FLEX FUNDS, 485BPOS, 1996-12-23

FLEX FUNDS
485BPOS, 1996-12-23

Previous: NORFOLK SOUTHERN CORP, SC 14D1/A, 1996-12-23

Next: PAINEWEBBER AMERICA FUND /NY/, 497, 1996-12-23

<PAGE> 1
Commission File No. 2-85378
Commission File No. 811-3462

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 37

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 37

The Flex-funds
(Exact Name of Registrant as Specified in Charter)

P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017
(Address of Principal Executive Offices-Zip Code)

Registrant's Telephone Number, including Area Code: (614)766-7000

Donald F. Meeder, Secretary - R. Meeder & Associates, Inc.
P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017
(Name and Address of Agent for Service)

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

It is proposed that this filing will become effective (check appropriate
box).
XXX immediately upon filing pursuant to paragraph (b) of Rule 485
-----
on pursuant to paragraph (b) of Rule 485.
-----
60 days after filing pursuant to paragraph (a)(1).
-----
on (date) pursuant to paragraph (a)(1).
-----
75 days after filing pursuant to paragraph (a)(2).
-----
on (date) pursuant to paragraph (a)(2) of Rule 485.
-----

If appropriate, check the following box:

This post-effective amendment designates a new effective date for
----- a previously filed post-effective amendment.

Indefinite number of shares registered under Rule 24f-2 by filing of a
Pre-Effective Amendment No. 1, effective July 28, 1983. The 24(f)-2 Notice for
the fiscal year ended December 31, 1995, was filed with the Commission on
February 14, 1996.

The Growth Stock Portfolio has also executed this Registration Statement.
<PAGE> 2
THE FLEX-FUNDS
CROSS REFERENCE SHEET TO FORM N-1A
FOR THE HIGHLANDER FUND

Part A.

Item No. Prospectus Caption
- -------- ------------------

1 Cover Page

2 Highlights
Synopsis of Financial Information

3 Financial Highlights

4 The Trust and its Management
Investment Objectives and Policies
Additional Investment Policies
5 The Trust and its Management
5A Performance Comparison

6(a) Other Information - Shares of Beneficial Interest
6(b) Not applicable
6(c) Other Information - Shares of Beneficial Interest
6(d) Not applicable
6(e) Highlights
6(f)(g) Income Dividends, Capital Gains, Distributions and Taxes
6(h) Cover Page
Other Information - Investment Structure

7(a) Not applicable
7(b) How Net Asset Value is Determined
7(c) Exchange Privilege
Flex-funds Retirement Plans
Other Shareholder Services
7(d) How to Buy Shares
7(e)(f) Distribution Plan

8(a) How to Make Withdrawals (Redemptions)
8(b) Not applicable
8(c) Shareholder Accounts
8(d) How to Make Withdrawals (Redemptions)

9 Not applicable

<PAGE> 3
PROSPECTUS __________, 1996

THE FLEX-FUNDS
THE HIGHLANDER FUND
6000 Memorial Drive
Dublin, OH 43017
614-766-7000

THE FLEX-FUNDS (THE "TRUST") ARE A FAMILY OF NO-LOAD MUTUAL FUNDS
CONSISTING OF FIVE DIFFERENT SERIES OR PORTFOLIOS, EACH OF WHICH HAS SEPARATE
INVESTMENT OBJECTIVES AND POLICIES. THE HIGHLANDER FUND (THE "FUND")
IS A MULTI-MANAGED OPEN-END INVESTMENT MANAGEMENT COMPANY KNOWN AS A MUTUAL
FUND. THE FUND SEEKS CAPITAL GROWTH BY INVESTING PRIMARILY IN A DIVERSIFIED
PORTFOLIO OF DOMESTIC COMMON STOCKS WITH GREATER THAN AVERAGE GROWTH
CHARACTERISTICS SELECTED PRIMARILY FROM THE STANDARD & POOR'S 500 COMPOSITE
STOCK PRICE INDEX (THE "S&P 500").

THE TRUST SEEKS TO ACHIEVE THE INVESTMENT OBJECTIVE OF THE FUND BY
INVESTING ALL OF THE INVESTABLE ASSETS OF THE FUND IN THE GROWTH STOCK PORTFOLIO
(THE "PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING
THE SAME INVESTMENT OBJECTIVE AS THE FUND. ACCORDINGLY, INVESTORS SHOULD
CAREFULLY CONSIDER THIS INVESTMENT APPROACH. FOR ADDITIONAL INFORMATION
REGARDING THIS UNIQUE CONCEPT, SEE "INVESTMENT OBJECTIVES AND POLICIES" ON PAGE
9 AND "OTHER INFORMATION - SHARES OF BENEFICIAL INTEREST AND INVESTMENT
STRUCTURE" ON PAGES 22 AND 23.

R. Meeder & Associates, Inc. is the investment adviser of the Portfolio
and Sector Capital Management , L.L.C. (the "Subadviser") is the investment
subadviser of the Portfolio. Sub-subadvisers, selected by the Subadviser,
subject to the review and approval of the Trustees of the Portfolio, are
responsible for the selection of individual portfolio securities for the assets
of the Portfolio assigned to them by the Subadviser.

This Prospectus sets forth basic information about the Trust and The
Highlander Fund that a prospective investor should know before
investing and it should be retained for future reference. A STATEMENT OF
ADDITIONAL INFORMATION, dated _________________, 1996, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Statement of Additional Information is available upon request and without charge
by contacting the Fund at the address given above or by calling: 1-800-325-FLEX,
or (614) 766-7000.

ADDITIONAL INFORMATION
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
Highlights 3 Performance Information and Reports 21
Synopsis of Financial Information 4 Other Information 22
Financial Highlights 6 How to Buy Shares 24
Performance Comparison 6 How to Make Withdrawals 26
Performance of Mr. Gurner and (Redemptions)
Subadviser 7 Exchange Privilege 27
Investment Objectives and Policies 9 Flex Funds Retirement Plans 28
Additional Investment Policies 10 Other Shareholder Services 28
The Trust and Its Management 13 Shareholder Accounts 29
Portfolio Transaction Policies 18
Distribution Plan 19
Income Dividends, Capital Gains,
Distributions and Taxes 20
How Net Asset Value is Determined 21
</TABLE>

2
<PAGE> 4
- -------------------------------------------------------------------------------
Highlights
- -------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The Highlander Fund seeks capital growth by investing
primarily in a diversified portfolio of domestic common stocks with greater
than average growth characteristics selected primarily from the S & P 500.
The Trust seeks to achieve the Fund's objective by investing all of the
investable assets of the Fund in the Growth Stock Portfolio, a corresponding
open-end management investment company (the "Portfolio") having the same
investment objective as the Fund. See "Investment Objectives and Policies" on
page 9.

LIQUIDITY: The Fund is an open-end management investment company that
continuously offers and redeems shares of beneficial interest at next determined
net asset value per share. See "How to Buy Shares" on page 24 and "How to Make
Withdrawals (Redemptions)" on page 26.

NO SALES OR REDEMPTION CHARGES: There are no commissions, fees or charges for
the purchase or redemption of shares. See "Synopsis of Financial Information" on
page 4, "How to Buy Shares" on page 29 and "How to Make Withdrawals
(Redemptions)" on page 26.

RETIREMENT PLANS AND OTHER SHAREHOLDER SERVICES: The Trust offers retirement
plans, which include a prototype Profit Sharing Plan, Money Purchase Pension
Plan, Salary Savings Plan --401(k), Individual Retirement Account (IRA),
Simple IRA and a number of other special shareholder
services.

MINIMUM INVESTMENT: A minimum investment of $2,500 is required to open an
account, except an IRA account, for which the minimum is $500. Subsequent
investments must be at least $100. The Fund has the right to redeem the shares
in an account and pay the proceeds to the shareholder if the value of the
account drops below $1,000 because of shareholder redemptions. The shareholder
will be given 30 days' written notice and an opportunity to restore his account
to $1,000 ($500 for an IRA). See "How to Buy Shares" on page 24, "Other
Shareholder Services" on page 28, and "Shareholder Accounts" on page 29.

INVESTMENT ADVISER AND SUBADVISERS: R. Meeder & Associates, Inc. is the
Portfolio's Investment Adviser and Manager (the "Investment Adviser" or the
"Manager"). The Manager has been an investment adviser to individuals,
retirement plans, corporations and foundations since 1974.

Sector Capital Management, L.L.C. (the "Subadviser") is the Portfolio's
subadviser. The Subadviser has been an investment adviser to individuals,
pension and profit sharing plans, trusts, charitable organizations, corporations
and other institutions since February, 1995.

Sub-subadvisers (the "Sector Advisers") selected by the Subadviser, subject to
the review and approval of the Trustees of the Portfolio, are responsible for
the selection of individual portfolio securities for the assets of the Portfolio
assigned to them by the Subadviser. See "The Trust and Its Management" on page
13.

DISTRIBUTION PLAN: The Highlander Fund has adopted a Rule 12b-1 distribution
plan for using as much as 2/10 of 1% of average net assets annually to aid in
the distribution of shares. See "Distribution Plan" on page 19.

HOW TO BUY SHARES: Complete the New Account Application and forward with payment
as directed. Orders accompanied by payment (ordinary check, bank check, bank
wire, and money order) are accepted immediately and priced at the next
determined net asset value per share after receipt of the order. See "How to Buy
Shares" on page 24 and "How Net Asset Value is Determined" on page 21.

3
<PAGE> 5
RISK FACTORS: As in any common stock fund, stock values may fluctuate in
response to the activities of an individual company or in response to general
market and/or economic conditions. Smaller or newer issuers are more likely to
realize more substantial growth as well as suffer more significant losses than
larger more established issuers. Investments in such companies can be both more
volatile and more speculative. See "Additional Investment Policies- Risk
Factors" on page 12. The Portfolio may use various investment techniques to
hedge the Portfolio's risks, including futures contracts and options. Special
risk factors may apply to those investments. See "Additional Investment Policies
- - Hedging Strategies and Option Strategies" on pages 11 and 12.

SHAREHOLDER INQUIRIES: Shareholder inquiries should be directed to the Fund by
writing or telephoning the Fund at the address or telephone number indicated on
the cover page of this Prospectus. To protect the confidentiality of shareholder
accounts, information relating to a specific account will be disclosed pursuant
to a telephone inquiry if the shareholder identifies the account by account
number or by the taxpayer identification number listed on the account.

- -------------------------------------------------------------------------------
SYNOPSIS OF FINANCIAL INFORMATION
- -------------------------------------------------------------------------------

THE HIGHLANDER
FUND
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sale Load Imposed on Purchases .................... none
Maximum Sales Load Imposed on
Reinvested Dividends ................................. none
Deferred Sales Load ....................................... none
Redemption Fees ........................................... none
Exchange Fee .............................................. none

ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees ........................................... 1.00%
Distribution Plan
(12b-1 Fees)** ....................................... 0.13%
Other Expenses ............................................ 0.51%
----

TOTAL FUND OPERATING EXPENSES* ............................ 1.64%
</TABLE>

EXAMPLE
An investor would pay the following expense on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
The Highlander Fund $17 $52 $89 $194
</TABLE>

4
<PAGE> 6
*Expenses used in these illustrations are based upon expenses actually
incurred for both The Highlander Fund (formerly known as "The Growth Fund")
and its corresponding Portfolio, the Growth Stock Portfolio, for the year
ended December 31, 1995.

**Distribution Plan Expense: The Trust is party to agreements whereby
consultant companies or individuals (including two Trustees of the Portfolio)
are paid for explaining the Fund, its investment objectives and policies, and
the Trust's retirement plans, to clients. Other distribution plan expense
includes: the expense of printing and mailing prospectuses, periodic reports and
other sales materials to prospective investors; advertising; payment for
marketing programs and the services of public relations consultants; and the
cost of special telephone service to encourage the sale of Fund shares. (See
"Distribution Plan.")

The table on the this page is meant to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Fund does not impose a sales charge, exchange fee or
redemption fee with the following exceptions. The custodian of IRA accounts
charges a $5.00 annual maintenance fee and the transfer agent charges IRA
accounts a $7.00 fee if the account is totally liquidated. For more complete
descriptions of the various costs and expenses of the Fund see "The Trust and
Its Management" and "Distribution Plan."

The Board of Trustees of the Trust believes that the aggregate per share
expenses of the Fund and the Portfolio will be less than or approximately equal
to the expenses which the Fund would incur if it retained the services of an
investment adviser and the assets of the Fund were invested directly in the type
of securities being held by the Portfolio. For additional information concerning
expenses incurred by the Fund and the Portfolio, see "The Trust and Its
Management" herein, and "Investment Adviser and Manager", "Investment
Subadviser" and "Investment Sub-subadvisers" in the Statement of Additional
Information.

The table and hypothetical example above are for illustrative purposes
only. The investment rate of return and expenses should not be considered as
representations of past or future performance as actual rates of return and
expenses may be more or less than the rate and amounts shown.

5
<PAGE> 7
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------

The financial highlights for The Highlander Fund (formerly known as
"The Growth Fund") are listed below. This information has been audited in
conjunction with the annual audit of the financial statements of The Enhanced
Sector Growth Fund and its corresponding Portfolio by KPMG Peat Marwick LLP,
independent certified public accountants, for each of the periods ended December
31, 1988 through December 31, 1995; and by other certified public accountants
for the earlier periods.

