Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
Midwest Strategic Trust
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii),
14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
MIDWEST STRATEGIC TRUST
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 28, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
(Name of Fund)
The undersigned hereby appoints Robert H. Leshner and John F. Splain, and each
of them, as Proxies with power of substitution and hereby authorizes each of
them to represent and to vote as provided on the reverse side, all shares of
beneficial interest of the above Fund which the undersigned is entitled to vote
at the special meeting of shareholders to be held on February 28, 1997 or at any
adjournment thereof.
The undersigned acknowledges receipt of the Notice of Special Meeting and Proxy
Statement dated January 10, 1997.
Date: ____________________
NOTE: Please sign exactly
as your name appears on
this proxy. If signing for
an estate, trust or
corporation, title or
capacity should be stated.
If the shares are held
jointly, both signers
should sign, although the
signature of one will bind
the other.
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--------------------------------
Signature(s) PLEASE SIGN IN BOX ABOVE
<PAGE>
PLEASE INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOXES
BELOW, AS SHOWN, USING BLUE OR BLACK INK OR DARK PENCIL. DO NOT
USE RED INK.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES INDICATED AND FOR THE PROPOSALS DESCRIBED HEREIN
1. With respect to approval of a new investment advisory
agreement with Midwest Group Financial Services, Inc., to become
effective upon the closing of the proposed acquisition of Leshner
Financial, Inc. by Countrywide Credit Industries, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Authority to vote for the election of all nominees for
trustee as listed below (except as marked to the contrary below).
FOR WITHHOLD
[ ] [ ]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), WRITE
THAT NOMINEE'S NAME ON THE LINE BELOW.
D. Bogdon, J. Delfino, H.J. Lerner, R. Leshner, A. Mozilo, O. Robertson,
J. Seymour, S. Sterpa
3. With respect to ratification of the selection of Arthur Andersen LLP as the
Trust's independent public accountants for the current fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
PLEASE MARK YOUR PROXY, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
<PAGE>
MIDWEST STRATEGIC TRUST
312 Walnut Street
Cincinnati, Ohio 45202
January 20, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of Midwest Strategic Trust to be held on Friday, February 28, 1997 at 10:00
a.m., Eastern time, in the 10th Floor Conference Center at 312 Walnut Street,
Cincinnati, Ohio 45202.
We have previously informed you of some recent developments involving
Midwest Group Financial Services, Inc. (the "Adviser"), the Trust's investment
adviser and principal underwriter, and its parent company, Leshner Financial,
Inc. ("LFI"). On December 10, 1996, the shareholders of LFI entered into an
Agreement for Exchange of Stock with Countrywide Credit Industries, Inc.
("CCI"), a publicly-held company and the nation's largest independent mortgage
lender and servicer. Pursuant to the Agreement, CCI will acquire all of the
outstanding stock of LFI.
Widely recognized as a skilled innovator of financial products and
services, CCI offers mortgage products to home buyers. In addition, CCI has a
loan servicing operation and a variety of ancillary financial products and
services which augments its mortgage lending and servicing operations.
We view this transaction as very positive for a number of reasons. We
will have access to CCI's broad managerial, financial and technological
resources. Moreover, nothing will change regarding the management of the Trust
or the investment strategies we employ. The full team of investment
professionals assigned to the Trust will remain as it currently exists.
Moreover, founder Robert H. Leshner will continue his role as President of the
Trust and as Chairman of the Adviser.
This transaction with CCI will allow the present management team to stay
active in the Trust's operations without changing the existing corporate culture
or the delivery of client service. We believe that these events will further
strengthen the Trust as we plan for the future.
Under the Investment Company Act of 1940, the stock transaction is
considered an assignment of the investment advisory agreements between the
Adviser and the Trust. The advisory agreements require that we obtain approval
from shareholders of a new investment advisory agreement for each of the Funds
as a result of the transaction. Upon completion of such transaction, the Adviser
will change its name but will continue to carry on its business with its current
management.
<PAGE>
You are also being asked to elect a new slate of trustees and to ratify the
selection of Arthur Andersen LLP as the Trust's independent public accountants
for the current fiscal year.
The Board of Trustees has given full and careful consideration to each of
these matters and has concluded that the proposals are in the best interests of
the Trust and its shareholders. The Board of Trustees therefore recommends that
you vote "FOR" each of the matters discussed herein.
Regardless of the number of shares you own, it is important that they
are represented and voted. If you cannot personally attend the special
shareholders' meeting, we would appreciate your promptly voting, signing and
returning the enclosed proxy in the postage-paid envelope provided.
Very truly yours,
/s/ Robert H. Leshner
Robert H. Leshner
President
<PAGE>
MIDWEST STRATEGIC TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on February 28, 1997
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of
Midwest Strategic Trust (the "Trust") will be held in the 10th Floor Conference
Center at 312 Walnut Street, Cincinnati, Ohio 45202, on Friday, February 28,
1997 at 10:00 a.m., Eastern time, to consider and vote on the following matters:
1. To approve or disapprove, with respect to each series of the
Trust, a new investment advisory agreement with Midwest
Group Financial Services, Inc., to become effective upon the
closing of the proposed acquisition of Leshner Financial,
Inc. by Countrywide Credit Industries, Inc. No fee increase is
proposed;
2. To elect eight trustees, each to serve until his successor
is duly elected and shall qualify;
3. To ratify or reject the selection of Arthur Andersen LLP as
the Trust's independent public accountants for the current
fiscal year. No change in accountants is proposed; and
4. To transact any other business, not currently contemplated,
that may properly come before the meeting in the discretion
of the proxies or their substitutes.
Shareholders of record at the close of business on January 3, 1997 are
entitled to notice of and to vote at this meeting or any adjournment thereof.
By order of the Board of Trustees,
/s/ John F. Splain
John F. Splain
January 10, 1997 Secretary
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Please execute the enclosed proxy and return it promptly in the enclosed
envelope, thus avoiding unnecessary expense and delay. No postage is required if
mailed in the United States. The proxy is revocable and will not affect your
right to vote in person if you attend the meeting.
<PAGE>
MIDWEST STRATEGIC TRUST
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on February 28, 1997
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PROXY STATEMENT
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This proxy statement is furnished in connection with the solicitation
by the Board of Trustees of Midwest Strategic Trust ("the Trust") of proxies for
use at the special meeting of shareholders or at any adjournment thereof. The
proxy statement and form of proxy were first mailed to shareholders on or about
January 20, 1997.
The purpose of the meeting is to consider approval of new investment
advisory agreements between Midwest Group Financial Services, Inc. (the
"Adviser") and the Trust as a result of a proposed transaction whereby the
Adviser, by means of an exchange of stock of the Adviser's parent company, will
become a wholly-owned indirect subsidiary of Countrywide Credit Industries, Inc.
