73 $10.14
====== ======
Total return(B) 11.96% (10.38%)(D)
====== ======
Net assets at end of period(000's) $598 $508
Ratio of expenses to average net assets(C) 1.48% 1.46%(D)
Ratio of net investment income to average net assets 5.60% 4.89%(D)
Portfolio turnover rate 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 3.57% and 2.41%(D)
for the periods ended September 30, 1995 and 1994, respectively.
(D) Annualized.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES
The Short Term Government Income Fund and the Intermediate Term Government
Income Fund are two series of Midwest Trust (the "Trust"), each with its own
portfolio and investment objective(s). Neither Fund is intended to be a
complete investment program, and there is no assurance that the investment
objectives of either Fund can be achieved. Unless otherwise indicated, all
investment practices and limitations of the Funds are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
For a discussion of each Fund's investment practices, see "Investment
Policies."
The SHORT TERM GOVERNMENT INCOME FUND seeks high current income, consistent
with protection of capital. The Fund seeks to achieve its investment
objective by investing primarily in obligations issued or guaranteed as to
principal and interest by the United States Government, its agencies or
instrumentalities ("U.S. Government obligations" described below) and backed
by the "full faith and credit" of the United States, maturing within thirteen
months or less with a dollar-weighted average portfolio maturity of 90 days or
less. In order to achieve its investment objective, the Fund may also enter
into repurchase agreements collateralized by U.S. Government obligations
backed by the "full faith and credit" of the United States.
The investment objective of the Short Term Government Income Fund is
fundamental and as such may not be changed without the affirmative vote of a
majority of the outstanding shares of the Fund. The term "majority" of the
outstanding shares means the lesser of (1) 67% or more of the outstanding
shares of the Fund present at a meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented at such meeting
or (2) more than 50% of the outstanding shares of the Fund. Notwithstanding
the foregoing, the limitation of the Short Term Government Income Fund's
permissible investments to obligations backed by the "full faith and credit"
of the United States is a determination made by the Board of Trustees which
may be changed by the Board without shareholder approval, but only after
notification has been given to shareholders and after this Prospectus has been
revised accordingly.
The INTERMEDIATE TERM GOVERNMENT INCOME FUND seeks high current income,
consistent with protection of capital, by investing 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. To the extent consistent with the Fund's primary
objective, capital appreciation is a secondary objective. In order to achieve
its investment objectives, the Fund may also enter into repurchase agreements
collateralized by U.S. Government obligations.
The investment objectives of the Intermediate Term Government Income Fund may
be changed by the Board of Trustees without shareholder approval, but only
after notification has been given to shareholders and after this Prospectus
has been revised accordingly. If there is a change in the Fund's investment
objectives, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs.
<PAGE>
INVESTMENT POLICIES
Each Fund invests in U.S. Government obligations. The Short Term Government
Income Fund invests in short-term U.S. Government obligations backed by the
"full faith and credit" of the United States. The Intermediate Term
Government Income Fund invests in intermediate-term U.S. Government
obligations.
"U.S. Government obligations" include securities which are issued or
guaranteed by the United States Treasury, by various agencies of the United
States Government, and by various instrumentalities which have been
established or sponsored by the United States Government. U.S. Treasury
obligations are backed by the "full faith and credit" of the United States
Government. U.S. Treasury obligations include Treasury bills, Treasury notes,
and Treasury bonds. U.S. Treasury obligations also include the separate
principal and interest components of U.S. Treasury obligations which are
traded under the Separate Trading of Registered Interest and Principal of
Securities ("STRIPS") program. Agencies or instrumentalities established by
the United States Government include the Federal Home Loan Banks, the Federal
Land Bank, the Government National Mortgage Association, the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, the Student
Loan Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing
Bank, the Federal Farm Credit Banks, the Federal Agricultural Mortgage
Corporation, the Resolution Funding Corporation, the Financing Corporation of
America and the Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the United States Government while
others are supported only by the credit of the agency or instrumentality,
which may include the right of the issuer to borrow from the United States
Treasury. In the case of securities not backed by the full faith and credit
of the United States, the investor must look principally to the agency issuing
or guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the United States in the event the agency or
instrumentality does not meet its commitments. Shares of the Funds are not
guaranteed or backed by the United States Government.
Each Fund may invest in securities issued or guaranteed by any of the entities
listed above or by any other agency or instrumentality established or
sponsored by the United States Government, provided that the securities are
otherwise permissible investments of the Fund. Certain U.S. Government
obligations which have a variable rate of interest readjusted no less
frequently than annually will be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate.
The market value of investments available to the Funds, and therefore each
Fund's yield, will fluctuate due to changes in interest rates, economic
conditions, quality ratings and other factors beyond the control of the
Adviser. The net asset value of the Intermediate Term Government Income Fund
also will fluctuate due to these changes. The portfolio securities held by
the Funds are subject to price fluctuations based upon changes in the level of
interest rates, which will generally result in all those securities changing
in price in the same way, i.e., all those securities experiencing appreciation
when interest rates decline and depreciation when interest rates rise. In
addition, the prepayment experience of the mortgages underlying
mortgage-related U.S. Government securities may affect the value of, and the
return on an investment in, such securities.
<PAGE>
OTHER INVESTMENT TECHNIQUES
The Funds may also engage in the following investment techniques, each of
which may involve certain risks:
MORTGAGE-RELATED U.S. GOVERNMENT SECURITIES. The Intermediate Term Government
Income Fund may invest in mortgage-related U.S. Government obligations,
including GNMA Certificates, FHLMC Certificates and FNMA Certificates.
GNMA Certificates are U.S. Government obligations guaranteed by the Government
National Mortgage Association (the GNMA) and are mortgage-backed securities
representing part ownership of a pool of mortgage loans. The pool of mortgage
loans underlying the GNMA Certificates is assembled by the issuer, usually a
private mortgage lender. The loans in the pool, issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations, are
either insured by the Federal Housing Administration or the Farmers' Home
Administration or guaranteed by the Veterans Administration. If the pool is
approved by the GNMA, GNMA Certificates are issued and sold to investors such
as the Intermediate Term Government Income Fund. The Fund will invest only in
GNMA Certificates of the pass-through type. This type of GNMA Certificate
entitles the holder to receive all interest and principal payments owed on the
pool of mortgage loans, net of fees paid to the issuer and the GNMA. In
addition, the timely payment of interest and principal on this type of GNMA
Certificate is guaranteed by the GNMA, even in the event of the foreclosure of
underlying mortgage loans. The GNMA guarantee is backed by the full faith and
credit of the United States. However, shares of the Fund are not guaranteed
or backed by either the GNMA or the United States.
FHLMC Certificates are U.S. Government obligations guaranteed by the Federal
Home Loan Mortgage Corporation (the FHLMC). As with GNMA Certificates, FHLMC
Certificates are pass-through mortgage-backed securities representing part
ownership of a pool of mortgage loans. The FHLMC generally purchases such
mortgage loans from those lenders insured by the Federal Deposit Insurance
Corporation, or Federal Housing Administration mortgagees approved by the
Department of Housing and Urban Development. The securities and guarantees of
the FHLMC are not backed, directly or indirectly, by the full faith and credit
of the United States.
FNMA Certificates are U.S. Government obligations guaranteed by the Federal
National Mortgage Association (the FNMA). The FNMA is a U.S. Government
sponsored corporation owned entirely by private stockholders. It is subject
to general regulation by the Secretary of Housing and Urban Development. The
FNMA purchases residential mortgages from a list of approved sellers, which
include state and federally-chartered savings and loan associations, mutual
savings banks, commercial banks, credit unions and mortgage banks.
Pass-through securities issued by the FNMA are not backed by the full faith
and credit of the United States, although the Secretary of the Treasury of the
United States has discretionary authority to lend the FNMA up to $2.25 billion
outstanding at any time.
<PAGE>
Prepayments of and payments on foreclosures of mortgage loans underlying a
mortgage-related security are passed through to the registered holder with the
regular monthly payments of principal and interest, and have the effect of
reducing future payments. The mortgage loans underlying a mortgage-related
security may be prepaid at any time without penalty. If a prepayment of a
mortgage loan underlying a particular mortgage-related security occurs, the
return to the Fund may be lower if the Fund acquired the security at a premium
over par or higher if the Fund acquired the security at a discount from par.
In addition, prepayments of mortgage loans underlying a particular
mortgage-related security held by the Fund will reduce the market value of the
security to the extent the market value of the security at the time of
prepayment exceeds its par value. In periods of declining mortgage interest
rates, prepayments may occur with increasing frequency because, among other
reasons, mortgagors may be able to refinance outstanding mortgages at lower
interest rates. In general, a decline in interest rates will cause the net
asset value of the Fund to increase to the extent that prepayments do not
occur, while a rise in interest rates will cause the net asset value of the
Fund to decrease.
Some of the pass-through mortgage securities in which the Intermediate Term
Government Income Fund invests may be adjustable rate mortgage securities
("ARMS"). ARMS are collateralized by adjustable rather than fixed-rate
mortgages. The ARMS in which the Fund invests are actively traded.
Generally, adjustable rate mortgages have a specified maturity date and
amortize principal over their life. In periods of declining interest rates
there is a reasonable likelihood that ARMS will experience increased rates of
prepayment of principal. However, the major difference between ARMS and
fixed-rate mortgage securities is that the interest rate can and does change
in accordance with movements in a particular, pre-specified, published
interest rate index. There are two main categories of indices: those based on
U.S. Treasury obligations and those derived from a calculated measure, such as
a cost of funds index or a moving average of mortgage rates. The amount of
interest on an adjustable rate mortgage is calculated by adding a specified
amount to the applicable index, subject to limitations on the maximum and
minimum interest that is charged during the life of the mortgage or to maximum
and minimum changes to that interest rate during a given period. Because the
interest rate on ARMS generally moves in the same direction as market interest
rates, the market value of ARMS tends to be more stable than that of
fixed-rate mortgage securities and ARMS tend to experience lower rates of
prepayment of principal than fixed-rate mortgage securities. However, ARMS
are also less likely than fixed-rate mortgage securities of comparable quality
and maturity to increase significantly in value during periods of declining
interest rates.
<PAGE>
DELAYED SETTLEMENT TRANSACTIONS. The Intermediate Term Government Income Fund
may trade securities on a "when-issued" or "to-be-announced" basis.
Obligations issued on a when-issued or to-be-announced basis are settled by
delivery and payment after the date of the transaction, usually within 15 to
45 days. In a to-be-announced transaction, the Fund has committed to
purchasing or selling securities for which all specific information is not yet
known at the time of the trade, particularly the face amount in transactions
involving mortgage-related securities. The Fund will only make commitments to
purchase obligations on a when-issued or to-be-announced basis with the
intention of actually acquiring the obligations, but the Fund may sell these
securities before the settlement date if it is deemed advisable as a matter of
investment strategy or in order to meet its obligations, although it would not
normally expect to do so. The Fund does not currently intend to invest more
than 5% of its net assets in securities purchased on this basis, and the Fund
will not enter into a delayed settlement transaction which settles in more
than 120 days.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements.
Repurchase agreements are transactions by which a Fund purchases a security
and simultaneously commits to resell that security to the seller at an agreed
upon time and price, thereby determining the yield during the term of the
agreement. In the event of a bankruptcy or other default of the seller of a
repurchase agreement, a Fund could experience both delays in liquidating the
underlying security and losses. To minimize these possibilities, each Fund
intends to enter into repurchase agreements only with its Custodian, banks
having assets in excess of $10 billion and the largest and, in the Board of
Trustees' judgment, most creditworthy primary U.S. Government securities
dealers. Each Fund will enter into repurchase agreements which are
collateralized by U.S. Government obligations in which that Fund could invest
directly. Collateral for repurchase agreements is held in safekeeping in the
customer-only account of the Funds' Custodian at the Federal Reserve Bank. At
the time a Fund enters into a repurchase agreement, the value of the
collateral, including accrued interest, will equal or exceed the value of the
repurchase agreement and, in the case of a repurchase agreement exceeding one
day, the seller agrees to maintain sufficient collateral so that the value of
the underlying collateral, including accrued interest, will at all times equal
or exceed the value of the repurchase agreement. A Fund will not enter into a
repurchase agreement not terminable within seven days if, as a result thereof,
more than 10% of the value of the net assets of the Fund would be invested in
such securities and other illiquid securities.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, each Fund may borrow money from banks or other persons in an amount
not exceeding 10% of its total assets. Each Fund may pledge assets in
connection with borrowings but will not pledge more than 15% of its total
assets. Neither Fund will make any additional purchases of portfolio
securities if outstanding borrowings exceed 5% of the value of its total
assets. Borrowing magnifies the potential for gain or loss on the portfolio
securities of the Funds and, therefore, if employed, increases the possibility
of fluctuation in a Fund's net asset value. This is the speculative factor
known as leverage. To reduce the risks of borrowing, the Funds will limit
their borrowings as described above. Each Fund's policies on borrowing and
pledging are fundamental policies which may not be changed without the
affirmative vote of a majority of its outstanding shares.
<PAGE>
PORTFOLIO TURNOVER. The Funds do not intend to use short-term trading as a
primary means of achieving their investment objectives. However, each Fund's
rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when portfolio changes are deemed necessary
or appropriate by the Adviser. The portfolio turnover of the Intermediate
Term Government Income Fund may be greater than that of many other mutual
funds. High turnover involves correspondingly greater commission expenses and
transaction costs and increases the possibility that the Funds would not
qualify as regulated investment companies under Subchapter M of the Internal
Revenue Code. A Fund will not qualify as a regulated investment company if it
derives 30% or more of its gross income from gains (without offset for losses)
from the sale or other disposition of securities held for less than three
months. High turnover may result in a Fund recognizing greater amounts of
income and capital gains, which would increase the amount of income and
capital gains which the Fund must distribute to its shareholders in order to
maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
SHORT TERM GOVERNMENT INCOME FUND
Your initial investment in the Short Term Government Income Fund ordinarily
must be at least $1,000 ($250 for tax-deferred retirement plans). Shares of
the Fund are sold on a continuous basis at the net asset value next determined
after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Short Term Government Income Fund by sending a check and a
completed account application form to MGF Service Corp., P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the "Short Term
Government Income Fund." An account application is included in this
Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month.
Certificates representing shares are not issued. The Trust and the Adviser
reserve the rights to limit the amount of investments and to refuse to sell to
any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, MGF Service Corp. and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
to the various services (for example, telephone redemptions and exchanges and
check redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or MGF Service Corp. in the transaction.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Short Term
Government Income Fund by wire. Please telephone MGF Service Corp.
(Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050) for
instructions. You should be prepared to give the name in which the account is
to be established, the address, telephone number and taxpayer identification
number for the account, and the name of the bank which will wire the money.
<PAGE>
You may receive a dividend on the day of your wire investment provided you
have given notice of your intention to make such investment to MGF Service
Corp. by 12:30 p.m., Eastern time, on that day. Your investment will be made
at the net asset value next determined after your wire is received together
with the account information indicated above. If the Trust does not receive
timely and complete account information, there may be a delay in the
investment of your money and any accrual of dividends. To make your initial
wire purchase, you are required to mail a completed account application to MGF
Service Corp. Your bank may impose a charge for sending your wire. There is
presently no fee for receipt of wired funds, but MGF Service Corp. reserves
the right to charge shareholders for this service upon thirty days' prior
notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to MGF Service Corp., P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable or endorsed
to the "Short Term Government Income Fund." Bank wires should be sent as
outlined above. You may also make additional investments at the Trust's
offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. Each
additional purchase request must contain the name of your account and your
account number to permit proper crediting to your account. While there is no
minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Short Term
Government Income Fund at the next determined net asset value on a day
selected by the institution or its customer, or when the account balance
reaches a predetermined dollar amount (e.g., $5,000).
Participating institutions are responsible for prompt transmission of orders
relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer
and the participating institution with regard to the services provided, the
fees charged for these services and any restrictions and limitations imposed.
INTERMEDIATE TERM GOVERNMENT INCOME FUND
Your initial investment in the Intermediate Term Government Income Fund
ordinarily must be at least $1,000 ($250 for tax-deferred retirement plans).
You may purchase additional shares through the Open Account Program described
below. You may open an account and make an initial investment through
securities dealers having a sales agreement with the Trust's principal
underwriter, Midwest Group Financial Services, Inc. (the "Adviser"). You may
also make a direct initial investment by sending a check and a completed
account application form to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio
45201-5354. Checks should be made payable to the "Intermediate Term
Government Income Fund." An account application is included in this
Prospectus.
<PAGE>
The Trust mails you confirmations of all purchases or redemptions of shares of
the Intermediate Term Government Income Fund. Certificates representing
shares are not ordinarily issued, but you may receive a certificate without
charge by sending a written request to MGF Service Corp. Certificates for
fractional shares will not be issued. If a certificate has been issued to
you, you will not be permitted to redeem shares by check, or to redeem or
exchange shares by telephone, or to use the automatic withdrawal plan as to
those shares. The Trust and the Adviser reserve the rights to limit the
amount of investments and to refuse to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, MGF Service Corp. and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
to the various services (for example, telephone redemptions and exchanges and
check redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or MGF Service Corp. in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to MGF Service Corp. at the address or numbers
listed below.
After an initial investment, all investors are considered participants in the
Open Account Program. The Open Account Program helps investors make purchases
of shares of the Intermediate Term Government Income Fund over a period of
years and permits the automatic reinvestment of dividends and distributions of
the Fund in additional shares without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a
check to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio 45201-5354. The
check should be made payable to the "Intermediate Term Government Income
Fund."
Under the Open Account Program, you may also purchase shares of the
Intermediate Term Government Income Fund by bank wire. Please telephone MGF
Service Corp. (Nationwide call toll-free 800-543-0407; in Cincinnati call
629-2050) for instructions. Your bank may impose a charge for sending your
wire. There is presently no fee for receipt of wired funds, but MGF Service
Corp. reserves the right to charge shareholders for this service upon thirty
days' prior notice to shareholders.
Each additional purchase request must contain the name of your account and
your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves
the right to impose such requirement. All purchases under the Open Account
Program are made at the public offering price next determined after receipt of
a purchase order by the Trust. If a broker-dealer received concessions for
selling shares of the Intermediate Term Government Income Fund to a current
shareholder, such broker-dealer will receive the concessions described above
with respect to additional investments by the shareholder.
<PAGE>
SALES LOAD ALTERNATIVES
The Intermediate Term Government Income Fund offers two classes of shares
which may be purchased at the election of the purchaser. The two classes of
shares each represent interests in the same portfolio of investments of the
Fund, have the same rights and are identical in all material respects except
that (i) Class C shares bear the expenses of higher distribution fees; (ii)
certain other class specific expenses will be borne solely by the class to
which such expenses are attributable, including transfer agent fees
attributable to a specific class of shares, printing and postage expenses
related to preparing and distributing materials to current shareholders of a
specific class, registration fees incurred by a specific class of shares, the
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating
to a class of shares, Trustees' fees or expenses incurred as a result of
issues relating to a specific class of shares and accounting fees and expenses
relating to a specific class of shares; and (iii) each class has exclusive
voting rights with respect to matters relating to its own distribution
arrangements. The net income attributable to Class C shares and the dividends
payable on Class C shares will be reduced by the amount of the incremental
expenses associated with the distribution fee (see "Distribution Plans").
Shares of the Intermediate Term Government Income Fund purchased prior to
February 1, 1994 are Class A shares.
The Fund's alternative sales arrangements permit investors to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold his shares and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur a front-end sales
load and be subject to lower ongoing charges, as discussed below, or to have
all of the initial purchase price invested in the Fund with the investment
thereafter being subject to higher ongoing charges. A salesperson or any
other person entitled to receive any portion of a distribution fee may receive
different compensation for selling Class A or Class C shares.
As an illustration, investors who qualify for reduced sales loads as described
below, might elect the Class A sales load alternative because similar sales
load reductions are not available for purchases under the Class C sales load
alternative. Moreover, shares acquired under the Class A sales load
alternative would be subject to lower ongoing distribution fees as described
below. Investors not qualifying for reduced initial sales loads who expect to
maintain their investment for an extended period of time might also elect the
Class A sales load alternative because over time the accumulated continuing
distribution fees on Class C shares may exceed the difference in initial sales
loads between Class A and Class C shares. Again, however, such investors must
weigh this consideration against the fact that less of their funds will be
invested initially under the Class A sales load alternative. Furthermore, the
higher ongoing distribution fees will be offset to the extent any return is
realized on the additional funds initially invested under the Class C sales
load alternative.
<PAGE>
Some investors might determine that it would be more advantageous to utilize
the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 2% initial sales load on Class A shares who elects to reinvest
dividends in additional shares would have to hold the investment in Class A
shares approximately 4 years before the accumulated ongoing distribution fees
on the alternative Class C shares would exceed the initial sales load plus the
accumulated ongoing distribution fees on Class A shares. In this example and
assuming the investment was maintained for more than 4 years, the investor
might consider purchasing Class A shares. This example does not take into
account the time value of money which reduces the impact of the higher ongoing
Class C distribution fees, fluctuations in net asset value or the effect of
different performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Adviser may from time to time pay from its own resources additional cash
bonuses or other incentives to selected dealers in connection with the sale of
shares of the Intermediate Term Government Income Fund. On some occasions,
such bonuses or incentives may be conditioned upon the sale of a specified
minimum dollar amount of the shares of the Fund and/or other funds in the
Midwest Group during a specific period of time. Such bonuses or incentives
may include financial assistance to dealers in connection with conferences,
sales or training programs for their employees, seminars for the public,
advertising, sales campaigns and other dealer-sponsored programs or events.
<PAGE>
<TABLE>
CLASS A SHARES
Class A shares of the Intermediate Term Government Income Fund are sold on a
continuous basis at the public offering price next determined after receipt of
a purchase order by the Trust. Purchase orders received by dealers prior to
4:00 p.m., Eastern time, on any business day and transmitted to the Adviser by
5:00 p.m., Eastern time, that day are confirmed at the public offering price
determined as of the close of the regular session of trading on the New York
Stock Exchange on that day. It is the responsibility of dealers to transmit
properly completed orders so that they will be received by the Adviser by 5:00
p.m., Eastern time. Dealers may charge a fee for effecting purchase orders.
Direct purchase orders received by MGF Service Corp. by 4:00 p.m., Eastern
time, are confirmed at that day's public offering price. Direct investments
received by MGF Service Corp. after 4:00 p.m., Eastern time, and orders
received from dealers after 5:00 p.m., Eastern time, are confirmed at the
public offering price next determined on the following business day.
The public offering price of Class A shares applicable to investors whose
accounts are opened after January 31, 1995 is the next determined net asset
value per share plus a sales load as shown in the following table.
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50 1.52 1.35
$250,000 but less than $500,000 1.00 1.01 .90
$500,000 but less than $1,000,000 .75 .76 .65
$1,000,000 or more None* None*
Investors whose accounts were opened prior to February 1, 1995 are subject to
a different table of sales loads as follows:
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 .75 .76 .75
$1,000,000 or more None* None*
<FN>
* There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .50% may apply with respect to Class A
shares if a commission was paid by the Adviser to a participating unaffiliated
dealer and the shares are redeemed within twelve months from the date of
purchase.
</TABLE>
Under certain circumstances, the Adviser may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may
be deemed to be underwriters under the Securities Act of 1933. The Adviser
retains the entire sales load on all direct initial investments in the Fund
and on all investments in accounts with no designated dealer of record.
<PAGE>
For initial purchases of Class A shares of $1,000,000 or more made after
October 1, 1995 and subsequent purchases further increasing the size of the
account, a dealer's commission of .50% of the purchase amount may be paid by
the Adviser to participating unaffiliated dealers through whom such purchases
are effected. In determining a dealer's eligibility for such commission,
purchases of Class A shares of the Intermediate Term Government Income Fund
may be aggregated with concurrent purchases of Class A shares of other Midwest
Group funds. Dealers should contact the Adviser concerning the applicability
and calculation of the dealer's commission in the case of combined purchases.
An exchange from other Midwest Group funds will not qualify for payment of the
dealer's commission, unless such exchange is from a Midwest Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. Redemptions of Class A shares may result in the imposition
of a contingent deferred sales load if the dealer's commission described in
this paragraph was paid in connection with the purchase of such shares. See
"Contingent Deferred Sales Charge for Certain Purchases of Class A Shares"
below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Adviser with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the tables above. Purchases made in any
load fund distributed by the Adviser pursuant to a Letter of Intent may also
be eligible for the reduced sales loads. The minimum initial investment under
a Letter of Intent is $10,000. The load funds currently distributed by the
Adviser are listed in the Exchange Privilege section of this Prospectus.
Shareholders should contact MGF Service Corp. for information about the Right
of Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase Class A shares of the
Intermediate Term Government Income Fund at net asset value when the payment
for your investment represents the proceeds from the redemption of shares of
any other mutual fund which has a front-end sales load and is not distributed
by the Adviser. Your investment will qualify for this provision if the
purchase price of the shares of the other fund included a sales load and the
redemption occurred within one year of the purchase of such shares and no more
than sixty days prior to your purchase of Class A shares of the Fund. To make
a purchase at net asset value pursuant to this provision, you must submit
photocopies of the confirmations (or similar evidence) showing the purchase
and redemption of shares of the other fund. Your payment may be made with the
redemption check representing the proceeds of the shares redeemed, endorsed to
the order of the "Intermediate Term Government Income Fund." The redemption
of shares of the other fund is, for federal income tax purposes, a sale on
which you may realize a gain or loss. These provisions may be modified or
terminated at any time. Contact your securities dealer or the Trust for
further information.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase Class A shares
of the Intermediate Term Government Income Fund at net asset value. To the
extent permitted by regulatory authorities, a bank trust department may charge
fees to clients for whose account it purchases shares at net asset value.
Federal and state credit unions may also purchase Class A shares at net asset
value.
<PAGE>
In addition, Class A shares of the Intermediate Term Government Income Fund
may be purchased at net asset value by broker-dealers who have a sales
agreement with the Adviser, and their registered personnel and employees,
including members of the immediate families of such registered personnel and
employees.
Clients of investment advisers and financial planners may also purchase Class
A shares of the Intermediate Term Government Income Fund at net asset value if
their investment adviser or financial planner has made arrangements to permit
them to do so with the Trust and the Adviser. The investment adviser or
financial planner must notify MGF Service Corp. that an investment qualifies
as a purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the Adviser or MGF
Service Corp., including members of the immediate family of such individuals
and employee benefit plans established by such entities, may also purchase
Class A shares of the Intermediate Term Government Income Fund at net asset
value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Intermediate Term Government Income Fund (or shares into which
such Class A shares were exchanged) purchased at net asset value in amounts
totaling $1 million or more, if the dealer's commission described above was
paid by the Adviser and the shares are redeemed within twelve months from the
date of purchase. The contingent deferred sales load will be paid to the
Adviser and will be equal to .50% of the lesser of (1) the net asset value at
the time of purchase of the Class A shares being redeemed or (2) the net asset
value of such Class A shares at the time of redemption. In determining
whether the contingent deferred sales load is payable, it is assumed that
shares not subject to the contingent deferred sales load are the first
redeemed followed by other shares held for the longest period of time. The
contingent deferred sales load will not be imposed upon shares representing
reinvested dividends or capital gains distributions, or upon amounts
representing share appreciation. If a purchase of Class A shares is subject
to the contingent deferred sales load, the investor will be so notified on the
confirmation for such purchase.
Redemptions of such Class A shares of the Intermediate Term Government Income
Fund held for at least 12 months will not be subject to the contingent
deferred sales load and an exchange of such Class A shares into another
Midwest Group fund is not treated as a redemption and will not trigger the
imposition of the contingent deferred sales load at the time of such exchange.
A fund will "tack" the period for which such Class A shares being exchanged
were held onto the holding period of the acquired shares for purposes of
determining if a contingent deferred sales load is applicable in the event
that the acquired shares are redeemed following the exchange; however, the
period of time that the redemption proceeds of such Class A shares are held in
a money market fund will not count toward the holding period for determining
whether a contingent deferred sales load is applicable. (See "Exchange
Privilege.")
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986, as amended) of a shareholder (including one who owns the
shares with his or her spouse as a joint tenant with rights of survivorship)
from an account in which the deceased or disabled is named. The Adviser may
require documentation prior to waiver of the charge, including death
certificates, physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the applicable sales load
and for purposes of the Letter of Intent and Right of Accumulation privileges,
a purchaser includes an individual, his spouse and their children under the
age of 21, purchasing shares for his or their own account; or a trustee or
other fiduciary purchasing shares for a single fiduciary account although more
than one beneficiary is involved; or employees of a common employer, provided
that economies of scale are realized through remittances from a single source
and quarterly confirmation of such purchases; or an organized group, provided
that the purchases are made through a central administration, or a single
dealer, or by other means which result in economy of sales effort or expense.
Contact MGF Service Corp. for additional information concerning purchases at
net asset value or at reduced sales loads.
<PAGE>
CLASS C SHARES
Class C shares of the Intermediate Term Government Income Fund are sold on a
continuous basis at the net asset value next determined after receipt of a
purchase order by the Trust. Purchase orders received by dealers prior to
4:00 p.m., Eastern time, on any business day and transmitted to the Adviser by
5:00 p.m., Eastern time, that day are confirmed at the net asset value
determined as of the close of the regular session of trading on the New York
Stock Exchange on that day. It is the responsibility of dealers to transmit
properly completed orders so that they will be received by the Adviser by 5:00
p.m., Eastern time. Dealers may charge a fee for effecting purchase orders.
Direct purchase orders received by MGF Service Corp. by 4:00 p.m., Eastern
time, are confirmed at that day's net asset value. Direct investments
received by MGF Service Corp. after 4:00 p.m., Eastern time, and orders
received from dealers after 5:00 p.m., Eastern time, are confirmed at the net
asset value next determined on the following business day.
A contingent deferred sales load is imposed on Class C shares of the
Intermediate Term Government Income Fund if an investor redeems an amount
which causes the current value of the investor's account to fall below the
total dollar amount of purchase payments subject to the deferred sales load,
except that no such charge is imposed if the shares redeemed have been
acquired through the reinvestment of dividends or capital gains distributions
or to the extent the amount redeemed is derived from increases in the value of
the account above the amount of purchase payments subject to the deferred
sales load.
Whether a contingent deferred sales load is imposed will depend on the amount
of time since the investor made a purchase payment from which an amount is
being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
------------------- -------------------
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it is
assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that an individual opens an account and purchases 1,000
shares at $10 per share and that six months later the net asset value per
share is $12 and, during such time, the investor has acquired 50 additional
shares through reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not be subject
to the load because of dividend reinvestment. With respect to the remaining
400 shares, the load is applied only to the original cost of $10 per share and
not to the increase in net asset value of $2 per share. Therefore, $4,000 of
the $5,400 redemption proceeds will be charged the load. At the rate of 1%,
the contingent deferred sales load would be $40. In determining whether an
amount is available for redemption without incurring a deferred sales load,
the purchase payments made for all Class C shares of the Intermediate Term
Government Income Fund in the shareholder's account are aggregated, and the
current value of all such shares is aggregated.
All sales loads imposed on redemptions are paid to the Adviser. The Adviser
intends to pay a commission of 1% of the purchase amount to participating
brokers at the time the investor purchases Class C shares of the Intermediate
Term Government Income Fund.
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986, as amended) of a shareholder (including one who owns the
shares with his or her spouse as a joint tenant with rights of survivorship)
from an account in which the deceased or disabled is named. The Adviser may
require documentation prior to waiver of the charge, including death
certificates, physicians' certificates, etc.
<PAGE>
SHAREHOLDER SERVICES
Contact MGF Service Corp. (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may elect
to receive, or may designate another person to receive, monthly or quarterly
payments in a specified amount of not less than $50 each. There is no charge
for this service. Purchases of additional Class A shares of the Intermediate
Term Government Income Fund while the plan is in effect are generally
undesirable because a sales load is incurred whenever purchases are made.
Tax-Deferred Retirement Plans
Shares of either Fund are available for purchase in connection with the
following tax-deferred retirement plans:
- -- Keogh Plans for self-employed individuals
- -- Individual retirement account (IRA) plans for individuals and their
non-employed spouses
- -- Qualified pension and profit-sharing plans for employees, including those
profit-sharing plans with a 401(k) provision
- -- 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code
DIRECT DEPOSIT PLANS
Shares of either Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder
to have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Funds.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in either Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. MGF Service Corp. pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds.
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Intermediate Term Government Income Fund,
you may reinvest all or part of the proceeds without any additional sales
load. This reinvestment must occur within ninety days of the redemption and
the privilege may only be exercised once per year.
HOW TO REDEEM SHARES
You may redeem shares of either Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined
after receipt by MGF Service Corp. of a proper redemption request in the form
described below, less any applicable contingent deferred sales load. Payment
is normally made within three business days after tender in such form,
provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares
of the Funds by certified check or wire.
A contingent deferred sales load may apply to a redemption of Class C shares
of the Intermediate Term Government Income Fund or to a redemption of certain
Class A shares of the Fund purchased at net asset value. (See "How to
Purchase Shares.")
<PAGE>
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent
by mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call MGF Service
Corp. (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050).
The redemption proceeds from your Short Term Government Income Fund account
will normally be sent by mail or by wire within one business day (but not
later than three business days) after receipt of your telephone instructions.
Any redemption requests by telephone must be received in proper form prior to
12:30 p.m., Eastern time, on any business day in order for payment by wire to
be made that day. The redemption proceeds from your Intermediate Term
Government Income Fund account will be sent by mail or by wire within three
business days after receipt of your telephone instructions. IRA accounts are
not redeemable by telephone.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to MGF Service Corp.
with your signature guaranteed by any eligible guarantor institution
(including banks, brokers and dealers, municipal securities brokers and
dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact MGF Service Corp. to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
Neither the Trust, MGF Service Corp., nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss.
The Trust or MGF Service Corp., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or MGF
Service Corp. do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to MGF Service Corp. The request must state the number of
shares or the dollar amount to be redeemed and your account number. The
request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by
mail are mailed within three business days following receipt of instructions
in proper form.
BY CHECK. You may establish a special checking account with either Fund for
the purpose of redeeming shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
<PAGE>
When a check is presented to the Custodian for payment, MGF Service Corp., as
your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check. Checks
will be processed at the net asset value on the day the check is presented to
the Custodian for payment.
If the amount of a check is greater than the value of the shares held in your
account, the check will be returned. Shareholders of the Intermediate Term
Government Income Fund should consider potential fluctuations in the net asset
value of the Fund's shares when writing checks. A check representing a
redemption request will take precedence over any other redemption instructions
issued by a shareholder.
As long as no more than six check redemptions are effected in your account in
any month, there will be no charge for the check redemption privilege.
However, after six check redemptions are effected in your account in a month,
MGF Service Corp. will charge you $.25 for each additional check redemption
effected that month. MGF Service Corp. charges shareholders its costs for
each stop payment and each check returned for insufficient funds. In
addition, MGF Service Corp. reserves the right to make additional charges to
recover the costs of providing the check redemption service. All charges will
be deducted from your account by redemption of shares in your account. The
check redemption procedure may be suspended or terminated at any time upon
written notice by the Trust or MGF Service Corp.
Shareholders of the Intermediate Term Government Income Fund should be aware
that writing a check (a redemption of shares) is a taxable event. Shares of
the Intermediate Term Government Income Fund for which certificates have been
issued may not be redeemed by check. Shareholders who invest in the Short
Term Government Income Fund through a cash sweep or similar program with a
financial institution are not eligible for the checkwriting privilege.
THROUGH BROKER-DEALERS. You may also redeem shares of the Intermediate Term
Government Income Fund by placing a wire redemption request through a
securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per
share next determined after receipt by the Trust or its agent of your wire
redemption request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a redemption
by wire, you will be charged an $8 processing fee by the Funds' Custodian.
The Trust reserves the right, upon thirty days' written notice, to change the
processing fee. All charges will be deducted from your account by redemption
of shares in your account. Your bank or brokerage firm may also impose a
charge for processing the wire. In the event that wire transfer of funds is
impossible or impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for
ACH transactions. Contact MGF Service Corp. for more information about ACH
transactions.
If a certificate for shares of the Intermediate Term Government Income Fund
was issued, it must be delivered to MGF Service Corp., or the dealer in the
case of a wire redemption, duly endorsed or accompanied by a duly endorsed
stock power, with the signature guaranteed by any of the eligible guarantor
institutions outlined above.
<PAGE>
At the discretion of the Trust or MGF Service Corp., corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves
the right to require you to close your account if at any time the value of
your shares is less than $1,000 (based on actual amounts invested including
any sales load paid, unaffected by market fluctuations), or $250 in the case
of tax-deferred retirement plans, or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
Shares of either Fund and of any other fund of the Midwest Group of Funds may
be exchanged for each other.
Shares of the Short Term Government Income Fund and Class A shares of the
Intermediate Term Government Income Fund which are not subject to a contingent
deferred sales load may be exchanged for Class A shares of any other fund and
for shares of any other fund which offers only one class of shares (provided
such shares are not subject to a contingent deferred sales load). A sales
load will be imposed equal to the excess, if any, of the sales load rate
applicable to the shares being acquired over the sales load rate, if any,
previously paid on the shares being exchanged. A contingent deferred sales
load may be imposed on a redemption of shares of the Short Term Government
Income Fund if such shares had previously been acquired in connection with an
exchange from another fund in the Midwest Group which imposes a contingent
deferred sales load, as described in the prospectus of such other fund.
Class C shares of the Intermediate Term Government Income Fund, as well as
Class A shares of the Fund subject to a contingent deferred sales load, may be
exchanged, on the basis of relative net asset value per share, for shares of
any other fund which imposes a contingent deferred sales load and for shares
of any fund which is a money market fund. A fund will "tack" the period for
which the shares being exchanged were held onto the holding period of the
acquired shares for purposes of determining if a contingent deferred sales
load is applicable in the event that the acquired shares are redeemed
following the exchange. The period of time that shares are held in a money
market fund will not count toward the holding period for determining whether a
contingent deferred sales load is applicable.
<TABLE>
The following are the funds of the Midwest Group of Funds currently offered
to the public. Funds which may be subject to a front-end or contingent
deferred sales load are indicated by an asterisk.
<CAPTION>
MIDWEST GROUP TAX FREE TRUST MIDWEST TRUST MIDWEST STRATEGIC TRUST
<S> <C> <C>
Tax-Free Money Fund Short Term Government Income Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund *Equity Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund *Utility Fund
Royal Palm Florida Tax-Free Money Fund *Adjustable Rate U.S. Government *Treasury Total Return Fund
Government Housing Tax-Exempt Fund Securities Fund
*Tax-Free Intermediate Term Fund *Global Bond Fund
*Ohio Insured Tax-Free Fund
</TABLE>
<PAGE>
You may request an exchange by sending a written request to MGF Service Corp.
The request must be signed exactly as your name appears on the Trust's
account records. Exchanges may also be requested by telephone. If you are
unable to execute your transaction by telephone (for example during times of
unusual market activity) consider requesting your exchange by mail or by
visiting the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati,
Ohio 45202. An exchange will be effected at the next determined net asset
value (or offering price, if sales load is applicable) after receipt of a
request by MGF Service Corp.
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or
terminated by the Board of Trustees upon 60 days' prior notice to
shareholders. An exchange results in a sale of fund shares, which may cause
you to recognize a capital gain or loss. Before making an exchange, contact
MGF Service Corp. to obtain a current prospectus for any of the other funds
in the Midwest Group and more information about exchanges among the Midwest
Group of Funds.
DIVIDENDS AND DISTRIBUTIONS
All of the net investment income of each Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Each Fund expects to distribute any net realized long-term capital gains at
least once each year. Management will determine the timing and frequency of
the distributions of any net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option -- income distributions and capital gains distributions
reinvested in additional shares.
Income Option -- income distributions and short-term capital gains
distributions paid in cash; long-term capital gains distributions reinvested
in additional shares.
Cash Option -- income distributions and capital gains distributions paid in
cash.
You should indicate your choice of option on your application. If no option
is specified on your application, distributions will automatically be
reinvested in additional shares. All distributions will be based on the net
asset value in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then-current
net asset value and your account will be converted to the Share Option.
An investor in the Intermediate Term Government Income Fund who has received
in cash any dividend or capital gains distribution may return the
distribution within thirty days of the distribution date to MGF Service Corp.
for reinvestment at the net asset value next determined after its return.
The investor or his dealer must notify MGF Service Corp. that a distribution
is being reinvested pursuant to this provision.
<PAGE>
TAXES
Each Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. Each Fund
intends to distribute substantially all of its net investment income and any
net realized capital gains to its shareholders. Distributions of net
investment income as well as from net realized short-term capital gains, if
any, are taxable as ordinary income. Since the Funds' investment income is
derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
Distributions of net realized long-term capital gains are taxable as
long-term capital gains regardless of how long you have held your Fund
shares.
The Funds will mail to each of their shareholders a statement indicating the
amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Funds may be subject
to state and local taxes on distributions. Shareholders should consult their
tax advisors about the tax effect of distributions and withdrawals from the
Funds and the use of the Automatic Withdrawal Plan and the Exchange
Privilege. The tax consequences described in this section apply whether
distributions are taken in cash or reinvested in additional shares.
OPERATION OF THE FUNDS
The Funds are diversified series of Midwest Trust, an open-end management
investment company organized as a Massachusetts business trust on December 7,
1980. The Board of Trustees supervises the business activities of the Trust.
Like other mutual funds, the Trust retains various organizations to perform
specialized services for the Funds.
The Trust retains Midwest Group Financial Services, Inc., 312 Walnut Street,
Cincinnati, Ohio (the "Adviser"), to manage the Funds' investments and their
business affairs. The Adviser was organized in 1974 and is also the
investment adviser to three other series of the Trust, seven series of
Midwest Group Tax Free Trust and four series of Midwest Strategic Trust. The
Adviser is a subsidiary of Leshner Financial, Inc., of which Robert H.
Leshner is the controlling shareholder. Each Fund pays the Adviser a fee
equal to the annual rate of .5% of the average value of its daily net assets
up to $50 million; .45% of such assets from $50 million to $150 million; .4%
of such assets from $150 million to $250 million; and .375% of such assets in
excess of $250 million.
Bruce Chaiken, Assistant Vice President-Investments of the Adviser, is
primarily responsible for managing the portfolio of each Fund. Mr. Chaiken
has been employed by the Adviser and affiliated companies in various
capacities since 1987 and has been managing each Fund's portfolio since June
1994.
<PAGE>
The Funds are responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment
company organizations, brokerage fees and commissions, legal, auditing and
accounting expenses, expenses of registering shares under federal and state
securities laws, expenses related to the distribution of the Funds' shares
(see "Distribution Plans"), insurance expenses, taxes or governmental fees,
fees and expenses of the custodian, transfer agent and accounting and pricing
agent of the Funds, fees and expenses of members of the Board of Trustees who
are not interested persons of the Trust, the cost of preparing and
distributing prospectuses, statements, reports and other documents to
shareholders, expenses of shareholders' meetings and proxy solicitations, and
such extraordinary or non-recurring expenses as may arise, including
litigation to which the Funds may be a party and indemnification of the
Trust's officers and Trustees with respect thereto.
The Trust has retained MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio, a
subsidiary of Leshner Financial, Inc., to serve as the Funds' transfer agent,
dividend paying agent and shareholder service agent.
MGF Service Corp. also provides accounting and pricing services to the Funds.
MGF Service Corp. receives a monthly fee from each Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, MGF Service Corp. has been retained by the Adviser to assist the
Adviser in providing administrative services to the Funds. In this capacity,
MGF Service Corp. supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the
Funds) pays MGF Service Corp. a fee for these administrative services equal
to one-fourth of its advisory fee from the Funds.
The Adviser serves as principal underwriter for the Funds and, as such, is
the exclusive agent for the distribution of shares of the Funds. Robert H.
Leshner, Chairman and a director of the Adviser, is President and a Trustee
of the Trust. John F. Splain, Secretary and General Counsel of the Adviser,
is Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to
sales of shares of the Funds as a factor in the selection of brokers and
dealers to execute portfolio transactions of the Funds. Subject to the
requirements of the Investment Company Act of 1940 and procedures adopted by
the Board of Trustees, the Funds may execute portfolio transactions through
any broker or dealer and pay brokerage commissions to a broker (i) which is
an affiliated person of the Trust, or (ii) which is an affiliated person of
such person, or (iii) an affiliated person of which is an affiliated person
of the Trust or the Adviser.
<PAGE>
Shares of each Fund have equal voting rights and liquidation rights. Each
Fund shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of a Fund shall vote separately on matters relating to its plan of
distribution pursuant to Rule 12b-1 (see "Distribution Plans"). When matters
are submitted to shareholders for a vote, each shareholder is entitled to one
vote for each full share owned and fractional votes for fractional shares
owned. The Trust does not normally hold annual meetings of shareholders.
The Trustees shall promptly call and give notice of a meeting of shareholders
for the purpose of voting upon the removal of any Trustee when requested to
do so in writing by shareholders holding 10% or more of the Trust's
outstanding shares. The Trust will comply with the provisions of Section
16(c) of the Investment Company Act of 1940 in order to facilitate
communications among shareholders.
DISTRIBUTION PLANS
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Short Term Government Income Fund and Class A shares of the
Intermediate Term Government Income Fund have adopted a plan of distribution
(the "Class A Plan") under which such shares may directly incur or reimburse
the Adviser for certain distribution-related expenses, including payments to
securities dealers and others who are engaged in the sale of shares of the
Funds and who may be advising investors regarding the purchase, sale or
retention of Fund shares; expenses of maintaining personnel who engage in or
support distribution of shares or who render shareholder support services not
otherwise provided by MGF Service Corp.; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of
the Funds; expenses of obtaining such information, analyses and reports with
respect to marketing and promotional activities as the Trust may, from time
to time, deem advisable; and any other expenses related to the distribution
of such shares.
Pursuant to the Class A Plan, the Funds may make payments to dealers and
other persons, including the Adviser and its affiliates, who may be advising
investors regarding the purchase, sale or retention of shares of the Funds.
For the fiscal year ended September 30, 1995, the Short Term Government
Income Fund and Class A shares of the Intermediate Term Government Income
Fund paid $104,000 and $80,362, respectively to the Adviser to reimburse it
for payments made to dealers and other persons who may be advising
shareholders regarding the retention of shares of the Funds.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.35% of the Short Term Government Income Fund's average daily net assets and
.35% of the Intermediate Term Government Income Fund's average daily net
assets allocable to Class A shares. Unreimbursed expenditures will not be
carried over from year to year. In the event the Class A Plan is terminated
by a Fund in accordance with its terms, the Fund will not be required to make
any payments for expenses incurred by the Adviser after the date the Class A
Plan terminates.
<PAGE>
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Intermediate Term Government Income Fund has adopted a plan of
distribution (the "Class C Plan") which provides for two categories of
payments. First, the Class C Plan provides for the payment to the Adviser of
an account maintenance fee, in an amount equal to an annual rate of .25% of
the Fund's average daily net assets allocable to Class C shares, which may be
paid to other dealers based on the average value of Fund shares owned by
clients of such dealers. In addition, the Class C shares may directly incur
or reimburse the Adviser in an amount not to exceed .75% per annum of the
Fund's average daily net assets allocable to Class C shares for expenses
incurred in the distribution and promotion of the Fund's Class C shares,
including payments to securities dealers and others who are engaged in the
sale of shares of the Fund and who may be advising investors regarding the
purchase, sale or retention of such shares; expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services not otherwise provided by MGF Service Corp.; expenses of
formulating and implementing marketing and promotional activities, including
direct mail promotions and mass media advertising; expenses of preparing,
printing and distributing sales literature and prospectuses and statements of
additional information and reports for recipients other than existing
shareholders of the Fund; expenses of obtaining such information, analyses
and reports with respect to marketing and promotional activities as the Trust
may, from time to time, deem advisable; and any other expenses related to the
distribution of the Fund's Class C shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class C Plan is terminated by the Intermediate Term Government
Income Fund in accordance with its terms, the Fund will not be required to
make any payments for expenses incurred by the Adviser after the date the
Class C Plan terminates. The Adviser may make payments to dealers and other
persons in an amount up to .75% per annum of the average value of Class C
shares owned by their clients, in addition to the .25% account maintenance
fee described above.
GENERAL. Pursuant to the Plans, the Funds may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging
in the business of underwriting, selling or distributing securities.
Although the scope of this prohibition under the Glass-Steagall Act has not
been clearly defined by the courts or appropriate regulatory agencies,
management of the Trust believes that the Glass-Steagall Act should not
preclude a bank from providing such services. However, state securities laws
on this issue may differ from the interpretations of federal law expressed
herein and banks and financial institutions may be required to register as
dealers pursuant to state law. If a bank were prohibited from continuing to
perform all or a part of such services, management of the Trust believes that
there would be no material impact on the Funds or their shareholders. Banks
may charge their customers fees for offering these services to the extent
permitted by applicable regulatory authorities, and the overall return to
those shareholders availing themselves of the bank services will be lower
than to those shareholders who do not. The Funds may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Funds, no preference will be shown for such
securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of mutual
funds. These Rules require fund-level accounting in which all sales charges
- -- front-end load, 12b-1 fees or contingent deferred load -- terminate when a
percentage of gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
On each day that the Trust is open for business, the share price (net asset
value) of the Short Term Government Income Fund's shares is determined as of
12:30 p.m. and 4:00 p.m., Eastern time. The share price of Class C shares
and the public offering price (net asset value plus applicable sales load) of
Class A shares of the Intermediate Term Government Income Fund is determined
as of the close of the regular session of trading on the New York Stock
Exchange, currently 4:00 p.m., Eastern time. The Trust is open for business
on each day the New York Stock Exchange is open for business and on any other
day when there is sufficient trading in a Fund's investments that its net
asset value might be materially affected. The net asset value per share of
each Fund is calculated by dividing the sum of the value of the securities
held by the Fund plus cash or other assets minus all liabilities (including
estimated accrued expenses) by the total number of shares outstanding of the
Fund, rounded to the nearest cent.
The Short Term Government Income Fund's portfolio securities are valued on an
amortized cost basis. In connection with the use of the amortized cost
method of valuation, the Short Term Government Income Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less, purchases only
United States dollar-denominated securities having remaining maturities of
thirteen months or less and invests only in securities determined by the
Board of Trustees to meet the Fund's quality standards and to present minimal
credit risks. Other assets of the Fund 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.
It is anticipated, but there is no assurance, that the use of the amortized
cost method of valuation by the Short Term Government Income Fund will enable
it to maintain a stable net asset value per share of $1.
The Intermediate Term Government Income Fund's portfolio securities for which
market quotations are readily available are valued at their most recent bid
prices as obtained from one or more of the major market makers for such
securities. Securities (and other assets) for which market quotations are
not readily available are valued at their fair value as determined in good
faith in accordance with consistently applied procedures established by and
under the general supervision of the Board of Trustees. The net asset value
per share of the Intermediate Term Government Income Fund will fluctuate with
the value of the securities it holds.
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Short Term Government Income Fund may advertise its
"current yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"current yield" of the Short Term Government Income Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period
will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment.
From time to time, the Intermediate Term Government Income Fund may advertise
its "average annual total return." The Fund may also advertise "yield."
Both yield and average annual total return figures are based on historical
earnings and are not intended to indicate future performance. Total return
and yield are computed separately for Class A and Class C shares. The yield
of Class A shares is expected to be higher than the yield of Class C shares
due to the higher distribution fees imposed on Class C shares.
The "average annual total return" of the Intermediate Term Government Income
Fund refers to the average annual compounded rates of return over the most
recent 1, 5 and 10 year periods (which periods will be stated in the
advertisement) that would equate an initial amount invested at the beginning
of a stated period to the ending redeemable value of the investment. The
calculation of "average annual total return" assumes the reinvestment of all
dividends and distributions and, for Class A shares, the deduction of the
current maximum sales load from the initial investment. The Intermediate
Term Government Income Fund may also advertise total return (a
"nonstandardized quotation") which is calculated differently from "average
annual total return." A nonstandardized quotation of total return may be a
cumulative return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no activity in
the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation of total return may also indicate
average annual compounded rates of return over periods other than those
specified for "average annual total return." These nonstandardized returns
do not include the effect of the applicable sales load which, if included,
would reduce total return. A nonstandardized quotation of total return will
always be accompanied by the Fund's "average annual total return" as
described above.
<PAGE>
The "yield" of the Intermediate Term Government Income Fund is computed by
dividing the net investment income per share earned during a thirty-day (or
one month) period stated in the advertisement by the maximum public offering
price per share on the last day of the period (using the average number of
shares entitled to receive dividends). The yield formula assumes that net
investment income is earned and reinvested at a constant rate and annualized
at the end of a six-month period.
From time to time, the Funds may advertise their performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also
compare their performance to that of other selected mutual funds, averages of
the other mutual funds within their categories as determined by Lipper, or
recognized indicators. In connection with a ranking, the Funds may provide
additional information, such as the particular category of funds to which the
ranking relates, the number of funds in the category, the criteria upon which
the ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. Each Fund may also present its performance and other
investment characteristics, such as volatility or a temporary defense
posture, in light of the Adviser's view of current or past market conditions
or historical trends.
Further information about the Intermediate Term Government Income Fund's
performance is contained in the Trust's annual report which can be obtained
by shareholders at no charge by calling MGF Service Corp. (Nationwide call
toll-free 800-543-0407; in Cincinnati call 629-2050) or by writing to the
Trust at the address on the front of this Prospectus.
MIDWEST TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
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
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
TABLE OF CONTENTS
Expense Information 2
Financial Highlights 4
Investment Objectives 7
Investment Policies 7
How to Purchase Shares 10
Shareholder Services 17
How to Redeem Shares 18
Exchange Privilege 20
Dividends and Distributions 21
Taxes 22
Operation of the Funds 22
Distribution Plans 23
Calculation of Share Price and Public Offering Price 25
Performance Information 25
<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to
make such offer in such State.
INCOME
PROSPECTUS
FEBRUARY 1, 1996
Short Term
Government
INCOME FUND
Intermediate Term Government
INCOME FUND
MIDWEST GROUP
ACCOUNT APPLICATION (check appropriate Fund)
Please mail account application to:
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o SHORT TERM GOVT. INCOME FUND (0) $________________
INTERMEDIATE TERM GOVT. INCOME FUND
o A SHARES (1) $________________
o C SHARES (15) $________________
ACCOUNT NO._______________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:_______________________
Home Office Address:_____________
Branch Address:__________________
Rep Name & No.:__________________
Rep Signature:___________________
- ---------------------------------------------------------------------------
o Check or draft enclosed payable to the Fund(s) designated above.
o Bank Wire From:___________________________________________________
o Exchange From:____________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/TAX L.D.#
_____________________________________ ____________________________
Name of Individual, Corporation, (In case of custodial account
Organization, or Minor, etc. please list minor's S.S.#)
_____________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other________
ADDRESS PHONE
_____________________________________ ( )_____________________
Street or P.O. Box Business Phone
_____________________________________ ( )_____________________
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship
presumed) o Partnership o Corporation o Trust o Custodial o Non-Profit
o Other
Occupation and Employer Name/Address____________________________________
Are you an associated person of an NASD member? o Yes o No
- ---------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. Check
box if appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends;
or the Internal Revenue Service has notified me that I am no longer subject
to backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital gains distributions
reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions paid
in cash.
- ---------------------------------------------------------------------------
REDEMPTION OPTIONS
I (we) authorize the Trust or MGF Service Corp. to act upon instructions
received by telephone, or upon receipt of and in the amounts of checks as
described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund in the Midwest Group (see prospectus for
limitations on this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below.
I (we) further authorize the used of automated cash transfers to and from
the account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
Please attach a voided check for the account.
Bank Account Number____________________ Bank Routing Transit Number________
Name of Account Holder_______________________________________________________
Bank Name______________________________ Bank Address_______________________
City State
o CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable Midwest
Group Pay Through Draft Account (PTDA) or otherwise arrange for application
of such proceeds to payment of said checks. I (we) authorize the persons
whose signatures appear on the PTDA signature card to draw checks on the PTDA
and to cause the redemption of my (our) shares of the Trust. I (we) agree
to be bound by the Rules and Regulations for the Midwest Group Pay Through
Draft Account as such Rules and Regulations may be amended from time to time
- ---------------------------------------------------------------------------
REDUCED SALES CHARGES (INTERMEDIATE TERM GOVERNMENT INCOME FUND'S CLASS A
SHARES ONLY)
Right of Accumulation: I apply for Right of Accumulation subject to the
Agent's confirmation of the following holdings of eligible load funds of the
Midwest Group of Funds.
ACCOUNT NUMBER/NAME ACCOUNT NUMBER/NAME
______________________________________ _________________________________
______________________________________ _________________________________
LETTER OF INTENT: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o l agree to the Letter of Intent in the current Prospectus of Midwest
Trust. Although I am not obligated to purchase, and the Trust is not
obligated to sell, I intend to invest over a 13 month period beginning
______________________ 19 _______ (Purchase Date of not more than 90 days
prior to this Letter) an aggregate amount in the load funds of the Midwest
Group of Funds at least equal to (check appropriate box):
o $100,000 o $250,000 o $500,000 o $1,000,000
- ---------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Funds' current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints MGF Service Corp. as his agent to enter orders for shares whether by
direct purchase or exchange, to receive dividends and distributions for
automatic reinvestment in additional shares of the Funds for credit to the
investor's account and to surrender for redemption shares held in the
investor's account in accordance with any of the procedures elected above or
for payment of service charges incurred by the investor. The investor further
agrees that MGF Service Corp. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this
Application. The investor hereby ratifies any instructions given pursuant to
this Application and for himself and his successors and assigns does hereby
release MGF Service Corp., Midwest Trust, Midwest Group Financial Services,
Inc., and their respective officers, employees, agents and affiliates from
any and all liability in the performance of the acts instructed herein.
Neither the Trust, MGF Service Corp., nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to
be genuine or for any loss, damage, cost or expense in acting on such
telephone instructions. The investor(s) will bear the risk of any such loss.
The Trust or MGF Service Corp., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or MGF
Service Corp. do not employ such procedures, they may be liable for losses
due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
_______________________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc.
_______________________________________________________________
Signature of Joint Owner, if Any
_______________________________________________________________
Title of Corporate Officer, Trustee, etc.
_______________________________________________________________
Date
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE THE
RESOLUTION FORM ON THE REVERSE SIDE.
UNLESS OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL AUTHORITY TO ACT
ON BEHALF OF THE ACCOUNT.
- ---------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN (COMPLETE FOR INVESTMENTS INTO THE FUND(S))
The Automatic Investment Plan is available for all established accounts of
Midwest Trust. There is no charge for this service, and it offers the
convenience of automatic investing on a regular basis. The minimum
investment is $50.00 per month. For an account that is opened by using this
Plan, the minimum initial and subsequent investments must be $50.00. Though a
continuous program of 12 monthly investments is recommended, the Plan may be
discontinued by the shareholder at any time.
Please invest $ _________________per month in (Check applicable Fund)
ABA Routing Number_____________________
o Short Term Govt. Income Fund o Intermediate Term Govt. Income Fund
FI Account Number______________________
o Checking Account o Savings Account
_______________________________________
Name of Financial Institution (FI)
Please make my automatic investment on:
o the last business day of each month
o the 15th day of each month
o both the 15th and last business day
_______________________________________
City State
X______________________________________ X_________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant -
it appears on FI Records) if any)
(Joint Signatures are required when bank account is in joint names. Please
sign exactly as signature appears on your FI's records.)
PLEASE ATTACH A VOIDED CHECK FOR THE AUTOMATIC INVESTMENT PLAN.
INDEMNIFICATION TO DEPOSITOR'S BANK
In consideration of your participation in a plan which MGF Service Corp.
("MGF") has put into effect, by which amounts, determined by your depositor,
payable to the applicable Fund designated above, for purchase of shares of
said Fund, are collected by MGF, MGF hereby agrees:
MGF will indemnify and hold you harmless from any liability to any person
or persons whatsoever arising out of the payment by you of any amount drawn
by the Funds to their own order on the account of your depositor or from
any liability to any person whatsoever arising out of the dishonor
by you whether with or without cause or intentionally or inadvertently,
of any such amount. MGF will defend, at its own cost and expense,
any action which might be brought against you by any person or persons
whatsoever because of your actions taken pursuant to the foregoing
request or in any manner arising by reason of your participation in this
arrangement. MGF will refund to you any amount erroneously paid by you
to the Funds if the claim for the amount of such erroneous payment is made by
you within six (6) months from the date of such erroneous payment; your
participation in this arrangement and that of the Funds may be terminated by
thirty (30) days written notice from either party to the other.
- ---------------------------------------------------------------------------
AUTOMATIC WITHDRAWAL PLAN (COMPLETE FOR WITHDRAWALS FROM THE FUND(S))
This is an authorization for you to withdraw $_________________________from
my mutual fund account beginning the last business day of the month of
_____________________.
Please Indicate Withdrawal Schedule (Check One):
Please indicate which Fund: o Short Term Govt. Income Fund o Intermediate
Term Govt. Income Fund
o MONTHLY -- Withdrawals will be made on the last business day of each month.
o QUARTERLY -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and
12/31.
o ANNUALLY -- Please make withdrawals on the last business day of the month
of:___________________________.
Please Select Payment Method (Check One):
o EXCHANGE: Please exchange the withdrawal proceeds into another Midwest
account number: ____ ____ -- ____ ____ ____ ____ ____ ____ -- ____
o CHECK: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o ACH TRANSFER: Please send my withdrawal proceeds via ACH transfer to my
bank checking or savings account as indicated below. I understand that the
transfer will be completed in two to three business days and that there is
no charge.
o BANK WIRE: Please send my withdrawal proceeds via bank wire, to the
account indicated below. I understand that the wire will be completed in one
business day and that there is an $8.00 fee.
PLEASE ATTACH A VOIDED CHECK FOR ACH OR BANK WIRE
___________________________________________________________________________
Bank Name Bank Address
___________________________________________________________________________
Bank ABA# Account # Account Name
O SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_____________________________________________________________
Please send to:___________________________________________________________
Street address City State Zip
- ---------------------------------------------------------------------------
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other
Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Midwest Trust (the Trust) and that
__________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf
of the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the
Trust, and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint MGF Service Corp. as
redemption agent of the corporation or organization for shares of the
applicable series of the Trust, to establish or acknowledge terms and
conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application, and it is
(If checkwriting privilege is not desired, please cross out the following
resolution.)
FURTHER RESOLVED: That the corporation or organization participate in the
Midwest Group Pay Through Draft Account (PTDA) and that until otherwise
ordered in writing, MGF Service Corp. is authorized to make redemptions of
shares held by the corporation or organization, and to make payment from PTDA
upon and according to the check, draft, note or order of this corporation or
organization when signed by
___________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the
payee or any other holder without inquiry as to the circumstances of issue or
the disposition or proceeds, whether drawn to the individual order or
tendered in payment of individual obligations of the persons above named or
other officers of this corporation or organization or otherwise.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
__________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of___________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on ____________________ at
which a quorum was present and acting throughout, and that the same are now
in full force and effect.
I further certify that the following is (are) duly elected officer(s) of the
corporation or organization, authorized to act in accordance with the
foregoing resolutions.
NAME TITLE
______________________________________ _________________________________
______________________________________ _________________________________
______________________________________ _________________________________
Witness my hand and seal of the corporation or organization
this______________________day of________________________________, 19_______
______________________________________ _________________________________
*Secretary-Clerk Other Authorized Officer (if
required)
*If the Secretary or other recording officer is authorized to act by the
above resolutions, this certificate must also be signed by another officer.
PROSPECTUS
February 1, 1996
MIDWEST TRUST
312 WALNUT STREET, 21ST FLOOR
CINCINNATI, OHIO 45202-4094
INSTITUTIONAL GOVERNMENT INCOME FUND
The Institutional Government Income Fund (the "Fund"), a separate series of
Midwest Trust, 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. Such institutions
include banks and trust companies, savings institutions, corporations,
investment bankers and brokers, insurance companies, pension funds, employee
benefit plans and educational, religious and charitable institutions. The
minimum initial purchase is $100,000 per investor.
THE FUND'S PORTFOLIO SECURITIES ARE VALUED ON AN AMORTIZED COST BASIS. FUND
SHARES ARE NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES GOVERNMENT OR
ANY OTHER ENTITY. IT IS ANTICIPATED, BUT THERE IS NO ASSURANCE, THAT THE FUND
WILL MAINTAIN A STABLE NET ASSET VALUE PER SHARE OF $1.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Midwest Group Financial Services, Inc. (the "Adviser") manages the Fund's
investments and its business affairs.