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of $ 13.03 $ 13.45 $ 12.70 $ 10.21 $ 10.33
Period

Net Investment income 0.50 0.27 0.09 0.18 0.34
Net Gains or (Losses) on Securities
(both realized and unrealized) 2.68 (0.37) 0.82 0.58 1.84
Total From Investment Operations 3.18 (0.10) 0.91 0.76 2.18
LESS DISTRIBUTIONS
Dividends (from net investment (0.50) (0.27) (0.16) (0.11) (0.34)
income)
Distributions (from capital gains) (0.42) -- -- -- --
Total Distributions (0.92) (0.27) (0.16) (0.11) (0.34)

NET ASSET VALUE, END OF PERIOD $ 15.34 $ 13.08 $ 13.45 $ 12.70 $ 12.05

Total Return 24.61% (0.69%) 7.21% 6.35% 21.46%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 24,631 22,176 26,171 25,534 32,654
Ratio of Expenses to Average Net Assets 1.64% 1.63% 1.54% 1.51% 1.42%
Ratio of Net Income (Loss) to
Average Net Assets 3.38% 1.95% 0.69% 1.31% 2.98%
Portfolio Turnover Rate 338% 103% 100% 39% 265%
Average Brokerage Commission Per Share $0.0806 N/A N/A N/A N/A
</TABLE>

<TABLE>
<CAPTION>
1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of $ 9.67 $ 9.67 $ 11.27 $ 10.52 $ 10.69
Period

Net Investment income 0.57 0.29 0.59 0.21 0.20
Net Gains or (Losses) on Securities
(both realized and unrealized) (0.12) 0.69 (1.22) 0.59 1.06
Total From Investment Operations 0.45 0.98 (0.63) 0.80 1.26
LESS DISTRIBUTIONS
Dividends (from net investment (0.57) (0.32) (0.78) (0.05) (1.43)
income)
Distributions (from capital gains) -- -- (0.19) -- (1.15)
Total Distributions (0.57) (0.32) (.097) (0.05) (1.43)

NET ASSET VALUE, END OF PERIOD $ 10.25 $ 10.33 $ 9.67 $ 11.27 $ 10.52

Total Return 4.31% 10.71 (5.79%) 7.61% 11.81%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 24,664 29,711 4,478 12,822 10,222
Ratio of Expenses to Average Net Assets 1.46% 1.55% 1.50% 1.48% 1.49%
Ratio of Net Income (Loss) to
Average Net Assets 4.90% 2.63% 2.06% 1.79% 2.32%
Portfolio Turnover Rate 436% 50% 313% 326% 152%
Average Brokerage Commission Per Share N/A N/A N/A N/A N/A
</TABLE>

- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON
- -------------------------------------------------------------------------------

THE HIGHLANDER FUND VS. THE S&P 500 INDEX

The Growth of $10,000 (12/31/85 to 12/31/95)

<TABLE>
<CAPTION>
THE HIGHLANDER FUND THE S&P 500 THE HIGHLANDER FUND
<S> <C> <C>
$10,000 $10,000 Average Annual Total Return
1986 $11,181 $11,850 -------------------------------
1987 $12,032 $12,466 1 year
1988 $11,336 $14,560 24.61%
1989 $12,489 $19,147
1990 $13,028 $18,534 5 years
1991 $15,824 $24,206 11.38%
1992 $16,830 $26,069
1993 $18,043 $28,651 10 years
1994 $17,918 $29,023 8.36%
1995 $22,328 $39,912
</TABLE>

1995 IN REVIEW.

The total return of The Highlander Fund (formerly known as "The Growth
Fund") was 24.61 percent during 1995. This compares with the return of the
average Asset Allocation Fund, as reported by Morningstar, Inc., of 23.84
percent during 1995. The S&P 500 Index provided a return of 37.53 percent
during 1995. The Highlander Fund was fully exposed to the stock market for
much of the year. During that time, the portfolio of The Highlander Fund was
dominated by exposure to large capitalization stocks.

6
<PAGE> 8
Fully defensive as 1995 began, The Highlander Fund was fully exposed to
the stock market in early January. In mid-March, the Fund adopted a 50 percent
defensive position. By the first week in June, The Highlander Fund was again
fully exposed to the stock market where it remained until the fourth quarter of
1995. By October, certain fundamental questions about the market's continued
advance began to indicate that the most prudent posture was to again adopt a
partially defensive position. The Highlander Fund remained partially defensive
until the first week in December when it returned to a fully invested position.

The Highlander Fund changed its name from The Growth Fund to
The Highlander Fund on November 2, 1996. Along with its name change,
The Highlander Fund changed its investment objective to that
described in "Investment Objectives and Policies" on page 9 and the Portfolio
engaged the Subadviser and the Sector Advisers to manage the Portfolio.
Consequently, the performance information shown above reflects the performance
of The Highlander Fund under the prior investment objective and
policies and before the Portfolio's engagement of the Subadviser and Sector
Advisers. See "The Trust and its Management."

The graph depicting the growth of $10,000 and the average annual total
returns for the Fund is representative of past performance and is not intended
to indicate future performance.

The index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management and accounting fees. The Fund's
performance reflects the deduction of fees for these value added services.

*The returns of the index are from the beginning or end of the
month nearest the Fund's inception to the end of the calendar year.

- -------------------------------------------------------------------------------
PERFORMANCE OF MR. GURNER AND SUBADVISER
- -------------------------------------------------------------------------------

William L. Gurner, the President, Administrator and Portfolio Manager of
the Subadviser, served as Manager (Trust Investments) for an employee benefit
plan of a large corporation from September, 1987 through December, 1994. The
following table sets forth Mr. Gurner's performance from March 1, 1991 through
December 31, 1994 (from September, 1987 until March 1, 1991, the employee
benefit plan did not have investment objectives, policies, strategies and risks
similar to those of the Growth Stock Portfolio and the Fund) relating to the
historical performance the employee benefit plan managed by Mr. Gurner and the
Subadviser's composite performance relating to the historical performance of
private accounts managed by the Subadviser from January 1, 1995 through
September 30, 1996, that have investment objectives, policies, strategies and
risks substantially similar to those of the Growth Stock Portfolio and the Fund.
Mr. Gurner and the Subadviser engaged substantially the same Sector Advisers
currently engaged by the Growth Stock Portfolio to manage on a discretionary
basis the assets of the employee benefit plan and such private accounts. The
data is provided to illustrate the past performance of Mr. Gurner and the
Subadviser in managing substantially similar accounts as measured against
specified market indices and does not represent the performance of the Growth
Stock Portfolio or the Fund. Investors should not consider this performance data
as an indication of future performance of the Growth Stock Portfolio or the
Fund. Mr. Gurner and the Subadviser's composite performance data shown below
were calculated in accordance with recommended standards of the Association for
Investment Management and Research ("AIMR"*), retroactively applied to all time
periods. All returns presented were calculated on a total return basis and
include all dividends and interest, accrued income and realized and unrealized
gains and losses. All returns reflect the deduction of investment advisory fees,
brokerage commissions and execution costs paid by the employee benefit plan and
the private accounts without provision for federal or state income taxes.
Custodial fees, if any , were not included in the calculation. The Subadviser's
composite includes all actual, fee paying, discretionary, private accounts
managed by the Subadviser that have investment objectives, policies, strategies
and risks substantially similar to those of the Growth Stock Portfolio and the
Fund. Securities transactions are accounted for on the trade date and accrual
accounting is utilized. Cash and

7
<PAGE> 9
equivalents are included in performance returns. The yearly returns of the
Subadviser's composite combine the individual accounts' returns by
asset-weighting each individual account's asset value as of the beginning of
each quarter. The yearly returns are computed by geometrically linking the
returns of each quarter within the calendar year.

The employee benefit plan managed by Mr. Gurner and the private accounts
that are included in the Subadviser's composite are not subject to the same
types of expenses to which the Growth Stock Portfolio or the Fund are subject
nor to the diversification requirements, specific tax restrictions and
investment limitations imposed on the Growth Stock Portfolio and the Fund by the
Investment Company Act or Subchapter M of the Internal Revenue Code.
Consequently, the performance results for the employee benefit plan managed by
Mr. Gurner and the Subadviser's composite could have been adversely affected if
the employee benefit plan and the private accounts included in the composite had
been regulated as investment companies under the federal securities laws.

The investment results of Mr. Gurner and the Subadviser's composite
presented below are unaudited and not intended to predict or suggest the returns
that might be experienced by the Growth Stock Portfolio or an individual
investor investing in the Fund. Investors should also be aware that the use of a
methodology different from that used below to calculate performance could result
in different performance data.
-----------------------
*AIMR is a non-profit membership and education organization with more than
60,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.

<TABLE>
<CAPTION>
PERFORMANCE
-----------
YEAR MR. GURNER'S THE SUBADVISER'S S&P 500(1)
- ---- ------------ ---------------- ----------

(1)The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the U.S. stock market. The Index reflects the
reinvestment of income dividends and capital gain distributions, if any, but
does not reflect fees, brokerage commissions, or other expenses of investing.

(2) Commencement of investment operations with regard to Mr. Gurner is March
1, 1991.

(3) Through September 30, 1996.

8
<PAGE> 10
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------

The Highlander Fund and the Growth Stock Portfolio have their own separate
investment objectives and policies, as set forth below. These investment
objectives and policies, which are identical, are not fundamental and may be
changed by their respective Trustees without approval of the Fund's
shareholders, or approval of the Portfolio's investors, except as otherwise
provided herein. No such change would be made in the Fund, or Portfolio, without
30 days prior written notice to shareholders. The Trust seeks to achieve the
Fund's investment objective by investing all of its investable assets in the
Portfolio. For more information concerning the investment structure of the Fund
which invests its assets in the Portfolio, see "Other Information --Investment
Structure." Since the investment characteristics of the Fund will correspond
directly to those of the Portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio. Additional information
about the investment policies of the Portfolio appears in the Statement of
Additional Information. There can be no assurance that the investment objectives
of the Fund and the Portfolio will be achieved.

The Portfolio seeks capital growth by investing primarily in a diversified
portfolio of domestic common stocks with greater than average growth
characteristics selected primarily from the Standard & Poor's 500 Composite
Stock Price Index (the "S & P 500"). Current income will not be a primary
objective. Under normal conditions, at least 80% of the Portfolio's total assets
will be invested in domestic common stocks.

Common stocks are selected for the Portfolio from all domestic publicly
traded common stocks; however, at least 70% of the assets of the Portfolio
invested in common stocks will be invested in common stocks which are included
in the S & P 500.

The Portfolio consists of investment portfolios representing each of the
industry sectors (identified by the Subadviser) comprising the S & P 500. The
assets of the Portfolio will be allocated to each of these industry sectors in
approximately the same proportion as these industry sectors are represented in
the S & P 500 on a market capitalization-weighted basis. The Subadviser
continuously reviews the representation of the industry sectors in the S & P 500
and continuously categorizes domestic publicly traded common stocks into a
specific industry sector.

The total market value of the common stocks in each industry sector of the
S & P 500 is compared by the Subadviser to the total market value of all common
stocks in the S & P 500 to determine each industry sector's weighting in the S &
P 500. If the weighting of any industry sector in the Portfolio varies from the
weighting on a market-capitalization basis of that industry sector in the S & P
500 at the end of any month, the amount of assets in the Portfolio allocated to
that industry sector will be reallocated by the Subadviser. The Subadviser may
make a reallocation more frequently than monthly if it chooses to do so in its
sole discretion. Reallocations may result in additional transaction costs to the
extent that sales of securities as part of such reallocations result in higher
portfolio turnover.

Except as otherwise provided below, the assets of the Portfolio
representing each of these industry sectors are managed on a discretionary
basis by one or more separate investment advisers (the "Sector Advisers")
selected by the Subadviser, subject to the review and approval of the Board of
Trustees of the Portfolio.

Assets of the Portfolio representing each of the industry sectors are
managed by one or more Sector Advisers, except (i) the assets of the Portfolio
representing the health sector managed and "indexed" by the Subadviser until it
selects one or more Sector Advisers, subject to the review and approval of the
Portfolio Trustees, to manage the assets of the Portfolio representing the
health sector and (ii) in the event a Sub-subadvisory Agreement is terminated
leaving no Sector Adviser to manage the assets of the Portfolio representing an
industry sector, the Subadviser will, upon termination and until a new Sector
Adviser were selected, manage and "index" the assets of the Portfolio
representing the applicable industry sector by selling any stocks representing
the industry sector that are not included in the S&P 500 and investing the
assets comprising the industry sector in S&P 500 stocks identified by the
Subadviser as belonging to that industry sector in the same proportion as those
stocks are represented in the S&P 500 on a market capitalization-weighted basis.

Each Sector Adviser is limited to the list of companies identified by the
Subadviser which represents the Sector Adviser's specific industry sector. Each
Sector Adviser then selects those common stocks which, in its

9
<PAGE> 11
opinion, best represent the industry sector the Sector Adviser has been
assigned. In selecting securities for the Portfolio, the Sector Advisers
evaluate factors believed to be favorable to long term growth of capital
including specific financial characteristics of the issuer such as historical
earnings growth, sales growth, profitability and return on equity. The Sector
Advisers also analyze the issuer's position within its industry sector as well
as the quality and experience of the issuer's management.

Up to 20% of the Portfolio's assets may be invested in temporary
investments such as money market instruments, obligations issued or guaranteed
by the U.S. Government, its agencies and instrumentalities, and repurchase
agreements. See "Additional Investment Policies - Money Market Instruments and
Bonds." The Portfolio may purchase stock index futures contracts and related
options. See "Additional Investment Policies - Hedging Strategies and Option
Strategies". Up to 5% of the total assets of the Portfolio may be invested in
American Depository Receipts.

As a fundamental policy, the Portfolio may not own more than 10% of the
outstanding voting shares of any issuer and with respect to 75% of the total
assets of the Portfolio, the Portfolio will not purchase a security of any
issuer (other than cash items and U.S. Government Securities, as defined in the
Investment Company Act of 1940) if such purchase would cause the Portfolio's
holdings of that issuer to amount to more than 5% of the Portfolio's total
assets.

See the Fund's Statement of Additional Information for other details.

- -------------------------------------------------------------------------------
ADDITIONAL INVESTMENT POLICIES
- -------------------------------------------------------------------------------

MONEY MARKET INSTRUMENTS AND BONDS

When investing in money market instruments or bonds, the Portfolio will
limit its purchases to the following securities:

o U.S. Government Securities and Securities of its Agencies and
Instrumentalities.

o Bank Obligations and Instruments Secured Thereby.

o High Quality Commercial Paper -- The Portfolio may invest in commercial
paper rated no lower than "A-2" by Standard & Poor's Corporation or "Prime-2" by
Moody's Investors Services, Inc., or, if not rated, issued by a company having
an outstanding debt issue rated at least A by Standard & Poor's or Moody's.

o Private Placement Commercial Paper -- unregistered securities which are
traded in public markets to qualified institutional investors, such as the
Portfolio.

o High Grade Corporate Obligations -- obligations rated at least A by
Standard & Poor's or Moody's.

o Repurchase Agreements Pertaining to the Above -- The Portfolio may invest
in any of the above securities subject to repurchase agreements with any Federal
Reserve reporting dealer or member bank of the Federal Reserve System.
Repurchase agreements usually are for short periods, such as one week or less,
but

10
<PAGE> 12
could be longer. The Portfolio will not invest more than 10% of its assets,
at time of purchase, in repurchase agreements which mature in excess of seven
days or in other illiquid or not readily marketable securities.

HEDGING STRATEGIES

The Portfolio may engage in hedging transactions in carrying out its
investment policies. A hedging program may be implemented for the following
reasons: (1) To gain equity market exposure for unallocated and uninvested cash
balances of the Portfolio; (2) To protect the value of specific securities
owned or intended to be purchased while the Investment Adviser, Subadviser or a
Sector Adviser is implementing a change in the Portfolio's investment position;
(3) To protect portfolio values during periods of extraordinary risk without
incurring transaction costs associated with buying or selling actual
securities; and (4) To utilize the "designated hedge" provisions of Sub-Chapter
M of the Internal Revenue Code as a permitted means of avoiding taxes that
would otherwise have to be paid on gains from the sale of portfolio securities.

A hedging program involves entering into an "option" or "futures"
transaction in lieu of the actual purchase or sale of securities. At present,
many groups of common stocks (stock market indices) may be made the subject of
futures contracts.

Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying assets, security or index.
Accordingly, these financial futures contracts or related options used by the
Portfolio to implement its hedging strategies are considered derivatives. The
value of derivatives can be affected significantly by even small market
movements, sometimes in unpredictable ways. They do not necessarily increase
risk, and may in fact reduce risk.

The Portfolio will not engage in transactions in financial futures
contracts or related options for speculation but only as a hedge against changes
in the market value of securities held in the Portfolio, securities which it
intends to purchase, or to gain market exposure for unallocated and uninvested
cash balances. The Portfolio will only enter in such transactions when they are
economically appropriate to meeting portfolio investment objectives and to the
reduction of risks inherent in the ongoing management of the Portfolio.

