LETTER FROM THE PRESIDENT
==============================================================================
Photo of: Robert H. Leshner
Dear Fellow Shareholders:
We are pleased to present the audited annual report for the U.S. Government
Securities Fund, Treasury Total Return Fund, Utility Fund and Equity Fund for
the fiscal year ending March 31, 1996.
Even though recent economic reports have been mixed, there is an overall bias
toward moderate economic growth with little inflationary pressure. During the
first quarter of 1996, equity and bond market performance was characterized by
uncertainty and volatility. Daily fluctuations caused growing investor
concern; even so, overall performance remained in a fairly steady range. The
release of a stronger than expected March employment report and subsequent
market corrections caused increased volatility which continued through
quarter-end.
Electric utility stocks continue to follow the performance of the bond market.
As an industry in transition, electric and telecommunication utilities are
facing increased merger and acquisition activity. As an important part of the
Midwest portfolio strategy, we seek those utilities companies that may provide
investors with the opportunity for income as well as growth.
Despite some setbacks in early January, equities continue their upward trend.
The market remains positive, as investors believe that stocks are among the
most attractive long-term investments.
Fund descriptions and performance are listed below:
The U.S. GOVERNMENT SECURITIES FUND seeks high current income, consistent with
the protection of capital, by investing primarily in mortgage-backed
securities which are issued or guaranteed as to principal and interest by the
U.S. Government, its agencies or instrumentalities. For the fiscal year ending
March 31, 1996, the Fund's total return (excluding the impact of sales loads)
was 8.39%.
The TREASURY TOTAL RETURN FUND seeks the highest level of total return over
the long term, consistent with the protection of capital, by investing
primarily in direct obligations of the United States Treasury. For the fiscal
year ending March 31, 1996, the Fund's total return (excluding the impact of
sales loads) was 2.95%.
The UTILITY FUND seeks a high level of current income by investing primarily
in securities of public utilities. Capital appreciation is a secondary
objective. For the fiscal year ending March 31, 1996, the Fund's total returns
(excluding the impact of sales loads) were 21.65% for Class A shares and
20.78% for Class C shares.
The EQUITY FUND seeks long-term capital appreciation by investing primarily in
common stocks that offer growth potential. For the fiscal year ending March
31, 1996, the Fund's total returns (excluding the impact of sales loads) were
27.90% for Class A shares and 26.90% for Class C shares.
While there are compelling arguments for either a continued economic rebound
or slowing growth, we are confident that the Midwest Group of Funds are
well-positioned for the current market environment. Despite current
volatility, we are optimistic in our outlook for the remainder of 1996.
Inflation appears to remain in check, and profits should continue to grow
during the second half of the year.
The Funds, all of which are appropriate vehicles for retirement planning,
provide solid opportunities for long-term growth and current income. The
Midwest Group remains committed to providing conservative and quality
opportunities to help investors meet their financial goals. By putting our
values to work for you on a continuous basis, we hope to ensure not only the
success of our future, but most importantly, the success of yours.
Sincerely,
/s/ Robert H. Leshner
----------------------
Robert H. Leshner
President
<PAGE>
U.S. GOVERNMENT SECURITIES FUND
MANAGEMENT DISCUSSION AND ANALYSIS
==============================================================================
The U.S. Government Securities Fund seeks high current income, consistent with
the protection of capital, by investing primarily in mortgage-backed
securities which are issued or guaranteed as to principal and interest by the
U.S. Government, its agencies or instrumentalities. For the fiscal year ended
March 31, 1996, the Fund's total return (excluding the impact of the maximum
2% front-end sales load) was 8.39%, as compared to 10.49% for the Lehman
Brothers Mortgage-Backed Securities Index.
The economy slowed in 1995 following above average growth in 1994. Gross
domestic product moderated from a 3.5% annual growth rate in 1994 to 1.3% in
1995. The slowdown, which began in the first quarter of 1995, prompted the
Federal Reserve Board to lower the widely followed Federal Funds rate three
times in an effort to stimulate the economy. Interest rates declined
dramatically during the calendar year with intermediate and long maturities
declining approximately 2%. However, economic growth accelerated in the first
quarter of 1996, causing interest rates to reverse their year-long trend. This
resulted in increased bond price volatility as investors grappled with the
uncertainty regarding the future direction of the economy.
Throughout the fiscal year ended March 31, 1996, the Fund maintained a
combination of mortgage-backed securities, government agency securities and
Treasury issues. A core position of passthrough mortgage-backed securities and
callable agency securities generated current income while a smaller position
in Treasuries and non-callable agency securities produced capital
appreciation. Management also executed a sector rotation strategy whereby the
Fund was able to capitalize on inefficiencies in the market by buying
undervalued sectors while selling those considered overvalued. The Fund was
well-positioned for the declining interest rate environment which prevailed
throughout 1995. However, the unexpected rise in rates in early 1996 hurt the
Fund's comparative performance for the fiscal year.
As a result of heightened market volatility and the potential for an increase
in inflation, the Fund will maintain a cautious approach in the months ahead.
Until it becomes apparent that the economy is positioned for trend growth and
that inflation remains subdued, the Fund will pursue a defensive strategy
which emphasizes current income over total return. We expect market volatility
to continue through the summer months with the possibility of further
increases in interest rates. Longer term, we are more constructive on the
market as we believe trend growth will resume in the latter part of 1996.
<PAGE>
TREASURY TOTAL RETURN FUND
MANAGEMENT DISCUSSION AND ANALYSIS
==============================================================================
The Treasury Total Return Fund seeks the highest level of total return over
the long term, consistent with the protection of capital, by investing
primarily in direct obligations of the United States Treasury. High current
income is a secondary objective. For the fiscal year ended March 31, 1996, the
Fund's total return (excluding the impact of the maximum 4% front-end sales
load) was 2.95%, as compared to 10.55% for the Merrill Lynch Treasuries (All
Maturities) Index.
Following a series of Federal Funds rate increases in 1994, the economy
moderated notably in 1995. By mid-year, economic reports indicated that the
manufacturing sector was contracting and that gross domestic product (GDP) was
virtually stagnant. The Federal Reserve Board, noting the lack of inflationary
pressures, opted to reverse course and lowered short-term interest rates in
the first of three easing moves totaling .75%. Intermediate and long-term
rates followed suit, declining approximately 2%. However, economic growth
rebounded in the first quarter of 1996, reversing a year-long trend of
declining interest rates, highlighting the potential for inflation and
increasing bond price volatility.
In response to the economic surge in 1994, management moved the investment
portfolio of the Fund into short-term Treasury issues and cash equivalents in
early 1995. This cautious outlook came on the heels of one of the worse
one-year periods in bond market history. Based on the uncertainty and
volatility that was characteristic of the bond market in the first half of
1995, management deemed it prudent to remain invested in short-term
maturities. As the economy moderated and the Federal Reserve Board utilized
monetary policy to stimulate economic activity, the pull-back in bond prices
anticipated by management never materialized. The Fund remained invested in
short-term obligations for the balance of the year and, as a result,
underperformed the peer group.
The current economic environment is a challenging one for fixed-income
investors. The economy appears to be rebounding solidly following a harsh
winter with muted economic activity. Growth in the first quarter of 1996 came
in much stronger than expected, exacerbating the sell-off in the bond market
which began in January. The short-term nature of the securities in the Fund
has benefitted performance in recent months, helping to mitigate the impact of
a 1% rise in long-term rates. Longer term, management anticipates moderate
growth in the economy and low inflation. The maturities of the U.S. Treasury
obligations in which the Fund invests will continue to be allocated based upon
projected interest rate trends.
<PAGE>
UTILITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
==============================================================================
The Utility Fund seeks a high level of current income by investing primarily
in securities of public utilities. Capital appreciation is a secondary
objective. The Fund's total returns for the fiscal year ended March 31, 1996
(excluding the impact of the maximum 4% front-end sales load on Class A
shares) were 21.65% and 20.78% for Class A shares and Class C shares,
respectively.
Interest rates remained at low levels throughout 1995 providing a healthy
environment for utility stocks. The utility market followed the general stock
market in producing impressive returns for the year. This was a dramatic
turnaround from the disappointing performance of utility stocks during 1994.
Competition and its impact on utility stocks received much discussion as
electric utility companies now face deregulation and increased competition
(brought on by the Energy Act of 1992). Telecommunications companies are also
undergoing change and will soon be allowed to enter the long distance and
cable markets. In the first quarter of 1996, as interest rates moved higher,
stock and utility markets diverged with stocks largely performing well and
utilities showing weakness. For the twelve months ended March 31, 1996, the
S&P Utility Index returned 26.61%.
Throughout the fiscal year, the Fund maintained a diversified portfolio that
consisted of electric, gas, water and telecommunications utility stocks.
Management's focus has been on quality utility companies that are positioned
favorably for increased competition with better than average potential for
earnings and dividend growth. Comparative performance of the Fund to the S&P
Utility Index was influenced by the growth-oriented concentration of the Index
with heavy weightings in telecommunications and technology sectors, whereas
the Fund focused more on higher-yielding utility holdings. Top performing
stocks for the Fund included GTE Corp. (the largest non-Bell
telecommunications system), Duke Power Co. (a Carolinas-based electric
utility) and MCN Corp. (a Michigan-based natural gas utility).