("CCI"). Upon completion of such transaction, it is anticipated that the Adviser
will continue to carry on its business with its current management at its
current location. Shareholders are being asked to elect a new slate of trustees,
subject to consummation of the proposed transaction. Shareholders are also being
asked to ratify the selection of Arthur Andersen LLP as the Trust's independent
public accountants.
A proxy, if properly executed, duly returned and not revoked, will be
voted in accordance with the specifications thereon. A proxy which is properly
executed that has no voting instructions with respect to a proposal will be
voted for that proposal. A shareholder may revoke a proxy at any time prior to
use by filing with the Secretary of the Trust an instrument revoking the proxy,
by submitting a proxy bearing a later date, or by attending and voting at the
meeting.
The Trust has retained Management Information Services Corp. ("MIS") to
solicit proxies for the special meeting. MIS is responsible for printing proxy
cards, mailing proxy material to shareholders, soliciting brokers, custodians,
nominees and fiduciaries, tabulating the returned proxies and performing other
proxy solicitation services. The anticipated cost of such services is
approximately $8,000, and will be paid LFI. LFI will also pay the printing and
postage costs of the solicitation.
In addition to solicitation through the mail, proxies may be solicited
by officers, employees and agents of the Trust without cost to the Trust. Such
solicitation may be by telephone, facsimile or otherwise. LFI will reimburse
MIS, brokers, custodians, nominees and fiduciaries for the reasonable expenses
incurred by them in connection with forwarding solicitation material to the
beneficial owners of shares held of record by such persons.
<PAGE>
The Trust's annual report for the fiscal year ended March 31, 1996 and
the Trust's most recent semiannual report are available at no charge by writing
to the Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202-4094, or
by calling the Trust nationwide toll-free 800-543-0407, in Cincinnati 629-
2050.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on January 3,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the special meeting of shareholders or any adjournment
thereof. The Trust is composed of four separate funds, the U.S. Government
Securities Fund, the Treasury Total Return Fund, the Utility Fund and the Equity
Fund (individually a "Fund" and collectively, the "Funds"), each of which is
represented by a separate series of the Trust's shares. The Utility Fund and the
Equity Fund series each offer two classes of shares, Class A and Class C shares.
As of the record date there were 8,055,610.327 shares of beneficial interest, no
par value, of the Trust outstanding, comprised of 2,192,675.329 shares of the
U.S. Government Securities Fund, 1,344,428.868 shares of the Treasury Total
Return Fund, 3,320,336.384 shares of the Utility Fund and 1,198,169.746 shares
of the Equity Fund. All full shares of the Trust are entitled to one vote, with
proportionate voting for fractional shares.
On January 3, 1997, Amivest Corporation, P.O. Box 370 Cooper Station, New
York, New York owned of record 21.1% of the outstanding shares of the U.S.
Government Securities Fund; Merrill Lynch, Pierce, Fenner & Smith Incorporated,
for the sole benefit of its customers, 4800 Deer Lake Drive East, Jacksonville,
Florida owned of record 6.4% of the outstanding shares of the Utility Fund;
Martin S. Goldfarb, M.D., 919 N. Crescent, Beverly Hills, California owned of
record 8.6% of the outstanding shares of the Equity Fund; and Orflex Employees
401(k) Plan, 470 W. Northland Boulevard, Cincinnati, Ohio owned of record 7.3%
of the outstanding shares of the Equity Fund. No other person owned of record
and, according to information available to the Trust, no other person owned
beneficially, 5% or more of the outstanding shares of the Trust (or any Fund) on
the record date.
If a quorum (more than 50% of the outstanding shares of the Trust and
of each Fund) is represented at the meeting, the vote of a majority of the
outstanding shares of a Fund is required for approval of the new investment
advisory agreement with the Adviser with respect to that Fund (Item I below).
The vote of a majority of the outstanding shares for purposes of Item I means
the vote of the lesser of (1) 67% or more of the shares present
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<PAGE>
or represented by proxy at the meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (2) more than 50% of
the outstanding shares. The vote of a plurality of the Trust's shares
represented at the meeting is required for the election of trustees (Item II
below). The vote of a simple majority of the shares voted is required for the
ratification of the selection of Arthur Andersen LLP as the independent public
accountants for each Fund (Item III below).
If the meeting is called to order but a quorum is not represented at the
meeting, the persons named as proxies may vote the proxies which have been
received to adjourn the meeting to a later date. If a quorum is present at the
meeting but sufficient votes to approve the proposals described herein are not
received, the persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
meeting in person or by proxy. The persons named as proxies will vote those
proxies received which voted in favor of the proposal in favor of such an
adjournment and will vote those proxies received which voted against the
proposal against any such adjournment. A shareholder vote may be taken on one or
more of the proposals in this proxy statement prior to any such adjournment if
sufficient votes have been received and it is otherwise appropriate. Abstentions
and "broker non-votes" are counted for purposes of determining whether a quorum
is present but do not represent votes cast with respect to a proposal. "Broker
non-votes" are shares held by a broker or nominee for which an executed proxy is
received by the Trust, but are not voted as to one or more proposals because
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power.
The trustees of the Trust intend to vote all of their shares in favor
of the proposals described herein. On the record date, all nominees for election
of trustees and officers as a group owned of record or beneficially 1.3% of the
outstanding shares of the Equity Fund and less than 1% of the outstanding shares
of each of the other Funds.
I. APPROVAL OR DISAPPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS
WITH MIDWEST GROUP FINANCIAL SERVICES, INC.
TERMS OF THE ACQUISITION. Pursuant to an Agreement for Exchange of
Stock (the "Acquisition Agreement") dated December 10, 1996 between CCI and the
shareholders of Leshner Financial, Inc. ("LFI"), CCI has agreed to acquire all
of the outstanding common stock of LFI in exchange for newly issued common stock
of CCI (the "Acquisition"). The Adviser is a wholly-owned
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<PAGE>
subsidiary of LFI, of which Robert H. Leshner is the controlling shareholder.
MGF Service Corp. ("MGF"), the Trust's administrator, transfer agent and
accounting and pricing agent, is also a wholly-owned subsidiary of LFI. As a
result of the Acquisition, the Adviser and MGF will become wholly-owned indirect
subsidiaries of CCI. The value of the CCI common stock to be issued in the
Acquisition is $18.5 million, subject to certain adjustments in the event that
the trading price of CCI common stock at the closing is either greater than $29
per share or less than $24 per share. Pursuant to the Acquisition Agreement,
$2.5 million of the purchase price payable to Mr. Leshner and members of his
family will be withheld at closing and paid over the next five years based on
the achievement of specified pre-tax earnings goals.