For certain regulatory purposes, the Commodity Futures Trading Commission
("CFTC") limits the types of futures positions that can be taken in conjunction
with the management of a securities portfolio for a mutual fund, such as the
Fund. All futures transactions for the Portfolio will consequently be subject to
the restrictions on the use of futures contracts established in CFTC rules, such
as observation of the CFTC's definition of "hedging." In addition, whenever the
Portfolio establishes a long futures position, it will set aside cash or cash
equivalents equal to the underlying commodity value of the long futures
contracts held by the Portfolio. Although all futures contracts involve leverage
by virtue of the margin system applicable to trading on futures exchanges, the
Portfolio will not, on a net basis, have leverage exposure on any long futures
contracts that it establishes because of the cash set aside requirement. All
futures transactions can produce a gain or a loss when they are closed,
regardless of the purpose for which they have been established. Unlike short
futures contracts positions established to protect against the risk of a decline
in value of existing securities holdings, the long futures positions established
by the Portfolio to protect against reinvestment risk are intended to protect
the Portfolio against the risks of reinvesting portfolio assets that arise
during periods when the assets are not fully invested in securities.

11
<PAGE> 13
The Portfolio may not purchase or sell financial futures or purchase
related options if immediately thereafter the sum of the amount of margin
deposits on the Portfolio's existing futures positions and premiums paid for
related options would exceed 5% of the market value of the Portfolio's total
assets.

The Portfolio expects that any gain or loss on hedging transactions will
be substantially offset by any gain or loss on the securities underlying the
contracts or being considered for purchase. There can be no guaranty that the
Portfolio will be able to realize this objective and, as noted below under "Risk
Factors," there are some risks in utilizing a hedging strategy.

OPTION STRATEGIES

The Portfolio may write (sell) covered call options. The purpose of such
transactions is to: (1) hedge against changes in the market value of specific
securities held by the Portfolio; and/or (2) to generate incremental income by
capturing the proceeds of options sold.

The Portfolio may write (sell) call options, but only if such options are
covered and remain covered as long as the Portfolio is obligated as a writer of
the option (seller). A call option is "covered" if the Portfolio owns the
underlying security covered by the call. If a "covered" call option expires
un-exercised, the writer realizes a gain in the amount of the premium received.
If the covered call option is exercised, the writer realizes either a gain or a
loss from the sale of the underlying security with the proceeds to the writer
being increased by the amount of the premium. Prior to its expiration, a call
option may be closed out by means of a purchase of an identical option. Any gain
or loss from such transaction will depend on whether the amount paid is more or
less than the premium received for the option plus related transaction costs.

RISK FACTORS

The Growth Stock Portfolio will be invested in securities which fluctuate
in market value, so net asset value per share will fluctuate as well. When The
Growth Stock Portfolio is invested in smaller capitalization issues, it could be
subject to wider price fluctuations than the stock market as measured by popular
market indices.

There is no guarantee that a shareholder will receive the full amount of
his investment upon the redemption of shares. The Portfolio does, however, seek
to minimize the risk of loss through diversification and, at times, the use of
hedging techniques. Hedging involves risks which are not present in some other
mutual funds with similar objectives (See "Hedging Strategies.")

Options are subject to certain risks, including the risk of imperfect
correlation between the option and the security underlying the option contract
and the risk that there may not be a liquid secondary market for the option when
the Portfolio seeks to repurchase a call option. Entering into a covered call
writing transaction can also limit the appreciation potential of the Portfolio.

Futures contracts likewise involve some risk. It is possible that the
contract(s) selected by the Manager or the Subadviser will not follow exactly
the price movement of the securities covered by the contract. If this occurs,
the objective of the hedging strategy may not be successful. There may not be a
liquid market for futures positions when the Portfolio seeks to remove a hedge
transaction. The liquidity of both options and futures contracts may also be
affected if options and futures exchanges impose trading halts, particularly
when markets are volatile.

12
<PAGE> 14
The Portfolio may invest in repurchase agreements with banks and
securities brokers, and in private placement commercial paper.

All repurchase agreements entered into by the Portfolio will be fully
collateralized. The Portfolio's risk is that the seller may fail to repurchase
the security on the delivery date. If the seller defaults, the underlying
security constitutes collateral for the seller's obligation to pay. It is a
policy of the Portfolio to make settlement on repurchase agreements only upon
proper delivery of the underlying collateral. In the event of a bankruptcy or
other default of a seller of a repurchase agreement to the Portfolio, the
Portfolio could encounter delays and expenses in enforcing its rights and could
experience losses, including a decline in the value of the underlying securities
and loss of income.

Private placement commercial paper ("Rule 144A securities ") consists of
unregistered securities which are traded in public markets to qualified
institutional investors, such as the Portfolio. The Portfolio's risk is that the
universe of potential buyers for the securities, should the Portfolio desire to
liquidate a position, is limited to qualified dealers and institutions, and
therefore such securities could have the effect of being illiquid.

The use of multiple Sector Advisers or the replacement of a Sector Adviser
may increase the Portfolio's portfolio turnover rate, realizations of gains or
losses, and brokerage commissions. High portfolio turnover may involve
correspondingly greater brokerage commissions and transaction costs, which will
be borne by the Portfolio and may result in increased short-term capital gains
which , when distributed to shareholders, are treated as ordinary income. See
"Income Dividends, Capital Gains, Distributions and Taxes."

PORTFOLIO TURNOVER

Although it is not possible to predict future portfolio turnover rates
accurately, and such rates may vary greatly from year to year, the Subadviser
anticipates that the annual portfolio turnover rate for the Portfolio will not
exceed 60%. See "Portfolio Transaction Policies."

The Portfolio intends to comply with the short-term trading restrictions
of Subchapter M of the Internal Revenue Code of 1986, as amended, although these
restrictions could inhibit a rapid change in the Portfolio's investments.

- -------------------------------------------------------------------------------
THE TRUST AND ITS MANAGEMENT
- -------------------------------------------------------------------------------

The Trust is an open-end management investment company organized as a
Massachusetts Business Trust on December 31, 1991 as the successor to a
Pennsylvania Business Trust organized on April 30, 1982. Four of the Trust's
five constituent funds are diversified open-end management investment companies.
The Trust's offices are at 6000 Memorial Drive, Dublin, OH 43017. The business
and affairs of the Trust are under the direction of its Board of Trustees.

Neither the Trust nor the Fund has an investment adviser because the Trust
seeks to achieve the investment objective of the Fund by investing its assets in
the Portfolio. The Portfolio has retained the services of R. Meeder &
Associates, Inc. as investment adviser.

MANAGER

13
<PAGE> 15
R. Meeder & Associates, Inc. (the "Manager"), has been an investment
adviser to individuals and retirement plans since 1974. The Manager served as
the Fund's investment adviser from its inception in 1988 until January of 1993,
at which time the investment by the Fund in the Portfolio was implemented. The
Manager serves the Portfolio pursuant to an Investment Advisory Contract under
the terms of which it has agreed to provide an investment program within the
limitations of the Portfolio's investment policies and restrictions, and to
furnish all executive, administrative, and clerical services required for the
transaction of Portfolio business, other than accounting services and services
which are provided by the Portfolio's custodian, transfer agent, independent
accountants and legal counsel. The Manager invests the Portfolio's liquidity
reserves and may invest the Portfolio's financial futures contracts and related
options. See "Additional Investment Policies-Hedging Strategies and Option
Strategies."

The Manager was incorporated in Ohio in 1974 and maintains its principal
offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a wholly-owned
subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled by Robert S.
Meeder, Sr. through ownership of voting common stock. MII conducts business only
through its five subsidiaries which are the Manager; Mutual Funds Service Co.,
the Trust's transfer agent; Opportunities Management Co., a venture capital
investor; Meeder Advisory Services, Inc., a registered investment adviser and
OMCO, Inc., a registered commodity trading adviser and commodity pool operator.

The Manager's officers and directors are as follows: Robert S. Meeder,
Sr., Chairman and Sole Director; Robert S. Meeder, Jr., President; Philip A.
Voelker, Senior Vice President; Donald F. Meeder, Vice President and
Secretary; Sherrie L. Acock, Vice President; Robert D. Baker, Vice President,
Wesley F. Hoag, General Counsel; Steven T. McCabe, Vice President; Elyse Jurman,
Vice President; and Roy E. Rogers, Vice President.

Philip A. Voelker is primarily responsible for managing the liquidity
reserve of the Portfolio and managing the futures contracts and related options
of the Portfolio on behalf of the Manager. Mr. Voelker is a Vice President and
Trustee of the Portfolio, Vice President of the Flex-funds and Senior Vice
President of the Manager. Mr. Voelker has been associated with the Manager
since 1975.

All compensation to the Manager will be shared by the Subadviser and the
Manager out of the Manager's fee from the Portfolio in accordance with a
formula such that the Manager will receive 70% and the Subadviser 30% of the
fee payable with respect to the net assets of the Portfolio upon effectiveness
of the subadvisory arrangement; then the Subadviser will receive 70% and the
Manager 30% of the fee attributable to any additional net assets of the
Portfolio up to an amount of net assets equal to the net assets at
effectiveness of the subadvisory arrangement, then the Manager and the
Subadviser will share equally the fee attributable to any additional net
assets of the Portfolio up to $50 million of the net assets. With respect to
net assets of more than $50 million and less than $100 million, the applicable
fee of 0.75% will be shared such that the Manager will receive 0.35% and the
Subadviser 0.40%. For net assets of $100 million and more, the applicable
0.60% fee will be shared such that the Manager will receive 0.25% and
Subadviser 0.35%.

Accounting, stock transfer, dividend disbursing, and shareholder services
are provided to the Portfolio and the Fund by Mutual Funds Service Co., 6000
Memorial Drive, Dublin, Ohio 43017, a wholly-owned subsidiary of MII. The
minimum annual fee, payable monthly, for accounting services in the Portfolio is
$7,500. Subject to the applicable minimum fee, the fee is computed at the rate
of 0.15% of the first $10 million, 0.10% of the next $20 million, 0.02% of the
next $50 million and 0.01% in excess of $80 million of the Portfolio's average
net assets. In addition, the Fund incurs (subject to a $4,000 annual minimum
fee) an annual fee of the greater of $15 per shareholder account or 0.10% of the
Fund's average net assets, payable monthly, for stock transfer, dividend
disbursing and shareholder support services. Mutual Funds Service Co. also
serves as Administrator to the Fund. Services provided to the Fund include
coordinating and monitoring any third party services to the Fund; providing the
necessary personnel to perform administrative functions for the Fund; assisting
in the preparation, filing and distribution of proxy materials, periodic reports
to Trustees and shareholders, registration statements and other necessary
documents. The Fund incurs an annual fee for the foregoing services provided by
the Administrator, payable monthly, of .03% of the Fund's average net assets.
These fees are reviewed annually by the respective Trustees of the Trust and
the

14
<PAGE> 16
Portfolio. For the year ended December 31, 1995, total payments to Mutual Funds
Service Co. amounted to $29,772 and $28,335 for the Fund and Portfolio,
respectively.

A broker-dealer may use a portion of the Commissions paid by the
Portfolio to reduce the Portfolio or the Fund's expenses. The Manager,
Subadviser and Sector Advisers may take into account sales of shares of the
Fund and other funds advised by them in selecting broker-dealers to effect
portfolio transactions on behalf of the Portfolio.

SUBADVISER

Sector Capital Management, L.L.C. (the "Subadviser"), 5350 Poplar Avenue,
Suite 490, Memphis, Tennessee 38119, serves as the Growth Stock Portfolio's
subadviser under an Investment Subadvisory Agreement among the Portfolio,
the Manager and the Subadviser. The Subadviser furnishes investment
advisory services in connection with the management of the Growth Stock
Portfolio.

The Subadviser is a Georgia limited liability company that has been a
registered investment adviser to individuals, pension and profit sharing plans,
trusts, charitable organizations, corporations and other institutions since
February, 1995. As of September 30, 1996, the Subadviser held discretionary
investment authority over approximately $88 million of assets. The Subadviser
is controlled by William L. Gurner and John K. Donaldson. Mr. Gurner is
primarily responsible for the day-to-day management of the Portfolio through
interaction with each of the Sector Advisers. Mr. Gurner is also primarily
responsible for managing the futures contracts and related options of the
Portfolio on behalf of the Subadviser. Mr. Gurner has been associated with the
Subadviser since its inception in February, 1995. Mr. Gurner, President,
Administrator, Manager and a Member of the Subadviser, is a trustee of The
Flex-Partners, mutual funds whose corresponding portfolios are also advised by
the Manager.

The Subadviser and the Portfolio have entered into a Sub-subadvisory
Agreement with each Sector Adviser selected for the Portfolio. It is the
Subadviser's responsibility to select, subject to the review and approval of the
Board of Trustees, the Sector Advisers who have distinguished themselves by able
performance in respective areas of expertise in sector management and to review
their continued performance. In addition, it is the Subadviser's responsibility
to categorize domestic publicly traded common stocks into a specific industry
sector. The Subadviser may also invest the Portfolio's financial futures
contracts and related options.

Subject to the supervision and direction of the Portfolio's Board of
Trustees, the Subadviser provides to the Portfolio investment management
evaluation services principally by performing initial due diligence on
prospective Sector Advisers for the Portfolio and thereafter monitoring Sector
Adviser performance through quantitative and qualitative analysis as well as
periodic in-person, telephonic and written consultations with Sector Advisers.
In evaluating prospective Sector Advisers, the Subadviser considers among other
factors, each Sector Advisers level of expertise; relative performance and
consistency of performance, level of adherence to investment discipline or
philosophy; personnel, facilities and financial strength; and quality of service
and client communications. The Subadviser has responsibility for communicating
performance expectations and evaluations to Sector Advisers and ultimately
recommending to the Board of Trustees of the Portfolio whether Sector Advisers'
contracts should be renewed, modified, or terminated. The Subadviser provides
reports to the Portfolio's Board of Trustees regarding the results of its
evaluation and monitoring functions.

The Subadviser pays each Sector Adviser a fee for its investment advisory
services that is computed daily and paid monthly based on the value of the
average net assets of the Portfolio assigned by the Subadviser to the Sector
Adviser at an annual rate equal to .25%.

Investors should be aware that the Subadviser may be subject to a conflict
of interest when making decisions regarding the retention and compensation of
particular Sector Advisers. However, the Subadviser's decisions regarding the
selection of Sector Advisers and specific amount of the compensation to be paid
to Sector Advisers, are subject to review and approval by a majority of the
Board of Trustees of the Portfolio.

Although the Subadviser and the Sector Advisers' activities are subject
to general oversight by the Board of Trustees and the officers of the Portfolio,
neither the Board nor the officers evaluate the investment merits of any Sector
Adviser's individual security selections. The Board of Trustees will review
regularly the Portfolio's performance compared to the applicable indices and
also will review the Portfolio's compliance with its investment objectives and
policies.

While the investment professionals of the Subadviser have experience in
asset management and the selection of investment advisers, prior to the
Subadviser becoming the subadviser to the Portfolio, on December 31, 1996, it
did not have previous experience in providing investment advisory services to an
investment company.