Looking forward, we anticipate moderate growth in the economy and low
inflation which would likely keep interest rates at their current levels or
lower and bode well for utility stocks. Earnings growth in this sector,
partially due to cost containment efforts, should continue and translate into
better dividend growth. The recent rise in interest rates and related decline
in utility stock prices is presenting the Fund with an opportunity to buy into
healthy utility companies at improved values. Management believes the Fund is
well-positioned to take advantage of such buying opportunities and benefit
from the earnings and dividend growth projected for the utility market.
<PAGE>
EQUITY FUND
MANAGEMENT DISCUSSION AND ANALYSIS
==============================================================================
The Equity Fund seeks long-term capital appreciation by investing primarily in
common stocks of companies that offer growth potential. The Fund's total
returns for the fiscal year ended March 31, 1996 (excluding the impact of the
maximum 4% front-end sales load for Class A shares) were 27.90% and 26.90% for
Class A shares and Class C shares, respectively.
Growth in the economy advanced at a more moderate pace during 1995. Inflation
remained subdued and interest rates moved lower. These factors, combined with
strong corporate earnings reports, provided a healthy environment for the
stock market. Large capitalization stocks were the investments of choice and
proved to be the clear market leaders. In the first quarter of 1996, equities
continued their upward trend, despite increased volatility and speculation
that the economy might be stronger than anticipated. Steady inflows of money
pouring into stocks have kept the equity markets near record high levels. For
the twelve months ended March 31, 1996, the S&P 500 Index returned 32.10%.
Throughout the fiscal year, the Fund maintained a disciplined approach to
investing and remained well-diversified. Management continued to emphasize
quality, growth-oriented companies with above average long-term prospects
utilizing criteria such as identified competitive advantages and strong,
consistent earnings growth. Exposure to the technology and health-related
sectors of the market and emphasis on large-cap growth stocks helped
contribute to the Fund's total return and comparative performance for the
fiscal year ended March 31, 1996. Top performing stocks for the Fund included
Loral Corp. (acquired at a premium by Lockheed Martin Corp.), Gap, Inc., and
United Healthcare Corp.
Additional upward movements in interest rates could put near-term pressure on
stock prices. However, our outlook for the stock market remains positive as we
expect inflation to stay under control and the economy to experience moderate
growth. Corporate profits should continue their upward path as profits margins
improve, but not at the accelerated pace witnessed in 1995. In response,
management anticipates maintaining the Fund's exposure to the technology and
health-care sectors to benefit from corporate productivity enhancements and
the population's aging trend. As opportunities arise, the Fund will continue
to invest in quality companies that are well-positioned for the future.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996
===================================================================================================================
U.S. TREASURY
GOVERNMENT TOTAL
SECURITIES RETURN
FUND FUND
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
<S> <C> <C>
At acquisition cost.................................................... $ 24,581,898 $ 15,539,375
=============== ===============
At amortized cost...................................................... $ 24,557,654 $ 15,523,699
=============== ===============
At value (Note 2)...................................................... $ 24,457,770 $ 15,234,526
Investments in repurchase agreements (Note 2)............................. 246,000 --
Cash ..................................................................... 274 49,765
Receivable for capital shares sold........................................ 827 584
Interest receivable....................................................... 280,964 135,097
Other assets.............................................................. 2,850 2,749
--------------- ---------------
TOTAL ASSETS........................................................... 24,988,685 15,422,721
--------------- --------------
LIABILITIES
Payable for capital shares redeemed....................................... 17,217 53,373
Dividends payable......................................................... 21,765 7,316
Payable to affiliates (Note 4)............................................ 21,161 13,504
Other accrued expenses and liabilities.................................... 12,117 4,259
--------------- ---------------
TOTAL LIABILITIES...................................................... 72,260 78,452
--------------- ---------------
NET ASSETS ............................................................... $ 24,916,425 $ 15,344,269
=============== ===============
Net assets consist of:
Capital shares............................................................ $ 29,093,500 $ 17,704,643
Accumulated net realized losses from security transactions................ ( 4,077,191 ) ( 2,071,201 )
Net unrealized depreciation on investments................................ ( 99,884 ) ( 289,173 )
--------------- ---------------
Net assets................................................................ $ 24,916,425 $ 15,344,269
=============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5)........................... 2,642,220 1,866,811
=============== ===============
Net asset value and redemption price per share (Note 2)................... $ 9.43 $ 8.22
=============== ===============
Maximum offering price per share (Note 2)................................. $ 9.62 $ 8.56
=============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996
===================================================================================================================
UTILITY EQUITY
FUND FUND
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
<S> <C> <C>
At acquisition cost.................................................... $ 33,405,437 $ 7,422,385
=============== ===============
At amortized cost...................................................... $ 33,396,763 $ 7,422,385
=============== ===============
At value (Note 2)...................................................... $ 39,514,410 $ 9,156,557
Investments in repurchase agreements (Note 2)............................. 4,620,000 1,791,000
Cash ..................................................................... 210 510
Receivable for capital shares sold ....................................... 62,725 2,581
Dividends and interest receivable......................................... 153,511 7,502
Other assets.............................................................. 5,952 1,185
--------------- ---------------
TOTAL ASSETS........................................................... 44,356,808 10,959,335
--------------- ---------------
LIABILITIES
Payable for capital shares redeemed....................................... 139,483 6,079
Dividends payable......................................................... 41,688 343
Payable to affiliates (Note 4)............................................ 49,940 7,290
Other accrued expenses and liabilities ................................... 15,450 7,500
--------------- ---------------
TOTAL LIABILITIES...................................................... 246,561 21,212
--------------- ---------------
NET ASSETS ............................................................... $ 44,110,247 $ 10,938,123
--------------- ---------------
Net assets consist of:
Capital shares ........................................................... $ 38,023,127 $ 9,469,795
Accumulated net realized losses from security transactions................ ( 30,527 ) ( 265,871 )
Accumulated undistributed net investment income........................... -- 27
Net unrealized appreciation on investments ............................... 6,117,647 1,734,172
--------------- ---------------
Net assets ............................................................... $ 44,110,247 $ 10,938,123
=============== ===============
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares ................................ $ 40,424,488 $ 8,501,862
=============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5)........................... 3,302,863 682,935
=============== ===============
Net asset value and redemption price per share (Note 2)................... $ 12.24 $ 12.45
=============== ===============
Maximum offering price per share (Note 2)................................. $ 12.75 $ 12.97
=============== ===============
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares ................................ $ 3,685,759 $ 2,436,261
=============== ===============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5)........................... 301,479 195,573
=============== ===============
Net asset value, offering price and redemption price per share (Note 2)... $ 12.23 $ 12.46
=============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
===================================================================================================================
U.S. TREASURY
GOVERNMENT TOTAL
SECURITIES RETURN
FUND FUND
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C>
Interest............................................................... $ 1,861,030 $ 1,267,152
--------------- ---------------
EXPENSES
Investment advisory fees (Note 4)...................................... 199,075 161,371
Accounting services fees (Note 4)...................................... 39,750 33,750
Transfer agent fees (Note 4)........................................... 24,940 40,423
Postage and supplies................................................... 15,597 28,136
Professional fees...................................................... 13,631 7,661
Registration fees...................................................... 7,767 9,365
Custodian fees......................................................... 9,215 6,413
Trustees' fees and expenses............................................ 5,503 5,503
Insurance expense...................................................... 4,362 3,487
Distribution expenses (Note 4)......................................... 2,528 2,317
Reports to shareholders................................................ 2,597 4,153
Other expenses......................................................... 2,555 2,178
--------------- ---------------
TOTAL EXPENSES....................................................... 327,520 304,757
Fees waived by the Adviser (Note 4).................................... ( 9,000 ) ( 35,800 )
--------------- ---------------
NET EXPENSES......................................................... 318,520 268,957
--------------- ---------------
NET INVESTMENT INCOME .................................................... 1,542,510 998,195
--------------- ---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions.......................... 1,132,774 19,746
Net change in unrealized appreciation/depreciation on investments...... ( 506,128 ) ( 305,916 )
--------------- ---------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS ................ 626,646 ( 286,170 )
--------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................... $ 2,169,156 $ 712,025
=============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
===================================================================================================================
UTILITY EQUITY
FUND FUND
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C>
Dividends ............................................................. $ 1,761,248 $ 112,004