This Prospectus sets forth concisely the information about the Fund that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated February 1, 1996 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling one of the
numbers listed below.
For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free) 800-543-0407
Cincinnati 513-629-2050
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
EXPENSE INFORMATION
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Exchange Fee None
Redemption Fee None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<S> <C>
Management Fees After Waivers .18% (A)
12b-1 Fees .01% (B)
Other Expenses .21%
----
Total Fund Operating Expenses After Waivers .40% (C)
====
<FN>
(A)Absent waivers of management fees, such fees would have been .20% for the
fiscal year ended September 30, 1995.
(B)The Fund may incur 12b-1 fees in an amount up to .10% of its average net
assets.
(C)Absent waivers of management fees, total Fund operating expenses would have
been .42% for the fiscal year ended September 30, 1995.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are
based on amounts incurred during the most recent fiscal year. THE EXAMPLE
BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<CAPTION>
<S> <C>
1 Year $ 4
3 Years 13
5 Years 22
10 Years 51
Institutions who utilize the transfer agent's subaccounting system to minimize
their internal recordkeeping requirements will be charged a subaccounting fee
based on the level of services (see "Subaccounting Services").
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
The following information, which has been audited by Arthur Andersen LLP, is
an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
September 30, 1995 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at
no charge by calling MGF Service Corp. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FROM DATE OF
PUBLIC
OFFERING
(MAY 23, 1988)
THROUGH
YEAR ENDED SEPTEMBER 30, SEPT.30,
1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------ ------ ------ ------ ------ ------ ------
Net investment income 0.053 0.034 0.029 0.040 0.065 0.081 0.087 0.025
------- ------ ------ ------ ------ ------ ------ ------
Dividends from net investment income (0.053) ( 0.034) ( 0.029) ( 0.040) ( 0.065) ( 0.081) ( 0.087) ( 0.025)
------- ------ ------ ------ ------ ------ ------ ------
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======== =======
Total return 5.42% 3.43% 2.96% 4.08% 6.61% 8.31% 9.07% 7.42%(B)
======= ======= ======= ======= ======= ======= ======== =======
Net assets at end of period (000's) $36,009 $41,769 $34,610 $43,432 $62,313 $97,727 $121,826 $70,489
======= ======= ======= ======= ======= ======= ======== =======
Ratio of expenses to average net assets(A) 0.40% 0.40% 0.40% 0.37% 0.35% 0.33% 0.32% 0.30%(B)
Ratio of net investment income
to average net assets 5.30% 3.41% 2.92% 4.04% 6.50% 8.04% 8.74% 7.39%(B)
<FN>
(A) Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 0.42%, 0.42%, 0.48%, 0.43%, 0.36% and 0.34% for the
years ended September 30, 1995, 1994, 1993, 1992, 1991 and 1989, respectively.
(B) Annualized.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a series of Midwest Trust (the "Trust"). The investment objective
of the Fund is to seek high current income, consistent with protection of
capital. The Fund seeks to achieve its investment objective by investing
primarily in obligations issued or guaranteed as to principal and interest by
the United States Government, its agencies or instrumentalities ("U.S.
Government obligations" described below), maturing within thirteen months or
less with a dollar-weighted average portfolio maturity of 90 days or less.
The Fund is not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved. The Fund's
investment objective may be changed by the Board of Trustees without
shareholder approval, but only after notification has been given to
shareholders and after this Prospectus has been revised accordingly. If there
is a change in the Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. Unless otherwise indicated, all
investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
The Fund invests in U.S. Government obligations. "U.S. Government
obligations" include securities which are issued or guaranteed by the United
States Treasury, by various agencies of the United States Government, and by
various instrumentalities which have been established or sponsored by the
United States Government. U.S. Treasury obligations are backed by the "full
faith and credit" of the United States Government. U.S. Treasury obligations
include Treasury bills, Treasury notes, and Treasury bonds. U.S. Treasury
obligations also include the separate principal and interest components of
U.S. Treasury obligations which are traded under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Agencies
or instrumentalities established by the United States Government include the
Federal Home Loan Banks, the Federal Land Bank, the Government National
Mortgage Association, the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation, the Student Loan Marketing Association, the
Small Business Administration, the Bank for Cooperatives, the Federal
Intermediate Credit Bank, the Federal Financing Bank, the Federal Farm Credit
Banks, the Federal Agricultural Mortgage Corporation, the Resolution Funding
Corporation, the Financing Corporation of America and the Tennessee Valley
Authority. Some of these securities are supported by the full faith and
credit of the United States Government while others are supported only by the
credit of the agency or instrumentality, which may include the right of the
issuer to borrow from the United States Treasury. In the case of securities
not backed by the full faith and credit of the United States, the investor
must look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States in the event the agency or instrumentality does not meet its
commitments. Shares of the Fund are not guaranteed or backed by the United
States Government.
The Fund may invest in securities issued or guaranteed by any of the entities
listed above or by any other agency or instrumentality established or
sponsored by the United States Government, provided that the securities are
otherwise permissible investments of the Fund. Certain U.S. Government
obligations which have a variable rate of interest readjusted no less
frequently than annually will be deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate.
<PAGE>
The market value of investments available to the Fund and therefore the Fund's
yield, will fluctuate due to changes in interest rates, economic conditions,
quality ratings and other factors beyond the control of the Adviser. In
addition, the prepayment experience of the mortgages underlying
mortgage-related securities, such as obligations issued by the Government
National Mortgage Association, may affect the value of, and the return on an
investment in, such securities.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
DELAYED SETTLEMENT TRANSACTIONS. Obligations issued on a when-issued or
to-be-announced basis are settled by delivery and payment after the date of
the transaction, usually within 15 to 45 days. In a to-be-announced
transaction, the Fund has committed to purchasing or selling securities for
which all specific information is not yet known at the time of the trade,
particularly the face amount in transactions involving mortgage-related
securities. The Fund will only make commitments to purchase obligations on a
when-issued or to-be-announced basis with the intention of actually acquiring
the obligations, but the Fund may sell these securities before the settlement
date if it is deemed advisable as a matter of investment strategy or in order
to meet its obligations, although it would not normally expect to do so. The
Fund does not currently intend to invest more than 5% of its net assets in
securities purchased on this basis, and the Fund will not enter into a delayed
settlement transaction which settles in more than 120 days.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the
Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other
default of the seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying security and losses. To minimize
these possibilities, the Fund intends to enter into repurchase agreements only
with its Custodian, banks having assets in excess of $10 billion and the
largest and, in the Board of Trustees' judgment, most creditworthy primary
U.S. Government securities dealers. The Fund will enter into repurchase
agreements which are collateralized by U.S. Government obligations.
Collateral for repurchase agreements is held in safekeeping in the
customer-only account of the Fund's Custodian at the Federal Reserve Bank. At
the time the Fund enters into a repurchase agreement, the value of the
collateral, including accrued interest, will equal or exceed the value of the
repurchase agreement and, in the case of a repurchase agreement exceeding one
day, the seller agrees to maintain sufficient collateral so that the value of
the underlying collateral, including accrued interest, will at all times equal
or exceed the value of the repurchase agreement. The Fund will not enter into
a repurchase agreement not terminable within seven days if, as a result
thereof, more than 10% of the value of the net assets of the Fund would be
invested in such securities and other illiquid securities.
<PAGE>
BORROWING AND PLEDGING. The Fund may borrow money from banks (provided there
is 300% asset coverage) or from banks or other persons for temporary purposes
(in an amount not exceeding 5% of its total assets). The Fund will not make
any borrowing which would cause its outstanding borrowings to exceed one-third
of the value of its total assets. The Fund may pledge assets in connection
with borrowings but will not pledge more than one-third of its total assets.
The Fund will not make any additional purchases of portfolio securities if
outstanding borrowings exceed 5% of the value of its total assets. Borrowing
magnifies the potential for gain or loss on the Fund's portfolio securities
and, therefore, if employed, increases the possibility of fluctuation in its
net asset value. This is the speculative factor known as leverage. The
Fund's policies on borrowing and pledging are fundamental policies which may
not be changed without the affirmative vote of a majority of its outstanding
shares.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio
securities exposes the Fund to the risk that the borrower may fail to return
the loaned securities or may not be able to provide additional collateral or
that the Fund may experience delays in recovery of the loaned securities or
loss of rights in the collateral if the borrower fails financially. To
minimize these risks, the borrower must agree to maintain collateral marked to
market daily, in the form of cash and/or U.S. Government obligations, with the
Fund's Custodian in an amount at least equal to the market value of the loaned
securities. The Fund will limit the amount of its loans of portfolio
securities to no more than 25% of its net assets. This lending policy may not
be changed by the Fund without the affirmative vote of a majority of its
outstanding shares.
HOW TO PURCHASE SHARES
Your initial investment in the Fund must be at least $100,000. Shares of the
Fund are sold on a continuous basis at the net asset value next determined
after receipt of a purchase order by the Trust.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in the Fund by sending a check and a completed account application
form to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks
should be made payable to the "Institutional Government Income Fund." An
account application is included in this Prospectus.
You will be sent within five business days after the end of each month a
written statement disclosing each purchase or redemption effected and each
dividend or distribution credited to your account during the month.
Certificates representing shares are not issued. The Trust and the Adviser
reserve the rights to limit the amount of investments and to refuse to sell to
any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, MGF Service Corp. and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
to the various services (for example, telephone redemptions and exchanges)
made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or MGF Service Corp. in the transaction.
<PAGE>
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Fund by
wire. Please telephone MGF Service Corp. (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
You may receive a dividend on the day of your wire investment provided you
have given notice of your intention to make such investment to MGF Service
Corp. by 12:30 p.m., Eastern time, on that day. Your investment will be made
at the net asset value next determined after your wire is received together
with the account information indicated above. If the Trust does not receive
timely and complete account information, there may be a delay in the
investment of your money and any accrual of dividends. To make your initial
wire purchase, you are required to mail a completed account application to MGF
Service Corp. Your bank may impose a charge for sending your wire. There is
presently no fee for receipt of wired funds, but MGF Service Corp. reserves
the right to charge shareholders for this service upon thirty days' prior
notice to shareholders.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to MGF Service Corp., P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable or endorsed
to the "Institutional Government Income Fund." Bank wires should be sent as
outlined above. You may also make additional investments at the Trust's
offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. Each
additional purchase request must contain the name of your account and your
account number to permit proper crediting to your account. While there is no
minimum amount required for subsequent investments, the Trust reserves the
right to impose such requirement.
CASH SWEEP PROGRAM. Cash accumulations in accounts with financial
institutions may be automatically invested in shares of the Fund at the next
determined net asset value on a day selected by the institution or its
customer, or when the account balance reaches a predetermined dollar amount
(e.g., $5,000).
Participating institutions are responsible for prompt transmission of orders
relating to the program. Institutions participating in this program may
charge their customers fees for services relating to the program which would
reduce the customers' yield from an investment in the Fund. This Prospectus
should, therefore, be read together with any agreement between the customer
and the participating institution with regard to the services provided, the
fees charged for these services and any restrictions and limitations imposed.
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined
after receipt by MGF Service Corp. of a proper redemption request in the form
described below. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased
by check will be effected only after the check has been collected, which may
take up to fifteen days from the purchase date. To eliminate this delay, you
may purchase shares of the Fund by certified check or wire.
<PAGE>
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent
by mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call MGF Service
Corp. (Nationwide call toll-free 800-543-0407; in Cincinnati call 629-2050).
The redemption proceeds will normally be sent by mail or by wire within one
business day (but not later than three business days) after receipt of your
telephone instructions. Any redemption requests by telephone must be received
in proper form prior to 12:30 p.m., Eastern time, on any business day in order
for payment by wire to be made that day.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to MGF Service Corp.
with your signature guaranteed by any eligible guarantor institution
(including banks, brokers and dealers, municipal securities brokers and
dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact MGF Service Corp. to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
Neither the Trust, MGF Service Corp., nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss.
The Trust or MGF Service Corp., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or MGF
Service Corp. do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to MGF Service Corp. The request must state the number of
shares to be redeemed and your account number. The request must be signed
exactly as your name appears on the Trust's account records. If the shares to
be redeemed have a value of $25,000 or more, your signature must be guaranteed
by any of the eligible guarantor institutions outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by
mail are normally mailed within two business days following receipt of
instructions in proper form, but in no event later than three business days
following receipt of instructions.
ADDITIONAL REDEMPTION INFORMATION. There is currently no charge for
processing wire redemptions. However, the Trust reserves the right, upon
thirty days' written notice, to make reasonable charges for wire redemptions.
All charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing
the wire. In the event that wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by mail to the designated
account.
<PAGE>
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for
ACH transactions. Contact MGF Service Corp. for more information about ACH
transactions.
At the discretion of the Trust or MGF Service Corp., corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves
the right to require you to close your account if at any time the value of
your shares is less than $100,000 (based on actual amounts invested,
unaffected by market fluctuations) or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
Shares of the Fund and of any other fund of the Midwest Group of Funds may be
exchanged for each other. A sales load will be imposed equal to the excess,
if any, of the sales load rate applicable to the shares being acquired over
the sales load rate, if any, previously paid on the shares being exchanged. A
contingent deferred sales load may be imposed on a redemption of shares of the
Fund if such shares had previously been acquired in connection with an
exchange from another fund in the Midwest Group which imposes a contingent
deferred sales load, as described in the Prospectus of such other fund.
The following are the funds of the Midwest Group of Funds currently offered to
the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
MIDWEST GROUP TAX FREE TRUST MIDWEST STRATEGIC TRUST
Tax-Free Money Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Royal Palm Florida Tax-Free Money Fund
Government Housing Tax-Exempt Fund MIDWEST TRUST
*Tax-Free Intermediate Term Fund Short Term Government Income Fund
*Ohio Insured Tax-Free Fund Institutional Government Income Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
You may request an exchange by sending a written request to MGF Service Corp.
The request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by MGF Service
Corp.
<PAGE>
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated
by the Board of Trustees upon 60 days' prior notice to shareholders. An
exchange results in a sale of fund shares, which may cause you to recognize a
capital gain or loss. Before making an exchange, contact MGF Service Corp. to
obtain a current prospectus for any of the other funds in the Midwest Group
and more information about exchanges among the Midwest Group of Funds.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. MGF Service Corp. may
charge a subaccounting fee based on the level of services rendered.
Institutions holding Fund shares in a fiduciary, agency, custodial or similar
capacity may charge or pass through subaccounting fees as part of or in
addition to normal trust or agency account fees. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to the services provided, the fees charged for those
services and any restrictions and limitations imposed.
DIVIDENDS AND DISTRIBUTIONS
All of the net investment income of the Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Management will determine the timing and frequency of the distributions of any
net realized short-term capital gains. Although the Fund does not expect to
realize any long-term capital gains, if the Fund does realize such gains it
will distribute them at least once each year.
Dividends are automatically reinvested in additional shares of the Fund (the
Share Option) unless cash payments are specified on your application or are
otherwise requested by contacting MGF Service Corp. If you elect to receive
dividends in cash and the U.S. Postal Service cannot deliver your checks or if
your checks remain uncashed for six months, your dividends may be reinvested
in your account at the then-current net asset value and your account will be
converted to the Share Option.
TAXES
The Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund
intends to distribute substantially all of its net investment income and any
net realized capital gains to its shareholders. Distributions of net
investment income as well as from net realized short-term capital gains, if
any, are taxable as ordinary income. Since the Fund's investment income is
derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Fund may be subject
to state and local taxes on distributions. The tax consequences described in
this section apply whether distributions are taken in cash or reinvested in
additional shares.
<PAGE>
OPERATION OF THE FUND
The Fund is a diversified series of Midwest Trust, an open-end management
investment company organized as a Massachusetts business trust on December 7,
1980. The Board of Trustees supervises the business activities of the Trust.
Like other mutual funds, the Trust retains various organizations to perform
specialized services for the Fund.
The Trust retains Midwest Group Financial Services, Inc., 312 Walnut Street,
Cincinnati, Ohio (the "Adviser"), to manage the Fund's investments and its
business affairs. The Adviser was organized in 1974 and is also the
investment adviser to four other series of the Trust, seven series of Midwest
Group Tax Free Trust and four series of Midwest Strategic Trust. The Adviser
is a subsidiary of Leshner Financial, Inc., of which Robert H. Leshner is the
controlling shareholder. The Fund pays the Adviser a fee equal to the annual
rate of .2% of the average value of its daily net assets.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders,
expenses of shareholders' meetings and proxy solicitations, and such
extraordinary or non-recurring expenses as may arise, including litigation to
which the Fund may be a party and indemnification of the Trust's officers and
Trustees with respect thereto.
The Trust has retained MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio, a
subsidiary of Leshner Financial, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
MGF Service Corp. also provides accounting and pricing services to the Fund.
MGF Service Corp. receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, MGF Service Corp. has been retained by the Adviser to assist the
Adviser in providing administrative services to the Fund. In this capacity,
MGF Service Corp. supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser (not the
Fund) pays MGF Service Corp. a fee for these administrative services equal to
one-fourth of its advisory fee from the Fund.
The Adviser serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Robert H.
Leshner, Chairman and a director of the Adviser, is President and a Trustee of
the Trust. John F. Splain, Secretary and General Counsel of the Adviser, is
Secretary of the Trust.
<PAGE>
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to
sales of shares of the Fund as a factor in the selection of brokers and
dealers to execute portfolio transactions of the Fund. Subject to the
requirements of the Investment Company Act of 1940 and procedures adopted by
the Board of Trustees, the Fund may execute portfolio transactions through any
broker or dealer and pay brokerage commissions to a broker (i) which is an
affiliated person of the Trust, or (ii) which is an affiliated person of such
person, or (iii) an affiliated person of which is an affiliated person of the
Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional shares owned.
The Trust does not normally hold annual meetings of shareholders. The
Trustees shall promptly call and give notice of a meeting of shareholders for
the purpose of voting upon the removal of any Trustee when requested to do so
in writing by shareholders holding 10% or more of the Trust's outstanding
shares. The Trust will comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 in order to facilitate communications among
shareholders.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund has
adopted a plan of distribution (the "Plan") under which the Fund may directly
incur or reimburse the Adviser for certain distribution-related expenses,
including payments to securities dealers and others who are engaged in the
sale of shares of the Fund and who may be advising investors regarding the
purchase, sale or retention of Fund shares; expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services not otherwise provided by MGF Service Corp.; expenses of
formulating and implementing marketing and promotional activities, including
direct mail promotions and mass media advertising; expenses of preparing,
printing and distributing sales literature and prospectuses and statements of
additional information and reports for recipients other than existing
shareholders of the Fund; expenses of obtaining such information, analyses and
reports with respect to marketing and promotional activities as the Trust may,
from time to time, deem advisable; and any other expenses related to the
distribution of the Fund's shares.
The annual limitation for payment of expenses pursuant to the Plan is .10% of
the Fund's average daily net assets. Unreimbursed expenditures will not be
carried over from year to year. In the event the Plan is terminated by the
Fund in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
<PAGE>
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although
the scope of this prohibition under the Glass-Steagall Act has not been
clearly defined by the courts or appropriate regulatory agencies, management
of the Trust believes that the Glass-Steagall Act should not preclude a bank
from providing such services. However, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law. If a bank were prohibited from continuing to perform all or a part
of such services, management of the Trust believes that there would be no
material impact on the Fund or its shareholders. Banks may charge their
customers fees for offering these services to the extent permitted by
applicable regulatory authorities, and the overall return to those
shareholders availing themselves of the bank services will be lower than to
those shareholders who do not. The Fund may from time to time purchase
securities issued by banks which provide such services; however, in selecting
investments for the Fund, no preference will be shown for such securities.
CALCULATION OF SHARE PRICE
On each day that the Trust is open for business, the share price (net asset
value) of the Fund's shares is determined as of 12:30 p.m. and 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in the Fund's investments that its net asset value might be materially
affected. The net asset value per share of the Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent.
The Fund's portfolio securities are valued on an amortized cost basis. In
connection with the use of the amortized cost method of valuation, the Fund
maintains a dollar-weighted average portfolio maturity of 90 days or less,
purchases only United States dollar-denominated securities having remaining
maturities of thirteen months or less and invests only in securities
determined by the Board of Trustees to meet the Fund's quality standards and
to present minimal credit risks. Other assets of the Fund 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. It is anticipated, but there is no assurance, that the use of the
amortized cost method of valuation will enable the Fund to maintain a stable
net asset value per share of $1.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not
intended to indicate future performance. The "current yield" of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is
then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the compounding effect of
this assumed reinvestment.
<PAGE>
MIDWEST TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
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
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information 2
Financial Highlights 3
Investment Objective and Policies 4
How to Purchase Shares 5
How to Redeem Shares 7
Exchange Privilege 8
Subaccounting Services 8
Dividends and Distributions 9
Taxes 9
Operation of the Fund 9
Distribution Plan 10
Calculation of Share Price 11
Performance Information 11
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
INCOME
PROSPECTUS
FEBRUARY 1, 1996
Institutional
Government
INCOME FUND
Midwest Group Logo
<PAGE>
ACCOUNT APPLICATION
Please mail account application to:
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
INSTITUTIONAL GOVERNMENT
INCOME FUND
ACCOUNT NO. 23-______________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:________________________
Home Office Address:______________
Branch Address:___________________
Rep Name & No.:___________________
Initial Investment of $___________ ($100,000 Minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From:_______________________________________________________
o Exchange From:________________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/TAX L.D.#
Name of Individual, Corporation, (In case of custodial account
Organization, or Minor, etc. please list minor's S.S.#)
________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other
ADDRESS PHONE
________________________________________ ( )_____________
Street or P.O. Box Business Phone
________________________________________ ( )_____________
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship
presumed) o Partnership o Corporation o Trust o Custodial o Non-Profit o Other
- ------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. Check
box if appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends; or
the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do not
provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
<PAGE>
- ------------------------------------------------------------------------------
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions paid in
cash.
- ------------------------------------------------------------------------------
REDEMPTION OPTIONS
I (we) authorize the Trust or MGF Service Corp. to act upon instructions
received by telephone, to have amounts withdrawn from my (our) account in any
fund in the Midwest Group (see prospectus for limitations on this option) and:
WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I
(we) further authorize the used of automated cash transfers to and from the
account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
PLEASE ATTACH A VOIDED CHECK FOR THE ACCOUNT.
Bank Account Number______________Bank Routing Transit Number_______________
Name of Account Holder_____________________________________________________
Bank Name________________Bank Address______________________________________
City State
<PAGE>
- ------------------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints MGF Service Corp. as his agent to enter orders for shares whether by
direct purchase or exchange, to receive dividends and distributions for
automatic reinvestment in additional shares of the Fund for credit to the
investor's account and to surrender for redemption shares held in the
investor's account in accordance with any of the procedures elected above or
for payment of service charges incurred by the investor. The investor further
agrees that MGF Service Corp. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this
Application. The investor hereby ratifies any instructions given pursuant to
this Application and for himself and his successors and assigns does hereby
release MGF Service Corp., Midwest Trust, Midwest Group Financial Services,
Inc., and their respective officers, employees, agents and affiliates from any
and all liability in the performance of the acts instructed herein. Neither
the Trust, MGF Service Corp., nor their respective affiliates will be liable
for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expense in acting on such telephone
instructions. The investor(s) will bear the risk of any such loss. The Trust
or MGF Service Corp., or both, will employ reasonable procedures to determine
that telephone instructions are genuine. If the Trust and/or MGF Service
Corp. do not employ such procedures, they may be liable for losses due to
unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
_____________________________________ _____________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
_____________________________________ _____________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE THE
RESOLUTION FORM ON THE REVERSE SIDE.
UNLESS OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL AUTHORITY TO ACT
ON BEHALF OF THE ACCOUNT.
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other
Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Midwest Trust (the Trust) and that ________________________ is (are) hereby
authorized to complete and execute the Application on behalf of the
corporation or organization and to take any action for it as may be necessary
or appropriate with respect to its shareholder account with the Trust, and it
is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint MGF Service Corp. as
redemption agent of the corporation or organization for shares of the
applicable series of the Trust, to establish or acknowledge terms and
conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
____________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of ___________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on _____________ at which a
quorum was present and acting throughout, and that the same are now in full
force and effect.
I further certify that the following is (are) duly elected officer(s) of the
corporation or organization, authorized to act in accordance with the
foregoing resolutions.
NAME TITLE
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
Witness my hand and seal of the corporation or organization
this________________day of________, 19_______
_____________________________________ _____________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
PROSPECTUS
February 1, 1996
MIDWEST TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
The Adjustable Rate U.S. Government Securities Fund (the "Fund"), a separate
series of Midwest Trust, 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 Fund offers two classes of shares: Class A shares (sold subject to a
maximum 2% front-end sales load and a 12b-1 fee of up to .35% of average daily
net assets) and Class C shares (sold subject to a 1% contingent deferred sales
load for a one-year period and a 12b-1 fee of up to 1% of average daily net
assets). Each Class A and Class C share of the Fund represents identical
interests in the Fund's investment portfolio and has the same rights, except
that (i) Class C shares bear the expenses of higher distribution fees, which
will cause Class C shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable; and (iii) each class has exclusive voting rights with respect to
matters relating to its own distribution arrangements.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Midwest Group Financial Services, Inc. (the "Adviser") manages the Fund's
investments after consultation with Hanover Capital Advisors Inc. (see
"Operation of the Fund").
This Prospectus sets forth concisely the information about the Fund that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated February 1, 1996 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling one of the
numbers listed below.
For Information or Assistance in Opening an Account, Please Call:
Nationwide (Toll-Free) 800-543-0407
Cincinnati 513-629-2050
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
EXPENSE INFORMATION
<CAPTION>
Class A Class C
Shares Shares
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 2% None
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends None None
Exchange Fee None None
Redemption Fee None ** None **
Check Redemption Processing Fee (per check):
First Six Checks per Month None None
Additional Checks per Month. $0.25 $0.25
<FN>
* Purchases at net asset value of amounts totaling $1 million or
more may be subject to a contingent deferred sales load of .50% if a
redemption occurred within 12 months of purchase and a commission was
paid by the Adviser to a participating unaffiliated dealer.
** A wire transfer fee is charged by the Fund's Custodian in the
case of redemptions made by wire. Such fee is subject to change
and is currently $8. See "How to Redeem Shares."
<CAPTION>
Class A Class C
Shares Shares
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees After Waivers(A) .04% .04%
12b-1 Fees(B) .06% .00%
Other Expenses .65% 1.20%
---- -----
Total Fund Operating Expenses After Waivers(C) .75% 1.24%
==== =====
<FN>
(A) Absent waivers of management fees, such fees would have been .50%
for the fiscal year ended September 30, 1995.
(B) Class A shares may incur 12b-1 fees in an amount up to .35% of
average net assets and Class C shares may incur 12b-1 fees in an
amount up to 1.00% of average net assets. Long-term shareholders may
pay more than the economic equivalent of the maximum front-end sales
loads permitted by the National Association of Securities Dealers.
(C) Absent waivers of management fees, total Fund operating expenses
would have been 1.21% and 1.70% for Class A and Class C shares,
respectively, for the fiscal year ended September 30, 1995.
</TABLE>
The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear
directly or indirectly. The percentages expressing annual fund
operating expenses are based on amounts incurred during the most
recent fiscal year. THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:
Class A Class C
Shares Shares
1 Year $ 28 $ 23
3 Years 43 39
5 Years 61 68
10 Years 111 150
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
The following information, which has been audited by Arthur Andersen
LLP, is an integral part of the audited financial statements and
should be read in conjunction with the financial statements. The
financial statements as of September 30, 1995 and related auditors'
report appear in the Statement of Additional Information of the Fund,
which can be obtained by shareholders at no charge by calling MGF
Service Corp. (Nationwide call toll-free 800-543-0407, in Cincinnati
call 629-2050) or by writing to the Trust at the address on the front
of this Prospectus.
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A CLASS C
YEAR YEAR PERIOD PERIOD
ENDED ENDED ENDED ENDED
SEPT.30, SEPT.30, SEPT.30, SEPT.30,
1995 1994 1993(A) 1995(B)
<S> <C> <C> <C> <C>
Net asset value at beginning of period $9.82 $10.01 $10.00 $9.76
------- ------- ------- -----
Income from investment operations:
Net investment income 0.55 0.39 0.28 0.22
Net realized and unrealized gains
(losses) on investments (0.04) (0.18) 0.01 0.02
------- ------- ------- -----
Total from investment operations 0.51 0.21 0.29 0.24
------- ------- ------- -----
Less distributions:
Dividends from net investment income (0.55) (0.39) (0.28) (0.22)
Distributions from net realized gains -- (0.01) -- --
------- ------- ------- -----
Total distributions (0.55) (0.40) (0.28) (0.22)
------- ------- ------- -----
Net asset value at end of period $9.78 $9.82 $10.01 $9.78
======= ======= ======= =====
Total return(C) 5.33% 2.09% 4.56(E) 5.87%(E)
======= ======= ======= =====
Net assets at end of period (000's) $20,752 $37,572 $24,400 $ 86
======= ======= ======= =====
Ratio of expenses to average net assets(D) 0.75% 0.68% 0.22%(E) 1.24%(E)
Ratio of net investment income to average net assets 5.57% 3.91% 4.17%(E) 5.38%(E)
Portfolio turnover rate 115% 81% 170%(E) 115%(E)
<FN>
(A)Represents the period from the initial public offering of Class A
shares (February 10, 1993) through September 30, 1993.
(B)Represents the period from the initial public offering of Class C
shares (May 1, 1995) through September 30, 1995.
(C)The total returns shown do not include the effect of applicable
sales loads.
(D)Absent fee waivers and/or expense reimbursements by the Adviser,
the ratios of expenses to average net assets for Class A shares would
have been 1.21%, 0.78% and 1.18%(E) for the periods ended September
30, 1995, 1994 and 1993, respectively. Absent fee waivers and expense
reimbursements by the Adviser, the ratio of expenses to average net
assets for Class C shares would have been 18.84%(E) for the period
ended September 30, 1995.
(E)Annualized.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a series of Midwest Trust (the "Trust"). The Fund seeks
high current income, consistent with lower volatility of principal.
The Fund seeks to achieve its investment objective by investing
primarily in mortgage-backed securities created from pools of
adjustable rate mortgages which are guaranteed as to principal and
interest by the United States Government, its agencies or
instrumentalities.
The Fund is not intended to be a complete investment program, and
there is no assurance that its investment objective can be achieved.
The Fund's investment objective is fundamental and as such may not be
changed without the affirmative vote of a majority of the outstanding
shares of the Fund. The term "majority" of the outstanding shares
means the lesser of (1) 67% or more of the outstanding shares of the
Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such
meeting or (2) more than 50% of the outstanding shares of the Fund.
Unless otherwise indicated, all investment practices and limitations
of the Fund are nonfundamental policies which may be changed by the
Board of Trustees without shareholder approval.
Under normal circumstances, at least 65% of the Fund's total assets
will be invested in adjustable rate mortgage securities
(collectively, "mortgage-related securities"), which have interest
rates that are reset at periodic intervals and which are issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities. It is anticipated that by investing primarily in
mortgage-related securities which have variable rates of interest,
the Fund will achieve a less volatile net asset value than is
characteristic of mutual funds that invest primarily in
mortgage-related securities paying a fixed rate of interest.
Mortgage-related securities eligible for purchase by the Fund are
described below.
The market value of investments available to the Fund, and therefore
the Fund's yield and net asset value, will fluctuate due to changes
in interest rates, economic conditions, quality ratings and other
factors beyond the control of the Adviser. Mortgage-related
securities and other debt securities are subject to price
fluctuations based upon changes in the level of interest rates, which
will generally result in all those securities changing in price in
the same way, i.e., all those securities experiencing appreciation
when interest rates decline and depreciation when interest rates
rise. In addition, the prepayment experience of the mortgages
underlying mortgage-related securities may affect the value of, and
the return on an investment in, such securities.
In addition to mortgage-related securities, the Fund may invest in
all types of U.S. Government obligations (described below). For
defensive or liquidity purposes, the Fund may temporarily hold up to
10% of its assets in short-term obligations such as bank debt
instruments (certificates of deposit, bankers' acceptances and time
deposits) or repurchase agreements collateralized by U.S. Government
obligations.
<PAGE>
It is the current policy of the Fund to limit its investments and
transactions to those investments and transactions permissible for
Federal credit unions pursuant to 12 U.S.C. Section 1757(7) and (8)
and 12 CFR Part 703. If this policy is changed as to permit the Fund
to make portfolio investments and engage in transactions not
permissible for Federal credit unions, the Trust will so notify all
Federal credit union shareholders.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities include
GNMA Certificates, FHLMC Certificates and FNMA Certificates.
GNMA Certificates are U.S. Government obligations guaranteed by the
Government National Mortgage Association (the GNMA) and are
mortgage-backed securities representing part ownership of a pool of
mortgage loans. The pool of mortgage loans underlying the GNMA
Certificates is assembled by the issuer, usually a private mortgage
lender. The loans in the pool, issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations, are
either insured by the Federal Housing Administration or the Farmers'
Home Administration or guaranteed by the Veterans Administration. If
the pool is approved by the GNMA, GNMA Certificates are issued and
sold to investors such as the Fund. The Fund will invest only in
GNMA Certificates of the pass-through type. This type of GNMA
Certificate entitles the holder to receive all interest and principal
payments owed on the pool of mortgage loans, net of fees paid to the
issuer and the GNMA. In addition, the timely payment of interest and
principal on this type of GNMA Certificate is guaranteed by the GNMA,
even in the event of the foreclosure of underlying mortgage loans.
The GNMA guarantee is backed by the full faith and credit of the
United States. However, shares of the Fund are not guaranteed or
backed by either the GNMA or the United States.
FHLMC Certificates are U.S. Government obligations guaranteed by the
Federal Home Loan Mortgage Corporation (the FHLMC). As with GNMA
Certificates, FHLMC Certificates are pass-through mortgage-backed
securities representing part ownership of a pool of mortgage loans.
The FHLMC generally purchases such mortgage loans from those lenders
insured by the Federal Deposit Insurance Corporation, or Federal
Housing Administration mortgagees approved by the Department of
Housing and Urban Development. The securities and guarantees of the
FHLMC are not backed, directly or indirectly, by the full faith and
credit of the United States.
FNMA Certificates are U.S. Government obligations guaranteed by the
Federal National Mortgage Association (the FNMA). The FNMA is a U.S.
Government sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary
of Housing and Urban Development. The FNMA purchases residential
mortgages from a list of approved sellers, which include state and
federally-chartered savings and loan associations, mutual savings
banks, commercial banks, credit unions and mortgage banks.
Pass-through securities issued by the FNMA are not backed by the full
faith and credit of the United States, although the Secretary of the
Treasury of the United States has discretionary authority to lend the
FNMA up to $2.25 billion outstanding at any time.
<PAGE>
Prepayments of and payments on foreclosures of mortgage loans
underlying a mortgage-related security are passed through to the
registered holder with the regular monthly payments of principal and
interest, and have the effect of reducing future payments. The
mortgage loans underlying a mortgage-related security may be prepaid
at any time without penalty. If a prepayment of a mortgage loan
underlying a particular mortgage-related security occurs, the return
to the Fund may be lower if the Fund acquired the security at a
premium over par or higher if the Fund acquired the security at a
discount from par. In addition, prepayments of mortgage loans
underlying a particular mortgage-related security held by the Fund
will reduce the market value of the security to the extent the market
value of the security at the time of prepayment exceeds its par
value. In periods of declining mortgage interest rates, prepayments
may occur with increasing frequency because, among other reasons,
mortgagors may be able to refinance outstanding mortgages at lower
interest rates. In general, a decline in interest rates will cause
the net asset value of the Fund to increase to the extent that
prepayments do not occur, while a rise in interest rates will cause
the net asset value of the Fund to decrease.
Most of the pass-through mortgage securities in which the Fund
invests will be adjustable rate mortgage securities ("ARMS"). ARMS
are collateralized by adjustable rather than fixed-rate mortgages.
The ARMS in which the Fund invests are actively traded. Generally,
adjustable rate mortgages have a specified maturity date and amortize
principal over their life. In periods of declining interest rates
there is a reasonable likelihood that ARMS will experience increased
rates of prepayment of principal. However, the major difference
between ARMS and fixed-rate mortgage securities is that the interest
rate can and does change in accordance with movements in a
particular, pre-specified, published interest rate index. There are
two main categories of indices: those based on U.S. Treasury
obligations and those derived from a calculated measure, such as a
cost of funds index or a moving average of mortgage rates. The
amount of interest on an adjustable rate mortgage is calculated by
adding a specified amount to the applicable index, subject to
limitations on the maximum and minimum interest that is charged
during the life of the mortgage or to maximum and minimum changes to
that interest rate during a given period. Because the interest rate
on ARMS generally moves in the same direction as market interest
rates, the market value of ARMS tends to be more stable than that of
fixed-rate mortgage securities and ARMS tend to experience lower
rates of prepayment of principal than fixed-rate mortgage securities.
However, ARMS are also less likely than fixed-rate mortgage
securities of comparable quality and maturity to increase
significantly in value during periods of declining interest rates.
<PAGE>
The adjustable interest rate feature of the mortgages underlying ARMS
will generally act as a buffer to reduce sharp changes in the Fund's
net asset value in response to normal interest rate fluctuations. As
the interest rates on the mortgages underling ARMS are reset
periodically, yields of portfolio securities will gradually align
themselves to reflect changes in market rates and should cause the
net asset value of the Fund to fluctuate less dramatically than it
would if the Fund invested in more traditional long-term, fixed-rate
debt securities. However, during the periods of rising interest
rates, changes in the coupon rate lag behind changes in the market
rate resulting in possibly a slightly lower net asset value until the
coupon resets to market rates. Thus, investors could suffer some
principal loss if they sold their shares of the Fund before the
interest rates on the underlying mortgages are adjusted to reflect
current market rates.
The underlying mortgages which collateralize the ARMS in which the
Fund invests will frequently have caps and floors which limit the
maximum amount by which the loan rate to the residential borrower may
change up or down (1) per reset or adjustment interval and (2) over
the life of the loan. Some residential mortgage loans restrict
periodic adjustments by limiting changes in the borrower's monthly
principal and interest payments rather than limiting interest rate
changes. These payment caps may result in negative amortization.
The value of mortgage-related securities in which the Fund invests
may be affected if market interest rates rise or fall faster and
farther than the allowable caps or floors on the underlying
residential mortgage loans. Additionally, even though the interest
rates on the underlying residential mortgages are adjustable,
amortization and prepayments may occur, thereby causing the effective
maturities of the mortgage-related securities in which the Fund
invests to be shorter than the maturities stated in the underlying
mortgages.
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include
securities which are issued or guaranteed by the United States
Treasury, by various agencies of the United States Government, and by
various instrumentalities which have been established or sponsored by
the United States Government. U.S. Treasury obligations are backed
by the "full faith and credit" of the United States Government. U.S.
Treasury obligations include Treasury bills, Treasury notes, and
Treasury bonds. U.S. Treasury obligations also include the separate
principal and interest components of U.S. Treasury obligations which
are traded under the Separate Trading of Registered Interest and
Principal of Securities ("STRIPS") program. Agencies or
instrumentalities established by the United States Government include
the Federal Home Loan Banks, the Federal Land Bank, the Government
National Mortgage Association, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, the Student
Loan Marketing Association, the Small Business Administration, the
Bank for Cooperatives, the Federal Intermediate Credit Bank, the
Federal Financing Bank, the Federal Farm Credit Banks, the Federal
Agricultural Mortgage Corporation, the Resolution Funding
Corporation, the Financing Corporation of America and the Tennessee
Valley Authority. Some of these securities are supported by the full
faith and credit of the United States Government while others are
supported only by the credit of the agency or instrumentality, which
may include the right of the issuer to borrow from the United States
Treasury. In the case of securities not backed by the full faith and
credit of the United States, the investor must look principally to
the agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United
States in the event the agency or instrumentality does not meet its
commitments. Shares of the Fund are not guaranteed or backed by the
United States Government.
<PAGE>
The Fund may invest in securities issued or guaranteed by any of the
entities listed above or by any other agency or instrumentality
established or sponsored by the United States Government, provided
that the securities are otherwise permissible investments of the
Fund. Certain U.S. Government obligations which have a variable rate
of interest readjusted no less frequently than annually will be
deemed to have a maturity equal to the period remaining until the
next readjustment of the interest rate.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each
of which may involve certain risks:
DELAYED SETTLEMENT TRANSACTIONS. Obligations issued on a when-issued
or to-be-announced basis are settled by delivery and payment after
the date of the transaction, usually within 15 to 45 days. In a
to-be-announced transaction, the Fund has committed to purchasing or
selling securities for which all specific information is not yet
known at the time of the trade, particularly the face amount in
transactions involving mortgage-related securities. The Fund will
only make commitments to purchase obligations on a when-issued or
to-be-announced basis with the intention of actually acquiring the
obligations, but the Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment
strategy or in order to meet its obligations, although it would not
normally expect to do so. The Fund will not enter into a delayed
settlement transaction which settles in more than 120 days.
Purchases of securities on a when-issued or to-be-announced basis are
subject to market fluctuations and their current value is determined
in the same manner as other portfolio securities. When effecting
such purchases for the Fund, a segregated account of cash or U.S.
Government obligations of the Fund in an amount sufficient to make
payment for the portfolio securities to be purchased will be
maintained with the Fund's Custodian at the trade date and valued
daily at market for the purpose of determining the adequacy of the
securities in the account. If the market value of segregated
securities declines, additional cash or U.S. Government obligations
will be segregated on a daily basis so that the market value of the
Fund's segregated assets will equal the amount of the Fund's
commitments to purchase when-issued obligations and securities on a
to-be-announced basis. The Fund's purchase of securities on a
when-issued or to-be-announced basis may increase its overall
investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date or if the
broker-dealer selling the securities fails to deliver after the value
of the securities has risen.
<PAGE>
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by
which the Fund purchases a security and simultaneously commits to
resell that security to the seller at an agreed upon time and price,
thereby determining the yield during the term of the agreement. In
the event of a bankruptcy or other default of the seller of a
repurchase agreement, the Fund could experience both delays in
liquidating the underlying security and losses. To minimize these
possibilities, the Fund intends to enter into repurchase agreements
only with its Custodian, banks having assets in excess of $10 billion
and the largest and, in the Board of Trustees' judgment, most
creditworthy primary U.S. Government securities dealers. The Fund
will enter into repurchase agreements which are collateralized by
U.S. Government obligations. Collateral for repurchase agreements is
held in safekeeping in the customer-only account of the Fund's
Custodian at the Federal Reserve Bank. At the time the Fund enters
into a repurchase agreement, the value of the collateral, including
accrued interest, will equal or exceed the value of the repurchase
agreement and, in the case of a repurchase agreement exceeding one
day, the seller agrees to maintain sufficient collateral so that the
value of the underlying collateral, including accrued interest, will
at all times equal or exceed the value of the repurchase agreement.
The Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value
of the net assets of the Fund would be invested in such securities
and other illiquid securities.
BORROWING AND PLEDGING. As a temporary measure for extraordinary or
emergency purposes, the Fund may borrow money from banks or other
persons in an amount not exceeding 10% of its total assets. The Fund
may pledge assets in connection with borrowings but will not pledge
more than 15% of its total assets. The Fund will not make any
additional purchases of portfolio securities if outstanding
borrowings exceed 5% of the value of its total assets. Borrowing
magnifies the potential for gain or loss on the Fund's portfolio
securities and, therefore, if employed, increases the possibility of
fluctuation in its net asset value. This is the speculative factor
known as leverage. To reduce the risks of borrowing, the Fund will
limit its borrowings as described above. The Fund's policies on
borrowing and pledging are fundamental policies which may not be
changed without the affirmative vote of a majority of its outstanding
shares.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of
its portfolio securities to banks, brokers and dealers. Lending
portfolio securities exposes the Fund to the risk that the borrower
may fail to return the loaned securities or may not be able to
provide additional collateral or that the Fund may experience delays
in recovery of the loaned securities or loss of rights in the
collateral if the borrower fails financially. To minimize these
risks, the borrower must agree to maintain collateral marked to
market daily, in the form of cash and/or U.S. Government obligations,
with the Fund's Custodian in an amount at least equal to the market
value of the loaned securities. The Fund will limit the amount of
its loans of portfolio securities to no more than 25% of its net
assets. This lending policy may not be changed by the Fund without
the affirmative vote of a majority of its outstanding shares.
<PAGE>
PORTFOLIO TURNOVER. The Fund does not intend to use short-term
trading as a primary means of achieving its investment objective.
However, the Fund's rate of portfolio turnover will depend upon
market and other conditions, and it will not be a limiting factor
when portfolio changes are deemed necessary or appropriate by the
Adviser. The portfolio turnover of the Fund may be greater than that
of many other mutual funds. High turnover involves correspondingly
greater commission expenses and transaction costs and increases the
possibility that the Fund would not qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. The Fund
will not qualify as a regulated investment company if it derives 30%
or more of its gross income from gains (without offset for losses)
from the sale or other disposition of securities held for less than
three months. High turnover may result in the Fund recognizing
greater amounts of income and capital gains, which would increase the
amount of income and capital gains which the Fund must distribute to
its shareholders in order to maintain its status as a regulated
investment company and to avoid the imposition of federal income or
excise taxes (see "Taxes").
<PAGE>
HOW TO PURCHASE SHARES
Your initial investment in the Fund ordinarily must be at least
$1,000 ($250 for tax-deferred retirement plans). You may purchase
additional shares through the Open Account Program described below.
You may open an account and make an initial investment through
securities dealers having a sales agreement with the Trust's
principal underwriter, Midwest Group Financial Services, Inc. (the
"Adviser"). You may also make a direct initial investment by sending
a check and a completed account application form to MGF Service
Corp., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be
made payable to the "Adjustable Rate U.S. Government Securities
Fund." An account application is included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not ordinarily
issued, but you may receive a certificate without charge by sending a
written request to MGF Service Corp. Certificates for fractional
shares will not be issued. If a certificate has been issued to you,
you will not be permitted to redeem shares by check, to redeem or
exchange shares by telephone, or to use the automatic withdrawal plan
as to those shares. The Trust and the Adviser reserve the rights to
limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application
contains provisions in favor of the Trust, MGF Service Corp. and
certain of their affiliates, excluding such entities from certain
liabilities (including, among others, losses resulting from
unauthorized shareholder transactions) relating to the various
services (for example, telephone redemptions and exchanges and check
redemptions) made available to investors.
Should an order to purchase shares be canceled because your check
does not clear, you will be responsible for any resulting losses or
fees incurred by the Trust or MGF Service Corp. in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the
services described in this section to MGF Service Corp. at the
address or numbers listed below.
After an initial investment, all investors are considered
participants in the Open Account Program. The Open Account Program
helps investors make purchases of shares of the Fund over a period of
years and permits the automatic reinvestment of dividends and
distributions of the Fund in additional shares without a sales load.
Under the Open Account Program, you may purchase and add shares to
your account at any time either through your securities dealer or by
sending a check to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio
45201-5354. The check should be made payable to the "Adjustable Rate
U.S. Government Securities Fund."
Under the Open Account Program, you may also purchase shares of the
Fund by bank wire. Please telephone MGF Service Corp. (Nationwide
call toll-free 800-543-0407; in Cincinnati call 629-2050) for
instructions. Your bank may impose a charge for sending your wire.
There is presently no fee for receipt of wired funds, but MGF Service
Corp. reserves the right to charge shareholders for this service upon
thirty days' prior notice to shareholders.
<PAGE>
Each additional purchase request must contain the name of your
account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent
investments, the Trust reserves the right to impose such requirement.
All purchases under the Open Account Program are made at the public
offering price next determined after receipt of a purchase order by
the Trust. If a broker-dealer received concessions for selling
shares of the Fund to a current shareholder, such broker-dealer will
receive the concessions described above with respect to additional
investments by the shareholder.
SALES LOAD ALTERNATIVES
The Fund offers two classes of shares which may be purchased at the
election of the purchaser. The two classes of shares each represent
interests in the same portfolio of investments of the Fund, have the
same rights and are identical in all material respects except that
(i) Class C shares bear the expenses of higher distribution fees;
(ii) certain other class specific expenses will be borne solely by
the class to which such expenses are attributable, including transfer
agent fees attributable to a specific class of shares, printing and
postage expenses related to preparing and distributing materials to
current shareholders of a specific class, registration fees incurred
by a specific class of shares, the expenses of administrative
personnel and services required to support the shareholders of a
specific class, litigation or other legal expenses relating to a
class of shares, Trustees' fees or expenses incurred as a result of
issues relating to a specific class of shares and accounting fees and
expenses relating to a specific class of shares; and (iii) each class
has exclusive voting rights with respect to matters relating to its
own distribution arrangements. The net income attributable to Class
C shares and the dividends payable on Class C shares will be reduced
by the amount of the incremental expenses associated with the
distribution fee (see "Distribution Plans"). Shares of the Fund
purchased prior to May 2, 1995 are Class A shares.
The Fund's alternative sales arrangements permit investors to choose
the method of purchasing shares that is most beneficial given the
amount of the purchase, the length of time the investor expects to
hold his shares and other relevant circumstances. Investors should
determine whether under their particular circumstances it is more
advantageous to incur a front-end sales load and be subject to lower
ongoing charges, as discussed below, or to have all of the initial
purchase price invested in the Fund with the investment thereafter
being subject to higher ongoing charges. A salesperson or any other
person entitled to receive any portion of a distribution fee may
receive different compensation for selling Class A or Class C shares.
<PAGE>
As an illustration, investors who qualify for reduced sales loads as
described below, might elect the Class A sales load alternative
because similar sales load reductions are not available for purchases
under the Class C sales load alternative. Moreover, shares acquired
under the Class A sales load alternative would be subject to lower
ongoing distribution fees as described below. Investors not
qualifying for reduced initial sales loads who expect to maintain
their investment for an extended period of time might also elect the
Class A sales load alternative because over time the accumulated
continuing distribution fees on Class C shares may exceed the
difference in initial sales loads between Class A and Class C shares.
Again, however, such investors must weigh this consideration against
the fact that less of their funds will be invested initially under
the Class A sales load alternative. Furthermore, the higher ongoing
distribution fees will be offset to the extent any return is realized
on the additional funds initially invested under the Class C sales
load alternative.
Some investors might determine that it would be more advantageous to
utilize the Class C sales load alternative to have more of their
funds invested initially, although remaining subject to higher
ongoing distribution fees and, for a one-year period, being subject
to a contingent deferred sales load. For example, based on estimated
fees and expenses, an investor subject to the maximum 2% initial
sales load on Class A shares who elects to reinvest dividends in
additional shares would have to hold the investment in Class A shares
approximately 4 years before the accumulated ongoing distribution
fees on the alternative Class C shares would exceed the initial sales
load plus the accumulated ongoing distribution fees on Class A
shares. In this example and assuming the investment was maintained
for more than 4 years, the investor might consider purchasing Class A
shares. This example does not take into account the time value of
money which reduces the impact of the higher ongoing Class C
distribution fees, fluctuations in net asset value or the effect of
different performance assumptions.
In addition to the compensation otherwise paid to securities dealers,
the Adviser may from time to time pay from its own resources
additional cash bonuses or other incentives to selected dealers in
connection with the sale of shares of the Fund. On some occasions,
such bonuses or incentives may be conditioned upon the sale of a
specified minimum dollar amount of the shares of the Fund and/or
other funds in the Midwest Group during a specific period of time.
Such bonuses or incentives may include financial assistance to
dealers in connection with conferences, sales or training programs
for their employees, seminars for the public, advertising, sales
campaigns and other dealer-sponsored programs or events.
CLASS A SHARES
Class A shares of the Fund are sold on a continuous basis at the
public offering price next determined after receipt of a purchase
order by the Trust. Purchase orders received by dealers prior to
4:00 p.m., Eastern time, on any business day and transmitted to the
Adviser by 5:00 p.m., Eastern time, that day are confirmed at the
public offering price determined as of the close of the regular
session of trading on the New York Stock Exchange on that day. It is
the responsibility of dealers to transmit properly completed orders
so that they will be received by the Adviser by 5:00 p.m., Eastern
time. Dealers may charge a fee for effecting purchase orders.
Direct purchase orders received by MGF Service Corp. by 4:00 p.m.,
Eastern time, are confirmed at that day's public offering price.
Direct investments received by MGF Service Corp. after 4:00 p.m.,
Eastern time, and orders received from dealers after 5:00 p.m.,
Eastern time, are confirmed at the public offering price next
determined on the following business day.
<PAGE>
The public offering price of Class A shares applicable to investors
whose accounts are opened after January 31, 1995 is the next
determined net asset value per share plus a sales load as shown in
the following table.
<TABLE>
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
Less than $100,000 2.00% 2.04% 1.80%
$100,000 but less than $250,000 1.50 1.52 1.35%
$250,000 but less than $500,000 1.00 1.01 .90
$500,000 but less than $1,000,000 .75 .76 .65
$1,000,000 or more None* None*
Investors whose accounts were opened prior to February 1, 1995 are
subject to a different table of sales loads as follows:
<CAPTION>
Dealer
Sales Load as % of: Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
<S> <C> <C> <C>
Less than $500,000 1.00% 1.01% 1.00%
$500,000 but less than $1,000,000 .75 .76 .75
$1,000,000 or more None* None*
<FN>
* There is no front-end sales load on purchases of $1 million or
more but a contingent deferred sales load of .50% may apply with
respect to Class A shares if a commission was paid by the Adviser to
a participating unaffiliated dealer and the shares are redeemed
within twelve months from the date of purchase.
</TABLE>
<PAGE>
Under certain circumstances, the Adviser may increase or decrease
the reallowance to dealers. Dealers engaged in the sale of shares
of the Fund may be deemed to be underwriters under the Securities
Act of 1933. The Adviser retains the entire sales load on all
direct initial investments in the Fund and on all investments in
accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made
after October 1, 1995 and subsequent purchases further increasing
the size of the account, a dealer's commission of .50% of the
purchase amount may be paid by the Adviser to participating
unaffiliated dealers through whom such purchases are effected. In
determining a dealer's eligibility for such commission, purchases of
Class A shares of the Fund may be aggregated with concurrent
purchases of Class A shares of other Midwest Group funds. Dealers
should contact the Adviser concerning the applicability and
calculation of the dealer's commission in the case of combined
purchases. An exchange from other Midwest Group funds will not
qualify for payment of the dealer's commission, unless such exchange
is from a Midwest Group fund with assets as to which a dealer's
commission or similar payment has not been previously paid.
Redemptions of Class A shares may result in the imposition of a
contingent deferred sales load if the dealer's commission described
in this paragraph was paid in connection with the purchase of such
shares. See "Contingent Deferred Sales Charge for Certain Purchases
of Class A Shares" below.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right
of Accumulation to combine the cost or current net asset value
(whichever is higher) of his existing Class A shares of the load
funds distributed by the Adviser with the amount of his current
purchases in order to take advantage of the reduced sales loads set
forth in the table above. Purchases made in any load fund
distributed by the Adviser pursuant to a Letter of Intent may also
be eligible for the reduced sales loads. The minimum initial
investment under a Letter of Intent is $10,000. The load funds
currently distributed by the Adviser are listed in the Exchange
Privilege section of this Prospectus. Shareholders should contact
MGF Service Corp. for information about the Right of Accumulation
and Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase Class A shares of
the Fund at net asset value when the payment for your investment
represents the proceeds from the redemption of shares of any other
mutual fund which has a front-end sales load and is not distributed
by the Adviser. Your investment will qualify for this provision if
the purchase price of the shares of the other fund included a sales
load and the redemption occurred within one year of the purchase of
such shares and no more than sixty days prior to your purchase of
Class A shares of the Fund. To make a purchase at net asset value
pursuant to this provision, you must submit photocopies of the
confirmations (or similar evidence) showing the purchase and
redemption of shares of the other fund. Your payment may be made
with the redemption check representing the proceeds of the shares
redeemed, endorsed to the order of the "Adjustable Rate U.S.
Government Securities Fund." The redemption of shares of the other
fund is, for federal income tax purposes, a sale on which you may
realize a gain or loss. These provisions may be modified or
terminated at any time. Contact your securities dealer or the Trust
for further information.
<PAGE>
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also
purchase Class A shares of the Fund at net asset value. To the
extent permitted by regulatory authorities, a bank trust department
may charge fees to clients for whose account it purchases shares at
net asset value. Federal and state credit unions may also purchase
Class A shares at net asset value.
In addition, Class A shares of the Fund may be purchased at net
asset value by broker-dealers who have a sales agreement with the
Adviser, and their registered personnel and employees, including
members of the immediate families of such registered personnel and
employees.
Clients of municipal fund advisers, public finance investment
specialists, municipal reinvestment brokers, authorities and
trustees may purchase Class A shares of the Fund at net asset value
if the permitted investment section of the trust indenture can be
interpreted with an accompanying opinion by the issuer or trustee
counsel.
Clients of investment advisers and financial planners may also
purchase Class A shares of the Fund at net asset value if their
investment adviser or financial planner has made arrangements to
permit them to do so with the Trust and the Adviser. The investment
adviser or financial planner must notify MGF Service Corp. that an
investment qualifies as a purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the
Adviser or MGF Service Corp., including members of the immediate
family of such individuals and employee benefit plans established by
such entities, may also purchase Class A shares of the Fund at net
asset value.
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A
SHARES. A contingent deferred sales load is imposed upon certain
redemptions of Class A shares of the Fund (or shares into which such
Class A shares were exchanged) purchased at net asset value in
amounts totaling $1 million or more, if the dealer's commission
described above was paid by the Adviser and the shares are redeemed
within twelve months from the date of purchase. The contingent
deferred sales load will be paid to the Adviser and will be equal to
.50% of the lesser of (1) the net asset value at the time of
purchase of the Class A shares being redeemed or (2) the net asset
value of such Class A shares at the time of redemption. In
determining whether the contingent deferred sales load is payable,
it is assumed that shares not subject to the contingent deferred
sales load are the first redeemed followed by other shares held for
the longest period of time. The contingent deferred sales load will
not be imposed upon shares representing reinvested dividends or
capital gains distributions, or upon amounts representing share
appreciation. If a purchase of Class A shares is subject to the
contingent deferred sales load, the investor will be so notified on
the confirmation for such purchase.
<PAGE>
Redemptions of such Class A shares of the Fund held for at least 12
months will not be subject to the contingent deferred sales load and
an exchange of such Class A shares into another Midwest Group fund
is not treated as a redemption and will not trigger the imposition
of the contingent deferred sales load at the time of such exchange.
A fund will "tack" the period for which such Class A shares being
exchanged were held onto the holding period of the acquired shares
for purposes of determining if a contingent deferred sales load is
applicable in the event that the acquired shares are redeemed
following the exchange; however, the period of time that the
redemption proceeds of such Class A shares are held in a money
market fund will not count toward the holding period for determining
whether a contingent deferred sales load is applicable. (See
"Exchange Privilege".)
The contingent deferred sales load is currently waived for any
partial or complete redemption following death or disability (as
defined in the Internal Revenue Code of 1986, as amended) of a
shareholder (including one who owns the shares with his or her
spouse as a joint tenant with rights of survivorship) from an
account in which the deceased or disabled is named. The Adviser may
require documentation prior to waiver of the charge, including death
certificates, physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the applicable
sales load and for purposes of the Letter of Intent and Right of
Accumulation privileges, a purchaser includes an individual, his
spouse and their children under the age of 21, purchasing shares for
his or their own account; or a trustee or other fiduciary purchasing
shares for a single fiduciary account although more than one
beneficiary is involved; or employees of a common employer, provided
that economies of scale are realized through remittances from a
single source and quarterly confirmation of such purchases; or an
organized group, provided that the purchases are made through a
central administration, or a single dealer, or by other means which
result in economy of sales effort or expense. Contact MGF Service
Corp. for additional information concerning purchases at net asset
value or at reduced sales loads.
CLASS C SHARES
Class C shares of the Fund are sold on a continuous basis at the net
asset value next determined after receipt of a purchase order by the
Trust. Purchase orders received by dealers prior to 4:00 p.m.,
Eastern time, on any business day and transmitted to the Adviser by
5:00 p.m., Eastern time, that day are confirmed at the net asset
value determined as of the close of the regular session of trading
on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so
that they will be received by the Adviser by 5:00 p.m., Eastern
time. Dealers may charge a fee for effecting purchase orders.
Direct purchase orders received by MGF Service Corp. by 4:00 p.m.,
Eastern time, are confirmed at that day's net asset value. Direct
investments received by MGF Service Corp. after 4:00 p.m., Eastern
time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the net asset value next determined on the
following business day.
<PAGE>
A contingent deferred sales load is imposed on Class C shares if an
investor redeems an amount which causes the current value of the
investor's account to fall below the total dollar amount of purchase
payments subject to the deferred sales load, except that no such
charge is imposed if the shares redeemed have been acquired through
the reinvestment of dividends or capital gains distributions or to
the extent the amount redeemed is derived from increases in the
value of the account above the amount of purchase payments subject
to the deferred sales load.
Whether a contingent deferred sales load is imposed will depend on
the amount of time since the investor made a purchase payment from
which an amount is being redeemed. Purchases are subject to the
contingent deferred sales load according to the following schedule:
<TABLE>
<CAPTION>
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
<S> <C>
First Year 1%
Thereafter None
</TABLE>
In determining whether a contingent deferred sales load is payable,
it is assumed that the purchase payment from which the redemption is
made is the earliest purchase payment (from which a redemption or
exchange has not already been effected). If the earliest purchase
from which a redemption has not yet been effected was made within
one year before the redemption, then a deferred sales load at the
rate of 1% will be imposed.
The following example will illustrate the operation of the
contingent deferred sales load. Assume that an individual opens an
account and purchases 1,000 shares at $10 per share and that six
months later the net asset value per share is $12 and, during such
time, the investor has acquired 50 additional shares through
reinvestment of distributions. If at such time the investor should
redeem 450 shares (proceeds of $5,400), 50 shares will not be
subject to the load because of dividend reinvestment. With respect
to the remaining 400 shares, the load is applied only to the
original cost of $10 per share and not to the increase in net asset
value of $2 per share. Therefore, $4,000 of the $5,400 redemption
proceeds will be charged the load. At the rate of 1%, the
contingent deferred sales load would be $40. In determining whether
an amount is available for redemption without incurring a deferred
sales load, the purchase payments made for all Class C shares in the
shareholder's account are aggregated, and the current value of all
such shares is aggregated.
All sales loads imposed on redemptions are paid to the Adviser. The
Adviser intends to pay a commission of 1% of the purchase amount to
participating brokers at the time the investor purchases Class C
shares.
<PAGE>
The contingent deferred sales load is currently waived for any
partial or complete redemption following death or disability (as
defined in the Internal Revenue Code of 1986, as amended) of a
shareholder (including one who owns the shares with his or her
spouse as a joint tenant with rights of survivorship) from an
account in which the deceased or disabled is named. The Adviser may
require documentation prior to waiver of the charge, including death
certificates, physicians' certificates, etc.
SHAREHOLDER SERVICES
Contact MGF Service Corp. (Nationwide call toll-free 800-543-0407;
in Cincinnati call 629-2050) for additional information about the
shareholder services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you
may elect to receive, or may designate another person to receive,
monthly or quarterly payments in a specified amount of not less than
$50 each. There is no charge for this service. Purchases of
additional Class A shares of the Fund while the plan is in effect
are generally undesirable because a sales load is incurred whenever
purchases are made.
TAX-DEFERRED RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
- -- Keogh Plans for self-employed individuals
- -- Individual retirement account (IRA) plans for individuals and
their non-employed spouses
- -- Qualified pension and profit-sharing plans for employees,
including those profit-sharing plans with a 401(k) provision
- -- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit organizations
meeting certain requirements of the Internal Revenue Code.
DIRECT DEPOSIT PLANS
Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans
enable a shareholder to have all or a portion of his or her payroll
or social security checks transferred automatically to purchase
shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Fund from your
bank, savings and loan or other depository institution account. The
minimum initial and subsequent investments must be $50 under the
plan. MGF Service Corp. pays the costs associated with these
transfers, but reserves the right, upon thirty days' written notice,
to make reasonable charges for this service. Your depository
institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Fund.
<PAGE>
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Fund, you may reinvest all or
part of the proceeds without any additional sales load. This
reinvestment must occur within ninety days of the redemption and the
privilege may only be exercised once per year.
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Trust is open
for business. You will receive the net asset value per share next
determined after receipt by MGF Service Corp. of a proper redemption
request in the form described below, less any applicable contingent
deferred sales load. Payment is normally made within three business
days after tender in such form, provided that payment in redemption
of shares purchased by check will be effected only after the check
has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of
the Fund by certified check or wire.