15
<PAGE> 17
The Portfolio intends to file an exemptive order application
(the"Application") with the Securities and Exchange Commission (the "SEC")
seeking an exemption from Section 15(a)(1) of the Investment Company Act of 1940
to the extent necessary to permit the Portfolio and the Subadviser to enter into
Investment Subadvisory Agreements with each Sector Adviser without such
agreements being approved by the shareholders of the Portfolio except for
Investment Subadvisory Agreements with an affiliated person of the Portfolio,
the Manager or the Subadviser other than by reason of such affiliated person
serving as an existing Sector Adviser to the Portfolio. Applicable orders
granted by the SEC to other investment companies seeking similar exemptions have
required as a condition to granting the order that the investment company obtain
shareholder approval for such a policy. The Portfolio expects that the SEC will
impose the same condition on the Portfolio and accordingly on December 20, 1996,
at a Special Meeting of the shareholders of the Portfolio, the shareholders
approved a proposal to allow the Portfolio and the Subadviser to enter into
Investment Subadvisory Agreements with Sector Advisers without such agreements
being approved by the shareholders of the Portfolio. In addition, the
Portfolio's Application will likely include the condition that within 90 days of
the hiring of any new Sector Advisers and executing a new Investment Subadvisory
Agreement, the Subadviser will furnish shareholders with an information
statement about the new Sector Adviser and Investment Subadvisory Agreement.
There is no guarantee that the SEC will grant the Portfolio's application for
exemptive relief. Any changes to the Investment Advisory Contract between the
Portfolio and the Manager or the Investment Subadvisory Agreement between the
Portfolio, Manager and Subadviser still require shareholder approval. In
accordance with the terms of the application for exemption, a majority of the
shareholders of the Fund have approved the operation of the Trust in accordance
with the exemption.

SECTOR ADVISERS: The Sector Advisers have agreed to an investment advisory
fee based on the average net assets of the Portfolio assigned to them by the
Subadviser at an annual rate equal to .25%, which is generally lower than the
fees they charge to institutional accounts for which they serve as investment
adviser, and for which they perform all administrative responsibilities.

Subject to the supervision and direction of the Subadviser and,
ultimately, the Board of Trustees of the Portfolio, each Sector Adviser's
responsibilities are limited to managing its portion of the securities held by
the Portfolio in accordance with the Portfolio's stated investment objective and
policies, making investment decisions for the Portfolio and placing orders to
purchase and sell securities on behalf of the Portfolio.

The following sets forth certain information about each of the Sector Advisers:

MILLER/HOWARD INVESTMENTS, INC. serves as Sector Adviser to the
utilities and transportation sectors of the Portfolio. Miller/Howard is a
registered investment adviser which has been providing investment services to
broker-dealers, investment advisers, employee benefit plans, endowment
portfolios, foundations and other institutions and individuals since 1984. As of
June 30, 1996, Miller/Howard held discretionary investment authority over
approximately $ 203 million of assets. Lowell Miller and Helen Hamada who are,
respectively, Miller/Howard's President, Secretary and a director and its
Treasurer and a director, each own more than 10% of the outstanding voting
securities of Miller/Howard. Mr. Miller will be the portfolio manager primarily
responsible for the day-to-day management of those assets of the Portfolio
allocated to Miller/Howard. Mr. Miller has been associated with Miller/Howard
since 1984. Mr. Miller is a Vice President of the Trust and a trustee and a Vice
President of the Flex-Partners, mutual funds whose corresponding portfolios are
also advised by the Manager. Miller/Howard's principal executive offices are
located at 141 Upper Byrdcliffe Road, Post Office Box 549, Woodstock, New York,
12498.

HALLMARK CAPITAL MANAGEMENT, INC. serves as Sector Adviser to the
capital goods sector of the Portfolio. Hallmark is a registered investment
adviser which has been providing investment services to individuals; banks;

16
<PAGE> 18
pension, profit sharing, and other retirement plans; trusts; endowments;
foundations; and other charitable organizations since 1986. As of September 30,
1996, Hallmark held discretionary investment authority over approximately $ 113
million of assets. Peter S. Hagerman owns more than 10% of the outstanding
voting securities of Hallmark. Mr. Hagerman, Chairman of the Board, President,
and Chief Executive Officer, Thomas S. Moore, Senior Vice President and Chief
Investment Officer, and Kathryn A. Skwieralski, Senior Vice President,
Treasurer, Chief Financial and Administrative Officer, are the directors of
Hallmark. Mr. Hagerman will be the portfolio manager primarily responsible for
the day-to-day management of those assets off the Portfolio allocated to
Hallmark. Mr. Hagerman has been associated with Hallmark since 1986. Hallmark's
principal executive offices are located at One Greenbrook Corporate Center, 100
Passaic Avenue, Fairfield, New Jersey, 07004.

BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. serves as Sector Adviser to the
consumer durable and non-durable sectors of the Portfolio. Barrow is a
registered investment adviser which has been providing investment services to
banks; investment companies; pension and profit sharing plans; charitable
organizations and corporations since 1979. As of September 30, 1996, Barrow held
discretionary investment authority over approximately $ 18.8 billion of assets.
Barrow is a wholly-owned subsidiary of United Asset Management Corp. Bryant M.
Hanley, Jr., President and Chief Executive Officer, is the sole director of
Barrow. Michael C. Mewhinney will be the portfolio manager primarily responsible
for the day-to-day management of those assets of the Portfolio allocated to
Barrow. Mr. Mewhinney has been associated with Barrow since 1979. Barrow's
principal executive offices are located at 3232 McKinney Avenue, 15th Floor,
Dallas, Texas, 75204-2429.

THE MITCHELL GROUP, INC. serves as Sector Adviser to the energy sector of
the Portfolio. The Mitchell Group is a registered investment adviser which has
been providing investment services to individuals; banks; investment companies;
pension and profit sharing plans; charitable organizations, corporations and
other institutions since 1989. As of September 30, 1996, The Mitchell Group held
discretionary investment authority over approximately $ 214 million of assets.
Rodney Mitchell, President, Chief Executive Officer and sole director, owns more
than 10% of the outstanding voting securities of The Mitchell Group. Mr.
Mitchell will be the portfolio manager primarily responsible for the day-to-day
management of those assets of the Portfolio allocated to The Mitchell Group. Mr.
Mitchell has been associated with The Mitchell Group since 1989. The Mitchell
Group's principal executive offices are located at 1100 Louisiana, #4810,
Houston, Texas, 77702.

ASHLAND MANAGEMENT INCORPORATED serves as Sector Adviser to the materials
and services sector of the Portfolio. Ashland is a registered investment adviser
which has been providing investment services to individuals, pension and profit
sharing plans, charitable organizations, corporations and other institutions
since 1975. As of September 30, 1996, Ashland managed accounts having a value of
approximately $1.5 billion of assets. Charles C. Hickox, Chairman of the Board,
Chief Executive Officer and a director, and Perry V. S. Jones, President, Chief
Operating Officer and a director, each own more than 10% of the outstanding
voting securities of Ashland. Terrence J. McLaughlin, Managing Director of
Ashland and Deborah C. Ohl, a Portfolio Management Associate, will be the
portfolio managers primarily responsible for the day-to-day management of those
assets of the Portfolio allocated to Ashland. Mr. McLaughlin has been
associated with Ashland since 1987. Ms. Ohl has been employed by Ashland since
August, 1992 and has served as a Portfolio Management Associate for Ashland
since 1993. From May, 1991 until July, 1992, Ms. Ohl was a research and sales
assistant with Kidder, Peabody & Co. Incorporated. Ashland's principal executive
offices are located at 26 Broadway, New York, New York, 10004.

17
<PAGE> 19

DREMAN VALUE ADVISORS, Inc. serves as Sector Adviser to the finance sector
of the Portfolio. Dreman is a registered investment adviser which has been
providing investment services to individuals, banks, investment companies,
pension and profit sharing plans, charitable organizations, corporations and
other institutions since 1977. As of June 30, 1996, Dreman held discretionary
investment authority over approximately $2.463 billion of assets. Dreman is a
wholly-owned subsidiary of Zurich Kemper Investments, Inc. ("Zurich Kemper"),
which is a wholly-owned subsidiary of ZKI Holding Corporation, which is
approximately 97% owned by Zurich Holding Company of America, which is a
wholly-owned subsidiary of Zurich Insurance Company. The directors of Dreman are
James R. Neal, President and Chief Executive Officer of Dreman, John E. Neal,
Group President of Zurich Kemper, Stephen R. Timbers, President of Zurich
Kemper, and David N. Dreman, Chairman of the Board of Dreman. Jonathan Kay will
be the portfolio manager primarily responsible for the day-to-day management of
those assets of the Portfolio allocated to Dreman. Mr. Kay has been associated
with Dreman since 1993. From 1990 to 1993, Mr. Kay was an associate with J.S.
Eliezer, a management consulting firm serving primarily the media industry.
Dreman's principal executive offices are located at 280 Park Avenue,
40th Floor, New York, New York 10017.

RCM CAPITAL MANAGEMENT, L.L.C. serves as Sector Adviser to the technology
sector of the Portfolio. RCM is a registered investment advisor that provides
investment services to institutional and individual clients and registered
investment companies, with approximately $25.7 billion of assets under
management as of September 30, 1996. RCM was established in April 1996, as the
successor to the business operations of RCM Capital Management, a California
Limited Partnership, which, with its predecessors, has been in operation since
1970. RCM is a wholly-owned subsidiary of Dresdner Bank AG ("Dresdner"), an
international banking organization with principal executive offices in
Frankfurt, Germany. The Board of Managers of RCM is comprised of William L.
Price, Chairman of the Board and Chief Investment Officer of RCM, Michael J.
Apatoff, Chief Operating Officer of RCM, Hans-Dieter Bauernfeind, General
Manager of Dresdner, Gerhard Eberstadt, Senior Chairman of Dresdner, George N.
Fugelsang, Senior General Manager of Dresdner, John D. Leland, Jr., Principal of
RCM, Jeffrey S. Rudsten, Principal of RCM, William S. Stack, Principal of RCM
and Kenneth B. Weeman, Jr., Head of Equity Trading of RCM. Walter C. Price and
Huschen Chen, each principals of RCM, will be the portfolio managers primarily
responsible for the day-to-day management of those assets of the Portfolio
allocated to RCM. Messrs. Price and Chen have managed equity portfolios on
behalf of RCM since 1985. RCM's principal executive offices are located at Four
Embarcadero Center, San Francisco, CA 94111.

Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, prohibit
certain banking entities, such as Dresdner, from sponsoring, organizing,
controlling or distributing the shares of a registered investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities. However, banks and their affiliates generally can
act as an adviser (or sub-subadviser) to an investment company and can purchase
shares of an investment company as agent for and upon the order of customers.
RCM believes that it may perform the services contemplated by the investment
management agreement without violating these banking law regulations. However,
future changes in legal requirements relating to the permissible activities of
banks and their affiliates at will as future interpretations of current
requirements, could prevent RCM from continuing to perform investment management
services for the Portfolio.

- -------------------------------------------------------------------------------
PORTFOLIO TRANSACTION POLICIES
- -------------------------------------------------------------------------------

Decisions to buy and sell securities are made by the Sector Advisers for
the assets assigned to them, and by the Manager and Subadviser for assets not
assigned to a Sector Adviser. Currently, each portfolio representing an industry
sector has one Sector Adviser. The Manager invests the Portfolio's liquidity
reserves and the Manager or the Subadviser may invest the Portfolio's assets in
financial futures contracts and related options. Each Sector Adviser makes
decisions to buy or sell securities independently from other Sector Advisers. In
addition, when a Sector Adviser's services are terminated and another retained,
the new Sector Adviser may significantly restructure the Portfolio's assets
assigned to it. These practices may increase the Portfolio's portfolio turnover
rates, realization of gains or losses, and brokerage commissions. The portfolio
turnover rates for the Portfolio may vary greatly from year to year as well as
within a year and may be affected by sales of investments necessary to meet cash
requirements for redemptions of shares. A high rate of turnover involves
correspondingly greater expenses, increased brokerage commissions and other
transaction costs, which must be borne by the Portfolio and their shareholders.
See "Portfolio Turnover" above and in the Statement of Additional Information.
In addition, high portfolio turnover

18
<PAGE> 20
may result in increased short-term capital gains, which, when distributed to
shareholders, are treated as ordinary income. See "Income Dividends, Capital
Gains, Distributions and Taxes".

The Portfolio may effect portfolio transactions with or through the
Manager, Subadviser or Sector Advisers, or their affiliates, when the Manager,
Subadviser or Sector Advisers, as appropriate, determine that the Portfolio will
receive the best net price and execution. This standard would allow the Manager,
Subadviser or Sector Advisers, or their affiliates, to receive no more than the
remuneration that would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction.

- -------------------------------------------------------------------------------
DISTRIBUTION PLAN
- -------------------------------------------------------------------------------

The Trust has adopted a distribution expense plan (the "Plan") which
authorizes The Highlander Fund to bear a portion of the expense of any activity
which is primarily intended to result in the sale of Fund shares. This Plan
permits, among other things, payment for distribution in the form of commissions
and fees, advertising, the services of public relations consultants, and direct
solicitation. Possible recipients include securities brokers, attorneys,
accountants, investment advisers, investment performance consultants, pension
actuaries, banks, and service organizations, all of them being hereafter
referred to as "Consultants."

The Trust may expend in the Fund as much as, but not more than, 2/10 of 1%
of its average net assets annually pursuant to the Plan. The Fund does not make
Plan payments with respect to any of the other Funds of the Trust, nor are any
of its Plan payments made by any of the other Funds.

The Plan was approved by the Board of Trustees, who made a determination
that there is a reasonable likelihood that the Plan will benefit the Trust.

The Trust has entered into agreements whereby Consultants (including two
(2) Trustees of the Portfolio) are paid for their assistance in explaining and
interpreting the Trust, its investment objectives and policies, and its
retirement plans to their clients. Under these agreements, Consultants are paid
quarterly compensation by the Trust on the average value of The Highlander Fund
shares held by their clients. Although the compensation is thus seen to be
continuing, the Trust retains the right to terminate any Consultant's agreement
on 60 days' notice, without further obligation beyond the date of termination.

Although the objective of the Trust is to pay Consultants for a portion of
the expenses they incur and to provide them with some incentive to be of
assistance to the Trust and its shareholders, no effort has been made to
determine the actual expenses incurred by Consultants. If any Consultant's
expenses are in excess of what the Trust pays, such excess will not be paid by
the Trust. Conversely, if the Consultant's expenses are less than what the Trust
pays, the Consultant is not obligated to refund the excess, and this excess
could represent a profit for the Consultant.

Total payments made in The Highlander Fund under the Distribution Plan for
the period ended December 31, 1995, as a percentage of average net assets,
amounted to 0.13%. (See "Synopsis of Financial Information.")

19
<PAGE> 21
The Manager or the Subadviser may use its resources to pay expenses
associated with the sale of the Fund's shares. This may include payments to
third parties such as banks or broker-dealers, that provide shareholder support
services or engage in the sale of the Fund's shares. However, the Fund does not
pay the Manager or Subadviser any separate fees for this service.

- --------------------------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAINS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

It is the policy of the Trust to distribute substantially all of its net
income. The Fund's net income consists of the income it earns from its
investment in the Growth Stock Portfolio, less expenses. The Fund also intends
to distribute its net capital gains, if any, to its shareholders annually.