Interest .............................................................. 521,903 71,086
--------------- ---------------
TOTAL INVESTMENT INCOME ............................................. 2,283,151 183,090
--------------- ---------------
EXPENSES
Investment advisory fees (Note 4) ..................................... 328,982 58,991
Accounting services fees (Note 4) ..................................... 45,000 45,000
Transfer agent fees, Class A (Note 4).................................. 42,457 12,000
Transfer agent fees, Class C (Note 4).................................. 12,000 12,000
Distribution expenses, Class A (Note 4) ............................... 45,893 556
Distribution expenses, Class C (Note 4) ............................... 22,116 5,545
Postage and supplies................................................... 27,742 7,757
Registration fees, Common ............................................. 4,907 2,617
Registration fees, Class A ............................................ 3,931 2,539
Registration fees, Class C ............................................ 2,479 2,569
Professional fees ..................................................... 13,785 8,684
Custodian fees ........................................................ 6,387 5,979
Trustees' fees and expenses ........................................... 5,503 5,503
Reports to shareholders ............................................... 5,846 1,105
Insurance expense ..................................................... 5,496 1,365
Other expenses ........................................................ 3,712 1,474
--------------- ---------------
TOTAL EXPENSES ...................................................... 576,236 173,684
Fees waived by the Adviser (Note 4).................................... -- ( 53,777 )
Class A expenses reimbursed by the Adviser (Note 4).................... -- ( 5,308 )
--------------- ---------------
NET EXPENSES ........................................................ 576,236 114,599
--------------- ---------------
NET INVESTMENT INCOME .................................................... 1,706,915 68,491
--------------- ---------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ......................... 338,447 292,780
Net change in unrealized appreciation/depreciation on investments...... 6,353,364 1,472,570
--------------- ---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ......................... 6,691,811 1,765,350
--------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................. $ 8,398,726 $ 1,833,841
=============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET
ASSETS FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
===================================================================================================================
U.S. GOVERNMENT TREASURY TOTAL
SECURITIES FUND RETURN FUND
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income........................ $ 1,542,510 $ 2,181,908 $ 998,195 $ 1,408,592
Net realized gains (losses) from
security transactions...................... 1,132,774 ( 5,097,610) 19,746 ( 1,660,245)
Net change in unrealized appreciation/
depreciation on investments................ ( 506,128) 2,526,800 ( 305,916 ) ( 348,543)
------------ ------------- ------------- ------------
Net increase (decrease) in net assets from
operations................................. 2,169,156 ( 388,902) 712,025 ( 600,196)
------------ ------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................... ( 1,542,510) ( 2,181,908) ( 998,195) ( 1,408,592)
From net realized gains from security
transactions.............................. -- ( 128,416) -- --
------------ ------------- ------------- ------------
Decrease in net assets from distributions to
shareholders.............................. ( 1,542,510) ( 2,310,324) ( 998,195) ( 1,408,592)
------------ ------------- ------------- ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold.................... 3,262,088 4,299,872 541,010 3,955,275
Net asset value of shares issued in reinvestment
of distributions to shareholders........... 1,232,943 1,876,091 863,694 1,234,357
Payments for shares redeemed................. ( 6,379,727) ( 17,781,225) ( 11,748,023) ( 9,480,316)
------------ ------------- ------------- ------------
Net decrease in net assets from capital
share transactions........................... ( 1,884,696) ( 11,605,262) ( 10,343,319) ( 4,290,684)
------------ ------------- ------------- ------------
TOTAL DECREASE IN NET ASSETS ................... ( 1,258,050) ( 14,304,488) ( 10,629,489) ( 6,299,472)
NET ASSETS:
Beginning of year............................ 26,174,475 40,478,963 25,973,758 32,273,230
------------ ------------- ------------- ------------
End of year.................................. $ 24,916,425 $ 26,174,475 $ 15,344,269 $ 25,973,758
============ ============= ============= ============
ACCUMULATED UNDISTRIBUTED NET
INVESTMENT INCOME ........................... $ -- $ -- $ -- $ --
============ ============= ============= ============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
===================================================================================================================
UTILITY EQUITY
FUND FUND
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income........................ $ 1,706,915 $ 1,748,651 $ 68,491 $ 88,431
Net realized gains (losses)
from security transactions................. 338,447 ( 330,519) 292,780 ( 558,651)
Net change in unrealized appreciation/
depreciation on investments................ 6,353,364 91,379 1,472,570 983,919
------------ ------------- ------------- ------------
Net increase in net assets from operations...... 8,398,726 1,509,511 1,833,841 513,699
------------ ------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Class A.......... ( 1,586,046) ( 1,651,628) ( 59,987) ( 64,588)
From net investment income, Class C.......... ( 120,869) ( 97,023) ( 8,477) ( 25,618)
------------ ------------- ------------- ------------
Decrease in net assets from distributions
to shareholders.............................. ( 1,706,915) ( 1,748,651) ( 68,464) ( 90,206)
------------ ------------- ------------- ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
CLASS A
Proceeds from shares sold.................... 5,363,503 8,624,377 4,389,037 1,844,954
Net asset value of shares issued in
reinvestment of distributions to shareholders 1,407,457 1,451,000 57,517 61,635
Payments for shares redeemed................. ( 12,476,946) ( 10,224,952) ( 1,513,954) ( 1,218,368)
------------ ------------- ------------- ------------
Net increase (decrease) in net assets from
Class A share transactions................... ( 5,705,986) ( 149,575) 2,932,600 688,221
------------ ------------- ------------- ------------
CLASS C
Proceeds from shares sold.................... 1,386,159 2,807,607 485,970 341,886
Net asset value of shares issued in
reinvestment of distributions to shareholders 111,439 91,538 8,355 24,412
Payments for shares redeemed................. ( 1,984,950) ( 1,012,792) ( 549,348) ( 4,386,211)
------------ ------------- ------------- ------------
Net increase (decrease) in net assets from
Class C share transactions................... ( 487,352) 1,886,353 ( 55,023) ( 4,019,913)
------------ ------------- ------------- ------------
Net increase (decrease) from capital
share transactions......................... ( 6,193,338) 1,736,778 2,877,577 ( 3,331,692)
------------ ------------- ------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....... 498,473 1,497,638 4,642,954 ( 2,908,199)
NET ASSETS:
Beginning of year............................ 43,611,774 42,114,136 6,295,169 9,203,368
------------ ------------- ------------- ------------
End of year.................................. $ 44,110,247 $ 43,611,774 $ 10,938,123 $ 6,295,169
============ ============= ============= ============
ACCUMULATED UNDISTRIBUTED NET
INVESTMENT INCOME ......................... $ -- $ -- $ 27 $ --
============ ============= ============= ============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED MARCH 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 9.22 $ 9.85 $ 10.47 $ 10.18 $ 10.04
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income........................ 0.56 0.58 0.64 0.69 0.79
Net realized and unrealized
gains (losses) on investments.............. 0.21 ( 0.59) ( 0.59) 0.47 0.14
---------- ---------- ---------- ---------- ----------
Total from investment operations................ 0.77 ( 0.01) 0.05 1.16 0.93
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income......... ( 0.56 ) ( 0.58) ( 0.64) ( 0.69 ) ( 0.79 )
Distributions from net realized gains........ -- ( 0.04) ( 0.03) ( 0.18 ) --
---------- ---------- ---------- ---------- ----------
Total distributions............................. ( 0.56 ) ( 0.62) ( 0.67) ( 0.87 ) ( 0.79 )
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 9.43 $ 9.22 $ 9.85 $ 10.47 $ 10.18
========== ========== ========== ========== ==========
Total return(A) ................................ 8.39% 0.06% 0.30% 11.71% 9.46%
========== ========== ========== ========== ==========
Net assets at end of year (000's) .............. $24,916 $ 26,174 $ 40,479 $ 31,633 $ 40,253
========== ========== ========== ========== ==========
Ratio of expenses to average net assets(B) ..... 1.20% 1.20% 1.20% 1.20% 1.19%
Ratio of net investment income to average
net assets.................................. 5.82% 6.26% 6.14% 6.61% 7.73%
Portfolio turnover rate......................... 160% 205% 246% 188% 55%
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales
loads.
(B)Absent fee waivers by the Adviser, the ratio of expenses to average net
assets would have been 1.24% for the year ended March 31, 1996 (Note 4).
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TREASURY TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED MARCH 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 8.36 $ 8.95 $ 9.70 $ 9.10 $ 9.00
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income........................ 0.38 0.43 0.37 0.55 0.60
Net realized and unrealized
gains (losses) on investments.............. ( 0.14 ) ( 0.59) ( 0.39) 0.87 0.17
---------- ---------- ---------- ---------- ----------
Total from investment operations................ 0.24 ( 0.16) ( 0.02) 1.42 0.77
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income(A) .... ( 0.38 ) ( 0.43) ( 0.37) ( 0.55 ) ( 0.60 )
Distributions from net realized gains(A) .... -- -- ( 0.36) ( 0.27 ) ( 0.07 )
---------- ---------- ---------- ---------- ----------
Total distributions............................. ( 0.38 ) ( 0.43) ( 0.73) ( 0.82 ) ( 0.67 )
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 8.22 $ 8.36 $ 8.95 $ 9.70 $ 9.10
========== ========== ========== ========== ==========
Total return(B) ................................ 2.95% (1.75%) ( 0.54%) 16.21% 8.98%
========== ========== ========== ========== ==========
Net assets at end of year (000's)............... $15,344 $ 25,974 $ 32,190 $ 43,427 $ 49,071
========== ========== ========== ========== ==========
Ratio of expenses to average net assets(C) ..... 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment income to average
net assets................................. 4.66% 5.06% 3.84% 5.82% 6.58%
Portfolio turnover rate......................... 0% 63% 526% 161% 130%
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A)For the years ended prior to March 31, 1993, the per share data was
calculated using average shares outstanding throughout each year, whereas
for the years ended March 31, 1993 and thereafter, the per share data was
calculated based upon actual distributions. Actual distributions per share
based upon the actual number of shares outstanding on the ex-dividend date
of distribution amounted to $.61 from net investment income and $.08 from
net realized gains for the year ended March 31, 1992.