A contingent deferred sales load may apply to a redemption of Class
C shares or to a redemption of certain Class A shares of the Fund
purchased at net asset value. (See "How to Purchase Shares.")
BY TELEPHONE. You may redeem shares by telephone. The proceeds
will be sent by mail to the address designated on your account or
wired directly to your existing account in any commercial bank or
brokerage firm in the United States as designated on your
application. To redeem by telephone, call MGF Service Corp.
(Nationwide call toll-free 800-543-0407; in Cincinnati call
629-2050). The redemption proceeds from your account will be sent
by mail or by wire within three business days after receipt of your
telephone instructions. IRA accounts are not redeemable by
telephone.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which
you have designated under this procedure at any time by writing to
MGF Service Corp. with your signature guaranteed by any eligible
guarantor institution (including banks, brokers and dealers,
municipal securities brokers and dealers, government securities
brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations) or by completing a supplemental telephone redemption
authorization form. Contact MGF Service Corp. to obtain this form.
Further documentation will be required to change the designated
account if shares are held by a corporation, fiduciary or other
organization.
<PAGE>
Neither the Trust, MGF Service Corp., nor their respective
affiliates will be liable for complying with telephone instructions
they reasonably believe to be genuine or for any loss, damage, cost
or expense in acting on such telephone instructions. The affected
shareholders will bear the risk of any such loss. The Trust or MGF
Service Corp., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust
and/or MGF Service Corp. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape
recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by
sending a written request to MGF Service Corp. The request must
state the number of shares or the dollar amount to be redeemed and
your account number. The request must be signed exactly as your
name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be
guaranteed by any of the eligible guarantor institutions outlined
above.
Written redemption requests may also direct that the proceeds be
deposited directly in the bank account or brokerage account
designated on your account application for telephone redemptions.
Proceeds of redemptions requested by mail are mailed within three
business days following receipt of instructions in proper form.
BY CHECK. You may establish a special checking account with the
Fund for the purpose of redeeming shares by check. Checks may be
made payable to anyone for any amount, but checks may not be
certified.
When a check is presented to the Custodian for payment, MGF Service
Corp., as your agent, will cause the Fund to redeem a sufficient
number of full and fractional shares in your account to cover the
amount of the check. Checks will be processed at the net asset
value on the day the check is presented to the Custodian for
payment.
If the amount of a check is greater than the value of the shares
held in your account, the check will be returned. Shareholders
should consider potential fluctuations in the net asset value of the
Fund's shares when writing checks. A check representing a
redemption request will take precedence over any other redemption
instructions issued by a shareholder.
<PAGE>
As long as no more than six check redemptions are effected in your
account in any month, there will be no charge for the check
redemption privilege. However, after six check redemptions are
effected in your account in a month, MGF Service Corp. will charge
you $.25 for each additional check redemption effected that month.
MGF Service Corp. charges shareholders its costs for each stop
payment and each check returned for insufficient funds. In
addition, MGF Service Corp. reserves the right to make additional
charges to recover the costs of providing the check redemption
service. All charges will be deducted from your account by
redemption of shares in your account. The check redemption
procedure may be suspended or terminated at any time upon written
notice by the Trust or MGF Service Corp.
Shareholders should be aware that writing a check (a redemption of
shares) is a taxable event. Shares for which certificates have been
issued may not be redeemed by check.
THROUGH BROKER-DEALERS. You may also redeem shares by placing a
wire redemption request through a securities broker or dealer.
Unaffiliated broker-dealers may impose a fee on the shareholder for
this service. You will receive the net asset value per share next
determined after receipt by the Trust or its agent of your wire
redemption request. It is the responsibility of broker-dealers to
properly transmit wire redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, you will be charged an $8 processing fee by the
Fund's Custodian. The Trust reserves the right, upon thirty days'
written notice, to change the processing fee. All charges will be
deducted from your account by redemption of shares in your account.
Your bank or brokerage firm may also impose a charge for processing
the wire. In the event that wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited
directly in your account with a commercial bank or other depository
institution via an Automated Clearing House (ACH) transaction.
There is currently no charge for ACH transactions. Contact MGF
Service Corp. for more information about ACH transactions.
If a certificate for shares of the Fund was issued, it must be
delivered to MGF Service Corp., or the dealer in the case of a wire
redemption, duly endorsed or accompanied by a duly endorsed stock
power, with the signature guaranteed by any of the eligible
guarantor institutions outlined above.
<PAGE>
At the discretion of the Trust or MGF Service Corp., corporate
investors and other associations may be required to furnish an
appropriate certification authorizing redemptions to ensure proper
authorization. The Trust reserves the right to require you to close
your account if at any time the value of your shares is less than
$1,000 (based on actual amounts invested including any sales load
paid, unaffected by market fluctuations), or $250 in the case of
tax-deferred retirement plans, or such other minimum amount as the
Trust may determine from time to time. After notification to you of
the Trust's intention to close your account, you will be given
thirty days to increase the value of your account to the minimum
amount.
The Trust reserves the right to suspend the right of redemption or
to postpone the date of payment for more than three business days
under unusual circumstances as determined by the Securities and
Exchange Commission.
EXCHANGE PRIVILEGE
Shares of the Fund and of any other fund of the Midwest Group of
Funds may be exchanged for each other.
Class A shares of the Fund which are not subject to a contingent
deferred sales load may be exchanged for Class A shares of any other
fund and for shares of any other fund which offers only one class of
shares (provided such shares are not subject to a contingent
deferred sales load). A sales load will be imposed equal to the
excess, if any, of the sales load rate applicable to the shares
being acquired over the sales load rate, if any, previously paid on
the shares being exchanged.
Class C shares of the Fund, as well as Class A shares of the Fund
subject to a contingent deferred sales load, may be exchanged, on
the basis of relative net asset value per share, for shares of any
other fund which imposes a contingent deferred sales load and for
shares of any fund which is a money market fund. A fund will "tack"
the period for which the shares being exchanged were held onto the
holding period of the acquired shares for purposes of determining if
a contingent deferred sales load is applicable in the event that the
acquired shares are redeemed following the exchange. The period of
time that shares are held in a money market fund will not count
toward the holding period for determining whether a contingent
deferred sales load is applicable.
The following are the funds of the Midwest Group of Funds currently
offered to the public. Funds which may be subject to a front-end or
contingent deferred sales load are indicated by an asterisk.
<TABLE>
<CAPTION>
MIDWEST GROUP TAX FREE TRUST MIDWEST TRUST MIDWEST STRATEGIC TRUST
<S> <C> <C>
Tax-Free Money Fund Short Term Government Income Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund Institutional Government Income Fund *Equity Fund
California Tax-Free Money Fund *Intermediate Term Government Income Fund *Utility Fund
Royal Palm Florida Tax-Free Money Fund *Adjustable Rate U.S. Government *Treasury Total Return Fund
Government Housing Tax-Exempt Fund Securities Fund
*Tax-Free Intermediate Term Fund *Global Bond Fund
*Ohio Insured Tax-Free Fund
</TABLE>
<PAGE>
You may request an exchange by sending a written request to MGF
Service Corp. The request must be signed exactly as your name
appears on the Trust's account records. Exchanges may also be
requested by telephone. If you are unable to execute your
transaction by telephone (for example during times of unusual market
activity) consider requesting your exchange by mail or by visiting
the Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati,
Ohio 45202. An exchange will be effected at the next determined net
asset value (or offering price, if sales load is applicable) after
receipt of a request by MGF Service Corp.
Exchanges may only be made for shares of funds then offered for sale
in your state of residence and are subject to the applicable minimum
initial investment requirements. The exchange privilege may be
modified or terminated by the Board of Trustees upon 60 days' prior
notice to shareholders. An exchange results in a sale of fund
shares, which may cause you to recognize a capital gain or loss.
Before making an exchange, contact MGF Service Corp. to obtain a
current prospectus for any of the other funds in the Midwest Group
and more information about exchanges among the Midwest Group of
Funds.
DIVIDENDS AND DISTRIBUTIONS
All of the net investment income of the Fund is declared as a
dividend to shareholders of record on each business day of the Trust
and paid monthly. The Fund expects to distribute any net realized
long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net
realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option -- income distributions and capital gains
distributions reinvested in additional shares.
Income Option -- income distributions and short-term capital gains
distributions paid in cash; long-term capital gains distributions
reinvested in additional shares.
Cash Option -- income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If
no option is specified on your application, distributions will
automatically be reinvested in additional shares. All distributions
will be based on the net asset value in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S.
Postal Service cannot deliver your checks or if your checks remain
uncashed for six months, your dividends may be reinvested in your
account at the then-current net asset value and your account will be
converted to the Share Option.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty
days of the distribution date to MGF Service Corp. for reinvestment
at the net asset value next determined after its return. The
investor or his dealer must notify MGF Service Corp. that a
distribution is being reinvested pursuant to this provision.
<PAGE>
TAXES
The Fund has qualified in all prior years and intends to continue to
qualify for the special tax treatment afforded a "regulated
investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains
distributed to shareholders. The Fund intends to distribute
substantially all of its net investment income and any net realized
capital gains to its shareholders. Distributions of net investment
income as well as from net realized short-term capital gains, if
any, are taxable as ordinary income. Since the Fund's investment
income is derived from interest rather than dividends, no portion of
such distributions is eligible for the dividends received deduction
available to corporations. Distributions of net realized long-term
capital gains are taxable as long-term capital gains regardless of
how long you have held your Fund shares.
The Fund will mail to each of its shareholders a statement
indicating the amount and federal income tax status of all
distributions made during the year. In addition to federal taxes,
shareholders of the Fund may be subject to state and local taxes on
distributions. Shareholders should consult their tax advisors about
the tax effect of distributions and withdrawals from the Fund and
the use of the Automatic Withdrawal Plan and the Exchange Privilege.
The tax consequences described in this section apply whether
distributions are taken in cash or reinvested in additional shares.
OPERATION OF THE FUND
The Fund is a diversified series of Midwest Trust, an open-end
management investment company organized as a Massachusetts business
trust on December 7, 1980. The Board of Trustees supervises the
business activities of the Trust. Like other mutual funds, the
Trust retains various organizations to perform specialized services
for the Fund.
The Trust retains Midwest Group Financial Services, Inc., 312 Walnut
Street, Cincinnati, Ohio (the "Adviser"), to manage the Fund's
investments and its business affairs. The Adviser was organized in
1974 and is also the investment adviser to four other series of the
Trust, seven series of Midwest Group Tax Free Trust and four series
of Midwest Strategic Trust. The Adviser is a subsidiary of Leshner
Financial, Inc., of which Robert H. Leshner is the controlling
shareholder. The Fund pays the Adviser a fee equal to the annual
rate of .5% of the average value of its daily net assets up to $50
million; .45% of such assets from $50 million to $150 million; .4%
of such assets from $150 million to $250 million; and .375% of such
assets in excess of $250 million.
Hanover Capital Advisors Inc., 90 West Street, New York, New York
("Hanover"), reviews the Fund's portfolio holdings and overall
investment strategies. The Adviser retains Hanover to recommend
securities to be purchased for the Fund and to confer with the
Adviser regarding the credit and maturity guidelines for investments
in the Fund's portfolio. The Adviser pays Hanover a fee equal to
the annual rate of .25% of the average value of the Fund's daily net
assets up to $50 million; .225% of such assets from $50 million to
$150 million; .2% of such assets from $150 to $250 million; and
.1875% of such assets in excess of $250 million. The fee paid to
Hanover is subject to reduction in the event the Adviser waives or
<PAGE>
reimburses any portion of its advisory fee in order to reduce the
operating expenses of the Fund. Hanover is a subsidiary of Hanover
Capital Partners Ltd., the controlling shareholders of which are
John A. Burchett and George J. Ostendorf.
Bruce Chaiken, Assistant Vice President-Investments of the Adviser,
is primarily responsible for managing the portfolio of the Fund.
Mr. Chaiken has been employed by the Adviser and affiliated
companies in various capacities since 1987 and has been managing the
Fund's portfolio since June 1994. Irma N. Tavares, Vice President of
Hanover, is primarily responsible for fulfilling Hanover's
contractual obligations to the Adviser. Ms. Tavares, who has been
employed by Hanover since 1989, has been assisting in the management
of the Fund's portfolio since its inception in February 1993.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in
investment company organizations, brokerage fees and commissions,
legal, auditing and accounting expenses, expenses of registering
shares under federal and state securities laws, expenses related to
the distribution of the Fund's shares (see "Distribution Plans"),
insurance expenses, taxes or governmental fees, fees and expenses of
the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who
are not interested persons of the Trust, the cost of preparing and
distributing prospectuses, statements, reports and other documents
to shareholders, expenses of shareholders' meetings and proxy
solicitations, and such extraordinary or non-recurring expenses as
may arise, including litigation to which the Fund may be a party and
indemnification of the Trust's officers and Trustees with respect
thereto.
The Trust has retained MGF Service Corp., P.O. Box 5354, Cincinnati,
Ohio, a subsidiary of Leshner Financial, Inc., to serve as the
Fund's transfer agent, dividend paying agent and shareholder service
agent.
MGF Service Corp. also provides accounting and pricing services to
the Fund. MGF Service Corp. receives a monthly fee from the Fund
for calculating daily net asset value per share and maintaining such
books and records as are necessary to enable it to perform its
duties.
In addition, MGF Service Corp. has been retained by the Adviser to
assist the Adviser in providing administrative services to the Fund.
In this capacity, MGF Service Corp. supplies executive,
administrative and regulatory services, supervises the preparation
of tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Adviser
(not the Fund) pays MGF Service Corp. a fee for these administrative
services equal to one-fourth of its advisory fee from the Fund.
The Adviser serves as principal underwriter for the Fund and, as
such, is the exclusive agent for the distribution of shares of the
Fund. Robert H. Leshner, Chairman and a director of the Adviser, is
President and a Trustee of the Trust. John F. Splain, Secretary and
General Counsel of the Adviser, is Secretary of the Trust.
<PAGE>
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to its
objective of seeking best execution of portfolio transactions, the
Adviser may give consideration to sales of shares of the Fund as a
factor in the selection of brokers and dealers to execute portfolio
transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 and procedures adopted by the Board
of Trustees, the Fund may execute portfolio transactions through any
broker or dealer and pay brokerage commissions to a broker (i) which
is an affiliated person of the Trust, or (ii) which is an affiliated
person of such person, or (iii) an affiliated person of which is an
affiliated person of the Trust or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights.
The Fund shall vote separately on matters submitted to a vote of the
shareholders except in matters where a vote of all series of the
Trust in the aggregate is required by the Investment Company Act of
1940 or otherwise. Each class of shares of the Fund shall vote
separately on matters relating to its plan of distribution pursuant
to Rule 12b-1 (see "Distribution Plans"). When matters are
submitted to shareholders for a vote, each shareholder is entitled
to one vote for each full share owned and fractional votes for
fractional shares owned. The Trust does not normally hold annual
meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon
the removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares.
The Trust will comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 in order to facilitate communications
among shareholders.
Amivest Corporation, P.O. Box 370, Cooper Station, New York, New
York, may be deemed to control the Fund by virtue of the fact that
it owns of record more than 25% of the Fund's shares as of the date
of this Prospectus.
DISTRIBUTION PLANS
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company
Act of 1940, the Fund has adopted a plan of distribution (the "Class
A Plan") under which Class A shares may directly incur or reimburse
the Adviser for certain distribution-related expenses, including
payments to securities dealers and others who are engaged in the
sale of shares of the Fund and who may be advising investors
regarding the purchase, sale or retention of Fund shares; expenses
of maintaining personnel who engage in or support distribution of
shares or who render shareholder support services not otherwise
provided by MGF Service Corp.; expenses of formulating and
implementing marketing and promotional activities, including direct
mail promotions and mass media advertising; expenses of preparing,
printing and distributing sales literature and prospectuses and
statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining
such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem
advisable; and any other expenses related to the distribution of the
Fund's Class A shares.
<PAGE>
Pursuant to the Class A Plan, the Fund may make payments to dealers
and other persons, including the Adviser and its affiliates, who may
be advising investors regarding the purchase, sale or retention of
Class A shares. For the fiscal year ended September 30, 1995, Class
A shares of the Fund paid $4,898 to the Adviser to reimburse it for
payments made to dealers and other persons who may be advising
shareholders regarding the retention of shares of the Fund.
The annual limitation for payment of expenses pursuant to the Class
A Plan is .35% of the Fund's average daily net assets allocable to
Class A shares. Unreimbursed expenditures will not be carried over
from year to year. In the event the Class A Plan is terminated by
the Fund in accordance with its terms, the Fund will not be required
to make any payments for expenses incurred by the Adviser after the
date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company
Act of 1940, the Fund has adopted a plan of distribution (the "Class
C Plan") which provides for two categories of payments. First, the
Class C Plan provides for the payment to the Adviser of an account
maintenance fee, in an amount equal to an annual rate of .25% of the
Fund's average daily net assets allocable to Class C shares, which
may be paid to other dealers based on the average value of Fund
shares owned by clients of such dealers. In addition, the Class C
shares may directly incur or reimburse the Adviser in an amount not
to exceed .75% per annum of the Fund's average daily net assets
allocable to Class C shares for expenses incurred in the
distribution and promotion of the Fund's Class C shares, including
payments to securities dealers and others who are engaged in the
sale of shares of the Fund and who may be advising investors
regarding the purchase, sale or retention of such shares; expenses
of maintaining personnel who engage in or support distribution of
shares or who render shareholder support services not otherwise
provided by MGF Service Corp.; expenses of formulating and
implementing marketing and promotional activities, including direct
mail promotions and mass media advertising; expenses of preparing,
printing and distributing sales literature and prospectuses and
statements of additional information and reports for recipients
other than existing shareholders of the Fund; expenses of obtaining
such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem
advisable; and any other expenses related to the distribution of the
Fund's Class C shares.
Unreimbursed expenditures will not be carried over from year to
year. In the event the Class C Plan is terminated by the Fund in
accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the
Class C Plan terminates. The Adviser may make payments to dealers
and other persons in an amount up to .75% per annum of the average
value of Class C shares owned by their clients, in addition to the
.25% account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Fund may also make payments to
banks or other financial institutions that provide shareholder
services and administer shareholder accounts. The Glass-Steagall
Act prohibits banks from engaging in the business of underwriting,
selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly
<PAGE>
defined by the courts or appropriate regulatory agencies, management
of the Trust believes that the Glass-Steagall Act should not
preclude a bank from providing such services. However, state
securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions
may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of
such services, management of the Trust believes that there would be
no material impact on the Fund or its shareholders. Banks may
charge their customers fees for offering these services to the
extent permitted by applicable regulatory authorities, and the
overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The
Fund may from time to time purchase securities issued by banks which
provide such services; however, in selecting investments for the
Fund, no preference will be shown for such securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of
mutual funds. These Rules require fund-level accounting in which
all sales charges -- front-end load, 12b-1 fees or contingent
deferred load -- terminate when a percentage of gross sales is
reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
On each day that the Trust is open for business, the share price
(net asset value) of Class C shares and the public offering price
(net asset value plus applicable sales load) of Class A shares of
the Fund is determined as of the close of the regular session of
trading on the New York Stock Exchange, currently 4:00 p.m., Eastern
time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is
sufficient trading in the Fund's investments that its net asset
value might be materially affected. The net asset value per share
of the Fund is calculated by dividing the sum of the value of the
securities held by the Fund plus cash or other assets minus all
liabilities (including estimated accrued expenses) by the total
number of shares outstanding of the Fund, rounded to the nearest
cent.
The Fund's portfolio securities for which market quotations are
readily available are valued at their most recent bid prices as
obtained from one or more of the major market makers for such
securities. Securities (and other assets) for which market
quotations are not readily available are valued at their fair value
as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the
Board of Trustees. The net asset value per share of the Fund will
fluctuate with the value of the securities it holds.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its "average annual total
return." The Fund may also advertise "yield." Both yield and
average annual total return figures are based on historical earnings
and are not intended to indicate future performance. Total return
and yield are computed separately for Class A and Class C shares.
The yield of Class A shares is expected to be higher than the yield
of Class C shares due to the higher distribution fees imposed on
Class C shares.
<PAGE>
The "average annual total return" of the Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10
year periods or, where the Fund has not been in operation for such
period, over the life of the Fund (which periods will be stated in
the advertisement) that would equate an initial amount invested at
the beginning of a stated period to the ending redeemable value of
the investment. The calculation of "average annual total return"
assumes the reinvestment of all dividends and distributions and, for
Class A shares, the deduction of the current maximum sales load from
the initial investment. The Fund may also advertise total return (a
"nonstandardized quotation") which is calculated differently from
"average annual total return." A nonstandardized quotation of total
return may be a cumulative return which measures the percentage
change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized
quotation of total return may also indicate average annual
compounded rates of return over periods other than those specified
for "average annual total return." These nonstandardized returns do
not include the effect of the applicable sales load which, if
included, would reduce total return. A nonstandardized quotation of
total return will always be accompanied by the Fund's "average
annual total return" as described above.
The "yield" of the Fund is computed by dividing the net investment
income per share earned during a thirty-day (or one month) period
stated in the advertisement by the maximum public offering price per
share on the last day of the period (using the average number of
shares entitled to receive dividends). The yield formula assumes
that net investment income is earned and reinvested at a constant
rate and annualized at the end of a six-month period.
From time to time, the Fund may advertise its performance rankings
as published by recognized independent mutual fund statistical
services such as Lipper Analytical Services, Inc. ("Lipper"), or by
publications of general interest such as Forbes, Money, The Wall
Street Journal, Business Week, Barron's, Fortune or Morningstar
Mutual Fund Values. The Fund may also compare its performance to
that of other selected mutual funds, averages of the other mutual
funds within its category as determined by Lipper, or recognized
indicators. In connection with a ranking, the Fund may provide
additional information, such as the particular category of funds to
which the ranking relates, the number of funds in the category, the
criteria upon which the ranking is based, and the effect of fee
waivers and/or expense reimbursements, if any. The Fund may also
present its performance and other investment characteristics, such
as volatility or a temporary defense posture, in light of the
Adviser's view of current or past market conditions or historical
trends.
<PAGE>
Further information about the Fund's performance is contained in the
Trust's annual report which can be obtained by shareholders at no
charge by calling MGF Service Corp. (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050) or by writing to the
Trust at the address on the front of this Prospectus.
MIDWEST TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
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
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
RATE LINE
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information 2
Financial Highlights 3
Investment Objective and Policies 4
How to Purchase Shares 8
Shareholder Services 14
How to Redeem Shares 14
Exchange Privilege 16
Dividends and Distributions 17
Taxes 18
Operation of the Fund 18
Distribution Plans 20
Calculation of Share Price and Public Offering Price 21
Performance Information 21
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in
connection with the offering contained in this Prospectus, and if
given or made, such information or representations must not be
relied upon as being authorized by the Trust. This Prospectus does
not constitute an offer by the Trust to sell shares in any State to
any person to whom it is unlawful for the Trust to make such offer
in such State.
INCOME
PROSPECTUS
FEBRUARY 1, 1996
Adjustable Rate
U.S. Government
SECURITIES FUND
Midwest Fund Logo
<PAGE>
ACCOUNT APPLICATION
Please mail account application to:
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
ADJUSTABLE RATE U.S.
GOVERNMENT SECURITIES FUND
o A SHARES (27)
o C SHARES (10)
ACCOUNT NO. __________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________________
Home Office Address:___________________________
Branch Address:________________________________
Rep Name & No.:________________________________
Rep Signature:_________________________________
- --------------------------------------------------------------------
Initial Investment of $_____________________($1,000 Minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From:_________________________________________________
o Exchange From:__________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/TAX L.D.#
____________________________________________ ___________________
Name of Individual, Corporation, (In case of custodial
Organization, or Minor, etc. account please list
minor's S.S.#)
____________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other
ADDRESS PHONE
____________________________________________ ( )______________
Street or P.O. Box Business Phone
____________________________________________ ( )______________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (Right of survivorship presumed) o Partnership
o Corporation o Trust o Custodial o Non-Profit o Other
Occupation and Employer Name/Address________________________________
Are you an associated person of an NASD member? o Yes o No
- --------------------------------------------------------------------
<PAGE>
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I
certify that the Taxpayer Identification Number listed above is my
correct number. Check box if appropriate:
o I am exempt from backup withholding under the provisions of
section 3406(a)(1)(c) of the Internal Revenue Code; or I am not
subject to backup withholding because I have not been notified
that I am subject to backup withholding as a result of a failure
to report all interest or dividends; or the Internal Revenue
Service has notified me that I am no longer subject to backup
withholding.
o I certify under penalties of perjury that a Taxpayer
Identification Number has not been issued to me and I have mailed
or delivered an application to receive a Taxpayer Identification
Number to the Internal Revenue Service Center or Social Security
Administration Office. I understand that if I do not provide a
Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
- --------------------------------------------------------------------
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be
assigned.)
o Share Option -- Income distributions and capital gains
distributions automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital
gains distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains
distributions paid in cash.
- --------------------------------------------------------------------
REDEMPTION OPTIONS
I (we) authorize the Trust or MGF Service Corp. to act upon
instructions received by telephone, or upon receipt of and in the
amounts of checks as described below (if checkwriting is selected),
to have amounts withdrawn from my (our) account in any fund in the
Midwest Group (see prospectus for limitations on this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account
designated below. I (we) further authorize the used of automated
cash transfers to and from the account designated below.
NOTE: For wire redemptions, the indicated bank should be a
commercial bank. PLEASE ATTACH A VOIDED CHECK FOR THE ACCOUNT.
Bank Account Number___________ Bank Routing Transit Number________
Name of Account Holder_____________________________________________
Bank Name_____________________ Bank Address_______________________
City State
<PAGE>
o CHECKWRITING (A signature card must be completed)
...to deposit the proceeds of such redemptions in the applicable
Midwest Group Pay Through Draft Account (PTDA) or otherwise arrange
for application of such proceeds to payment of said checks. I (we)
authorize the persons whose signatures appear on the PTDA signature
card to draw checks on the PTDA and to cause the redemption of my
(our) shares of the Trust. I (we) agree to be bound by the Rules
and Regulations for the Midwest Group Pay Through Draft Account as
such Rules and Regulations may be amended from time to time
- --------------------------------------------------------------------
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to
the Agent's confirmation of the following holdings of eligible load
funds of the Midwest Group of Funds.
ACCOUNT NUMBER/NAME ACCOUNT NUMBER/NAME
______________________________ __________________________________
______________________________ __________________________________
Letter of Intent: (Complete the Right of Accumulation section if
related accounts are being applied to your Letter of Intent.)
o l agree to the Letter of Intent in the current Prospectus of
Midwest Trust. Although I am not obligated to purchase, and the
Trust is not obligated to sell, I intend to invest over a 13 month
period beginning ______________________ 19 _______ (Purchase Date
of not more than 90 days prior to this Letter) an aggregate amount
in the load funds of the Midwest Group of Funds at least equal to
(check appropriate box):
o $100,000 o $250,000 o $500,000 o $1,000,000
- --------------------------------------------------------------------
SIGNATURES
By signature below each investor certifies that he has received a
copy of the Fund's current Prospectus, that he is of legal age, and
that he has full authority and legal capacity for himself or the
organization named below, to make this investment and to use the
options selected above. The investor appoints MGF Service Corp. as
his agent to enter orders for shares whether by direct purchase or
exchange, to receive dividends and distributions for automatic
reinvestment in additional shares of the Fund for credit to the
investor's account and to surrender for redemption shares held in
the investor's account in accordance with any of the procedures
elected above or for payment of service charges incurred by the
investor. The investor further agrees that MGF Service Corp. can
cease to act as such agent upon ten days' notice in writing to the
investor at the address contained in this Application. The investor
hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release
MGF Service Corp., Midwest Trust, Midwest Group Financial Services,
Inc., and their respective officers, employees, agents and
affiliates from any and all liability in the performance of the acts
instructed herein. Neither the Trust, MGF Service Corp., nor their
respective affiliates will be liable for complying with telephone
instructions they reasonably believe to be genuine or for any loss,
damage, cost or expense in acting on such telephone instructions.
The investor(s) will bear the risk of any such loss. The Trust or
MGF Service Corp., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust
and/or MGF Service Corp. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions.
These procedures may include, among others, requiring forms of
personal identification prior to acting upon telephone instructions,
providing written confirmation of the transactions and/or tape
recording telephone instructions.
<PAGE>
________________________________________________________________
Signature of Individual Owner, Corporate Officer, Trustee, etc.
________________________________________________________________
Signature of Joint Owner, if Any
___________________________________________________ ___________
Title of Corporate Officer, Trustee, etc. Date
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE
THE RESOLUTION FORM ON THE REVERSE SIDE.
UNLESS OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL
AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
- --------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN (COMPLETE FOR INVESTMENTS INTO THE FUND)
The Automatic Investment Plan is available for all established
accounts of Midwest Trust. There is no charge for this service, and
it offers the convenience of automatic investing on a regular basis.
The minimum investment is $50.00 per month. For an account that is
opened by using this Plan, the minimum initial and subsequent
investments must be $50.00. Though a continuous program of 12
monthly investments is recommended, the Plan may be
discontinued by the shareholder at any time.
Please invest $ _________________per month in the Fund.
ABA Routing Number__________________
____________________________________
FI Account Number
o Checking Account
o Savings Account
____________________________________
Name of Financial Institution (FI)
____________________________________
City State
Please make my automatic investment on:
o the last business day of each month
o the 15th day of each month
o both the 15th and last business day
X_____________________________________ X___________________________
(Signature of Depositor EXACTLY as (Signature of Joint
it appears on FI Records) Tenant - if any)
(Joint Signatures are required when bank account is in joint names.
Please sign exactly as signature appears on your FI's records.)
PLEASE ATTACH A VOIDED CHECK FOR THE AUTOMATIC INVESTMENT PLAN.
<PAGE>
INDEMNIFICATION TO DEPOSITOR'S BANK
In consideration of your participation in a plan which MGF Service
Corp. ("MGF") has put into effect, by which amounts, determined by
your depositor, payable to the Fund, for purchase of shares of the
Fund, are collected by MGF, MGF hereby agrees:
MGF will indemnify and hold you harmless from any liability to any
person or persons whatsoever arising out of the payment by you of
any amount drawn by the Fund to its own order on the account of your
depositor or from any liability to any person whatsoever arising out
of the dishonor by you whether with or without cause or
intentionally or inadvertently, of any such amount. MGF will
defend, at its own cost and expense, any action which might be
brought against you by any person or persons whatsoever because of
your actions taken pursuant to the foregoing request or in any
manner arising by reason of your participation in this arrangement.
MGF will refund to you any amount erroneously paid by you to the
Fund if the claim for the amount of such erroneous payment is made
by you within six (6) months from the date of such erroneous
payment; your participation in this arrangement and that of the Fund
may be terminated by thirty (30) days written notice from either
party to the other.
- --------------------------------------------------------------------
AUTOMATIC WITHDRAWAL PLAN (COMPLETE FOR WITHDRAWALS FROM THE FUND)
This is an authorization for you to withdraw $___________________
from my mutual fund account beginning the last business day of the
month of _____________.
Please Indicate Withdrawal Schedule (Check One):
o MONTHLY -- Withdrawals will be made on the last business day of
each month.
o QUARTERLY -- Withdrawals will be made on or about 3/31, 6/30, 9/30
and 12/31.
o ANNUALLY -- Please make withdrawals on the last business day of
the month of:_________________.
Please Select Payment Method (Check One):
o EXCHANGE: Please exchange the withdrawal proceeds into another
Midwest account number: ____ ____ -- ____ ____ ____ ____
____ ____ -- ____
o CHECK: Please mail a check for my withdrawal proceeds to the
mailing address on this account.
o ACH TRANSFER: Please send my withdrawal proceeds via ACH transfer
to my bank checking or savings account as indicated below. I
understand that the transfer will be completed in two to three
business days and that there is no charge.
o BANK WIRE: Please send my withdrawal proceeds via bank wire, to
the account indicated below. I understand that the wire will be
completed in one business day and that there is an $8.00 fee.
PLEASE ATTACH A VOIDED CHECK FOR ACH OR BANK WIRE
_________________________________ ______________________________
Bank Name Bank Address
_________________________________ ______________________________
Bank ABA# Account # Account Name
<PAGE>
o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a
check for my withdrawal proceeds to the mailing address below:
Name of payee_____________________________________________________
Please send to:___________________________________________________
Street address City State Zip
- --------------------------------------------------------------------
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other
Organizations)
RESOLVED: That this corporation or organization become a shareholder
of the Adjustable Rate U.S. Government Securities Fund (the Fund)
and that___________________________________________________________
is (are) hereby authorized to complete and execute the Application
on behalf of the corporation or organization and to take any action
for it as may be necessary or appropriate with respect to its
shareholder account with the Fund, and it is FURTHER RESOLVED: That
any one of the above noted officers is authorized to sign any
documents necessary or appropriate to appoint MGF Service Corp. as
redemption agent of the corporation or organization for shares of
the Fund, to establish or acknowledge terms and conditions governing
the redemption of said shares and to otherwise implement the
privileges elected on the Application, and it is
(If checkwriting privilege is not desired, please cross out the
following resolution.)
FURTHER RESOLVED: That the corporation or organization participate
in the Midwest Group Pay Through Draft Account (PTDA) and that until
otherwise ordered in writing, MGF Service Corp. is authorized to
make redemptions of shares held by the corporation or organization,
and to make payment from PTDA upon and according to the check,
draft, note or order of this corporation or organization when signed
by
____________________________________________________________________
and to receive the same when so signed to the credit of, or payment
to, the payee or any other holder without inquiry as to the
circumstances of issue or the disposition or proceeds, whether drawn
to the individual order or tendered in payment of individual
obligations of the persons above named or other officers of this
corporation or organization or otherwise.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity
with the Charter and By-Laws or other empowering documents of the
___________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of___________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees
of the organization or corporation duly called and held on
_____________ at which a quorum was present and acting throughout,
and that the same are now in full force and effect.
<PAGE>
I further certify that the following is (are) duly elected
officer(s) of the corporation or organization, authorized to act in
accordance with the foregoing resolutions.
NAME TITLE
_________________________________ ______________________________
_________________________________ ______________________________
_________________________________ ______________________________
Witness my hand and seal of the corporation or organization
this____________________________________day
of_______________________________________, 19_______
_________________________________ ______________________________
*Secretary-Clerk Other Authorized Officer
(if required)
*If the Secretary or other recording officer is authorized to act by
the above resolutions, this certificate must also be signed by
another officer.
PROSPECTUS
February 1, 1996
MIDWEST TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
GLOBAL BOND FUND
The Global Bond Fund (the "Fund"), a separate series of Midwest Trust, seeks
high total return, through both income and capital appreciation. The Fund
invests primarily in high-grade domestic and foreign fixed-income securities.
THE FUND IS A NON-DIVERSIFIED SERIES AND THEREFORE MAY INVEST MORE THAN 5% OF
ITS TOTAL ASSETS IN OBLIGATIONS ISSUED BY ONE ISSUER.
The Fund offers two classes of shares: Class A shares (sold subject to a
maximum 4% front-end sales load and a 12b-1 fee of up to .35% of average daily
net assets) and Class C shares (sold subject to a 1% contingent deferred sales
load for a one-year period and a 12b-1 fee of up to 1% of average daily net
assets). Each Class A and Class C share of the Fund represents identical
interests in the Fund's investment portfolio and has the same rights, except
that (i) Class C shares bear the expenses of higher distribution fees, which
will cause Class C shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares; (ii) certain other class
specific expenses will be borne solely by the class to which such expenses are
attributable; and (iii) each class has exclusive voting rights with respect to
matters relating to its own distribution arrangements.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Rogge Global Partners, plc (the "Adviser") manages the Fund's investments
under the supervision of Midwest Group Financial Services, Inc. (the
"Manager"). See "Operation of the Fund."
This Prospectus sets forth concisely the information about the Fund that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated February 1, 1996 has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of
Additional Information can be obtained at no charge by calling one of the
numbers listed below.
For Information or Assistance in Opening an Account, Please Call:
Nationwide (Toll-Free) 800-543-0407
Cincinnati 513-629-2050
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
EXPENSE INFORMATION
<CAPTION>
Class A Class C
Shares Shares
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4% None
Maximum Contingent Deferred Sales Load
(as a percentage of original purchase price) None* 1%
Sales Load Imposed on Reinvested Dividends None None
Exchange Fee None None
Redemption Fee None** None**
<FN>
* Purchases at net asset value of amounts totaling $1 million or more may
be subject to a contingent deferred sales load of .75% if a redemption
occurred within 12 months of purchase and a commission was paid by the Manager
to a participating unaffiliated dealer.
** A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently $8.
See "How to Redeem Shares."
<CAPTION>
Class A Class C
Shares Shares
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES (as a percentage of
average net assets)
Management Fees .70% .70%
12b-1 Fees(A) .14% .56%
Other Expenses .51% .74%
----- -----
Total Fund Operating Expenses 1.35% 2.00%
===== =====
<FN>
(A) Class A shares may incur 12b-1 fees in an amount up to .35% of average
net assets and Class C shares may incur 12b-1 fees in an amount up to 1.00% of
average net assets. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales loads permitted by the National
Association of Securities Dealers.
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are
based on estimated amounts for the current fiscal year. THE EXAMPLE BELOW
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
<TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<CAPTION>
Class A Class C
Shares Shares
<S> <C> <C>
1 Year $53 $30
3 Years $81 $63
FINANCIAL HIGHLIGHTS
The following information, which has been audited by Arthur Andersen LLP, is
an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
September 30, 1995 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at
no charge by calling MGF Service Corp. (Nationwide call toll-free
800-543-0407, in Cincinnati call 629-2050) or by writing to the Trust at the
address on the front of this Prospectus.
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD(A)
CLASS A CLASS C
<S> <C> <C>
Net asset value at beginning of period $10.00 $10.00
------ ------
Income from investment operations:
Net investment income 0.35 0.38
Net realized and unrealized gains on
investments and foreign currency 0.64 0.57
------- ------
Total from investment operations 0.99 0.95
------- ------
Less distributions:
Dividends from net investment income (0.35) (0.36)
------- ------
Total distributions ( 0.35) (0.36)
------- ------
Net asset value at end of period $ 10.64 $10.59
======= ======
Total return(B) 14.89%(D) 14.25%(D)
======= ======
Net assets at end of period(000's) $13,297 $4,518
======= ======
Ratio of expenses to average net assets(C) 1.33%(D) 1.98%(D)
Ratio of net investment income to average net assets 4.30%(D) 3.70%(D)
Portfolio turnover rate 130%(D) 130%(D)
<FN>
(A) Represents the period from initial public offering of 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 Manager, the ratios
of expenses to average net assets would have been 2.47(D) and 3.45(D) for
Class A and Class C shares, respectively.
(D) Annualized.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
The Fund is a series of Midwest Trust (the "Trust"). The Fund seeks high
total return, through both income and capital appreciation. The Fund invests
primarily in high-grade domestic and foreign fixed-income securities. The
Fund is not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved. The Fund's
investment objective may be changed by the Board of Trustees without
shareholder approval, but only after notification has been given to
shareholders and after this Prospectus has been revised accordingly. If there
is a change in the Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. Unless otherwise indicated, all
investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in domestic and foreign bonds issued by governments, corporations and
supranational organizations such as the World Bank, Asian Development Bank,
European Investment Bank and European Economic Community. Bonds are viewed by
the Fund to include fixed-income securities of any maturity. Investments of
the Fund will be geographically concentrated in the countries included in the
Salomon Brothers World Government Bond Index: Australia, Belgium, Canada,
Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, the
United Kingdom and the United States. Under normal market conditions,
investments will be made in a minimum of three countries, one of which may be
the United States. For temporary defensive purposes, the Fund may invest in
securities of only one country, including the United States. The Fund may
invest in non-U.S. dollar denominated securities. The Fund may utilize a
variety of currency hedging techniques in order to reduce volatility resulting
from currency exchange rate fluctuations.
The Fund may invest up to 10% of its total assets in global bonds issued by
emerging countries. The emerging countries in which the Fund may invest
currently include Argentina, Brazil, Chile, Columbia, Indonesia, India,
Malaysia, Mexico, the Philippines, Poland, Singapore, Thailand and Venezuela.
Such markets tend to be in the less economically developed regions of the
world. General characteristics of emerging countries also include lower
degrees of political stability, a high demand for capital investment, a high
dependence on export markets for their major industries, a need to develop
basic economic infrastructures and rapid economic growth. The Adviser
believes that investments in bonds issued in emerging countries offer the
opportunity for significant long-term investment returns; however, these
investments involve certain risks.
The Fund may engage in various hedging techniques to seek to hedge all or a
portion of its assets against market value changes resulting from changes in
security prices, interest rates, currency exchange rates or other factors that
affect the value of the Fund's portfolio. Hedging is a means of attempting to
offset, or neutralize, the price movement of an investment by making another
investment, the price of which should tend to move in the opposite direction
from the original investment. The hedging techniques which may be used by the
Fund include buying and selling put and call options, buying and selling
futures contracts and entering into forward currency exchange contracts.
<PAGE>
It is anticipated that under normal circumstances the Fund's dollar-weighted
average maturity will be ten years or less, although the Fund may invest in
securities of any maturity, provided that such obligations meet the Fund's
quality standards. The Fund's quality standards limit its investments to those
rated within the three highest grades assigned by Moody's Investors Services,
Inc. (Aaa, Aa or A), Standard & Poor's Ratings Group (AAA, AA or A) or Fitch
Investors Services, Inc. (AAA, AA or A), or unrated securities determined by
the Adviser to be of comparable quality.
For defensive purposes, the Fund may temporarily hold all or a portion of its
assets in short-term obligations such as bank debt instruments (certificates
of deposit, bankers' acceptances and time deposits), commercial paper,
domestic and foreign Government obligations having a maturity of less than one
year or repurchase agreements collateralized by U.S. Government obligations.
The Fund's quality standards limit its investments in short-term obligations
to those which are rated within the two highest grades by Moody's (Prime-1 or
Prime-2), Standard & Poor's (A-1 or A-2) or Fitch (Fitch-1 or Fitch-2). The
Statement of Additional Information contains a description of Moody's,
Standard & Poor's and Fitch ratings.
It is anticipated that by investing in a portfolio of foreign fixed-income
securities in markets that have historically had a low correlation with the
U.S. fixed-income market (when considering the aggregate impact of both
fluctuations in currencies and interest rates), the Fund will achieve a less
volatile net asset value than is characteristic of mutual funds that invest
primarily in fixed-income obligations of a single market denominated in a
single currency. The decision to invest in a given bond market is normally
made in tandem with the decision to invest in the related currency.
Generally, the factors used to determine the relative attractiveness of one
market (currency) versus another are long-term in nature and, therefore, the
core structure of the Fund's portfolio will remain relatively stable over
time. In order to reduce the volatility of short-term investment returns,
short-term currency risk is managed through currency hedging.
<PAGE>
HEDGING TECHNIQUES
Unless otherwise indicated, the Fund's Adviser may engage in the following
hedging techniques to seek to hedge all or a portion of the Fund's assets
against market value changes resulting from changes in securities prices,
interest rates and currency fluctuations. Hedging is a means of attempting to
offset, or neutralize, the price movement of an investment by making another
investment, the price of which should tend to move in the opposite direction
from the original investment. The imperfect correlation in price movement
between an option and the underlying financial instrument and/or the costs of
implementing such an option may limit the effectiveness of the hedging
strategy.
PUT AND CALL OPTIONS. The Fund may write (sell) covered put and call options
as a means of enhancing its return and may buy put and call options written by
others covering securities, futures contracts and foreign currencies to
attempt to provide protection against the adverse effects of anticipated
changes in the prices of such instruments. The Fund may write covered call
options as a means of enhancing its return through the receipt of premiums
when the Adviser determines that the underlying securities, futures contracts
or foreign currencies have achieved their potential for appreciation.
However, by writing such options, the Fund forgoes the opportunity to profit
from an increase in the market price of the underlying security, futures
contract or foreign currency above the exercise price except insofar as the
premium represents such a profit. The Fund may also seek to earn additional
income through receipt of premiums by writing covered put options. The risk
involved in writing such options is that there could be a decrease in the
market value of the underlying security, futures contract or foreign currency.
If this occurred, the option could be exercised and the underlying instrument
would then be sold to the Fund at a higher price than its then current market
value. The Fund may purchase put and call options to attempt to provide
protection against adverse price effects from anticipated changes in
prevailing prices of securities, futures contracts or foreign currencies. The
purchase of a put option protects the value of portfolio holdings in a falling
market, while the purchase of a call option protects cash reserves from a
failure to participate in a rising market. In purchasing a call option, the
Fund would be in a position to realize a gain if, during the option period,
the price of the security, futures contract or foreign currency increased by
an amount greater than the premium paid. It would realize a loss if the price
of the security, futures contract or foreign currency decreased or remained
the same or did not increase during the period by more than the amount of the
premium. If a put or call option purchased by the Fund were permitted to
expire without being sold or exercised, its premium would represent a realized
loss to the Fund. When writing put options the Fund will be required to
segregate cash and/or liquid high-grade debt securities to meet its
obligations. When writing call options the Fund will be required to own the
underlying financial instrument or segregate with its Custodian cash and/or
short-term high quality securities to meet its obligations under written
calls. By so doing, the Fund's ability to meet current obligations, to honor
redemptions or to achieve its investment objective may be impaired. The staff
of the Securities and Exchange Commission has taken the position that
over-the-counter options and the assets used as "cover" for over-the-counter
options are illiquid securities.
<PAGE>
FUTURES CONTRACTS. The Fund may buy and sell futures contracts as a hedge to
protect the value of the Fund's portfolio against anticipated changes in
interest rates, securities prices and foreign currencies. There are several
risks in using futures contracts. One risk is that futures prices could
correlate imperfectly with the behavior of cash market prices of the financial
instrument being hedged so that even a correct forecast of general price
trends may not result in a successful transaction. Another risk is that the
Fund's Adviser may be incorrect in its expectation of future prices of the
underlying financial instrument. There is also a risk that a secondary market
in the obligations that the Fund holds may not exist or may not be adequately
liquid to permit the Fund to close out positions when it desires to do so.
When buying or selling futures contracts the Fund will be required to
segregate cash and/or liquid high-grade debt obligations to meet its
obligations under these types of financial instruments. By so doing, the
Fund's ability to meet current obligations, to honor redemptions or to operate
in a manner consistent with its investment objective may be impaired.
FORWARD CURRENCY EXCHANGE CONTRACTS. When the Adviser believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, it may attempt to hedge some portion or all of this
anticipated risk by entering into a forward contract to sell an amount of
foreign currency approximating the value of some or all of the Fund's
portfolio obligations denominated in such foreign currency. It may also enter
into such contracts to protect against loss between trade and settlement dates
resulting from changes in foreign currency exchange rates. Such contracts
will also have the effect of limiting any gains to the Fund between trade and
settlement dates resulting from changes in such rates.
RISK FACTORS
The market value of investments available to the Fund, and therefore the
Fund's yield and net asset value, will fluctuate due to changes in interest
rates, economic conditions, foreign exchange conditions, quality ratings and
other factors beyond the control of the Adviser. The Fund's portfolio
securities are subject to price fluctuations based upon changes in the level
of interest rates, which will generally result in all those securities
changing in price in the same way, i.e., all those securities experiencing
appreciation when interest rates decline and depreciation when interest rates
rise. In addition, the financial condition of an issuer or adverse changes in
general economic conditions, or both, may impair the issuer's ability to make
payments of interest and principal.
The Fund may invest in securities which are rated at the time of purchase
within the three highest grades assigned by Moody's, Standard & Poor's or
Fitch. Subsequent to its purchase by the Fund, a security may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. In the event a security's rating is reduced below the Fund's
minimum requirements, the Fund will sell the security, subject to market
conditions and the Adviser's assessment of the most opportune time for sale.
Although lower rated securities will generally provide higher yields than
higher rated securities of similar maturities, they are subject to a greater
degree of market fluctuation. The lower rating also reflects a greater
possibility that changing circumstances may impair the ability of the issuer
to make timely payments of interest and principal. In addition, securities
with longer maturities generally offer both higher yields and greater exposure
to market fluctuation from changes in interest rates. Consequently, investors
in the Fund should be aware that there is a possibility of greater fluctuation
in the Fund's net asset value.
<PAGE>
The Fund is a non-diversified fund under the Investment Company Act of 1940.
Thus, its investments may be more concentrated in fewer issuers than those of
a diversified fund. This concentration may cause greater fluctuation in the
Fund's net asset value. As the Fund intends to comply with Subchapter M of
the Internal Revenue Code, it may invest up to 50% of its assets at the end of
each quarter of its fiscal year in as few as two issuers, provided that no
more than 25% of the assets are invested in one issuer. With respect to the
remaining 50% of its assets at the end of each quarter, it may invest no more
than 5% in one issuer.
INVESTMENTS IN FOREIGN OBLIGATIONS. Where investments in foreign obligations
are made in currencies of foreign countries, the value of the Fund's assets as
measured in U.S. dollars may be affected favorably or unfavorably by changes
in currency exchange rates, currency restrictions and in exchange control
regulations. While the Fund will attempt to hedge against fluctuations in
exchange rates between the U.S. dollar and other currencies in which the Fund
invests, the Fund may nevertheless incur losses from currency translation
effects. Generally, an increase in the value of a foreign currency versus the
U.S. dollar will have a positive effect on the Fund's return while a decline
in the value of a foreign currency versus the U.S. dollar will have a negative
impact on the Fund. Foreign investments may be subject to special risks,
including future political and economic developments and the possibility of
seizure or nationalization of companies, imposition of withholding taxes on
income, establishment of exchange controls or adoption of other restrictions,
less governmental supervision of securities markets, reduced publicly
available information concerning issuers, and the lack of uniform accounting,
auditing and financial reporting standards that might affect an investment
adversely. Moreover, obligations issued by many foreign companies may be less
liquid and their prices more volatile than obligations issued by U.S.
companies. The settlement practices in foreign countries may include delays
and subject the Fund to risk of loss not customary in U.S. markets.
Investment in foreign obligations may also result in higher expenses due to
the cost of converting foreign currency into U.S. dollars, the payment of
fixed brokerage commissions on foreign exchanges, which generally are higher
than commissions on U.S. exchanges, and the expense of maintaining securities
with foreign custodians.
EMERGING MARKETS. The risks of foreign investing are of greater concern in
the case of investments in emerging markets which may exhibit greater price
volatility and have less liquidity. Furthermore, the economies of emerging
market countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, managed adjustments in relative currency values, and other
protectionist measures applied internally or imposed by the countries with
which they trade. These emerging market economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade.
<PAGE>
CURRENCY EXPOSURE. Because of exchange rate movements, the net asset value of
the Fund is likely to be more volatile than funds which invest only in U.S.
dollar-denominated securities. As the U.S. dollar strengthens relative to a
given foreign currency, the value of a portfolio security denominated in that
currency will fall. Conversely, when the U.S. dollar weakens relative to a
currency, the value of a portfolio security in that currency will rise.
Therefore, the greater the level of a fund's currency exposure, the greater
its risk and return potential. By actively managing currency exposure, the
Adviser attempts to insulate portfolios from the effect of currency
fluctuations, or profit from them. There is, of course, no guarantee the
Adviser will be successful in this regard.
HEDGING TECHNIQUES. The Fund's ability to establish and close out positions
in futures contracts and options will be subject to the existence of a liquid
secondary market. Although the Fund generally will purchase or sell only
those futures contracts and options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular futures contract or option or at any
particular time.
Transactions in options involve special risks. The Fund may not be able to
enter into a closing transaction to cancel its obligations with respect to the
options it has written or purchased. If an option purchased by the Fund
expires unexercised, the Fund will lose the premium it paid. In addition, the
Fund could suffer a loss if the premium paid by the Fund in a closing
transaction exceeds the premium income it received. When the Fund writes a
call option, its ability to participate in the capital appreciation of the
underlying obligation is limited.
OTHER INVESTMENT TECHNIQUES
The Fund may also engage in the following investment techniques, each of which
may involve certain risks:
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include securities
which are issued or guaranteed by the United States Treasury, by various
agencies of the United States Government, and by various instrumentalities
which have been established or sponsored by the United States Government.
U.S. Treasury obligations are backed by the "full faith and credit" of the
United States Government. Other U.S. Government obligations may or may not be
backed by the full faith and credit of the United States. In the case of
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim
against the United States in the event the agency or instrumentality does not
meet its commitments. Shares of the Fund are not guaranteed or backed by the
United States Government.
<PAGE>
DELAYED SETTLEMENT TRANSACTIONS. Obligations issued on a when-issued or
to-be-announced basis are settled by delivery and payment after the date of
the transaction, usually within 15 to 45 days. In a to-be-announced
transaction, the Fund has committed to purchasing or selling securities for
which all specific information is not yet known at the time of the trade,
particularly the face amount in transactions involving mortgage-related
securities. The Fund will only make commitments to purchase obligations on a
when-issued or to-be-announced basis with the intention of actually acquiring
the obligations, but the Fund may sell these securities before the settlement
date if it is deemed advisable as a matter of investment strategy or in order
to meet its obligations, although it would not normally expect to do so. The
Fund will not enter into a delayed settlement transaction which settles in
more than 120 days.
Purchases of securities on a when-issued or to-be-announced basis are subject
to market fluctuations and their current value is determined in the same
manner as other portfolio securities. When effecting such purchases for the
Fund, a segregated account of cash, U.S. Government obligations or other
liquid high-grade debt obligations of the Fund in an amount sufficient to make
payment for the portfolio securities to be purchased will be maintained with
the Fund's Custodian at the trade date and valued daily at market for the
purpose of determining the adequacy of the securities in the account. If the
market value of segregated securities declines, additional cash or securities
will be segregated on a daily basis so that the market value of the Fund's
segregated assets will equal the amount of the Fund's commitments to purchase
when-issued obligations and securities on a to-be-announced basis. The Fund's
purchase of securities on a when-issued or to-be-announced basis may increase
its overall investment exposure and involves a risk of loss if the value of
the securities declines prior to the settlement date or if the broker-dealer
selling the securities fails to deliver after the value of the securities has
risen.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the
Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other
default of the seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying security and losses. To minimize
these possibilities, the Fund intends to enter into repurchase agreements only
with its Custodian, banks having assets in excess of $10 billion and the
largest and, in the Board of Trustees' judgment, most creditworthy primary
U.S. Government securities dealers. The Fund will enter into repurchase
agreements which are collateralized by U.S. Government obligations or other
liquid high-grade debt obligations. Collateral for repurchase agreements is
held in safekeeping in the customer-only account of the Fund's Custodian at
the Federal Reserve Bank. At the time the Fund enters into a repurchase
agreement, the value of the collateral, including accrued interest, will equal
or exceed the value of the repurchase agreement and, in the case of a
repurchase agreement exceeding one day, the seller agrees to maintain
sufficient collateral so that the value of the underlying collateral,
including accrued interest, will at all times equal or exceed the value of the
repurchase agreement. The Fund will not enter into a repurchase agreement not
terminable within seven days if, as a result thereof, more than 15% of the
value of the net assets of the Fund would be invested in such securities and
other illiquid securities.
<PAGE>
BORROWING AND PLEDGING. As a temporary measure for extraordinary or emergency
purposes, the Fund may borrow money from banks or other persons in an amount
not exceeding 10% of its total assets. The Fund may pledge assets in
connection with borrowings but will not pledge more than 10% of its total
assets. The Fund will not make any additional purchases of portfolio
securities if outstanding borrowings exceed 5% of the value of its total
assets. These policies do not preclude the Fund from entering into reverse
repurchase transactions (see below), provided that the Fund has asset coverage
of 300% of all its reverse repurchase commitments pursuant to such
transactions and all other outstanding borrowings of the Fund. Borrowings of
the Fund, including its current obligations under reverse repurchase
agreements, will not exceed one-third of the current market value of the
Fund's total assets (less all its liabilities other than obligations under
reverse repurchase agreements and other borrowings).
Borrowing magnifies the potential for gain or loss on the Fund's portfolio
securities and, therefore, if employed, increases the possibility of
fluctuation in its net asset value. This is the speculative factor known as
leverage. To reduce the risks of borrowing, the Fund will limit its
borrowings as described above. The Fund's policies on borrowing and pledging
are fundamental policies which may not be changed without the affirmative vote
of a majority of its outstanding shares.
REVERSE REPURCHASE TRANSACTIONS. The Fund may enter into reverse repurchase
transactions. A reverse repurchase transaction involves the sale of a money
market instrument held by the Fund coupled with an agreement by the Fund to
repurchase the instrument at a stated price, date and interest payment. The
Fund will use the proceeds of a reverse repurchase transaction to purchase
other money market instruments which either mature at a date simultaneous with
or prior to the expiration of the reverse repurchase agreement or which are
held under an agreement to resell maturing as of that time.
The Fund will enter into a reverse repurchase transaction only when the
interest income to be earned from the investment of the proceeds of the
transaction is greater than the interest expense of the transaction. Under
the Investment Company Act of 1940, reverse repurchase transactions may be
considered to be borrowings by the seller. The Fund may not enter into a
reverse repurchase transaction if, as a result, its current obligations under
such agreements and all of its other outstanding borrowings would exceed
one-third of the current market value of the Fund's total assets (less all its
liabilities other than obligations under such agreements and other
borrowings). The Fund may enter into reverse repurchase transactions with
banks or broker-dealers. Entry into such transactions requires the creation
and maintenance of a segregated account with the Fund's Custodian consisting
of cash and/or liquid high-grade debt obligations.
<PAGE>
The Fund may also enter into reverse repurchase transactions in order to hedge
against a possible decline in the value of the foreign currency in which a
debt security is denominated. In these transactions, the Fund sells a debt
security denominated in a foreign currency for delivery in the current month
and simultaneously contracts to repurchase the same security on a specified
future date. The foreign currency cash proceeds from the sale of the debt
security are then converted into U.S. dollars. Thus, as a result of the
transaction, the Fund continues to be subject to fluctuations in the value of
the security, but not to fluctuations in the value of the currency in which
the security is denominated. Because these reverse repurchase transactions
are entered into to hedge foreign currency risk and not for leverage purposes,
they will not be treated as borrowing for purposes of the Fund's investment
restriction concerning borrowing.
LENDING PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio
securities exposes the Fund to the risk that the borrower may fail to return
the loaned securities or may not be able to provide additional collateral or
that the Fund may experience delays in recovery of the loaned securities or
loss of rights in the collateral if the borrower fails financially. To
minimize these risks, the borrower must agree to maintain collateral marked to
market daily, in the form of cash and/or liquid high-grade debt obligations,
with the Fund's Custodian in an amount at least equal to the market value of
the loaned securities. The Fund will limit the amount of its loans of
portfolio securities to no more than 25% of its net assets. This lending
policy may not be changed by the Fund without the affirmative vote of a
majority of its outstanding shares.
PORTFOLIO TURNOVER. The Fund does not intend to use short-term trading as a
primary means of achieving its investment objective. However, the Fund's rate
of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. The portfolio turnover of the Fund may be greater
than that of many other mutual funds. Although the annual portfolio turnover
rate of the Fund cannot be accurately predicted, it is not expected to exceed
150%, but may be either higher or lower. High turnover involves
correspondingly greater commission expenses and transaction costs and
increases the possibility that the Fund would not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. The Fund
will not qualify as a regulated investment company if it derives 30% or more
of its gross income from gains (without offset for losses) from the sale or
other disposition of securities held for less than three months. High
turnover may result in the Fund recognizing greater amounts of income and
capital gains, which would increase the amount of income and capital gains
which the Fund must distribute to its shareholders in order to maintain its
status as a regulated investment company and to avoid the imposition of
federal income or excise taxes (see "Taxes").
<PAGE>
HOW TO PURCHASE SHARES
Your initial investment in the Fund ordinarily must be at least $1,000 ($250
for tax-deferred retirement plans). You may purchase additional shares
through the Open Account Program described below. You may open an account and
make an initial investment through securities dealers having a sales agreement
with the Trust's principal underwriter, Midwest Group Financial Services, Inc.
(the "Manager"). You may also make a direct initial investment by sending a
check and a completed account application form to MGF Service Corp., P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Global Bond Fund." An account application is included in this Prospectus.
The Trust mails you confirmations of all purchases or redemptions of Fund
shares. Certificates representing shares are not ordinarily issued, but you
may receive a certificate without charge by sending a written request to MGF
Service Corp. Certificates for fractional shares will not be issued. If a
certificate has been issued to you, you will not be permitted to exchange
shares by telephone or to use the automatic withdrawal plan as to those
shares. The Trust and the Manager reserve the rights to limit the amount of
investments and to refuse to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Trust, MGF Service Corp. and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
to the various services (for example, telephone exchanges) made available to
investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or MGF Service Corp. in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to MGF Service Corp. at the address or numbers
listed below.
After an initial investment, all investors are considered participants in the
Open Account Program. The Open Account Program helps investors make purchases
of shares of the Fund over a period of years and permits the automatic
reinvestment of dividends and distributions of the Fund in additional shares
without a sales load.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a
check to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio 45201-5354. The
check should be made payable to the "Global Bond Fund."
Under the Open Account Program, you may also purchase shares of the Fund by
bank wire. Please telephone MGF Service Corp. (Nationwide call toll-free
800-543-0407; in Cincinnati call 629-2050) for instructions. Your bank may
impose a charge for sending your wire. There is presently no fee for receipt
of wired funds, but MGF Service Corp. reserves the right to charge
shareholders for this service upon thirty days' prior notice to shareholders.
<PAGE>
Each additional purchase request must contain the name of your account and
your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Trust reserves
the right to impose such requirement. All purchases under the Open Account
Program are made at the public offering price next determined after receipt of
a purchase order by the Trust. If a broker-dealer received concessions for
selling shares of the Fund to a current shareholder, such broker-dealer will
receive the concessions described above with respect to additional investments
by the shareholder.
SALES LOAD ALTERNATIVES
The Fund offers two classes of shares which may be purchased at the election
of the purchaser. The two classes of shares each represent interests in the
same portfolio of investments of the Fund, have the same rights and are
identical in all material respects except that (i) Class C shares bear the
expenses of higher distribution fees; (ii) certain other class specific
expenses will be borne solely by the class to which such expenses are
attributable, including transfer agent fees attributable to a specific class
of shares, printing and postage expenses related to preparing and distributing
materials to current shareholders of a specific class, registration fees
incurred by a specific class of shares, the expenses of administrative
personnel and services required to support the shareholders of a specific
class, litigation or other legal expenses relating to a class of shares,
Trustees' fees or expenses incurred as a result of issues relating to a
specific class of shares and accounting fees and expenses relating to a
specific class of shares; and (iii) each class has exclusive voting rights
with respect to matters relating to its own distribution arrangements. The
net income attributable to Class C shares and the dividends payable on Class C
shares will be reduced by the amount of the incremental expenses associated
with the distribution fee. See "Distribution Plans."
The Fund's alternative sales arrangements permit investors to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold his shares and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur a front-end sales
load and be subject to lower ongoing charges, as discussed below, or to have
all of the initial purchase price invested in the Fund with the investment
thereafter being subject to higher ongoing charges. A salesperson or any
other person entitled to receive any portion of a distribution fee may receive
different compensation for selling Class A or Class C shares.
As an illustration, investors who qualify for significantly reduced sales
loads as described below, might elect the Class A sales load alternative
because similar sales load reductions are not available for purchases under
the Class C sales load alternative. Moreover, shares acquired under the Class
A sales load alternative would be subject to lower ongoing distribution fees
as described below. Investors not qualifying for reduced initial sales loads
who expect to maintain their investment for an extended period of time might
also elect the Class A sales load alternative because over time the
accumulated continuing distribution fees on Class C shares may exceed the
difference in initial sales loads between Class A and Class C shares. Again,
however, such investors must weigh this consideration against the fact that
less of their funds will be invested initially under the Class A sales load
alternative. Furthermore, the higher ongoing distribution fees will be offset
to the extent any return is realized on the additional funds initially
invested under the Class C sales load alternative.
<PAGE>
Some investors might determine that it would be more advantageous to utilize
the Class C sales load alternative to have more of their funds invested
initially, although remaining subject to higher ongoing distribution fees and,
for a one-year period, being subject to a contingent deferred sales load. For
example, based on estimated fees and expenses, an investor subject to the
maximum 4% initial sales load on Class A shares who elects to reinvest
dividends in additional shares would have to hold the investment in Class A
shares approximately 5 1/2 years before the accumulated ongoing distribution
fees on the alternative Class C shares would exceed the initial sales load
plus the accumulated ongoing distribution fees on Class A shares. In this
example and assuming the investment was maintained for more than 5 1/2 years,
the investor might consider purchasing Class A shares. This example does not
take into account the time value of money which reduces the impact of the
higher ongoing Class C distribution fees, fluctuations in net asset value or
the effect of different performance assumptions.