The Highlander Fund declares and pays dividends from net investment
income, if any, on a quarterly basis. All such dividends of net income are
automatically reinvested in additional shares at the net asset value on the
last business day of each month. A shareholder may elect to receive such
dividends in cash either by checking the appropriate box on the New Account
Application, or by notifying the Trust in writing.

The Internal Revenue Code of 1986 imposes on the Fund a nondeductible
excise tax unless the Fund distributes annually at least 98% of its net
investment income earned during the calendar year, and at least 98% of capital
gain net income realized in the 12 months preceding October 31, and any
undistributed balances from the previous year. In addition, the Tax Reform Act
of 1986 (the "Tax Act") provides that any dividend declared by a Fund in
October, November, or December and paid in January will be deemed to have been
paid by the Fund and to have been received by each shareholder in December.
Distribution dates and the amounts paid, if any, are subject to determination by
the Board of Trustees.

Dividends and capital gains distributions are ordinarily taxable to
shareholders in the year distributed. However, under the Tax Act, the Fund is
permitted to make distributions up to February 1 and have them apply to the
previous tax year. The Highlander Fund expects to make such a distribution in
future years.

A shareholder is taxed on capital gains and income realized by the Fund,
regardless of the length of time he has been a shareholder. Thus a shareholder
may receive capital gains distributions shortly after purchasing shares, and
this will reduce the market value of the shares by the amount of the
distribution. The shareholder will not be able to recognize the resultant loss
in value for tax purposes until the shares are sold at a later date. In the case
of some mutual funds this effect can be substantial.

Dividends and capital gains distributions are taxable to the shareholder
whether received in cash or reinvested in additional shares. Shareholders not
otherwise subject to tax on their income will not be required to pay tax on
amounts distributed to them. Each Shareholder will receive a statement annually
informing him of the amount of the income and capital gains which have been
distributed during the calendar year.

The Trust files federal income tax returns for each of its Funds. The Fund
is treated as a separate entity for federal income tax purposes. The Fund also
intends to comply with Subchapter M of the Internal Revenue Code, which imposes
such restrictions as (1) appropriate diversification of its portfolio of
investments; (2) realization of 90% of its annual gross income from dividends,
interest, and gains from the sale of securities and (3) realization of less than
30% of gross income from gains on the sale of securities held less than three
months.

20
<PAGE> 22

The Fund might deviate from this policy, and incur a tax liability, if this were
necessary to fully protect shareholder values. The Trust qualified as a
"regulated investment company" for each of the last 10 fiscal years.

The foregoing discussion of taxes is limited to federal income taxes.
Distributions, whether in cash or in kind may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions relating to federal, state, and local taxes.

The Fund is required to withhold and remit to the federal government 31% of
any reportable payments (which may include dividends, capital gains
distributions, if any, and redemptions) paid to certain shareholders. In order
to avoid this withholding requirement, each shareholder must certify on the New
Account Application that the social security or taxpayer identification number
is correct and that the shareholder is not currently subject to backup
withholding or is exempt from backup withholding.

- --------------------------------------------------------------------------------
HOW NET ASSET VALUE IS DETERMINED
- --------------------------------------------------------------------------------

Net asset value per share is determined at each closing of the New York
Stock Exchange each day the Exchange is open for business and each other day
during which there is a sufficient degree of trading that the current net asset
value of the Fund's shares might be materially affected by changes in the value
of the securities held by the Portfolio. Net asset value is obtained by dividing
the value of the Fund's assets (i.e., the value of its investment in the
Portfolio and other assets), less its liabilities, by the total number of its
shares of beneficial interest outstanding at the time.

- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION AND REPORTS
- --------------------------------------------------------------------------------

The Highlander Fund's performance may be used from time to time in
advertisements, shareholder reports or other communications to shareholders or
prospective shareholders. Performance information may include the Fund's
investment results and/or comparisons of its investment results to the Standard
& Poor's 500 Composite Stock Price Index or other various unmanaged indices or
results of other mutual funds or investment results as used in such
communications will be calculated on a total rate of return basis in the manner
set forth below. From time to time, Fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc. and Morningstar Mutual Fund
Report.

The Fund may provide period and average annualized "total return"
quotations. The Fund's "total return" refers to the change in the value of an
investment in the Fund over a stated period based on any change in net asset
value per share and including the value of any shares purchasable with any
dividends or capital gains distributed during such period. Period total return
may be annualized. Average annual total return smoothes out variations in
performance.

An annualized total return is a compounded total return which assumes that
the period total return is generated over a one-year period, and that all
dividends and capital gain distributions are reinvested. An annualized total
return will be slightly higher than a period total return if the period is
shorter than one year, because of the assumed reinvestment.

21
<PAGE> 23

Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Portfolio
and changes in the Fund's expenses. In addition, during certain periods for
which total return quotations may be provided, the Manager and/or the Subadviser
may have voluntarily agreed to waive portions of their fees or reimburse Fund
expenses on a month-to-month basis. Such waivers and reimbursements will have
the effect of increasing the Fund's net income (and therefore its total return)
during the period such waivers and reimbursements are in effect.

Shareholders will receive financial reports semi-annually that include the
Fund's financial statements, including listings of investment securities held by
the Growth Stock Portfolio at those dates. Annual reports are audited by
independent accountants.

- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------

SHARES OF BENEFICIAL INTEREST

The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest with a par
value of $.10 per share. Shares are fully paid, non assessable and fully
transferable when issued. All shares are issued as full or fractional shares.

A fraction of a share has the same rights and privileges as a full share.
Each Fund of the Trust will issue its own series of shares of beneficial
interest. The shares of each Fund represent an interest only in that Fund's
assets (and profits or losses) and in the event of liquidation, each share of a
particular Fund would have the same rights to dividends and assets as every
other share of that Fund.

Each full or fractional share has a proportionate vote. On some issues,
such as the election of Trustees, all shares of the Trust vote together as one
series. On an issue affecting a particular Fund, only its shares vote as a
separate series. An example of such an issue would be a fundamental investment
restriction pertaining to only one Fund. In voting on a Distribution Plan,
approval of the Plan by the shareholders of a particular Fund would make the
Plan effective as to that Fund, whether or not it had been approved by the
shareholders of the other Funds.

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.

When matters are submitted for shareholder vote, shareholders of each Fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. A separate vote of a Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
one Fund are not entitled to vote on a matter that does not affect that Fund but
that does require a separate vote of any other Fund. There normally will be no
meetings of shareholders for the purpose of electing Trustees unless and until
such

22
<PAGE> 24

time as less than a majority of Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. Shareholders have under
certain circumstances (e.g., upon application and submission of certain
specified documents to the Trustees of a Fund by a specified number of
shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees.

The Portfolio, in which all the assets of a corresponding Fund will be
invested, is organized as a trust under the laws of the State of New York. The
Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (e.g., other investment companies, insurance company
separate accounts, and common and commingled trust funds) will each be liable
for all obligations of that Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and that the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that
neither the Fund nor its shareholders will be adversely affected by reason of
the Fund's investing in the Portfolio. In addition, whenever the Trust is
requested to vote on matters pertaining to the fundamental policies of the
Portfolio, the Trust will hold a meeting of the corresponding Fund's
shareholders and will cast its vote as instructed by the Fund's shareholders.

INVESTMENT STRUCTURE

Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, the Fund seeks to achieve its investment objectives by
investing all of its assets in the Portfolio, a separate registered investment
company with the same investment objectives as the Fund. Therefore, an
investor's interest in the Portfolio's securities is indirect. In addition to
selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in the different funds that invest in the Portfolio. Such differences in returns
are also present in other mutual fund structures. Information concerning other
holders of interests in the Portfolio is available by contacting the Trust by
calling: 1-800-325-FLEX, or (614) 766-7000.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. (However, this
possibility also exists for traditionally structured funds which have large or
institutional investors.) Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes in the same proportion as do the Fund's shareholders.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Trust to withdraw the Fund's interest in the
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from the Portfolio). If
such securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund.

23
<PAGE> 25

The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the Fund to do so. Upon any such withdrawal, the Board of Trustees would
consider what action might be taken, including the investment of all the assets
of the Fund in another pooled investment entity having the same investment
objectives as the Fund or the retaining of an investment adviser to manage the
Fund's assets in accordance with the investment policies with respect to the
Fund's Portfolio. The inability to find an adequate investment pool or
investment adviser could have a significant impact on shareholders' investment
in the Fund.

As stated in "Investment Objectives and Policies", except as otherwise
provided herein, the Fund's investment objectives and policies are not
fundamental and may be changed by Trustees without shareholder approval. (No
such change would be made, however, without 30 days' written notice to
shareholders.)

For descriptions of the investment objectives and policies of the
Portfolio, see "Investment Objectives and Policies" and "Additional Investment
Policies." For descriptions of the management and expenses of the Portfolio, see
"The Trust and Its Management" herein, and "Investment Adviser and Manager",
"Investment Sub-adviser", "Investment Sub-subadvisers" and "Trustees and
Officers" in the Statement of Additional Information.

- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------

Shares are offered continuously and sold without a direct sales charge,
although the Trust does pay some consultants for services in explaining the
Fund, its investment policies and restrictions, and retirement plans to their
clients. (See "Distribution Plan" and "Synopsis of Financial Information".)
Shares of The Highlander Fund are sold at the net asset value per share next
determined after receipt by The Highlander Fund or the authorized service
agent or sub-agent of both a purchase order and payment. (See "How Net Asset
Value is Determined.") Net asset value generally changes each day.

MINIMUM INVESTMENT -- The minimum investment to open an account is $2,500
except an Individual Retirement Account (IRA) which has a $500 minimum.
Subsequent investments in any account may be made in amounts of at least $100.

OPENING AN ACCOUNT --You may open an account by mail or bank wire as
follows:

By Mail: To purchase shares, fill out the New Account Application
accompanying this Prospectus. A check payable to The Highlander Fund
must accompany the New Account Application and should be mailed to
the following address:

THE FLEX-FUNDS, C/O R. MEEDER & ASSOCIATES, INC., P.O. BOX 7177,
DUBLIN, OHIO 43017

By Bank Wire: If the wire order is for a new account in the Fund, you
must telephone the Fund prior to making your initial investment. Call
1-800-325-FLEX, or (614) 766-7000. Advise the Fund of the amount you
wish to invest and obtain an account number and instructions. Have your
bank wire federal funds to:

24
<PAGE> 26

STAR BANK, N.A. CINTI/TRUST
(ABA #: 042-00001-3)

ATTENTION: THE FLEX-FUNDS

Credit Account Number: 9304932
Account Name (your name)
Personal Account No. (your Highlander Fund account number)

On new accounts, a completed application must be sent to The Flex-funds c/o
R. Meeder & Associates, Inc., P.O. Box 7177, Dublin, OH 43017 on the same day
your wire is sent. The Fund will not permit redemptions until it receives the
New Account Application in good order.

SUBSEQUENT INVESTMENTS--Subsequent investments in an existing account in
the Fund may be made by mailing a check payable to The Highlander Fund
(please include your account number on the check) and mail as follows:

THE FLEX-FUNDS
LOCATION NUMBER: 00215
CINCINNATI, OH 45264-0215

Subsequent investments may also be made by bank wire as described above. It
is necessary to notify the Fund prior to each wire purchase. Wires sent without
notifying the Fund will result in a delay of the effective date of your
purchase.

AUTOMATIC ACCOUNT BUILDER--Periodic investments in an existing account can
be made by selecting this option. (See "Other Shareholder Services.")

WHEN PURCHASES ARE EFFECTIVE--Shares of The Highlander Fund are sold at
net asset value per share next determined after receipt of both a purchase
order and payment.

If a shareholder's check is dishonored, the purchase and any dividends paid
thereon, if any, will be reversed. If shares are purchased with federal funds,
they may be redeemed at any time thereafter and the shareholder may secure his
funds as explained below. (See "How to Make Withdrawals (Redemptions).")
However, if shares are purchased by check(s) or the Automatic Account Builder,
Mutual Funds Service Co. will delay payment of redemption proceeds until the
check used to purchase shares, or Automatic Account Builder order, has cleared
which could be fifteen (15) calendar days or more subsequent to the purchase of
the shares. The Fund will forward the proceeds promptly once the check has
cleared.

FINANCIAL INSTITUTIONS--You may buy shares or sell shares of the Fund
through a broker or financial institution who may charge you a fee for this
service. If you are purchasing shares of the Fund through a program of services
offered or administered by a securities dealer or financial institution, you
should read the program materials in conjunction with this Prospectus.

Certain financial institutions that have entered into sales agreements with
the Trust may enter confirmed purchase orders on behalf of customers by
telephone to purchase shares of the Fund. Payment is due no later

25
<PAGE> 27

than the Fund's pricing on the following business day. If payment for the
purchase of shares is not received in a timely manner, the financial institution
could be held liable for any loss incurred by the Fund.

- --------------------------------------------------------------------------------
HOW TO MAKE WITHDRAWALS (REDEMPTIONS)
- --------------------------------------------------------------------------------

Shares are redeemed and funds withdrawn at net asset value per share, and
there are no redemption fees. (See "How Net Asset Value Is Determined.")

BY MAIL--A shareholder may redeem shares by mailing a written request in
good order to The Flex-funds, c/o R. Meeder & Associates, Inc., P.O. Box 7177,
Dublin, OH 43017. Good order means that the request must be signed by the
shareholder(s) and the signature(s) must be guaranteed by an eligible guarantor
institution (a bank, broker-dealer, credit union, securities exchange and
association, clearing agency and savings association). The Fund does not accept
signatures guaranteed by a notary public. Further documentation may be required
as to the authority of the person requesting redemption of shares held of record
in the name of corporations, executors, administrators, trustees, guardians or
other fiduciaries. The Fund may waive these requirements in certain instances.

Amounts withdrawn are mailed without charge to the address printed on your
account statement.

BY TELEPHONE--A shareholder may redeem by telephone: 1-800-325-FLEX, or
call (614) 766-7000. Shareholders who wish to use this procedure must so elect
on the New Account Application. Amounts withdrawn from an account by telephone
are mailed without charge to the address printed on your account statement.

As a special service, a shareholder may arrange to have amounts in excess
of $1,000 wired in federal funds to a designated commercial bank account. To use
this procedure please designate on the New Account Application a bank and bank
account number to receive the proceeds of wire withdrawals. There is no charge
for this service.

A shareholder may change the bank account designated to receive
redemption's. This may be done at any time upon written request to the Fund. The
shareholder's signature must be guaranteed. Further documentation may be
required from corporations, executors, administrators, trustees, guardians, or
other fiduciaries.

Neither the Fund nor Mutual Funds Service Co. ("MFSCo") will be responsible
for any loss, expense, or cost arising from any telephone redemption request
made according to the authorization set forth in the New Account Application if
they reasonably believe such request to be genuine and follow reasonable
procedures designed to verify the identity of the person requesting the
redemption. If MFSCo fails to follow reasonable procedures, MFSCo or the Fund
may be liable for losses due to unauthorized or fraudulent transactions. MFSCo
will provide each investor seeking telephone redemption privileges with a
personalized security code which, along with other information, will be required
of the caller upon request of a telephone redemption. Other information may also
be required and calls may be recorded.