(B)The total returns shown do not include the effect of applicable sales
loads.
(C)Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 1.42% and 1.37% for the years ended March 31, 1996
and 1995, respectively (Note 4).
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND - CLASS A
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
===================================================================================================================
YEAR ENDED MARCH 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 10.47 $ 10.52 $ 11.34 $ 10.58 $ 10.01
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income........................ 0.47 0.43 0.37 0.48 0.51
Net realized and unrealized
gains (losses) on investments.............. 1.77 ( 0.05) ( 0.59) 1.62 0.75
---------- ---------- ---------- ---------- ----------
Total from investment operations................ 2.24 0.38 ( 0.22) 2.10 1.26
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (A) .... ( 0.47 ) ( 0.43) ( 0.37) ( 0.48 ) ( 0.51 )
Distributions from net realized gains(A) .... -- -- ( 0.23) ( 0.86 ) ( 0.18 )
---------- ---------- ---------- ---------- ----------
Total distributions............................. ( 0.47 ) ( 0.43) ( 0.60) ( 1.34 ) ( 0.69 )
---------- ---------- ---------- ---------- ----------
Net asset value at end of year.................. $ 12.24 $ 10.47 $ 10.52 $ 11.34 $ 10.58
========== ========== ========== ========== ==========
Total return(B) ................................ 21.65% 3.68% ( 2.11%) 20.64% 11.84%
========== ========== ========== ========== ==========
Net assets at end of year (000's)............... $40,424 $ 40,012 $ 40,373 $ 42,051 $ 29,398
========== ========== ========== ========== ==========
Ratio of expenses to average net assets......... 1.25% 1.25% 1.25% 1.40% 1.63%
Ratio of net investment income to average
net assets................................. 3.97% 4.06% 3.32% 4.41% 4.83%
Portfolio turnover rate......................... 11% 17% 91% 137% 33%
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A)For the years ended prior to March 31, 1993, the per share data was
calculated using average shares outstanding throughout each year, whereas
for the years ended March 31, 1993 and thereafter, the per share data was
calculated based upon actual distributions. Actual distributions per share
based upon the actual number of shares outstanding on the ex-dividend date
of distribution amounted to $.48 from net investment income and $.13 from
net realized capital gains for the year ended March 31, 1992.
(B)The total returns shown do not include the effect of applicable sales
loads.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND - CLASS C
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR YEAR (AUG. 2, 1993)
ENDED ENDED THROUGH
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................... $ 10.46 $ 10.51 $ 11.55
--------------- --------------- ---------------
Income from investment operations:
Net investment income.................................. 0.37 0.35 0.23
Net realized and unrealized gains (losses) on
investments......................................... 1.78 ( 0.04) (0.81)
--------------- --------------- ---------------
Total from investment operations.......................... 2.15 0.31 ( 0.58 )
--------------- --------------- ---------------
Less distributions:
Dividends from net investment income................... ( 0.38 ) ( 0.36 ) ( 0.23 )
Distributions from net realized gains.................. -- -- ( 0.23 )
--------------- --------------- ---------------
Total distributions....................................... ( 0.38 ) ( 0.36 ) ( 0.46 )
--------------- --------------- ---------------
Net asset value at end of period.......................... $ 12.23 $ 10.46 $ 10.51
=============== =============== ===============
Total return(A) .......................................... 20.78% 3.00% ( 7.89%) (B)
=============== =============== ===============
Net assets at end of period (000's)....................... $ 3,686 $ 3,599 $ 1,742
=============== =============== ===============
Ratio of expenses to average net assets .................. 2.00% 2.00% 2.00% (B)
Ratio of net investment income to average net assets ..... 3.19% 3.41% 2.19% (B)
Portfolio turnover rate................................... 11% 17% 91% (B)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales
loads.
(B)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND - CLASS A
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR YEAR (AUG. 2, 1993)
ENDED ENDED THROUGH
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................... $ 9.84 $ 9.26 $ 10.02
--------------- --------------- ---------------
Income from investment operations:
Net investment income.................................. 0.13 0.15 0.08
Net realized and unrealized gains (losses) on
investments........................................ 2.60 0.59 ( 0.34)
--------------- --------------- ---------------
Total from investment operations.......................... 2.73 0.74 ( 0.26 )
--------------- --------------- ---------------
Less distributions:
Dividends from net investment income................... ( 0.12 ) ( 0.16 ) ( 0.08 )
Distributions from net realized gains.................. -- -- ( 0.42 )
--------------- --------------- ---------------
Total distributions....................................... ( 0.12 ) ( 0.16 ) ( 0.50 )
--------------- --------------- ---------------
Net asset value at end of period.......................... $ 12.45 $ 9.84 $ 9.26
=============== =============== ===============
Total return(A) .......................................... 27.90% 8.07% ( 3.98%) (C)
=============== =============== ===============
Net assets at end of period (000's)....................... $ 8,502 $ 4,300 $ 3,346
=============== =============== ===============
Ratio of expenses to average net assets(B) .............. 1.25% 1.25% 1.24% (C)
Ratio of net investment income to average net assets ..... 1.06% 1.57% 0.82% (C)
Portfolio turnover rate................................... 38% 159% 109% (C)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales
loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 2.02%, 1.94% and
2.04%(C) for the periods ended March 31, 1996, 1995 and 1994, respectively
(Note 4).
(C)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND - CLASS C
FINANCIAL HIGHLIGHTS
===================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
===================================================================================================================
FROM DATE OF
PUBLIC OFFERING
YEAR YEAR (JUNE 7, 1993)
ENDED ENDED THROUGH
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.................... $ 9.86 $ 9.26 $ 10.00
--------------- --------------- ---------------
Income from investment operations:
Net investment income.................................. 0.05 0.10 0.03
Net realized and unrealized gains (losses) on
investments......................................... 2.60 0.57 ( 0.32)
--------------- --------------- ---------------
Total from investment operations.......................... 2.65 0.67 ( 0.29 )
--------------- --------------- ---------------
Less distributions:
Dividends from net investment income................... ( 0.05 ) ( 0.07 ) ( 0.03 )
Distributions from net realized gains.................. -- -- ( 0.42 )
--------------- --------------- ---------------
Total distributions....................................... ( 0.05 ) ( 0.07 ) ( 0.45 )
--------------- --------------- ---------------
Net asset value at end of period.......................... $ 12.46 $ 9.86 $ 9.26
=============== =============== ===============
Total return(A) .......................................... 26.90% 7.32% ( 3.58%) (C)
=============== =============== ===============
Net assets at end of period (000's)....................... $ 2,436 $ 1,995 $ 5,857
=============== =============== ===============
Ratio of expenses to average net assets(B) .............. 2.00% 2.00% 1.94% (C)
Ratio of net investment income to average net assets ..... 0.38% 0.68% 0.58% (C)
Portfolio turnover rate................................... 38% 159% 109% (C)
- -------------------------------------------------------------------------------------------------------------------
<FN>
(A)The total returns shown do not include the effect of applicable sales
loads.
(B)Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 2.70%, 2.50% and
2.33%(C) for the periods ended March 31, 1996, 1995 and 1994, respectively
(Note 4).
(C)Annualized.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
==============================================================================
1. ORGANIZATION
The U.S. Government Securities Fund, the Treasury Total Return Fund, the
Utility Fund and the Equity Fund (collectively, the Funds) are each a
diversified series of shares of Midwest Strategic Trust (the Trust). The Trust
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated November 18,
1982. The Declaration of Trust, as amended, permits the Trustees to issue an
unlimited number of shares of each Fund.
The U.S. Government Securities Fund seeks high current income, consistent with
the protection of capital, 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). It is anticipated
that the Fund will invest primarily in mortgage-backed securities issued or
guaranteed by the Government National Mortgage Association, the Federal Home
Loan Mortgage Corporation or the Federal National Mortgage Association.
The Treasury Total Return Fund seeks the highest level of total return over
the long term, consistent with the protection of capital, by investing
primarily in direct obligations of the United States Treasury. High current
income is a secondary objective. The maturities of the U.S. Treasury
obligations in which the Fund invests will be allocated based upon interest
rate trends projected by the Adviser.
The Utility Fund seeks a high level of current income by investing primarily
in securities of public utilities. Capital appreciation is a secondary
objective.
The Equity Fund seeks long-term capital appreciation by investing primarily in
common stocks which are believed by the Adviser to offer growth potential.