The consummation of the Acquisition is subject to the satisfaction of
various conditions subsequent to closing, including, but not limited to,
obtaining shareholder approval of new investment advisory agreements for the
Funds and the other funds within the Midwest Group complex, such that the assets
under management by the Adviser under such new agreements are at least 90% of
the amount of assets managed under the present investment advisory agreements on
the date the Acquisition Agreement was executed; obtaining approval of new
servicing agreements between MGF and its other investment company clients from
each client's board, such that the projected fee income under all such new
agreements is at least 90% of the projected fee income under the present
servicing agreements; obtaining consent to the assignment of non-investment
company advisory contracts of the Adviser, such that projected fee income for
such contracts for which consent has been given is at least 90% of the projected
fee income for all such contracts presently in force; any further consents and
regulatory approvals required to consummate the Acquisition; favorable
composition, in the sole discretion of CCI, of the Board of Trustees of the
Trust and the other funds within the Midwest Group complex, which shall be in
compliance with Section 15(f) of the Investment Company Act of 1940 (the "1940
Act"); the execution and delivery of an employment and non-competition agreement
from certain key employees of LFI and its subsidiaries; the receipt by the
parties to the Acquisition Agreement of certain legal and tax opinions; the
absence of any litigation or other event prior to consummation of the
Acquisition that could have a material adverse affect on LFI or its
subsidiaries; and the receipt of an opinion and independent appraisal which
provides that the Acquisition is fair to the participants in LFI's Employee
Stock Ownership Plan and that the fair market value of the LFI shares held by
LFI's Employee Stock Ownership Plan is not greater than the consideration to be
received by the participants in connection with the Acquisition.
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<PAGE>
The Acquisition Agreement contemplates that certain key personnel of the
Adviser will enter into employment and non-competition agreements with CCI,
which is intended to assure that the Adviser will continue to operate with its
same investment personnel and officers. Upon completion of the Acquisition, the
Adviser expects to retain the services of all of its current management
personnel, including Robert H. Leshner, who intends to enter into a five-year
employment agreement with CCI. Furthermore, no changes in the Adviser's method
of operation, or the location where it conducts its business, are contemplated.
Under the 1940 Act, a transaction which results in a change of control
or management of an investment adviser may be deemed an "assignment." The 1940
Act further provides that an investment advisory agreement will automatically
terminate in the event of its assignment. The Acquisition constitutes a "change
in control" of the Adviser for purposes of the 1940 Act and will cause the
"assignment" and resulting termination of the present investment advisory
agreements. Accordingly, the Board of Trustees recommends that new investment
advisory agreements (the "New Management Agreements") between the Trust and the
Adviser, on behalf of each Fund, be approved by shareholders of the applicable
Fund.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive any amount or benefit in connection therewith as
long as two conditions are satisfied. First, an "unfair burden" must not be
imposed on the investment company as a result of the transaction relating to the
change of control, or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" includes any arrangement during the
two-year period after the change in control whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from the investment company or its security holders (other than fees for bona
fide investment advisory or other services) or from any person in connection
with the purchase or sale of securities or other property to, from, or on behalf
of the investment company (other than fees for bona fide principal underwriting
services). No such compensation arrangements are contemplated as a result of the
Acquisition.
The second condition is that, during the three-year period immediately
following consummation of the transaction, at least 75% of the Trust's Board of
Trustees must not be "interested persons" of the investment adviser or
predecessor investment adviser within the meaning of the 1940 Act. No interested
person of the Adviser within the meaning of the 1940 Act will serve on
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<PAGE>
the Board of Trustees of the Trust during such period if such service would
cause this condition to be violated.
THE PRESENT MANAGEMENT AGREEMENTS. The Adviser currently provides
investment advisory services to the Funds pursuant to three separate investment
advisory agreements between the Trust and the Adviser, which are substantially
identical to each other in all respects except for different effective and
termination dates. Each of the current investment advisory agreements are
referred to individually as a "Present Management Agreement" and collectively as
the "Present Management Agreements." The Present Management Agreement with
respect to the U.S. Government Securities Fund and the Treasury Total Return
Fund is dated March 31, 1989 and was last approved by shareholders of each Fund
on that date. The Present Management Agreement with respect to the Utility Fund
is dated August 15, 1989 and was last approved by shareholders of such Fund on
July 13, 1990. The Present Management Agreement with respect to the Equity Fund
is dated May 13, 1993 and was approved by the Adviser, as such Fund's initial
shareholder, on May 28, 1993. The Present Management Agreements were last
approved by the Board of Trustees, including a majority of the Trustees who are
not interested persons, as defined in the 1940 Act, of the Adviser or the Trust
(the "Independent Trustees"), on February 6, 1996.
THE NEW MANAGEMENT AGREEMENTS. The terms and conditions of the New
Management Agreements are substantially identical in all material respects to
those of the Present Management Agreements with the exception of a change in the
effective date and the termination date and the removal of three provisions
contained in the Present Management Agreements which management of the Trust
believe to be non-material:
(1) The New Management Agreements will not provide, as do the Present
Management Agreements, that the Funds will pay the compensation and
expenses of the Chief Financial Officer of the Trust since, in the
past, the Funds have not actually paid these expenses. The removal of
this provision will not result in a reduction in the expenses of any
Fund.
(2) The New Management Agreements do not contain a provision requiring
the Adviser to reduce its compensation during any fiscal year in the
event expenses exceed the lowest expense limitations imposed by state
securities administrators in the states where a Fund's shares are
qualified for sale. This language has not been provided for in the New
Management Agreements because of the enactment, in October 1996, of the
National Securities Markets Improvement Act of 1996, which eliminates
substantive state regulation of mutual funds.
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<PAGE>
(3) The final provision contained in the Present Management Agreements
but which is not included in the New Management Agreements is one which
permits the Adviser to use the name "Midwest" or "Midwest Strategic" in
connection with another business enterprise in which the Adviser is, or
may become associated. This provision has been removed because the name
of the Trust will be changed to "Countrywide Strategic Trust" upon
completion of the Acquisition. It is contemplated that CCI will retain
all rights to the name "Countrywide" by means of a Licensing Agreement
to be entered into between CCI and the Trust.
Each Fund will enter separately into a New Management Agreement with the
Adviser, each containing substantially identical terms and conditions. Under the
New Management Agreements, the Adviser will select portfolio securities for
investment by the Funds, purchase and sell securities of the Funds, and upon
making any purchase or sale decision, place orders for the execution of such
portfolio transactions, all in accordance with the 1940 Act and any rules
thereunder, the supervision and control of the Board of Trustees of the Trust,
such specific instructions as the Board of Trustees may adopt and communicate to
the Adviser and the investment objectives, policies and restrictions of the
Funds. Under the New Management Agreements, the Adviser will receive from each
Fund a fee, computed and accrued daily and paid monthly, at an annual rate of
.75% of the average daily net assets of such Fund up to $200 million; .7% of the
next $300 million of such assets; and .5% of such assets in excess of $500
million. This is the same fee that the Adviser currently receives from each Fund
under its Present Management Agreement. During the fiscal year ended March 31,
1996, the U.S. Government Securities Fund, the Treasury Total Return Fund, the
Utility Fund and the Equity Fund paid to the Adviser advisory fees (net of
voluntary fee waivers) of $190,075, $125,571, $328,982 and $5,214, respectively.