WHEN REDEMPTIONS ARE EFFECTIVE--Redemptions are made at the net asset value
per share next determined after receipt of a redemption request in good order.
(See "How Net Asset Value Is Determined.")

26
<PAGE> 28

WHEN PAYMENTS ARE MADE--Amounts withdrawn by telephone are normally mailed
or wired on the next Columbus, Ohio business day following the effective date of
the order for withdrawal. Amounts withdrawn by mail are normally sent by mail
within one business day after request is received, and must be mailed within
seven days with the following exception: If shares are purchased by check,
Mutual Funds Service Co. will not pay a redemption until reasonably satisfied
the check, used to purchase shares, has been collected which could be fifteen
(15) calendar days or more after shares are first paid for, unless payment was
made with federal funds. The Fund will forward proceeds promptly once the check
has cleared. (See "How to Buy Shares.")

- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------

A shareholder may exchange shares of the Fund for shares of any other
Flex-funds' fund that are available for sale in your state at their respective
net asset values. Exchanges are subject to applicable minimum initial and
subsequent investment requirements.

It will be necessary to complete a separate New Account Application if:

1. a shareholder wishes to register a new account in a different
name;

2. a shareholder wishes to add telephone redemption to an
account; or

3. a shareholder wishes to have check-writing redemption
privileges in a Money Market Fund account.

Exchange requests may be directed to the Fund by telephone or written
request. If a shareholder request is in valid form, and is accepted before the
close of the Fund's business day, shares will be exchanged that day.

BY MAIL:

Exchange requests may also be made in writing and should be sent to The
Flex-funds, c/o R. Meeder & Associates, Inc., P. O. Box 7177, Dublin, Ohio
43017. The letter must be signed exactly as the shareholder's name appears on
the Fund's account records.

BY TELEPHONE:

Exchange requests may be made by telephone: call 1-800-325-FLEX, or call
(614) 766-7000. You may make exchanges by telephone if you have telephone
redemption privileges for your current investment account and the registration
of additional accounts will be identical. Neither the Fund nor Mutual Funds
Service Co. ("MFSCo") will be responsible for any loss, expense, or cost arising
from any telephone exchange request made according to the authorization set
forth in the New Account Application if they reasonably believe such request to
be genuine and follow reasonable procedures designed to verify the identity of
the person requesting the exchange. If MFSCo fails to follow reasonable
procedures MFSCo or the Fund may be liable for losses due to unauthorized or
fraudulent transactions. MFSCo will provide each investor seeking telephone
exchange privileges with a personalized security code which, along with other
information, will be required of the caller upon request of a telephone
exchange. Other information may also be required and calls may be recorded.

27
<PAGE> 29
Any exchange involves a redemption of all or a portion of the shares in the
Fund and an investment of the redemption proceeds in shares of one of the other
Flex-funds' funds. The exchange will be based on the respective net asset values
of the shares involved, ordinarily at the value next determined after the
request is received. An exchange may be delayed briefly if redemption proceeds
will not be available immediately for purchase of newly acquired shares. The
exchange privilege may be modified or terminated at any time. The exchange
privilege is designed to accommodate changes in shareholder investment
objectives. In addition, the Highlander Fund reserves the right to reject any
exchange request and to limit a shareholder's use of the exchange privilege.

The exchange of shares of the Fund for shares of another Flex-funds' fund
is treated for federal income tax purposes as a sale of the shares given in
exchange. A shareholder may realize a taxable gain or loss on an exchange, and
he should consult his tax adviser for further information concerning the tax
consequences of an exchange.

- --------------------------------------------------------------------------------
FLEX-FUNDS RETIREMENT PLANS
- --------------------------------------------------------------------------------

The Trust offers retirement plans which include a prototype Profit Sharing
Plan, a Money Purchase Pension Plan, a Salary Savings Plan - 401(k), an
Individual Retirement Account (IRA), and a Simple IRA. Plan Adoption Agreements
and other information required to establish a Flex-funds Retirement Plan are
available from The Flex-funds, c/o R. Meeder & Associates, Inc., P.O. Box 7177,
Dublin, Ohio 43017; or call 1-800-325-FLEX, or call (614) 766-7000.

Minimum purchase requirements for retirement plan accounts are subject to
the same requirements as regular accounts, except for an IRA, which has a
reduced minimum purchase requirement. (See "How to Buy Shares.")

- --------------------------------------------------------------------------------
OTHER SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

AUTOMATIC ACCOUNT BUILDER: Regular investments in the Fund of $100 or more
will be deducted from a shareholder's checking or savings account and invested
in shares of the Fund. A shareholder's bank must be a member of the Automated
Clearing House (ACH). Shareholders wishing to add to their investment account
must complete the Automatic Account Builder section of the New Account
Application. There is no charge for this service.

SYSTEMATIC WITHDRAWAL PROGRAM: A Systematic Withdrawal Program is offered
for any investor who wishes to receive regular distributions from his account.
The investor must either own or purchase shares of the Fund having a value of at
least $10,000 and advise the Fund in writing of the amount to be distributed and
the desired frequency, i.e., monthly, quarterly or annually. This option may be
exercised by completing the appropriate section of the New Account Application.
The investor should realize that if withdrawals exceed

28
<PAGE> 30

income dividends, the invested principal may be depleted. The investor may make
additional investments and may change or stop the program at any time. There is
no charge for this program.

SUB-ACCOUNTING FOR INSTITUTIONAL INVESTORS: The Fund's optional
sub-accounting system offers a separate shareholder account for each participant
and a master account record for the institution. Share activity is thus recorded
and statements prepared for both individual sub-accounts and for the master
account. For more complete information concerning this program contact the Fund.

DISTRIBUTOR: Shares of the Fund are sold by the Trust itself in those
states where the Fund's shares have been registered for sale or a valid
exemption exists. States where registration or an exemption exists can be
obtained by calling 1-800-325-FLEX or (614) 766-7000.

- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNTS
- --------------------------------------------------------------------------------

The Fund maintains an account for each shareholder in full and fractional
shares. The Fund reserves the right to reject any purchase order, and to waive
minimum purchase requirements.

CONFIRMATION STATEMENTS--All purchase and sale transactions, and dividend
reinvestments, are confirmed promptly after they become effective.

ACCOUNTS BELOW MINIMUMS--The Fund reserves the right to redeem shares in
any account for their then current net asset value and pay the proceeds to the
shareholder if at any time the account has shares valued at less than $1,000
($500 for an IRA) as a result of redemptions by the shareholder. The Fund also
reserves the right to redeem the shares in any account which may have been
opened under a waiver of minimum purchase requirements if sufficient additional
shares were not subsequently purchased to meet these requirements. Before a
redemption is processed, the shareholder will be allowed 30 days after written
notice from the Fund to make an additional investment sufficient to bring the
value of shares in the account to $1,000 ($500 for an IRA).

29
<PAGE> 31

INVESTMENT ADVISER
R. Meeder & Associates, Inc.

ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)

INVESTMENT SUBADVISER
Sector Capital Management, L.L.C.
5350 Poplar Avenue, Suite 490
Memphis, Tennessee 38119

CUSTODIAN
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202

TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)

AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page

<S> <C>
Highlights .............................................................. 3
Synopsis of Financial Information ....................................... 4
Financial Highlights .................................................... 6
Performance Comparison .................................................. 6
Performance of Mr. Gurner and Subadviser ................................ 7
Investment Objective and Policies ....................................... 9
Additional Investment Policies .......................................... 10
The Trust and Its Management ............................................ 13
Portfolio Transaction Policies .......................................... 18
Distribution Plan ....................................................... 19
Income Dividends, Capital Gains, Distributions and Taxes ................ 20
How Net Asset Value is Determined ....................................... 21
Performance Information and Reports ..................................... 21
Other Information ....................................................... 22
How to Buy Shares ....................................................... 24
How to Make Withdrawals (Redemptions) ................................... 26
Exchange Privilege ...................................................... 27
Flex-funds Retirement Plans ............................................. 28
Other Shareholder Services .............................................. 28
Shareholder Accounts .................................................... 29
</TABLE>

THE FLEX-FUNDS

THE HIGHLANDER FUND

PROSPECTUS

________________,1996

<PAGE> 32

THE FLEX-FUNDS
CROSS REFERENCE SHEET TO FORM N-1A

FOR THE HIGHLANDER FUND

Part B.
- -------

Item No Statement of Additional Information
- ------- -----------------------------------
<S> <C>
10 Cover Page

11 Table of Contents

12 Not applicable

13(a)(b)(c) Investment Policies and Limitations
13(d) Not applicable

14(a)(b)(c) Trustees and Officers

15(a)(b) Not applicable
15(c) Trustees and Officers

16(a)(b) Investment Adviser and Manager
Investment Subadvisers
Investment Sub-subadvisers
16(c) Portfolio Transactions
16(d) Other Services
16(e) Not applicable
16(f) Distribution Plan
16(g) Not applicable
16(h) Description of the Trust
16(i) Contracts with Companies Affiliated with Manager

17 Portfolio Transactions

18(a) Description of the Trust
18(b) Not applicable

19(a) Additional Purchase and Redemption Information
Flex-funds Retirement Plans
19(b) Valuation of Portfolio Securities

20 Not applicable

21 Not applicable

22(a) Not applicable
22(b) Performance

23 Not applicable
</TABLE>

<PAGE> 33

THE HIGHLANDER FUND
A FUND OF THE FLEX-FUNDS TRUST
STATEMENT OF ADDITIONAL INFORMATION
________________________, 1996

Statement is not a prospectus but should be read in conjunction with the
Fund's current Prospectus (dated , 1996). Please retain this document for
future reference. To obtain an additional copy of the Prospectus, please call
Mutual Funds Service Co. at 1-800-325-3539. Capitalized terms used and not
otherwise defined herein have the same meanings as defined in the Prospectus.

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C> <C>
Investment Policies and Limitations 2
Portfolio Transactions 12
Valuation of Portfolio Securities 14
Performance 15
Additional Purchase and Redemption Information 17
Distributions and Taxes 19
Investment Adviser and Manager 20
Investment Subadvisers 22
Investment Sub-subadvisers 23
Distribution Plan 27
Trustees and Officers 28
Flex-funds Retirement Plans 32
Contracts With Companies Affiliated With Manager 33
Description of the Trust 33
Financial Statements 35
</TABLE>

INVESTMENT ADVISER TRANSFER AGENT
R. Meeder & Associates, Inc. Mutual Funds Service Co.

INVESTMENT SUBADVISER
Sector Capital Management, L.L.C.
<PAGE> 34
INVESTMENT POLICIES AND LIMITATIONS

The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the Portfolio's assets that may be
invested in any security or other asset, or sets forth a policy regarding
quality standards, such standard or percentage limitation will be determined
immediately after and as a result of the Portfolio's acquisition of such
security or other asset. Accordingly, any subsequent change in values, net
assets, or other circumstances will not be considered when determining whether
the investment complies with the Fund's investment policies and limitations.

The Fund's fundamental investment limitations cannot be changed without
approval by a "majority of the outstanding voting securities" (as defined in the
Investment Company Act of 1940) of the Fund. However, except for the fundamental
investment limitations set forth below, the investment policies and limitations
described in this Statement of Additional Information are not fundamental and
may be changed by the Trustees without shareholder approval. THE FOLLOWING ARE
THE PORTFOLIO'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY;
PROVIDED THAT NOTHING IN THE FOLLOWING INVESTMENT RESTRICTIONS WILL PREVENT THE
FUND FROM INVESTING ALL OR PART OF THE FUND'S ASSETS IN AN OPEN-END MANAGEMENT
INVESTMENT COMPANY WITH THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND OR
THE PORTFOLIO MAY NOT:

(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than obligations issued or guaranteed by the
government of the United States, or any of its agencies or instrumentalities)
if, as a result thereof, (a) more than 5% of the Portfolio's total assets would
be invested in the securities of such issuer, or (b) the Fund would hold more
than 10% of the voting securities of such issuer;

(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;

(3) borrow money, except that the Portfolio may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an amount
not exceeding 33-1/3% of its total assets including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed this
amount will be reduced within three days (not including Sundays and holidays) to
the extent necessary to comply with the 33-1/3% limitation;

(4) underwrite securities issued by others (except to the extent that
the Portfolio may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);

(5) purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a

2
<PAGE> 35
result, more than 25% of the Portfolio's total assets would be invested in the
securities of companies whose principal business activities are in the same
industry;

(6) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business); or

(7) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent the
Portfolio from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities).

THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.

(i) The Portfolio does not currently intend to engage in short sales,
but may engage in short sales "against the box" to the extent that the Portfolio
contemporaneously owns or has the right to obtain at no added cost securities
identical to those sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities short.

(ii) The Portfolio does not currently intend to purchase securities on
margin, except that the Fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.

(iii) The Portfolio may borrow money from a bank. The Portfolio will
not purchase any security while borrowings representing more than 5% of its
total assets are outstanding.

(iv) The Portfolio does not currently intend to purchase any security
if, as a result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued, including repurchase agreements with remaining maturities in excess of
seven days or securities without readily available market quotes.

3
<PAGE> 36
(v) The Portfolio does not currently intend to invest in securities of
real estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the New
York Stock Exchange or the American Stock Exchange or traded on the NASDAQ
National Market System.

(vi) The Portfolio does not currently intend to purchase securities of
other investment companies. This limitation does not apply to securities
received as dividends, through offers of exchange, or as a result of
reorganization, consolidation, or merger.

(vii) The Portfolio does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by the U.S.
Government or political subdivisions thereof) if, as a result, more than 5% of
its total assets would be invested in the securities of business enterprises
that, including predecessors, have a record of less than three years of
continuous operation.

(viii) The Portfolio does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of the Portfolio's net
assets. Included in that amount, but not to exceed 2% of the Portfolio's net
assets, may be warrants that are not listed on the New York Stock Exchange or
the American Stock Exchange. Warrants acquired by the Portfolio in units or
attached to securities are not subject to these restrictions.

(ix) The Portfolio does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.

(x) The Portfolio does not currently intend to purchase the securities
of any issuer if those officers and Trustees of the Trust and those officers and
directors of the Manager, the Subadviser, or the Sector Advisers who
individually own more than 1/2 of 1% of the securities of such issuer, together
own more than 5% of such issuer's securities.

For the Portfolio's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page 9. For the Portfolio's limitations on short sales, see the
section entitled "Short Sales" on page 11.

MONEY MARKET INSTRUMENTS When investing in money market instruments, the
Portfolio will limit its purchases, denominated in U.S. dollars, to the
following securities.

U.S. Government Securities and Securities of its Agencies and
Instrumentalities obligations issued or guaranteed as to principal or interest
by the United States or its agencies (such as the Export Import Bank of the
United States, Federal Housing Administration, and Government National Mortgage
Association) or its instrumentalities (such as the Federal Home Loan Bank,
Federal Intermediate Credit Banks and Federal Land Bank), including Treasury
bills, notes and bonds.