The Utility Fund and the Equity Fund each offer two classes of shares: Class A
shares (sold subject to a maximum 4% front-end sales load and a distribution
fee of up to .25% of average daily net assets) and Class C shares (sold
subject to a maximum contingent deferred sales load of 1% if redeemed within a
one-year period from purchase and a distribution fee of up to 1% of average
daily net assets). Each Class A and Class C share of a Fund represents 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 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
rights with respect to matters relating to its own distribution arrangements.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
Security valuation -- The Funds' portfolio securities are valued as of the
close of business of the regular session of the New York Stock Exchange
(currently 4:00 p.m., Eastern time). U.S. Government obligations and
mortgage-backed securities are generally valued at their most recent bid price
as obtained from one or more of the major market makers for such securities or
are valued based on estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics. Portfolio
securities listed on stock exchanges and securities traded in the
over-the-counter market are valued at the last sales price as of the close of
business on the day the securities are being valued. Securities not traded on
a particular day, or for which the last sale price is not readily available,
are valued at the closing bid price quoted by brokers that make markets in the
securities. On limited occasions, if the valuation provided by a pricing
service ignores certain market conditions affecting the value of a security,
or if the pricing service cannot provide a valuation, the fair value of the
security will be determined in good faith consistent with procedures
established by the Board of Trustees.
Repurchase agreements -- Repurchase agreements, which are collateralized by
U.S. Government obligations, are valued at cost which, together with accrued
interest, approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' custodian, at the
Federal Reserve Bank of Cleveland. At the time a 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 value
of the repurchase agreement. 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 of each of the U.S. Government
Securities Fund and the Treasury Total Return Fund is calculated daily by
dividing the total value of each Fund's assets, less liabilities, by the
number of shares outstanding. The maximum offering price per share of the U.S.
Government Securities Fund is equal to net asset value per share plus a sales
load equal to 2.04% of net asset value (or 2% of the offering price). The
maximum offering price per share of the Treasury Total Return Fund is equal to
net asset value per share plus a sales load equal to 4.17% of net asset value
(or 4% of the offering price). The redemption price per share of each Fund is
equal to the net asset value per share.
The net asset value of Class A shares and Class C shares of each of the
Utility Fund and the Equity Fund is calculated daily for each class by
dividing the total value of the Fund's assets attributable to that class, less
liabilities attibutable to that class, by the number of shares of that class
outstanding. The maximum offering price of Class A shares of each Fund is
equal to net asset value per share plus a sales load equal to 4.17% of net
asset value (or 4% of the offering price). The offering price of Class C
shares of each Fund is equal to net asset value per share.
The redemption price per share of Class A shares and Class C shares of each of
the Utility Fund and the Equity Fund is equal to the net asset value per
share. However, Class C shares of the Utility Fund and the Equity Fund are
each 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.
<PAGE>
Investment income -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date. Discounts and premiums on securities
purchased are amortized in accordance with income tax regulations which
approximate generally accepted accounting principles.
Distributions to shareholders -- Dividends from net investment income are
declared daily and paid on the last business day of each month to shareholders
of the U.S. Government Securities Fund and the Treasury Total Return Fund.
Dividends from net investment income are declared and paid quarterly to
shareholders of the Utility Fund and the Equity Fund. With respect to each
Fund, net realized short-term capital gains, if any, may be distributed
throughout the year and net realized long-term capital gains, if any, are
distributed at least once each year. Income distributions and capital gain
distributions are determined in accordance with income tax regulations.
Allocations between classes -- Investment income earned, realized capital
gains and losses, and unrealized appreciation and depreciation for the Utility
Fund and the Equity Fund is allocated daily to each class of shares based upon
its proportionate share of total net assets of the Fund. Class specific
expenses are charged directly to the class incurring the expense. Common
expenses which are not attributable to a specific class are allocated daily to
each class of shares based upon its proportionate share of total net assets of
the Fund.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Securities traded on a to-be-announced basis -- The U.S. Government Securities
Fund frequently trades portfolio securities on a "to-be-announced" (TBA)
basis. In a TBA transaction, the Fund has committed to purchase securities for
which all specific information is not yet known at the time of the trade,
particularly the face amount in mortgage-backed securities transactions.
Securities purchased on a TBA basis are not settled until they are delivered
to the Fund, normally 15 to 45 days later. These transactions are subject to
market fluctuations and their current value is determined in the same manner
as for other portfolio securities. When effecting such transactions, assets of
a dollar amount sufficient to make payment for the portfolio securities to be
purchased are placed in a segregated account on the trade date.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
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 is made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ending October 31) plus undistributed amounts from prior
years.
<TABLE>
The following information is based upon the federal income tax cost of
portfolio investments (excluding repurchase agreements) as of March 31, 1996:
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
U.S. GOVT. TREASURY TOTAL
SECURITIES RETURN UTILITY EQUITY
FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized appreciation................... $ 94,194 $ 3,428 $ 6,419,511 $ 1,875,191
Gross unrealized depreciation................... ( 194,078) ( 292,601) ( 301,864) ( 141,019)
------------ ------------- ------------- ------------
Net unrealized appreciation (depreciation)...... $ ( 99,884) $ ( 289,173) $ 6,117,647 $ 1,734,172
============ ============= ============= ============
Federal income tax cost......................... $ 24,557,654 $ 15,523,699 $ 33,396,763 $ 7,422,385
============ ============= ============= ============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
As of March 31, 1996, the U.S. Government Securities Fund, the Treasury Total
Return Fund, the Utility Fund and the Equity Fund had capital loss
carryforwards for federal income tax purposes of $4,077,191, $2,071,201,
$30,527 and $265,871, respectively, none of which expire until at least March
31, 2002. These capital loss carryforwards may be utilized in future years to
offset net realized capital gains prior to distributing such gains to
shareholders.
<PAGE>
3. INVESTMENT TRANSACTIONS
<TABLE>
Investment transactions (excluding short-term investments) were as follows for
the year ended March 31, 1996:
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
U.S. GOVT. TREASURY TOTAL
SECURITIES RETURN UTILITY EQUITY
FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of investment securities............. $ 41,611,129 $ 9,509,531 $ 4,588,799 $ 5,107,424
============ ============= ============= ============
Proceeds from sales and maturities of
investment securities..................... $ 39,645,016 $ -- $ 12,070,713 $ 2,564,330
============ ============= ============= ============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
4. TRANSACTIONS WITH AFFILIATES
The President of the Trust is the controlling shareholder of Leshner
Financial, Inc., whose subsidiaries include Midwest Group Financial Services,
Inc. (the Adviser), the Trust's principal underwriter and investment adviser,
and MGF Service Corp. (MGF), the shareholder servicing and transfer agent and
accounting and pricing agent for the Trust.
MANAGEMENT AGREEMENTS
Each Fund's investments are managed by the Adviser under the terms of separate
Management Agreements. Under the terms of the Management Agreements, each Fund
pays the Adviser a fee, computed and accrued daily and paid monthly, at an
annual rate of 0.75% of its average daily net assets up to $200,000,000, 0.7%
of such net assets from $200,000,000 to $500,000,000 and 0.5% of such net
assets in excess of $500,000,000.
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 for expenses which exceed the lowest applicable expense limitation of any
state. No such reimbursement was required for the year ended March 31, 1996.
In order to reduce the operating expenses of the U.S. Government Securities
Fund and the Treasury Total Return Fund, the Adviser voluntarily waived
advisory fees of $9,000 and $35,800, respectively, during the year. In order
to reduce the operating expenses of the Equity Fund, the Adviser voluntarily
waived advisory fees of $53,777 and reimbursed the Fund for $5,308 of Class A
expenses during the year.
<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 for
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 $21.00 per shareholder
account from each of the U.S. Government Securities Fund and the Treasury
Total Return Fund and $17.00 per shareholder account from each of the Utility
Fund and Equity 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
$3,250 for the U.S. Government Securities Fund, $2,750 for the Treasury Total
Return Fund, and $3,500 for each of the Utility Fund and the Equity Fund. In
addition, each Fund pays certain out-of-pocket expenses incurred by MGF in
obtaining valuations of such Fund's portfollio securities.
UNDERWRITING AGREEMENT
The Adviser is the Funds' principal underwriter and, as such, acts as the
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and the Adviser, the Adviser earned
$704, $1,317, $11,472, and $1,625 from underwriting and broker commissions on
the sale of shares of the U.S. Government Securities Fund, the Treasury Total
Return Fund, the Utility Fund and the Equity Fund, respectively, for the year
ended March 31, 1996.
<PAGE>
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of each
Fund having one class of shares and Class A shares of each Fund having two
classes of shares may directly incur or reimburse the Adviser for expenses
related to the distribution and promotion of shares. The annual limitation for
payment of such expenses under the Class A Plan is .25% of average daily net
assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of each Fund having two classes of shares may directly incur or
reimburse the Adviser for expenses related to the distribution and promotion
of shares. The annual limitation for payment of such expenses under the Class
C Plan is 1% of average daily net assets attributable to Class C shares.