There is no assurance that any fee waivers will continue in the future.
If the New Management Agreements are approved by shareholders of the Funds,
they will become effective upon the consummation of the Acquisition. The New
Management Agreements provide that they will remain in force for an initial term
of two years, and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of a majority (as defined in the 1940
Act) of the outstanding shares of a Fund; provided that in either event
continuance is also approved by a majority of the Independent Trustees, by a
vote cast in person at a meeting called for the purpose of voting such approval.
The New Management Agreements may be terminated at any time, on sixty days'
written notice, without the payment of any penalty, by the Board of Trustees, by
a vote of a majority of the outstanding
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<PAGE>
voting securities of a Fund, or by the Adviser. The New Management Agreements
automatically terminate in the event of their assignment, as defined by the 1940
Act and the rules thereunder.
The New Management Agreements provide that the Adviser shall not be
liable for any action taken or omitted to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights conferred upon it by such Agreement, or in accordance with
specific instructions from the Trust, provided that such acts or omissions shall
not have resulted from the Adviser's willful misfeasance, bad faith or gross
negligence, a violation of the standard of care established by and applicable to
the Adviser in its actions under such Agreement, or breach of its obligations
thereunder.
The form of the New Management Agreements is attached as Exhibit A. The
description set forth in this Proxy Statement of the New Management Agreements
is qualified in its entirety by reference to Exhibit A.
In the event that shareholders of a Fund do not approve the New
Management Agreement with respect to such Fund and the Acquisition is
consummated, the Board of Trustees will promptly seek to obtain for such Fund
interim advisory services either from the Adviser or from another advisory
organization. Thereafter, the Board of Trustees would either negotiate a new
investment advisory agreement with an advisory organization selected by the
Board or make other appropriate arrangements, in either event subject to
approval by the shareholders of the Fund. In the event the Acquisition is not
consummated for any reason, the Adviser will continue to serve as the investment
adviser of the Funds pursuant to the terms of the Present Advisory Agreements.
INFORMATION CONCERNING CCI. CCI is a New York Stock Exchange listed
company principally engaged in residential mortgage lending. CCI offers a
variety of mortgage products to home buyers, including home equity loans and
subprime credit quality first-lien mortgages. In addition, CCI has a loan
servicing operation which serves over 1.4 million homeowners as well as a
variety of ancillary financial products and services which augment its mortgage
lending and servicing operations. Founded in 1969, CCI is the nation's largest
independent residential mortgage lender and servicer. CCI has more than 5,500
employees and 350 offices across the nation. Angelo R. Mozilo, who has been
nominated to serve as a trustee of the Trust, is the Vice Chairman of the Board
and Executive Vice President of CCI. According to recent reports filed with the
Securities and Exchange Commission, Neuberger & Berman, 605 Third
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Avenue, New York, New York 10158, is the beneficial owner of 14.6% of the
outstanding shares of CCI common stock and Oppenheimer Group, Inc., Oppenheimer
Tower, World Financial Center, New York, New York 10281, is the beneficial owner
of 15.6% of the outstanding shares of CCI common stock.
INFORMATION CONCERNING THE ADVISER. The Adviser is a wholly-owned
subsidiary of LFI, of which Robert H. Leshner is the controlling shareholder.
The Adviser also serves as the Trust's principal underwriter. If the Acquisition
is consummated, the Adviser will continue to serve as the Trust's principal
underwriter pursuant to the terms of a new underwriting agreement which was
approved by the Board of Trustees, including a majority of the Independent
Trustees, on December 11, 1996.
Mr. Leshner, his wife and two daughters together own of record and
beneficially 64.2% of the issued and outstanding shares of LFI. Mr. Leshner,
in his capacity as trustee of LFI's Employee Stock Ownership Plan, is the record
owner of an additional 32.2% of the issued and outstanding shares of LFI.
James A. Markley, Jr. and Noretta Markley, as trustees of the Noretta Markley
Trust, are the record owners of 3.6% of the issued and outstanding shares
of LFI.
During LFI's fiscal year ended September 30, 1996, Mr. Leshner
purchased a total of 8,441.75 shares (representing approximately 7.4% of the
outstanding shares) of the common stock of LFI from three officers of LFI.
During such fiscal year, LFI purchased and retired as treasury shares a total of
1,840.5 shares (representing approximately 1.6% of the outstanding shares) of
its common stock from two officers of LFI. The purchase price for each
transaction was $163 per share. Upon consummation of the Acquisition, the
current shareholders of LFI will own of record and beneficially less than 1% of
the outstanding common shares of CCI.
The directors and principal executive officers of the Adviser are
Robert H. Leshner, who is Chairman of the Board and a director of the Adviser,
MGF and LFI; Michael F. Andrews, who is President of the Adviser and a director
and Vice President of LFI; and James A. Markley, Jr., who is a director of the
Adviser, MGF and LFI and is also President of LFI. The address of the Adviser
and of each director and principal executive officer is 312 Walnut Street,
Cincinnati, Ohio 45202.
The Adviser serves as investment adviser to the following affiliated
registered investment companies listed below:
- 9 -
<PAGE>
<TABLE>
<C> <C> <C>
Amount of the
Net Assets as of Adviser's Annual
Name of Fund December 31, 1996 Advisory Fees
- ------------ ----------------- -------------
Midwest Group
Tax Free Trust:
Tax-Free Money Fund $ 36,930,361 With respect to each
Ohio Tax-Free Money 279,687,085 Fund, .50% of average
Fund daily net assets up to
California Tax-Free 38,659,316 $100 million; .45% of
Money Fund* next $100 million of
Royal Palm Florida 48,845,225 such assets; .40% of
Tax-Free Money Fund* next $100 million of
Tax-Free Intermediate 69,675,882 such assets; and .375%
Term Fund of such assets in
Ohio Insured Tax-Free 77,542,779 excess of $300 million
Fund
Midwest Trust:
Short Term Government $98,489,436 With respect to each
Income Fund Fund, .50% of average
Intermediate Term 57,617,457 daily net assets up
Government Income to $50 million; .45%
Fund of next $100 million
Adjustable Rate U.S. 14,269,802 of such assets; .40%
Government of next $100 million
Securities Fund* . of such assets; and
.375% of such assets
in excess of $250
million
Institutional 39,717,199 .20% of average
Government Income Fund* daily net assets
Global Fund Fund* 19,242,377 .70% of average
daily net assets up to
$100 million and .60%
of such assets in
excess of $100 million
</TABLE>
* During the 1996 fiscal year, the Adviser waived all or a portion of its
advisory fees for such funds. There is no assurance that any fee waivers
will continue in the future.