In addition to the compensation otherwise paid to securities dealers, the
Manager may from time to time pay from its own resources additional cash
bonuses or other incentives to selected dealers in connection with the sale of
shares of the Fund. On some occasions, such bonuses or incentives may be
conditioned upon the sale of a specified minimum dollar amount of the shares
of the Fund and/or other funds in the Midwest Group during a specific period
of time. Such bonuses or incentives may include financial assistance to
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising, sales campaigns and other
dealer-sponsored programs or events.
CLASS A SHARES
Class A shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Manager by 5:00 p.m., Eastern time, that
day are confirmed at the public offering price determined as of the close of
the regular session of trading on the New York Stock Exchange on that day. It
is the responsibility of dealers to transmit properly completed orders so that
they will be received by the Manager by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received
by MGF Service Corp. by 4:00 p.m., Eastern time, are confirmed at that day's
public offering price. Direct investments received by MGF Service Corp. after
4:00 p.m., Eastern time, and orders received from dealers after 5:00 p.m.,
Eastern time, are confirmed at the public offering price next determined on
the following business day.
<PAGE>
<TABLE>
The public offering price of Class A shares is the next determined net asset
value per share plus a sales load as shown in the following table.
<CAPTION>
Dealer
Sales Load Reallowance
as % of: as % of
Public Net Public
Offering Amount Offering
Amount of Investment Price Invested Price
<S> <C> <C> <C>
Less than $100,000 4.00% 4.17% 3.60%
$100,000 but less than $250,000 3.50 3.63 3.30
$250,000 but less than $500,000 2.50 2.56 2.30
$500,000 but less than $1,000,000 2.00 2.04 1.80
$1,000,000 or more None* None*
<FN>
*There is no front-end sales load on purchases of $1 million or more but a
contingent deferred sales load of .75% may apply with respect to Class A
shares if a commission was paid by the Manager to a participating unaffiliated
dealer and the shares are redeemed within twelve months from the date of
purchase.
</TABLE>
Under certain circumstances, the Manager may increase or decrease the
reallowance to dealers. Dealers engaged in the sale of shares of the Fund may
be deemed to be underwriters under the Securities Act of 1933. The Manager
retains the entire sales load on all direct initial investments in the Fund
and on all investments in accounts with no designated dealer of record.
For initial purchases of Class A shares of $1,000,000 or more made after
October 1, 1995 and subsequent purchases further increasing the size of the
account, a dealer's commission of .75% of the purchase amount may be paid by
the Manager to participating unaffiliated dealers through whom such purchases
are effected. In determining a dealer's eligibility for such commission,
purchases of Class A shares of the Fund may be aggregated with concurrent
purchases of Class A shares of other Midwest Group funds. Dealers should
contact the Manager concerning the applicability and calculation of the
dealer's commission in the case of combined purchases. An exchange from other
Midwest Group funds will not qualify for payment of the dealer's commission,
unless such exchange is from a Midwest Group fund with assets as to which a
dealer's commission or similar payment has not been previously paid.
Redemptions of Class A shares may result in the imposition of a contingent
deferred sales load if the dealer's commission described in this paragraph was
paid in connection with the purchase of such shares. See "Contingent Deferred
Sales Charge for Certain Purchases of Class A Shares" below.
<PAGE>
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing Class A shares of the load funds distributed by the
Manager with the amount of his current purchases in order to take advantage of
the reduced sales loads set forth in the table above. Purchases made in any
load fund distributed by the Manager pursuant to a Letter of Intent may also
be eligible for the reduced sales loads. The minimum initial investment under
a Letter of Intent is $10,000. The load funds currently distributed by the
Manager are listed in the Exchange Privilege section of this Prospectus.
Shareholders should contact MGF Service Corp. for information about the Right
of Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase Class A shares of the Fund at
net asset value when the payment for your investment represents the proceeds
from the redemption of shares of any other mutual fund which has a front-end
sales load and is not distributed by the Manager. Your investment will
qualify for this provision if the purchase price of the shares of the other
fund included a sales load and the redemption occurred within one year of the
purchase of such shares and no more than sixty days prior to your purchase of
Class A shares of the Fund. To make a purchase at net asset value pursuant to
this provision, you must submit photocopies of the confirmations (or similar
evidence) showing the purchase and redemption of shares of the other fund.
Your payment may be made with the redemption check representing the proceeds
of the shares redeemed, endorsed to the order of the "Global Bond Fund." The
redemption of shares of the other fund is, for federal income tax purposes, a
sale on which you may realize a gain or loss. These provisions may be
modified or terminated at any time. Contact your securities dealer or the
Trust for further information.
Banks, bank trust departments and savings and loan associations, in their
fiduciary capacity or for their own accounts, may also purchase Class A shares
of the Fund at net asset value. To the extent permitted by regulatory
authorities, a bank trust department may charge fees to clients for whose
account it purchases shares at net asset value. Federal and state credit
unions may also purchase Class A shares at net asset value.
In addition, Class A shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Manager, and their
registered personnel and employees, including members of the immediate
families of such registered personnel and employees.
Clients of investment advisers and financial planners may also purchase Class
A shares of the Fund at net asset value if their investment adviser or
financial planner has made arrangements to permit them to do so with the Trust
and the Manager. The investment adviser or financial planner must notify MGF
Service Corp. that an investment qualifies as a purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the Manager, the
Adviser or MGF Service Corp., including members of the immediate family of
such individuals and employee benefit plans established by such entities, may
also purchase Class A shares of the Fund at net asset value.
<PAGE>
CONTINGENT DEFERRED SALES LOAD FOR CERTAIN PURCHASES OF CLASS A SHARES. A
contingent deferred sales load is imposed upon certain redemptions of Class A
shares of the Fund (or shares into which such Class A shares were exchanged)
purchased at net asset value in amounts totaling $1 million or more if the
dealer's commission described above was paid by the Manager and the shares are
redeemed within twelve months from the date of purchase. The contingent
deferred sales load will be paid to the Manager and will be equal to .75% of
the lesser of (1) the net asset value at the time of purchase of the Class A
shares being redeemed or (2) the net asset value of such Class A shares at the
time of redemption. In determining whether the contingent deferred sales load
is payable, it is assumed that shares not subject to the contingent deferred
sales load are the first redeemed followed by other shares held for the
longest period of time. The contingent deferred sales load will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. If a purchase
of Class A shares is subject to the contingent deferred sales load, the
investor will be so notified on the confirmation for such purchase.
Redemptions of such Class A shares of the Fund held for at least 12 months
will not be subject to the contingent deferred sales load and an exchange of
such Class A shares into another Midwest Group fund is not treated as a
redemption and will not trigger the imposition of the contingent deferred
sales load at the time of such exchange. A fund will "tack" the period for
which such Class A shares being exchanged were held onto the holding period of
the acquired shares for purposes of determining if a contingent deferred sales
load is applicable in the event that the acquired shares are redeemed
following the exchange; however, the period of time that the redemption
proceeds of such Class A shares are held in a money market fund will not count
toward the holding period for determining whether a contingent deferred sales
load is applicable. See "Exchange Privilege."
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986, as amended) of a shareholder (including one who owns the
shares with his or her spouse as a joint tenant with rights of survivorship)
from an account in which the deceased or disabled is named. The Manager may
require documentation prior to waiver of the charge, including death
certificates, physicians' certificates, etc.
ADDITIONAL INFORMATION. For purposes of determining the applicable sales load
and for purposes of the Letter of Intent and Right of Accumulation privileges,
a purchaser includes an individual, his spouse and their children under the
age of 21, purchasing shares for his or their own account; or a trustee or
other fiduciary purchasing shares for a single fiduciary account although more
than one beneficiary is involved; or employees of a common employer, provided
that economies of scale are realized through remittances from a single source
and quarterly confirmation of such purchases; or an organized group, provided
that the purchases are made through a central administration, or a single
dealer, or by other means which result in economy of sales effort or expense.
Contact MGF Service Corp. for additional information concerning purchases at
net asset value or at reduced sales loads.
<PAGE>
<TABLE>
CLASS C SHARES
Class C shares of the Fund are sold on a continuous basis at the net asset
value next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Manager by 5:00 p.m., Eastern time, that
day are confirmed at the net asset value determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is
the responsibility of dealers to transmit properly completed orders so that
they will be received by the Manager by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received
by MGF Service Corp. by 4:00 p.m., Eastern time, are confirmed at that day's
net asset value. Direct investments received by MGF Service Corp. after 4:00
p.m., Eastern time, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the net asset value next determined on the following
business day.
A contingent deferred sales load is imposed on Class C shares if an investor
redeems an amount which causes the current value of the investor's account to
fall below the total dollar amount of purchase payments subject to the
deferred sales load, except that no such charge is imposed if the shares
redeemed have been acquired through the reinvestment of dividends or capital
gains distributions or to the extent the amount redeemed is derived from
increases in the value of the account above the amount of purchase payments
subject to the deferred sales load.
Whether a contingent deferred sales load is imposed will depend on the amount
of time since the investor made a purchase payment from which an amount is
being redeemed. Purchases are subject to the contingent deferred sales load
according to the following schedule:
<CAPTION>
Year Since Purchase Contingent Deferred
Payment was Made Sales Load
<S> <C>
First Year 1%
Thereafter None
In determining whether a contingent deferred sales load is payable, it is
assumed that the purchase payment from which the redemption is made is the
earliest purchase payment (from which a redemption or exchange has not already
been effected). If the earliest purchase from which a redemption has not yet
been effected was made within one year before the redemption, then a deferred
sales load at the rate of 1% will be imposed.
The following example will illustrate the operation of the contingent deferred
sales load. Assume that an individual opens an account and purchases 1,000
shares at $10 per share and that six months later the net asset value per
share is $12 and, during such time, the investor has acquired 50 additional
shares through reinvestment of distributions. If at such time the investor
should redeem 450 shares (proceeds of $5,400), 50 shares will not be subject
to the load because of dividend reinvestment. With respect to the remaining
400 shares, the load is applied only to the original cost of $10 per share and
not to the increase in net asset value of $2 per share. Therefore, $4,000 of
the $5,400 redemption proceeds will be charged the load. At the rate of 1%,
the contingent deferred sales load would be $40. In determining whether an
amount is available for redemption without incurring a deferred sales load,
the purchase payments made for all Class C shares in the shareholder's account
are aggregated, and the current value of all such shares is aggregated.
</TABLE>
<PAGE>
All sales loads imposed on redemptions are paid to the Manager. The Manager
intends to pay a commission of 1% of the purchase amount to participating
brokers at the time the investor purchases Class C shares.
The contingent deferred sales load is currently waived for any partial or
complete redemption following death or disability (as defined in the Internal
Revenue Code of 1986, as amended) of a shareholder (including one who owns the
shares with his or her spouse as a joint tenant with rights of survivorship)
from an account in which the deceased or disabled is named. The Manager may
require documentation prior to waiver of the charge, including death
certificates, physicians' certificates, etc.
SHAREHOLDER SERVICES
Contact MGF Service Corp. (Nationwide call toll-free 800-543-0407; in
Cincinnati call 629-2050) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may elect
to receive, or may designate another person to receive, monthly or quarterly
payments in a specified amount of not less than $50 each. There is no charge
for this service. Purchases of additional Class A shares of the Fund while
the plan is in effect are generally undesirable because a sales load is
incurred whenever purchases are made.
TAX-DEFERRED RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with the following
tax-deferred retirement plans:
- -- Keogh Plans for self-employed individuals
- -- Individual retirement account (IRA) plans for individuals and their
non-employed spouses
- -- Qualified pension and profit-sharing plans for employees, including those
profit-sharing plans with a 401(k) provision
- -- 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code.
DIRECT DEPOSIT PLANS
Shares of the Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder
to have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Fund from your bank, savings
and loan or other depository institution account. The minimum initial and
subsequent investments must be $50 under the plan. MGF Service Corp. pays the
costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Fund.
<PAGE>
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Fund, you may reinvest all or part of the
proceeds without any additional sales load. This reinvestment must occur
within ninety days of the redemption and the privilege may only be exercised
once per year.
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Trust is open for
business by sending a written request to MGF Service Corp. The request must
state the number of shares or the dollar amount to be redeemed and your
account number. The request must be signed exactly as your name appears on
the Trust's account records. If the shares to be redeemed have a value of
$25,000 or more, your signature must be guaranteed by any eligible guarantor
institution, including banks, brokers and dealers, municipal securities
brokers and dealers, government securities brokers and dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations.
You may also redeem shares by placing a wire redemption request through a
securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per
share next determined after receipt by the Trust or its agent of your wire
redemption request. It is the responsibility of broker-dealers to properly
transmit wire redemption orders.
If your instructions request a redemption by wire, you will be charged an $8
processing fee by the Fund's Custodian. The Trust reserves the right, upon
thirty days' written notice, to change the processing fee. All charges will
be deducted from your account by redemption of shares in your account. Your
bank or brokerage firm may also impose a charge for processing the wire. In
the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for
ACH transactions. Contact MGF Service Corp. for more information about ACH
transactions.
If a certificate for the shares was issued, it must be delivered to MGF
Service Corp., or the dealer in the case of a wire redemption, duly endorsed
or accompanied by a duly endorsed stock power, with the signature guaranteed
by any of the eligible guarantor institutions outlined above.
A contingent deferred sales load may apply to a redemption of Class C shares
or to a redemption of certain Class A shares purchased at net asset value.
See "How to Purchase Shares."
Shares are redeemed at their net asset value per share next determined after
receipt by MGF Service Corp. of a proper redemption request in the form
described above, less any applicable contingent deferred sales load. Payment
is normally made within three business days after tender in such form,
provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares
of the Fund by certified check or wire.
<PAGE>
The Trust and MGF Service Corp. will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to
be genuine or the delivery or transmittal of the redemption proceeds by wire.
The affected shareholders will bear the risk of any such loss. The privilege
of exchanging shares by telephone is automatically available to all
shareholders. The Trust or MGF Service Corp., or both, will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or MGF Service Corp. do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. These procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
At the discretion of the Trust or MGF Service Corp., corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves
the right to require you to close your account if at any time the value of
your shares is less than $1,000 (based on actual amounts invested including
any sales load paid, unaffected by market fluctuations), or $250 in the case
of tax-deferred retirement plans, or such other minimum amount as the Trust
may determine from time to time. After notification to you of the Trust's
intention to close your account, you will be given thirty days to increase the
value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
Shares of the Fund and of any other fund of the Midwest Group of Funds may be
exchanged for each other.
Class A shares of the Fund which are not subject to a contingent deferred
sales load may be exchanged for Class A shares of any other fund and for
shares of any other fund which offers only one class of shares (provided such
shares are not subject to a contingent deferred sales load). A sales load
will be imposed equal to the excess, if any, of the sales load rate applicable
to the shares being acquired over the sales load rate, if any, previously paid
on the shares being exchanged.
Class C shares of the Fund, as well as Class A shares of the Fund subject to a
contingent deferred sales load, may be exchanged, on the basis of relative net
asset value per share, for shares of any other fund which imposes a contingent
deferred sales load and for shares of any fund which is a money market fund.
A fund will "tack" the period for which the shares being exchanged were held
onto the holding period of the acquired shares for purposes of determining if
a contingent deferred sales load is applicable in the event that the acquired
shares are redeemed following the exchange. The period of time that shares
are held in a money market fund will not count toward the holding period for
determining whether a contingent deferred sales load is applicable.
The following are the funds of the Midwest Group of Funds currently offered to
the public. Funds which may be subject to a front-end or contingent deferred
sales load are indicated by an asterisk.
<PAGE>
MIDWEST GROUP TAX FREE TRUST MIDWEST STRATEGIC TRUST
Tax-Free Money Fund *U.S. Government Securities Fund
Ohio Tax-Free Money Fund *Equity Fund
California Tax-Free Money Fund *Utility Fund
Royal Palm Florida Tax-Free Money Fund *Treasury Total Return Fund
Government Housing Tax-Exempt Fund
*Tax-Free Intermediate Term Fund MIDWEST TRUST
*Ohio Insured Tax-Free Fund Short Term Government Income Fund
Institutional Government Income Fund
*Intermediate Term Government Income
Fund
*Adjustable Rate U.S. Government
Securities Fund
*Global Bond Fund
You may request an exchange by sending a written request to MGF Service Corp.
The request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value (or offering
price, if sales load is applicable) after receipt of a request by MGF Service
Corp.
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated
by the Board of Trustees upon 60 days' prior notice to shareholders. An
exchange results in a sale of fund shares, which may cause you to recognize a
capital gain or loss. Before making an exchange, contact MGF Service Corp. to
obtain a current prospectus for any of the other funds in the Midwest Group
and more information about exchanges among the Midwest Group of Funds.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to distribute substantially all of its net investment income,
if any, on a quarterly basis. The Fund expects to distribute any net realized
long-term capital gains at least once each year. Management will determine
the timing and frequency of the distributions of any net realized short-term
capital gains.
Distributions are paid according to one of the following options:
Share Option--income distributions and capital gains distributions reinvested
in additional shares.
Income Option--income distributions and short-term capital gains distributions
paid in cash; long-term capital gains distributions reinvested in additional
shares.
Cash Option--income distributions and capital gains distributions paid in
cash.
<PAGE>
You should indicate your choice of option on your application. If no option
is specified on your application, distributions will automatically be
reinvested in additional shares. All distributions will be based on the net
asset value in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then-current net asset
value and your account will be converted to the Share Option.
An investor who has received in cash any dividend or capital gains
distribution from the Fund may return the distribution within thirty days of
the distribution date to MGF Service Corp. for reinvestment at the net asset
value next determined after its return. The investor or his dealer must
notify MGF Service Corp. that a distribution is being reinvested pursuant to
this provision.
TAXES
The Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. The Fund
intends to distribute substantially all of its net investment income and any
net realized capital gains to its shareholders. Distributions of net
investment income as well as from net realized short-term capital gains, if
any, are taxable as ordinary income. Since the Fund's investment income is
derived from interest rather than dividends, no portion of such distributions
is eligible for the dividends received deduction available to corporations.
Distributions resulting from the sale of foreign currencies and foreign
obligations, to the extent of foreign exchange gains, are taxed as ordinary
income or loss. If these transactions result in reducing the Fund's net
income, a portion of the income may be classified as a return of capital
(which will lower your tax basis). If the Fund pays nonrefundable taxes to
foreign governments during the year, the taxes will reduce the Fund's net
investment income but still may be included in your taxable income. However,
you may be able to claim an offsetting tax credit or itemized deduction on
your return for your portion of foreign taxes paid by the Fund. Distributions
of net realized long-term capital gains are taxable as long-term capital gains
regardless of how long you have held your Fund shares.
Under applicable tax law, the Fund may be required to limit its gains from
hedging in foreign currency forwards, futures and options. Although it is
anticipated the Fund will comply with such limits, the Fund's extensive use of
these hedging techniques involves greater risk of unfavorable tax consequences
than funds not engaging in such techniques. Hedging may also result in the
application of the mark-to-market and straddle provisions of the Internal
Revenue Code. These provisions could result in an increase (or decrease) in
the amount of taxable dividends paid by the Fund as well as affect whether
dividends paid by the Fund are classified as capital gain or ordinary income.
<PAGE>
The Fund will mail to each of its shareholders a statement indicating the
amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Fund may be subject
to state and local taxes on distributions. Shareholders should consult their
tax advisors about the tax effect of distributions and withdrawals from the
Fund and the use of the Automatic Withdrawal Plan and the Exchange Privilege.
The tax consequences described in this section apply whether distributions are
taken in cash or reinvested in additional shares.
OPERATION OF THE FUND
The Fund is a non-diversified series of Midwest Trust, an open-end management
investment company organized as a Massachusetts business trust on December 7,
1980. The Board of Trustees supervises the business activities of the Trust.
Like other mutual funds, the Trust retains various organizations to perform
specialized services for the Fund.
The Trust retains Midwest Group Financial Services, Inc., 312 Walnut Street,
Cincinnati, Ohio (the "Manager"), to provide general investment supervisory
services to the Fund and to manage the Fund's business affairs. The Manager
was organized in 1974 and is a subsidiary of Leshner Financial, Inc., of which
Robert H. Leshner is the controlling shareholder. The Manager serves as
investment adviser to four other series of the Trust, seven series of Midwest
Group Tax Free Trust and four series of Midwest Strategic Trust. The Fund
pays the Manager a fee equal to the annual rate of .7% of the average value of
its daily net assets up to $100 million and .6% of such assets in excess of
$100 million.
Rogge Global Partners, plc (the "Adviser"), 5-6 St. Andrew's Hill, London,
England, has been retained by the Manager to manage the Fund's investments.
The Adviser was organized in 1984 and specializes in global fixed-income
management. The Manager (not the Fund) pays the Adviser a fee equal to the
annual rate of .35% of the average value of the Fund's daily net assets up to
$100 million and .3% of such assets in excess of $100 million.
Decisions regarding the investment of the Fund's portfolio are made by the
Adviser's Global Strategy Group, which is made up of the Adviser's directors
of portfolio management: Olaf Rogge, John Graham and Richard Bell. Mr. Rogge
is the founder and the majority shareholder of the Adviser and has been
managing global investments for approximately twenty-two years.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees
and expenses of the custodian, transfer agent and accounting and pricing agent
of the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders,
expenses of shareholders' meetings and proxy solicitations, and such
extraordinary or non-recurring expenses as may arise, including litigation to
which the Fund may be a party and indemnification of the Trust's officers and
Trustees with respect thereto.
<PAGE>
The Trust has retained MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio, a
subsidiary of Leshner Financial, Inc., to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent.
MGF Service Corp. also provides accounting and pricing services to the Fund.
MGF Service Corp. receives a monthly fee from the Fund for calculating daily
net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, MGF Service Corp. has been retained by the Manager to assist the
Manager in providing administrative services to the Fund. In this capacity,
MGF Service Corp. supplies executive, administrative and regulatory services,
supervises the preparation of tax returns, and coordinates the preparation of
reports to shareholders and reports to and filings with the Securities and
Exchange Commission and state securities authorities. The Manager (not the
Fund) pays MGF Service Corp. a fee for these administrative services equal to
one-fourth of its advisory fee from the Fund.
The Manager serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. Robert H.
Leshner, Chairman and a director of the Manager, is President and a Trustee of
the Trust. John F. Splain, Secretary and General Counsel of the Manager, is
Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to
sales of shares of the Fund as a factor in the selection of brokers and
dealers to execute portfolio transactions of the Fund. Subject to the
requirements of the Investment Company Act of 1940 and procedures adopted by
the Board of Trustees, the Fund may execute portfolio transactions through any
broker or dealer and pay brokerage commissions to a broker (i) which is an
affiliated person of the Trust, or (ii) which is an affiliated person of such
person, or (iii) an affiliated person of which is an affiliated person of the
Trust, the Manager or the Adviser.
Shares of the Fund have equal voting rights and liquidation rights. The Fund
shall vote separately on matters submitted to a vote of the shareholders
except in matters where a vote of all series of the Trust in the aggregate is
required by the Investment Company Act of 1940 or otherwise. Each class of
shares of the Fund shall vote separately on matters relating to its plan of
distribution pursuant to Rule 12b-1 (see "Distribution Plans"). When matters
are submitted to shareholders for a vote, each shareholder is entitled to one
vote for each full share owned and fractional votes for fractional shares
owned. The Trust does not normally hold annual meetings of shareholders. The
Trustees shall promptly call and give notice of a meeting of shareholders for
the purpose of voting upon the removal of any Trustee when requested to do so
in writing by shareholders holding 10% or more of the Trust's outstanding
shares. The Trust will comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 in order to facilitate communications among
shareholders.
<PAGE>
DISTRIBUTION PLANS
CLASS A SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Fund has adopted a plan of distribution (the "Class A Plan") under
which Class A shares may directly incur or reimburse the Manager for certain
distribution-related expenses, including payments to securities dealers and
others who are engaged in the sale of shares of the Fund and who may be
advising investors regarding the purchase, sale or retention of Fund shares;
expenses of maintaining personnel who engage in or support distribution of
shares or who render shareholder support services not otherwise provided by
MGF Service Corp.; expenses of formulating and implementing marketing and
promotional activities, including direct mail promotions and mass media
advertising; expenses of preparing, printing and distributing sales literature
and prospectuses and statements of additional information and reports for
recipients other than existing shareholders of the Fund; expenses of obtaining
such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable;
and any other expenses related to the distribution of the Fund's Class A
shares.
Pursuant to the Class A Plan, the Fund may make payments to dealers and other
persons, including the Manager and its affiliates, who may be advising
investors regarding the purchase, sale or retention of Class A shares. For
the fiscal period ended September 30, 1995, Class A shares of the Fund paid
$6,493 to the Manager to reimburse it for payments made to dealers and other
persons who may be advising shareholders regarding the retention of shares of
the Fund.
The annual limitation for payment of expenses pursuant to the Class A Plan is
.35% of the Fund's average daily net assets allocable to Class A shares.
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class A Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by
the Manager after the date the Class A Plan terminates.
CLASS C SHARES. Pursuant to Rule 12b-1 under the Investment Company Act of
1940, the Fund has adopted a plan of distribution (the "Class C Plan") which
provides for two categories of payments. First, the Class C Plan provides for
the payment to the Manager of an account maintenance fee, in an amount equal
to an annual rate of .25% of the Fund's average daily net assets allocable to
Class C shares, which may be paid to other dealers based on the average value
of Fund shares owned by clients of such dealers. In addition, the Class C
shares may directly incur or reimburse the Manager in an amount not to exceed
.75% per annum of the Fund's average daily net assets allocable to Class C
shares for expenses incurred in the distribution and promotion of the Fund's
Class C shares, including payments to securities dealers and others who are
engaged in the sale of shares of the Fund and who may be advising investors
regarding the purchase, sale or retention of such shares; expenses of
maintaining personnel who engage in or support distribution of shares or who
render shareholder support services not otherwise provided by MGF Service
Corp.; expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
expenses of preparing, printing and distributing sales literature and
prospectuses and statements of additional information and reports for
recipients other than existing shareholders of the Fund; expenses of obtaining
such information, analyses and reports with respect to marketing and
promotional activities as the Trust may, from time to time, deem advisable;
and any other expenses related to the distribution of the Fund's Class C
shares.
<PAGE>
Unreimbursed expenditures will not be carried over from year to year. In the
event the Class C Plan is terminated by the Fund in accordance with its terms,
the Fund will not be required to make any payments for expenses incurred by
the Manager after the date the Class C Plan terminates. The Manager may make
payments to dealers and other persons in an amount up to .75% per annum of the
average value of Class C shares owned by their clients, in addition to the
.25% account maintenance fee described above.
GENERAL. Pursuant to the Plans, the Fund may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although
the scope of this prohibition under the Glass-Steagall Act has not been
clearly defined by the courts or appropriate regulatory agencies, management
of the Trust believes that the Glass-Steagall Act should not preclude a bank
from providing such services. However, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law. If a bank were prohibited from continuing to perform all or a part
of such services, management of the Trust believes that there would be no
material impact on the Fund or its shareholders. Banks may charge their
customers fees for offering these services to the extent permitted by
applicable regulatory authorities, and the overall return to those
shareholders availing themselves of the bank services will be lower than to
those shareholders who do not. The Fund may from time to time purchase
securities issued by banks which provide such services; however, in selecting
investments for the Fund, no preference will be shown for such securities.
The National Association of Securities Dealers, in its Rules of Fair Practice,
places certain limitations on asset-based sales charges of mutual funds.
These Rules require fund-level accounting in which all sales charges --
front-end load, 12b-1 fees or contingent deferred load -- terminate when a
percentage of gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
On each day that the Trust is open for business, the share price (net asset
value) of Class C shares and the public offering price (net asset value plus
applicable sales load) of Class A shares of the Fund is determined as of the
close of the regular session of trading on the New York Stock Exchange,
currently 4:00 p.m., Eastern time. The Trust is open for business on each day
the New York Stock Exchange is open for business. Obligations held by the
Fund may be primarily listed on foreign exchanges or traded in foreign markets
which are open on days (such as Saturdays and U.S. holidays) when the New York
Stock Exchange is not open for business. As a result, the net asset value per
share of the Fund may be significantly affected by trading on days when the
Trust is not open for business. The net asset value per share of the Fund is
calculated by dividing the sum of the value of the securities held by the Fund
plus cash or other assets minus all liabilities (including estimated accrued
expenses) by the total number of shares outstanding of the Fund, rounded to
the nearest cent.
<PAGE>
The Fund's portfolio securities for which market quotations are readily
available are valued at their most recent bid prices as obtained from one or
more of the major market makers for such securities. Foreign securities are
valued on the basis of quotations from the primary market in which they are
traded and are translated from the local currency into U.S. dollars using
currency exchange rates. Securities (and other assets) for which market
quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
The net asset value per share of the Fund will fluctuate with the value of the
securities it holds.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its "average annual total return."
The Fund may also advertise "yield." Both yield and average annual total
return figures are based on historical earnings and are not intended to
indicate future performance. Total return and yield are computed separately
for Class A and Class C shares. The yield of Class A shares is expected to be
higher than the yield of Class C shares due to the higher distribution fees
imposed on Class C shares.
The "average annual total return" of the Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and, for
Class A shares, the deduction of the current maximum sales load from the
initial investment. The Fund may also advertise total return (a
"nonstandardized quotation") which is calculated differently from "average
annual total return." A nonstandardized quotation of total return may be a
cumulative return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains distributions.
A nonstandardized quotation of total return may also indicate average annual
compounded rates of return over periods other than those specified for
"average annual total return." These nonstandardized returns do not include
the effect of the applicable sales load which, if included, would reduce total
return. A nonstandardized quotation of total return will always be
accompanied by the Fund's "average annual total return" as described above.
The "yield" of the Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day
of the period (using the average number of shares entitled to receive
dividends). The yield formula assumes that net investment income is earned
and reinvested at a constant rate and annualized at the end of a six-month
period.
<PAGE>
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Fund may also
compare its performance to that of other selected mutual funds, averages of
the other mutual funds within its category as determined by Lipper, or
recognized indicators such as the Salomon Brothers World Government Bond
Index. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Fund may also present its performance and other investment
characteristics, such as volatility or a temporary defense posture, in light
of the Manager's view of current or past market conditions or historical
trends.
Further information about the Fund's performance is contained in the Trust's
annual report which can be obtained by shareholders at no charge by calling
MGF Service Corp. (Nationwide call toll-free 800-543-0407; in Cincinnati call
629-2050) or by writing to the Trust at the address on the front of this
Prospectus.
<PAGE>
MIDWEST TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
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 MANAGER/UNDERWRITER
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
INVESTMENT ADVISER
ROGGE GLOBAL PARTNERS, plc
5-6 St. Andrew's Hill
London EC4V 5BY England
TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Service
Nationwide: (Toll-Free) 800-543-0407
Cincinnati: 513-629-2050
Rate Line
Nationwide: (Toll-Free) 800-852-3809
Cincinnati: 513-579-0999
<PAGE>
TABLE OF CONTENTS
Expense Information 2
Financial Highlights 3
Investment Objective, Investment
Policies and Risk Considerations 4
How to Purchase Shares 10
Shareholder Services 15
How to Redeem Shares 16
Exchange Privilege 17
Dividends and Distributions 18
Taxes 19
Operation of the Fund 19
Distribution Plans 21
Calculation of Share Price and Public
Offering Price 22
Performance Information 22
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
<PAGE>
TOTAL RETURN
PROSPECTUS
FEBRUARY 1, 1996
Global
BOND FUND
GRAPHIC MIDWEST LOGO
<PAGE>
ACCOUNT APPLICATION
Please mail account application to:
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
GLOBAL BOND FUND
o A SHARES (12)
o C SHARES (13)
ACCOUNT NO._________________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:__________________________
Home Office Address:________________
Branch Address:_____________________
Rep Name & No.:_____________________
Rep Signature:______________________
Initial Investment of $__________________ ($1,000 minimum)
o Check or draft enclosed payable to the Fund.
o Bank Wire From: _________________________________________________________
o Exchange From: __________________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/TAX L.D.#
__________________________________________________ _____________________
Name of Individual, Corporation, Organization, (In case of custodial
or Minor, etc. account please list
minor's S.S.#)
__________________________________________________ Citizenship:
Name of Joint Tenant, Partner, Custodian o U.S.
o Other
ADDRESS PHONE
__________________________________________________ ( )______
Street or P.O. Box Business Phone
__________________________________________________ ( )______
City State Zip Home Phone
Check Appropriate Box: o Individual o Joint Tenant (Right of survivorship
presumed) o Partnership o Corporation o Trust o Custodial o Non-Profit o Other
Occupation and Employer Name/Address__________________________________________
Are you an associated person of an NASD member? o Yes o No
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. Check
box if appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends; or
the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do not
provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
<PAGE>
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital gains distributions reinvested
in additional shares.
o Cash Option --Income distributions and capital gains distributions paid in
cash.
REDUCED SALES CHARGES (CLASS A SHARES ONLY)
RIGHT OF ACCUMULATION: I apply for Right of Accumulation subject to the
Agent's confirmation of the following holdings of eligible load funds of the
Midwest Group of Funds.
ACCOUNT NUMBER/NAME ACCOUNT NUMBER/NAME
_____________________________________ _____________________________________
_____________________________________ _____________________________________
LETTER OF INTENT: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o l agree to the Letter of Intent in the current Prospectus of Midwest Trust.
Although I am not obligated to purchase, and the Trust is not obligated to
sell, I intend to invest over a 13 month period beginning ___________________
19 _______ (Purchase Date of not more than 90 days prior to this Letter) an
aggregate amount in the load funds of the Midwest Group of Funds at least
equal to (check appropriate box):
o $100,000 o $250,000 o $500,000 o $1,000,000
<PAGE>
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints MGF Service Corp. as his agent to enter orders for shares whether by
direct purchase or exchange, to receive dividends and distributions for
automatic reinvestment in additional shares of the Fund for credit to the
investor's account and to surrender for redemption shares held in the
investor's account in accordance with any of the procedures elected above or
for payment of service charges incurred by the investor. The investor further
agrees that MGF Service Corp. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this
Application. The investor hereby ratifies any instructions given pursuant to
this Application and for himself and his successors and assigns does hereby
release MGF Service Corp., Midwest Trust, Midwest Group Financial Services,
Inc., and their respective officers, employees, agents and affiliates from any
and all liability in the performance of the acts instructed herein provided
that such entities have exercised due care to determine that the instructions
are genuine.
_____________________________________ _____________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
_____________________________________ _____________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE THE
RESOLUTION FORM ON THE REVERSE SIDE.
UNLESS OTHERWISE SPECIFIED, EACH JOINT OWNER SHALL HAVE FULL AUTHORITY TO ACT
ON BEHALF OF THE ACCOUNT.
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of
Midwest Trust. There is no charge for this service, and it offers the
convenience of automatic investing on a regular basis. The minimum investment
is $50.00 per month. For an account that is opened by using this Plan, the
minimum initial and subsequent investments must be $50.00. Though a continuous
program of 12 monthly investments is recommended, the Plan may be discontinued
by the shareholder at any time.
<PAGE>
Please invest $_________________ ABA Routing Number_________________________
per month in the Fund.
FI Account Number__________________________
o Checking Account o Savings Account
_________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
_________________________________ o the 15th day of each month
City State o both the 15th and last business day
X________________________________ X________________________________
(Signature of Depositor EXACTLY (Signature of Joint Tenant -
as it appears on FI Records) if any)
(Joint Signatures are required when bank account is in joint names. Please
sign exactly as signature appears on your FI's records.)
Please attach a voided check for the Automatic Investment Plan.
INDEMNIFICATION TO DEPOSITOR'S BANK
In consideration of your participation in a plan which MGF Service Corp.
("MGF") has put into effect, by which amounts, determined by your depositor,
payable to the Fund, for purchase of shares of the Fund, are collected by MGF,
MGF hereby agrees:
MGF will indemnify and hold you harmless from any liability to any person or
persons whatsoever arising out of the payment by you of any amount drawn by
the Fund to its own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you whether
with or without cause or intentionally or inadvertently, of any such amount.
MGF will defend, at its own cost and expense, any action which might be
brought against you by any person or persons whatsoever because of your
actions taken pursuant to the foregoing request or in any manner arising by
reason of your participation in this arrangement. MGF will refund to you any
amount erroneously paid by you to the Fund if the claim for the amount of such
erroneous payment is made by you within six (6) months from the date of such
erroneous payment; your participation in this arrangement and that of the Fund
may be terminated by thirty (30) days written notice from either party to the
other.
<PAGE>
AUTOMATIC WITHDRAWAL PLAN (COMPLETE FOR WITHDRAWALS FROM THE FUND)
This is an authorization for you to withdraw $_________ from my mutual fund
account beginning the last business day of the month of ____________.
Please Indicate Withdrawal Schedule (Check One):
o MONTHLY -- Withdrawals will be made on the last business day of each month.
o QUARTERLY -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and
12/31.
o ANNUALLY -- Please make withdrawals on the last business day of the month
of:_____________.
Please Select Payment Method (Check One):
o EXCHANGE: Please exchange the withdrawal proceeds into another Midwest
account number: ____ ____ -- ____ ____ ____ ____ ____ ____ -- ____
o CHECK: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o ACH TRANSFER: Please send my withdrawal proceeds via ACH transfer to my
bank checking or savings account as indicated below. I understand that the
transfer will be completed in two to three business days and that there
is no charge.
o BANK WIRE: Please send my withdrawal proceeds via bank wire, to the account
indicated below. I understand that the wire will be completed in one business
day and that there is an $8.00 fee.
PLEASE ATTACH A VOIDED CHECK FOR ACH OR BANK WIRE
_____________________________________________________________________________
Bank Name Bank Address
_____________________________________________________________________________
Bank ABA# Account # Account Name
o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee_________________________________________________________________
Please send to:_______________________________________________________________
Street address City State Zip
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other
Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Midwest Trust (the Trust) and that __________________________________ is (are)
hereby authorized to complete and execute the Application on behalf of the
corporation or organization and to take any action for it as may be necessary
or appropriate with respect to its shareholder account with the Trust, and it
is
FURTHER RESOLVED: That any one of the above noted officers is authorized to
sign any documents necessary or appropriate to appoint MGF Service Corp. as
redemption agent of the corporation or organization for shares of the
applicable series of the Trust, to establish or acknowledge terms and
conditions governing the redemption of said shares and to otherwise implement
the privileges elected on the Application.
<PAGE>
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
_____________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of_____________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on __________ at which a
quorum was present and acting throughout, and that the same are now in full
force and effect.
I further certify that the following is (are) duly elected officer(s) of the
corporation or organization, authorized to act in accordance with the
foregoing resolutions.
NAME TITLE
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
Witness my hand and seal of the corporation or organization
this____________________________day of____________________________, 19_______
_____________________________________ _____________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
MIDWEST TRUST
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
Short Term Government Income Fund
Intermediate Term Government Income Fund
Institutional Government Income Fund
Adjustable Rate U.S. Government Securities Fund
Global Bond Fund
This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Prospectus
of the applicable Fund of Midwest Trust dated February 1, 1996.
A copy of a Fund's Prospectus can be obtained by writing the
Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202-4094, or by calling the Trust nationwide toll-free
800-543-0407, in Cincinnati 629-2050.
STATEMENT OF ADDITIONAL INFORMATION
Midwest Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS
PAGE
THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS. . . . . . . . . . . . . . 4
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS . . . . . . . . . . . . 6
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 19
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . 28
THE INVESTMENT ADVISER AND UNDERWRITER . . . . . . . . . . . . . . . . . 30
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECURITIES TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 36
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE . . . . . . . . . . 39
OTHER PURCHASE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 41
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
REDEMPTION IN KIND . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
HISTORICAL PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . 45
PRINCIPAL SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . 50
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
MGF SERVICE CORP.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ANNUAL REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
THE TRUST
Midwest Trust (the "Trust"), formerly Midwest Income Trust,
was organized as a Massachusetts business trust on December 7,
1980. The Trust currently offers five series of shares to
investors: the Short Term Government Income Fund (formerly the
Short Term Government Fund), the Intermediate Term Government
Income Fund (formerly the Intermediate Term Government Fund), the
Institutional Government Income Fund (formerly the Institutional
Government Fund), the Adjustable Rate U.S. Government Securities
Fund and the Global Bond Fund (referred to individually as a
"Fund" and collectively as the "Funds"). Each Fund has its own
investment objective(s) and policies.
Each share of a Fund represents an equal proportionate
interest in the assets and liabilities belonging to that Fund
with each other share of that Fund and is entitled to such
dividends and distributions out of the income belonging to the
Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights,
and the Trustees have the authority from time to time to divide
or combine the shares of any Fund into a greater or lesser number
of shares of that Fund so long as the proportionate beneficial
interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any
liquidation of a Fund, the holders of shares of the Fund being
liquidated will be entitled to receive as a class a distribution
out of the assets, net of the liabilities, belonging to that
Fund. Expenses attributable to any Fund are borne by that Fund.
Any general expenses of the Trust not readily identifiable as
belonging to a particular Fund are allocated by or under the
direction of the Trustees in such manner as the Trustees
determine to be fair and equitable. Generally, the Trustees
allocate such expenses on the basis of relative net assets or
number of shareholders. No shareholder is liable to further
calls or to assessment by the Trust without his express consent.
Both Class A shares and Class C shares of the Intermediate
Term Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund and the Global Bond Fund represent an interest in
the same assets of such Fund, have the same rights and are
identical in all material respects except that (i) Class C shares
bear the expenses of higher distribution fees; (ii) certain other
class specific expenses will be borne solely by the class to
which such expenses are attributable, including transfer agent
fees attributable to a specific class of shares, printing and
postage expenses related to preparing and distributing materials
to current shareholders of a specific class, registration fees
incurred by a specific class of shares, the expenses of
administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal
expenses relating to a class of shares, Trustees' fees or
expenses incurred as a result of issues relating to a specific
class of shares and accounting fees and expenses relating to a
specific class of shares; and (iii) each class has exclusive
voting rights with respect to matters relating to its own
distribution arrangements. The Board of Trustees may classify
and reclassify the shares of a Fund into additional classes of
shares at a future date.
Under Massachusetts law, under certain circumstances,
shareholders of a Massachusetts business trust could be deemed to
have the same type of personal liability for the obligations of
the Trust as does a partner of a partnership. However, numerous
investment companies registered under the Investment Company Act
of 1940 have been formed as Massachusetts business trusts and the
Trust is not aware of an instance where such result has occurred.
In addition, the Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust or the Trustees.
The Trust Agreement also provides for the indemnification out of
the Trust property for all losses and expenses of any shareholder
held personally liable for the obligations of the Trust.
Moreover, it provides that the Trust will, upon request, assume
the defense of any claim made against any shareholder for any act
or obligation of the Trust and satisfy any judgment thereon. As
a result, and particularly because the Trust assets are readily
marketable and ordinarily substantially exceed liabilities,
management believes that the risk of shareholder liability is
slight and limited to circumstances in which the Trust itself
would be unable to meet its obligations. Management believes
that, in view of the above, the risk of personal liability is
remote.
QUALITY RATINGS OF FIXED-INCOME OBLIGATIONS
CORPORATE BONDS.
Moody's Investors Service, Inc. provides the following
descriptions of its corporate bond ratings:
Aaa - "Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk
and are generally referred to as 'gilt edge.' Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues."
Aa - "Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat
larger than in Aaa securities."
A - "Bonds which are rated A possess many favorable
investment attributes and are considered as upper medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future."
Standard & Poor's Ratings Group provides the following
descriptions of its corporate bond ratings:
AAA - "Debt rated AAA has the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong."
AA - "Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the highest rated
issues only in small degree."
A - "Debt rated A has strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories."
CORPORATE NOTES.
Moody's Investors Service, Inc. provides the following
descriptions of its corporate note ratings:
MIG-1 "Notes which are rated MIG-1 are judged to be of the
best quality. There is present strong protection by
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing."
MIG-2 "Notes which are rated MIG-2 are judged to be of high
quality. Margins of protection are ample although not
so large as in the preceding group."
MIG-3 "Notes which are rated MIG-3 are judged to be of
favorable quality. All security elements are accounted
for but they are lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection
may be narrow and market access for refinancing is
likely to be less well established."
Standard & Poor's Ratings Group provides the following
descriptions of its corporate note ratings:
SP-1 "Debt rated SP-1 has very strong or strong capacity to
pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be
given a plus (+) designation."
SP-2 "Debt rated SP-2 has satisfactory capacity to pay
principal and interest."
SP-3 "Debt rated SP-3 has speculative capacity to pay
principal and interest."
COMMERCIAL PAPER.
Description of Commercial Paper Ratings of Moody's Investors
Service, Inc.:
Prime-1 "Superior capacity for repayment of short-term
promissory obligations."
Prime-2 "Strong capacity for repayment of short-term promissory
obligations."
Prime-3 "Acceptable capacity for repayment of short-term
promissory obligations."
Description of Commercial Paper Ratings of Standard & Poor's
Ratings Group:
A-1 "This designation indicates that the degree of safety
regarding timely payment is very strong."
A-2 "Capacity for timely payment on issues with this
designation is strong. However, the relative degree of
safety is not as overwhelming as for issues designated
A-1."
A-3 "Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however,
somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the
higher designations."
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and
investment policies described in the Prospectuses (see
"Investment Objectives and Policies") appears below:
When-Issued Securities and Securities Purchased On a To-Be-
Announced Basis. The Intermediate Term Government Income Fund,
the Institutional Government Income Fund, the Adjustable Rate
U.S. Government Securities Fund and the Global Bond Fund will
only make commitments to purchase securities on a when-issued or
to-be-announced ("TBA") basis with the intention of actually
acquiring the securities. In addition, the Funds may purchase
securities on a when-issued or TBA basis only if delivery and
payment for the securities takes place within 120 days after the
date of the transaction. In connection with these investments,
each Fund will direct the Custodian to place cash, U.S.
Government obligations or other liquid high-grade debt
obligations in a segregated account in an amount sufficient to
make payment for the securities to be purchased. When a
segregated account is maintained because a Fund purchases
securities on a when-issued or TBA basis, the assets deposited in
the segregated account will be valued daily at market for the
purpose of determining the adequacy of the securities in the
account. If the market value of such securities declines,
additional cash or securities will be placed in the account on a
daily basis so that the market value of the account will equal
the amount of a Fund's commitments to purchase securities on a
when-issued or TBA basis. To the extent funds are in a
segregated account, they will not be available for new investment
or to meet redemptions. Securities purchased on a when-issued or
TBA basis and the securities held in a Fund's portfolio are
subject to changes in market value based upon changes in the
level of interest rates (which will generally result in all of
those securities changing in value in the same way, i.e., all
those securities experiencing appreciation when interest rates
decline and depreciation when interest rates rise). Therefore,
if in order to achieve higher returns, a Fund remains
substantially fully invested at the same time that it has
purchased securities on a when-issued or TBA basis, there will be
a possibility that the market value of the Fund's assets will
experience greater fluctuation. The purchase of securities on a
when-issued or TBA basis may involve a risk of loss if the seller
fails to deliver after the value of the securities has risen.
When the time comes for a Fund to make payment for
securities purchased on a when-issued or TBA basis, the Fund will
do so by using then available cash flow, by sale of the
securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by
directing the sale of the securities purchased on a when-issued
or TBA basis themselves (which may have a market value greater or
less than the Fund's payment obligation). Although a Fund will
only make commitments to purchase securities on a when-issued or
TBA basis with the intention of actually acquiring the
securities, the Funds may sell these securities before the
settlement date if it is deemed advisable by the Adviser as a
matter of investment strategy.
STRIPS. STRIPS are U.S. Treasury bills, notes, and bonds
that have been issued without interest coupons or stripped of
their unmatured interest coupons, interest coupons that have been
stripped from such U.S. Treasury securities, and receipts or
certificates representing interests in such stripped U.S.
Treasury securities and coupons. A STRIPS security pays no
interest in cash to its holder during its life although interest
is accrued for federal income tax purposes. Its value to an
investor consists of the difference between its face value at the
time of maturity and the price for which it was acquired, which
is generally an amount significantly less than its face value.
Investing in STRIPS may help to preserve capital during periods
of declining interest rates. For example, if interest rates
decline, GNMA Certificates owned by a Fund which were purchased
at greater than par are more likely to be prepaid, which would
cause a loss of principal. In anticipation of this, a Fund might
purchase STRIPS, the value of which would be expected to increase
when interest rates decline.
STRIPS do not entitle the holder to any periodic payments of
interest prior to maturity. Accordingly, such securities usually
trade at a deep discount from their face or par value and will be
subject to greater fluctuations of market value in response to
changing interest rates than debt obligations of comparable
maturities which make periodic distributions of interest. On the
other hand, because there are no periodic interest payments to be
reinvested prior to maturity, STRIPS eliminate the reinvestment
risk and lock in a rate of return to maturity. Current federal
tax law requires that a holder of a STRIPS security accrue a
portion of the discount at which the security was purchased as
income each year even though the Fund received no interest
payment in cash on the security during the year.
As a matter of current policy that may be changed without
shareholder approval, the Adjustable Rate U.S. Government
Securities Fund will not purchase STRIPS with a maturity date
that is more than 10 years from the settlement of the purchase.
GNMA Certificates. The term "GNMA Certificates" refers to
mortgage-backed securities representing part ownership of a pool
of mortgage loans, which are guaranteed by the Government
National Mortgage Association and backed by the full faith and
credit of the United States.
1. The Life of GNMA Certificates. The average life of
GNMA Certificates is likely to be substantially less than the
original maturity of the mortgage pools underlying the GNMA
Certificates due to prepayments, refinancing and payments from
foreclosures. Thus, the greatest part of principal will usually
be paid well before the maturity of the mortgages in the pool.
As prepayment rates of individual mortgage pools will vary
widely, it is not possible to accurately predict the average life
of a particular issue of GNMA Certificates. However, statistics
published by the FHA are normally used as an indicator of the
expected average life of GNMA Certificates. These statistics
indicate that the average life of single-family dwelling
mortgages with 25-30 year maturities, the type of mortgages
backing the vast majority of GNMA Certificates, is approximately
12 years. However, mortgages with high interest rates have
experienced accelerated prepayment rates which would indicate a
shorter average life.
2. Yield Characteristics of GNMA Certificates. The coupon
rate of interest of GNMA Certificates is lower than the interest
rate paid on the VA-guaranteed or FHA-insured mortgages
underlying the GNMA Certificates, but only by the amount of the
fees paid to the GNMA and the issuer. For the most common type
of mortgage pool, containing single-family dwelling mortgages,
the GNMA receives an annual fee of 0.06 of 1% of the outstanding
principal for providing its guarantee, and the issuer is paid an
annual fee of 0.44 of 1% for assembling the mortgage pool and for
passing through monthly payments of interest and principal to
Certificate holders.
The coupon rate by itself, however, does not indicate the
yield which will be earned on the GNMA Certificates for the
following reasons:
(a) GNMA Certificates may be issued at a premium or
discount, rather than at par.
(b) After issuance, GNMA Certificates may trade in the
secondary market at a premium or discount.
(c) Interest is earned monthly, rather than semi-
annually as for traditional bonds. Monthly compounding has
the effect of raising the effective yield earned on GNMA
Certificates.
(d) The actual yield of each GNMA Certificate is
influenced by the prepayment experience of the mortgage pool
underlying the Certificate. If mortgagors pay off their
mortgages early, the principal returned to Certificate
holders may be reinvested at more or less favorable rates.
3. Market for GNMA Certificates. Since the inception of
the GNMA mortgage-backed securities program in 1970, the amount
of GNMA Certificates outstanding has grown rapidly. The size of
the market and the active participation in the secondary market
by securities dealers and many types of investors make GNMA
Certificates highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and
depend on, among other things, the level of market rates, the
Certificate's coupon rate and the prepayment experience of the
pool of mortgages backing each Certificate.
FHLMC Certificates. The term "FHLMC Certificates" refers to
mortgage-backed securities representing part ownership of a pool
of mortgage loans, which are guaranteed by the Federal Home Loan
Mortgage Corporation. The Federal Home Loan Mortgage Corporation
is the leading seller of conventional mortgage securities in the
United States. FHLMC Certificates are not guaranteed by the
United States or by any Federal Home Loan Bank and do not
constitute debts or obligations of the United States or any
Federal Home Loan Bank.
Mortgage loans underlying FHLMC Certificates will consist of
fixed rate mortgages with original terms to maturity of between
10 and 30 years, substantially all of which are secured by first
liens on one-family or two-to-four family residential properties.
Mortgage interest rates may be mixed in a pool. The seller/
servicer of each mortgage retains a minimum three-eighths of 1%
servicing fee, and any remaining excess of mortgage rate over
coupon rate is kept by the Federal Home Loan Mortgage
Corporation. The coupon rate of a FHLMC Certificate does not by
itself indicate the yield which will be earned on the Certificate
for the reasons discussed above in connection with GNMA
Certificates.
FNMA Certificates. The term "FNMA Certificates" refers to
mortgage-backed securities representing part ownership of a pool
of mortgage loans, which are guaranteed by the Federal National
Mortgage Association.
The FNMA, despite having U.S. Government agency status, is
also a private, for-profit corporation organized to provide
assistance in the housing mortgage market. The only function of
the FNMA is to provide a secondary market for residential
mortgages. Mortgage loans underlying FNMA Certificates reflect a
considerable diversity and are purchased from a variety of
mortgage originators. They are typically collateralized by
conventional mortgages (not FHA-insured or VA-guaranteed). FNMA
Certificates are highly liquid and usually trade in the secondary
market at higher yields than GNMA Certificates. The coupon rate
of a FNMA Certificate does not by itself indicate the yield which
will be earned on the Certificate for the reasons discussed above
in connection with GNMA Certificates.
Repurchase Agreements. Repurchase agreements are
transactions by which a Fund purchases a security and
simultaneously commits to resell that security to the seller at
an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or
other default of the seller of a repurchase agreement, a Fund
could experience both delays in liquidating the underlying
security and losses. To minimize these possibilities, each Fund
intends to enter into repurchase agreements only with its
Custodian, with banks having assets in excess of $10 billion and
with broker-dealers who are recognized as primary dealers in U.S.
Government obligations by the Federal Reserve Bank of New York.
Collateral for repurchase agreements is held in safekeeping in
the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement
not terminable within seven days if, as a result thereof, more
than 10% of the value of its net assets would be invested in such
securities and other illiquid securities.
Although the securities subject to a repurchase agreement
might bear maturities exceeding one year, settlement for the
repurchase would never be more than one year after the Fund's
acquisition of the securities and normally would be within a
shorter period of time. The resale price will be in excess of
the purchase price, reflecting an agreed upon market rate
effective for the period of time the Fund's money will be
invested in the securities, and will not be related to the coupon
rate of the purchased security. At the time a Fund enters into a
repurchase agreement, the value of the underlying security,
including accrued interest, will equal or exceed the value of the
repurchase agreement, and in the case of a repurchase agreement
exceeding one day, the seller will agree that the value of the
underlying security, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must be of a credit
quality at least equal to a Fund's investment criteria for
portfolio securities and will be held by the Custodian or in the
Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a
repurchase agreement is deemed to be a loan from a Fund to the
seller subject to the repurchase agreement and is therefore
subject to that Fund's investment restriction applicable to
loans. It is not clear whether a court would consider the
securities purchased by a Fund subject to a repurchase agreement
as being owned by that Fund or as being collateral for a loan by
the Fund to the seller. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase of the security under a
repurchase agreement, a Fund may encounter delay and incur costs
before being able to sell the security. Delays may involve loss
of interest or decline in price of the security. If a court
characterized the transaction as a loan and a Fund has not
perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured
creditor, a Fund would be at the risk of losing some or all of
the principal and income involved in the transaction. As with
any unsecured debt obligation purchased for a Fund, the Adviser
seeks to minimize the risk of loss through repurchase agreements
by analyzing the creditworthiness of the obligor, in this case,
the seller. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to
repurchase the security, in which case a Fund may incur a loss if
the proceeds to that Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market
value of the securities subject to the repurchase agreement
becomes less than the repurchase price (including interest), the
Fund involved will direct the seller of the security to deliver
additional securities so that the market value of all securities
subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be
unsuccessful in seeking to enforce the seller's contractual
obligation to deliver additional securities.
Loans of Portfolio Securities. The Institutional Government
Income Fund, the Adjustable Rate U.S. Government Securities Fund
and the Global Bond Fund may each lend its portfolio securities
subject to the restrictions stated in its Prospectus. Under
applicable regulatory requirements (which are subject to change),
the loan collateral must, on each business day, at least equal
the value of the loaned securities. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Fund.
The Fund receives amounts equal to the interest on loaned
securities and also receives one or more of (a) negotiated loan
fees, (b) interest on securities used as collateral, or (c)
interest on short-term debt securities purchased with such
collateral; either type of interest may be shared with the
borrower. The Fund may also pay fees to placing brokers as well
as custodian and administrative fees in connection with loans.
Fees may only be paid to a placing broker provided that the
Trustees determine that the fee paid to the placing broker is
reasonable and based solely upon services rendered, that the
Trustees separately consider the propriety of any fee shared by
the placing broker with the borrower, and that the fees are not
used to compensate the Adviser or any affiliated person of the
Trust or an affiliated person of the Adviser or other affiliated
person. The terms of the Funds' loans must meet applicable tests
under the Internal Revenue Code and permit the Fund to reacquire
loaned securities on five days' notice or in time to vote on any
important matter.
Bank Debt Instruments. Bank debt instruments in which the
Adjustable Rate U.S. Government Securities Fund and the Global
Bond Fund may invest consist of certificates of deposit, bankers'
acceptances and time deposits issued by national banks and state
banks, trust companies and mutual savings banks, or of banks or
institutions the accounts of which are insured by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable
certificates evidencing the indebtedness of a commercial bank to
repay funds deposited with it for a definite period of time
(usually from fourteen days to one year) at a stated or variable
interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been
drawn on it by a customer, which instruments reflect the
obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Time deposits are non-
negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Investments
in time deposits maturing in more than seven days will be subject
to each Fund's restrictions on illiquid investments (see
"Investment Limitations"). The Global Bond Fund may also invest
in certificates of deposit, bankers' acceptances and time
deposits issued by foreign branches of national banks.
Eurodollar certificates of deposit are negotiable U.S. dollar
denominated certificates of deposit issued by foreign branches of
major U.S. commercial banks. Eurodollar bankers' acceptances are
U.S. dollar denominated bankers' acceptances "accepted" by
foreign branches of major U.S. commercial banks.
Commercial Paper. Commercial paper consists of short-term,
(usually from one to two hundred seventy days) unsecured
promissory notes issued by U.S. and foreign corporations in order
to finance their current operations. Eurodollar commercial paper
refers to notes payable by European issuers in U.S. dollars.
The Adjustable Rate U.S. Government Securities Fund will only
invest in U.S. commercial paper rated A-1 by Standard & Poor's or
Prime-1 by Moody's or unrated paper of issuers who have
outstanding unsecured debt rated AAA or better by Standard &
Poor's or Aaa or better by Moody's. The Adjustable Rate U.S.
Government Securities Fund does not presently intend to invest in
commercial paper. The Global Bond Fund will only invest in
commercial paper rated A-1 or A-2 by Standard & Poor's or Prime-1
or Prime-2 by Moody's or unrated paper of issuers who have
outstanding unsecured debt rated A or better by Standard & Poor's
or Moody's. Certain notes may have floating or variable rates.
Variable and floating rate notes with a demand notice period
exceeding seven days will be subject to a Fund's restrictions on
illiquid investments (see "Investment Limitations") unless, in
the judgment of the Adviser or the Sub-Adviser, subject to the
direction of the Board of Trustees, such note is liquid.
Foreign Securities. The Global Bond Fund may invest in non-
U.S. dollar denominated debt securities principally traded in
financial markets outside the United States. Because the Fund
invests in foreign securities, an investment in the Fund involves
risks that are different in some respects from an investment in a
fund which invests only in securities of U.S. domestic issuers.
Foreign investments may be affected favorably or unfavorably by
changes in currency rates and exchange control regulations.
There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not
be subject to accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S.
companies. There may be less governmental supervision of
securities markets, brokers and issuers of securities.
Securities of some foreign companies are less liquid or more
volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the
United States. Settlement practices may include delays and may
differ from those customary in United States markets.
Investments in foreign securities may also be subject to other
risks different from those affecting U.S. investments, including
local political or economic developments, expropriation or
nationalization of assets, restrictions on foreign investment and
repatriation of capital, imposition of withholding taxes on
dividend or interest payments, currency blockage (which would
prevent cash from being brought back to the United States), and
difficulty in enforcing legal rights outside the United States.
European Currency Unit Bonds. The European Currency Unit
("ECU") is a basket of European currencies consisting of
specified amounts of the currencies of ten members of the
European community. The ECU is used by members as their
budgetary currency to determine official claims and debts. It
fluctuates with the daily exchange rate changes of the
constituent currencies. The ECU is now defined by the following
ten currencies: German Deutschmark, British Pound, French Franc,
Italian Lira, Dutch Guilder, Belgian Franc, Luxembourg Franc,
Finish Kroner, Irish Pound and Greek Drachma. ECU bonds are
bonds or debentures denominated in ECUs.
Forward Currency Exchange Contracts. The value of the
Global Bond Fund's portfolio securities which are invested in
non-U.S. dollar denominated instruments as measured in U.S.
dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations,
and the Fund may incur costs in connection with conversions
between various currencies. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency
exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward currency exchange contract
involves an obligation to purchase or sell a specific currency at
a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set
at the time of the contract. These contracts are traded directly
between currency traders (usually large commercial banks) and
their customers. The Fund will not, however, hold foreign
currency except in connection with purchase and sale of foreign
portfolio securities.
The Global Bond Fund will enter into forward currency
exchange contracts as described hereafter. When the Fund enters
into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to establish the
cost or proceeds relative to another currency. The forward
contract may be denominated in U.S. dollars or may be a "cross-
currency" contract where the forward contract is denominated in a
currency other than U.S. dollars. However, this tends to limit
potential gains which might result from a positive change in such
currency relationships.
The forecasting of a short-term currency market movement is
extremely difficult and the successful execution of a short-term
hedging strategy is highly uncertain. The Fund may enter into
such forward contracts if, as a result, not more than 50% of the
value of its total assets would be committed to such contracts.
Under normal circumstances, consideration of the prospect for
currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification
strategies. However, the Trustees believe that it is important
to have the flexibility to enter into forward contracts when the
Sub-Adviser determines it to be in the best interests of the
Fund. The Fund's Custodian will segregate cash, U.S. Government
obligations or other liquid high-grade debt obligations in an
amount not less than the value of the Fund's total assets
committed to foreign currency exchange contracts entered into
under this type of transaction. If the value of the segregated
securities declines, additional cash or securities will be added
on a daily basis, i.e., "marked to market," so that the
segregated amount will not be less than the amount of the Fund's
commitments with respect to such contracts.
Generally, the Fund will not enter into a forward currency
exchange contract with a term of greater than 90 days. At the
maturity of the contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or may retain
the security and terminate the obligation to deliver the foreign
currency by purchasing an "offsetting" forward contract with the
same currency trader obligating the Fund to purchase, on the same
maturity date, the same amount of the foreign currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of the
contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security
is less than the amount of foreign currency the Fund is obligated
to deliver and if a decision is made to sell the security and
make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is
obligated to deliver.
If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss (as
described below) to the extent that there has been movement in
forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward
contract to sell the foreign currency. Should forward prices
decline during the period between entering into a forward
contract for the sale of a foreign currency and the date the Fund
enters into an offsetting contract for the purchase of the
foreign currency, the Fund will realize a gain to the extent the
price of the currency the Fund has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the
price of the currency the Fund has agreed to purchase exceeds the
price of the currency the Fund has agreed to sell.
The Fund's dealings in forward foreign currency exchange
contracts will be limited to the transactions described above.
The Fund is not required to enter into such transactions with
regard to its foreign currency-denominated securities and will
not do so unless deemed appropriate by its Sub-Adviser. It
should also be realized that this method of protecting the value
of the Fund's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying
prices of the securities held by the Fund. It simply establishes
a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain
which might result should the value of such currency increase.