<TABLE>
<CAPTION>
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes
in Net Assets are the result of the following share transactions for the years
ended March 31, 1996 and 1995:
- -------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT TREASURY TOTAL
SECURITIES FUND RETURN FUND
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold..................................... 343,417 456,445 64,654 471,081
Shares issued in reinvestment of distributions
to shareholders.............................. 129,033 203,373 103,352 145,610
Shares redeemed................................. ( 667,998) ( 1,932,052) ( 1,406,629) ( 1,115,965)
------------ ------------- ------------- ------------
Net decrease in shares outstanding.............. ( 195,548) ( 1,272,234) ( 1,238,623) ( 499,274)
Shares outstanding, beginning of year........... 2,837,768 4,110,002 3,105,434 3,604,708
------------ ------------- ------------- ------------
Shares outstanding, end of year................. 2,642,220 2,837,768 1,866,811 3,105,434
============ ============= ============= ============
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
UTILITY EQUITY
FUND FUND
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C>
Shares sold..................................... 454,436 817,927 376,432 197,947
Shares issued in reinvestment of distributions
to shareholders.............................. 120,422 139,905 5,108 6,598
Shares redeemed................................. ( 1,093,005) ( 975,981) ( 135,368) ( 129,000)
------------ ------------- ------------- ------------
Net increase (decrease) in shares outstanding... ( 518,147) ( 18,149) 246,172 75,545
Shares outstanding, beginning of year........... 3,821,010 3,839,159 436,763 361,218
------------ ------------- ------------- ------------
Shares outstanding, end of year................. 3,302,863 3,821,010 682,935 436,763
============ ============= ============= ============
CLASS C
Shares sold..................................... 120,511 266,298 42,510 37,075
Shares issued in reinvestment of distributions
to shareholders.............................. 9,544 8,821 775 2,646
Shares redeemed................................. ( 172,643) ( 96,684) ( 50,111) ( 469,556)
------------ ------------- ------------- ------------
Net increase (decrease) in shares outstanding... ( 42,588) 178,435 ( 6,826) ( 429,835)
Shares outstanding, beginning of year........... 344,067 165,632 202,399 632,234
------------ ------------- ------------- ------------
Shares outstanding, end of year................. 301,479 344,067 195,573 202,399
============ ============= ============= ============
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1996
===================================================================================================================
PAR MARKET
VALUE INVESTMENTS -- 98.2% VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 13.3%
$ 2,000,000 U.S. Treasury Notes, 6.25%, 8/31/00.......................................... $ 2,010,624
1,000,000 U.S. Treasury Bonds, 10.75%, 8/15/05......................................... 1,298,125
- -------------- -------------
$ 3,000,000 TOTAL U.S. TREASURY OBLIGATIONS (Amortized Cost $3,311,423).................. $ 3,308,749
- -------------- -------------
U.S. GOVERNMENT AGENCY ISSUES -- 84.9%
$ 3,000,000 Federal Home Loan Mortgage Corp., 7.65%, 5/10/05............................. $ 3,061,209
2,000,000 Federal Home Loan Mortgage Corp., 7.05%, 6/8/05.............................. 1,997,852
1,815,095 Federal Home Loan Mortgage Corp. Pool #E00228, 6.50%, 7/1/08................. 1,786,018
2,000,000 Federal National Mortgage Assoc., 6.35%, 6/10/05............................. 1,964,628
1,153,307 Federal National Mortgage Assoc. Pool #50811, 7.50%, 12/1/12................. 1,159,119
1,754,569 Federal National Mortgage Assoc. Pool #190666, 7.00%, 3/1/14................. 1,730,286
2,867,460 Federal National Mortgage Assoc. Pool #220114, 7.00%, 6/1/23................. 2,799,501
1,986,700 Federal National Mortgage Assoc. Pool #317689, 6.50%, 8/1/25................. 1,887,355
2,983,237 Federal National Mortgage Assoc. Pool #317691, 7.00%, 8/1/25................. 2,906,776
1,950,777 Federal National Mortgage Assoc. Pool #63859, 6.50%, 9/1/25.................. 1,856,277
- -------------- -------------
$ 21,511,145 TOTAL U.S. GOVERNMENT AGENCY ISSUES
- --------------
(Amortized Cost $21,246,231)............................................. $ 21,149,021
-------------
$ 24,511,145 TOTAL INVESTMENTS AT VALUE-- 98.2%
==============
(Amortized Cost $24,557,654)............................................. $ 24,457,770
-------------
<CAPTION>
===================================================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS (1) -- 1.0% VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
$ 246,000 Nesbitt Burns Securities, Inc., 5.00%, dated 3/29/96, due 4/1/96,
- --------------
repurchase proceeds $246,103............................................. $ 246,000
-------------
$ 246,000 TOTAL REPURCHASE AGREEMENTS ................................................. $ 246,000
============== -------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS -- 99.2% ....................... $ 24,703,770
OTHER ASSETS AND LIABILITIES, NET-- 0.8% ................................... 212,655
-------------
NET ASSETS-- 100.0% ......................................................... $ 24,916,425
-------------
<FN>
(1)Repurchase agreements are fully collateralized by U.S. Government obligations.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TREASURY TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1996
===================================================================================================================
PAR MARKET
VALUE U.S. TREASURY OBLIGATIONS-- 99.3% VALUE
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
$ 6,000,000 U.S. Treasury Notes, 6.25%, 8/31/96.......................................... $ 6,018,750
1,000,000 U.S. Treasury Notes, 6.00%, 10/15/99......................................... 1,000,000
8,500,000 U.S. Treasury Notes, 5.25%, 1/31/01.......................................... 8,215,776
- -------------- -------------
$ 15,500,000 TOTAL U.S. TREASURY OBLIGATIONS
==============
(Amortized Cost $15,523,699)............................................. $ 15,234,526
-------------
OTHER ASSETS AND LIABILITIES, NET-- 0.7% ................................... 109,743
-------------
NET ASSETS-- 100.0% ......................................................... $ 15,344,269
-------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTILITY FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1996
===================================================================================================================
MARKET
COMMON STOCK -- 84.8% SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 50.7%
<S> <C> <C>
Baltimore Gas & Electric Co................................................... 50,050 $ 1,382,631
CMS Energy Corp............................................................... 60,000 1,770,000
Central Louisiana Electric.................................................... 30,000 806,250
CINergy Corp.................................................................. 40,000 1,200,000
DPL, Inc...................................................................... 50,000 1,193,750
Dominion Resources, Inc....................................................... 45,000 1,783,125
Duke Power Co................................................................. 50,000 2,525,000
FPL Group, Inc................................................................ 50,000 2,262,500
Florida Progress Corp......................................................... 65,000 2,218,125
Kansas City Power & Light Co.................................................. 90,000 2,295,000
Montana Power Co.............................................................. 35,000 756,875
Northern States Power Co...................................................... 46,000 2,242,500
Scana Corp.................................................................... 70,000 1,925,000
-------------
......................................................................... $ 22,360,756
-------------
TELECOMMUNICATIONS -- 20.5%
Ameritech Corp................................................................ 35,000 $ 1,907,500
AT&T Corp..................................................................... 30,000 1,837,500
Bell Atlantic Corp............................................................ 20,000 1,235,000
BellSouth Corp................................................................ 50,000 1,850,000
GTE Corp...................................................................... 50,000 2,193,750
-------------
......................................................................... $ 9,023,750
-------------
GAS COMPANIES -- 10.5%
Indiana Energy, Inc........................................................... 15,000 $ 360,000
MCN Corp...................................................................... 100,000 2,312,500
Nicor, Inc.................................................................... 20,000 535,000
Oneok, Inc.................................................................... 25,000 596,875
Wicor, Inc.................................................................... 25,000 843,750
-------------
......................................................................... $ 4,648,125
-------------
WATER COMPANIES -- 3.1%
American Water Works, Inc..................................................... 35,000 $ 1,347,500
-------------
TOTAL COMMON STOCK (Cost $31,303,647)......................................... $ 37,380,131
-------------
<CAPTION>
===================================================================================================================
PAR MARKET
CORPORATE BONDS -- 4.8% VALUE VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dayton Power and Light, 8.40%, 12/1/22........................................ $ 1,000,000 $ 1,041,858
New York Telephone Co., 9.375%, 7/15/31....................................... 1,000,000 1,092,421
-------------- -------------
TOTAL CORPORATE BONDS (Amortized Cost $2,093,116)............................. $ 2,000,000 $ 2,134,279
-------------- -------------
TOTAL INVESTMENTS AT VALUE-- 89.6% (Amortized Cost $33,396,763)............... $ 39,514,410
-------------
<PAGE>
<CAPTION>
UTILITY FUND (CONTINUED)
===================================================================================================================
FACE MARKET
REPURCHASE AGREEMENTS(1) -- 10.5% VALUE VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nesbitt Burns Securities, Inc., 5.00%, dated 3/29/96, due 4/1/96,
repurchase proceeds $4,621,925........................................... $ 4,620,000 $ 4,620,000
-------------- -------------
TOTAL REPURCHASE AGREEMENTS .................................................. $ 4,620,000 $ 4,620,000
============== -------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 100.1% ................ $ 44,134,410
OTHER ASSETS AND LIABILITIES, NET-- (0.1%) ................................... ( 24,163 )
-------------
NET ASSETS-- 100.0% .......................................................... $ 44,110,247
-------------
<FN>