4
<PAGE> 37
Bank Obligations and Instruments Secured Thereby - obligations
including certificates of deposit, time deposits and bankers' acceptances) of
domestic banks having total assets of $1,000,000,000 or more, instruments
secured by such obligations and obligations of foreign branches of such banks,
if the domestic parent bank is unconditionally liable to make payment on the
instrument if the foreign branch fails to make payment for any reason. The
Portfolio may also invest in obligations (including certificates of deposit and
bankers' acceptances) of domestic branches of foreign banks having assets of
$1,000,000,000 or more, if the domestic branch is subject to the same regulation
as United States banks. The Portfolio will not invest at time of purchase more
than 25% of its assets in obligations of banks, nor will the Portfolio invest
more than 10% of its assets in time deposits.

High Quality Commercial Paper - The Portfolio may invest in commercial
paper rated no lower than "A-2" by Standard & Poor's Corporation or "Prime-2" by
Moody's Investors Services, Inc., or, if not rated, issued by a company having
an outstanding debt issue rated at least A by Standard & Poor's or Moody's.

Private Placement Commercial Paper - Private placement commercial paper
consists of unregistered securities which are traded in public markets to
qualified institutional investors, such as the Portfolio. The Portfolio's risk
is that the universe of potential buyers for the securities, should the
Portfolio desire to liquidate a position, is limited to qualified dealers and
institutions, and therefore such securities could have the effect of being
illiquid.

High Grade Corporate Obligations - obligations rated at least A by
Standard & Poor's or Moody's. See rating information below.

Repurchase Agreements - See "Repurchase Agreements" below.

The Manager exercises due care in the selection of money market
instruments. However, there is a risk that the issuers of the securities may not
be able to meet their obligations to pay interest or principal when due. There
is also a risk that some of the Portfolio's securities might have to be
liquidated prior to maturity at a price less than original amortized cost or
value, face amount or maturity value to meet larger than expected redemptions.
Any of these risks, if encountered, could cause a reduction in net income or in
the net asset value of the Portfolio.

Ratings

1. Moody's Investors Services, Inc.'s Corporate Bond Rating:

Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is

5
<PAGE> 38
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.

Aa - Bonds which are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length or time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

2. Standard and Poor's Corporation's Corporate Bond Rating:

AAA - Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they move
with interest rates, and hence provide the maximum safety on all counts.

AA - Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.

A - Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from the adverse
effect of changes in economic and trade conditions. Interest and principal are
regarded as safe. They predominantly reflect money rates in their market
behavior but, to some extent, also economic conditions.

BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.

6
<PAGE> 39
3. Commercial Paper Ratings:

Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has
the following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A-1, A-2, or
A-3.

The rating P-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Among the factors considered by
Moody's in assigning ratings are the following: (1) evaluation of the management
of the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative- type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations.

4. Description of Permitted Money Market Investments:

Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short term credit needs.

U.S. Government Obligations - are bills, certificates of indebtedness
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury, as for example, the Government National Mortgage Association; others
by the right of the issuer to borrow from the Treasury, as in the case of
Federal Farm Credit Banks and Federal National Mortgage Association; and others
only by the credit of the agency, authority or instrumentality; as for example,
Federal Home Loan Mortgage and Federal Home Loan Bank.

Repurchase Agreements - See "Repurchase Agreements" below.

Certificates of Deposit - are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified or
variable rate of return and are normally negotiable.

7
<PAGE> 40
Banker's Acceptances - are short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.

Corporate Obligations - include bonds and notes issued by corporations
in order to finance longer term credit needs.

ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of
in the ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Trustees, the Manager, Subadviser
and/or Sector Advisers determine the liquidity of the Portfolio's investments
and, through reports from the Manager, Subadviser and/or Sector Advisers, the
Board monitors investments in illiquid instruments. In determining the liquidity
of the Portfolio's investments, the Manager, Subadviser and Sector Advisers may
consider various factors, including (1) the frequency of trades and quotations,
(2) the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Portfolio's rights and
obligations relating to the investment). Investments currently considered by the
Portfolio to be illiquid include repurchase agreements not entitling the holder
to payment of principal and interest within seven days, over-the-counter
options, and non-government stripped fixed-rate mortgage-backed securities.
Also, the Manager, Subadviser and/or Sector Advisers may determine some
restricted securities to be illiquid. However, with respect to over-the-counter
options the Portfolio writes, all or a portion of the value of the underlying
instrument may be illiquid depending on the assets held to cover the option and
the nature and terms of any agreement the Portfolio may have to close out the
option before expiration. In the absence of market quotations, illiquid
investments are priced at fair value as determined in good faith by the Board of
Trustees. If through a change in values, net assets, or other circumstances, the
Portfolio were in a position where more than 10% of its net assets were invested
in illiquid securities, it would seek to take appropriate steps to protect
liquidity.

RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is required,
the Portfolio may be obligated to pay all or part of the registration expense
and a considerable period may elapse between the time it decides to seek
registration and the time the Portfolio may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Portfolio might obtain a less favorable
price than prevailed when it decided to seek registration of the security.

REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases a security and simultaneously commits to resell that security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is

8
<PAGE> 41
unrelated to the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed upon price,
which obligation is in effect secured by the value (at least equal to the amount
of the agreed upon resale price and marked to market daily) of the underlying
security. The Portfolio may engage in repurchase agreements with respect to any
security in which it is authorized to invest.

While it does not presently appear possible to eliminate all risks from
these transactions (particularly the possibility of a decline in the market
value of the underlying securities, as well as delays and costs to the Portfolio
in connection with bankruptcy proceedings), it is the Portfolio's current policy
to limit repurchase agreement transactions to parties whose creditworthiness has
been reviewed and found satisfactory by the Manager.

LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Portfolio will
not: (a) write call options if, as a result, more than 25% of the Portfolio's
total assets would be hedged with options under normal conditions; or (b)
purchase futures contracts if, as a result, the Portfolio's total obligations
upon settlement or exercise of purchased futures contracts would exceed 25% of
its total assets. These limitations do not apply to options attached to or
acquired or traded together with their underlying securities, and do not apply
to securities that incorporate features similar to options. The above
limitations on the Portfolio's investments in futures contracts and options, and
the Portfolio's policies regarding futures contracts and options discussed
elsewhere in this Statement of Additional Information, may be changed as
regulatory agencies permit.

FUTURES CONTRACTS. When the Portfolio purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future date.
When the Portfolio sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and sale
will take place is fixed when the Portfolio enters into the contract.

Some currently available futures contracts are based on indices of
securities-prices, such as the Standard & Poor's 500 Composite Stock Price Index
(S&P 500). Futures can be held until their delivery dates, or can be closed out
before then if a liquid secondary market is available.

The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore, purchasing
futures contracts will tend to increase the Portfolio's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the Portfolio sells a futures
contract, by contrast, the value of its futures position will tend to move in a
direction contrary to the market. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much as if the
underlying instrument had been sold.

9
<PAGE> 42
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and seller
are required to deposit "initial margin" with a futures broker, known as a
futures commission merchant (FCM), when the contract is entered into. Initial
margin deposits are typically equal to a percentage of the contract's value.

If the value of either party's position declines, that party will be
required to make additional "variation margin" payments to settle the change in
value on a daily basis. The party that has a gain may be entitled to receive all
or a portion of this amount. Initial and variation margin payments do not
constitute purchasing securities on margin for purposes of the Portfolio's
investment limitations. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.

WRITING CALL OPTIONS. Writing a call option obligates the Portfolio to
sell or deliver the option's underlying instrument, in return for the strike
price, upon exercise of the option. The characteristics of writing call options
are similar to those of writing put options, except that writing calls generally
is a profitable strategy if prices remain the same or fall. Through receipt of
the option premium, a call writer mitigates the effects of a price decline. At
the same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.

CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange traded options and futures contracts, it is likely that the
standardized contracts available will not match the Portfolio's current or
anticipated investments exactly. The Portfolio may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Portfolio's other investments.

Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Portfolio's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts.

The Portfolio may purchase or sell options and futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends to
purchase in order to

10
<PAGE> 43
attempt to compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price changes
in the Portfolio's options or futures positions are poorly correlated with its
other investments, the positions may fail to produce anticipated gains or result
in losses that are not offset by gains in other investments.

LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading volume
and liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily price
fluctuation limits for options and futures contracts, and may halt trading if a
contract's price moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached or a trading
halt is imposed, it may be impossible for the Portfolio to enter into new
positions or close out existing positions. If the secondary market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and potentially could
require the Portfolio to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, the Portfolio's
access to other assets held to cover its options or futures positions could also
be impaired.

ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Portfolio will
comply with guidelines established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and if the guidelines so
require, will set aside appropriate liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated account cannot
be sold while the futures or option strategy is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.

SHORT SALES. The Portfolio may enter into short sales "against the box"
with respect to equity securities it holds. For example, if a Sector Adviser
anticipates a decline in the price of a stock the Portfolio holds, it may sell
the stock short "against the box." If the stock price subsequently declines, the
proceeds of the short sale could be expected to offset all or a portion of the
stock's decline. The Portfolio currently intends to hedge no more than 15% of
its total assets with short sales "against the box" on equity securities under
normal circumstances.

When the Portfolio enters into a short sale "against the box", it will
be required to own or have the right to obtain at no added cost securities
identical to those sold short "against the box" and will be required to continue
to hold them while the short sale "against the box" is outstanding. The
Portfolio will incur transaction costs, including interest expense, in
connection with opening, maintaining, and closing short sales.

11
<PAGE> 44
PORTFOLIO TURNOVER.

The portfolio turnover rate for the fiscal year ended December 31,
1995, in the Growth Stock Portfolio was 338% (1994-103%). Resultant turnover
rates are primarily a function of the Manager's response to market conditions.
In the Manager's opinion, it was in the best interest of Growth Stock Portfolio
to change its portfolio from a fully invested position to a partially defensive
position at various times during the year. This defensive investment strategy
can produce high portfolio turnover ratios when calculated in accordance with
SEC rules and the greater frequency of the use of this defensive investment
strategy produced a significantly higher turnover rate in 1995 as compared to
1994.

The Portfolio began the year with 100% of its portfolio invested in
money market instruments and became fully exposed to the stock market in late
January. By mid-March, the Portfolio in response to internal weaknesses which
were not confirming the price movement of the Dow, adopted a partially
defensive position by scaling back exposure to the stock market to
approximately 50%. In early May, as negative divergences no longer existed
among the major stock market indexes, the Portfolio was returned to a fully
invested position where it remained until the fourth quarter. In October,
certain technical and fundamental questions about the market's continued
advance began to indicate that the most prudent posture was to again adopt a
partially defensive position. The Portfolio remained partially defensive until
the first week in December when a fully invested position was implemented and
maintained through the end of the year.

Major changes in the portfolio has resulted in portfolio turnover rates
of as much as 338%, which is greater than that of most other investment
companies, including many which emphasize capital appreciation as a basic
policy. The policies of the Growth Stock Portfolio may be expected to result in
correspondingly heavier brokerage commissions and taxes, which ultimately must
be borne by the Trust's shareholders.

Management is presently unable to predict the portfolio turnover rate
for the current year. It is conceivable that the turnover rate for the Portfolio
will exceed 300% in the current year.

PORTFOLIO TRANSACTIONS

All orders for the purchase or sale of portfolio securities are placed
on behalf of the Portfolio by the Manager, Subadviser or Sector Advisers
pursuant to authority contained in the investment advisory agreement, investment
subadvisory agreement and investment sub-subadvisory agreements. The Manager,
Subadviser and Sector Advisers are also responsible for the placement of
transaction orders for accounts for which they or their affiliates act as
investment adviser. In selecting broker-dealers, subject to applicable
limitations of the federal securities laws, the Manager, Subadviser and Sector
Advisers consider various relevant factors, including, but not limited to, the
size and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions, and arrangements for payment of Portfolio
expenses.

The Portfolio may execute portfolio transactions with broker-dealers
who provide research and execution services to the Portfolio or other accounts
over which the Manager, Subadviser or Sector Advisers or their affiliates
exercise investment discretion. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers industries,
securities, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The selection of such
broker-dealers generally is made by the Manager, Subadviser and Sector Advisers
(to the extent possible consistent with execution considerations) in accordance
with a ranking of broker-dealers determined periodically by the Manager,
Subadviser and Sector Advisers' investment staffs based upon the quality of
research and execution services provided.

The receipt of research from broker-dealers that execute transactions
on behalf of the Portfolio may be useful to the Manager, Subadviser and Sector
Advisers in rendering investment management services to the Portfolio or their
other clients, and conversely, such research provided by broker-dealers who have
executed transaction orders on behalf of other Manager, Subadviser and Sector
Advisers' clients may be useful to the Manger, Subadviser and Sector Advisers in
carrying out their obligations to the Portfolio. The receipt of such research is
not expected to reduce the Manager, Subadviser and Sector Advisers' normal
independent research activities; however, it enables the Manager, Subadviser and
Sector Advisers to avoid the additional expenses that could be incurred if the
Manager, Subadviser and Sector Advisers tried to develop comparable information
through their own efforts.

12
<PAGE> 45
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
Portfolio to pay such higher commissions, the Manager, Subadviser and/or Sector
Advisers must determine in good faith that such commissions are reasonable in
relation to the value of the brokerage and research services provided by such
executing broker-dealers viewed in terms of a particular transaction or the
Manager, Subadviser and/or Sector Advisers' overall responsibilities to the
Portfolio and their other clients. In reaching this determination, the Manager,
Subadviser and/or Sector Advisers will not attempt to place a specific dollar
value on the brokerage and research services provided or to determine what
portion of the compensation should be related to those services.

The Manager, Subadviser and Sector Advisers are authorized to use
research services provided by and to place portfolio transactions with brokerage
firms that have provided assistance in the distribution of shares of the Fund or
shares of other Flex-funds funds or Flex-Partners funds to the extent permitted
by law.

The Manager, Subadviser and Sector Advisers may allocate brokerage
transactions to broker-dealers who have entered into arrangements with the
Manager, Subadviser and Sector Advisers under which the broker-dealer allocates
a portion of the commissions paid by the Portfolio toward payment of the
Portfolio or the Fund's expenses, such as transfer agent fees of Mutual Funds
Service Co. or custodian fees. The transaction quality must, however, be
comparable to those of other qualified broker-dealers.

The Trustees of the Portfolio periodically review the Manager,
Subadviser and Sector Advisers' performance of their responsibilities in
connection with the placement of portfolio transactions on behalf of the
Portfolio and review the commissions paid by the Portfolio over representative
periods of time to determine if they are reasonable in relation to the benefits
to the Portfolio.

From time to time, the Trustees of the Portfolio will review whether
the recapture for the benefit of the Portfolio of some portion of the brokerage
commissions or similar fees paid by the Portfolio on portfolio transactions is
legally permissible and advisable.

The Portfolio seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture arrangements
are in effect. The Trustees of the Portfolio intend to continue to review
whether recapture opportunities are available and are legally permissible and,
if so, to determine in the exercise of their business judgment, whether it would
be advisable for the Portfolio to seek such recapture.

Although the Trustees and officers of the Portfolio are substantially
the same as those of other portfolios managed by the Manager, investment
decisions for the Portfolio are made independently from those of other
portfolios managed by the Manager or

13
<PAGE> 46
accounts managed by affiliates of the Manager. It sometimes happens that the
same security is held in the portfolio of more than one of these funds or
accounts. Simultaneous transactions are inevitable when several portfolios are
managed by the same investment adviser, particularly when the same security is
suitable for the investment objective of more than one portfolio.