Interest Rate Futures Contracts. The Global Bond Fund may
enter into contracts for the future delivery of fixed-income
securities commonly referred to as "interest rate futures
contracts." In this context, a futures contract is an agreement
by the Fund to buy or sell fixed-income securities at a specified
date and price. No payment is made for securities when the Fund
buys a futures contract and no securities are delivered when the
Fund sells a futures contract. Instead, the Fund makes a deposit
called an "initial margin" equal to a percentage of the
contract's value. Payment or delivery is made when the contract
expires. Futures contracts will be used only as a hedge against
anticipated interest rate changes and for other transactions
permitted to entities exempt from the definition of the term
commodity pool operator. The Fund will not enter into a futures
contract if immediately thereafter the sum of the then aggregate
futures market prices of financial or other instruments required
to be delivered under open futures contract sales and the
aggregate futures market prices of financial instruments required
to be delivered under open futures contract purchases would
exceed 50% of the value of its total assets. The Fund will not
enter into a futures contract if immediately thereafter more than
5% of the fair market value of its assets would be committed to
initial margins.
Writing Covered Call Options. The Global Bond Fund may
write covered call options on individual bonds and on interest
rate futures contracts to earn premium income, to assure a
definite price for a security it has considered selling, or to
close out options previously purchased. A call option gives the
holder (buyer) the right to purchase a security or futures
contract at a specified price (the exercise price) at any time
until a certain date (the expiration date). A call option is
"covered" if the Fund owns the underlying security subject to the
call option at all times during the option period. A covered
call writer is required to deposit in escrow the underlying
security in accordance with the rules of the exchanges on which
the option is traded and the appropriate clearing agency.
The writing of covered call options is a conservative
investment technique which the Sub-Adviser believes involves
relatively little risk. However, there is no assurance that a
closing transaction can be effected at a favorable price. During
the option period, the covered call writer has, in return for the
premium received, given up the opportunity for capital
appreciation above the exercise price should the market price of
the underlying security increase, but has retained the risk of
loss should the price of the underlying security decline.
The Fund may write covered call options if, immediately
thereafter, not more than 30% of its net assets would be
committed to such transactions. As long as the rules promulgated
under the California Corporate Securities Law prohibit the Fund
from engaging in unlisted covered call transactions, the Fund
will not do so. In addition, as long as the Securities and
Exchange Commission continues to take the position that unlisted
options are illiquid securities, the Fund will not commit more
than 15% of its net assets to unlisted covered call transactions
and other illiquid securities. The ability of the Fund to write
covered call options may be limited by state regulations which
require the Fund to commit no more than a specified percentage of
its assets to such transactions and the tax requirement that less
than 30% of the Fund's gross income be derived from the sale or
other disposition of securities held for less than 3 months.
Writing Covered Put Options. The Global Bond Fund may write
covered put options on bonds and on interest rate futures
contracts to assure a definite price for a security if it is
considering acquiring the security at a lower price than the
current market price or to close out options previously
purchased. A put option gives the holder of the option the right
to sell, and the writer has the obligation to buy, the underlying
security at the exercise price at any time during the option
period. The operation of put options in other respects is
substantially identical to that of call options. When the Fund
writes a covered put option, it maintains in a segregated account
with its Custodian cash or liquid debt obligations in an amount
not less than the exercise price at all times while the put
option is outstanding.
The risks involved in writing put options include the risk
that a closing transaction cannot be effected at a favorable
price and the possibility that the price of the underlying
security may fall below the exercise price, in which case the
Fund may be required to purchase the underlying security at a
higher price than the market price of the security at the time
the option is exercised. The Fund may not write a put option if,
immediately thereafter, more than 25% of its net assets would be
committed to such transactions.
Purchasing Options on Interest Rate Futures Contracts. The
Global Bond Fund may purchase put and call options on interest
rate futures contracts. The purchase of put options on interest
rate futures contracts hedges the Fund's portfolio against the
risk of rising interest rates. The purchase of call options on
futures contracts is a means of obtaining temporary exposure to
market appreciation at limited risk and is a hedge against a
market advance when the Fund is not fully invested. Assuming
that any decline in the securities being hedged is accompanied by
a rise in interest rates, the purchase of options on the futures
contracts may generate gains which can partially offset any
decline in the value of the Fund's portfolio securities which
have been hedged. However, if after the Fund purchases an option
on a futures contract, the value of the securities being hedged
moves in the opposite direction from that contemplated, the Fund
will tend to experience losses in the form of premiums on such
options which would partially offset gains the Fund would have.
An interest rate futures contract is a contract to buy or
sell specified debt securities at a future time for a fixed
price. The Fund may purchase put and call options on interest
rate futures contracts which are traded on a national exchange or
board of trade and sell such options to terminate an existing
position. Options on interest rate futures give the purchaser
the right, in return for the premium paid, to assume a position
in an interest rate futures contract (a long position if the
option is a call and a short position if the option is a put),
rather than to purchase or sell a security, at a specified
exercise price at any time during the period of the option.
The holder of an option on an interest rate futures contract
may terminate his position by selling an option of the same
series. There is no guarantee that such closing transactions can
be effected. In addition to the risks which apply to all options
transactions, there are several special risks relating to options
on interest rate futures contracts. The ability to establish and
close out positions on such options is subject to the maintenance
of a liquid secondary market. Compared to the use of interest
rate futures, the purchase of options on interest rate futures
involves less potential risk to the Fund because the maximum
amount at risk is the premium paid for the options, plus
transaction costs.
Options Transactions Generally. Option transactions in
which the Global Bond Fund may engage involve the specific risks
described above as well as the following risks: the writer of an
option may be assigned an exercise at any time during the option
period; disruptions in the markets for underlying instruments
could result in losses for options investors; imperfect or no
correlation between the option and the securities being hedged;
the insolvency of a broker could present risks for the broker's
customers; and market imposed restrictions may prohibit the
exercise of certain options. In addition, the option activities
of the Fund may affect its portfolio turnover rate and the amount
of brokerage commissions paid by the Fund. The success of the
Fund in using the option strategies described above depends,
among other things, on the Sub-Adviser's ability to predict the
direction and volatility of price movements in the options,
futures contracts and securities markets and the Sub-Adviser's
ability to select the proper time, type and duration of the
options.
Majority. As used in the Prospectuses and this Statement of
Additional Information, the term "majority" of the outstanding
shares of the Trust (or of any Fund) means the lesser of (1) 67%
or more of the outstanding shares of the Trust (or the applicable
Fund) present at a meeting, if the holders of more than 50% of
the outstanding shares of the Trust (or the applicable Fund) are
present or represented at such meeting or (2) more than 50% of
the outstanding shares of the Trust (or the applicable Fund).
INVESTMENT LIMITATIONS
The Trust has adopted certain fundamental investment
limitations designed to reduce the risk of an investment in the
Funds. These limitations may not be changed with respect to any
Fund without the affirmative vote of a majority of the
outstanding shares of that Fund.
THE LIMITATIONS APPLICABLE TO THE SHORT TERM GOVERNMENT
INCOME FUND AND THE INTERMEDIATE TERM GOVERNMENT INCOME FUND ARE:
1. Borrowing Money. Each Fund will not borrow money,
except (a) as a temporary measure for extraordinary or emergency
purposes and then only in amounts not in excess of 10% of the
value of the Fund's total assets or (b) pursuant to Paragraph
(15) of this section. Each Fund may pledge its assets to the
extent of up to 15% of the value of its total assets to secure
such borrowings.
2. Underwriting. Each Fund will not act as underwriter of
securities issued by other persons, either directly or through a
majority owned subsidiary. This limitation is not applicable to
the extent that, in connection with the disposition of its
portfolio securities (including restricted securities), a Fund
may be deemed an underwriter under certain federal securities
laws.
3. Illiquid Investments. Each Fund will not purchase
securities for which there are legal or contractual restrictions
on resale or enter into a repurchase agreement maturing in more
than seven days if, as a result thereof, more than 10% of the
value of the Fund's total assets would be invested in such
securities.
4. Real Estate. Each Fund will not purchase, hold or deal
in real estate, including real estate limited partnership
interests.
5. Commodities. Each Fund will not purchase, hold or deal
in commodities or commodities futures contracts.
6. Loans. Each Fund will not make loans to individuals, to
any officer or Trustee of the Trust or to its Adviser or to any
officer or director of the Adviser (each Fund, however, may
purchase and simultaneously resell for later delivery obligations
issued or guaranteed as to principal and interest by the United
States Government or an agency or instrumentality thereof;
provided that each Fund will not enter into such repurchase
agreements if, as a result thereof, more than 10% of the value of
the Fund's total assets at that time would be subject to
repurchase agreements maturing in more than seven days). The
making of a loan by either Fund does not include the purchase of
a portion of an issue of publicly distributed bonds, debentures
or other debt securities, whether or not the purchase was made
upon the original issuance of the securities.
7. Securities of One Issuer. Each Fund will not purchase
the securities of any issuer if such purchase at the time thereof
would cause more than 25% of the value of the Fund's total assets
to be invested in the securities of such issuer (the foregoing
limitation does not apply to investments in government securities
as defined in the Investment Company Act of 1940).
8. Securities of One Class. Each Fund will not purchase
the securities of any issuer if such purchase at the time thereof
would cause 10% of any class of securities of such issuer to be
held by a Fund, or acquire more than 10% of the outstanding
voting securities of such issuer. (All outstanding bonds and
other evidences of indebtedness shall be deemed to be a single
class of securities of the issuer, and all kinds of stock of an
issuer preferred over the common stock as to dividends or
liquidation shall be deemed to constitute a single class
regardless of relative priorities, series designations,
conversion rights and other differences).
9. Investing for Control. Each Fund will not invest in
companies for the purpose of exercising control or management.
10. Other Investment Companies. Each Fund will not
purchase securities issued by any other investment company or
investment trust except (a) by purchase in the open market where
no commission or profit to a sponsor or dealer results from such
purchase other than customary brokers' commission or (b) where
such purchase, not made in the open market, is part of a plan of
merger or consolidation or acquisition of assets; provided that
each Fund shall not purchase the securities of any investment
companies or investment trusts if such purchase at the time
thereof would cause more than 10% of the value of the Fund's
total assets to be invested in the securities of such issuers,
and provided further, that each Fund shall not purchase
securities issued by any other open-end investment company.
11. Margin Purchases. Each Fund will not purchase
securities or evidences of interest thereon on "margin," except
that the Funds may obtain such short-term credit as may be
necessary for the clearance of purchases and sales or redemption
of securities.
12. Common Stocks. Each Fund will not invest in common
stocks.
13. Options. Each Fund will not engage in the purchase or
sale of put or call options.
14. Short Sales. Each Fund will not sell any securities
short.
15. When-Issued Purchases. The Funds will not make any
commitment to purchase securities on a when-issued basis except
that the Intermediate Term Government Income Fund may make such
commitments if no more than 20% of the Fund's net assets would be
so committed.
16. Concentration. Each Fund will not invest more than 25%
of its total assets in the securities of issuers in any
particular industry; provided, however, that there is no
limitation with respect to investments in obligations issued or
guaranteed by the United States Government or its agencies or
instrumentalities or repurchase agreements with respect thereto.
17. Mineral Leases. The Funds will not purchase oil, gas
or other mineral leases or exploration or development programs.
THE LIMITATIONS APPLICABLE TO THE INSTITUTIONAL GOVERNMENT
INCOME FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except
(a) from a bank, provided that immediately after such borrowing
there is asset coverage of 300% for all borrowings of the Fund;
or (b) from a bank for temporary purposes only, provided that,
when made, such temporary borrowings are in an amount not
exceeding 5% of the Fund's total assets. The Fund also will not
make any borrowing which would cause its outstanding borrowings
to exceed one-third of the value of its total assets.
2. Pledging. The Fund will not mortgage, pledge,
hypothecate or in any manner transfer, as security for
indebtedness, any security owned or held by the Fund except as
may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or
hypothecate more than one-third of its assets in connection with
borrowings.
3. Underwriting. The Fund will not act as underwriter of
securities issued by other persons. This limitation is not
applicable to the extent that, in connection with the disposition
of portfolio securities (including restricted securities), the
Fund may be deemed an underwriter under certain federal
securities laws.
4. Illiquid Investments. The Fund will not invest more
than 10% of its net assets in securities for which there are
legal or contractual restrictions on resale and other illiquid
securities.
5. Real Estate. The Fund will not purchase, hold or deal
in real estate.
6. Commodities. The Fund will not purchase, hold or deal
in commodities or commodities futures contracts, or invest in
oil, gas or other mineral explorative or development programs.
This limitation is not applicable to the extent that the U.S.
Government obligations in which the Fund may otherwise invest
would be considered to be such commodities, contracts or
investments.
7. Loans. The Fund will not make loans to other persons,
except (a) by loaning portfolio securities, or (b) by engaging in
repurchase agreements. For purposes of this limitation, the term
"loans" shall not include the purchase of a portion of an issue
of U.S. Government obligations.
8. Margin Purchases. The Fund will not purchase securities
or evidences of interest thereon on "margin." This limitation is
not applicable to short-term credit obtained by the Fund for the
clearance of purchases and sales or redemption of securities.
9. Short Sales and Options. The Fund will not sell any
securities short or sell put and call options. This limitation
is not applicable to the extent that sales by the Fund of
securities in which the Fund may otherwise invest would be
considered to be sales of options.
10. Other Investment Companies. The Fund will not invest
more than 5% of its total assets in the securities of any
investment company and will not invest more than 10% of its total
assets in securities of other investment companies.
11. Concentration. The Fund will not invest more than 25%
of its total assets in a particular industry; this limitation is
not applicable to investments in obligations issued by the U.S.
Government, its territories and possessions, the District of
Columbia and their respective agencies and instrumentalities or
repurchase agreements with respect thereto.
12. Mineral Leases. The Fund will not purchase oil, gas or
other mineral leases or exploration or development
programs.
THE LIMITATIONS APPLICABLE TO THE ADJUSTABLE RATE U.S.
GOVERNMENT SECURITIES FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except
(a) as a temporary measure for extraordinary or emergency
purposes and then only in amounts not in excess of 10% of the
value of its total assets or (b) pursuant to Paragraph (15) of
this section. The Fund may pledge its assets to the extent of up
to 15% of the value of its total assets to secure such
borrowings.
2. Underwriting. The Fund will not act as underwriter of
securities issued by other persons, either directly or through a
majority owned subsidiary. This limitation is not applicable to
the extent that, in connection with the disposition of its
portfolio securities (including restricted securities), the Fund
may be deemed an underwriter under certain federal securities
laws.
3. Illiquid Investments. The Fund will not purchase
securities for which there are legal or contractual restrictions
on resale or enter into a repurchase agreement maturing in more
than seven days if, as a result thereof, more than 15% of the
value of the Fund's net assets would be invested in such
securities.
4. Real Estate. The Fund will not purchase, hold or deal
in real estate, including real estate limited partnerships.
5. Commodities. The Fund will not purchase, hold or deal
in commodities or commodities futures contracts.
6. Loans. The Fund will not make loans to other persons,
except (a) by loaning portfolio securities if the borrower agrees
to maintain collateral marked to market daily in an amount at
least equal to the market value of the loaned securities, or (b)
by engaging in repurchase agreements. For purposes of this
limitation, the term "loans" shall not include the purchase of a
portion of an issue of U.S. Government obligations.
7. Securities of One Issuer. The Fund will not purchase
the securities of any issuer if such purchase at the time thereof
would cause more than 5% of the value of its total assets to be
invested in the securities of such issuer (the foregoing
limitation does not apply to investments in government securities
as defined in the Investment Company Act of 1940).
8. Securities of One Class. The Fund will not purchase the
securities of any issuer if such purchase at the time thereof
would cause 10% of any class of securities of such issuer to be
held by the Fund, or acquire more than 10% of the outstanding
voting securities of such issuer. (All outstanding bonds and
other evidences of indebtedness shall be deemed to be a single
class of securities of the issuer).
9. Investing for Control. The Fund will not invest in
companies for the purpose of exercising control or management.
10. Other Investment Companies. The Fund will not invest
more than 5% of its total assets in the securities of any
investment company and will not invest more than 10% of its total
assets in securities of other investment companies.
11. Margin Purchases. The Fund will not purchase
securities or evidences of interest thereon on "margin," except
that it may obtain such short-term credit as may be necessary for
the clearance of purchases and sales or redemption of securities.
12. Common Stocks. The Fund will not invest in common
stocks.
13. Options. The Fund will not engage in the purchase or
sale of put or call options.
14. Short Sales. The Fund will not sell any securities
short.
15. When-Issued Purchases. The Fund will not make any
commitment to purchase securities on a when-issued or to-be-
announced basis if more than 25% of the Fund's net assets would
be so committed.
16. Concentration. The Fund will not invest more than 25%
of its total assets in the securities of issuers in any
particular industry; provided, however, that there is no
limitation with respect to investments in obligations issued or
guaranteed by the United States Government or its agencies or
instrumentalities or repurchase agreements with respect thereto.
17. Mineral Leases. The Fund will not purchase oil, gas or
other mineral leases or exploration or development programs.
18. Senior Securities. The Fund will not issue or sell any
senior security as defined by the Investment Company Act of 1940
except insofar as any borrowing that the Fund may engage in may
be deemed to be an issuance of a senior security.
19. Unseasoned Issuers. The Fund will not purchase
securities of unseasoned issuers, including their predecessors,
which have been in operation for less than three years if more
than 5% of the value of the Fund's total assets would be so
committed.
THE LIMITATIONS APPLICABLE TO THE GLOBAL BOND FUND ARE:
1. Borrowing Money. The Fund will not borrow money, except
as a temporary measure for extraordinary or emergency purposes
and then only in amounts not in excess of 10% of the value of its
total assets. While the Fund's borrowings are in excess of 5% of
its total assets, the Fund will not purchase any additional
portfolio securities. This investment limitation does not
preclude the Fund from entering into reverse repurchase
transactions, provided that the Fund has asset coverage of 300%
for all borrowings of the Fund and reverse repurchase commitments
of the Fund pursuant to such transactions. The Fund will not
pledge, mortgage or hypothecate its assets (collateral
arrangements with respect to writing options and initial margin
on futures contracts are not deemed to be a pledge, mortgage or
hypothecation of assets for purposes of this investment
limitation) except in connection with borrowings described in
this investment limitation.
2. Underwriting. The Fund will not act as underwriter of
securities issued by other persons, either directly or through a
majority owned subsidiary. This limitation is not applicable to
the extent that, in connection with the disposition of its
portfolio securities (including restricted securities), the Fund
may be deemed an underwriter under certain federal securities
laws.
3. Illiquid Investments. The Fund will not purchase
securities for which there are legal or contractual restrictions
on resale or enter into a repurchase agreement maturing in more
than seven days if, as a result thereof, more than 15% of the
value of the Fund's net assets would be invested in such
securities.
4. Real Estate. The Fund will not purchase, hold or deal
in real estate, including real estate limited partnerships.
5. Commodities. The Fund will not purchase, hold or deal
in commodities or commodities futures contracts.
6. Loans. The Fund will not make loans to other persons,
except (a) by loaning portfolio securities if the borrower agrees
to maintain collateral marked to market daily in an amount at
least equal to the market value of the loaned securities, or (b)
by engaging in repurchase agreements. For purposes of this
limitation, the term "loans" shall not include the purchase of
marketable bonds, debentures, commercial paper, corporate notes
or similar marketable evidences of indebtedness which are part of
an issue for the public.
7. Investing for Control. The Fund will not invest in
companies for the purpose of exercising control or management.
8. Other Investment Companies. The Fund will not invest
more than 5% of its total assets in the securities of any single
investment company and will not invest more than 10% of its total
assets in securities of other investment companies.
9. Margin Purchases. The Fund will not purchase any
securities or evidences of interest thereon on "margin," except
that it may obtain such short-term credit as may be necessary for
the clearance of purchases and sales or redemption of securities.
10. Common Stocks. The Fund will not invest in common
stocks.
11. Options. The Fund will not purchase or sell puts,
calls, options, futures or straddles except as described in its
Prospectus and this Statement of Additional Information.
12. Short Sales. The Fund will not sell any securities
short.
13. When-Issued Purchases. The Fund will not make any
commitment to purchase securities on a when-issued or to-be-
announced basis if more than 25% of the Fund's net assets would
be so committed.
14. Concentration. The Fund will not invest more than 25%
of its total assets in the securities of issuers in any
particular industry; provided, however, that there is no
limitation with respect to investments in obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities or repurchase agreements with respect thereto.
15. Mineral Leases. The Fund will not purchase oil, gas or
other mineral leases or exploration or development programs.
16. Senior Securities. The Fund will not issue or sell any
senior security as defined by the Investment Company Act of 1940
except insofar as any borrowing that the Fund may engage in may
be deemed to be an issuance of a senior security. This
limitation is not applicable to arrangements with respect to
transactions involving forward foreign currency exchange
contracts, options, futures contracts and other similar permitted
investments and techniques.
17. Unseasoned Issuers. The Fund will not purchase
securities of unseasoned issuers, including their predecessors,
which have been in operation for less than three years if more
than 5% of the value of the Fund's total assets would be so
committed.
With respect to the percentages adopted by the Trust as
maximum limitations on the Funds' investment policies and
restrictions, an excess above the fixed percentage (except for
the percentage limitations relative to the borrowing of money)
will not be a violation of the policy or restriction unless the
excess results immediately and directly from the acquisition of
any security or the action taken.
The Trust has never pledged, mortgaged or hypothecated the
assets of any Fund, and the Trust presently intends to continue
this policy. The Trust has never acquired, nor does it presently
intend to acquire, securities issued by any other investment
company or investment trust. As long as the rules promulgated
under the California Corporate Securities Law prohibit a Fund
from acquiring or retaining securities of any open-end investment
company, the Funds will not acquire or retain such securities,
unless the acquisition is part of a merger or acquisition of
assets or other reorganization. The Institutional Government
Income Fund does not intend to invest in obligations issued by
territories and possessions of the United States, the District of
Columbia and their respective agencies and instrumentalities or
repurchase agreements with respect thereto. The Short Term
Government Income Fund and the Intermediate Term Government
Income Fund will not purchase securities for which there are
legal or contractual restrictions on resale or enter into a
repurchase agreement maturing in more than seven days if, as a
result thereof, more than 10% of the value of a Fund's net assets
would be invested in such securities. The statements of
intention in this paragraph reflect nonfundamental policies which
may be changed by the Board of Trustees without shareholder
approval.
Although not a fundamental policy of the Adjustable Rate
U.S. Government Securities Fund, portfolio investments and
transactions of the Fund will be limited to those investments and
transactions permissible for Federal credit unions pursuant to 12
U.S.C. Section 1757(7) and (8) and 12 CFR Part 703. If this
policy is changed as to allow the Fund to make portfolio
investments and engage in transactions not permissible for
Federal credit unions, the Fund will so notify all Federal credit
union shareholders.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive
officers of the Trust and their aggregate compensation from the
Trust and the Midwest complex (consisting of the Trust, Midwest
Group Tax Free Trust and Midwest Strategic Trust) for the fiscal
year ended September 30, 1995. Each Trustee who is an
"interested person" of the Trust, as defined by the Investment
Company Act of 1940, is indicated by an asterisk. Each Trustee
is also a Trustee of Midwest Group Tax Free Trust and Midwest
Strategic Trust.
COMPENSATION
COMPENSATION FROM
NAME AGE POSITION HELD FROM TRUST MIDWEST COMPLEX
*Robert H. Leshner 56 President/Trustee $ 0 $ 0
+Dale P. Brown 48 Trustee 0 1,800
Gary W. Heldman 48 Trustee 2,200 4,400
+H. Jerome Lerner 57 Trustee 2,200 6,800
+Richard A. Lipsey 56 Trustee 0 2,400
Donald J. Rahilly 50 Trustee 0 1,800
Fred A. Rappoport 49 Trustee 0 2,400
Oscar P. Robertson 57 Trustee 2,200 4,400
Robert B. Sumerel 54 Trustee 0 1,200
John F. Splain 39 Secretary 0 0
Mark J. Seger 34 Treasurer 0 0
* Mr. Leshner, as an affiliated person of Midwest Group
Financial Services, Inc., the Trust's principal underwriter
and investment adviser, is an "interested person" of the
Trust within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive
officers of the Trust during the past five years are set forth
below:
ROBERT H. LESHNER, 312 Walnut Street, Cincinnati, Ohio is
Chairman of the Board of Midwest Group Financial Services, Inc.
(the investment adviser and principal underwriter of the Trust),
MGF Service Corp. (a registered transfer agent) and Leshner
Financial, Inc. (a financial services company and parent of
Midwest Group Financial Services, Inc. and MGF Service Corp.).
He is President and a Trustee of Midwest Group Tax Free Trust and
Midwest Strategic Trust, registered investment companies.
DALE P. BROWN, 36 East Seventh Street, Cincinnati, Ohio is
President and Chief Executive Officer of Sive/Young & Rubicam, an
advertising agency. She is also a director of The Ohio National
Life Insurance Company.
GARY W. HELDMAN, 183 Congress Run Road, Cincinnati, Ohio is
the former President of The Fechheimer Brothers Company, a
manufacturer of uniforms.
H. JEROME LERNER, 7149 Knoll Road, Cincinnati, Ohio is a
principal of HJL Enterprises and is Chairman of Crane
Electronics, Inc., a manufacturer of electronic connectors.
RICHARD A. LIPSEY, 11478 Rue Concord, Baton Rouge, Louisiana
is President and Chief Executive Officer of Lipsey's, Inc., a
national sporting goods distributor. He is also a Regional
Director of Premier Bank, N.A.
DONALD J. RAHILLY, 9933 Alliance Road, Cincinnati, Ohio is
Chairman of S. Rosenthal & Co., Inc., a printing company.
FRED A. RAPPOPORT, 830 Birchwood Drive, Los Angeles,
California is President and Chairman of The Fred Rappoport
Company, a broadcasting and entertainment production company.
OSCAR P. ROBERTSON, 4293 Muhlhauser Road, Fairfield, Ohio is
President of Orchem, Inc., a chemical specialties distributor,
and Orpack Stone Corporation, a corrugated box manufacturer.
ROBERT B. SUMEREL, 8675 Bridgewater Lane, Cincinnati, Ohio
is Chief Executive Officer of Bob Sumerel Tire Inc., a tire sales
and service company.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio is
Secretary and General Counsel of Leshner Financial, Inc., Midwest
Group Financial Services, Inc. and MGF Service Corp. He is also
Secretary of Midwest Group Tax Free Trust, Midwest Strategic
Trust, Brundage, Story and Rose Investment Trust, Leeb Personal
FinanceTM Investment Trust, Williamsburg Investment Trust,
Markman MultiFund Trust and The Tuscarora Investment Trust and
Assistant Secretary of Schwartz Investment Trust and Fremont
Mutual Funds, Inc., all of which are registered investment
companies.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio
is Vice President of Leshner Financial, Inc. and MGF Service
Corp. He is also Treasurer of Midwest Group Tax Free Trust,
Midwest Strategic Trust, Brundage, Story and Rose Investment
Trust, Leeb Personal FinanceTM Investment Trust, Williamsburg
Investment Trust and Markman MultiFund Trust, Assistant Treasurer
of Schwartz Investment Trust and The Tuscarora Investment Trust
and Assistant Secretary of Fremont Mutual Funds, Inc.
THE INVESTMENT ADVISER AND UNDERWRITER
Midwest Group Financial Services, Inc. (the "Adviser") is
the Funds' investment manager. The Adviser is a subsidiary of
Leshner Financial, Inc., of which Robert H. Leshner is the
controlling shareholder. Mr. Leshner may be deemed to be a
controlling person and an affiliate of the Adviser by reason of
his indirect ownership of its shares and his position as the
principal executive officer of the Adviser. Mr. Leshner, by
reason of such affiliation, may directly or indirectly receive
benefits from the advisory fees paid to the Adviser.
Under the terms of the investment advisory agreements
between the Trust and the Adviser, the Adviser is responsible for
the management of the Funds' investments. 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 computed and accrued daily and paid monthly
at an annual rate of .5% of its average daily net assets up to
$50,000,000, .45% of such assets from $50,000,000 to
$150,000,000, .4% of such assets from $150,000,000 to
$250,000,000 and .375% of such assets in excess of $250,000,000.
The Institutional Government Income Fund pays the Adviser a fee
computed and accrued daily and paid monthly at an annual rate of
.2% of its average daily net assets. The Global Bond Fund pays
the Adviser a fee computed and accrued daily and paid monthly at
an annual rate of .7% of its average daily net assets up to
$100,000,000 and .6% of such assets in excess of $100,000,000.
The total fees paid by a Fund during the first and second halves
of each fiscal year of the Trust may not exceed the semiannual
total of the daily fee accruals requested by the Adviser during
the applicable six month period.
For the fiscal years ended September 30, 1995, 1994 and
1993, the Short Term Government Income Fund paid advisory fees of
$407,097, $410,716 and $409,926, respectively. For the fiscal
years ended September 30, 1995, 1994 and 1993, the Intermediate
Term Government Income Fund accrued advisory fees of $294,316,
$378,622 and $363,386, respectively; however, the Adviser
voluntarily reimbursed the Fund for $11,362 of Class C expenses
during the fiscal year ended September 30, 1995 and voluntarily
waived $2,297 of such fees for the fiscal year ended September
30, 1994 in order to reduce the operating expenses of the Fund.
For the fiscal years ended September 30, 1995, 1994 and 1993, the
Institutional Government Income Fund accrued advisory fees of
$86,367, $89,790 and $76,405, respectively; however, the Adviser
voluntarily waived $8,500, $9,000 and $30,033 of such fees for
the fiscal years ended September 30, 1995, 1994 and 1993,
respectively, in order to reduce the operating expenses of the
Fund. For the fiscal periods ended September 30, 1995, 1994 and
1993, the Adjustable Rate U.S. Government Securities Fund accrued
advisory fees of $112,333, $238,362 and $52,662, respectively;
however, in order to reduce the operating expenses of the Fund,
the Adviser voluntarily waived $103,298 of such fees and
reimbursed the Fund for $4,898 of Class C expenses for the fiscal
year ended September 30, 1995, voluntarily waived $45,624 of such
fees for the fiscal year ended September 30, 1994 and voluntarily
waived its entire advisory fee and reimbursed the Fund $49,125
for other expenses for the period ended September 30, 1993. For
the fiscal period ended September 30, 1995, the Global Bond Fund
accrued advisory fees of $41,518; however, the Adviser
voluntarily waived its entire advisory fee and reimbursed the
Fund for $22,707 of common operating expenses and $6,493 of Class
C expenses in order to reduce the operating expenses of the Fund.
The Funds are responsible for the payment of all expenses
incurred in connection with the organization, registration of
shares and operations of the Funds, including such extraordinary
or non-recurring expenses as may arise, such as litigation to
which the Trust may be a party. The Funds may have an obligation
to indemnify the Trust's officers and Trustees with respect to
such litigation, except in instances of willful misfeasance, bad
faith, gross negligence or reckless disregard by such officers
and Trustees in the performance of their duties. The Adviser
bears promotional expenses in connection with the distribution of
the Funds' shares to the extent that such expenses are not
assumed by the Funds under their plans of distribution (see
below). The compensation and expenses of any officer, Trustee or
employee of the Trust who is an officer, director, employee or
stockholder of the Adviser are paid by the Adviser, except that
the compensation and expenses of the Chief Financial Officer of
the Trust are paid by the Trust regardless of the Chief Financial
Officer's relationship with the Adviser.
By their terms, the Funds' investment advisory agreements
will remain in force until January 30, 1997 and from year to year
thereafter, subject to annual approval by (a) the Board of
Trustees or (b) a vote of the majority of a Fund's outstanding
voting securities; provided that in either event continuance is
also approved by a majority of the Trustees who are not
interested persons of the Trust, by a vote cast in person at a
meeting called for the purpose of voting such approval. The
Funds' investment advisory agreements may be terminated at any
time, on sixty days' written notice, without the payment of any
penalty, by the Board of Trustees, by a vote of the majority of a
Fund's outstanding voting securities, or by the Adviser. The
investment advisory agreements automatically terminate in the
event of their assignment, as defined by the Investment Company
Act of 1940 and the rules thereunder.
The Adviser will reimburse the Funds to the extent that the
expenses of a Fund for any fiscal year exceed the applicable
expense limitations imposed by state securities administrators,
as such limitations may be lowered or raised from time to time.
The most restrictive limitation is presently 2.5% of the first
$30 million of average daily net assets, 2% of the next $70
million of average daily net assets and 1.5% of average daily net
assets in excess of $100 million. If any such reimbursement is
required, the payment of the advisory fee at the end of any month
will be reduced or postponed or, if necessary, a refund will be
made to the Funds at the end of such month. Certain expenses
such as brokerage commissions, if any, taxes, interest,
extraordinary items and other expenses subject to approval of
state securities administrators are excluded from such
limitations. If the expenses of a Fund approach the applicable
limitation in any state, the Trust will consider the various
actions that are available to it, including suspension of sales
to residents of that state.
The Adviser may use the name "Midwest" in connection with
any registered investment company or other business enterprise
with which it is or may become associated.
The Adviser is also the principal underwriter of the Funds
and, as such, the exclusive agent for distribution of shares of
the Funds. The Adviser is obligated to sell the shares on a best
efforts basis only against purchase orders for the shares.
Shares of each Fund are offered to the public on a continuous
basis.
The Adviser currently allows concessions to dealers who sell
shares of the Intermediate Term Government Income Fund, the
Adjustable Rate U.S. Government Securities Fund and the Global
Bond Fund. The Adviser retains the entire sales load on all
direct initial investments in the Funds and on all investments in
accounts with no designated dealer of record. For the fiscal
year ended September 30, 1995, the aggregate commissions on sales
of the Trust's shares were $141,293 of which the Adviser paid
$130,182 to unaffiliated broker-dealers in the selling network,
earned (along with affiliates) $5,053 as a broker-dealer in the
selling network and retained $6,058 in underwriting commissions.
For the fiscal year ended September 30, 1994, the aggregate
underwriting commissions on sales of the Trust's shares were
$153,921 of which the Adviser paid $146,864 to unaffiliated
broker-dealers in the selling network and earned (along with
affiliates) $7,057 as a broker-dealer in the selling network.
For the fiscal year ended September 30, 1993, the aggregate
underwriting commissions on sales of the Trust's shares were
$284,503 of which the Adviser paid $270,956 to unaffiliated
broker-dealers in the selling network and earned (along with
affiliates) $13,547 as a broker-dealer in the selling network.
The Funds may compensate dealers, including the Adviser and
its affiliates, based on the average balance of all accounts in
the Funds for which the dealer is designated as the party
responsible for the account. See "Distribution Plans below."
HANOVER CAPITAL ADVISORS INC. Hanover Capital Advisors Inc.
("Hanover") regularly reviews the Adjustable Rate U.S. Government
Securities Fund's portfolio holdings and overall investment
strategy. Hanover confers periodically with the Adviser to make
recommendations concerning the investment programs of the Fund.
Such recommendations may include (i) the specific securities to
be held by the Fund and the proportion of the Fund's assets that
should be allocated to such investments during particular market
cycles, (ii) the specific issuers whose securities should be
purchased or sold by the Fund, (iii) credit guidelines for the
issuers of securities in the Fund's portfolio, (iv) the maximum
maturity of the Fund's portfolio investments and (v) the
appropriate average weighted maturity of the Fund's portfolio in
light of current market conditions. Hanover receives a fee equal
to the annual rate of .25% of the Fund's average daily net assets
up to $50,000,000, .225% of such assets from $50,000,000 to
$150,000,000, .2% of such assets from $150,000,000 to
$250,000,000 and .1875% of such assets in excess of $250,000,000.
The services provided by Hanover are paid for wholly by the
Adviser. The fee paid to Hanover is subject to reduction in the
event the Adviser waives or reimburses any portion of its
advisory fee from the Fund in order to reduce the operating
expenses of the Fund. The compensation of any officer, director
or employee of Hanover who is rendering services to the Fund is
paid by Hanover. For the fiscal year ended September 30, 1995,
the Adviser paid advisory fees of $11,493 to Hanover.
The Adviser also compensates Hanover for providing
administration services to the Adjustable Rate U.S. Government
Securities Fund accounts for which Hanover is designated as the
responsible party. Hanover receives a fee equal to the annual
rate of .25% of the average balance of all such accounts. For
the fiscal year ended September 30, 1995, the Adviser paid
administration fees of $12,118 to Hanover. The Fund may
reimburse the Adviser for these amounts pursuant to the Fund's
plans of distribution. See "Distribution Plans below."
ROGGE GLOBAL PARTNERS, PLC. Rogge Global Partners, plc
("Rogge") has been retained by the Adviser to serve as the
discretionary portfolio adviser of the Global Bond Fund. Rogge
selects the portfolio securities for investment by the Fund,
purchases and sells securities of the Fund and places orders for
the execution of such portfolio transactions, subject to the
general supervision of the Board of Trustees and the Adviser.
Rogge receives a fee equal to the annual rate of .35% of the
Fund's average daily net assets up to and including $100,000,000
and .3% of such assets in excess of $100,000,000. The services
provided by Rogge are paid for wholly by the Adviser. The
compensation of any officer, director or employee of Rogge who is
rendering services to the Fund is paid by Rogge. For the fiscal
year ended September 30, 1995, the Adviser paid advisory fees of
$18,413 to Rogge.
DISTRIBUTION PLANS
Class A Shares -- As stated in the Prospectus, the Funds
have adopted a plan of distribution (the "Class A Plan") pursuant
to Rule 12b-1 under the Investment Company Act of 1940 which
permits each Fund to pay for expenses incurred in the
distribution and promotion of the Funds' shares, including but
not limited to, the printing of prospectuses, statements of
additional information and reports used for sales purposes,
advertisements, expenses of preparation and printing of sales
literature, promotion, marketing and sales expenses, and other
distribution-related expenses, including any distribution fees
paid to securities dealers or other firms who have executed a
distribution or service agreement with the Adviser. The Class A
Plan expressly limits payment of the distribution expenses listed
above in any fiscal year to a maximum of .35% of the average
daily net assets of the Short Term Government Income Fund, .35%
of the average daily net assets of the Class A shares of the
Intermediate Term Government Income Fund, the Adjustable Rate
U.S. Government Securities Fund and the Global Bond Fund and .10%
of the average daily net assets of the Institutional Government
Income Fund. Unreimbursed expenses will not be carried over from
year to year.
For the fiscal year ended September 30, 1995, the aggregate
distribution-related expenditures of the Short Term Government
Income Fund ("STF"), the Intermediate Term Government Income Fund
("ITF"), the Institutional Government Income Fund ("IGF"), the
Adjustable Rate U.S. Government Securities Fund ("ARM") and the
Global Bond Fund ("GBF") under the Class A Plan were $109,110,
$84,109, $1,655, $14,176 and $7,199, respectively. Amounts were
spent as follows:
STF ITF IGF ARM GBF
Printing and mailing
of prospectuses and
reports to prospective
shareholders......... $ 5,110 $ 3,747 $1,655 $ 9,278 $ 706
Payments to broker-
dealers and others
for the sale or
retention of assets... 104,000 80,362 -- 4,898 6,493
_______ ______ ______ _______ ______
$109,110 $84,109 $1,655 $14,176 $7,199
Class C Shares (Intermediate Term Government Income Fund,
Adjustable Rate U.S. Government Securities Fund and Global Bond
Fund) -- The Intermediate Term Government Income Fund, the
Adjustable Rate U.S. Government Securities Fund and the Global
Bond Fund have also adopted a plan of distribution (the "Class C
Plan") with respect to the Class C shares of such Funds. The
Class C Plan provides for two categories of payments. First, the
Class C Plan provides for the payment to the Adviser of an
account maintenance fee, in an amount equal to an annual rate of
.25% of the average daily net assets of the Class C shares, which
may be paid to other dealers based on the average value of Class
C shares owned by clients of such dealers. In addition, a Fund
may pay up to an additional .75% per annum of the daily net
assets of the Class C shares for expenses incurred in the
distribution and promotion of the shares, including prospectus
costs for prospective shareholders, costs of responding to
prospective shareholder inquiries, payments to brokers and
dealers for selling and assisting in the distribution of Class C
shares, costs of advertising and promotion and any other expenses
related to the distribution of the Class C shares. Unreimbursed
expenditures will not be carried over from year to year. The
Funds may make payments to dealers and other persons in an amount
up to .75% per annum of the average value of Class C shares owned
by their clients, in addition to the .25% account maintenance fee
described above.
General Information -- Agreements implementing the Plans
(the "Implementation Agreements"), including agreements with
dealers wherein such dealers agree for a fee to act as agents for
the sale of the Funds' shares, are in writing and have been
approved by the Board of Trustees. All payments made pursuant to
the Plans are made in accordance with written agreements.
The continuance of the Plans and the Implementation
Agreements must be specifically approved at least annually by a
vote of the Trust's Board of Trustees and by a vote of the
Trustees who are not interested persons of the Trust and have no
direct or indirect financial interest in the Plans or any
Implementation Agreement (the "Independent Trustees") at a
meeting called for the purpose of voting on such continuance. A
Plan may be terminated at any time by a vote of a majority of the
Independent Trustees or by a vote of the holders of a majority of
the outstanding shares of a Fund or the applicable class of a
Fund. In the event a Plan is terminated in accordance with its
terms, the affected Fund (or class) will not be required to make
any payments for expenses incurred by the Adviser after the
termination date. Each Implementation Agreement terminates
automatically in the event of its assignment and may be
terminated at any time by a vote of a majority of the Independent
Trustees or by a vote of the holders of a majority of the
outstanding shares of a Fund (or the applicable class) on not
more than 60 days' written notice to any other party to the
Implementation Agreement. The Plans may not be amended to
increase materially the amount to be spent for distribution
without shareholder approval. All material amendments to the
Plans must be approved by a vote of the Trust's Board of Trustees
and by a vote of the Independent Trustees.
In approving the Plans, the Trustees determined, in the
exercise of their business judgment and in light of their
fiduciary duties as Trustees, that there is a reasonable
likelihood that the Plans will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of
the Funds' assets for distribution expenses under the Plans
should assist in the growth of the Funds which will benefit the
Funds and their shareholders through increased economies of
scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned
investment strategies. The Plans will be renewed only if the
Trustees make a similar determination for each subsequent year of
the Plans. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for
distribution will be realized. While the Plans are in effect,
all amounts spent by the Funds pursuant to the Plans and the
purposes for which such expenditures were made must be reported
quarterly to the Board of Trustees for its review. Distribution
expenses attributable to the sale of more than one class of
shares of a Fund will be allocated at least annually to each
class of shares based upon the ratio in which the sales of each
class of shares bears to the sales of all the shares of such
Fund. In addition, the selection and nomination of those
Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during
such period.
By reason of his indirect ownership of shares of the
Adviser, Robert H. Leshner may be deemed to have a financial
interest in the operation of the Plans and the Implementation
Agreements.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Funds and the
placing of the Funds' securities transactions and negotiation of
commission rates where applicable are made by the Adviser (or
Rogge, with respect to the Global Bond Fund) and are subject to
review by the Board of Trustees of the Trust. In the purchase
and sale of portfolio securities, the Adviser (or Rogge) seeks
best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and
responsiveness of the broker or dealer and the brokerage and
research services provided by the broker or dealer. The Adviser
(or Rogge) generally seeks favorable prices and commission rates
that are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the
dealers who make a market in the securities involved unless
better prices and execution are available elsewhere. Such
dealers usually act as principals for their own account. On
occasion, portfolio securities for the Funds may be purchased
directly from the issuer. Because the portfolio securities of
the Funds are generally traded on a net basis and transactions in
such securities do not normally involve brokerage commissions,
the cost of portfolio securities transactions of the Funds will
consist primarily of dealer or underwriter spreads. For the
fiscal year ended September 30, 1994, the Short Term Government
Income Fund and the Intermediate Term Government Income Fund paid
brokerage commissions of $74 and $15,313, respectively. No
brokerage commissions were paid by the Short Term Government
Income Fund and the Intermediate Term Government Income Fund
during the fiscal years ended September 30, 1995 and 1993. No
brokerage commissions were paid by the Institutional Government
Income Fund, the Adjustable Rate U.S. Government Securities Fund
or the Global Bond Fund during the last three fiscal years.
The Adviser (or Rogge, with respect to the Global Bond Fund)
is specifically authorized to select brokers who also provide
brokerage and research services to the Funds and/or other
accounts over which the Adviser (or Rogge) exercises investment
discretion and to pay such brokers a commission in excess of the
commission another broker would charge if it is determined in
good faith that the commission is reasonable in relation to the
value of the brokerage and research services provided. The
determination may be viewed in terms of a particular transaction
or the Adviser's (or Rogge) overall responsibilities with respect
to the Funds and to accounts over which it exercises investment
discretion.
Research services include securities and economic analyses,
reports on issuers' financial conditions and future business
prospects, newsletters and opinions relating to interest trends,
general advice on the relative merits of possible investment
securities for the Funds and statistical services and information
with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to
the Funds, the Adviser and Rogge, it is not possible to place a
dollar value on it. Research services furnished by brokers
through whom the Funds effect securities transactions may be used
by the Adviser (or Rogge) in servicing all of its accounts and
not all such services may be used in connection with the Funds.
The Funds have no obligation to deal with any broker or
dealer in the execution of securities transactions. However, the
Adviser and other affiliates of the Trust or the Adviser may
effect securities transactions which are executed on a national
securities exchange or transactions in the over-the-counter
market conducted on an agency basis. No Fund will effect any
brokerage transactions in its portfolio securities with the
Adviser if such transactions would be unfair or unreasonable to
its shareholders. Over-the-counter transactions will be placed
either directly with principal market makers or with broker-
dealers. Although the Funds do not anticipate any ongoing
arrangements with other brokerage firms, brokerage business may
be transacted from time to time with other firms. Neither the
Adviser nor affiliates of the Trust or the Adviser will receive
reciprocal brokerage business as a result of the brokerage
business transacted by the Funds with other brokers.
During the fiscal year ended September 30, 1995, the Funds
entered into repurchase transactions with the following of the
Trust's regular broker-dealers as defined under the Investment
Company Act of 1940: Daiwa Securities America Inc., Dean Witter
Reynolds Inc., Fuji Securities Inc., Nesbitt-Burns Securities,
Inc., Prudential-Bache Securities Inc. and Sanwa Securities (USA)
Co., L.P.
CODE OF ETHICS. The Trust and the Adviser have each adopted a
Code of Ethics under Rule 17j-1 of the Investment Company Act of
1940. The Code significantly restricts the personal investing
activities of all employees of the Adviser and, as described
below, imposes additional, more onerous, restrictions on
investment personnel of the Adviser. The Code requires that all
employees of the Adviser preclear any personal securities
investment (with limited exceptions, such as U.S. Government
obligations). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition
or limitation applicable to the proposed investment. In
addition, no employee may purchase or sell any security which at
the time is being purchased or sold (as the case may be), or to
the knowledge of the employee is being considered for purchase or
sale, by any Fund. The substantive restrictions applicable to
investment personnel of the Adviser include a ban on acquiring
any securities in an initial public offering and a prohibition
from profiting on short-term trading in securities. Furthermore,
the Code provides for trading "blackout periods" which prohibit
trading by investment personnel of the Adviser within periods of
trading by the Funds in the same (or equivalent) security.
PORTFOLIO TURNOVER
The Adviser intends to hold the portfolio securities of the
Short Term Government Income Fund and the Institutional
Government Income Fund to maturity and to limit portfolio
turnover to the extent possible. Nevertheless, changes in a
Fund's portfolio will be made promptly when determined to be
advisable by reason of developments not foreseen at the time of
the original investment decision, and usually without reference
to the length of time a security has been held.
The Intermediate Term Government Income Fund, the Adjustable
Rate U.S. Government Securities Fund and the Global Bond Fund do
not intend to purchase securities for short term trading;
however, a security may be sold in anticipation of a market
decline, or purchased in anticipation of a market rise and later
sold. Securities will be purchased and sold in response to the
Adviser's (or Rogge's) evaluation of an issuer's ability to meet
its debt obligations in the future. A security may be sold and
another purchased when, in the opinion of the Adviser (or Rogge),
a favorable yield spread exists between specific issues or
different market sectors.
A Fund's portfolio turnover rate is calculated by dividing
the lesser of purchases or sales of portfolio securities for the
fiscal year by the monthly average of the value of the portfolio
securities owned by the Fund during the fiscal year. High
portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne
directly by the Funds. A 100% turnover rate would occur if all
of a Fund's portfolio securities were replaced once within a one
year period.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
The share price (net asset value) of the shares of the Short
Term Government Income Fund and the Institutional Government
Income Fund is determined as of 12:30 p.m. and 4:00 p.m., Eastern
time, on each day the Trust is open for business. The share
price (net asset value) and the public offering price (net asset
value plus applicable sales load) of the shares of the
Intermediate Term Government Income Fund, the Adjustable Rate
U.S. Government Securities Fund and the Global Bond Fund are
determined as of the close of the regular session of trading on
the New York Stock Exchange (currently 4:00 p.m., Eastern time),
on each day the Trust is open for business. The Trust is open
for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas. The Trust may also be open for business on other
days in which there is sufficient trading in any Fund's portfolio
securities that its net asset value might be materially affected.
The Global Bond Fund's net asset value may be materially affected
on a day when the Trust is not open for business because trading
in foreign exchanges may take place at times other than the times
trading occurs on the New York Stock Exchange. In addition,
foreign exchange trading may not take place on each day the Trust
is open for business. For a description of the methods used to
determine the share price and the public offering price, see
"Calculation of Share Price and Public Offering Price" in the
Prospectus.
Pursuant to Rule 2a-7 promulgated under the Investment
Company Act of 1940, the Short Term Government Income Fund and
the Institutional Government Income Fund each value their
portfolio securities on an amortized cost basis. The use of the
amortized cost method of valuation involves valuing an instrument
at its cost and, thereafter, assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument.
Under the amortized cost method of valuation, neither the amount
of daily income nor the net asset value of the Short Term
Government Income Fund or the Institutional Government Income
Fund is affected by any unrealized appreciation or depreciation
of the portfolio. The Board of Trustees has determined in good
faith that utilization of amortized cost is appropriate and
represents the fair value of the portfolio securities of the
Short Term Government Income Fund and the Institutional
Government Income Fund.
Pursuant to Rule 2a-7, the Short Term Government Income Fund
and the Institutional Government Income Fund each maintain a
dollar-weighted average portfolio maturity of 90 days or less,
purchase only securities having remaining maturities of thirteen
months or less and invest only in United States dollar-
denominated securities determined by the Board of Trustees to be
of high quality and to present minimal credit risks. If a
security ceases to be an eligible security, or if the Board of
Trustees believes such security no longer presents minimal credit
risks, the Trustees will cause the Fund to dispose of the
security as soon as possible. The maturity of U.S. Government
obligations which have a variable rate of interest readjusted no
less frequently than annually will be deemed to be the period of
time remaining until the next readjustment of the interest rate.
The Board of Trustees has established procedures designed to
stabilize, to the extent reasonably possible, the price per share
of the Short Term Government Income Fund and the Institutional
Government Income Fund as computed for the purpose of sales and
redemptions at $1 per share. The procedures include review of
each Fund's portfolio holdings by the Board of Trustees to
determine whether a Fund's net asset value calculated by using
available market quotations deviates more than one-half of one
percent from $1 per share and, if so, whether such deviation may
result in material dilution or is otherwise unfair to existing
shareholders. In the event the Board of Trustees determines that
such a deviation exists, it will take corrective action as it
regards necessary and appropriate, including the sale of
portfolio securities prior to maturity to realize capital gains
or losses or to shorten average portfolio maturities; withholding
dividends; redemptions of shares in kind; or establishing a net
asset value per share by using available market quotations. The
Board of Trustees has also established procedures designed to
ensure that each Fund complies with the quality requirements of
Rule 2a-7.
While the amortized cost method provides certainty in
valuation, it may result in periods during which the value of an
instrument, as determined by amortized cost, is higher or lower
than the price the Short Term Government Income Fund or the
Institutional Government Income Fund would receive if it sold the
instrument. During periods of declining interest rates, the
daily yield on shares of each Fund may tend to be higher than a
like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and
estimates of market prices for all of its portfolio securities.
Thus, if the use of amortized cost by a Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective
investor in the Fund would be able to obtain a somewhat higher
yield than would result from investment in a fund utilizing
solely market values and existing investors would receive less
investment income. The converse would apply in a period of
rising interest rates.
Portfolio securities held by the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund or the Global Bond Fund for which market
quotations are readily available are generally valued at their
most recent bid prices as obtained from one or more of the major
market makers for such securities. However, certain foreign
fixed-income securities are valued at the last quoted sale price.
Securities (and other assets) for which market quotations are not
readily available are valued at their fair value as determined in
good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of
Trustees.
The value of non-dollar denominated portfolio instruments
held by the Global Bond Fund will be determined by converting all
assets and liabilities initially expressed in foreign currency
values into U.S. dollar values at the mean between the bid and
offered quotations of such currencies against U.S. dollars as
last quoted by any recognized dealer. If such quotations are not
available, the rate of exchange will be determined in accordance
with policies established in good faith by the Board of Trustees.
Gains or losses between trade and settlement dates resulting from
changes in exchange rates between the U.S. dollar and a foreign
currency are borne by the Fund. To protect against such losses,
the Fund may enter into forward foreign currency exchange
contracts, which will also have the effect of limiting any such
gains.
OTHER PURCHASE INFORMATION
The Prospectus describes generally how to purchase shares of
the Funds. Additional information with respect to certain types
of purchases of Class A shares of the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund and the Global Bond Fund is set forth below.
Right of Accumulation. A "purchaser" (as defined in the
Prospectus) of Class A shares of the Intermediate Term Government
Income Fund, the Adjustable Rate U.S. Government Securities Fund
and the Global Bond Fund has the right to combine the cost or
current net asset value (whichever is higher) of his existing
shares of the load funds distributed by the Adviser with the
amount of his current purchases in order to take advantage of the
reduced sales loads set forth in the tables in the Prospectus.
The purchaser or his dealer must notify MGF Service Corp. that an
investment qualifies for a reduced sales load. The reduced load
will be granted upon confirmation of the purchaser's holdings by
MGF Service Corp.
Letter of Intent. The reduced sales loads set forth in the
tables in the Prospectus may also be available to any "purchaser"
(as defined in the Prospectus) of Class A shares of the
Intermediate Term Government Income Fund, the Adjustable Rate
U.S. Government Securities Fund and the Global Bond Fund who
submits a Letter of Intent to MGF Service Corp. The Letter must
state an intention to invest within a thirteen month period in
any load fund distributed by the Adviser a specified amount
which, if made at one time, would qualify for a reduced sales
load. A Letter of Intent may be submitted with a purchase at the
beginning of the thirteen month period or within ninety days of
the first purchase under the Letter of Intent. Upon acceptance
of this Letter, the purchaser becomes eligible for the reduced
sales load applicable to the level of investment covered by such
Letter of Intent as if the entire amount were invested in a
single transaction.
The Letter of Intent is not a binding obligation on the
purchaser to purchase, or the Trust to sell, the full amount
indicated. During the term of a Letter of Intent, shares
representing 5% of the intended purchase will be held in escrow.
These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the
thirteen month period, the applicable sales load will be adjusted
by the redemption of sufficient shares held in escrow, depending
upon the amount actually purchased during the period. The
minimum initial investment under a Letter of Intent is $10,000.
The purchaser or his dealer must notify MGF Service Corp.
that an investment is being made pursuant to an executed Letter
of Intent.
Other Information. The Trust does not impose a front-end
sales load or imposes a reduced sales load in connection with
purchases of Class A shares of the Intermediate Term Government
Income Fund, the Adjustable Rate U.S. Government Securities Fund
and the Global Bond Fund made under the reinvestment privilege or
the purchases described in the "Reduced Sales Load," "Purchases
at Net Asset Value" or "Exchange Privilege" sections in the
Prospectus because such purchases require minimal sales effort by
the Adviser. Purchases described in the "Purchases at Net Asset
Value" section may be made for investment only, and the shares
may not be resold except through redemption by or on behalf of
the Trust.
TAXES
The Prospectus describes generally the tax treatment of
distributions by the Funds. This section of the Statement of
Additional Information includes additional information concerning
federal taxes.
Each Fund has qualified and intends to qualify annually for
the special tax treatment afforded a "regulated investment
company" under Subchapter M of the Internal Revenue Code so that
it does not pay federal taxes on income and capital gains
distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock, securities or foreign currency, or certain other income
(including but not limited to gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currencies; (ii) derive less
than 30% of its gross income in each taxable year from the sale
or other disposition of the following assets held for less than
three months: (a) stock or securities, (b) options, futures or
forward contracts not directly related to its principal business
of investing in stock or securities; and (iii) diversify its
holdings so that at the end of each quarter of its taxable year
the following two conditions are met: (a) at least 50% of the
value of the Fund's total assets is represented by cash, U.S.
Government securities, securities of other regulated investment
companies and other securities (for this purpose such other
securities will qualify only if the Fund's investment is limited
in respect to any issuer to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of
such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than
U.S. Government securities or securities of other regulated
investment companies).
A Fund's net realized capital gains from securities
transactions will be distributed only after reducing such gains
by the amount of any available capital loss carryforwards.
Capital losses may be carried forward to offset any capital gains
for eight years, after which any undeducted capital loss
remaining is lost as a deduction. As of October 1, 1995, the
Intermediate Term Government Income Fund, the Institutional
Government Income Fund and the Adjustable Rate U.S. Government
Securities Fund had capital loss carryforwards for federal income
tax purposes of $2,224,265, $28,440 and $1,321,314, respectively,
none of which expire until at least September 30, 2001.
Investments by the Global Bond Fund in certain options,
futures contracts and options on futures contracts are "section
1256 contracts." Any gains or losses on section 1256 contracts
are generally considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Section 1256 contracts held by the
Fund at the end of each taxable year are treated for federal
income tax purposes as being sold on such date for their fair
market value. The resultant paper gains or losses are also
treated as 60/40 gains or losses. When the section 1256 contract
is subsequently disposed of, the actual gain or loss will be
adjusted by the amount of any preceding year-end gain or loss.
The use of section 1256 contracts may force the Fund to
distribute to shareholders paper gains that have not yet been
realized in order to avoid federal income tax liability.
Foreign currency gains or losses on non-U.S. dollar
denominated bonds and other similar debt instruments and on any
non-U.S. dollar denominated futures contracts, options and
forward contracts that are not section 1256 contracts generally
will be treated as ordinary income or loss.
Certain hedging transactions undertaken by the Global Bond
Fund may result in "straddles" for federal income tax purposes.
The straddle rules may affect the character of gains (or losses)
realized by the Fund. In addition, losses realized by the Fund
on positions that are part of a straddle may be deferred, rather
than being taken into account in calculating taxable income for
the taxable year in which such losses are realized. Because only
a few regulations implementing the straddle rules have been
promulgated, the tax consequences of hedging transactions to the
Fund are not entirely clear. The hedging transactions may
increase the amount of short-term capital gain realized by the
Fund which is taxed as ordinary income when distributed to
shareholders. The Fund may make one or more of the elections
available under the Internal Revenue Code of 1986, as amended,
which are applicable to straddles. If the Fund makes any of the
elections, the amount, character and timing of the recognition of
gains or losses from the affected straddle positions will be
determined under rules that vary according to the elections made.
The rules applicable under certain of the elections operate to
accelerate the recognition of gains or losses from the affected
straddle positions. Because application of the straddle rules
may affect the character of gains or losses, defer losses and/or
accelerate the recognition of gains or losses from the affected
straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain in any year, may be increased or
decreased substantially as compared to a fund that did not engage
in such hedging transactions.
The 30% limit on gains from the sale of certain assets held
for less than three months and the diversification requirements
applicable to the Global Bond Fund's assets may limit the extent
to which the Fund will be able to engage in transactions in
options, futures contracts or options on futures contracts.
The Global Bond Fund may be subject to a tax on interest
income received from securities of a non-U.S. issuer withheld by
a foreign country at the source. The United States has entered
into tax treaties with many foreign countries which entitle the
Fund to a reduced rate of tax or exemption from tax on such
income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to
be invested within various countries is not known.
A federal excise tax at the rate of 4% will be imposed on
the excess, if any, of a Fund's "required distribution" over
actual distributions in any calendar year. Generally, the
"required distribution" is 98% of a Fund's ordinary income for
the calendar year plus 98% of its net capital gains recognized
during the one year period ending on October 31 of the calendar
year plus undistributed amounts from prior years. The Funds
intend to make distributions sufficient to avoid imposition of
the excise tax.
The Trust is required to withhold and remit to the U.S.
Treasury a portion (31%) of dividend income on any account unless
the shareholder provides a taxpayer identification number and
certifies that such number is correct and that the shareholder is
not subject to backup withholding.
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees
deems it in the best interests of a Fund's shareholders, the Fund
may make payment for shares repurchased or redeemed in whole or
in part in securities of the Fund taken at current value. If any
such redemption in kind is to be made, each Fund intends to make
an election pursuant to Rule 18f-1 under the Investment Company
Act of 1940. This election will require the Funds to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the
net asset value of each Fund during any 90 day period for any one
shareholder. Should payment be made in securities, the redeeming
shareholder will generally incur brokerage costs in converting
such securities to cash. Portfolio securities which are issued
in an in-kind redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
Yield quotations on investments in the Short Term Government
Income Fund and the Institutional Government Income Fund are
provided on both a current and an effective (compounded) basis.
Current yields are calculated by determining the net change in
the value of a hypothetical account for a seven calendar day
period (base period) with a beginning balance of one share,
dividing by the value of the account at the beginning of the base
period to obtain the base period return, multiplying the result
by (365/7) and carrying the resulting yield figure to the nearest
hundredth of one percent. Effective yields reflect daily
compounding and are calculated as follows: Effective yield =
(base period return + 1)365/7 -1. For purposes of these
calculations, no effect is given to realized or unrealized gains
or losses (the Short Term Government Income Fund and the
Institutional Government Income Fund do not normally recognize
unrealized gains and losses under the amortized cost valuation
method). The Short Term Government Income Fund's current and
effective yields for the seven days ended September 30, 1995 were
4.74% and 4.85%, respectively. The Institutional Government
Income Fund's current and effective yields for the seven days
ended September 30, 1995 were 5.41% and 5.56%, respectively.
From time to time, the Intermediate Term Government Income
Fund, the Adjustable Rate U.S. Government Securities Fund and the
Global Bond Fund may advertise average annual total return.
Average annual total return quotations will be computed by
finding the average annual compounded rates of return over 1, 5
and 10 year periods that would equate the initial amount invested
to the ending redeemable value, according to the following
formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 and 10 year periods at
the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
<TABLE>
The calculation of average annual total return assumes the
reinvestment of all dividends and distributions and the deduction
of the current maximum sales load from the initial $1,000
payment. If a Fund has been in existence less than one, five or
ten years, the time period since the date of the initial public
offering of shares will be substituted for the periods stated.
The average annual total returns of the Intermediate Term
Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund and the Global Bond Fund for the periods ended
September 30, 1995 are as follows:
<CAPTION>
Intermediate Term Government Income Fund (Class A)
<S> <C>
1 Year 10.27%
5 Years 7.93%
10 Years 7.59%
<CAPTION>
Intermediate Term Government Income Fund (Class C)
<S> <C>
1 Year 11.96%
Since Inception (February 1, 1994) 2.45%
<CAPTION>
Adjustable Rate U.S. Government Securities Fund (Class A)
<S> <C>
1 Year 3.23%
Since Inception (February 10, 1993) 3.12%
The Intermediate Term Government Income Fund, the Adjustable
Rate U.S. Government Securities Fund and the Global Bond Fund may
also advertise total return (a "nonstandardized quotation") which
is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative
return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and
capital gains distributions. This computation does not include
the effect of the applicable sales load which, if included, would
reduce total return. The total returns of the Intermediate Term
Government Income Fund ("ITF"), the Adjustable Rate U.S.