(1)Repurchase agreements are fully collateralized by U.S. Government obligations.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITY FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1996
===================================================================================================================
MARKET
COMMON STOCK -- 83.7% SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 21.1%
<S> <C> <C>
AT&T Corp..................................................................... 6,000 $ 367,500
Compaq Computer Corp.(1) ..................................................... 8,000 309,000
DSC Communications Corp....................................................... 14,000 378,000
Intel Corp.................................................................... 6,000 341,250
Loral Corp.................................................................... 11,000 539,000
Motorola, Inc................................................................. 7,000 371,000
-------------
......................................................................... $ 2,305,750
-------------
CONSUMER, NON-CYCLICAL -- 20.1%
Albertson's, Inc.............................................................. 7,400 $ 274,725
Bristol-Myers Squibb Co....................................................... 3,000 256,875
Mylan Laboratories............................................................ 16,000 336,000
Procter & Gamble Co........................................................... 4,000 339,000
Schering-Plough Corp.......................................................... 6,000 348,750
Unilever NV................................................................... 2,000 271,500
United Healthcare Corp........................................................ 6,000 369,000
-------------
......................................................................... $ 2,195,850
-------------
CONSUMER, CYCLICAL -- 15.0%
The Walt Disney Co............................................................ 2,623 $ 167,543
Ford Motor Co................................................................. 8,000 275,000
Gap, Inc...................................................................... 6,000 332,250
General Motors Corp., Class E................................................. 4,000 228,000
Lowe's Companies, Inc......................................................... 9,000 321,750
McDonald's Corp............................................................... 6,500 312,000
-------------
......................................................................... $ 1,636,543
-------------
FINANCIAL SERVICES -- 10.0%
AFLAC, Inc.................................................................... 6,750 $ 210,938
American General Corp......................................................... 8,600 296,700
American International Group.................................................. 3,000 280,875
Bank of New York Co., Inc..................................................... 6,000 309,000
-------------
......................................................................... $ 1,097,513
-------------
INDUSTRIAL -- 9.7%
Deere & Co.................................................................... 7,500 $ 313,125
Emerson Electric Co........................................................... 2,400 193,800
Nucor Corp.................................................................... 3,500 206,938
Sherwin-Williams Co........................................................... 7,800 346,125
-------------
......................................................................... $ 1,059,988
-------------
ENERGY -- 3.2%
Enron Corp.................................................................... 9,500 $ 350,313
-------------
CONGLOMERATES -- 2.5%
General Electric Co........................................................... 3,600 $ 280,350
-------------
<PAGE>
<CAPTION>
EQUITY FUND (CONTINUED)
===================================================================================================================
MARKET
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS -- 2.1%
<S> <C> <C>
Morton International, Inc..................................................... 6,000 $ 230,250
-------------
TOTAL COMMON STOCK (Cost $7,422,385).......................................... $ 9,156,557
-------------
<CAPTION>
===================================================================================================================
FACE MARKET
REPURCHASE AGREEMENTS(2) -- 16.4% AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nesbitt Burns Securities, Inc., 5.00%, dated 3/29/96, due 4/1/96,
repurchase proceeds $1,791,746........................................... $ 1,791,000 $ 1,791,000
-------------- -------------
TOTAL REPURCHASE AGREEMENTS .................................................. $ 1,791,000 $ 1,791,000
============== -------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 100.1% ................ $ 10,947,557
OTHER ASSETS AND LIABILITIES, NET-- (0.1%) .................................. ( 9,434 )
-------------
NET ASSETS-- 100.0% .......................................................... $ 10,938,123
-------------
<FN>
(1)Non-income producing security.
(2)Repurchase agreements are fully collateralized by U.S. Government
obligations.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
==============================================================================
To the Shareholders and Board of Trustees of Midwest Strategic Trust:
We have audited the accompanying statements of assets and liabilities of the
Treasury Total Return Fund, Utility Fund, Equity Fund and U.S. Government
Securities Fund of the Midwest Strategic Trust (a Massachusetts business
trust), including the portfolios of investments, as of March 31, 1996, and the
related statements of operations, the statements of changes in net assets, and
the financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of March 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Treasury Total Return Fund, Utility Fund, Equity Fund and U.S. Government
Securities Fund of the Midwest Strategic Trust as of March 31, 1996, the
results of their operations, the changes in their net assets, and the
financial highlights for the periods indicated thereon, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio
April 26, 1996
<PAGE>
<TABLE>
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 8, 1995 (UNAUDITED)
==============================================================================
On December 8, 1995, a Special Meeting of Shareholders of the Trust was held
to elect Trustees to serve on the Board and to ratify or reject the selection
of Arthur Andersen LLP as the Trust's independent public accountants for the
current fiscal year. The total number of shares of the Trust present by proxy
represented 58.0% of the shares entitled to vote at the meeting.
The results of the voting for Trustees were as follows:
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
WITHHOLD
NOMINEES FOR ELECTION AUTHORITY STATUS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dale P. Brown 5,604,499.018 68,378.746 Incumbent
Gary W. Heldman 5,571,909.785 100,967.979 New Trustee
H. Jerome Lerner 5,600,680.140 72,197.624 New Trustee
Robert H. Leshner 5,597,856.794 75,020.970 Incumbent
Richard A. Lipsey 5,583,720.100 89,157.664 Incumbent
Donald J. Rahilly 5,590,326.361 82,551.403 Incumbent
Fred A. Rappoport 5,566,887.711 105,990.053 Incumbent
Oscar P. Robertson 5,605,767.904 67,109.860 New Trustee
Robert B. Sumerel 5,591,488.056 81,389.708 Incumbent
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
The results of the voting for Arthur Andersen LLP by each Fund were as
follows:
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities Fund 1,835,038.503 7,684.377 32,199.143
Treasury Total Return Fund 1,340,426.396 7,443.348 34,284.657
Utility Fund 2,032,011.308 10,400.155 40,223.035
Equity Fund 325,598.067 5,831.574 1,737.201
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Midwest Group of Funds(R)
==============================================================================
==============================================================================
MIDWEST STRATEGIC TRUST
312 Walnut St., 21st Floor
Cincinnati, Ohio 45202-3874
Nationwide (Toll Free) 800-543-8721
Cincinnati 629-2000
Rate Line 579-0999
Shareholder Services
Nationwide (Toll Free) 800-543-0407
Cincinnati 629-2050
BOARD OF TRUSTEES
Dale P. Brown
Gary W. Heldman
H. Jerome Lerner
Robert H. Leshner
Richard A. Lipsey
Donald J. Rahilly
Fred A. Rappoport
Oscar P. Robertson
Robert B. Sumerel
OFFICERS
Robert H. Leshner, President
John F. Splain, Secretary
Mark J. Seger, Treasurer
INVESTMENT ADVISER/UNDERWRITER
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut St., 21st Floor
Cincinnati, Ohio 45202-3874
TRANSFER AGENT
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
This report is authorized for distribution only when it is
accompanied or preceded by a current prospectus of Midwest Strategic
Trust.
<PAGE>
TOTAL RETURN
CAPITAL APPRECIATION
INCOME
ANNUAL
REPORT
MARCH 31, 1996
U.S. Government
SECURITIES FUND
o
Treasury Total
RETURN FUND
o
Utility
FUND
o
Equity
FUND
<PAGE>
Appendix
A representation of the graphic material contained in the Midwest Strategic
Trust March 31, 1996 Annual Report is set forth below.
1. Comparison of the Change in Value of a $10,000 Investment in the
U.S. Government Securities Fund and the Lehman Brothers Mortgage-
Backed Securities Index.
LEHMAN BROTHERS MBS INDEX: U.S. GOVERNMENT SECURITIES FUND
QTLY QTLY
DATE RETURN BALANCE DATE RETURN BALANCE
03/31/86 10,000 03/31/86 9,800
06/30/86 0.66% 10,066 06/30/86 -0.62% 9,739
09/30/86 3.93% 10,462 09/30/86 3.26% 10,056
12/31/86 3.78% 10,857 12/31/86 3.64% 10,422
03/31/87 2.21% 11,097 03/31/87 2.14% 10,645
06/30/87 -1.37% 10,945 06/30/87 -2.63% 10,365
09/30/87 -2.08% 10,717 09/30/87 -4.12% 9,938
12/31/87 5.65% 11,323 12/31/87 6.63% 10,597
03/31/88 4.28% 11,807 03/31/88 3.42% 10,959
06/30/88 1.67% 12,005 06/30/88 1.44% 11,117
09/30/88 2.37% 12,289 09/30/88 2.16% 11,357
12/31/88 0.18% 12,311 12/31/88 0.63% 11,428
03/31/89 1.24% 12,464 03/31/89 0.66% 11,504
06/30/89 7.76% 13,431 06/30/89 5.05% 12,084
09/30/89 1.65% 13,653 09/30/89 0.85% 12,187
12/31/89 4.00% 14,199 12/31/89 3.47% 12,609
03/31/90 0.13% 14,217 03/31/90 -0.92% 12,493
06/30/90 3.79% 14,756 06/30/90 2.97% 12,863
09/30/90 1.48% 14,975 09/30/90 0.94% 12,985
12/31/90 4.98% 15,720 12/31/90 4.92% 13,624
03/31/91 3.07% 16,203 03/31/91 2.12% 13,913
06/30/91 1.90% 16,511 06/30/91 1.78% 14,161
09/30/91 5.48% 17,416 09/30/91 4.57% 14,807
12/31/91 4.45% 18,191 12/31/91 3.95% 15,393
03/31/92 -0.86% 18,034 03/31/92 -1.06% 15,229
06/30/92 4.02% 18,759 06/30/92 3.97% 15,833
09/30/92 2.98% 19,318 09/30/92 3.09% 16,322
12/31/92 0.72% 19,457 12/31/92 0.13% 16,342
03/31/93 2.96% 20,033 03/31/93 4.10% 17,013
06/30/93 1.86% 20,406 06/30/93 2.61% 17,456
09/30/93 0.96% 20,602 09/30/93 1.38% 17,697
12/31/93 0.90% 20,787 12/31/93 0.23% 17,738
03/31/94 -2.32% 20,305 03/31/94 -3.80% 17,064
06/30/94 -0.56% 20,191 06/30/94 -3.94% 16,391
09/30/94 0.87% 20,367 09/30/94 -0.13% 16,370
12/31/94 0.43% 20,454 12/31/94 -0.15% 16,345
03/31/95 5.24% 21,526 03/31/95 4.46% 17,074
06/30/95 5.22% 22,650 06/30/95 5.10% 17,945
09/30/95 2.10% 23,125 09/30/95 1.39% 18,194
12/31/95 3.32% 23,893 12/31/95 3.83% 18,892
03/31/96 -0.44% 23,788 03/31/96 -2.04% 18,506
Past performance is not predictive of future performance.