INFORMATION CONCERNING MGF. MGF provides transfer agency, shareholder
servicing and accounting and pricing services to the Funds. The address of MGF
is 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. During the fiscal year
ended March 31, 1996, MGF received fees from the Funds for its services as
transfer and shareholder servicing agent and accounting and pricing services
agent as follows:
- 10 -
<PAGE>
As Transfer As Accounting
and Shareholder and Pricing
Servicing Agent Services Agent
U.S. Government Securities Fund $24,940 $39,750
Treasury Total Return Fund 40,423 33,750
Utility Fund 54,457 45,000
Equity Fund 24,000 45,000
MGF is retained by the Adviser to assist the Adviser in providing
administrative services to the Funds. In this capacity, MGF supplies executive,
administrative and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and reports
to and filings with the Securities and Exchange Commission and state securities
authorities. The Adviser (not the Funds) pays MGF a fee for these services equal
to .1% of the average value of each Fund's daily net assets.
If the Acquisition is consummated, MGF will continue to provide
transfer agent, accounting and pricing and administrative services to the Trust
at the same rates as are currently in effect, pursuant to new service agreements
which were approved by the Board of Trustees, including a majority of the
Independent Trustees, on December 11, 1996.
EVALUATION BY THE BOARD OF TRUSTEES. On December 11, 1996, the Board of
Trustees, including a majority of the Independent Trustees, by vote cast in
person, unanimously approved, subject to the required shareholder approval
described herein, the New Management Agreements. Prior to such approval, the
Independent Trustees met separately with their counsel, which did not represent
either LFI or CCI, for the purpose of assisting them in reaching a determination
with respect to the New Management Agreements.
In considering approval of the New Management Agreements, the Board of
Trustees carefully evaluated information they deemed necessary to enable them to
determine whether the New Management Agreements will be in the best interests of
each Fund and its shareholders. In making this recommendation, the Trustees
evaluated the experience of the Adviser's key personnel in investing, the
quality of services the Adviser is expected to provide to the Funds and the
compensation proposed to be paid to the Adviser. The Trustees have given careful
consideration to all factors deemed to be relevant to the Trust, including, but
not limited to: (1) the fees and expense ratios of comparable mutual funds; (2)
the performance of the Funds as compared to similar mutual funds; (3) the nature
and quality of the services
- 11 -
<PAGE>
expected to be rendered to the Trust by the Adviser; (4) the distinct investment
objective and policies of each Fund; (5) the research services received by the
Adviser from brokers as a result of placement of the Funds' brokerage, which may
benefit the Funds; (6) that the compensation payable to the Adviser under the
New Management Agreements will be at the same rate as the compensation now
payable to the Adviser under the Present Management Agreements; (7) that the
terms of the New Management Agreements are substantially identical in all
material respects as the terms of the Present Management Agreements except for
different effective and termination dates and the removal of several
non-material provisions; (8) the history, reputation, qualification and
background of the Adviser and CCI and their respective financial conditions, as
well as the qualifications of their personnel; (9) the commitment of LFI to pay
or reimburse the Trust for the expenses incurred in connection with the
Acquisition; and (10) the substantial benefits expected to be realized as a
result of the Adviser's ownership by CCI, such as the potential for increasing
Fund assets and the opportunity to gain access to CCI's managerial and
technological resources.
In making the determination to recommend approval of the New Management
Agreements to shareholders of the Trust, the Board of Trustees gave substantial
weight to the Adviser's representations that (i) the Acquisition should benefit
the Adviser and the Funds by preserving the Adviser's independent management
structure and portfolio management style, while providing stability from a
strengthening balance sheet, more attractive financial incentives to the
Adviser's employees and increased resources for the Adviser's operations; (ii)
the Acquisition will not materially affect the advisory operations of the
Adviser or the level or quality of advisory services provided to the Funds;
(iii) the same personnel of the Adviser who currently provide services to the
Trust will continue to do so after the Acquisition; (iv) the Trust will not be
subject to any unfair burden as a result of the Acquisition; (v) access to CCI's
broad managerial, financial and technological resources should allow the Adviser
to increase the range and quality of services provided to the Trust; and (vi)
the Acquisition could potentially result in an increase in assets of the Funds,
thereby possibly reducing the effective rate of the Adviser's fees and other
expenses of the Funds. In considering approval of the New Management Agreements,
the Board of Trustees reviewed the most recent audited financial statements of
the Adviser and of CCI. The Board of Trustees believes that the Acquisition
should benefit the Adviser and the Funds and that the Funds should receive
investment advisory services under the New Management Agreements equal or
superior to those currently received under the Present Management Agreements, at
the same fee levels. The Board of Trustees therefore unanimously recommends
approval of the New Management Agreements by shareholders of each
- 12 -
<PAGE>
Fund.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS APPROVE THE
NEW MANAGEMENT AGREEMENTS.
II. ELECTION OF TRUSTEES TO SERVE UPON CONSUMMATION OF THE ACQUISITION
On January 8, 1997, the Board of Trustees, including a majority of the
Independent Trustees, met to review pertinent information on the nominees for
election to the Board of Trustees and unanimously determined to nominate each of
the individuals named below to serve on the Board, subject to the required
shareholder approval. At such meeting, the Independent Trustees were represented
by their counsel for the purpose of assisting them in reaching a determination
with respect to the nominees.
Five individuals not currently serving on the Board of Trustees have
been nominated to serve as trustees, effective upon consummation of the
Acquisition. If elected by shareholders, the five nominees will serve together
with three members of the present Board of Trustees, Robert H. Leshner,
H. Jerome Lerner and Oscar P. Robertson. Upon consummation of the Acquisition,
Dale P. Brown, Gary W. Heldman, Richard A. Lipsey, Donald J. Rahilly, Fred A.
Rappoport and Robert B. Sumerel intend to resign from the Board of Trustees.
In the event the Acquisition is not consummated for any reason, the members of
the present Board of Trustees will continue to serve as trustees. Consummation
of the Acquisition is conditioned upon satisfactory composition of the
Board of Trustees, in the sole discretion of CCI.
Eight nominees are to be elected, each to serve until his successor is
duly elected and shall qualify. The current Independent Trustees reserve the
right to substitute another person or persons of their choice as nominee or
nominees if a nominee is unable to serve as a trustee at the time of the meeting
for any reason. Nothing, however, indicates that such a situation will arise.