Government Securities Fund ("ARM") and the Global Bond Fund
("GBF") as calculated in this manner for each of the last ten
fiscal years (or since inception) are as follows:
<CAPTION>
ITF ITF ARM ARM GBF GBF
Class A Class C Class A Class C Class A Class C
Period Ended
<S> <C> <C> <C> <C> <C> <C>
September 30, 1986 14.11%
September 30, 1987 0.66%
September 30, 1988 8.77%
September 30, 1989 7.79%
September 30, 1990 5.31%
September 30, 1991 14.19%
September 30, 1992 13.27%
September 30, 1993 10.15% 2.90%(2)
September 30, 1994 -6.76% 2.45%(1) 2.09%
September 30, 1995 12.52% 11.96% 5.33% 2.46%(3) 9.87%(4) 9.45%(4)
<FN>
(1) From date of initial public offering on February 1, 1994
(2) From date of initial public offering on February 10, 1993
(3) From date of initial public offering on May 1, 1995
(4) From date of initial public offering on February 1, 1995
A nonstandardized quotation may also indicate average annual
compounded rates of return without including the effect of the
applicable sales load or over periods other than those specified
for average annual total return. The average annual compounded
rates of return for the Intermediate Term Government Income Fund
and the Adjustable Rate U.S. Government Securities Fund
(excluding sales loads) for the periods ended September 30, 1995
are as follows:
<CAPTION>
Intermediate Term Government Income Fund (Class A)
<S> <C>
1 Year 12.52%
3 Years 4.94%
5 Years 8.37%
10 Years 7.80%
Since Inception (February 6, 1981) 9.19%
<CAPTION>
Intermediate Term Government Income Fund (Class C)
<S> <C>
1 Year 11.96%
Since Inception (February 1, 1994) 2.45%
<CAPTION>
Adjustable Rate U.S. Government Securities Fund (Class A)
<S> <C>
1 Year 5.33%
Since Inception (February 10, 1993) 3.91%
</TABLE>
A nonstandardized quotation of total return will always be
accompanied by the Fund's average annual total return as
described above.
From time to time, the Intermediate Term Government Income
Fund, the Adjustable Rate U.S. Government Securities Fund and the
Global Bond Fund may advertise their yield. A yield quotation is
based on a 30-day (or one month) period and is computed by
dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of
the period, according to the following formula:
Yield = 2[a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Generally, interest earned (for the purpose of "a" above) on debt
obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation
(including actual accrued interest) at the close of business on
the last business day prior to the start of the 30-day (or one
month) period for which yield is being calculated, or, with
respect to obligations purchased during the month, the purchase
price (plus actual accrued interest). With respect to the
treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject
to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an
increase or decrease to interest income during the period and
discount or premium on the remaining security is not amortized.
The yields of Class A and Class C shares of the Intermediate Term
Government Income Fund for September 1995 were 5.49% and 5.10%,
respectively. The yields of Class A and Class C shares of the
Adjustable Rate U.S. Government Securities Fund for September
1995 were 5.95% and 5.57%, respectively. The yields of Class A
and Class C shares of the Global Bond Fund for September 1995
were 4.10% and 3.84%, respectively.
The performance quotations described above are based on
historical earnings and are not intended to indicate future
performance. Average annual total return and yield are computed
separately for Class A and Class C shares of the Intermediate
Term Government Income Fund, the Adjustable Rate U.S. Government
Securities Fund and the Global Bond Fund. The yield of Class A
shares is expected to be higher than the yield of Class C shares
due to the higher distribution fees imposed on Class C shares.
To help investors better evaluate how an investment in a
Fund might satisfy their investment objective, advertisements
regarding each Fund may discuss various measures of Fund
performance, including current performance ratings and/or
rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements
may also compare performance (using the calculation methods set
forth in the Prospectus) to performance as reported by other
investments, indices and averages. When advertising current
ratings or rankings, the Funds may use the following publications
or indices to discuss or compare Fund performance:
Donoghue's Money Fund Report provides a comparative analysis
of performance for various categories of money market funds. The
Short Term Government Income Fund may compare performance
rankings with money market funds appearing in the Taxable U.S.
Treasury & Repo Funds category. The Institutional Government
Income Fund may compare performance rankings with money market
funds appearing in the Taxable Government-Only Institutional
Funds category. Donoghue's Bond Fund Report provides a
comparative analysis of performance for various categories of
bond funds. The Intermediate Term Government Income Fund may
compare performance rankings with bond funds appearing in the
Government General Intermediate Term category, the Adjustable
Rate U.S. Government Securities Fund may compare performance
rankings with bond funds appearing in the Adjustable Rate
Mortgages category and the Global Bond Fund may compare
performance rankings with bond funds appearing in the Global and
International Long-Term category.
Lipper Fixed Income Fund Performance Analysis measures total
return and average current yield for the mutual fund industry and
ranks individual mutual fund performance over specified time
periods assuming reinvestment of all distributions, exclusive of
sales loads. The Short Term Government Income Fund may provide
comparative performance information appearing in the U.S.
Government Money Market Funds category, the Intermediate Term
Government Income Fund may provide comparative performance
information appearing in the Intermediate U.S. Government Funds
category, the Institutional Government Income Fund may provide
comparative performance information appearing in the
Institutional U.S. Government Money Market Funds category, the
Adjustable Rate U.S. Government Securities Fund may provide
comparative performance information appearing in the Adjustable
Rate Mortgage Funds category and the Global Bond Fund pay provide
comparative performance information appearing in the General
World Income Funds category.
In assessing such comparisons of performance an investor
should keep in mind that the composition of the investments in
the reported indices and averages is not identical to the Funds'
portfolios, that the averages are generally unmanaged and that
the items included in the calculations of such averages may not
be identical to the formula used by the Funds to calculate their
performance. In addition, there can be no assurance that the
Funds will continue this performance as compared to such other
averages.
PRINCIPAL SECURITY HOLDERS
As of January 5, 1996, Amivest Corporation, P.O. Box 370
Cooper Station, New York, New York owned of record 14.41% of the
outstanding Class A shares of the Intermediate Term Government
Income Fund and 30.69% of the outstanding Class A shares of the
Adjustable Rate U.S. Government Securities Fund. Amivest
Corporation may be deemed to control the Adjustable Rate U.S.
Government Securities Fund by virtue of the fact that it owns of
record more than 25% of the Fund's shares. For purposes of
voting on matters submitted to shareholders, any person who owns
more than 5% of the outstanding shares of a Fund generally would
be able to cast the deciding vote.
As of January 5, 1996, Ann Butler, P.O. Box 157, Frisco,
Texas owned of record 16.59% of the outstanding Class C shares of
the Intermediate Term Government Income Fund, Rhea W. Mentz, J.C.
Waldridge Sr. POA, 4610 Highway 155, Fisherville, Kentucky owned
of record 10.73% of the outstanding Class C shares of the
Intermediate Term Government Income Fund, Resources Trust Co. IRA
UA FBO Arthur R. Thigpen, P.O. Box 5900, Denver, Colorado owned
of record 8.37% of the outstanding Class C shares of the
Intermediate Term Government Income Fund; Marvin A. McIntire,
Claudine M. McIntire, 409 Edgewater Drive, Kokomo, Indiana owned
of record 5.10% of the outstanding Class C shares of the
Intermediate Term Government Income Fund.
As of January 5, 1996, The Fechheimer Brothers Company, 4545
Malsbary Road, Cincinnati, Ohio owned of record 14.40% of the
outstanding shares of the Institutional Government Income Fund;
F&C Litigations Trust Fund B, c/o Ballenger Budetti & Associates,
10920 Wilshire Boulevard, Los Angeles, California owned of record
8.17% of the outstanding shares of the Institutional Government
Income Fund; J.M. Rubin Foundation Inc., c/o Island National Bank
in Palm Beach, 180 Royal Palm Way, Palm Beach, Florida owned of
record 5.62% of the outstanding shares of the Institutional
Government Income Fund; The Fifth Third Bank Trust Department, 38
Fountain Square Plaza, Cincinnati, Ohio owned of record 7.04% of
the outstanding shares of the Institutional Government Income
Fund; Gottfried Profit Sharing Trust Ltd., c/o Island National
Bank & Trust Company, 180 Royal Palm Way, Palm Beach, Florida
owned of record 5.90% of the outstanding shares of the
Institutional Government Income Fund.
As of January 5, 1996, Merrill Lynch/FDS Mutual Fund
Operations, 4800 Deer Lake Drive East, Jacksonville, Florida
owned of record 10.29% and 14.81% of the outstanding Class A and
Class C shares, respectively, of the Adjustable Rate U.S.
Government Securities Fund; The Butler Trust Dtd 4-27-95, Roger/
Jeanette Butler Trustees, 19840 Pandy Court, Santa Clarita,
California owned of record 6.54% of the outstanding Class C
shares of the Intermediate Term Government Income Fund and 60.92%
of the outstanding Class C shares of the Adjustable Rate U.S.
Government Securities Fund; Andrew J. Allen, 306 N. Annin Avenue,
Fullerton, California owned of record 10.64% of the outstanding
Class C shares of the Adjustable Rate U.S. Government Securities
Fund; Doris E. Palmerton, Linda L. Snyder, 11165 Centerville
Street, Whitehouse, Ohio owned of record 6.23% of the outstanding
Class C shares of the Adjustable Rate U.S. Government Securities
Fund.
As of January 5, 1996, Martin S. Goldfarb M.D., 919 N.
Crescent, Beverly Hills, California owned of record 16.93% of the
outstanding Class A shares of the Global Bond Fund; Queen City
Urology Associates Inc., 400 Martin Luther King Drive,
Cincinnati, Ohio owned of record 7.36% of the outstanding Class A
shares of the Global Bond Fund; PaineWebber FBO Tempel Steel
Employee Pension Trust, 5215 Old Orchard Road, Skokie, Illinois
owned of record 19.33% of the outstanding Class C shares of the
Global Bond Fund; PaineWebber FBO The Florence & Co. Trust
Account #2, 11713 N.E. 99th Street, Vancouver, Washington owned
of record 9.34% of the outstanding Class C shares of the Global
Bond Fund.
As of January 5, 1996, the Trustees and officers of the
Trust as a group owned of record and beneficially 1.49% of the
outstanding shares of the Short Term Government Income Fund,
2.55% of the outstanding Class A shares of the Global Bond Fund
and less than 1% of the outstanding shares of the Trust and of
each other Fund (or Class thereof).
CUSTODIAN
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati,
Ohio, has been retained to act as Custodian for the investments
of the Short Term Government Income Fund, the Intermediate Term
Government Income Fund, the Institutional Government Income Fund
and the Adjustable Rate U.S. Government Securities Fund. The
Fifth Third Bank acts as each Fund's depository, safekeeps its
portfolio securities, collects all income and other payments with
respect thereto, disburses funds as instructed and maintains
records in connection with its duties. As compensation, The
Fifth Third Bank receives from each Fund a base fee at the annual
rate of .005% of average net assets (subject to a minimum annual
fee of $1,500 per Fund and a maximum fee of $5,000 per Fund) plus
transaction charges for each security transaction of the Funds.
The Northern Trust Company, 50 South LaSalle Street,
Chicago, Illinois, has been retained to act as Custodian for the
Global Bond Fund's investments. The Northern Trust Company acts
as the Fund's depository, safekeeps its portfolio securities,
collects all income and other payments with respect thereto,
disburses funds as instructed and maintains records in connection
with its duties.
AUDITORS
The firm of Arthur Andersen LLP has been selected as
independent auditors for the Trust for the fiscal year ending
September 30, 1996. Arthur Andersen LLP, 425 Walnut Street,
Cincinnati, Ohio, performs an annual audit of the Trust's
financial statements and advises the Funds as to certain
accounting matters.
MGF SERVICE CORP.
The Trust's transfer agent, MGF Service Corp. ("MGF"),
maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes
purchases and redemptions of the Funds' shares, acts as dividend
and distribution disbursing agent and performs other shareholder
service functions. MGF is an affiliate of the Adviser by reason
of common ownership. MGF receives for its services as transfer
agent a fee payable monthly at an annual rate of $25 per account
from each of the Short Term Government Income Fund and the
Institutional Government Income Fund and $21 per account from the
Intermediate Term Government Income Fund, the Adjustable Rate
U.S. Government Securities Fund and the Global Bond Fund,
provided, however, that the minimum fee is $1,000 per month for
each class of shares of a Fund. In addition, the Funds pay out-
of-pocket expenses, including but not limited to, postage,
envelopes, checks, drafts, forms, reports, record storage and
communication lines.
<TABLE>
MGF also provides accounting and pricing services to the
Trust. For calculating daily net asset value per share and
maintaining such books and records as are necessary to enable MGF
to perform its duties, the Short Term Government Income Fund and
the Institutional Government Income Fund each pay MGF a fee in
accordance with the following schedule:
<CAPTION>
Asset Size of Fund Monthly Fee
<S> <C>
$ 0 - $100,000,000 $3,000
$100,000,000 - $250,000,000 $3,500
$250,000,000 - $400,000,000 $4,000
Over $400,000,000 $4,500
The Intermediate Term Government Income Fund pays MGF a fee in
accordance with the following schedule:
<CAPTION>
Asset Size of Fund Monthly Fee
<S> <C>
$ 0 - $ 50,000,000 $3,750
$ 50,000,000 - $100,000,000 $4,250
$100,000,000 - $250,000,000 $4,750
Over $250,000,000 $5,250
The Adjustable Rate U.S. Government Securities Fund pays MGF a
fee in accordance with the following schedule:
<CAPTION>
Asset Size of Fund Monthly Fee
<S> <C>
$ 0 - $ 50,000,000 $4,250
$ 50,000,000 - $100,000,000 $4,750
$100,000,000 - $250,000,000 $5,250
Over $250,000,000 $5,750
The Global Bond Fund pays MGF a fee in accordance with the
following schedule:
<CAPTION>
Asset Size of Fund Monthly Fee
<S> <C>
$ 0 - $ 50,000,000 $4,750
$ 50,000,000 - $100,000,000 $5,250
$100,000,000 - $250,000,000 $5,750
Over $250,000,000 $6,750
</TABLE>
In addition, each Fund pays all costs of external pricing
services.
MGF is retained by the Adviser to assist the Adviser in
providing administrative services to the Funds. In this
capacity, MGF supplies non-investment related statistical and
research data, internal regulatory compliance services and
executive and administrative services. MGF supervises the
preparation of tax returns, reports to shareholders of the Funds,
reports to and filings with the Securities and Exchange
Commission and state securities commissions, and materials for
meetings of the Board of Trustees. For the performance of these
administrative services, MGF receives a fee from the Adviser
equal to one-fourth of the fee payable from the Trust to the
Adviser pursuant to the Funds' investment advisory agreements
with the Adviser. The Adviser is solely responsible for the
payment of these administrative fees to MGF, and MGF has agreed
to seek payment of such fees solely from the Adviser.
ANNUAL REPORT
The Funds' financial statements as of September 30, 1995
appear in the Trust's annual report which is attached to this
Statement of Additional Information.
<PAGE>
ANNUAL
REPORT
SEPTEMBER 30, 1995
Short Term Government
INCOME FUND
Institutional Government
INCOME FUND
Intermediate Term
Government
INCOME FUND
Adjustable Rate
U.S. Government
SECURITIES FUND
Global
BOND FUND
MANAGEMENT DISCUSSION AND ANALYSIS
INTERMEDIATE TERM GOVERNMENT INCOME FUND
=============================================================================
The Intermediate Term Government Income Fund 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 Fund invests 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. For
the fiscal year ended September 30, 1995, the Fund's total returns
(excluding the impact of applicable sales loads) were 12.52% and 11.96% for
Class A shares and Class C shares,respectively.
Economic conditions during the past fiscal year enabled the bond market to
stage an impressive rally. Moderate economic growth and subdued
inflationary pressures allowed the Federal Reserve Board to discontinue
its strategy of tightening monetary policy and to actually reverse its course
by lowering the Federal Funds rate in July. The domestic economy, which
had shown signs of growth late in 1994, slowed dramatically early in
1995. Industrial production, capacity utilization, employment levels,
inventories and stagnant inflation all suggested that the economy was
responding to a full year of restrictive monetary policy by
the Federal Reserve. Accordingly, the bond market showed steady
improvement throughout the year. For the twelve months ended September 30,
1995, the Lehman Brothers Intermediate Government Bond Index returned 10.60%.
The Fund was able to capitalize on the positive tone in the
bond market. Utilizing a proactive sector management strategy, the Fund
initiated several trades designed to capitalize on the changing yield spreads
between the callable and non-callable agency sectors of the market.
These trades were made in conjunction with adjustments to the average
maturity of the Fund's investment portfolio based on anticipated interest
rate movements. Our interest rate outlook and timely sector rotation
were the keys which helped the Fund outperform the Lehman Brothers
comparative index and much of the Fund's peer group.
Our outlook for the bond market and the Fund remains positive. Stable
inflation and moderate economic growth should help contain interest
rates. The Federal Reserve Board's willingness to ease monetary policy
in response to subdued growth and low inflation will be key to the magnitude
of any market move. The current budget battle being waged in Washington
should also influence the bond market. It is generally believed that
meaningful deficit reduction will suppress economic activity which will allow
the Federal Reserve to ease monetary policy. We will continue to actively
manage the Fund's sector exposures and make adjustments to the Fund's
duration based upon our interest rate
outlook.
MANAGEMENT DISCUSSION AND ANALYSIS
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
=============================================================================
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. For the fiscal year ended September
30, 1995, the Fund's total return for Class A shares (excluding the impact of
applicable sales loads) was 5.33% as compared to 9.44% for the Lehman Brothers
Adjustable Rate Mortgage (ARM) Index. The initial public offering of Class C
shares commenced on May 2, 1995.
Activity within the ARM market was subdued throughout most of the fiscal
year despite the impressive rally experienced in the overall bond
market. Spreads between interest rates on short and long-term
Treasury issues narrowed considerably giving investors an incentive to
refinance into fixed rate mortgages. This, in turn, increased prepayment
speeds on ARM securities causing yield spreads to widen versus U.S.
Treasury securities. As a result, fully indexed ARM securities with rate
adjustments tied to short-term U.S. Treasury securities traded in a very tight
range.
With more of the bond market rally concentrated in longer maturity issues
and with short-term rates relatively stagnant, the Fund's fiscal year
performance was generally representative of the interest rate environment.
This type of market favored the more volatile ARM issues having longer average
maturities and greater sensitivity to changes in interest rates more so
than the largely conservative, fully indexed ARM securities held by the Fund.
The Fund's strategy of maintaining a high quality portfolio with low
volatility was adhered to throughout the year. The yield on the Fund rose
by approximately 100 basis points during this period as coupons on ARM
securities held in the portfolio adjusted to current interest rate levels.
However, the share price of the Fund remained essentially unchanged as
widening spreads offset any price appreciation on such securities.
Our outlook for the next several months remains optimistic. With
inflation contained and economic activity mixed, there appears to be
some room for the Federal Reserve Board to further reduce short-term
interest rates. We will continue to pursue a conservative strategy for the
Fund, attempting to maximize current yield while minimizing principal
fluctuation.
MANAGEMENT DISCUSSION AND ANALYSIS
GLOBAL BOND FUND
============================================================================
The Global Bond Fund seeks high total return, through both income and
capital appreciation, by investing primarily in high-grade
domestic and foreign fixed-income securities. Investments in the Fund are
geographically concentrated in the countries included in the Salomon
Brothers World Government Bond Index:
Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan,
the Netherlands, Spain, Sweden, the United Kingdom and the United
States. For the period from inception of the Fund (February 1, 1995) through
September 30, 1995, the Fund's total returns (excluding the impact of
applicable sales loads) were 9.87% and 9.45% for Class A shares and Class C
shares, respectively. The Salomon Brothers World Government Bond Index
returned 13.24% 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 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, credibility of monetary authorities, fiscal policy and political
climate. Based upon twelve month expectations of investor confidence and
market outlook, optimal country weightings are assigned. Various hedging
strategies are also used by the Fund to reduce short-term volatility resulting
from currency exchange rate fluctuations.
The three largest countries represented in the Solomon Brothers
World Government Bond Index are the United States, Japan and Germany,
respectively, which account for approximately two-thirds of the index
weighting. While these three countries represent roughly the same total
percentage of the Fund's overall allocation, Germany is overweighted by
comparison whereas the United States and Japan have selectively been
underweighted by the Fund. In addition, allocations for Italy and the
Netherlands have both been increased in recent months. Global securities
held by the Fund continue to be invested predominately in
highly liquid government debt.
Our outlook for the global bond markets and the Fund is promising.
Global economies on the whole are experiencing reasonable growth with
little upward pressure on inflation, and budget deficits in most of the
industrialized world are generally declining. As always, the Fund's
portfolio will be reviewed on a continual basis focusing on country
allocation, currency management duration control and security selection.
We will continue to actively manage the Fund, seeking value-added returns
while striving to protect capital.
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1995
====================================================================================================================
MONEY MARKET FUNDS
====================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in securities:
At acquisition cost.................................................... $ 46,426,489 $ 29,640,982
=============== ===============
At amortized cost...................................................... $ 46,727,328 $ 29,825,915
=============== ===============
At value (Note 1)..................................................... $ 46,727,328 $ 29,825,915
Investments in repurchase agreements (Note1)............................. 39,277,000 6,198,000
Cash..................................................................... 800,693 702
Interest receivable....................................................... 397,548 18,009
Other assets.............................................................. 12,502 --
--------------- ---------------
TOTAL ASSETS........................................................... 87,215,071 36,042,626
--------------- ---------------
LIABILITIES
Dividends payable......................................................... 9,088 20,196
Payable to affiliates (Note 3).......................................... 53,113 7,163
Other accrued expenses and liabilities.................................. 11,734 6,637
--------------- ---------------
TOTAL LIABILITIES..................................................... 73,935 33,996
--------------- ---------------
NET ASSETS .............................................................. $ 87,141,136 $ 36,008,630
=============== ===============
Net assets consist of:
Capital shares........................................................... $ 87,138,909 $ 36,037,070
Accumulated net realized gains (losses) from security transactions ...... 2,227 (28,440)
--------------- ---------------
Net assets............................................................... $ 87,141,136 $ 36,008,630
. =============== ===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 4).................................... 87,138,909 36,037,070
=============== ===============
Net asset value, offering price and redemption price per share(Note 1) .. $ 1.00 $ 1.00
=============== ===============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1995
==================================================================================================================
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.................................................... $ 53,666,581 $ 19,417,632
=============== ===============
At amortized cost...................................................... $ 53,620,994 $ 19,417,632
=============== ===============
At value (Note 1)...................................................... $ 55,639,412 $ 19,566,997
Investments in repurchase agreements (Note. 1)........................... 981,000 1,024,000
Cash..................................................................... 42 837
Interest receivable....................................................... 1,030,130 168,812
Receivable for capital shares sold....................................... 42,229 4,143
Receivable for principal paydowns......................................... -- 145,849
Other assets.............................................................. -- 6,833
--------------- ---------------
TOTAL ASSETS.......................................................... 57,692,813 20,917,471
--------------- ---------------
LIABILITIES
Payable for capital shares redeemed...................................... 49,240 57,458
Dividends payable........................................................ 31,690 5,944
Payable to affiliates (Note 3)........................................... 33,623 9,550
Other accrued expenses and liabilities.................................... 11,224 5,800
--------------- ---------------
TOTAL LIABILITIES................................................... 125,777 78,752
--------------- ---------------
NET ASSETS .............................................................. $ 57,567,036 $ 20,838,719
=============== ===============
Net assets consist of:
Capital shares........................................................... $ 58,743,616 $ 22,010,668
Accumulated net realized losses from security transactions................ (3,194,998) (1,321,314)
Net unrealized appreciation on investments............................... 2,018,418 149,365
--------------- ---------------
Net assets............................................................... $ 57,567,036 $ 20,838,719
=============== ===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares................................ $ 56,968,568 $ 20,752,304
=============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 4)................... 5,308,934 2,121,595
=============== ===============
Net asset value and redemption price per share (Note 1)................... $ 10.73 $ 9.78
=============== ===============
Maximum offering price per share (Note 1)................................ $ 10.95 $ 9.98
=============== ===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares................................ $ 598,468 86,415
=============== ===============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 4).................... 55,773 8,834
=============== ===============
Net asset value, offering price and redemption price per share (Note 1)... $ 10.73 $ 9.78
=============== ===============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
===================================================================================================================
GLOBAL BOND
FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities and time deposits:
At acquisition cost...................................................................... $ 16,396,061
===============
At amortized cost....................................................................... $ 16,396,061
===============
At value (Note 1)....................................................................... $ 16,559,934
Cash denominated in foreign currencies (At cost $98,322)................................... 99,546
Cash....................................................................................... 769,469
Interest receivable........................................................................ 452,150
Receivable for capital shares sold.......................................................... 34,274
---------------
TOTAL ASSETS............................................................................ 17,915,373
---------------
LIABILITIES
Payable for capital shares redeemed......................................................... 203
Net unrealized depreciation on forward foreign currency exchange contracts
(Note 6)................................................................................. 71,979
Payable to affiliates (Note 3)............................................................. 15,945
Other accrued expenses and liabilities..................................................... 12,202
---------------
TOTAL LIABILITIES....................................................................... 100,329
---------------
NET ASSETS ................................................................................ $ 17,815,044
===============
Net assets consist of:
Capital shares............................................................................. $ 17,658,845
Undistributed net investment income......................................................... 8,355
Accumulated net realized gains from security transactions................................... 157,918
Accumulated net realized losses from foreign currencytransactions ......................... (106,555)
Net unrealized appreciation on investments and foreign currencies........................... 96,481
---------------
Net assets................................................................................. $ 17,815,044
===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares.................................................. $ 13,296,621
===============
Shares of beneficial interest outstanding (unlimited number of shares authorized,
no par value) (Note 4)................................................................. 1,249,309
===============
Net asset value and redemption price per share (Note 1).................................... $ 10.64
===============
Maximum offering price per share (Note 1).................................................. $ 11.08
===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares.................................................. $ 4,518,423
===============
Shares of beneficial interest outstanding (unlimited number of
shares authorized, no par value) (Note 4)............................................... 426,839
===============
Net asset value, offering price and redemption price per share (Note 1)..................... $ 10.59
===============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 1995
=====================================================================================================================
MONEY MARKET FUNDS
=====================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income....................................................... $ 4,729,343 $ 2,459,040
--------------- ---------------
EXPENSES
Investment advisory fees (Note 3)..................................... 407,097 86,367
Shareholder services and transfer agent fees (Note 3)................. 167,248 12,000
Distribution expenses (Note 3)......................................... 109,110 1,655
Accounting services fees (Note 3)...................................... 38,300 37,800
Postage and supplies................................................... 44,888 4,955
Custodian fees........................................................ 16,410 10,801
Professional fees..................................................... 13,008 8,808
Registration fees...................................................... 17,036 3,979
Insurance expense...................................................... 10,269 6,630
Reports to shareholders............................................... 8,073 224
Trustees' fees and expenses........................................... 2,965 2,965
Other expenses........................................................ 6,203 5,048
--------------- ---------------
TOTAL EXPENSES....................................................... 840,607 181,232
Fees waived by the Adviser (Note 3)................................... -- (8,500)
--------------- ---------------
NET EXPENSES......................................................... 840,607 172,732
--------------- ---------------
NET INVESTMENT INCOME.................................................... 3,888,736 2,286,308
--------------- ---------------
NET REALIZED GAINS FROM SECURITY TRANSACTIONS ........................... 2,227 4,844
--------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................. $ 3,890,963 $ 2,291,152
=============== ===============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 1995
=================================================================================================================
GOVERNMENT BOND FUNDS
=================================================================================================================
ADJUSTABLE
INTERMEDIATE RATE U.S.
TERM GOVERNMENT
GOVERNMENT SECURITIES
INCOME FUND FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income....................................................... $ 4,286,348 $ 1,418,607
--------------- ---------------
EXPENSES
Investment advisory fees (Note 3)...................................... 294,316 112,333
Accounting services fees (Note 3)...................................... 60,000 47,750
Distribution expenses, Class A (Note 3)................................ 84,109 14,176
Transfer agent fees, Class A (Note 3).................................. 59,523 16,584
Transfer agent fees, Class C (Note 3).................................. 12,000 5,000
Postage and supplies................................................... 34,630 11,741
Registration fees, Common.............................................. 9,351 12,010
Registration fees, Class A............................................. 2,195 360
Registration fees, Class C............................................. 3,393 95
Custodian fees......................................................... 8,529 14,125
Professional fees...................................................... 12,510 8,710
Insurance expense...................................................... 8,839 6,240
Trustees' fees and expenses............................................ 2,965 2,965
Reports to shareholders................................................ 3,774 1,559
Other expenses......................................................... 10,437 23,189
--------------- ---------------
TOTAL EXPENSES....................................................... 606,571 276,837
Fees waived or expenses reimbursed by the Adviser (Note 3)............. (11,362) (108,196)
--------------- ---------------
NET EXPENSES......................................................... 595,209 168,641
--------------- ---------------
NET INVESTMENT INCOME.................................................... 3,691,139 1,249,966
--------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions........................ (932,473) (997,493)
Net change in unrealized appreciation/depreciation on investments ..... 4,287,039 743,284
--------------- ---------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS ............... 3,354,566 (254,209)
--------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................. $ 7,045,705 $ 995,757
=============== ===============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995(A)
=====================================================================================================================
GLOBAL BOND
FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest income (net of foreign withholding taxes of $13,318)........................... $ 338,752
---------------
EXPENSES
Accounting services fees (Note 3)........................................................ 44,250
Investment advisory fees (Note 3)........................................................ 41,518
Custodian fees........................................................................... 13,968
Professional fees........................................................................ 12,611
Transfer agent fees, Class A (Note 3).................................................... 8,000
Transfer agent fees, Class C (Note 3).................................................... 8,000
Distribution expenses, Class A (Note 3).................................................. 7,199
Registration fees, Common................................................................ 7,066
Registration fees, Class A............................................................... 3,019
Registration fees, Class C............................................................... 3,529
Trustees' fees and expenses.............................................................. 2,130
Postage and supplies..................................................................... 1,530
Reports to shareholders.................................................................. 706
Other expenses........................................................................... 1,503
---------------
TOTAL EXPENSES......................................................................... 155,029
Fees waived and expenses reimbursed by the Adviser (Note 3).............................. (70,718)
---------------
NET EXPENSES........................................................................... 84,311
---------------
NET INVESTMENT INCOME...................................................................... 254,441
---------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND
FOREIGN CURRENCY (Note 5) Net realized gains (losses) from:
Security transactions................................................................. 157,918
Foreign currency transactions.......................................................... (106,555)
Net change in unrealized appreciation/depreciation on:
Investments........................................................................... 119,054
Translation of assets and liabilities in foreign currencies............................ (22,573)
---------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENTS AND FOREIGN CURRENCY .................... 147,844
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................................................ $ 402,285
===============
<FN>
(A)Represents the period from the start of business (February 1, 1995) through
September 30, 1995.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended September 30, 1995 and 1994
=======================================================================================================================
MONEY MARKET FUNDS
=======================================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1995 Sept. 30, 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income........................ $ 3,888,736 $ 2,306,072 $ 2,286,308 $ 1,532,617
Net realized gains (losses) from
security transactions ..................... 2,227 5,891 4,844 (134,563)
------------ ------------- ------------- ------------
Net increase in net assets from operations...... 3,890,963 2,311,963 2,291,152 1,398,054
------------ ------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income .................. (3,888,736) (2,306,072) (2,286,308) (1,532,617)
From net realized gains from
security transactions ..................... (4,105) -- -- --
------------ ------------- ------------- ------------
Decrease in net assets from
distributions to shareholders ............... (3,892,841) (2,306,072) (2,286,308) (1,532,617)
------------ ------------- ------------- ------------
FROM CAPITAL SHARE TRANSACTIONS (Note 4):
Proceeds from shares sold ................... 306,531,676 417,855,148 152,663,812 168,143,765
Net asset value of shares issued in
reinvestment of distributions
to shareholders ........................... 3,627,273 2,046,254 1,869,015 1,129,608
Payments for shares redeemed................. (312,723,860) (427,161,727) (160,298,008) (162,084,359)
------------ ------------- ------------- ------------
Net increase (decrease) in net assets from
capital share transactions................... (2,564,911) (7,260,325) (5,765,181) 7,189,014
------------ ------------- ------------- ------------
CAPITAL CONTRIBUTION BY AFFILIATE (Note 3) ..... -- -- -- 105,000
------------ ------------- ------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ...... (2,566,789) (7,254,434) (5,760,337) 7,159,451
NET ASSETS:
Beginning of year............................ 89,707,925 96,962,359 41,768,967 34,609,516
------------ ------------- ------------- ------------
End of year.................................. $ 87,141,136 $ 89,707,925 $ 36,008,630 $ 41,768,967
============ ============= ============= ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET
ASSETS For the Years Ended September 30, 1995 and 1994
===================================================================================================================
GOVERNMENT BOND FUNDS
===================================================================================================================
INTERMEDIATE TERM ADJUSTABLE RATE
GOVERNMENT U.S. GOVERNMENT
INCOMEFUND SECURITIES FUND
- -------------------------------------------------------------------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1995 Sept. 30, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ....................... $ 3,691,139 $ 4,062,227 $ 1,249,966 $ 1,873,947
Net realized losses from security transactions (932,473) (1,877,102) (997,493) (304,327)
Net change in unrealized
appreciation/depreciation on investments... 4,287,039 (7,766,054) 743,284 (612,863)
------------ ------------- ------------- ------------
Net increase (decrease) in net assets
from operations .............................. 7,045,705 (5,580,929) 995,757 956,757
------------ ------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A ......... (3,660,758) (4,050,330) (1,250,247) (1,872,126)
From net investment income, Class C ......... (30,381) (11,897) (1,540) --
From net realized gains from
security transactions, Class A ........... -- (1,012,050) -- (22,389)
------------ ------------- ------------- ------------
Decrease in net assets from distributions
to shareholders ............................. (3,691,139) (5,074,277) (1,251,787) (1,894,515)
------------ ------------- ------------- ------------
FROM CAPITAL SHARE TRANSACTIONS (Note 4):
CLASS A
Proceeds from shares sold ................... 13,539,608 19,529,582 17,065,780 96,127,400
Net asset value of shares issued in
reinvestment of distributions to shareholders 3,085,214 4,360,921 1,122,368 1,544,607
Payments for shares redeemed ................ (27,372,364) (38,538,270) (34,751,708) (83,562,236)
------------ ------------- ------------- ------------
Net increase (decrease) in net assets
from Class A share transactions ............. (10,747,542) (14,647,767) (16,563,560) 14,109,771
------------ ------------- ------------- ------------
CLASS C
Proceeds from shares sold ................... 438,070 792,585 85,878 --
Net asset value of shares issued in
reinvestment of distributions to shareholders 29,534 12,021 1,510 --
Payments for shares redeemed................. (410,675) (264,642) (1,007) --
------------ ------------- ------------- ------------
Net increase in net assets from Class C
share transactions 56,929 539,964 86,381 --
------------ ------------- ------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....... (7,336,047) (24,763,009) (16,733,209) 13,172,013
NET ASSETS:
Beginning of year............................ 64,903,083 89,666,092 37,571,928 24,399,915
------------ ------------- ------------- ------------
End of year.................................. $ 57,567,036 $ 64,903,083 $ 20,838,719 $ 37,571,928
============ ============= ============= ============
UNDISTRIBUTED NET INVESTMENT INCOME ............ -- -- -- $ 1,821
============ ============= ============= ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended September 30, 1995(A)
=====================================================================================================================
GLOBAL BOND
FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
FROM OPERATIONS:
Net investment income................................................................... $ 254,441
Net realized gains from security transactions........................................... 157,918
Net realized losses from foreign currencytransactions................................... (106,555)
Net change in unrealized appreciation/depreciation on investments........................ 119,054
Net change in unrealized appreciation/depreciation on translation of assets
and liabilities in foreign currencies.................................................. (22,573)
---------------
Net increase in net assets from operations................................................. 402,285
---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A..................................................... (232,249)
From net investment income, Class C..................................................... (13,837)
---------------
Decrease in net assets from distributions to shareholders.................................. (246,086)
---------------
FROM CAPITAL SHARE TRANSACTIONS (Note 4): CLASS A
Proceeds from shares sold............................................................... 13,448,590
Net asset value of shares issued in reinvestment of distributions to shareholders ....... 226,752
Payments for shares redeemed............................................................ (560,630)
---------------
Net increase in net assets from Class A share transactions................................. 13,114,712
---------------
CLASS C
Proceeds from shares sold............................................................... 4,554,154
Net asset value of shares issued in reinvestment of distributions to shareholders........ 13,614
Payments for shares redeemed............................................................. (23,635)
---------------
Net increase in net assets from Class C share transactions................................. 4,544,133
---------------
TOTAL INCREASE IN NET ASSETS .............................................................. 17,815,044
NET ASSETS:
Beginning of period...................................................................... --
---------------
End of period (including undistributed net investment income of $8,355).................. $ 17,815,044
===============
<FN>
(A)Represents the period from the start of business (February 1, 1995) through September 30, 1995.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
Per Share Datafor a Share Outstanding Throughout Each Year
=====================================================================================================================
Year Ended September 30,
- ---------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------
<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 .................... 0.046 0.027 0.022 0.035 0.059
----------- ----------- ---------- ---------- -----------
Dividends from net investment income...... (0.046) (0.027) (0.022) (0.035) (0.059)
----------- ----------- ---------- ---------- -----------
Net asset value at end of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== ========== ========== ===========
Total return ............................. 4.69% 2.72% 2.24% 3.55% 6.06%
=========== =========== ========== ========== ===========
Net assets at end of year (000's) ........ $ 87,141 $ 89,708 $ 96,962 $ 91,519 $ 101,535
----------- ----------- ---------- ---------- -----------
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 ................. 4.59% 2.69% 2.22% 3.51% 5.90%
- --------------------------------------------------------------------------------------------------------------------
<FN>
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,
- --------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<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..................... 0.053 0.034 0.029 0.040 0.065
----------- ----------- ---------- ---------- -----------
Dividends from net investment income...... (0.053) (0.034) (0.029) (0.040) (0.065)
----------- ----------- ---------- ---------- -----------
Net asset value at end of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== ========== ========== ===========
Total return.............................. 5.42% 3.43% 2.96% 4.08% 6.61%
=========== =========== ========== ========== ===========
Net assets at end of year (000's) ........ $ 36,009 $ 41,769 $ 34,610 $ 43,432 $ 62,313
=========== =========== ========== ========== ===========
Ratio of expenses to average net assets(A) 0.40% 0.40% 0.40% 0.37% 0.35%
Ratio of net investment income
to average net assets ................. 5.30% 3.41% 2.92% 4.04% 6.50%
- ---------------------------------------------------------------------------------------------------------------------
<FN>
(A)Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 0.42%, 0.42%, 0.48%, 0.43% and 0.36% for the years
ended September 30, 1995, 1994, 1993, 1992 and 1991, respectively (Note 3).
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,
- ----------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year...... $ 10.14 $ 11.59 $ 11.10 $ 10.45 $ 9.85
----------- ----------- ---------- ---------- -----------
Income from investment operations:
Net investment income.................. 0.64 0.56 0.60 0.68 0.75
Net realized and unrealized gains (losses)
on investments....................... 0.59 (1.32) 0.49 0.65 0.60
----------- ----------- ---------- ---------- -----------
Total from investment operations.......... 1.23 (0.76) 1.09 1.33 1.35
----------- ----------- ---------- ---------- -----------
Less distributions:
Dividends from net investment income... (0.64) (0.56) (0.60) (0.68) (0.75)
Distributions from net realized gains.. -- (0.13) -- -- --
----------- ----------- ---------- ---------- -----------
Total distributions....................... (0.64) (0.69) (0.60) (0.68) (0.75)
----------- ----------- ---------- ---------- -----------
Net asset value at end of year............ $ 10.73 $ 10.14 $ 11.59 $ 11.10 $ 10.45
=========== =========== ========== ========== ===========
Total return(A) .......................... 12.52% (6.76%) 10.15% 13.27% 14.19%
=========== =========== ========== ========== ===========
Net assets at end of year (000's)......... $ 56,969 $ 64,395 $ 89,666 $ 59,290 $ 40,896
=========== =========== ========== ========== ===========
Ratio of expenses to average net assets... 0.99% 0.99% 0.99% 1.00% 1.00%
Ratio of net investment income
to average net assets.................. 6.17% 5.17% 5.31% 6.40% 7.39%
Portfolio turnover rate................... 58% 236% 255% 76% 74%
- ---------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales loads.
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 Period
Ended Ended
Sept. 30, Sept. 30,
1995 1994(A)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period.................................... $ 10.14 $ 11.27
--------------- ---------------
Income from investment operations:
Net investment income.................................................. 0.59 0.34
Net realized and unrealized gains (losses) on investments.............. 0.59 (1.13)
--------------- ---------------
Total from investment operations.......................................... 1.18 (0.79)
--------------- ---------------
Less distributions:
Dividends from net investment income................................... (0.59) (0.34)
--------------- ---------------
Total distributions....................................................... (0.59) (0.34)
--------------- ---------------
Net asset value at end of period.......................................... $ 10.73 $ 10.14
=============== ===============
Total return(B).......................................................... 11.96% (10.38%)(D)
=============== ===============
Net assets at end of period (000's)....................................... $ 598 $ 508
=============== ===============
Ratio of expenses to average net assets (C ).............................. 1.48% 1.46%(D)
Ratio of net investment income to average net assets...................... 5.60% 4.89%(D)
Portfolio turnover rate................................................... 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 3.57% and 2.41% (D) for the
periods ended September 30, 1995 and 1994, respectively (Note 3).
(D)Annualized.
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 Period
Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30,
1995 1994 1993(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period ................... $ 9.82 $ 10.01 $ 10.00
--------------- --------------- ---------------
Income from investment operations:
Net investment income ................................. 0.55 0.39 0.28
Net realized and unrealized gains (losses) on investments (0.04) (0.18) 0.01
--------------- --------------- ---------------
Total from investment operations ......................... 0.51 0.21 0.29
--------------- --------------- ---------------
Less distributions:
Dividends from net investment income................... (0.55) (0.39) (0.28)
Distributions from net realized gains.................. -- (0.01) --
--------------- --------------- ---------------
Total distributions ...................................... (0.55) (0.40) (0.28)
--------------- --------------- ---------------
Net asset value at end of period ......................... $ 9.78 $ 9.82 $ 10.01
=============== =============== ===============
Total return(B) .......................................... 5.33% 2.09% 4.56%(D)
=============== =============== ===============
Net assets at end of period (000's) ...................... $ 20,752 $ 37,572 $ 24,400
=============== =============== ===============
Ratio of expenses to average net assets(C) ............... 0.75% 0.68% 0.22%(D)
Ratio of net investment income to average net assets ..... 5.57% 3.91% 4.17%(D)
Portfolio turnover rate .................................. 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 1.21%, 0.78% and 1.18%(D)
for the periods ended September 30, 1995, 1994 and 1993, respectively (Note
3).
(D)Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
======================================================================================================================
Per Share Datafor a Share Outstanding Throughout The Period
======================================================================================================================
Period
Ended
Sept. 30,
1995(A)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value at beginning of period..................................................... $ 9.76
---------------
Income from investment operations:
Net investment income................................................................... 0.22
Net realized and unrealized gains on investments........................................ 0.02
---------------
Total from investment operations........................................................... 0.24
---------------
Less distributions:
Dividends from net investment income..................................................... (0.22)
---------------
Total distributions........................................................................ (0.22)
---------------
Net asset value at end of period........................................................... $ 9.78
===============
Total return(B)............................................................................ 5.87%(D)
===============
Net assets at end of period (000's)........................................................ $ 86
===============
Ratio of expenses to average net assets(C)................................................. 1.24%(D)
Ratio of net investment income to average net assets....................................... 5.38%(D)
Portfolio turnover rate.................................................................... 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 return shown does 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 18.84%(D) (Note 3).
(D)Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS
For the Period Ended September 30, 1995(A)
===================================================================================================================
Per Share Data for a Share Outstanding Throughout The Period
===================================================================================================================
Class A Class C
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period.................................... $ 10.00 $ 10.00
--------------- ---------------
Income from investment operations:
Net investment income.................................................. 0.35 0.38
Net realized and unrealized gains on investments and foreign currency.. 0.64 0.57
--------------- ---------------
Total from investment operations.......................................... 0.99 0.95
--------------- ---------------
Less distributions:
Dividends from net investment income................................... (0.35) (0.36)
--------------- ---------------
Total distributions....................................................... (0.35) (0.36)
--------------- ---------------
Net asset value at end of period.......................................... $ 10.64 $ 10.59
=============== ===============
Total return(B).......................................................... 14.89%(D) 14.25%(D)
=============== ===============
Net assets at end of period (000's)....................................... $ 13,297 $ 4,518
=============== ===============
Ratio of expenses to average net assets(C)............................... 1.33%(D) 1.98%(D)
Ratio of net investment income to average net assets...................... 4.30%(D) 3.70%(D)
Portfolio turnover rate................................................... 130%(D) 130%(D)
- --------------------------------------------------------------------------------------------------------------------
<FN>
(A)Represents the period from initial public offering of 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 2.47% (D) and 3.45%(D) for
Class A and Class C shares, respectively (Note 3).
(D)Annualized.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
===============================================================================
1. Significant Accounting Policies
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 (formerly Midwest Income Trust) is registered under
the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Global Bond Fund, a non-diversified
series of the Trust, commenced operations on February 1, 1995. 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 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 .35% of average daily
net assets of each Fund) and Class C shares (sold subject to a maximum
contingent deferred sales load of1% 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 an
identical interest 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.
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 are valued at their most recent
bid prices as obtained from one or more of the major market makers for such
securities. The U.S. dollar value of foreign securities and forward
foreign currency contracts in the Global Bond Fund is determined using
spot and forward currency exchange rates, respectively, supplied by a
quotation service.
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. In the event of a bankruptcy or other default of
the seller of a repurchase agreement, a Fund could experience both delays
in liquidating the underlying security and losses. These losses would
equal the face amount of the repurchase agreement and accrued interest,
net of any proceeds received in liquidation of the underlying securities.
To minimize the possibility of loss, 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 the Intermediate Term Government Income
Fund, the Adjustable Rate U.S. Government Securities Fund and the Global
Bond Fund is also calculated daily. Net asset value per share is calculated
for each class of a Fund 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.
<PAGE>
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 and distributions to shareholders -- 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. For 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 daily and paid on the last business day of each month. For the
Global Bond Fund, dividends arising from net investment income are
declared and paid quarterly. With respect to each Fund, net realized
short-term capital gains, if any, may be distributed during the year
and net realized long-term capital gains, if any, are distributed at
least once each year. 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 based upon its proportionate share of
total net assets of the Fund.
Security transactions -- Security transactions are accounted for on the
trade date. Securities sold are valued on a specific identification basis.
Federal income tax -- It is each Fund's policy to comply with the
special provisions of the Internal Revenue Code available to regulated
investment companies. As provided therein, in any fiscal year in which a
Fund so qualifies, and distributes at least 90% of its taxable net
income, the Fund (but not the shareholders) will be relieved of federal
income tax on the income distributed. Accordingly, no provision for income
taxes has been made.
In order to avoid imposition of the excise tax applicable to
regulated investment companies, it is also each Fund's intention to
declare as dividends in each calendar year at least 98% of its net
investment income (earned during the calendar year) and 98% of its net
realized capital gains (earned during the twelve months 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,
1995:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Adjustable
Intermediate Rate U.S.
Term Government Global
Government Securities Bond
Income Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized appreciation............................. $ 2,200,137 $ 152,735 $ 255,065
Gross unrealized depreciation............................. (1,152,452) (3,370) (113,657)
--------------- --------------- ---------------
Net unrealized appreciation. ....................... $ 1,047,685 $ 149,365 $ 141,408
=============== =============== ===============
Federal income tax cost................................... $ 54,591,727 $ 19,417,632 $ 16,418,526
=============== =============== ===============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
As of September 30, 1995, the Institutional Government Income Fund had
capital loss carryforwards for federal income tax purposes of $28,440,
none of which will expire prior to September 30, 2001. As of
September 30, 1995, 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 $2,224,265 and
$1,321,314, respectively, none of which will expire prior to September
30, 2003. The difference between financial reporting and tax cost and
capital loss amounts for the Intermediate Term Government Income Fund and
the Global Bond Fund is due to certain timing differences in recognizing
capital losses under generally accepted accounting principles and tax
rules. These capital loss carryforwards may be utilized in future
years to offset net realized capital gains prior to distributing such
gains to shareholders.
2. Investment Transactions
During the period ended September 30, 1995, purchases and proceeds from
sales and maturities of investment securities, other than short-term
investments, amounted to $32,613,834 and $36,966,943, respectively, for the
Intermediate Term Government Income Fund, $24,893,721 and $42,626,042,
respectively, for the Adjustable Rate U.S. Government Securities Fund
and $22,511,709 and 6,622,851, respectively, for the Global Bond Fund.
3. Transactions with Affiliates
The President of the Trust is the controlling shareholder of Leshner
Financial, Inc., whose subsidiaries include Midwest Group Financial
Services, Inc. (the 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 managed 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 .5% of its respective average daily net assets up to
$50,000,000; .45% of such net assets from $50,000,000 to $150,000,000;
.4% of such net assets from $150,000,000 to $250,000,000; and .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 .2% 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 .7%
of its average daily net assets up to $100,000,000 and .6% of such net
assets in excess of $100,000,000.
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 pays Hanover a fee equal
to an annual rate of .25% of the Fund's average daily net assets up to
$50,000,000; .225% of such net assets from $50,000,000 to $150,000,000;
.2% of such net assets from $150,000,000 to $250,000,000; and .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 Adjustable Rate U.S. Government Securities Fund.
The Adviser provides general investment supervisory services to the Global
Bond Fund. The Fund's investments are managed by Rogge Global Partners,
plc, (Rogge) under the terms of an Investment Advisory Agreement.
Under the Investment Advisory Agreement, the Adviser pays Rogge a fee,
which is computed and accrued daily and paid monthly, at an annual rate
of .35% of the Fund's average daily net assets up to $100,000,000 and
.3% of such net assets in excess of $100,000,000.
States in which shares of the Trust are offered may impose an expense
limitation based upon net assets. The Adviser has agreed to reimburse each
Fund yearly for expenses which exceed the most restrictive applicable
expense limitation of any state. In order to reduce the operating expenses
of the Institutional Government Income Fund, the Adviser voluntarily
waived $8,500 of its advisory fees during the year ended September 30,
1995. In order to reduce the operating expenses of the Intermediate Term
Government Income Fund, the Adviser voluntarily reimbursed the Fund for
$11,362 of Class C expenses during the year ended September 30, 1995. In
order to reduce the operating expenses of the Adjustable Rate U.S.
Government Securities Fund, the Adviser voluntarily waived $103,298 of
its advisory fees and reimbursed the Fund for $4,898 of Class C expenses
during the year ended September 30, 1995. In order to reduce the operating
expenses of the Global Bond Fund, the Adviser voluntarily waived its
entire advisory fee of $41,518 and reimbursed the Fund for $22,707 of
common operating expenses and $6,493 of Class C expenses during the period
ended September 30, 1995.
<PAGE>
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. Under the terms of the
Agreement, MGF receives for its services a fee, payable monthly, 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 from each Fund. The monthly fee, based on current
asset levels, is $3,000 per month for each of the Short Term Government
Income Fund and the Institutional Government Income Fund, $4,250 per
month for each of the Intermediate Term Government Income Fund and the
Adjustable Rate U.S. Government Securities Fund, and $4,750 per month for
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 $5,350, $2,338 and $2,776 from underwriting and broker
commissions on sales of 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, 1995.
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 .10% of the Institutional Government Income Fund's average daily
net assets and .35% of each of the other Funds' average daily net assets
attributable to Class A 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.
CAPITAL CONTRIBUTION
During the year ended September 30, 1994, an affiliate purchased a security
from the Institutional Government Income Fund at an amount $105,000 in
excess of the security's fair market value. The Fund recorded a realized
loss on the sale and an offsetting capital contribution from the affiliate.
<PAGE>
4. 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, 1995 and September 30, 1994:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
INTERMEDIATE TERM ADJUSTABLE RATE GLOBAL
GOVERNMENT U.S. GOVERNMENT BOND
INCOME FUND SECURITIES FUND FUND
- ------------------------------------------------------------------------------------------------------------------
Year Year Year Year Period
Ended Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994 1995(A)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A
Shares sold............................... 1,296,111 1,766,194 1,751,161 9,629,743 1,280,982
Shares issued in reinvestment of
distributions to shareholders.......... 297,350 402,072 115,143 155,277 20,956
Shares redeemed........................... (2,637,294) (3,549,832) (3,571,519) (8,395,265) (52,629)
----------- ----------- ---------- ---------- -----------
Net increase (decrease) in
shares outstanding .................... (1,043,833) (1,381,566) (1,705,215) 1,389,755 1,249,309
Shares outstanding, beginning of period... 6,352,767 7,734,333 3,826,810 2,437,055 --
----------- ----------- ---------- ---------- -----------
Shares outstanding, end of period......... 5,308,934 6,352,767 2,121,595 3,826,810 1,249,309
=========== =========== ========== ========== ===========
CLASS C
Shares sold............................... 42,546 73,938 8,783 -- 427,772
Shares issued in reinvestment of
distributions to shareholders.......... 2,836 1,160 154 -- 1,259
Shares redeemed........................... (39,738) (24,969) (103) -- (2,192)
----------- ----------- ---------- ---------- -----------
Net increase in shares outstanding........ 5,644 50,129 8,834 -- 426,839
Shares outstanding, beginning of period... 50,129 -- -- -- --
----------- ----------- ---------- ---------- -----------
Shares outstanding, end of period......... 55,773 50,129 8,834 -- 426,839
=========== =========== ========== ========== ===========
- ---------------------------------------------------------------------------------------------------------------------
<FN>
(A)Represents the period from the initial public offering of shares
(February 1, 1995) through September 30, 1995.
</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.
5. Foreign Currency Translation
Amounts denominated in or expected to settle in foreign currencies
are translated into United States dollars based on exchange rates on the
following basis:
A. The market values of investment securities, other assets and
liabilities are translated at the closing rate of exchange each
day.
B. Purchases and sales of investment securities, income and
expenses are translated at the rate of exchange prevailing on the
respective dates of such transactions.
C. The Fund isolates that portion of the results of operations
resulting from changes in foreign exchange rates on
investments from those resulting from changes in market
prices of securities held. Reported net realized foreign exchange
gains or losses arise from 1) sales of foreign securities, 2)
sales of foreign currencies, 3) currency gains or losses
realized between the trade and settlement dates
on securities transactions, and 4) the difference between the
amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books, and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets
and liabilities, including investment securities, resulting from
changes in exchange rates.
<PAGE>
6. 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 inabilitiy 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, 1995, 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> <C> <C>
CONTRACTS TO SELL
10/27/95 (3,922,800) DEM $(2,693,767) $ (2,754,456) $ (60,689)
============ ------------- ------------- --------------
10/27/95 (300,000) FRF $ (61,149) $ (60,908) $ 241
============ ------------- ------------- --------------
10/27/95 (1,161,755) NLG $ (700,000) $ (728,962) $ (28,962)
============ ------------- ------------- --------------
TOTAL SELL CONTRACTS $(3,454,916) $ (3,544,326) $ (89,410)
------------- ------------- --------------
CONTRACTS TO BUY
10/27/95 87,131 DEM $ 61,149 $ 61,180 $ 31
============ ------------- ------------- --------------
10/27/95 152,643,400 JPY $ 1,523,767 $ 1,541,167 $ 17,400
============ ------------- ------------- --------------
TOTAL BUY CONTRACTS $ 1,584,916 $ 1,602,347 $ 17,431
------------- ------------- --------------
NET CONTRACTS $(1,870,000) $ (1,941,979) $ (71,979)
============= ============= ==============
- -------------------------------------------------------------------------------------------------------------------
<FN>
FRF-Franch Franc
DEM-German Mark
JPY-Japanese Yen
NLG-Netherlands Guilder
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1995
====================================================================================================================
Par Yield To Market
Value U.S. TREASURY OBLIGATIONS-- 53.6% Maturity(1) Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 4,000,000 U.S. Treasury Bills, 10/05/95................................... 6.128% $ 3,997,393
3,000,000 U.S. Treasury Bills, 10/19/95................................... 5.602% 2,991,870
5,000,000 U.S. Treasury Bills, 11/02/95................................... 5.592% 4,975,822
5,000,000 U.S. Treasury Notes, 9.50%, 11/15/95............................ 5.549% 5,023,203
5,000,000 U.S. Treasury Notes, 8.50%, 11/15/95............................ 5.561% 5,017,040
5,000,000 U.S. Treasury Bills, 11/16/95.................................. 5.585% 4,965,372
5,000,000 U.S. Treasury Bills, 11/24/95.................................. 5.617% 4,959,463
5,000,000 U.S. Treasury Bills, 2/22/96................................... 5.672% 4,891,200
5,000,000 U.S. Treasury Notes, 7.50%, 2/29/96............................. 5.557% 5,038,972
5,000,000 U.S. Treasury Bills, 3/28/96................................... 5.574% 4,866,993
- -------------- -------------
$ 47,000,000 TOTAL U.S. TREASURY OBLIGATIONS
============== (Amortized Cost $46,727,328).................................. $46,727,328
-------------
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================================================
Face Market
Amount REPURCHASE AGREEMENTS(2)-- 45.1% Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,277,000 Nesbitt Burns Securities, Inc., 5.60%, dated 9/29/95, due 10/02/95,
repurchase proceeds $2,278,063............................................... $ 2,277,000
6,100,000 Daiwa Securities America, Inc., 6.25%, dated 9/29/95, due 10/02/95,
repurchase proceeds $6,103,177............................................... 6,100,000
13,100,000 Fuji Securities, Inc., 6.35%, dated 9/29/95, due 10/02/95,
repurchase proceeds $13,106,932.............................................. 13,100,000
8,900,000 Prudential Bache Securities, Inc., 5.65%, dated 9/21/95, due 10/05/95,
repurchase proceeds $8,919,555............................................... 8,900,000
8,900,000 Prudential Bache Securities, Inc., 5.73%, dated 9/28/95, due 10/12/95,
repurchase proceeds $8,919,832............................................... 8,900,000
- -------------- -------------
$ 39,277,000 TOTAL REPURCHASE AGREEMENTS................................................... $ 39,277,000
============== -------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE--98.7% .................. $ 86,004,328
OTHER ASSETS AND LIABILITIES, NET--1.3%....................................... 1,136,808
-------------
NET ASSETS--100.0%............................................................. $87,141,136
-------------
<FN>
(1)Yield to maturity at date of purchase.
(2)Repurchase agreements are fully collateralized by U.S. Government obligations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1995
=================================================================================================================
Par Yield To Market
Value U.S. GOVERNMENT AGENCY ISSUES-- 82.8% Maturity(1) Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,000,000 Federal Home Loan Bank Discount Notes,10/5/95.................... 6.225% $ 1,998,676
2,000,000 Federal Agricultural Mortgage Corporation Discount Notes, 10/6/95. 5.707% 1,998,439
3,000,000 Federal National Mortgage Assoc. Discount Notes, 10/11/95......... 5.759% 2,995,292
3,000,000 Federal Home Loan Mortgage Corportion Discount Notes, 10/16/95.... 5.733% 2,992,962
2,000,000 Tennessee Valley Authority Discount Notes , 11/2/95............... 5.799% 1,989,956
2,000,000 Federal National Mortgage Assoc. Discount Notes, 11/3/95.......... 5.712% 1,989,733
3,000,000 Federal National Mortgage Assoc. Discount Notes, 11/6/95.......... 5.744% 2,983,260
3,000,000 Federal National Mortgage Assoc. Discount Notes, 11/8/95.......... 5.751% 2,982,298
3,000,000 Federal National Mortgage Assoc. Discount Notes, 11/22/95......... 5.736% 2,975,907
2,000,000 Federal Home Loan Bank Discount Notes, 2/2/96..................... 5.658% 1,962,387
2,000,000 Federal National Mortgage Assoc. Discount Notes, 2/20/96.......... 5.663% 1,957,005
3,000,000 Federal Home Loan Bank Notes, 5.90%, 8/29/96...................... 5.900% 3,000,000
- -------------- ------------
$ 30,000,000 TOTAL U.S. GOVERNMENT AGENCY ISSUES
============== (Amortized Cost $29,825,915).................................. $29,825,915
------------
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================
Face Market
Amount REPURCHASE AGREEMENTS(2)-- 17.2% Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,000,000 Fuji Securities, Inc., 6.35%, dated 9/29/95, due 10/2/95,
repurchase proceeds $5,002,646............................................... $5,000,000
1,198,000 Nesbitt Burns Securities, Inc., 5.60%, dated 9/29/95, due 10/2/95,
repurchase proceeds $1,198,559............................................... 1,198,000
- -------------- -------------
$ 6,198,000 TOTAL REPURCHASE AGREEMENTS................................................... $ 6,198,000
============== -------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 100.0% ................ $ 36,023,915
OTHER ASSETS AND LIABILITIES, NET-- 0.0%...................................... (15,285)
-------------
NET ASSETS-- 100.0%........................................................... $ 36,008,630
=============
<FN>
(1)Yield to maturity at date of purchase.
(2)Repurchase agreements are fully collateralized by U.S. Government obligations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
September 30, 1995
================================================================================================================
Par Market
Value INVESTMENTS -- 96.7% Value
- ----------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 23.9%
<S> <C> <C> <C>
$ 1,000,000 U.S. Treasury Notes, 7.875%, 11/15/99.......................................... $ 1,067,500
1,000,000 U.S. Treasury Notes, 8.50%, 11/15/00........................................... 1,106,250
1,000,000 U.S. Treasury Notes, 7.75%, 2/15/01............................................ 1,076,875
1,000,000 U.S. Treasury Notes, 8.00%, 5/15/01............................................ 1,090,625
3,000,000 U.S. Treasury Notes, 7.875%, 8/15/01........................................... 3,267,186
2,000,000 U.S. Treasury Notes, 7.50%, 11/15/01........................................... 2,143,123
3,000,000 U.S. Treasury Notes, 5.75%, 8/15/03............................................ 2,918,436
1,000,000 U.S. Treasury Bonds, 8.25%, 5/15/05............................................ 1,082,500
- -------------- -------------
$ 13,000,000 TOTAL U.S. TREASURY OBLIGATIONS
- -------------- (Amortized Cost $13,175,371)................................................ $13,752,495
-------------
U.S. GOVERNMENT AGENCY ISSUES -- 72.8%
$ 3,000,000 Federal Home Loan Bank Notes, 8.45%, 7/26/99................................... $ 3,231,134
3,000,000 Federal Home Loan Bank Notes, 8.375%, 10/25/99................................. 3,239,967
2,000,000 Federal Home Loan Bank Notes, 7.87%, 4/19/00................................... 2,021,244
4,000,000 Federal Home Loan Bank Notes, 7.25%, 8/9/00.................................... 4,009,496
2,000,000 Federal Home Loan Mortgage Corp. Notes, 7.265%, 6/22/01........................ 2,048,822
1,000,000 Student Loan Marketing Assoc. Medium Term Notes, 7.50%, 7/2/01................. 1,058,550
3,000,000 Federal Home Loan Bank Notes, 7.31%, 7/6/01.................................... 3,135,263
3,000,000 Federal Home Loan Bank Medium Term Notes, 8.43%, 8/1/01........................ 3,310,830
1,410,000 Federal National Mortgage Assoc. Strips, 3/9/02................................ 1,288,308
2,000,000 Federal National Mortgage Assoc. Notes, 7.55%, 4/22/02......................... 2,120,372
1,000,000 Federal National Mortgage Assoc. Notes, 7.00%, 8/12/02......................... 1,004,192
1,000,000 Federal Home Loan Mortgage Corp. Notes, 7.23%, 12/17/02........................ 1,022,326
1,000,000 Federal National Mortgage Assoc. Medium Term Notes, 6.72%, 2/25/03............. 980,000
1,000,000 Federal Home Loan Mortgage Corp. Notes, 6.60%, 3/25/03......................... 990,705
1,000,000 Federal National Mortgage Assoc. Notes, 6.90%, 3/10/04......................... 1,000,000
2,000,000 Federal Home Loan Mortgage Corp. Notes, 7.05%, 3/24/04......................... 2,022,794
2,000,000 Federal Home Loan Mortgage Corp. Notes, 8.53%, 11/18/04........................ 2,146,176
1,000,000 Federal National Mortgage Assoc. Notes, 8.00%, 4/13/05......................... 1,042,240
1,000,000 Federal Home Loan Mortgage Corp. Notes, 7.65%, 5/10/05......................... 1,036,613
2,000,000 Federal Farm Credit Bank Medium Term Notes, 6.74%, 2/25/08..................... 1,960,400
3,000,000 Federal Home Loan Mortgage Corp. Notes, 8.57%, 10/26/09........................ 3,217,485
- -------------- -------------
$ 40,410,000 TOTAL U.S. GOVERNMENT AGENCY ISSUES
- -------------- (Amortized Cost $40,445,623)................................................ $41,886,917
-------------
$ 53,410,000 TOTAL INVESTMENTS AT VALUE
============== (Amortized Cost $53,620,994).................................................$55,639,412
-------------
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================
Face Market
Amount REPURCHASE AGREEMENTS(1)-- 1.7% Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 981,000 Nesbitt Burns Securities, Inc., 5.60%, dated 9/29/95, due 10/2/95,
repurchase proceeds $981,458................................................ $ 981,000
- -------------- -------------
$ 981,000 TOTAL REPURCHASE AGREEMENTS................................................... $ 981,000
============== -------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 98.4% ................. $ 56,620,412
OTHER ASSETS AND LIABILITIES, NET-- 1.6%...................................... 946,624
-------------
NET ASSETS-- 100.0% .......................................................... $ 57,567,036
=============
<FN>
(1)Repurchase agreements are fully collateralized by U.S.