U.S. Government Securities Fund - Average Annual Total Returns*
1 Year 5 Years 10 Years
6.22% 5.45% 6.35%
* The initial public offering of shares commenced on June 4, 1984.
2. Comparison of the Change in Value of a $10,000 Investment in the Treasury
Total Return Fund and the Merrill Lynch Treasuries (All Maturities) Index.
M. L. TREASURIES (ALL MATURITIES) INDEX: TREASURY TOTAL RETURN FUND:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
01/26/88 10,000 01/26/88 9,600
03/31/88 1.29% 10,129 03/31/88 -3.14% 9,299
06/30/88 0.89% 10,219 06/30/88 -1.80% 9,131
09/30/88 1.72% 10,394 09/30/88 1.38% 9,257
12/31/88 0.94% 10,492 12/31/88 -0.52% 9,209
03/31/89 1.06% 10,602 03/31/89 4.17% 9,593
06/30/89 8.21% 11,473 06/30/89 5.92% 10,161
09/30/89 0.79% 11,563 09/30/89 -0.69% 10,090
12/31/89 3.71% 11,992 12/31/89 4.46% 10,540
03/31/90 -1.24% 11,843 03/31/90 -4.70% 10,045
06/30/90 3.43% 12,250 06/30/90 3.90% 10,437
09/30/90 0.78% 12,345 09/30/90 -3.61% 10,059
12/31/90 5.55% 13,030 12/31/90 8.50% 10,914
03/31/91 2.03% 13,294 03/31/91 1.19% 11,044
06/30/91 1.39% 13,479 06/30/91 -0.73% 10,964
09/30/91 5.69% 14,245 09/30/91 8.21% 11,864
12/31/91 5.37% 15,010 12/31/91 6.35% 12,618
03/31/92 -1.77% 14,745 03/31/92 -4.61% 12,037
06/30/92 3.92% 15,323 06/30/92 3.06% 12,405
09/30/92 5.04% 16,095 09/30/92 5.20% 13,050
12/31/92 -0.01% 16,092 12/31/92 1.21% 13,207
03/31/93 4.55% 16,824 03/31/93 5.91% 13,988
06/30/93 2.88% 17,309 06/30/93 2.66% 14,360
09/30/93 3.29% 17,879 09/30/93 3.55% 14,870
12/31/93 -0.42% 17,803 12/31/93 -2.13% 14,554
03/31/94 -2.97% 17,274 03/31/94 -4.41% 13,913
06/30/94 -1.14% 17,077 06/30/94 -3.24% 13,463
09/30/94 0.40% 17,146 09/30/94 -0.95% 13,335
12/31/94 0.36% 17,207 12/31/94 1.41% 13,523
03/31/95 4.66% 18,009 03/31/95 1.08% 13,670
06/30/95 6.26% 19,136 06/30/95 1.36% 13,856
09/30/95 1.76% 19,473 09/30/95 1.18% 14,020
12/31/95 4.67% 20,381 12/31/95 1.26% 14,196
03/31/96 -2.32% 19,908 03/31/96 -0.87% 14,073
Past performance is not predictive of future performance.
Treasury Total Return Fund - Average Annual Total Returns
1 Year 5 years Since Inception*
(1.17%) 4.11% 4.26%
*The initial public offering of shares commenced on January 26, 1988.
3. Comparison of the Change in Value of a $10,000 Investment in the Utility
Fund* and the Standard & Poor's Utility Index
STANDARD & POOR'S UTILITY INDEX: UTILITY FUND (CLASS A):
QTLY QTLY
DATE RETURN BALANCE DATE RETURN BALANCE
08/16/89 10,000 08/16/89 9,600
09/30/89 2.43% 10,243 09/30/89 0.73% 9,671
12/31/89 11.42% 11,412 12/31/89 6.72% 10,320
03/31/90 -7.45% 10,562 03/31/90 -1.99% 10,115
06/30/90 0.53% 10,618 06/30/90 0.28% 10,144
09/30/90 -4.50% 10,140 09/30/90 -2.86% 9,854
12/31/90 9.67% 11,120 12/31/90 7.19% 10,562
03/31/91 2.22% 11,367 03/31/91 4.61% 11,049
06/30/91 -4.20% 10,889 06/30/91 0.60% 11,115
09/30/91 7.90% 11,749 09/30/91 9.26% 12,144
12/31/91 8.49% 12,746 12/31/91 6.72% 12,960
03/31/92 -9.34% 11,556 03/31/92 -4.66% 12,356
06/30/92 7.79% 12,457 06/30/92 4.44% 12,905
09/30/92 7.88% 13,438 09/30/92 3.82% 13,398
12/31/92 2.53% 13,777 12/31/92 4.14% 13,953
03/31/93 10.79% 15,264 03/31/93 6.84% 14,906
06/30/93 1.86% 15,548 06/30/93 1.50% 15,130
09/30/93 6.70% 16,589 09/30/93 2.82% 15,556
12/31/93 -5.76% 15,634 12/31/93 -3.11% 15,073
03/31/94 -8.50% 14,305 03/31/94 -3.20% 14,591
06/30/94 -0.00% 14,304 06/30/94 -0.83% 14,469
09/30/94 0.45% 14,369 09/30/94 1.32% 14,660
12/31/94 -0.10% 14,355 12/31/94 0.74% 14,769
03/31/95 6.93% 15,349 03/31/95 2.43% 15,128
06/30/95 7.44% 16,491 06/30/95 5.03% 15,890
09/30/95 11.28% 18,350 09/30/95 6.90% 16,986
12/31/95 11.22% 20,409 12/31/95 9.96% 18,677
03/31/96 -4.78% 19,434 03/31/96 -1.46% 18,404
Past performance is not predictive of future performance.
Utility Fund - Average Annual Total Returns
1 Year 5 Years Since Inception
Class A 16.79% 9.84% 9.64%
Class C 20.78% N/A 6.39%
*The chart above represents performance of Class A shares only, which will
vary from the performance of Class C shares based on the difference in loads
and fees paid by shareholders in the different classes. The initial public
offering of Class A shares commenced on August 15, 1989, and the initial public
offering of Class C shares commenced on August 2, 1993.
4. Comparison of the Change in Value of a $10,000 Investment in the Equity
Fund* and the Standard & Poor's 500 Index
STANDARD & POOR'S 500 INDEX: EQUITY FUND (CLASS C):
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
06/07/93 10,000 06/07/93 10,000
06/30/93 0.78% 10,078 06/30/93 0.10% 10,010
09/30/93 2.58% 10,338 09/30/93 1.20% 10,130
12/31/93 2.32% 10,578 12/31/93 -1.34% 9,994
03/31/94 -3.79% 10,177 03/31/94 -2.85% 9,709
06/30/94 0.42% 10,220 06/30/94 -4.04% 9,317
09/30/94 4.88% 10,718 09/30/94 5.05% 9,787
12/31/94 -0.02% 10,716 12/31/94 -0.37% 9,751
03/31/95 9.74% 11,760 03/31/95 6.86% 10,419
06/30/95 9.55% 12,883 06/30/95 6.48% 11,095
09/30/95 7.95% 13,907 09/30/95 7.19% 11,893
12/31/95 6.02% 14,744 12/31/95 7.43% 12,776
03/31/96 5.37% 15,535 03/31/96 3.49% 13,222
Past performance is not predictive of future performance.
Equity Fund - Average Annual Total Returns
1 Year Since Inception
Class A 22.79% 10.11%
Class C 26.90% 10.43%
*The chart above represents performance of Class C shares only, which
will vary from the performance of Class A shares based on the differences
in loads and fees paid by shareholders in the different classes. The
initial public offering of Class C shares commenced on June 7, 1993, and
the initial public offering of Class A shares commenced on August 2, 1993.
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<TOTAL-LIABILITIES> 246,561
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,023,127
<SHARES-COMMON-STOCK> 301,479
<SHARES-COMMON-PRIOR> 344,067
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (30,527)
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 1,761,248
<INTEREST-INCOME> 521,903
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<EXPENSES-NET> 576,236
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<PER-SHARE-NII> .13
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