The following table sets forth certain information regarding each nominee for
election as a trustee by shareholders.
<TABLE>
<C> <C> <C> <C> <C>
Compensation During
Amount of the Fiscal Year
Name and Principal Occupation Beneficial Ended March 31, 1996
During the Past Five Years Ownership From:
and Directorships of Trustee of Shares of The The Midwest
Public Companies Age Since the Trust (1) Trust Complex(2)
- --------------------------- --- ------- ------------- --------- ----------
DONALD L. BOGDON, M.D. 66 Nominee None -- --
Physician with Hematology
Oncology Consultants and
director of Verdugo VNA (a
hospice facility). He was
formerly President of Western
Hematology/Oncology (1971-1996)
and Chairman of the Board of
Glendale Memorial Hospital
(1991-1993).
JOHN R. DELFINO 63 Nominee None -- --
President of Concorde Capital
Corporation (an investment firm).
He was formerly a director of
Cypress Financial (1984-1993)
and Chairman of Rancho Santa
Margarita (1989-1993), mortgage
banking firms.
H. JEROME LERNER 58 1981 None $2,849 $8,100
Principal of HJL Enterprises
and Chairman of Crane
Electronics, Inc. (a
manufacturer of electronic
connectors). He is also - 13 -
<PAGE>
a trustee of Midwest Group
Tax Free Trust and Midwest
Trust.
*ROBERT H. LESHNER 57 1981 8,693.95 $0 $0
Chairman of the Board shares of
of Midwest Group the Equity
Financial Services, Inc. (the Fund
investment adviser and
principal underwriter of the
Trust), MGF Service Corp. (a
registered transfer agent) and
Leshner Financial, Inc. (a
financial services company and
parent of Midwest Group
Financial Services, Inc.
and MGF Service Corp.).
He is also President and a
trustee of Midwest Group Tax
Free Trust and Midwest
Trust.
**ANGELO R. MOZILO 58 Nominee None -- --
Vice Chairman of the Board and
Executive Vice President of
Countrywide Credit Industries,
Inc. He is also President and
a director of CWM Mortgage Holdings,
Inc. (a publicly-held real estate
investment trust managed by CCI).
OSCAR P. ROBERTSON 57 1981 32,302.51 $2,549 $6,600
President of Orchem Corp. shares of
(a chemical specialties the Utility
distributor) and Orpack Fund; 7,286.77
Stone Corporation (a shares of the
corrugated box Equity Fund
manufacturer). He is also
a trustee of Midwest
Group Tax Free Trust
and Midwest Strategic
Trust.
- 14 -
<PAGE>
JOHN F. SEYMOUR, JR. 59 Nominee None -- --
Chief Executive Officer
of the Southern California
Housing Development Agency
and a consultant for Orange
Coast Title Co. (a mortgage
title insurance company).
He is also a director of
Irvine Apartment Communities
(a real estate investment trust)
and Inco Homes (a home builder).
He was formerly a Senator in the
United States Congress (1991-2)
and a director of the California
Housing Finance Agency (1993-4).
SEBASTIANO STERPA 67 Nominee None -- --
Chairman of Sterpa Realty,
Inc. and Chairman and a
director of the California
Housing Finance Agency. He
is also a director of Real
Estate Business Services and
a director of the SunAmerica
Mutual Funds.
</TABLE>
(1) Voting and investment power as of January 3, 1997. The percentage of
shares of a Fund owned beneficially by any nominee does not exceed one percent
of the outstanding shares of such Fund.
(2) The Midwest Complex consists of the Trust, Midwest Group Tax Free
Trust and Midwest Trust.
- 15 -
<PAGE>
* Robert H. Leshner, as an affiliated person of Midwest Group Financial
Services, Inc., the Trust's investment adviser and principal
underwriter, is an "interested person" of the Trust within the meaning
of Section 2(a)(19) of the 1940 Act. Mr. Leshner may directly or
indirectly receive benefits from the New Management Agreements as a
result of such affiliation.
** Angelo R. Mozilo, as an affiliated person of Countrywide Credit Industries,
Inc., will be an "interested person" of the Trust within the meaning of
Section 2(a)(19) of the 1940 Act. Mr. Mozilo may directly or indirectly
receive benefits from the New Management Agreements as a result of such
affiliation.
*** On February 2, 1996, an involuntary petition under Chapter 7 of the U.S.
Bankruptcy Code was filed by creditors against Orchem, Inc., of which Mr.
Robertson was the chief executive officer. The case was subsequently
converted to a Chapter 11 bankruptcy and is still pending in the U.S.
Bankruptcy Court.
Dr. Bogdon and Messrs. Delfino and Sterpa currently have outstanding
mortgage loans through CCI. Each mortgage loan was entered into as a result of
an arm's length transaction at competitive interest rates. Each of such loans
was placed prior to the beginning of the last two completed fiscal years of the
Trust. The outstanding aggregate balances of such loans are approximately
$315,000 for Dr. Bogdon, $950,000 for Mr. Delfino and $954,000 for Mr. Sterpa.
In addition, since April 15, 1989, CCI has leased a commercial property from Mr.
Sterpa at a competitive monthly rate of approximately $2,520.
All nominees have consented to being named in this proxy statement and
have agreed to serve if elected. Each nominee is also standing for election as a
trustee of Midwest Group Tax Free Trust and Midwest Trust. Trustees on the Board
who are not interested persons of the Trust will receive a quarterly retainer of
$1,000 plus $750 for each Board meeting attended. Such fees are split equally
among the Trust, Midwest Group Tax Free Trust and Midwest Trust.
The Trust has an Audit Committee currently consisting of Dale P.
Brown, H. Jerome Lerner and Richard A. Lipsey. If all of the nominees to
serve on the Board are elected by shareholders, it is anticipated that the
Audit Committee will consist of Mr. Lerner and two nominees for election as
trustees who are not interested persons of the Trust or the Adviser. The Audit
Committee makes recommendations to the Board of Trustees concerning the
- 16 -
<PAGE>
selection of the Trust's independent public accountants, reviews with
such accountants the scope and results of the Trust's annual audit, reviews
the semiannual financial reports of the Trust and considers any comments which
the accountants may have regarding the Trust's financial statements or books of
account. Audit Committee members will each receive $300 ($100 payable by each of
the Trust, Midwest Group Tax Free Trust and Midwest Trust) for attending an
Audit Committee meeting.
During the fiscal year ended March 31, 1996, the Board of Trustees and
the Audit Committee each held four meetings. During such fiscal year, each
trustee attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Trustees (held during the period during which he has
been a trustee) and (ii) the total number of meetings held by the committee of
the Board of Trustees on which he served.