Government obligations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
September 30, 1995
===================================================================================================================
Par Market
Value ADJUSTABLE RATE U.S. GOVERNMENT AGENCY ISSUES(1)--93.9% Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,703,115 Federal National Mortgage Assoc. #70907, 7.65%, 3/1/18......................... $ 1,754,769
1,647,572 Federal Home Loan Mortgage Corp. #605793, 7.29%, 5/1/18........................ 1,671,248
3,112,584 Federal National Mortgage Assoc. #70010, 7.39%, 6/1/18......................... 3,176,822
3,700,274 Federal National Mortgage Assoc. #70614, 7.49%, 10/1/18........................ 3,779,297
2,620,148 Federal Home Loan Mortgage Corp. #846013, 7.83%, 6/2/22........................ 2,704,550
98,256 Government National Mortgage Assoc. #8182, 7.37%,4/20/23....................... 100,467
3,603,466 Federal Home Loan Mortgage Corp. #846071, 7.36%, 2/1/25........................ 3,711,451
2,603,344 Federal National Mortgage Assoc. #70243, 7.30%, 3/1/28......................... 2,668,393
- -------------- -------------
$ 19,088,759 TOTAL ADJUSTABLE RATE U.S. GOVERNMENT AGENCY ISSUES
============== (Amortized Cost $19,417,632)................................................. $19,566,997
-------------
</TABLE>
<TABLE>
<CAPTION>
==================================================================================================================
Face Market
Amount REPURCHASE AGREEMENTS(2)-- 4.9% Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,024,000 Nesbitt Burns Securities, Inc., 5.60%, dated 9/29/95, due 10/2/95,
repurchase proceeds $1,024,478.............................................. $ 1,024,000
- -------------- -------------
$ 1,024,000 TOTAL REPURCHASE AGREEMENTS................................................... $ 1,024,000
============== -------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 98.8% ................. $ 20,590,997
OTHER ASSETS AND LIABILITIES, NET-- 1.2%...................................... 247,722
-------------
NET ASSETS-- 100.0%........................................................... $ 20,838,719
=============
<FN>
(1)Rates shown are as of September 30, 1995.
(2)Repurchase agreements are fully collateralized by U.S.
Government obligations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1995
===================================================================================================================
Par Market
Value INVESTMENTS -- 90.5% Value
- -------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 17.9%
<S> <C> <C> <C>
USD 2,795,000 U.S. Treasury Notes, 6.50%, 8/15/05...................................... $ 2,863,128
USD 315,000 U.S. Treasury Bonds, 6.875%, 8/15/25..................................... 331,045
-------------
TOTAL U.S. TREASURY OBLIGATIONS ........................................ $ 3,194,173
(Amortized Cost $3,178,020) -------------
GLOBAL BOND ISSUES -- 10.2%
USD 1,000,000 Asian Development Bank, 6.125%, 3/9/04................................... $ 972,500
JPY 72,000,000 International Bank For Reconstruction and Development, 4.75%, 12/20/04... 844,348
-------------
TOTAL GLOBAL BOND ISSUES................................................ $ 1,816,848
(Amortized Cost $1,861,533) -------------
FOREIGN GOVERNMENT ISSUES -- 62.4%
DKK 1,682,000 Government of Denmark, 8.00%, 3/15/06.................................... $ 302,135
-------------
FRF 720,000 Government of France, 7.75%, 4/12/00..................................... 151,708
FRF 3,170,000 Government of France, 7.75%, 10/25/05.................................... 656,060
-------------
807,768
-------------
ITL 790,000 Government of Italy, 9.50%, 1/1/05...................................... 428,801
ITL 2,245,000,000 Government of Italy, 10.50%, 4/1/05..................................... 1,312,451
-------------
1,741,252
-------------
JPY 20,000,000 Republic of Austria, 4.50%, 9/28/05...................................... 229,346
-------------
DEM 575,000 Federal Republic of Germany, 6.50%, 3/15/00............................. 418,961
DEM 1,400,000 Federal Republic of Germany, 7.50%, 11/11/04............................ 1,036,313
DEM 550,000 Federal Republic of Germany, 7.375%, 1/3/05............................. 404,031
DEM 4,881,000 Federal Republic of Germany, 6.875%, 5/12/05............................ 3,481,656
-------------
5,340,961
-------------
GBP 858,000 U.K. Gilt, 8.50%, 12/7/05................................................ 1,392,329
-------------
NLG 620,000 Government of Netherlands, 6.25%, 7/15/98............................... 401,485
NLG 1,369,000 Government of Netherlands, 7.50%, 4/15/10............................... 895,529
-------------
1,297,014
-------------
TOTAL FOREIGN GOVERNMENT ISSUES ........................................ $ 11,110,805
(Amortized Cost $10,918,400) -------------
TOTAL INVESTMENTS AT VALUE ............................................. $ 16,121,826
(Amortized Cost $15,957,953) -------------
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================================
Face Market
Amount TIME DEPOSITS-- 2.5% Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JPY 43,219,352 Japanese Yen Time Deposit, .375%, 10/4/95................................ $ 438,108
-------------
TOTAL TIME DEPOSITS
(Amortized Cost $438,108)............................................. $ 438,108
-------------
TOTAL INVESTMENTS AND TIME DEPOSITS AT VALUE -- 93.0% ................... $ 16,559,934
OTHER ASSETS AND LIABILITIES, NET-- 7.0%................................ 1,255,110
-------------
NET ASSETS-- 100.0%..................................................... $ 17,815,044
=============
<FN>
DKK-Danish Krone
FRF-French Franc
ITL-Italian Lira
JPY-Japanese Yen
DEM-German Mark
GBP-British Pound Sterling
NLG-Netherlands Guilder
USD-U.S. Dollar
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Report of Independent Public Accountants
================================================================================
To the Shareholders and Board of Trustees 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:
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, 1995, 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, 1995, by
correspondence with the custodian 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, 1995, 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.
Cincinnati, Ohio,
November 13, 1995
<PAGE>
Appendix
A representation of the graphic material contained in the Midwest
Trust Annual Report is set forth below.
1. Comparison of Change in Value of $10,000 Investment in the
Intermediate Term Government Income Fund* and the Lehman
Brothers Intermediate Government Bond Index.
LB INTERMEDIATE GOVT BOND INDEX: INTERMED TERM GOVT INCOME FUND:
- ------------------------------- ------------------------------
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
09/30/85 10,000 09/30/85 9,800
12/31/85 5.71% 10,571 12/31/85 4.94% 10,284
03/31/86 5.78% 11,182 03/31/86 4.94% 10,793
06/30/86 1.76% 11,379 06/30/86 1.27% 10,929
09/30/86 2.48% 11,661 09/30/86 2.32% 11,183
12/31/86 2.49% 11,951 12/31/86 2.35% 11,446
03/31/87 1.18% 12,092 03/31/87 0.84% 11,541
06/30/87 -0.83% 11,992 06/30/87 -1.32% 11,389
09/30/87 -1.29% 11,837 09/30/87 -1.17% 11,256
12/31/87 4.60% 12,382 12/31/87 3.91% 11,696
03/31/88 3.13% 12,769 03/31/88 2.50% 11,989
06/30/88 0.97% 12,893 06/30/88 0.47% 12,046
09/30/88 1.56% 13,094 09/30/88 1.64% 12,244
12/31/88 0.60% 13,173 12/31/88 0.27% 12,276
03/31/89 1.04% 13,310 03/31/89 1.05% 12,405
06/30/89 6.64% 14,194 06/30/89 5.40% 13,075
09/30/89 1.13% 14,354 09/30/89 0.93% 13,197
12/31/89 3.41% 14,844 12/31/89 2.88% 13,578
03/31/90 -0.14% 14,823 03/31/90 -1.32% 13,398
06/30/90 3.14% 15,288 06/30/90 2.77% 13,770
09/30/90 1.94% 15,585 09/30/90 0.93% 13,898
12/31/90 4.34% 16,261 12/31/90 4.51% 14,525
03/31/91 2.20% 16,619 03/31/91 1.93% 14,805
06/30/91 1.69% 16,900 06/30/91 1.25% 14,990
09/30/91 4.75% 17,703 09/30/91 5.87% 15,870
12/31/91 4.82% 18,556 12/31/91 5.33% 16,717
03/31/92 -1.05% 18,361 03/31/92 -2.24% 16,342
06/30/92 3.88% 19,073 06/30/92 4.25% 17,037
09/30/92 4.38% 19,909 09/30/92 5.51% 17,977
12/31/92 -0.34% 19,841 12/31/92 -0.87% 17,820
03/31/93 3.74% 20,583 03/31/93 5.09% 18,727
06/30/93 1.96% 20,987 06/30/93 2.76% 19,243
09/30/93 2.11% 21,429 09/30/93 2.90% 19,802
12/31/93 0.15% 21,462 12/31/93 -0.71% 19,660
03/31/94 -1.85% 21,065 03/31/94 -4.07% 18,861
06/30/94 -0.56% 20,947 06/30/94 -1.88% 18,507
09/30/94 0.77% 21,108 09/30/94 -0.24% 18,463
12/31/94 -0.10% 21,087 12/31/94 -0.23% 18,421
03/31/95 4.16% 21,964 03/31/95 5.14% 19,367
06/30/95 4.67% 22,990 06/30/95 5.95% 20,520
09/30/95 1.55% 23,346 09/30/95 1.24% 20,774
*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 sales loads and fees paid by shareholders in
the different classes. Fund inception was February 6, 1981, and
the initial public offering of Class C shares commenced on
February 1, 1994.
Past performance is not predictive of future performance.
Intermediate Term Government Income Fund
Average Annual Total Returns
1 Year 5 Years 10 Years Since Inception
Class A 10.27% 7.93% 7.59% 9.04%
Class C 11.96% N/A N/A 2.45%
2. Comparison of Change in Value of $10,000 Investment in the
Adjustable Rate U.S. Government Securities Fund* and the
Lehman Brothers ARM Index.
LEHMAN BROTHERS ARM INDEX: ADJ RATE U.S. GOVT SECURITIES FUND:
- ------------------------- ----------------------------------
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
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
*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 sales loads and fees paid by shareholders in
the different classes. Fund inception was February 10, 1993, and
the initial public offering of Class C shares commenced on May 2,
1995.
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 3.23% 3.12%
Class C N/A 3.49%
3. Comparison of Change in Value of $10,000 Investment in the
Global Bond Fund* and the Salomon Brothers World Government
Bond Index.
SALOMON BROTHERS WORLD GLOBAL BOND FUND:
GOVERNMENT BOND INDEX: ----------------
- ----------------------
MONTHLY MONTHLY
DATE RETURN BALANCE DATE RETURN BALANCE
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
*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 sales 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.
Past performance is not predictive of future performance.
Global Bond Fund - Average Annual Total Returns
Since Inception
Class A 8.26%
Class C 12.75%
MIDWEST TRUST
PART C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) (i) Financial Statements included in Part A:
Financial Highlights
(ii) Financial Statements included in Part B:
Portfolio of Investments, September 30, 1995
Statements of Assets and Liabilities, September 30, 1995
Statements of Operations for the Year Ended September 30,
1995
Statements of Changes in Net Assets for the Years Ended
September 30, 1995 and 1994
Financial Highlights
Notes to Financial Statements, September 30, 1995
(b) Exhibits:
(1) (i) Copy of Registrant's Restated Agreement and Declaration
of Trust, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 58, is hereby incorporated
by reference.
(ii) Copy of Amendment No. 1, dated December 8, 1994, to
Registrant's Restated Agreement and Declaration of Trust,
which was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 60, is hereby incorporated by
reference.
(iii) Copy of Amendment No. 2, dated January 31, 1995, to
Registrant's Restated Agreement and Declaration of Trust,
which was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 61, is hereby incorporated by
reference.
(2) (i) Copy of Registrant's Bylaws, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 26,
is hereby incorporated by reference.
(ii) Copy of Amendment to Registrant's Bylaws adopted on
January 10, 1984, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 35, is hereby
incorporated by reference.
(3) Voting Trust Agreements - None.
(4) Specimen of Share Certificate, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 38, is hereby
incorporated by reference.
(5) (i) Copy of Registrant's Management Agreement with Midwest
Group Financial Services, Inc. for the Short Term
Government Income Fund and the Intermediate Term
Government Income Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 62, is hereby
incorporated by reference.
(ii) Copy of Registrant's Management Agreement with Midwest
Group Financial Services, Inc. for the Institutional
Government Income Fund, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 62, is hereby
incorporated by reference.
(iii) Copy of Registrant's Management Agreement with Midwest
Group Financial Services, Inc. for the Adjustable Rate
U.S. Government Securities Fund, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 62,
is hereby incorporated by reference.
(iv) Copy of Subadvisory Agreement between Midwest Group
Financial Services, Inc. and Hanover Capital Advisors
Inc. for the Adjustable Rate U.S. Government Securities
Fund, which was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 62, is hereby incorporated by
reference.
(v) Copy of Registrant's Management Agreement with Midwest
Group Financial Services, Inc. for the Global Bond Fund,
which was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 61, is hereby incorporated by
reference.
(vi) Copy of Advisory Agreement between Midwest Group
Financial Services, Inc. and Rogge Global Partners, plc
for the Global Bond Fund, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 61, is
hereby incorporated by reference.
(6) (i) Copy of Registrant's Underwriting Agreement with Midwest
Group Financial Services, Inc. is filed herewith.
(ii) Form of Underwriter's Dealer Agreement is filed herewith.
(7) Bonus, Profit Sharing, Pension or Similar Contracts for the
benefit of Directors or Officers - None.
(8) (i) Copy of Custody Agreement with The Fifth Third Bank, the
custodian for the Short Term Government Income Fund, the
Intermediate Term Government Income Fund, the
Institutional Government Income Fund and the Adjustable
Rate U.S. Government Securities Fund, which was filed as
an Exhibit to Registrant's Post-Effective Amendment No.
49, is hereby incorporated by reference.
(ii) Copy of Custody Agreement with The Northern Trust
Company, the custodian for the Global Bond Fund, which
was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 61, is hereby incorporated by reference.
(9) (i) Copy of Transfer Agency, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with MGF Service Corp.,
which was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 61, is hereby incorporated by
reference.
(ii) Copy of Accounting and Pricing Services Agreement with
MGF Service Corp. is filed herewith.
(iii) Copy of Administration Agreement between Midwest Group
Financial Services, Inc. (formerly Midwest Advisory
Services, Inc.) and MGF Service Corp. is filed herewith.
(10) Opinion and Consent of Goodwin, Procter & Hoar, which was
filed with Registrant's Rule 24f-2 Notice for the fiscal year
ended September 30, 1995, is hereby incorporated by reference.
(11) Consent of Arthur Andersen LLP is filed herewith.
(12) Financial Statements Omitted from Item 23 - None.
(13) Agreements or understandings concerning initial capital -
None.
(14) (i) Copy of the Midwest Group Individual Retirement Account
Plan, including Schedule of Fees, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 45,
is hereby incorporated by reference.
(ii) Copy of the Midwest Group 403(b) Plan, including Schedule
of Fees, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 49, is hereby incorporated
by reference.
(iii) Copy of the Midwest Group Prototype Defined Contribution
Plan, which was filed as an Exhibit to Post-Effective
Amendment No. 4 of Leeb Personal FinanceTM Investment
Trust (File No. 811-6374), is hereby incorporated by
reference.
(15) (i) Copy of Registrant's Plans of Distribution, which were
filed as an Exhibit to Post-Effective Amendment No. 58,
is hereby incorporated by reference.
(ii) Form of Sales Agreement for Sales of No-Load Mutual
Funds, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 61, is hereby incorporated
by reference.
(iii) Form of Administration Agreement with respect to the
administration of shareholder accounts is filed herewith.
(16) Computations of each performance quotation provided in
response to Item 22, which were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 43, are hereby
incorporated by reference.
(17) Financial Data Schedules
(i) Financial Data Schedule for Short Term Government Income
Fund is filed herewith.
(ii) Financial Data Schedule for Intermediate Term Government
Income Fund - Class A is filed herewith.
(iii) Financial Data Schedule for Intermediate Term Government
Income Fund - Class C is filed herewith.
(iv) Financial Data Schedule for Institutional Government
Income Fund is filed herewith.
(v) Financial Data Schedule for Adjustable Rate U.S.
Government Securities Fund - Class A is filed herewith.
(vi) Financial Data Schedule for Adjustable Rate U.S.
Government Securities Fund - Class C is filed herewith.
(vii) Financial Data Schedule for Global Bond Fund - Class A is
filed herewith.
(viii) Financial Data Schedule for Global Bond Fund - Class C is
filed herewith.
(18) Rule 18f-3 Plan Adopted With Respect to the Multiple Class
Distribution System of the Midwest Group of Funds is filed
herewith.
Item 25. Persons Controlled by or Under Common Control with the
- ------- ------------------------------------------------------
Registrant
----------
None.
Item 26. Number of Holders of Securities (as of December 5, 1995)
- ------- -------------------------------------------------------
Title of Class Number of
-------------- Record
Holders
----------
Short Term Government Income Fund 5,919
Intermediate Term Government
Income Fund
Class A Shares 2,349
Class C Shares 50
Institutional Government Income Fund 209
Adjustable Rate U.S. Government
Securities Fund
Class A Shares 594
Class C Shares 11
Global Bond Fund
Class A Shares 323
Class C Shares 123
Item 27. Indemnification
- ------- ---------------
Article VI of Registrant's Restated Agreement and Declaration of
Trust provides for indemnification of officers and Trustees as
follows:
"Section 6.4 Indemnification of Trustees,
----------- ---------------------------
Officers, etc. The Trust shall indemnify each of its
-------------
Trustees and officers (including persons who serve at the Trust's
request as directors, officers or trustees of another organization
in which the Trust has any interest as a shareholder, creditor or
otherwise, and including persons who served as directors or
officers of Midwest Income Investment Company) (hereinafter
referred to as a "Covered Person") against all liabilities,
including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before
any court or administrative or legislative body, in which such
Covered Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, and
except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office ("disabling
conduct"). Anything herein contained to the contrary
notwithstanding, no Covered Person shall be indemnified for any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject unless (1) a final decision on
the merits is made by a court or other body before whom the
proceeding was brought that the Covered Person to be indemnified
was not liable by reason of disabling conduct or, (2) in the
absence of such a decision, a reasonable determination is made,
based upon a review of the facts, that the Covered Person was not
liable by reason of disabling conduct, by (a) the vote of a
majority of a quorum of Trustees who are neither "interested
persons" of the Company as defined in the Investment Company Act of
1940 nor parties to the proceeding ("disinterested, non-party
Trustees"), or (b) an independent legal counsel in a written
opinion.
Section 6.5 Advances of Expenses. The Trust
----------- --------------------
shall advance attorneys' fees or other expenses incurred by a
Covered Person in defending a proceeding, upon the undertaking by
or on behalf of the Covered Person to repay the advance unless it
is ultimately determined that such Covered Person is entitled to
indemnification, so long as one of the following conditions is met:
(i) the Covered Person shall provide security for his undertaking,
(ii) the Trust shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of a quorum of the
disinterested non-party Trustees of the Trust, or an independent
legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
Section 6.6 Indemnification Not Exclusive, etc. The
----------- -----------------------------------
right of indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Trust" shall
include Midwest Income Investment Company, "Covered Person" shall
include such person's heirs, executors and administrators, an
"interested Covered Person" is one against whom the action, suit or
other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been
pending or threatened, and a "disinterested" person is a person
against whom none of such actions, suits or other proceedings or
another action, suit or other proceeding on the same or similar
grounds is then or has been pending or threatened. Nothing
contained in this article shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person."
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability policy.
The policy provides coverage to the Registrant, its Trustees and
officers and Midwest Group Financial Services, Inc. (the
"Adviser"), in its capacity as investment adviser and principal
underwriter, among others. Coverage under the policy includes
losses by reason of any act, error, omission, misstatement,
misleading statement, neglect or breach of duty. The Registrant
may not pay for insurance which protects the Trustees and officers
against liabilities rising from action involving willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of their offices.
The Advisory Agreements provide that each investment adviser shall
not be liable for any error of judgment or mistake of law or for
any loss suffered by the Registrant in connection with the matters
to which the Agreements relate, except a loss resulting from
willful misfeasance, bad faith or gross negligence of an investment
adviser in the performance of its duties or from the reckless
disregard by the investment adviser of its obligations under the
Agreement. Registrant will advance attorneys' fees or other
expenses incurred by an investment adviser in defending a
proceeding, upon the undertaking by or on behalf of the investment
adviser to repay the advance unless it is ultimately determined
that the investment adviser is entitled to indemnification.
The Underwriting Agreement with the Adviser provides that the
Adviser, its directors, officers, employees, shareholders and
control persons shall not be liable for any error of judgment or
mistake of law or for any loss suffered by Registrant in connection
with the matters to which the Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence
on the part of any of such persons in the performance of the
Adviser's duties or from the reckless disregard by any of such
persons of the Adviser's obligations and duties under the
Agreement. Registrant will advance attorneys' fees or other
expenses incurred by any such person in defending a proceeding,
upon the undertaking by or on behalf of such person to repay the
advance if it is ultimately determined that such person is not
entitled to indemnification.
Item 28. Business and Other Connections of the Investment
- ------- ------------------------------------------------
Advisers
--------
A. Midwest Group Financial Services, Inc. ("MGFS") is a registered
investment adviser providing investment advisory services to the
Short Term Government Income Fund, the Intermediate Term Government
Income Fund, the Institutional Government Income Fund and the
Adjustable Rate U.S. Government Securities Fund and investment
management supervisory services to the Global Bond Fund. MGFS also
acts as the investment adviser to seven series of Midwest Group Tax
Free Trust and to four series of Midwest Strategic Trust, both of
which are registered investment companies. MGFS provides
investment advisory services to individual and institutional
accounts and is a registered broker-dealer.
The following list sets forth the business and other connections
of the directors and officers of MGFS. Unless otherwise noted,
the address of the corporations listed below is 312 Walnut
Street, Cincinnati, Ohio 45202.
(1) Robert H. Leshner - Chairman of the Board and a Director of
MGFS.
(a) President and a Trustee of Midwest Strategic Trust,
Midwest Trust and Midwest Group Tax Free Trust,
registered investment companies.
(b) Chairman of the Board and a Director of Leshner
Financial, Inc., a financial services company.
(c) Chairman of the Board and a Director of MGF Service
Corp., a registered transfer agent.
(d) President and a Director of Leshner Financial Services,
Inc., a registered investment adviser and registered
broker-dealer until December 1994.
(2) Michael F. Andrews - President of MGFS.
(a) President of ABT Financial Services, Inc., 340 Royal Palm
Way, Palm Beach, Florida 33480, until June 1995.
(3) James A. Markley, Jr. - A Director of MGFS.
(a) President and a Director of Leshner Financial, Inc.
(b) A Director of MGF Service Corp.
(c) A Director of Sycamore National Bank, 3209 West Galbraith
Road, Cincinnati, Ohio 45239.
(d) President of MGFS until July 1995.
(e) President of MGF Service Corp. until December 1994.
(f) A Director of Leshner Financial Services, Inc. until
December 1994.
(4) John J. Goetz - Chief Investment Officer of MGFS.
(a) Vice President of Leshner Financial, Inc.
(b) Vice President-Investments of Leshner Financial Services,
Inc. until December 1994.
(5) Maryellen Peretzky - Vice President, Assistant Secretary and a
Director of MGFS.
(a) Vice President and a Director of Leshner Financial, Inc.
(b) Vice President of MGF Service Corp.
(c) Assistant Secretary of The Tuscarora Investment Trust
(d) Vice President and a Director of Leshner Financial
Services, Inc. until December 1994.
(6) Sharon L. Karp - Vice President of MGFS.
(a) Vice President of Leshner Financial, Inc.
(7) John F. Splain - Secretary and General Counsel of MGFS.
(a) Secretary, General Counsel and a Director of Leshner
Financial, Inc.
(b) Secretary and General Counsel of MGF Service Corp.
(c) Secretary of Midwest Group Tax Free Trust, Midwest Trust,
Midwest Strategic Trust, Brundage, Story and Rose
Investment Trust, Leeb Personal FinanceTM Investment
Trust, Williamsburg Investment Trust, Markman MultiFund
Trust and The Tuscarora Investment Trust, registered
investment companies.
(d) Assistant Secretary of Fremont Mutual Funds, Inc. and
Schwartz Investment Trust, registered investment
companies.
(e) Secretary and General Counsel of Leshner Financial
Services, Inc. until December 1994.
(8) Robert G. Dorsey - Treasurer of MGFS.
(a) President of MGF Service Corp.
(b) Treasurer and a Director of Leshner Financial, Inc.
(c) Vice President of Brundage, Story and Rose Investment
Trust, Leeb Personal FinanceTM Investment Trust and
Markman MultiFund Trust.
(d) Assistant Vice President of Williamsburg Investment
Trust, Schwartz Investment Trust, Fremont Mutual Funds,
Inc. and The Tuscarora Investment Trust
(e) Treasurer of Leshner Financial Services, Inc. until
December 1994.
(9) Susan F. Flischel - Vice President-Investments of MGFS.
(a) Assistant Vice President-Investments of Leshner Financial
Services, Inc. until December 1994.
(10) Bruce Chaiken - Assistant Vice President-Investments of MGFS.
(a) Assistant Vice President-Investments of Leshner Financial
Services, Inc. until June 1994.
(11) Michele McClellan Hawkins - Assistant Vice President of MGFS.
(12) Dara Abel - Assistant Portfolio Manager of MGFS.
(13) Scott Weston - Assistant Portfolio Manager of MGFS.
(14) Elizabeth A. Santen - Assistant Secretary of MGFS.
(a) Assistant Secretary of Leshner Financial, Inc.
(b) Assistant Vice President of MGF Service Corp.
(c) Assistant Secretary of Midwest Trust, Midwest Group Tax
Free Trust, Midwest Strategic Trust and The Tuscarora
Investment Trust.
(d) Assistant Secretary of Leshner Financial Services, Inc.
until December 1994.
B. Hanover Capital Advisors Inc. ("Hanover") is a registered
investment advisor providing investment management services to a
number of institutional clients in addition to the Adjustable Rate
U.S. Government Securities Fund. The following officers of Hanover
hold the same position with Hanover Capital Partners Ltd., an
investment banking firm and the parent company of Hanover. The
address of Hanover and Hanover Capital Partners Ltd. is 90 West
Street, Suite 1508, New York, New York 10006.
(1) John A. Burchett - President
(2) George J. Ostendorf - Managing Director
(3) Joyce S. Mizerak - Senior Vice President
(4) Irma N. Tavares - Senior Vice President
C. Rogge Global Partners, plc ("Rogge") is a registered investment
adviser providing investment advisory services to The Managers
Funds, a registered investment company, and other institutional
clients. The following are the directors of Rogge and its U.S.
affiliate, Rogge Global Partners, Inc. The address of Rogge is 5-6
St. Andrew's Hill, London, England EC4V-5BY.
(1) Olaf Rogge
(2) John Graham
(3) Richard Bell
(4) Julie Cochran
Item 29. Principal Underwriters
- ------- ----------------------
(a) Midwest Group Financial Services, Inc. also acts as underwriter for
Midwest Group Tax Free Trust, Midwest Strategic Trust and Brundage,
Story and Rose Investment Trust.
Position With Position With
(b) Name Underwriter Registrant
---- ------------- -------------
Robert H. Leshner Chairman of the President and
Board and Director Trustee
Michael F. Andrews President None
James A. Markley, Director None
Jr.
John J. Goetz Chief Investment None
Officer
Maryellen Peretzky Vice President, None
Assistant Secretary
and Director
Sharon L. Karp Vice President None
John F. Splain Secretary and Secretary
General Counsel
Robert G. Dorsey Treasurer None
Susan F. Flischel Vice President- None
Investments
Bruce Chaiken Assistant Vice None
President-Investments
Michele M. Hawkins Assistant Vice None
President
Dara Abel Assistant Portfolio None
Manager
Scott Weston Assistant Portfolio None
Manager
Elizabeth A. Santen Assistant Secretary Assistant Secretary
The address of all of the above-named persons is 312 Walnut Street,
Cincinnati, Ohio 45202.
Item 30. Location of Accounts and Records
- ------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant.
Item 31. Management Services Not Discussed in Parts A or B
- ------- -------------------------------------------------
None.
Item 32. Undertakings
- ------- ------------
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes that, if so requested, it will
furnish each person to whom a prospectus is delivered with a
copy of Registrant's latest annual report without charge.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of Midwest Trust pursuant to the
provisions of Massachusetts law and the Restated Agreement and
Declaration of Trust of Midwest Trust or the Bylaws of Midwest
Trust, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by
a trustee, officer or controlling person of Midwest Trust in
the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(e) The Registrant undertakes that, within five business days
after receipt of a written application by shareholders holding
in the aggregate at least 1% of the shares then outstanding or
shares then having a net asset value of $25,000, whichever is
less, each of whom shall have been a shareholder for at least
six months prior to the date of application (hereinafter the
"Petitioning Shareholders"), requesting to communicate with
other shareholders with a view to obtaining signatures to a
request for a meeting for the purpose of voting upon removal
of any Trustee of the Registrant, which application shall be
accompanied by a form of communication and request which such
Petitioning Shareholders wish to transmit, Registrant will:
(i) provide such Petitioning Shareholders with access to a
list of the names and addresses of all shareholders of
the Registrant; or
(ii) inform such Petitioning Shareholders of the approximate
number of shareholders and the estimated costs of mailing
such communication, and to undertake such mailing
promptly after tender by such Petitioning Shareholders to
the Registrant of the material to be mailed and the
reasonable expenses of such mailing.
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cincinnati, State of Ohio, on the
1st day of February, 1996.
MIDWEST TRUST
/s/ John F. Splain
By:---------------------------
John F. Splain,
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated.
/s/ Robert H. Leshner
- --------------------- President February 1, 1996
ROBERT H. LESHNER and Trustee
/s/ Mark J. Seger
- --------------------- Treasurer February 1, 1996
MARK J. SEGER
*H. JEROME LERNER Trustee
*OSCAR P. ROBERTSON Trustee
*GARY W. HELDMAN Trustee
*DALE P. BROWN Trustee
*RICHARD A. LIPSEY Trustee
*DONALD J. RAHILLY Trustee
*FRED A. RAPPOPORT Trustee
*ROBERT B. SUMEREL Trustee
By:/s/ John F. Splain
-------------------------
JOHN F. SPLAIN
Attorney-in-Fact*
February 1, 1996
EXHIBIT INDEX
- -------------
1. Underwriting Agreement with Midwest Group
Financial Services, Inc.
2. Underwriter's Dealer Agreement
3. Accounting and Pricing Services Agreement
with MGF Service Corp.
4. Administration Agreement between Midwest
Group Financial Services, Inc. (formerly
Midwest Advisory Services, Inc.) and MGF
Service Corp.
5. Consent of Arthur Andersen LLP
6. Form of Administration Agreement with Respect
to the Administration of Shareholder Accounts
7. Financial Data Schedule for Short Term
Government Income Fund
8. Financial Data Schedule for Intermediate Term
Government Income Fund - Class A
9. Financial Data Schedule for Intermediate Term
Government Income Fund - Class C
10. Financial Data Schedule for Institutional
Government Income Fund
11. Financial Data Schedule for Adjustable Rate U.S.
Government Securities Fund - Class A
12. Financial Data Schedule for Adjustable Rate U.S.
Government Securities Fund - Class C
13. Financial Data Schedule for Global Bond Fund -
Class A
14. Financial Data Schedule for Global Bond Fund -
Class C
15. Rule 18f-3 Plan Adopted with Respect to the
Multiple Class Distribution System of the
Midwest Group of Funds
UNDERWRITING AGREEMENT
This Agreement made as of November 18, 1993 by and between
MIDWEST INCOME TRUST, a Massachusetts business trust (the
"Trust"), and MIDWEST GROUP FINANCIAL SERVICES, INC., an Ohio
corporation ("Underwriter").
WHEREAS, the Trust is an investment company registered under
the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the
Securities and Exchange Commission and a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, Underwriter serves as the principal underwriter of
shares of beneficial interest (the "Shares") of each series of
shares of the Trust (the "Series") pursuant to an underwriting
agreement dated November 24, 1986, and the Trust and Underwriter
are desirous of continuing such arrangement; and
WHEREAS, certain events have transpired since the parties
entered into the underwriting agreement dated November 24, 1986,
including (i) a change in the name of Underwriter; (ii) the
planned introduction of multiple classes of Shares of certain
Series; (iii) a statutory merger between Underwriter and an
affiliated company whereby Underwriter has become the investment
adviser to the Trust as well as its principal underwriter, and
(iv) the adoption of amendments to the Rules of Fair Practice of
the NASD concerning the permissible levels of sales charges; and
mit.und
WHEREAS, the Trust and Underwriter are desirous of entering
into a new agreement which reflects the circumstances described
in the previous recital;
NOW, THEREFORE, in consideration of the promises and
agreements of the parties contained herein, the parties agree as
follows:
1. Appointment.
The Trust hereby appoints Underwriter as its exclusive
agent for the distribution of the Shares, and Underwriter hereby
accepts such appointment under the terms of this Agreement.
While this Agreement is in force, the Trust shall not sell any
Shares except on the terms set forth in this Agreement.
Notwithstanding any other provision hereof, the Trust may
terminate, suspend or withdraw the offering of Shares whenever,
in its sole discretion, it deems such action to be desirable.
2. Sale and Repurchase of Shares.
(a) Underwriter will have the right, as agent for the
Trust, to enter into dealer agreements with responsible
investment dealers, and to sell Shares to such investment dealers
against orders therefor at the public offering price (as defined
in subparagraph 2(e) hereof) less a discount determined by
Underwriter, which discount shall not exceed the amount of the
sales charge stated in the Trust's effective Registration
Statement on Form N-1A under the Securities Act of 1933, as
amended, including the then current prospectus and statement of
additional information (the "Registration Statement"). Upon
receipt of an order to purchase Shares from a dealer with whom
Underwriter has a dealer agreement, Underwriter will promptly
cause such order to be filled by the Trust.
(b) Underwriter will also have the right, as agent for
the Trust, to sell such Shares to the public against orders
therefor at the public offering price.
(c) Underwriter will also have the right, as agent for
the Trust, to sell Shares at their net asset value to such
persons as may be approved by the Trustees of the Trust, all such
sales to comply with the provisions of the Act and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder.
(d) Underwriter will also have the right to take, as
agent for the Trust, all actions which, in Underwriter's
judgment, are necessary to carry into effect the distribution of
the Shares.
(e) The public offering price for the Shares of each
Series (and, with respect to each Series offering multiple
classes of Shares, the Shares of each Class of such Series)
shall be the respective net asset value of the Shares of that
Series (or Class of that Series) then in effect, plus any
applicable sales charge determined in the manner set forth in the
Registration Statement or as permitted by the Act and the rules
and regulations of the Securities and Exchange Commission
promulgated thereunder. In no event shall any applicable sales
charge exceed the maximum sales charge permitted by the Rules of
Fair Practice of the NASD.
(f) The net asset value of the Shares of each Series
(or each Class of a Series) shall be determined in the manner
provided in the Registration Statement, and when determined shall
be applicable to transactions as provided for in the Registration
Statement. The net asset value of the Shares of each Series (or
each Class of a Series) shall be calculated by the Trust or by
another entity on behalf of the Trust. Underwriter shall have no
duty to inquire into or liability for the accuracy of the net
asset value per Share as calculated.
(g) On every sale, the Trust shall receive the
applicable net asset value of the Shares promptly, but in no
event later than the tenth business day following the date on
which Underwriter shall have received an order for the purchase
of the Shares. Underwriter shall have the right to retain the
sales charge less any applicable dealer discount.
(h) Upon receipt of purchase instructions, Underwriter
will transmit such instructions to the Trust or its transfer
agent for registration of the Shares purchased.
(i) Nothing in this Agreement shall prevent
Underwriter or any affiliated person (as defined in the Act) of
Underwriter from acting as underwriter or distributor for any
other person, firm or corporation (including other investment
companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any
securities for its or their own account or for the accounts of
others for whom it or they may be acting; provided, however, that
Underwriter expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(j) Underwriter, as agent of and for the account of
the Trust, may repurchase the Shares at such prices and upon such
terms and conditions as shall be specified in the Registration
Statement.
3. Sale of Shares by the Trust.
The Trust reserves the right to issue any Shares at any
time directly to the holders of Shares ("Shareholders"), to sell
Shares to its Shareholders or to other persons approved by
Underwriter at not less than net asset value and to issue Shares
in exchange for substantially all the assets of any corporation
or trust or for the shares of any corporation or trust.
4. Basis of Sale of Shares.
Underwriter does not agree to sell any specific number
of Shares. Underwriter, as agent for the Trust, undertakes to
sell Shares on a best efforts basis only against orders therefor.
5. Rules of NASD, etc.
(a) Underwriter will conform to the Rules of Fair
Practice of the NASD and the securities laws of any jurisdiction
in which it sells, directly or indirectly, any Shares.
(b) Underwriter will require each dealer with whom
Underwriter has a dealer agreement to conform to the applicable
provisions hereof and the Registration Statement with respect to
the public offering price of the Shares, and neither Underwriter
nor any such dealers shall withhold the placing of purchase
orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust
sufficient copies of any agreements, plans or other materials it
intends to use in connection with any sales of Shares in adequate
time for the Trust to file and clear them with the proper
authorities before they are put in use, and not to use them until
so filed and cleared.
(d) Underwriter, at its own expense, will qualify as
dealer or broker, or otherwise, under all applicable State or
federal laws required in order that Shares may be sold in such
States as may be mutually agreed upon by the parties.
(e) Underwriter shall not make, or permit any
representative, broker or dealer to make, in connection with any
sale or solicitation of a sale of the Shares, any representations
concerning the Shares except those contained in the then current
prospectus and statement of additional information covering the
Shares and in printed information approved by the Trust as
information supplemental to such prospectus and statement of
additional information. Copies of the then effective prospectus
and statement of additional information and any such printed
supplemental information will be supplied by the Trust to
Underwriter in reasonable quantities upon request.
6. Records to be Supplied by Trust.
The Trust shall furnish to Underwriter copies of all
information, financial statements and other papers which
Underwriter may reasonably request for use in connection with the
distribution of the Shares, and this shall include, but shall not
be limited to, one certified copy, upon request by Underwriter,
of all financial statements prepared for the Trust by independent
public accountants.
7. Expenses.
In the performance of its obligations under this
Agreement, Underwriter will pay the costs incurred in qualifying
as a broker or dealer under state and federal laws and in
establishing and maintaining its relationships with the dealers
selling the Shares. All other costs in connection with the
offering of the Shares will be paid by the Trust or Underwriter
in accordance with agreements between them as permitted by
applicable law, including the Act and rules and regulations
promulgated thereunder.
8. Indemnification of Trust.
Underwriter, to the extent of the net commission
received by it from the sale of Shares but to no greater amount,
agrees to indemnify and hold harmless the Trust, and each person
who has been, is, or may hereafter be a trustee, officer,
employee, shareholder or control person of the Trust, against any
loss, damage or expense (including the reasonable costs of
investigation) reasonably incurred by any of them in connection
with any claim or in connection with any action, suit or
proceeding to which any of them may be a party, which arises out
of or is alleged to arise out of or is based upon any untrue
statement or alleged untrue statement of a material fact, or the
omission or alleged omission to state a material fact necessary
to make the statements not misleading, on the part of Underwriter
or any agent or employee of Underwriter or any other person for
whose acts Underwriter is responsible, unless such statement or
omission was made in reliance upon written information furnished
by the Trust. Underwriter likewise, to the extent of the net
commission received by it from the sale of Shares but to no
greater amount, agrees to indemnify and hold harmless the Trust
and each such person in connection with any claim or in
connection with any action, suit or proceeding which arises out
of or is alleged to arise out of Underwriter's failure to
exercise reasonable care and diligence with respect to its
services, if any, rendered in connection with investment,
reinvestment, automatic withdrawal and other plans for Shares.
The term "expenses" for purposes of this and the next paragraph
includes amounts paid in satisfaction of judgments or in
settlements which are made with Underwriter's consent. The
foregoing rights of indemnification shall be in addition to any
other rights to which the Trust or each such person may be
entitled as a matter of law.
9. Indemnification of Underwriter.
Underwriter, its directors, officers, employees,
shareholders and control persons shall not be liable for any
error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of any of such persons in
the performance of Underwriter's duties or from the reckless
disregard by any of such persons of Underwriter's obligations and
duties under this Agreement. The Trust will advance attorneys'
fees or other expenses incurred by any such person in defending a
proceeding, upon the undertaking by or on behalf of such person
to repay the advance if it is ultimately determined that such
person is not entitled to indemnification. Any person employed
by Underwriter who may also be or become an officer or employee
of the Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely
for the Trust and not as an employee or agent of Underwriter.
10. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without
the payment of any penalty, in the event of its assignment. This
Agreement may be amended only if such amendment is approved (i)
by Underwriter, (ii) either by action of the Board of Trustees of
the Trust or at a meeting of the Shareholders of the Trust by the
affirmative vote of a majority of the outstanding Shares, and
(iii) by a majority of the Trustees of the Trust who are not
interested persons of the Trust or of Underwriter by vote cast in
person at a meeting called for the purpose of voting on such
approval.
Either the Trust or Underwriter may at any time
terminate this Agreement on sixty (60) days' written notice
delivered or mailed by registered mail, postage prepaid, to the
other party.
11. Effective Period of this Agreement.
This Agreement shall take effect upon its execution and
shall remain in full force and effect for a period of two (2)
years from the date of its execution (unless terminated
automatically as set forth in Section 10), and from year to year
thereafter, subject to annual approval (i) by Underwriter, (ii)
by the Board of Trustees of the Trust or a vote of a majority of
the outstanding Shares, and (iii) by a majority of the Trustees
of the Trust who are not interested persons of the Trust or of
Underwriter by vote cast in person at a meeting called for the
purpose of voting on such approval.
12. Limitation on Liability.
The term "Midwest Income Trust" means and refers to the
Trustees from time to time serving under the Trust's Declaration
of Trust as the same may subsequently thereto have been, or
subsequently hereto be, amended. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any
of the Trustees, Shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the trust
property of the Trust, as provided in the Declaration of Trust of
the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees and Shareholders of the Trust and
signed by the officers of the Trust, acting as such, and neither
such authorization by such Trustees and Shareholders nor such
execution and delivery by such officers shall be deemed to have
been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property
of the Trust as provided in its Declaration of Trust.
13. New Series.
The terms and provisions of this Agreement shall become
automatically applicable to any additional series of the Trust
established during the initial or renewal term of this Agreement.
14. Successor Investment Company.
Unless this Agreement has been terminated in accordance
with Paragraph 10, the terms and provisions of this Agreement
shall become automatically applicable to any investment company
which is a successor to the Trust as a result of a
reorganization, recapitalization or change of domicile.
15. Severability.
In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall
not affect the remainder of this Agreement, which shall continue
to be in force.
16. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of
the State of Ohio.
(b) Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be resolved by
reference to such term or provision of the Act and to
interpretation thereof, if any, by the United States courts or in
the absence of any controlling decision of any such court, by
rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Act, reflected in any provision of
this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be
deemed to incorporate the effect of such rule, regulation or
order.
17. Notices.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party
at such address as such other party may designate for the receipt
of such notice. Until further notice to the other party, it is
agreed that the address of the Trust and of Underwriter for this
purpose shall be 312 Walnut Street, Cincinnati, Ohio 45202.
IN WITNESS WHEREOF, the Trust and Underwriter have each
caused this Agreement to be signed in duplicate on its behalf,
all as of the day and year first above written.
ATTEST: MIDWEST INCOME TRUST
/s/ John F. Splain /s/ Robert H. Leshner
_____________________________ By: __________________________
John F. Splain Robert H. Leshner
ATTEST: MIDWEST GROUP FINANCIAL
SERVICES, INC.
/s/ John F. Splain /s/ James A. Markley, Jr.
_____________________________ By: __________________________
John F. Splain James A. Markley, Jr.
DEALER'S AGREEMENT
------------------
Midwest Group Financial Services, Inc. ("Underwriter")
invites you, as a selected dealer, to participate as principal in the
distribution of shares (the "Shares") of the mutual funds set
forth on Schedule A to this Agreement (the "Funds"), of which it is the
exclusive underwriter. Underwriter agrees to sell to you,
subject to any limitations imposed by the Funds, Shares issued by the
Funds and to promptly confirm each sale to you. All sales will be made
according to the following terms:
1. All offerings of any of the Shares by you must be made
at the public offering prices, and shall be subject to the
conditions of offering, set forth in the then current Prospectus of the
Funds and to the terms and conditions herein set forth, and you agree
to comply with all requirements applicable to you of all applicable
laws, including federal and state securities laws, the rules and
regulations of the Securities and Exchange Commission, and the
Rules of Fair Practice of the National Association of Securities
Dealers, inc. (the "NASD"), including Section 24 of the Rules of
Fair Practice of the NASD. You will not offer the Shares for
sale in any state or other jurisdiction where they are not qualified
for sale under the Blue Sky Laws and regulations of such state or
jurisdiction, or where you are not qualified to act as a dealer.
Upon application to Underwriter, Underwriter will inform you as
to the states or other jurisdictions in which Underwriter believes
the Shares may legally be sold.
2. (a) You will receive a discount from the public
offering price ("concession") on all Shares purchased by you from
Underwriter as indicated on Schedule A, as it may be amended by
Underwriter from time to time.
(b) In all transactions in open accounts in which you
are designated as Dealer of Record, you will receive the
concessions as set forth on Schedule A. You hereby authorize
Underwriter to act as your agent in connection with all
transactions in open accounts in which you are designated as
Dealer of Record. All designations as Dealer of Record, and all
authorizations of Underwriter to act as your Agent pursuant
thereto, shall cease upon the termination of this Agreement or
upon the investor's instructions to transfer his open account to
another Dealer of Record. No dealer concessions will be allowed on
purchases generating less than $1.00 in dealer concessions.
(c) As the exclusive underwriter of the Shares,
Underwriter reserves the privilege of revising the discounts
specified on Schedule A at any time by written notice.
3. Concessions will be paid to you at the address of your
principal office, as indicated below in your acceptance of this
Agreement.
4. Underwriter reserves the right to cancel this Agreement
at any time without notice if any Shares shall be offered for
sale by you at less than the then current public offering prices
determined by, or for, the Funds.
5. All orders are subject to acceptance or rejection by
Underwriter in its sole discretion. We reserve the right, in our
discretion, without notice, to suspend sales or withdraw the
offering of Shares entirely.
6. Payment shall be made to the Funds and shall be
received by its Transfer Agent within five (5) business days after the
acceptance of your order or such shorter time as may be required
by law. With respect to all Shares ordered by you for which payment
has not been received, you hereby assign and pledge to
Underwriter all of your right, title and interest in such Shares to secure
payment therefor. You appoint Underwriter as your agent to
execute and deliver all documents necessary to effectuate any of the
transactions described in this paragraph. If such payment is not
received within the required time period, Underwriter reserves
the right, without notice, and at its option, forthwith (a) to cancel
the sale, (b) to sell the Shares ordered by you back to the
Funds, or (c) to assign your payment obligation, accompanied by all
pledged Shares, to any person. You agree that Underwriter may
hold you responsible for any loss, including loss of profit, suffered
by the Funds, its Transfer Agent or Underwriter, resulting from your
failure to make payment within the required time period.
7. No person is authorized to make any representations
concerning Shares of the Funds except those contained in the
current applicable Prospectus and Statement of Additional
Information and in sales literature issued and furnished by
Underwriter supplemental to such Prospectus. Underwriter will
furnish additional copies of the current Prospectus and Statement
of Additional Information and such sales literature and other
releases and information issued by Underwriter in reasonable
quantities upon request.
8. Under this Agreement, you act as principal and are not
employed by Underwriter as broker, agent or employee. You are
not authorized to act for Underwriter nor to make any representation
on its behalf; and in purchasing or selling Shares hereunder, you
rely only upon the current Prospectus and Statement of Additional
Information furnished to you by Underwriter from time to time and
upon such written representations as may hereafter be made by
Underwriter to you over its signature.
9. You appoint the transfer agent for the Funds as your
agent to execute the purchase transactions of Shares in
accordance with the terms and provisions of any account, program, plan or
service established or used by your customers and to confirm each
purchase to your customers on your behalf, and you guarantee the
legal capacity of your customers so purchasing such Shares and
any co-owners of such Shares.
10. You will (a) maintain all records required by law
relating to transactions in the Shares, and upon the request of
Underwriter, or the request of the Funds, promptly make such of
these records available to Underwriter or to the Funds as are
requested, and (b) promptly notify Underwriter if you experience
any difficulty in maintaining the records required in the
foregoing clause in an accurate and complete manner. In addition, you will
establish appropriate procedures and reporting forms and
schedule, approved by Underwriter and by the Funds, to enable the parties
hereto and the Funds to identify all accounts opened and
maintained by your customers.
11. Underwriter has adopted compliance standards, attached
hereto as Schedule B, as to when Class A and Class C Shares of
the Dual Pricing Funds may appropriately be sold to particular
investors. You agree that all persons associated with you will
conform to such standards when selling Shares.
12. Each party hereto represents that it is presently, and
at all times during the term of this Agreement will be, a member in
good standing of the NASD and agrees to abide by all its Rules of
Fair Practice including, but not limited to, the following
provisions:
(a) You shall not withhold placing customers' orders
for any Shares so as to profit yourself as a result of such
withholding. You shall not purchase any Shares from
Underwriter other than for investment, except for the
purpose of covering purchase orders already received.
(b) All conditional orders received by Underwriter
must be at a specified definite price.
(c) If any Shares purchased by you are repurchased by
the Funds (or by Underwriter for the account of the Funds)
or are tendered for redemption within seven business days after
confirmation of the original sale of such Shares (1) you
agree to forthwith refund to Underwriter the full concession
allowed to you on the original sale, such refund to be paid by
Underwriter to the Funds, and (2) Underwriter shall
forthwith pay to the Funds that part of the discount retained by
Underwriter on the original sale. Notice will be given to
you of any such repurchase or redemption within ten days of the
date on which the repurchase or redemption request is made.
(d) Neither Underwriter, as exclusive underwriter for
the Funds, nor you as principal, shall purchase any Shares
from a record holder at a price lower than the net asset
value then quoted by, or for, the Funds. Nothing in this sub-
paragraph shall prevent you from selling Shares for the
account of a record holder to Underwriter or the Funds at
the net asset value currently quoted by, or for, the Funds and
charging the investor a fair commission for handling the
transaction.
(e) You warrant on behalf of yourself and your
registered representatives and employees that any purchase
of Shares at net asset value by the same pursuant to the terms
of the Prospectus of the applicable Fund is for investment
purposes only and not for purposes of resale. Shares so
purchased may be resold only to the Fund which issued them.
13. You agree that you will indemnify Underwriter, the
Funds, the Funds' transfer agent, the Funds' investment adviser, and the
Funds' custodians and hold such persons harmless from any claims
or assertions relating to the lawfulness of your company's
participation in this Agreement and the transactions contemplated
hereby or relating to any activities of any persons or entities
affiliated with your company which are performed in connection
with the discharge of your responsibilities under this Agreement. If
any such claims are asserted, the indemnified parties shall have
the right to engage in their own defense, including the selection
and engagement of legal counsel of their choosing, and all costs
of such defense shall be borne by you.
14. This Agreement will automatically terminate in the
event of its assignment. Either party hereto may cancel this Agreement
without penalty upon ten days' written notice. This Agreement
may also be terminated as to any Fund at any time without penalty by
the vote of a majority of the members of the Board of Trustees of
the terminating Fund who are not "interested persons" (as such
term is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the applicable Fund's
Distribution Expense Plan or any agreement relating to such Plan,
including this Agreement, or by a vote of a majority of the
outstanding voting securities of the terminating Fund on ten
days' written notice.
15. All communications to Underwriter should be sent to
Midwest Group Financial Services, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202, or at such other address as Underwriter
may designate in writing. Any notice to you shall be duly given if
mailed or telegraphed to you at the address of your principal
office, as indicated below in your acceptance of this Agreement.
16. This Agreement supersedes any other agreement with you
relating to the offer and sale of the Shares, and relating to any
other matter discussed herein.
17. This Agreement shall be binding (i) upon placing your
first order with Underwriter for the purchase of Shares, or (ii)
upon receipt by Underwriter in Cincinnati, Ohio of a counterpart
of this Agreement duly accepted and signed by you, whichever shall
occur first. This Agreement shall be construed in accordance
with the laws of the State of Ohio.
18. The undersigned, executing this Agreement on behalf of
Dealer, hereby warrants and represents that he is duly authorized
to so execute this Agreement on behalf of Dealer.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us one copy of this
Agreement.
MIDWEST GROUP FINANCIAL
SERVICES, INC.
By: --------------------------
ACCEPTED BY DEALER:
------------------------------
Firm Name
By:---------------------------
Authorized Signature,
Position
------------------------------
Type or Print Name
ADDRESS (Principal Office):
------------------------------
------------------------------
Date:-------------------------
<PAGE>
<TABLE>
SCHEDULE A
- -----------
Midwest Group of Funds Commission Schedule
U.S. Government Securities Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund - Class A
Adjustable Rate U.S. Government Securities Fund - Class A
<CAPTION>
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
<S> <C> <C>
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over** None None
25 basis points annual trailing commission effective
immediately, paid quarterly.
- -------------------------------------------------------------------
<PAGE>
Equity Fund - Class A
Utility Fund - Class A
Global Bond Fund - Class A
Treasury Total Return Fund
Ohio Insured Tax-Free Fund - Class A
<CAPTION>
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
<S> <C> <C>
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over** None None
25 basis points annual trailing commission effective immediately, paid
quarterly.
<FN>
* As a percentage of offering price.
** Broker/Dealers are entitled to a commission of 50-75 basis
points at the time the investor purchases Class A shares at
NAV in amounts totaling $1 million or more. However, the
investor is subject to a contingent deferred sales load of
50-75 basis points if a redemption occurs within one year of
purchase. See specific Fund prospectus for details.
- -------------------------------------------------------------------
Equity Fund - Class C
Utility Fund - Class C
Global Bond Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
Intermediate Term Government Income Fund - Class C
Adjustable Rate U.S. Government Securities Fund - Class C
The Funds will be offered to clients at net asset value. A
commission of 1% of the purchase amount of Class C shares
will be paid to participating brokers at the time of
purchase. Purchases of Class C shares are subject to a
contingent deferred sales load, according to the following
schedule:
<CAPTION>
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
<S> <C>
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid
quarterly beginning in the thirteenth month.
- ------------------------------------------------------------------
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any
calendar quarter in which the average daily balance of all
accounts in the Midwest Group of Funds (including no-load
money market funds) is less than $1,000,000.
</TABLE>
<PAGE>
SCHEDULE B
Policies and Procedures
With Respect to Sales
Of Dual Pricing Fund
------------------------
As certain Funds within the Midwest Group (the "Dual Pricing
Funds") offer two classes of Shares subject to different levels
of
front-end sales charges, it is important for an investor not only
to choose the Fund that best suits his investment objectives, but
also to choose the sales financing method which best suits his
particular situation. To assist investors in these decisions, we
are instituting the following policy:
1. Any purchase order for $1 million or more must be for
Class A Shares.
2. Any purchase order for $100,000 but less than $1
million
is subject to approval by a registered principal of the
Underwriter, who must approve the purchase order for
either Class A Shares or Class C Shares in light of the
relevant facts and circumstances, including:
(a) the specific purchase order dollar amount;
(b) the length of time the investor expects to hold
the Shares; and
(c) any other relevant circumstances, such as the
availability of purchases under a Letter of
Intent.
3. Any order to exchange Class A Shares of a Dual Pricing
Fund (or Shares of another Fund having a maximum sales
load equal to or greater than Class A Shares of the
Dual Pricing Funds) for Shares of another Dual Pricing Fund
will be for Class A Shares only. Class C Shares of a
Dual Pricing Fund may be exchanged for either Class A
or Class C Shares of another Dual Pricing Fund, provided
that an exchange of Class C Shares for Class A Shares
is subject to approval by a registered principal of
Underwriter, who must approve the exchange in light of
the relevant facts and circumstances.
There are instances when one financing method may be more
appropriate than the other. For example, investors who would
qualify for a significant discount from the maximum sales charge
on
Class A Shares may determine that payment of such a reduced
front-
end sales charge is superior to payment of the higher ongoing
distribution fee applicable to Class C Shares. On the other
hand,
an investor whose order would not qualify for such a discount may
wish to pay a lower sales charge and have more of his funds
invested in Class C Shares. If such an investor anticipates that
he will redeem his Shares within a short period of time, the
investor may, depending on the amount of his purchase, choose to
bear higher distribution expenses than if he had purchased Class
A Shares.
In addition, investors who intend to hold their Shares for a
significantly long time may wish to purchase Class A Shares in
order to avoid the higher ongoing distribution expenses of Class
C Shares.
The appropriate supervisor must ensure that all employees
receiving investor inquiries about the purchase of Shares of Dual
Pricing Funds advise the investor of the available financing
methods offered by mutual funds, and the impact of choosing one
method over another. It may be appropriate for the supervisor to
discuss the purchase with the investor.
This policy is effective immediately with respect to any
order
for the purchase of Shares of all Dual Pricing Funds. Questions
relating to this policy should be directed to Sharon Karp, Vice
President of the Underwriter, at 513/629-2000.
MIDWEST GROUP FINANCIAL SERVICES, INC.
Addendum to Dealer's Agreement
--------------------------------------
In addition to the concessions as indicated in Schedule A to the
Dealer's Agreement, you will receive a trailing commission of
.25% per annum (payable quarterly) of the average balance during each
calendar quarter of all accounts in the Funds (excluding Class C
Shares of the Dual Pricing Funds) for which you are the dealer of
record.
Beginning one year from the date of the purchase of Class C
Shares of the Dual Pricing Funds, a trailing commission (payable
quarterly) is also paid with respect to such accounts (equal to
.75% per annum of the average balance during each calendar
quarter of all accounts in the Ohio Insured Tax-Free Fund, the
Intermediate Term Government Income Fund and the Tax-Free Intermediate
Term Fund and 1.00% per annum of the average balance during each calendar
quarter of all accounts in the Equity Fund, the Utility Fund and
the Global Bond Fund).
However, no trailing commissions will be paid to a dealer for any
calendar quarter in which the average daily balance of all
accounts ---
in the Midwest Group of Funds (including no-load money market
funds) is less than $1,000,000.
ACCOUNTING AND PRICING SERVICES AGREEMENT
THIS AGREEMENT effective as of May 23, 1988 (except as to
the Short Term Government Fund and Intermediate Term Government
Fund series of shares, for which the effective date shall be July
1, 1988) by and between MIDWEST INCOME TRUST, a Massachusetts
business trust (the "Trust") and MGF SERVICE CORP., an Ohio
corporation ("MGF").
WITNESSETH THAT:
WHEREAS, the Trust desires to hire MGF to provide the Trust
with certain accounting and pricing services, and MGF is willing
to provide such services upon the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. APPOINTMENT.
MGF is hereby appointed to provide the Trust with
certain accounting and pricing services, and MGF accepts such
appointment and agrees to provide such services under the terms
and conditions set forth herein.
2. CALCULATION OF NET ASSET VALUE.
MGF will calculate the net asset value of each series
of the Trust and the per share net asset value of each series of
the Trust, in accordance with the Trust's effective Registration
Statement on Form N-1A under the Securities Act of 1933, as
amended, including its current prospectus and statement of
additional information (the "Registration Statement"), once daily
as of the time selected by the Trust's Board of Trustees. MGF
will prepare and maintain a daily valuation of all securities and
other assets of the Trust in accordance with instructions from a
designated officer of the Trust or its investment adviser and in
the manner set forth in the Registration Statement. In valuing
securities of the Trust, MGF may contract with, and rely upon
market quotations provided by, outside services.
accprice.agr
3. BOOKS AND RECORDS.
MGF will maintain such books and records as are
necessary to enable it to perform its duties under this
Agreement, and, in addition, will prepare and maintain complete,
accurate and current all records with respect to the Trust
required to be maintained by the Trust under the Internal Revenue
Code, as amended (the "Code") and under the general rules and
regulations of the Investment Company Act of 1940, as amended
(the "Act"), and will preserve said records in the manner and for
the periods prescribed in the Code and such rules and
regulations. The retention of such records shall be at the
expense of the Trust.
All of the records prepared and maintained by MGF
pursuant to this Paragraph 3 which are required to be maintained
by the Trust under the Code and the Act ("Required Records") will
be the property of the Trust. In the event this Agreement is
terminated, all Required Records shall be delivered to the Trust
or to any person designated by the Trust at the Trust's expense,
and MGF shall be relieved of responsibility for the preparation
and maintenance of any Required Records delivered to the Trust or
any such person.
4. COOPERATION WITH ACCOUNTANTS.
MGF shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to assure
that the necessary information is made available to such
accountants for the expression of their unqualified opinion where
required for any document for the Trust.
5. FEES AND CHARGES.
For performing its services under this Agreement, the
Trust shall pay MGF a fee in accordance with the schedule
attached hereto as Schedule A.
6. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
Except as otherwise provided in this Agreement and
except for the accuracy of information furnished to it by MGF,
the Trust assumes full responsibility for the preparation,
contents and distribution of each prospectus and statement of
additional information of the Trust, for complying with all
applicable requirements of the Act, the Securities Act of 1933,
as amended, and any laws, rules and regulations of governmental
authorities having jurisdiction.
7. CONFIDENTIALITY.
MGF agrees to treat all records and other information
relative to the Trust and its prior, present or potential
shareholders confidentially and MGF on behalf of itself and its
employees agrees to keep confidential all such information,
except (after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and
may not be withheld where MGF may be exposed to civil or criminal
contempt proceedings for failure to comply) when requested to
divulge such information by duly constituted authorities or when
so requested by the Trust.
8. REFERENCES TO MGF.
The Trust shall not circulate any printed matter which
contains any reference to MGF without the prior written approval
of MGF, excepting solely such printed matter as merely identifies
MGF as Transfer Agent, Plan Agent, Dividend Disbursing Agent,
Shareholder Service Agent and Accounting and Pricing Services
Agent. The Trust will submit printed matter requiring approval
to MGF in draft form, allowing sufficient time for review by MGF
and its counsel prior to any deadline for printing.
9. EQUIPMENT FAILURES.
In the event of equipment failures beyond MGF's
control, MGF shall take all steps necessary to minimize service
interruptions but shall have no liability with respect thereto.
MGF shall endeavor to enter into one or more agreements making
provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
10. INDEMNIFICATION OF MGF.
(a) MGF may rely on information reasonably believed by
it to be accurate and reliable. Except as may otherwise be
required by the Investment Company Act of 1940 or the rules
thereunder, neither MGF nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of
any thereof shall be subject to any liability for, or any
damages, expenses or losses incurred by the Trust in connection
with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to
which this Agreement relates, except by reason of willful
misfeasance, bad faith or gross negligence on the part of any
such persons in the performance of the duties of MGF under this
Agreement or by reason of reckless disregard by any of such
persons of the obligations and duties of MGF under this
Agreement.
(b) Any person, even though also a director, officer,
employee, shareholder or agent of MGF, who may be or become an
officer, trustee, employee or agent of the Trust, shall be
deemed, when rendering services to the Trust or acting on any
business of the Trust (other than services or business in
connection with MGF's duties hereunder), to be rendering such
services to or acting solely for the Trust and not as a director,
officer, employee, shareholder or agent of, or one under the
control or direction of MGF, even though paid by it.
(c) Notwithstanding any other provision of this
Agreement, the Trust shall indemnify and hold harmless MGF, its
directors, officers, employees, shareholders and agents from and
against any and all claims, demands, expenses and liabilities
(whether with or without basis in fact or law) of any and every
nature which MGF may sustain or incur or which may be asserted
against MGF by any person by reason of, or as a result of: (i)
any action taken or omitted to be taken by MGF in good faith in
reliance upon any certificate, instrument, order or stock
certificate believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the
oral instructions or written instructions of an authorized person
of the Trust or upon the opinion of legal counsel for the Trust
or its own counsel; or (ii) any action taken or omitted to be
taken by MGF in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation of the
same even though the same may thereafter have been altered,
changed, amended or repealed. However, indemnifications under
this subparagraph shall not apply to actions or omissions of MGF
or its directors, officers, employees, shareholders or agents in
cases of its or their own gross negligence, willful misconduct,
bad faith or reckless disregard of its or their own duties
hereunder.
11. MAINTENANCE OF INSURANCE COVERAGE.
At all times during the term of this Agreement, MGF
shall be a named insured party on the Trust's Errors & Omissions
policy and the Trust's Fidelity Bond, both of which shall include
coverage of MGF's officers and employees. MGF shall pay its
allocable share of the cost of such policies in accordance with
the provisions of the Act. The scope of coverage and amount of
insurance limits applicable to the Trust on such policies shall
also be made applicable to MGF.
12. FURTHER ACTIONS.
Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof.
13. TERMINATION.
(a) The provisions of this Agreement shall be effective
on May 23, 1988, shall continue in effect for two years from that
date and shall continue in force from year to year thereafter,
but only so long as such continuance is approved (1) by MGF, (2)
by vote, cast in person at a meeting called for the purpose, of a
majority of the Trust's trustees who are not parties to this
Agreement or interested persons (as defined in the Act) of any
such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting
securities.
(b) Either party may terminate this Agreement on any
date by giving the other party at least sixty (60) days' prior
written notice of such termination specifying the date fixed
thereof.
(c) This Agreement shall automatically terminate in the
event of its assignment.
(d) In the event that in connection with termination of
this Agreement a successor to any of MGF's duties or
responsibilities under this Agreement is designated by the Trust
by written notice to MGF, MGF shall, promptly upon such
termination and at the expense of the Trust, transfer all
Required Records and shall cooperate in the transfer of such
duties and responsibilities, including provision for assistance
from MGF's cognizant personnel in the establishment of books,
records and other data by such successor.
14. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent MGF or any
affiliated person (as defined in the Act) of MGF from providing
services for any other person, firm or corporation (including
other investment companies); provided, however, that MGF
expressly represents that it will undertake no activities which,
in its judgment, will adversely affect the performance of its
obligations to the Trust under this Agreement.
15. MISCELLANEOUS.
The captions in this Agreement are included for
convenience of reference only and in no way define or limit any
of the provisions hereof or otherwise affect their construction
or effect.
16. LIMITATION ON LIABILITY.
The term "Midwest Income Trust" means and refers to the
trustees from time to time serving under the Trust's Declaration
of Trust as the same may subsequently thereto have been, or
subsequently hereto may be, amended. It is expressly agreed that
the obligations of the Trust hereunder shall not be binding upon
any of the trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the trust
property of the Trust. This Agreement has been authorized by the
trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such trustees
nor such execution by such officer shall be deemed to have been
made by any of them individually or to impose any liability on
any of them personally, but shall bind only the trust property of
the Trust.
17. SEVERABILITY.
In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall
not affect the remainder of this Agreement, which shall continue
to be in force.
18. QUESTIONS OF INTERPRETATION.
(a) This Agreement shall be governed by the laws of the
State of Ohio.
(b) Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be resolved by
reference to such term or provision of the Act and to
interpretations thereof, if any, by the United States Courts or
in the absence of any controlling decision of any such court, by
rules, regulations or orders of the Securities and Exchange
Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Act, reflected in any provision of
this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be
deemed to incorporate the effect of such rule, regulation or
order.
19. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party
at such address as such other party may designate for the receipt
of such notice. Until further notice to the other party, it is
agreed that the address of the Trust and of MGF for this purpose
shall be 700 Dixie Terminal Building, Cincinnati, Ohio 45202.
20. BINDING EFFECT.
Each of the undersigned expressly warrants and
represents that he has the full power and authority to sign this
Agreement on behalf of the party indicated, and that his
signature will operate to bind the party indicated to the
foregoing terms.
21. COUNTERPARTS.
This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
22. FORCE MAJEURE.
If MGF shall be delayed in its performance of services
or prevented entirely or in part from performing services due to
causes or events beyond its control, including and without
limitation, acts of God, interruption of power or other utility,
transportation or communication services, acts of civil or
military authority, sabotages, national emergencies, explosion,
flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law,
governmental order, rule or regulation, or shortages of suitable
parts, materials, labor or transportation, such delay or non-
performance shall be excused and a reasonable time for
performance in connection with this Agreement shall be extended
to include the period of such delay or non-performance.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
MIDWEST INCOME TRUST
/s/ Robert H. Leshner
By
MGF SERVICE CORP.
/s/ Robert H. Leshner
By
Schedule A
Effective July 1, 1995
<TABLE>
COMPENSATION
FOR FUND ACCOUNTING AND PORTFOLIO PRICING:
<CAPTION>
Short Term Government Income Fund
Institutional Government Income Fund
Asset Size Monthly Fee
<S> <C>
$ 0 - $100,000,000 $3,000
$100,000,000 - $250,000,000 $3,500
$250,000,000 - $400,000,000 $4,000
Over $400,000,000 $4,500
<CAPTION>
Adjustable Rate U.S. Government Securities Fund
<S> <C>
$ 0 - $ 50,000,000 $4,250
$ 50,000,000 - $100,000,000 $4,750
$100,000,000 - $250,000,000 $5,250
Over $250,000,000 $5,750
<CAPTION>
Intermediate Term Government Income Fund
<S> <C>
$ 0 - $ 50,000,000 $3,750
$ 50,000,000 - $100,000,000 $4,250
$100,000,000 - $250,000,000 $4,750
Over $250,000,000 $5,250
<CAPTION>
Global Bond Fund
<S> <C>
$ 0 - $ 50,000,000 $4,750
$ 50,000,000 - $100,000,000 $5,250
$100,000,000 - $250,000,000 $5,750
Over $250,000,000 $6,750
</TABLE>
Each Fund shall pay as an out-of-pocket expense all
costs of external pricing services.
ADMINISTRATION AGREEMENT
AGREEMENT dated as of October 1, 1989 between Midwest
Advisory Services, Inc. ("Adviser") and MGF Service Corp.
("MGF"), both of which are Ohio corporations having their
principal place of business at 700 Dixie Terminal Building,
Cincinnati, Ohio 45202.
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940 and has entered into an
investment advisory agreement (the "Management Agreement") with
Midwest Income Trust (the "Trust"); and
WHEREAS, the Trust has been organized as a Massachusetts
business trust to operate as an investment company registered
under the Investment Company Act of 1940; and
WHEREAS, the Adviser manages the business affairs of the
Trust pursuant to the Management Agreement; and
WHEREAS, the Adviser wishes to avail itself of the
information, advice, assistance and facilities of MGF to perform
on behalf of the Trust the services as hereinafter described; and
WHEREAS, MGF wishes to provide such services to the Adviser
under the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained in this Agreement, the Adviser and MGF agree
as follows:
1. Employment. The Adviser, being duly authorized, hereby
employs MGF to perform those services described in this
Agreement. MGF shall perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. Trust Administration. Subject to the direction and
control of the Adviser, MGF shall assist the Adviser in
supervising the Trust's business affairs not otherwise supervised
by other agents of the Trust. To the extent not otherwise the
primary responsibility of, or provided by, other agents of the
Trust, MGF shall supply (i) non-investment related statistical
and research data, (ii) internal regulatory compliance services,
and (iii) executive and administrative services. MGF shall
supervise the preparation of (i) tax returns, (ii) reports to
shareholders of the Trust, (iii) reports to and filings with the
Securities and Exchange Commission, state securities commissions
and Blue Sky authorities including preliminary and definitive
proxy materials and post-effective amendments to the Trust's
registration statement, and (iv) necessary materials for meetings
of the Trust's Board of Trustees unless prepared by other parties
under agreement.
adminmit.mas
3. Recordkeeping and Other Information. MGF shall create
and maintain all necessary records in accordance with all
applicable laws, rules and regulations, including but not limited
to records required by Section 31(a) of the Investment Company
Act of 1940 and the rules thereunder, as the same may be amended
from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party
pursuant to contract with the Trust. Where applicable, such
records shall be maintained by MGF for the periods and in the
places required by Rule 31a-2 under the Investment Company Act of
1940.
4. Audit, Inspection and Visitation. MGF shall make
available to the Adviser during regular business hours all
records and other data created and maintained pursuant to the
foregoing provisions of this Agreement for reasonable audit and
inspection by the Trust or any regulatory agency having authority
over the Trust.
5. Compensation. For the performance of its obligations
under this Agreement, the Adviser shall pay MGF a fee each month
equal to one-fourth (1/4) of the monthly fee due from the Trust
to the Adviser pursuant to the terms of the Management Agreement.
The Adviser is solely responsible for the payment of fees to MGF,
and MGF agrees to seek payment of its fees solely from the
Adviser. MGF shall not reimburse the Adviser for (or have
deducted from its fees) any Trust expenses in excess of expense
limitations imposed by certain state securities commissions
having jurisdiction over the Trust.
6. Limitation of Liability. MGF shall not be liable for
any action taken, omitted or suffered to be taken by it in its
reasonable judgment, in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred
upon it by this Agreement, or in accordance with instructions
from the Adviser, provided, however, that such acts or omissions
shall not have resulted from MGF's willful misfeasance, bad faith
or gross negligence.
7. Compliance with the Investment Company Act of 1940.
The parties hereto acknowledge and agree that nothing contained
herein shall be construed to require MGF to perform any services
for the Adviser which services could cause MGF to be deemed an
"investment adviser" of the Trust within the meaning of Section
2(a)(20) of the Investment Company Act of 1940 or to supercede or
contravene the Prospectus or Statement of Additional Information
of the Trust or any provisions of the Investment Company Act of
1940 and the rules thereunder.
8. Termination. This Agreement may be terminated by
either party upon sixty (60) days' written notice to the other
party. This Agreement shall terminate automatically in the event
of termination of the Management Agreement. Upon the termination
of this Agreement, the Adviser shall pay MGF such compensation as
may be payable for the period prior to the effective date of such
termination.
9. No Trust Liability. MGF is hereby expressly put on
notice that the Trust is not a contracting party to this
Agreement and assumes no obligations pursuant to this Agreement.
MGF shall seek satisfaction of any obligations arising out of
this Agreement only from the Adviser, and not from the Trust nor
its Trustees, officers, employees or shareholders. MGF shall not
act as agent for or bind either the Adviser or the Trust in any
matter.
10. Miscellaneous. Each party agrees to perform such
further acts and execute such further documents as are necessary
to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the
laws of the State of Ohio. The captions in this Agreement are
included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect their
construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
MIDWEST ADVISORY SERVICES, INC.
/s/ Robert H. Leshner
By:
MGF SERVICE CORP.
/s/ Robert H. Leshner
By:
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
use in this Post-Effective Amendment No. 63 of our report dated
November 13, 1995, and to all references to our Firm included in
or made a part of this Post-Effective Amendment.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
January 30, 1996
ADMINISTRATION AGREEMENT
-------------------------
This Agreement is made between -----------------------
("Administrator") and Midwest Trust, Midwest Group Tax Free Trust
and Midwest Strategic Trust (collectively the "Trusts" and
individually the "Trust"), the issuer of shares of beneficial
interest ("Shares") of the mutual funds set forth on Schedule A
to this Agreement (collectively the "Funds" and individually the
"Fund"). In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto
as follows:
1. The Trusts hereby appoint Administrator to render or
cause to be rendered administrative support services to each Fund
and its shareholders, which services may include, without
limitation: aggregating and processing purchase and redemption
requests and placing net purchase and redemption orders with the
Fund's transfer agent; answering client inquiries about the Fund
and referring to the Trust those inquiries which the
Administrator is unable to answer; assisting clients in changing
dividend options, account designations and addresses; performing
sub-accounting; establishing, maintaining and closing shareholder
accounts and records; investing client account cash balances
automatically in Shares of the Fund; providing periodic
statements showing a client's account balance, integrating such
statements with those of other transactions and balances in the
client's other accounts serviced by the Administrator and
performing such other recordkeeping as is necessary for the
Fund's transfer agent to comply with all the recordkeeping
requirements of the Investment Company Act of 1940 and the
regulations promulgated thereunder; arranging for bank wires; and
providing such other information and services as the Trust
reasonably may request, to the extent the Administrator is
permitted by applicable statute, rule or regulation to provide
these services.
2. Administrator shall provide such office space and
equipment, telephone facilities and personnel (which may be all
or any part of the space, equipment and facilities currently used
in Administrator's business, or all or any personnel employed by
Administrator) as is necessary or beneficial for providing
information and services to shareholders of each Fund, and to
assist each Trust in servicing accounts of clients.
Administrator shall transmit promptly to clients all
communications sent to it for transmittal to clients by or on
behalf of a Trust, a Fund, or a Trust's investment adviser,
custodian or transfer or dividend disbursing agent.
3. On each account in certain Funds for which the
Administrator is to render administrative support services,
Administrator will receive a fee, as set forth on Schedule B,
equal to the normal dealer's discount from the public offering
price on the Shares purchased by such accounts. During the term
of this Agreement, each Trust or the Trust's investment adviser
or underwriter will also pay to the Administrator quarterly one-
fourth of the annual administration fees set forth in Schedule B
hereto. Administrator shall notify the Trust if Administrator
directly charges a fee to Fund shareholders for its
administrative support services as described in this Agreement.
4. Administrator agrees to comply with the requirements of
all laws applicable to it, including but not limited to, ERISA,
federal and state securities laws and the rules and regulations
promulgated thereunder. Administrator agrees to provide services
to each Trust in compliance with the then current Prospectus and
Statement of Additional Information of the Trust and the
operating procedures and policies established by the Trust,
including, but not limited to, required minimum investment and
minimum account size.
5. No person is authorized to make any representations
concerning a Fund or its Shares except those contained in the
current Prospectus or Statement of Additional Information of the
applicable Trust and any such information as may be officially
designated as information supplemental to the Prospectus.
Additional copies of any Prospectus and any printed information
officially designated as supplemental to such Prospectus will be
supplied by the Trust to Administrator in reasonable quantities
on request.
6. Administrator agrees that it will provide
administrative support services only to those persons who reside
in any jurisdiction in which a Fund's Shares are registered for
sale and in which the Administrator may lawfully provide such
services. Upon request, the Trusts shall provide the
Administrator with a list of the states in which each Fund's
Shares are registered for sale and shall keep such list updated.
7. In no transaction shall Administrator have any
authority whatsoever to act as agent for any Trust, any Fund or
any person affiliated with any Trust or Fund.
8. The Administrator agrees not to solicit or cause to be
solicited directly, or indirectly at any time in the future, any
proxies from the shareholders of a Trust in opposition to proxies
solicited by management of the Trust, unless a court of competent
jurisdiction shall have determined that the conduct of a majority
of the Board of Trustees of the Trust constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard of
their duties. This paragraph 8 will survive the term of this
Agreement.
9. The Administrator shall prepare such quarterly reports
for each Trust as shall reasonably be requested by the Trust. In
addition, the Administrator will furnish the Trust or its
designees with such information as the Trust or they may
reasonably request (including, without limitation, periodic
certifications confirming the provision to clients of the
services described herein), and will otherwise cooperate with the
Trust and its designees (including, without limitation, any
auditors designated by the Trust), in connection with the
preparation of reports to the Trust's Board of Trustees
concerning this Agreement and the monies paid or payable by the
Trust or the Trust's investment adviser or underwriter pursuant
hereto, as well as any other reports or filings that may be
required by law.
10. The Administrator acknowledges that any Trust may enter
into similar agreements with others without the consent of the
Administrator.
11. Each Trust reserves the right, at its discretion and
without notice, to suspend the sale of Shares or withdraw the
sale of Shares of any Fund.
12. The Trust's underwriter has adopted compliance
standards, attached hereto as Schedule C, as to when Class A and
Class C Shares of the Dual Pricing Funds may appropriately be
sold to particular investors. The Administrator agrees that all
persons associated with it will conform to such standards.
13. With respect to each Fund, this Agreement shall
continue in effect for one year from the date of its execution,
and thereafter for successive periods of one year if the form of
this Agreement is approved as to the Fund at least annually by
the Trustees of the applicable Trust, including a majority of the
members of the Board of Trustees of the Trust who are not
interested persons ("Disinterested Trustees") of the Trust and
have no direct or indirect financial interest in the operations
of the Trust's Rule 12b-1 Plan ("Plan") or in any documents
related to the Plan cast in person at a meeting for that purpose.
In the event this Agreement, or any part thereof, is found
invalid or is ordered terminated by any regulatory or judicial
authority, or the Administrator shall fail to perform the
shareholder servicing and administrative functions contemplated
hereby, this Agreement is terminable effective upon receipt of
notice thereof by the Administrator.
14. Notwithstanding paragraph 13, this Agreement may be
terminated with respect to any Fund as follows:
(a) at any time, without the payment of any penalty,
by the vote of a majority of the Disinterested Trustees of
the applicable Trust or by a vote of a majority of the
outstanding voting securities of the Fund on not more than
thirty (30) days' written notice to the parties to this
Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940;
or
(c) by any party to the Agreement without cause by
giving the other parties at least thirty (30) days' written
notice of its intention to terminate.
15. Any termination of this Agreement shall not affect the
provisions of paragraph 18, which shall survive the termination
of this Agreement and continue to be enforceable thereafter.
16. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors.
17. This Agreement is not intended to, and shall not,
create any rights against any party hereto by any third person
solely on account of this Agreement.
18. The Administrator shall provide such security as is
necessary to prevent unauthorized use of any computer hardware or
software provided to it by or on behalf of the Trusts, if any.
The Administrator agrees to release, indemnify and hold harmless
each Fund, each Trust, each Trust's transfer agent, custodian,
investment adviser and underwriter, and their respective
principals, directors, trustees, officers, employees and agents
from any and all direct or indirect liabilities or losses
resulting from requests, directions, actions or inactions of or
by the Administrator, its officers, employees or agents regarding
the purchase, redemption, transfer or registration of Shares for
accounts of the Administrator, its clients and other
shareholders. Such indemnity shall also cover any losses and
liabilities incurred by and resulting from the Administrator's
performance of or failure to perform its obligations or its
breach of any representations or warranties under this Agreement.
Principals of the Administrator will be available to consult from
time to time with each Trust concerning the administration and
performance of the services contemplated by this Agreement.
19. This Agreement may be amended only by an agreement in
writing signed by the Administrator and the Trusts.
20. The obligations of each Trust under this Agreement
shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally,
but shall bind only the property of the Trust, as provided in the
Trust's Agreement and Declaration of Trust. The execution and
delivery of this Agreement has been authorized by the Trustees
and signed by a duly authorized officer of the Trust, acting as
such, and neither the authorization by the Trustees nor the
execution and delivery by such officer of the Trust shall be
deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the
property of the Trust as provided in its Agreement and
Declaration of Trust.
21. This Agreement does not authorize the Administrator to
participate in any activities relating to the sale or
distribution of the Shares, and the Administrator agrees that it
shall not participate in such activities.
22. If any provision of this Agreement, or any covenant,
obligation or agreement contained herein, is determined by a
court to be invalid or unenforceable, the parties agree that (a)
such determination shall not affect any other provision,
covenant, obligation or agreement contained herein, each of which
shall be construed and enforced to the full extent permitted by
law, and (b) such invalid or unenforceable portion shall be
deemed to be modified to the extent necessary to permit its
enforcement to the maximum extent permitted by applicable law.
23. This Agreement shall be construed in accordance with
the laws of the State of Ohio.
IN WITNESS WHEREOF, this Agreement has been executed for the
Trusts and the Administrator by their duly authorized officers,
on this --- day of ------------, 199--.
- ----------------------------- MIDWEST TRUST
Administrator
By: ---------------------- By: /s/ Robert H. Leshner
Authorized Siganture ---------------------
Authorized Signature
MIDWEST GROUP TAX FREE TRUST
By: /s/ Robert H. Leshner
----------------------
Authorized Signature
MIDWEST STRATEGIC TRUST
By: /s/ Robert H. Leshner
----------------------
Authorized Signature
<PAGE>
Schedule A
- ----------
SCHEDULE OF MUTUAL FUNDS
-------------------------
Midwest Trust
- -------------
Intermediate Term Government Income Fund
Adjustable Rate U.S. Government Securities Fund
* Short Term Government Income Fund
Global Bond Fund
Midwest Group Tax Free Trust
- ----------------------------
Tax-Free Intermediate Term Fund
Ohio Insured Tax-Free Fund
* Ohio Tax-Free Money Fund
* Tax-Free Money Fund
* California Tax-Free Money Fund
* Royal Palm Florida Tax-Free Money Fund
Midwest Strategic Trust
- -----------------------
U.S. Government Securities Fund
Treasury Total Return Fund
Utility Fund
Equity Fund
* No-load money market fund.
<PAGE>
<TABLE>
Schedule B
- ----------
Midwest Group of Funds Commission Schedule
U.S. Government Securities Fund
Tax-Free Intermediate Term Fund - Class A
Intermediate Term Government Income Fund - Class A
Adjustable Rate U.S. Government Securities Fund - Class A
<CAPTION>
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
<S> <C> <C>
Less than $100,000 2.00% 1.80%
from $100,000 but under $250,000 1.50% 1.35%
from $250,000 but under $500,000 1.00% .90%
from $500,000 but under $1,000,000 .75% .65%
$1,000,000 and over* None None
25 basis points annual trailing commission effective
immediately, paid quarterly.
Equity Fund - Class A
Utility Fund - Class A
Global Bond Fund - Class A
Treasury Total Return Fund
Ohio Insured Tax-Free Fund - Class A
<CAPTION>
Total
Dollar Amount of Purchase Sales Dealer
(At Offering Price) Charge* Concession
<S> <C> <C>
Less than $100,000 4.00% 3.60%
from $100,000 but under $250,000 3.50% 3.30%
from $250,000 but under $500,000 2.50% 2.30%
from $500,000 but under $1,000,000 2.00% 1.80%
$1,000,000 and over** None None
25 basis points annual trailing commission effective
immediately, paid quarterly.
<FN>
* As a percentage of offering price.
** Broker/Dealers are entitled to a commission of 50-75 basis
points at the time the investor purchases Class A shares at
NAV in amounts totaling $1 million or more. However, the
investor is subject to a contingent deferred sales load of
50-75 basis points if a redemption occurs within one year of
purchase. See specific Fund prospectus for details.
Equity Fund - Class C
Utility Fund - Class C
Global Bond Fund - Class C
Ohio Insured Tax-Free Fund - Class C
Tax-Free Intermediate Term Fund - Class C
Intermediate Term Government Income Fund - Class C
Adjustable Rate U.S. Government Securities Fund - Class C
The Funds will be offered to clients at net asset value. A
commission of 1% of the purchase amount of Class C shares
will be paid to participating brokers at the time of
purchase. Purchases of Class C shares are subject to a
contingent deferred sales load, according to the following
schedule:
<CAPTION>
Year Since Purchase Contingent Deferred
Payment Was Made Sales Load
<S> <C>
First Year 1%
Thereafter None
100 basis points annual trailing commission will be paid
quarterly beginning in the thirteenth month.
Brokers may invest for their own account at NAV
No trailing commissions will be paid to a dealer for any
calendar quarter in which the average daily balance of all
accounts in the Midwest Group of Funds (including no-load
money market funds) is less than $1,000,000.
</TABLE>
<PAGE>
Schedule C
- ----------
Administration Fees
-------------------
You will receive a quarterly fee of .25% per annum (payable
quarterly) of the average balance during each calendar quarter of
all accounts in the Midwest Group Funds set forth on Schedule A
for which you provide administrative services. However, no fee
will be paid to you for any calendar quarter in which the average
daily balance of such accounts is less than $1,000,000,000.
<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-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 85,703,489
<INVESTMENTS-AT-VALUE> 86,004,328
<RECEIVABLES> 397,548
<ASSETS-OTHER> 12,502
<OTHER-ITEMS-ASSETS> 800,693
<TOTAL-ASSETS> 87,215,071
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,935
<TOTAL-LIABILITIES> 73,935
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 87,138,909
<SHARES-COMMON-STOCK> 87,138,909
<SHARES-COMMON-PRIOR> 89,703,820
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,227
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 87,141,136
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,729,343
<OTHER-INCOME> 0
<EXPENSES-NET> 840,607
<NET-INVESTMENT-INCOME> 3,888,736
<REALIZED-GAINS-CURRENT> 2,227
<APPREC-INCREASE-CURRENT> 0
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,888,736
<DISTRIBUTIONS-OF-GAINS> 4,105
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 306,531,676
<NUMBER-OF-SHARES-REDEEMED> 312,723,860
<SHARES-REINVESTED> 3,627,273
<NET-CHANGE-IN-ASSETS> (2,566,789)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,105
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 840,607
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<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.046
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<PER-SHARE-NAV-END> 1.00
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<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-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
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<INVESTMENTS-AT-VALUE> 56,620,412
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<TOTAL-ASSETS> 57,692,813
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<TOTAL-LIABILITIES> 125,777
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<SHARES-COMMON-PRIOR> 6,352,767
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<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,018,418
<NET-ASSETS> 56,968,568
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,286,348
<OTHER-INCOME> 0
<EXPENSES-NET> 595,209
<NET-INVESTMENT-INCOME> 3,691,139
<REALIZED-GAINS-CURRENT> (932,473)
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 1,296,111
<NUMBER-OF-SHARES-REDEEMED> 2,637,294
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<NET-CHANGE-IN-ASSETS> (7,426,443)
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 606,571
<AVERAGE-NET-ASSETS> 59,285,943
<PER-SHARE-NAV-BEGIN> 10.14
<PER-SHARE-NII> 0.64
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 33
<NAME> INTERMEDIATE TERM GOVERNMENT INCOME FUND CLASS C
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<INTEREST-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 10.14
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 4
<NAME> INSTITUTIONAL GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 36,008,630
<DIVIDEND-INCOME> 0
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<NET-INVESTMENT-INCOME> 2,286,308
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<NUMBER-OF-SHARES-SOLD> 152,663,812
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<NET-CHANGE-IN-ASSETS> (5,760,337)
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<PER-SHARE-NAV-BEGIN> 1.00
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 61
<NAME> ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND CLASS A
<S> <C>
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<FISCAL-YEAR-END> SEP-30-1995
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<PER-SHARE-GAIN-APPREC> (0.04)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 63
<NAME> ADJUSTABLE RATE U.S. GOVERNMENT SECURITIES FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
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<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 86,415
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,418,607
<OTHER-INCOME> 0
<EXPENSES-NET> 168,641
<NET-INVESTMENT-INCOME> 1,249,966
<REALIZED-GAINS-CURRENT> (997,493)
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 8,783
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<PER-SHARE-NAV-BEGIN> 9.76
<PER-SHARE-NII> 0.22
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 71
<NAME> GLOBAL BOND FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 16,396,061
<INVESTMENTS-AT-VALUE> 16,559,934
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<OTHER-ITEMS-ASSETS> 869,015
<TOTAL-ASSETS> 17,915,373
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,329
<TOTAL-LIABILITIES> 100,329
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,658,845
<SHARES-COMMON-STOCK> 1,249,309
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,355
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 51,363
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 96,481
<NET-ASSETS> 13,296,621
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 338,752
<OTHER-INCOME> 0
<EXPENSES-NET> 84,311
<NET-INVESTMENT-INCOME> 254,441
<REALIZED-GAINS-CURRENT> 51,363
<APPREC-INCREASE-CURRENT> 96,481
<NET-CHANGE-FROM-OPS> 402,285
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 232,249
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,280,982
<NUMBER-OF-SHARES-REDEEMED> 52,629
<SHARES-REINVESTED> 20,956
<NET-CHANGE-IN-ASSETS> 13,296,621
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 41,518
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 155,029
<AVERAGE-NET-ASSETS> 8,056,569
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> 0.64
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.64
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000066117
<NAME> MIDWEST TRUST
<SERIES>
<NUMBER> 73
<NAME> GLOBAL BOND FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 16,396,061
<INVESTMENTS-AT-VALUE> 16,559,934
<RECEIVABLES> 486,424
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 869,015
<TOTAL-ASSETS> 17,915,373
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,329
<TOTAL-LIABILITIES> 100,329
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,658,845
<SHARES-COMMON-STOCK> 426,839
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,355
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 51,363
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 96,481
<NET-ASSETS> 4,518,423
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 338,752
<OTHER-INCOME> 0
<EXPENSES-NET> 84,311
<NET-INVESTMENT-INCOME> 254,441
<REALIZED-GAINS-CURRENT> 51,363
<APPREC-INCREASE-CURRENT> 96,481
<NET-CHANGE-FROM-OPS> 402,285
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,837
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 427,772
<NUMBER-OF-SHARES-REDEEMED> 2,192
<SHARES-REINVESTED> 1,259
<NET-CHANGE-IN-ASSETS> 4,518,423
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 41,518
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 155,029
<AVERAGE-NET-ASSETS> 1,001,297
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> 0.57
<PER-SHARE-DIVIDEND> 0.36
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.59
<EXPENSE-RATIO> 1.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
RULE 18f-3 PLAN ADOPTED WITH RESPECT TO THE MULTIPLE CLASS
DISTRIBUTION SYSTEM OF THE MIDWEST GROUP OF FUNDS
------------------------------------------------------------
Midwest Trust, Midwest Group Tax Free Trust and Midwest Strategic Trust
(the "Trusts") have each adopted this Plan pursuant to Rule 18f-3 promulgated
under the Investment Company Act of 1940 (the "1940 Act"). The individual
series of the Trusts which are not money market funds are referred to
collectively, in whole or in part, as the context requires, as the "Funds."
This Plan permits the Funds to issue and sell up to three classes of
shares for the purpose of establishing a multiple class distribution system
(the "Multiple Class Distribution System") and to assess a contingent deferred
sales charge ("CDSC") on certain redemptions of a class of the Funds' shares
and to waive the CDSC in certain instances. These guidelines set forth the
conditions pursuant to which the Multiple Class Distribution System will
operate and the duties and responsibilities of the Trustees of each Trust with
respect to the Multiple Class Distribution System.
DESCRIPTION OF THE MULTIPLE CLASS DISTRIBUTION SYSTEM
- ------------------------------------------------------
Each Trust is an open-end management investment company registered under
the 1940 Act. Midwest Group Financial Services, Inc. (the "Distributor")
provides investment advisory and management services to each of the Funds and
acts as principal underwriter for the Funds.
The Multiple Class Distribution System enables each Fund to offer
investors the option of purchasing shares in one of three manners: (1) subject
to a conventional front-end sales load and a distribution fee not to exceed
.35% of average net assets (Class A shares); (2) subject to either no front-
end sales load or a front-end sales load which is smaller than the sales load
on Class A shares, and in addition subject to a distribution fee and service
fee of up to 1% of average net assets (Class B shares); or (3) subject to a
CDSC and a distribution fee and service fee of up to 1% of average net assets
(Class C shares).
The actual creation and issuance of multiple classes of shares will be
made on a Fund-by-Fund basis, and some Funds may not in fact create or issue
any new classes of shares or may create or issue only two of the three classes
of shares described herein.
The three classes will each represent interests in the same portfolio of
investments of such Fund. The three classes will be identical except that (i)
the distribution fees payable by a Fund attributable to each class pursuant to
the distribution plans adopted by the Funds in accordance with Rule 12b-1
under the 1940 Act will be higher for Class B shares and Class C shares than
for Class A shares; (ii) each class may bear different Class Expenses (as
defined below); (iii) each class will vote separately as a class with respect
to a Fund's Rule 12b-1 distribution plan; (iv) each class has different
exchange privileges; and (v) each class may bear a different name or
designation.
Investors purchasing Class A shares will do so at net asset value plus a
front-end sales load in the traditional manner. The sales load may be subject
to reductions for larger purchases, under a combined purchase privilege, under
a right of accumulation or under a letter of intent. The sales load may be
subject to certain other reductions permitted by Section 22(d) of the 1940 Act
and set forth in the registration statement of each Trust. The public
offering price for the Class A shares will be computed in accordance with Rule
22c-1, Section 22(d) and other relevant provisions of the 1940 Act and the
rules and regulations thereunder. Each Fund will also pay a distribution fee
pursuant to the Fund's Rule 12b-1 distribution plan at an annual rate of up to
.35% of 1% of the average daily net asset value of the Class A shares.
Investors purchasing Class B shares of a Fund will do so at either net
asset value without a front-end sales load or at net asset value plus a front-
end sales load which is less than the front-end sales load applicable to Class
A shares of such Fund. The sales load on Class B shares, if any, may be
subject to reductions for larger purchases, under a combined purchase
privilege or under a letter of intent. The public offering price for the
Class B shares will be computed in accordance with Rule 22c-1, Section 22(d)
and other relevant provisions of the 1940 Act and the rules and regulations
thereunder. Each Fund will also pay a distribution fee pursuant to the Fund's
Rule 12b-1 distribution plan at an annual rate of up to 1% of the average
daily net asset value of the Class B shares.
Investors purchasing Class C shares will do so at net asset value per
share without the imposition of a sales load at the time of purchase. Each
Fund will pay a distribution fee pursuant to the distribution plan at an
annual rate of up to 1% of the average daily net asset value of the Class C
shares. In addition, an investor's proceeds from a redemption of Class C
shares made within a specified period of time of their purchase generally
will be subject to a CDSC imposed by the Distributor. The CDSC will range
from 1% to 5% (but may be higher or lower) on shares redeemed during the first
year after purchase and will be reduced at a rate of 1% (but may be higher or
lower) per year over the CDSC period, so that redemptions of shares held after
that period will not be subject to a CDSC. The CDSC will be made subject to
the conditions set forth below. The Class C alternative is designed to permit
the investor to purchase Class C shares without the assessment of a front-end
sales load and at the same time permit the Distributor to pay financial
intermediaries selling shares of each Fund a commission on the sale of the
Class C shares.
Under the Trusts' distribution plans, the Distributor will not be
entitled to any specific percentage of the net asset value of each class of
shares of the Funds or other specific amount. As described above, each Fund
will pay a distribution fee pursuant to its distribution plan at an annual
rate of up to .35% of the average daily net assets of such Fund's Class A
shares and up to 1% of the average daily net asset value of such Fund's
Class B shares and Class C shares. Under the Trusts' distribution plans,
payments will be made for expenses incurred in providing distribution-related
services (including, in the case of the Class C shares, commission expenses as
described in more detail below). Each Fund will accrue at a rate (but not in
excess of the applicable maximum percentage rate) which is reviewed by each
Trust's Board of Trustees quarterly. Such rate is intended to provide for
accrual of expenses at a rate that will not exceed the unreimbursed amounts
actually expended for distribution by a Fund. If at any time the amount
accrued by a Fund would exceed the amount of distribution expenses incurred
with respect to such Fund during the fiscal year (plus, in the case of Class C
shares, prior unreimbursed commission-related expenses), then the rate of
accrual will be adjusted accordingly. In no event will the amount paid by the
Funds exceed the unreimbursed expenses previously incurred in providing
distribution-related services.
Proceeds from the distribution fee and, in the case of Class C shares,
the CDSC, will be used to compensate financial intermediaries with a service
fee based upon a percentage of the average daily net asset value of the shares
maintained in the Funds by their customers and to defray the expenses of the
Distributor with respect to providing distribution related services, including
commissions paid on the sale of Class C shares.
All classes of shares of each Fund will have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except for the
differences mentioned above.
Under the Multiple Class Distribution System, the Board of Trustees could
determine that any of certain expenses attributable to the shares of a
particular class of shares will be borne by the class to which they were
attributable ("Class Expenses"). Class Expenses are limited to (a) transfer
agency fees identified by the Trusts as being attributable to a class of
shares; (b) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxy
statements to current shareholders of a specific class; (c) SEC and Blue Sky
registration fees incurred by a class of shares; (d) the expenses of
administrative personnel and services as required to support the shareholders
of a specific class; (e) litigation or other legal expenses relating to a
specific class of shares; (f) Trustees' fees or expenses incurred as a result
of issues relating to a specific class of shares; (g) accounting fees and
expenses relating to a specific class of shares; and (h) additional
incremental expenses not specifically identified above that are subsequently
identified and determined to be properly allocated to one class of shares and
approved by the Board of Trustees.
Under the Multiple Class Distribution System, certain expenses could be
attributable to more than one Fund ("Fund Expenses"). All such Fund Expenses
would be first allocated among Funds, based on the aggregate net assets of
such Funds, and then borne on such basis by each Fund and without regard to
class. Expenses that were attributable to a particular Fund but not to a
particular class thereof ("Series Expenses"), would be borne by each class on
the basis of the net assets of such class in relation to the aggregate net
assets of the Fund. In addition to distribution fees, Class Expenses may be
applied to the shares of a particular class. Any additional Class Expenses
not specifically identified above in the preceding paragraph which are
subsequently identified and determined to be properly applied to one class of
shares shall not be so applied until approved by the Board of Trustees.
Subject to the approval of the Board of Trustees, certain expenses may be
applied differently if their current application becomes no longer
appropriate. For example, if a Class Expense is no longer attributable to a
specific class, it may be charged to the applicable Fund or Funds, as
appropriate. In addition, if application of all or a portion of a particular
expense to a class is determined by the Internal Revenue Service or counsel to
the Trusts to result in a preferential dividend for which, pursuant to Section
562(c) of the Internal Revenue Code of 1986, as amended (the "Code"), a Fund
would not be entitled to a dividends paid deduction, all or a portion of the
expense may be treated as a Series Expense or a Fund Expense. Similarly, if a
Fund Expense becomes attributable to a specific Fund it may be treated as a
Series Expense.
Because of the varying distribution fees and Class Expenses that may be
borne by each class of shares, the net income of (and dividends payable with
respect to) each class may be different from the net income of (and dividends
payable with respect to) the other classes of shares of a Fund. Dividends
paid to holders of each class of shares in a Fund would, however, be declared
and paid on the same days and at the same times and, except as noted with
respect to the varying distribution fees and Class Expenses would be
determined and paid in the same manner. To the extent that a Fund has
undistributed net income, the net asset value per share of each class of such
Fund's shares will vary.
Each Fund will briefly describe the salient features of the Multiple
Class Distribution System in its prospectus. Each Fund will disclose in its
prospectus the respective expenses, performance data, distribution
arrangements, services, fees, sales loads, deferred sales loads and exchange
privileges applicable to each class of shares offered through that prospectus.
The shareholder reports of each Fund will disclose the respective expenses and
performance data applicable to each class of shares. The shareholder reports
will contain, in the statement of assets and liabilities and statement of
operations, information related to the Fund as a whole generally and not on a
per class basis. Each Fund's per share data, however, will be prepared on a
per class basis with respect to all classes of shares of such Fund. The
information provided by the Distributor for publication in any newspaper or
similar listing of the Funds' net asset values and public offering prices will
separately present Class A, Class B and Class C shares.
The Class C alternative is designed to permit the investor to purchase
Class C shares without the assessment of a front-end sales load and at the
same time permit the Distributor to pay financial intermediaries selling
shares of the Funds a commission on the sale of the Class C shares. Proceeds
from the distribution fee and the CDSC will be used to compensate financial
intermediaries with a service fee and to defray the expenses of the
Distributor with respect to providing distribution related services, including
commissions paid on the sale of Class B shares.
The CDSC will not be imposed on redemptions of shares which were
purchased more than a specified period, up to six years (the "CDSC Period")
prior to their redemption. The CDSC will be imposed on the lesser of the
aggregate net asset value of the shares being redeemed either at the time of
purchase or redemption. No CDSC will be imposed on shares acquired through
reinvestment of income dividends or capital gains distributions. In
determining whether a CDSC is applicable, unless the shareholder otherwise
specifically directs, it will be assumed that a redemption is made first of
any Class C shares derived from reinvestment of distributions, second of
Class C shares held for a period longer than the CDSC Period, third of any
class B shares in the shareholder's account, fourth of any Class A shares in
the shareholder's account, and fifth of Class C shares held for a period not
longer than the CDSC Period.
In addition, the Funds will waive the CDSC on redemptions following the
death or disability of a shareholder as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986. The Distributor will require satisfactory
proof of death or disability before it determines to waive the CDSC. In cases
of death or disability, the CDSC may be waived where the decedent or disabled
person is either an individual shareholder or owns the shares with his or her
spouse as a joint tenant with rights of survivorship if the redemption is made
within one year of death or initial determination of disability.
Under the Multiple Class Distribution System, Class A shares and Class B
shares of a Fund will be exchangeable for (a) Class A shares of the other
Funds, (b) Class B shares of the other Funds, (c) shares of series of the
Trusts which are money market funds (the "Money Market Funds") and (d) shares
of any Fund which offers only one class of shares (provided such Fund does not
impose a CDSC) on the basis of relative net asset value per share, plus an
amount equal to the difference, if any, between the sales charge previously
paid on the exchanged shares and sales charge payable at the time of the
exchange on the acquired shares.
Class C shares of a Fund will be exchangeable for (a) Class C shares of
the other Funds, (b) shares of the Money Market Funds and (c) shares of any
Fund which offers only one class of shares and which imposes a CDSC on the
basis of relative net asset value per share. A Fund will "tack" the period
for which original Class C shares were held onto the holding period of the
acquired Class C shares for purposes of determining what, if any, CDSC is
applicable in the event that the acquired Class C shares are redeemed
following the exchange. In the event of redemptions of shares after an
exchange, an investor will be subject to the CDSC of the Fund with the longest
CDSC period and/or highest CDSC schedule which may have been owned by him or
her, resulting in the greatest CDSC payment. The period of time that Class C
shares are held in a Money Market Fund will not count toward the CDSC holding
period. The Funds will comply with Rule 11a-3 under the 1940 Act as to any
exchanges.
LEGAL ANALYSIS
- --------------
The Board of Trustees of each Trust has determined to rely on Rule
18f-3 under the 1940 Act and to discontinue reliance on an Order previously
received from the Securities and Exchange Commission (the "SEC") exempting the
Funds from the provisions of Sections 18(f), 18(g) and 18(i) of the 1940 Act
to the extent that the issuance and sale of three classes of shares
representing interests in the same Fund might be deemed: (a) to result in a
"senior security" within the meaning of Section 18(g); (b) prohibited by
Section 18(f); and (c) to violate the equal voting provisions of Section
18(i).
The Distributor believes that the Multiple Class Distribution System
described herein will better enable the Funds to meet the competitive demands
of today's financial services industry. Under the Multiple Class Distribution
System, an investor will be able to choose the method of purchasing shares
that is most beneficial given the amount of his or her purchase, the length of
time the investor expects to hold his or her shares, and other relevant
circumstances. The System permits the Funds to facilitate both the
distribution of their securities and provide investors with a broader choice
as to the method of purchasing shares without assuming excessive accounting
and bookkeeping costs or unnecessary investment risks.
The allocation of expenses and voting rights relating to the Rule 12b-1
plans in the manner described is equitable and does not discriminate against
any group of shareholders. In addition, such arrangements should not give
rise to any conflicts of interest because the rights and privileges of each
class of shares are substantially identical.
The Distributor believes that the Multiple Class Distribution System
will not increase the speculative character of the shares of the Funds. The
Multiple Class Distribution System does not involve borrowing, nor will it
affect the Funds' existing assets or reserves, and does not involve a complex
capital structure. Nothing in the Multiple Class Distribution System suggests
that it will facilitate control by holders of any class of shares.
The Distributor believes that the ability of the Funds to implement the
CDSC is appropriate in the public interest, consistent with the protection of
investors, and consistent with the purposes fairly intended by the policy and
provisions of the 1940 Act. The CDSC arrangement will provide shareholders
the option of having their full payment invested for them at the time of their
purchase of shares of the Funds with no deduction of a sales charge.
CONDITIONS OF OPERATING UNDER THE MULTIPLE CLASS
DISTRIBUTION SYSTEM
- -------------------------------------------------
The operation of the Multiple Class Distribution System shall at all
times be in accordance with Rule 18f-3 under the 1940 Act and all other
applicable laws and regulations, and in addition, shall be subject to the
following conditions:
1. Each class of shares will represent interests in the same portfolio
of investments of a Fund, and be identical in all material respects, except as
set forth below. The only differences among the various classes of a Fund
will relate solely to: (a) the impact of the disproportionate Rule 12b-1
distribution plan payments allocated to each of the Class A shares, Class B
shares or Class C shares of a Fund; (b) Class Expenses, which are limited to
(i) transfer agency fees (including the incremental cost of monitoring a CDSC
applicable to a specific class of shares), (ii) printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders of a specific class, (iii)
SEC and Blue Sky registration fees incurred by a class of shares, (iv) the
expenses of administrative personnel and services as required to support the
shareholders of a specific class, (v) litigation or other legal expenses
relating to a specific class of shares, (vi) Trustees' fees or expenses
incurred as a result of issues relating to a specific class of shares, and
(vii) accounting fees and expenses relating to a specific class of shares;
(c) the fact that each class will vote separately as a class with respect to
the Rule 12b-1 distribution plans; (d) the different exchange privileges of
the various classes of shares; and (e) the designation of each class of shares
of the Funds. Any additional incremental expenses not specifically identified
above that are subsequently identified and determined to be properly allocated
to one class of shares shall not be so allocated until approved by the Board
of Trustees.
2. The Trustees of each Trust, including a majority of the Trustees
who are not interested persons of the Trust, have approved this Plan as being
in the best interests of each class individually and each Fund as a whole. In
making this finding, the Trustees evaluated the relationship among the
classes, the allocation of expenses among the classes, potential conflicts of
interest among classes, and the level of services provided to each class and
the cost of those services.
3. Any material changes to this Plan, including but not limited to a
change in the method of determining Class Expenses that will be applied to a
class of shares, will be reviewed and approved by votes of the Board of
Trustees of each Trust, including a majority of the Trustees who are not
interested persons of the Trust.
4. On an ongoing basis, the Trustees of each of the Trusts, pursuant to
their fiduciary responsibilities under the 1940 Act and otherwise, will
monitor each Fund for the existence of any material conflicts between the
interests of the classes of shares. The Trustees, including a majority of the
Trustees who are not interested persons of the Trust, shall take such action
as is reasonably necessary to eliminate any such conflicts that may develop.
The Distributor will be responsible for reporting any potential or existing
conflicts to the Trustees. If a conflict arises, the Distributor at its own
cost will remedy such conflict up to and including establishing a new
registered management investment company.
5. The Trustees of each Trust will receive quarterly and annual
Statements complying with paragraph (b)(3)(ii) of Rule 12b-1, as it may be
amended from time to time. In the Statements, only distribution expenditures
properly attributable to the sale of a class of shares will be used to support
the Rule 12b-1 fee charged to shareholders of such class of shares.
Expenditures not related to the sale of a particular class will not be
presented to the Trustees to justify any fee attributable to that class. The
Statements, including the allocations upon which they are based, will be
subject to the review and approval of the independent Trustees in the exercise
of their fiduciary duties.
6. Dividends paid by a Fund with respect to each class of shares, to
the extent any dividends are paid, will be calculated in the same manner, at
the same time, on the same day, and will be in the same amount, except that
distribution fee payments and Class Expenses relating to each respective class
of shares will be borne exclusively by that class.
7. Applicants have established the manner in which the net asset value
of the three classes of shares will be determined and the manner in which
dividends and distributions will be paid. Attached hereto as Exhibit A is a
procedures memorandum and worksheets with respect to the methodology and
procedures for calculating the net asset value and dividends and distributions
of the various classes and the proper allocation of income and expenses among
the classes.
8. The Distributor represents that it has in place, and will continue
to maintain, adequate facilities in place to ensure implementation of the
methodology and procedures for calculating the net asset value and dividends
and distributions among the various classes of shares.
9. If a Fund offers separate classes of shares through separate
prospectuses, each such prospectus will disclose (i) that the Fund issues
other classes, (ii) that those other classes may have different sales charges
and other expenses, which may affect performance, (iii) a telephone number
investors may call to obtain more information concerning the other classes
available to them through their sales representative, and (iv) that investors
may obtain information concerning those classes from their sales
representative or the Distributor.
10. The Distributor has adopted compliance standards as to when Class A,
Class B and Class C shares may appropriately be sold to particular investors.
The Distributor will require all persons selling shares of the Funds to agree
to conform to such standards.
11. Each Fund will briefly describe the salient features of the Multiple
Class Distribution System in its prospectus. Each Fund will disclose in its
prospectus the respective expenses, performance data, distribution
arrangements, services, fees, sales loads, deferred sales loads and exchange
privileges applicable to each class of shares offered through that prospectus.
Each Fund will disclose the respective expenses and performance data
applicable to each class of shares in every shareholder report. The
shareholder reports will contain, in the statement of assets and liabilities
and statement of operations, information related to the Fund as a whole
generally and not on a per class basis. Each Fund's per share data, however,
will be prepared on a per class basis with respect to all classes of shares of
such Fund. The information provided by the Applicants for publication in any
newspaper or similar listing of the Funds' net asset values and public
offering prices will separately present Class A, Class B and Class C shares.
12. Applicants will comply with the provisions of Rule 6c-10 under the
1940 Act, IC-20916 (February 23, 1995), as such rule is currently adopted and
as it may be amended.
EXHIBIT A
MIDWEST TRUST
MIDWEST STRATEGIC TRUST
MIDWEST GROUP TAX FREE TRUST
MULTIPLE-CLASS FUNDS
METHODOLOGY, PROCEDURES
AND
INTERNAL ACCOUNTING CONTROLS
INTRODUCTION
------------
Midwest Trust, Midwest Group Tax Free Trust and Midwest Strategic Trust
(the "Trusts") are Massachusetts business trusts registered under the
Investment Company Act of 1940 as open-end management investment companies.
Midwest Group Financial Services, Inc. (the "Distributor") acts as the
investment manager to each Fund and serves as each Fund's principal
underwriter. The Distributor is a subsidiary of Leshner Financial, Inc. The
Trusts presently offer the following series of shares (collectively, the
"Funds") representing interests in separate investment portfolios:
Midwest Strategic Trust Midwest Group Tax Free Trust
- ----------------------- ----------------------------
U.S. Government Securities Tax-Free Intermediate Term Fund
Fund Ohio Insured Tax-Free Fund
Treasury Total Return Fund
*Utility Fund
*Equity Fund
Midwest Trust
-------------
Intermediate Term Government Income Fund
*Global Bond Fund
Adjustable Rate U.S. Government Securities Fund
* Periodic (non-daily) dividend Funds
Each Fund may offer multiple classes of shares as more fully described in
the Trusts' Rule 18f-3 Plan. The Multiple Class Distribution System would
enable each Fund to offer investors the option of purchasing shares in one of
three manners: (1) subject to a conventional front-end sales load and a
distribution fee not to exceed .35% of average net assets (Class A shares);
(2) subject to either no front-end sales load or to a front-end sales load
which is smaller than the sales load on Class A shares, and also subject to a
distribution fee and service fee of up to 1% of average net assets (Class B
shares); or (3) subject to a contingent deferred sales charge and a
distribution fee and service fee of up to 1% of average net assets (Class C
shares). Each of the Funds which invests primarily in domestic debt
securities intends that substantially all net investment income will be
declared as a dividend daily and paid monthly. Each of the Funds designated
by an asterisk in the above chart declares and pays net investment income at
the end of each calendar quarter (such Funds are referred to herein as
"periodic dividend Funds"). Future series of the Trusts may declare dividends
daily or periodically. The Funds and any future series of the Trusts will
declare and pay substantially all net realized gains, if any, at least
annually.
Pursuant to an Accounting Services Agreement, MGF Service Corp. ("MGF")
maintains the Funds' accounting records and performs the daily calculations of
each Fund's net asset value. Thus the procedures and internal accounting
controls for the Funds include the participation of MGF.
The internal accounting control environment at MGF provides for minimal
risk of error. This has been accomplished through the use of competent and
well-trained employees, adequate facilities and established internal
accounting control procedures.
Additional procedures and internal accounting controls have been designed
for multiple class Funds. These procedures and internal accounting controls
have been reviewed by management of the Trusts and MGF to ensure that the
risks associated with multiple-class Funds are adequately addressed.
The specific internal accounting control objectives and the related
methodology, procedures and internal accounting controls to achieve these
stated objectives are outlined below.
METHODOLOGY, PROCEDURES AND INTERNAL
ACCOUNTING CONTROLS FOR MULTIPLE-CLASS FUNDS
--------------------------------------------
The three internal accounting control objectives to be achieved are:
(1) The daily net asset value for all classes of shares of each Fund is
accurately calculated.
(2) Recorded expenses of a Fund are properly allocated between each
class of shares.
(3) Dividend distributions are accurately calculated for each class of
shares.
1. Control Objective
The daily net asset value for all classes of shares of each Fund is
accurately calculated.
Methodology, Procedures and Internal Accounting Controls
--------------------------------------------------------
a. Securities will be valued daily at their current market value by a
reputable pricing source. Security positions will be reconciled
from the Trusts' records and to custody records and reviewed for
completeness and accuracy.
b. Prepaid and intangible assets will be amortized over their estimated
useful lives. These assets will be reviewed monthly to ensure a
proper presentation and amortization during the period.
c. Investment income, realized and unrealized gains or losses will be
calculated daily from MGF's portfolio system and reconciled to the
general ledger. Yields and fluctuations in security prices will be
monitored on a daily basis by MGF personnel. Interest and dividend
receivable amounts will be reconciled to holdings reports.
d. An estimate of all expenses for each Fund will be accrued daily.
Daily expense accruals will be reviewed and revised, as required, to
reflect actual payments made to vendors.
e. Capital accounts for each class of shares will be updated based on
daily share activity and reconciled to transfer agent reported
outstanding shares.
f. All balance sheet asset, liability and capital accounts will be
reconciled to subsidiary records for completeness and accuracy.
g. For each Fund, a pricing worksheet (see attached example) will be
prepared daily which calculates the net asset value of settled
shares by class (for daily dividend Funds) or net asset value of
outstanding shares (for periodic dividend Funds) and the percentage
of net asset value of such class to the total of all classes of
shares. Investment income and joint expenses will be allocated by
class of shares according to such percentages. Realized and
unrealized gains will be allocated by class of shares according to
such percentages.
h. Prior day net assets by class will be rolled forward to current day
net assets by class of shares by adjusting for current day income,
expense and distribution activity. (There may or may not be
distribution activity in the periodic dividend Funds.) Net assets
by class of shares will then be divided by the number of outstanding
shares for each class to obtain the net asset value per share. Net
asset values will be reviewed and approved by supervisors.
i. Net asset values per share of the different classes of shares for
daily dividend Funds should be identical except with respect to
possible differences attributable to rounding. Differences, if any,
will be investigated by the accounting supervisor.
j. Net asset values per share of the different classes of shares for
the periodic dividend Funds may be different as a result of
accumulated income between distribution dates and the effect of
class specific expenses. Other differences, if any, will be
investigated by the accounting supervisor.
2. Control Objective
Recorded expenses of a Fund are properly allocated between each class of
shares.
Methodology, Procedures and Internal Accounting Controls
--------------------------------------------------------
a. Expenses will be classified as being either joint or class specific
on the pricing worksheet.
b. Certain expenses will be attributable to more than one Fund. Such
expenses will be first allocated among the Funds, based on the
aggregate net assets of such Funds, and then borne on such basis by
each Fund and without regard to class. These expenses could
include, for example, Trustees' fees and expenses, unallocated audit
and legal fees, insurance premiums, expenses relating to shareholder
reports and printing expenses. Expenses that are attributable to a
particular Fund but not to a particular class thereof will be borne
by each class on the basis of the net assets of such class in
relation to the aggregate net assets of the Fund. These expenses
could include, for example, advisory fees and custodian fees, and
fees related to the preparation of separate documents for current
shareholders of a particular Fund.
c. Class specific expenses are those identifiable with each individual
class of shares. These expenses include 12b-1 distribution fees;
transfer agent fees as identified by MGF Service Corp. as being
attributable to a specific class; printing and postage expenses
related to preparing and distributing materials such as shareholder
reports, prospectuses and proxies to current shareholders of a
particular class; SEC and Blue Sky registration fees; the expenses
of administrative personnel and services required to support the
shareholders of a specific class; litigation or other legal expenses
relating solely to one class of shares; Trustees' fees incurred as a
result of issues relating to one class of shares; and accounting
fees and expenses relating to a specific class of shares.
d. Joint expenses will be allocated daily to each class of shares based
on the percentage of the net asset value of shares of such class to
the total of the net asset value of shares of all classes of shares.
Class specific expenses will be charged to the specific class of
shares. Both joint expenses and class specific expenses are
compared against expense projections.
e. The total of joint and class specific expense limits will be
reviewed to ensure that voluntary or contractual expense limits are
not exceeded. Amounts will be adjusted to ensure that any limits
are not exceeded. Expense waivers and reimbursements will be
calculated and allocated to each class of shares based upon the pro
rata percentage of the net assets of a Fund as of the end of the
prior day, adjusted for the previous day's share activity.
f. Each Fund will accrue distribution expenses at a rate (but not in
excess of the applicable maximum percentage rate) which will be
reviewed by the Board of Trustees on a quarterly basis. Such
distribution expenses will be calculated at an annual rate not to
exceed .25% (except that such amount is .35% for the series of
Midwest Income Trust) of the average daily net assets of the Fund's
Class A shares and not to exceed 1% of the average daily net assets
of the Fund's Class B shares and Class C shares. Under the
distribution plans, payments will be made only for expenses
incurred in providing distribution related services. Unreimbursed
distribution expenses of the Distributor will be determined daily
and the Distributor shall not be entitled to reimbursement for any
amount with respect to any day on which there exist no unreimbursed
distribution expenses.
g. Expense accruals for both joint and class specific expenses are
reviewed each month. Based upon these reviews, adjustments to
expense accruals or expense projections are made as needed.
h. Expense ratios and yields for each class of shares will be reviewed
daily to ensure that differences in yield relate solely to
acceptable expense differentials.
i. Any change to the classification of expenses as joint or class
specific is reviewed and approved by the Board of Trustees.
j. MGF will perform detailed expense analyses to ensure that expenses
are properly charged to each Fund and to each class of shares. Any
expense adjustments required as a result of this process will be
made.
3. Control Objective
Dividend distributions are accurately calculated for each class of
shares.
Methodology, Procedures and Internal Accounting Controls
--------------------------------------------------------
a. The daily dividend Funds declare substantially all net investment
income daily.
b. The periodic dividend Funds declare substantially all net investment
income periodically.
c. Investment income, including amortization of discount and premium,
where applicable, is recorded by each Fund and is allocated to each
class of shares based upon its pro rata percentage of the net assets
of the Fund as of the end of the prior day, adjusted for the
previous day's share activity.
d. For daily dividend Funds, distributable income is calculated for
each class of shares on the pricing worksheet from which daily
dividends and distributions are calculated. The dividend rates are
calculated on a settlement date basis for class shares outstanding.
e. Each non-daily dividend Fund will determine the amount of
accumulated income available for all classes after deduction of
allocated expenses but before consideration of any class specific
expenses. This amount will be divided by total outstanding shares
for all classes combined to arrive at a gross dividend rate for all
shares. From this gross rate, a class specific amount per share for
each class (representing the unique and incrementally higher, if
any, expenses accrued during the period to that class divided by the
shares outstanding for that class) is subtracted. The result is the
actual per share rate available for each class in determining
amounts to distribute.
f. Realized capital gains, if any, are allocated daily to each class
based upon its relative percentage of the total net assets of the
Fund as of the end of the prior day, adjusted for the previous day's
share activity.
g. Capital gains are distributed at least once every twelve months with
respect to each class of shares.
h. The capital gains distribution rate will be determined on the ex-
date by dividing the total realized gains of the Fund to be declared
as a distribution by the total outstanding shares of the Fund as of
the record date.
i. Capital gains dividends per share should be identical for each class
of shares within a Fund. Differences, if any, will be investigated
and resolved.
j. Distributions are reviewed annually by MGF at fiscal year end and as
required for excise tax purposes during the fiscal year to ensure
compliance with IRS regulations and accuracy of calculations.
There are several pervasive procedures and internal accounting controls which
impact all three of the previously mentioned objectives.
a. MGF's supervisory personnel will be involved on a daily basis to
ensure that the methodology and procedures for calculating the net
asset value and dividend distribution for each class of shares is
followed and a proper allocation of expenses among each class of
shares is performed.
b. MGF fund accountants will receive overall supervision. Their work
with regard to multiple class calculations will be reviewed and
approved by supervisors.
c. MGF's pricing worksheets will be clerically checked and verified
against corresponding computer system generated reports.
Sample Multiple Class Worksheet
Allocation Methodology - Value of Shares Outstanding (periodic dividend Funds)
Value of Settled Shares Outstanding (daily dividend Funds)
<TABLE>
Fund ______________________________
Date ______________________________
<CAPTION>
` Total
(T) (A) (B) (C)
<S> <C> <C> <C> <C>
1 Prior day NAV per share (unrounded)
Allocation Percentages
Complete for all Funds:
2 Shares O/S - prior day
3 Prior day shares activity
4 Adjusted shares O/S [2 + 3]
5 Adjusted net assets [4 x 1]
6 % Assets by class
For daily dividend funds complete Rows 7 - 11
For periodic (non daily) dividend funds insert
same # from Rows 2 - 6
7 Settled shares prior day
8 Prior day settled shares activity
9 Adjusted settled shares O/S [7 & 8]
10 Adjusted settled assets [9 x 1]
11 % Assets by class
Income and Expenses
12 Daily income *
Expenses:
13 Management Fee*
14 12-1 Fee
15 Other Joint Expenses*
16 Direct Class Expenses
17 Daily expenses [13+14+15+16]
18 Daily Net Income [12 - 17]
19 Dividend Rate (Daily Dividend Funds Only)
[18/9]
Capital
20 Income distribution
21 Undistributed Net Income [18 - 20]
22 Capital share activity
23 Realized Gains/Losses:
24 Short-Term**
25 Long-Term**
26 Capital gain distribution
27 Unrealized appreciation/depreciation**
28 Daily net asset change
[21 + 22 + 24 + 25 + 26 + 27]
<PAGE>
Sample Multiple Class Worksheet
Allocation Methodology - Value of Shares Outstanding (periodic dividend Funds)
Value of Settled Shares Outstanding (daily dividend Funds)
Fund ______________________________
Date ______________________________
<CAPTION>
Total
(T) (A) (B) (C)
<S> <C> <C> <C> <C>
NAV Proof
29 Prior day net assets
30 Current day net assets [28 + 29]
31 NAV per share [30 / 4]
32 Sales Load as a percent of offering price
33 Offering Price [31 / (100% - 32)]
<FN>
* - Allocated based on Line 11 percentages.
** - Allocated based on Line 6 percentages.
</TABLE>
<PAGE>
MULTIPLE CLASS PRICING
FINANCIAL STATEMENT DISCLOSURE
Statement of Assets and Liabilities
- -----------------------------------
- Assets and liabilities will be disclosed in accordance with standard
reporting format.
- The following will be disclosed for each class:
Net Assets:
Class A Shares
--------------
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Unrealized appreciation (depreciation) on
investments - net
Net Assets - equivalent to $--- per share based on --- shares
outstanding.
Class B Shares
--------------
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Unrealized appreciation (depreciation) on
investments - net
Net Assets - equivalent to $--- per share based on --- shares
outstanding.
Class C Shares
--------------
Paid-in capital
Undistributed net investment income
Undistributed realized gain (loss) on
investments - net
Unrealized appreciation (depreciation) on
investments - net
Net Assets - equivalent to $--- per share based on --- shares
outstanding.
Statement of Operations
- -----------------------
- Standard reporting format, except that class specific expenses will
be disclosed for each class.
Statement of Changes in Net Assets
- ----------------------------------
- Show components by each class of shares and in total as follows:
Current Year Prior Year
- -------------------------------- ------------------------------
Total Class A Class B Class C Total Class A Class B Class C
- ----- ------- ------- ------- ----- ------- ------- -------
Selected Share Data and Ratios
- ------------------------------
- Show components by each class as follows:
Current Year Prior Years
- ------------------------- -------------------------
Class A Class B Class C Class A Class B Class C
- ------- ------- ------- ------- ------- -------
Notes to Financial Statements
- -----------------------------
- Note on share transactions will include information on each class of
shares for two years
- Notes will include additional disclosure regarding allocation of
expenses between classes.
- Notes will describe the distribution arrangements, incorporating
disclosure on any classes' 12b-1 fee arrangements.