EXECUTIVE OFFICERS. The Trust's executive officers are set forth
below. The business address of each officer is 312 Walnut Street, Cincinnati,
Ohio 45202.
Name and Principal Occupation Officer Position with
During the Past Five Years Age Since the Trust
- ---------------------------- --- ------ -------------
ROBERT H. LESHNER 57 1983 President
(See page 14) and Trustee
JOHN F. SPLAIN 40 1989 Secretary
Secretary and General Counsel
of Leshner Financial, Inc.,
Midwest Group Financial
Services, Inc. and MGF Service
Corp. He is also Secretary of
Midwest Group Tax Free Trust,
Midwest Trust, Brundage, Story
and Rose Investment Trust,
Williamsburg Investment Trust,
Markman MultiFund Trust, The
Tuscarora Investment Trust,
PRAGMA Investment Trust,
Maplewood Investment Trust
and The Thermo Opportunity
Fund, Inc. and Assistant
Secretary of Fremont Mutual Funds,
Inc., Schwartz Investment
Trust, The Gannett Welsh & Kotler
Funds and Capitol Square Funds
(all of which are registered
investment companies).
- 17 -
<PAGE>
MARK J. SEGER, C.P.A. 35 1989 Treasurer
Vice President of Leshner
Financial, Inc. and MGF
Service Corp. He is also
Treasurer of Midwest Group
Tax Free Trust, Midwest
Trust, Brundage, Story
and Rose Investment
Trust, Williamsburg Investment
Trust, Markman MultiFund
Trust, PRAGMA Investment Trust,
Maplewood Investment Trust, The
Thermo Opportunity Fund, Inc. and
Capitol Square Funds; Assistant
Treasurer of Schwartz Investment
Trust, The Tuscarora Investment
Trust and The Gannett Welsh
& Kotler Funds; and Assistant
Secretary of Fremont Mutual Funds, Inc.
John F. Splain and Mark J. Seger, as participants in LFI's Employee
Stock Ownership Plan, own beneficially less than 1% of the outstanding shares of
LFI, and, as a result, have an interest in the approval of the New Management
Agreements. It is expected that Mr. Splain and Mr. Seger will enter into
employment and non-competition agreements with CCI prior to consummation of the
Acquisition.
III. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been selected as the Trust's independent public
accountants for the current fiscal year by vote of the Board of Trustees,
including a majority of the Independent Trustees. The employment of Arthur
Andersen LLP is conditional upon the right of the Trust, by a vote of a majority
of its outstanding shares, to terminate the employment without any penalties.
Arthur Andersen LLP has acted as the Trust's independent public
accountants since 1983. If the Trust's shareholders do not ratify the selection
of Arthur Andersen LLP, other certified public accountants will be considered
for selection by the Board of Trustees.
Representatives of Arthur Andersen LLP are not expected to be present
at the meeting although they will have an opportunity to attend and to make a
statement, if they desire to do so. If representatives of Arthur Andersen LLP
are present, they will be available to respond to appropriate questions from
shareholders.
- 18 -
<PAGE>
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS RATIFY THE SELECTION OF
ARTHUR ANDERSEN LLP. Adoption of this Proposal is not conditioned upon
consummation of the Acquisition.
IV. OTHER BUSINESS
The proxy holders have no present intention of bringing any matter
before the meeting other than those specifically referred to above or matters in
connection with or for the purpose of effecting the same. Neither the proxy
holders nor the Board of Trustees are aware of any matters which may be
presented by others. If any other business shall properly come before the
meeting, the proxy holders intend to vote thereon in accordance with their best
judgment.
Any shareholder proposal intended to be presented at the next
shareholder meeting must be received by the Trust for inclusion in its Proxy
Statement and form of Proxy relating to such meeting at a reasonable time before
the solicitation of proxies for the meeting is made.
By Order of the Board of Trustees,
/s/ John F. Splain
John F. Splain
Secretary
Date: January 10, 1997
Please complete, date and sign the enclosed Proxy and return it promptly in the
enclosed reply envelope. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- 19 -
<PAGE>
Exhibit A
FORM OF
MANAGEMENT AGREEMENT
TO: MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street
Cincinnati, Ohio 45202
Dear Sirs:
Midwest Strategic Trust (hereinafter referred to as the "Trust")
herewith confirms our agreement with you.
The Trust has been organized to engage in the business of an investment
company. The [ ] Fund (the "Fund") has been established as a series of the
Trust. You have been selected to act as the investment adviser of the Fund and
to provide certain other services, as more fully set forth below, and you are
willing to act as such investment adviser and to perform such services under the
terms and conditions hereinafter set forth. Accordingly, the Trust agrees with
you as follows upon the date of the execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Fund with such investment advice as you
in your discretion deem advisable and will furnish a continuous investment
program for the Fund consistent with its investment objectives and policies. You
will determine what securities shall be purchased for the Fund, what portfolio
securities shall be held or sold by the Fund, and what portion of the Fund's
assets shall be held uninvested, subject always to the Fund's investment
objectives, policies and restrictions, as each of the same shall be from time to
time in effect, and subject further, to such policies and instructions as the
Board of Trustees (the "Board") of the Trust may from time to time establish and
supply to you copies thereof. You will advise and assist the officers of the
Trust in taking such steps as are necessary or appropriate to carry out the
decisions of the Board and the appropriate committees of the Board regarding the
conduct of the business of the Trust.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay the compensation and expenses of any persons rendering any
services to the Fund who are officers, directors, stockholders or employees of
your corporation and will make available, without expense to the Fund, the
services of such of your employees as may duly be elected officers or trustees
of the Trust, subject to their individual consent to serve and to any
limitations imposed by law. The compensation and expenses of any officers,
trustees and employees of the Trust who are not
- 20 -
<PAGE>
officers, directors, employees or stockholders of your corporation will be paid
by the Trust.
You will pay all advertising and promotion expenses incurred in
connection with the sale or distribution of the Fund's shares to the extent such
expenses are not assumed by the Fund under the Trust's Plans of Distribution
Pursuant to Rule 12b-1.
The Fund will also be responsible for the payment of all other
operating expenses of the Fund, including fees and expenses incurred by the Fund
in connection with membership in investment company organizations, brokerage
fees and commissions, legal, auditing and accounting expenses, expenses of
registering shares under Federal and State securities laws, insurance expenses,
taxes or governmental fees, fees and expenses of the custodian, transfer,
shareholder service and dividend disbursing agent and accounting and pricing
agent of the Fund, expenses including clerical expenses of issue, sale,
redemption or repurchase of shares of the Fund, the fees and expenses of
trustees of the Trust who are not affiliated with you, the cost of preparing and
distributing reports and notices to shareholders, the cost of printing or
preparing prospectuses for delivery to the Fund's shareholders, the cost of
printing or preparing stock certificates or any other documents, statements or
reports to shareholders, expenses of shareholders' meetings and proxy
solicitations, such extraordinary or non-recurring expenses as may arise,
including litigation to which the Fund may be a party and indemnification of the
Trust's officers and trustees with respect thereto, or any other expense not
specifically described above incurred in the performance of the Fund's
obligations. All other expenses not assumed by you herein incurred by the Fund
in connection with the organization, registration of shares and operations of
the Fund will be borne by the Fund.
3. COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments made as provided in
this Agreement, the Fund will pay you as of the last day of each month, a fee
equal to the annual rate of:
.75% of the average value of the daily net assets of the Fund up to
$200,000,000; .7% of such assets from $200,000,000 to and including
$500,000,000; and .5% of such assets in excess of $500,000,000.
The total fees payable during each of the first and second halves of
each fiscal year of the Trust shall not exceed the semiannual total of the daily
fee accruals requested by you during the applicable six month period. The
average value of net assets shall be determined pursuant to the applicable
provisions of the Declaration of Trust of the Trust or a resolution of the
Board, if required. If, pursuant to such provisions, the
- 21 -
<PAGE>
determination of net asset value of the Fund is suspended for any particular
business day, then for the purposes of this paragraph, the value of the net
assets of the Fund as last determined shall be deemed to be the value of the net
assets as of the close of the business day, or as of such other time as the
value of the Fund's net assets may lawfully be determined, on that day. If the
determination of the net asset value of the Fund's shares has been suspended for
a period including such month, your compensation payable at the end of such
month shall be computed on the basis of the value of the net assets of the Fund
as last determined (whether during or prior to such month).
4. EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio securities for the
account of the Fund, it is understood that you will arrange for the placing of
all orders for the purchase and sale of portfolio securities for the Fund's
accounts with brokers or dealers selected by you, subject to review of this
selection by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and portfolio brokerage. In
the selection of such brokers or dealers and the placing of such orders, you are
directed at all times to seek for the Fund the best qualitative execution,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer.
You should generally seek favorable prices and commission rates that
are reasonable in relation to the benefits received. In seeking best qualitative
execution, you are authorized to select brokers or dealers who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which you exercise investment discretion. You are authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a portfolio transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
you determine in good faith that the amount of the commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker or dealer. The determination may be viewed in terms of either a
particular transaction or your overall responsibilities with respect to the Fund
and to accounts over which you exercise investment discretion. The Trust and you
understand that, although the information may be useful to the Fund and you, it
is not possible to place a dollar value on such information. The Board shall
periodically review the commissions paid by the Fund to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits to the Fund.
- 22 -
<PAGE>
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best qualitative execution,
you may give consideration to sales of shares of the Fund as a factor in the
selection of brokers and dealers to execute portfolio transactions of the Fund.
If any occasion should arise in which you give any advice to clients of
yours concerning the shares of the Fund, you will act solely as investment
counsel for such client and not in any way on behalf of the Trust. Your services
to the Fund pursuant to this Agreement are not to be deemed to be exclusive and
it is understood that you may render investment advice, management and other
services to others.
5. LIMITATION OF LIABILITY OF ADVISER
You (including your directors, officers, shareholders, employees,
control persons and affiliates of any thereof) shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from the reckless disregard by you of your
obligations and duties under this Agreement ("disabling conduct"). However, you
will not be indemnified for any liability unless (1) a final decision is made on
the merits by a court or other body before whom the proceeding was brought that
you were not liable by reason of disabling conduct, or (2) in the absence of
such a decision, a reasonable determination is made, based upon a review of the
facts, that you were not liable by reason of disabling conduct, by (a) the vote
of a majority of a quorum of trustees who are neither "interested persons" of
the Trust as defined in the Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party trustees"), or (b) an independent legal
counsel in a written opinion. The Fund will advance attorneys' fees or other
expenses incurred by you in defending a proceeding, upon the undertaking by or
on behalf of you to repay the advance unless it is ultimately determined that
you are entitled to indemnification, so long as you meet at least one of the
following as a condition to the advance: (1) you shall provide a security for
your undertaking, (2) the Fund shall be insured against losses arising by reason
of any lawful advances, or (3) a majority of a quorum of the disinterested,
non-party trustees of the Trust, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts (as
opposed to a full trial- type inquiry), that there is reason to believe that you
ultimately will be found entitled to indemnification. Any person employed by you
who may also be or become an employee of the Trust shall be deemed, when acting
within the scope of his employment by the Trust, to be acting in such employment
solely for the Trust and not as your employee or agent.
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6. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective upon its execution, shall remain in
force for a period of two (2) years from that date and remain in force from year
to year thereafter, subject to annual approval by (i) the Board of the Trust or
(ii) a vote of a majority (as defined in the Investment Company Act of 1940) of
the outstanding voting securities of the Fund, provided that in either event
continuance is also approved by a majority of the trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of you
or of the Trust, by a vote cast in person at a meeting called for the purpose of
voting such approval.
If the shareholders of the Fund fail to approve the Agreement in the
manner set forth above, upon approval of the Board, including a majority of the
trustees who are not interested persons of you or of the Trust, you may continue
to serve or act in such capacity for the Fund for the period of time (not
exceeding one hundred and twenty days after the termination of the Agreement)
pending required approval of the Agreement, of a new agreement with you or a
different adviser or other definitive action; provided that the compensation to
be paid by the Fund to you will be equal to the lesser of your actual costs
incurred in furnishing investment advisory services to the Fund or the amount
you would have received under this Agreement.
This Agreement may, on sixty days' written notice, be terminated at any
time without the payment of any penalty, by the Board, by a vote of a majority
of the outstanding voting securities of the Fund or by you. This Agreement shall
automatically terminate in the event of its assignment.
7. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, and no amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the outstanding voting
securities of the Fund and by the Board, including a majority of the trustees
who are not interested persons of you or of the Trust, cast in person at a
meeting called for the purpose of voting on such approval.
8. LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Fund, as provided in the Declaration of Trust of the Trust. The execution
and delivery of this Agreement have been authorized by the trustees of the Trust
and the shareholders of the Fund and
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signed by the officers of the Trust, acting as such, and neither such
authorization by such trustees and shareholders nor such execution and delivery
by such officers shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally, but shall bind only the
trust property of the Fund as provided in the Trust's Declaration of Trust.
9. MISCELLANEOUS
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same Agreement.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
upon the date thereof.
Yours very truly,
ATTEST: MIDWEST STRATEGIC TRUST
____________________ By: ________________________________
Dated: , 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: MIDWEST GROUP FINANCIAL SERVICES, INC.
____________________ By: ___________________________________
Dated: , 1997
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