When two or more portfolios are simultaneously engaged in the purchase
or sale of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the portfolios involved to be
equitable to each portfolio. In some cases this system could have a detrimental
effect on the price or value of the security as far as the Portfolio is
concerned. In other cases, however, the ability of the Portfolio to participate
in volume transactions will produce better executions and prices for the
Portfolio. It is the current opinion of the Trustees of the Portfolio that the
desirability of retaining the Manager as investment adviser to the Portfolio
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions. During the period from January 1, 1995 to December
31, 1995, the Growth Stock Portfolio paid total commissions of $ 44,655
($135,422 in 1994; $99,419 in 1993) on the purchase and sale of common stocks.
Brokerage commissions paid on the purchases and sales by the Portfolio of
futures and option contracts for the year ending December 31, 1995 were $22,399.

VALUATION OF PORTFOLIO SECURITIES

Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Equity securities for which the
primary market is the U.S. are valued at last sale price or, if no sale has
occurred, at the closing bid price. Short-term securities less than 60 days to
maturity are valued either at amortized cost or at original cost plus accrued
interest, both of which approximate current value. Fixed-income securities are
valued primarily by a pricing service that uses a vendor security valuation
matrix which incorporates both dealer-supplied valuations and electronic data
processing techniques.

This twofold approach is believed to more accurately reflect fair value
because it takes into account appropriate factors such as institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data without exclusive reliance
upon quoted, exchange, or over-the-counter prices.

Securities and other assets for which there is no readily available
market are valued in good faith by the Board of Trustees. The procedures set
forth above need not be used to determine the value of the securities owned by
the Portfolio if, in the opinion of the Board of Trustees, some other method
(e.g., closing over-the-counter bid prices in the case of debt instruments
traded on an exchange) would more accurately reflect the fair market value of
such securities.

14
<PAGE> 47
Generally, the valuation of equity securities, as well as corporate
bonds, U.S. government securities, money market instruments, and repurchase
agreements, is substantially completed each day at the close of the New York
Stock Exchange (NYSE).

The values of any such securities held by the Portfolio are determined
as of such time for the purpose of computing the Portfolio's net asset value. If
an extraordinary event that is expected to materially affect the value of a
portfolio security occurs after the close of an exchange on which that security
is traded, then the security will be valued as determined in good faith by the
Board of Trustees.

PERFORMANCE

The Fund may quote its performance in various ways. All performance
information supplied by the Fund in advertising is historical and is not
intended to indicate future returns. The Fund's share price and total returns
fluctuate in response to market conditions and other factors, and the value of
Fund shares when redeemed may be more or less than their original cost.

TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of the Fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the Fund's net asset value
over the period. Average annual returns will be calculated by determining the
growth or decline in value of a hypothetical historical investment in the Fund
over a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. While average annual returns are a
convenient means of comparing investment alternatives, investors should realize
that the Fund's performance is not constant over time, but changes from year to
year, and that average annual returns represent averaged figures as opposed to
the actual year-to-year performance of the Fund.

Total return is computed by finding the average annual compounded rates
of return over the length of the base periods that would equate the initial
amount invested to the ending redeemable value, according to the following
formula:

P (1+T) to the nth power = ERV
P = initial investment of $1,000
T = average annual total return
n = Number of years
ERV = ending redeemable value at the end of the base period

In addition to average annual returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series

15
<PAGE> 48
of investments, or series of redemptions over any time period. Total returns may
be broken down into their components of income and capital (including capital
gains and changes in share price) in order to illustrate the relationship of
these factors and their contributions to total return. Total returns may be
quoted on a before-tax or after-tax basis. Total returns, yields, and other
performance information may be quoted numerically, or in a table, graph, or
similar illustration.

NET ASSET VALUE. Charts and graphs using the Fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted net asset value includes any distributions paid by the
Fund and reflects all elements of its return. Unless otherwise indicated, the
Fund's adjusted net asset values are not adjusted for sales charges, if any.

MOVING AVERAGES. The Fund may illustrate performance using moving
averages. A long-term moving average is the average of each week's adjusted
closing net asset value for a specified period. A short-term moving average is
the average of each day's adjusted closing net asset value for a specified
period. Moving Average Activity Indicators combine adjusted closing net asset
values from the last business day of each week with moving averages for a
specified period to produce indicators showing when a net asset value has
crossed, stayed above, or stayed below its moving average.

HISTORICAL FUND RESULTS. The Fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as mutual
fund rankings prepared by Lipper Analytical Services, Inc. (Lipper), an
independent service located in Summit, New Jersey that monitors the performance
of mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and total return is prepared without regard
to tax consequences. In addition to the mutual fund rankings, the Fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.

From time to time, the Fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals. For
example, the Fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. Rankings that compare the performance of
Flex-Partners or Flex-funds funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.

In advertising materials, the Trust may reference or discuss its
products and services, which may include: other Flex-Partners or Flex-funds
funds; retirement investing; the effects of periodic investment plans and
dollar; cost averaging; saving for college; and charitable giving. In addition,
the Fund may quote financial or business publications and periodicals, including
model portfolios or allocations, as they relate to Fund management, investment
philosophy, and investment techniques. The Fund may

16
<PAGE> 49
also reprint, and use as advertising and sales literature, articles from
Reflexions, a quarterly magazine provided free of charge to Flex-Partners and
Flex-funds shareholders.

VOLATILITY. The Fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Fund may compare these
measures to those of other funds. Measures of volatility seek to compare the
Fund's historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a comparative
benchmark may be. All measures of volatility and correlation are calculated
using averages of historical data.

MOMENTUM INDICATORS indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the Fund's
percentage change in price movements over that period.

The Fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.

The Fund may be available for purchase through retirement plans or
other programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000 investment
earning a taxable return of 10% annually would have an after-tax value of $1,949
after ten years, assuming tax was deducted from the return each year at a 31%
rate. An equivalent tax deferred investment would have an after tax value of
$2,100 after ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Fund is open for business and its net asset value per share (NAV)
is calculated each day the NYSE is open for trading. The NYSE has designated the
following holiday closings for 1996: New Year's Day, Washington's Birthday
(observed), Good Friday, Memorial Day (observed), Independence Day (observed),
Labor Day, Thanksgiving Day, and Christmas Day (observed). Although the
Manager expects the same holiday schedule, with the addition of New Year's
Day, to be observed in the future, the NYSE may modify its holiday schedule at
any time.

The Fund's net asset value is determined as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the SEC. To the extent that
portfolio securities are traded

17
<PAGE> 50
in other markets on days when the NYSE is closed, the Fund's NAV may be affected
on days when investors do not have access to the Fund to purchase or redeem
shares.

Shareholders of the Fund will be able to exchange their shares for
shares of any mutual fund that is a series of The Flex-funds (each a
"Flex-funds' Fund"). No fee or sales load will be imposed upon the exchange.

Additional details about the exchange privilege and prospectuses for
each of The Flex-funds' funds are available from the Fund's Transfer Agent. The
exchange privilege may be modified, terminated or suspended on 60 days' notice
and the Fund has the right to reject any exchange application relating to such
Fund's shares. The 60 day notification requirement may be waived if (i) the only
effect of a modification would be to reduce or eliminate an administrative fee
redemption fee, or deferred sales charge ordinarily payable at the time of an
exchange, or (ii) the Fund suspends the redemption of the shares to be exchanged
as permitted under the 1940 Act or the rules and regulations thereunder, or the
Fund to be acquired suspends the sale of its shares because it is unable to
invest amounts effectively in accordance with its investment objective and
policies.

In the Prospectus, the Fund has notified shareholders that it reserves
the right at any time, without prior notice, to refuse exchange purchases by any
person or group if, in the Manager's judgment, the Fund would be unable to
invest effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.

Any redemptions in kind made by the Fund will be of readily marketable
securities.

AUTOMATIC ACCOUNT BUILDER. An investor may arrange to have a fixed
amount of $100 or more automatically invested in shares of the Fund monthly by
authorizing his or her bank account to be debited to invest specified dollar
amounts in shares of the Fund. The investor's bank must be a member of the
Automatic Clearing House System.

Further information about these programs and an application form can be
obtained from the Fund's Transfer Agent.

SYSTEMATIC WITHDRAWAL PROGRAM. A systematic withdrawal plan is
available for shareholders having shares of the Fund with a minimum value of
$10,000, based upon the offering price. The plan provides for monthly, quarterly
or annual checks in any amount, but not less than $100 (which amount is not
necessarily recommended).

Dividends and/or distributions on shares held under this plan are
invested in additional full and fractional shares at net asset value. The
Transfer Agent acts as agent for the shareholder in redeeming sufficient full
and fractional shares to provide the amount of the periodic withdrawal payment.
The plan may be terminated at any time.

18
<PAGE> 51
Withdrawal payments should not be considered as dividends, yield or
income. If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.

Furthermore, each withdrawal constitutes a redemption of shares, and
any gain or loss realized must be recognized for federal income tax purposes.
Each shareholder should consult his or her own tax adviser with regard to the
tax consequences of the plan, particularly if used in connection with a
retirement plan.

DISTRIBUTIONS AND TAXES

DISTRIBUTIONS. If you request to have distributions mailed to you and
the U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, the Manager, Subadviser and Sector Advisers may
reinvest your distributions at the then-current NAV. All subsequent
distributions will then be reinvested until you provide the Manager with
alternate instructions.

DIVIDENDS. A portion of the Fund's dividends derived from certain U.S.
government obligations may be exempt from state and local taxation. The Fund
will send each shareholder a notice in January describing the tax status of
dividends and capital gain distributions for the prior year.

CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the Fund
on the sale of securities by the Portfolio and distributed to shareholders of
the Fund are federally taxable as long-term capital gains regardless of the
length of time shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of the Fund and such shares are
held six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.

Short-term capital gains distributed by the Fund are taxable to
shareholders as dividends not as capital gains. Distributions from short-term
capital gains do not qualify for the dividends-received deduction.

TAX STATUS OF THE FUND. The Fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be liable
for federal tax on income and capital gains distributed to shareholders. In
order to qualify as a regulated investment company and avoid being subject to
federal income or excise taxes at the Fund level, the Fund intends to distribute
substantially all of its net investment income (consisting of the income it
earns from its investment in the Portfolio, less expenses) and net realized
capital gains within each calendar year as well as on a fiscal year basis. The
Fund intends to comply with other tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities held less than three months constitute less than 30% of the Fund's
gross income for each fiscal

19
<PAGE> 52
year. Gains from some futures contracts and options are included in this 30%
calculation, which may limit the Fund's investments in such instruments.

The Fund is treated as a separate entity from the other funds of The
Flex-funds Trust for tax purposes.

OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting the Fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In addition to
federal income taxes, shareholders may be subject to state and local taxes on
Fund distributions. Investors should consult their tax advisers to determine
whether the Fund is suitable to their particular tax situation.

INVESTMENT ADVISER AND MANAGER

R. Meeder & Associates, Inc. (the "Manager") is the investment adviser
and manager for, and has an Investment Advisory Contract with, the Portfolio.

Pursuant to the Investment Advisory Contract with the Portfolio, the
Manager, subject to the supervision of the Portfolio's Board of Trustees and in
conformity with the stated objective and policies of the Portfolio, has general
oversight responsibility for the investment operations of the Portfolio. In
connection therewith, the Manager is obligated to keep certain books and records
of the Portfolio. The Manager also administers the Fund's corporate affairs, and
in connection therewith, furnishes the Fund with office facilities, together
with those ordinary clerical and bookkeeping services which are not being
furnished by Star Bank, N.A., the Portfolio's custodian and Mutual Funds Service
Co., the Fund's transfer and disbursing agent. The management services of the
Manager are not exclusive under the terms of the Investment Advisory Contract
and the Manager is free to, and does, render management services for others.

The Manager invests the Portfolio's liquidity reserves and may invest
the Portfolio's assets in financial futures contracts and related options.

The Investment Advisory Contract for the Portfolio was separately
approved by a vote of a majority of the Trustees, including a majority of those
Trustees who are not "interested persons" (as defined in the Investment Company
Act of 1940) of the Portfolio. The Investment Advisory Contract is to remain in
force so long as renewal thereof is specifically approved at least annually by a
majority of the Trustees or by vote of a majority of the interests in the
Portfolio, and in either case by vote of a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) at a
meeting called for the purpose of voting on such renewal.

The Investment Advisory Contract provides that the Manager will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Portfolio in connection with the matters to which the Investment Advisory
Contract relates except for a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Investment Advisory
Contract will terminate automatically if assigned and

20
<PAGE> 53
may be terminated without penalty at any time upon 60 days prior written notice
by Majority Vote of the Portfolio, by the Trustees of the Portfolio, or by the
Manager.

Costs, expenses and liabilities of the Trust attributable to a
particular fund are allocated to that fund. Costs, expenses and liabilities
which are not readily attributable to a particular fund are allocated among all
of the Trust's funds. Thus, each fund pays its proportionate share of: the fees
of the Trust's independent auditors, legal counsel, custodian, transfer agent
and accountants; insurance premiums; the fees and expenses of Trustees who do
not receive compensation from R. Meeder & Associates, Sector Capital Management,
L.L.C or any of the Sector Advisers; association dues; the cost of printing and
mailing confirmations, prospectuses proxies, proxy statements, notices and
reports to existing shareholders; state registration fees; distribution expenses
within the percentage limitations of the Fund's distribution and service plan,
including the cost of printing and mailing of prospectuses and other materials
incident to soliciting new accounts; and other miscellaneous expenses.

The expenses of the Portfolio include the compensation of the Trustees
who are not affiliated with the Manager, Subadviser or Sector Advisers;
registration fees; membership dues allocable to the Portfolio; fees and expenses
of independent accountants, and any transfer agent or accountant of the
Portfolio; insurance premiums and other miscellaneous expenses.

Expenses of the Portfolio also include all fees under its Accounting
and Administrative Service Agreement; the expenses connected with the execution,
recording and settlement of security transactions, fees and expenses of the
Portfolio's custodian for all services to the Portfolio, including safekeeping
of funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to governmental offices and
commissions; expenses of meetings of investors and Trustees; the advisory fees
payable to the Manager, Subadviser and Sector Advisers under the investment
advisory contracts and other miscellaneous expenses.

The Board of Trustees of the Trust believe that the aggregate per share
expenses of the Fund and the Portfolio will be less than or approximately equal
to the expenses which the Fund would incur if it retained the services of an
investment adviser and the assets of the Fund were invested directly in the type
of securities being held by the Portfolio.

The Manager earns an annual fee, payable in monthly installments, at
the rate of 1% of the first $50 million, 0.75% of the next $50 million, and
0.60% in excess of $100 million, of the Portfolio's average net assets. The
Manager will receive 70% and the Subadviser 30% of the fee payable with respect
to the net assets of the Portfolio upon effectiveness of the subadvisory
arrangement; then the Manager will receive 30% and the Subadviser 70% of the fee
attributable to any additional net assets of the Portfolio up to an amount of
net assets equal to the net assets upon effectiveness of the subadvisory
arrangement, then the Manager and the Subadviser will share equally the fee
attributable to any additional net assets of the Portfolio up to $50 million of
the net assets. With respect to net assets of more than $50 million and less
than $100 million, the applicable fees of 0.75% will be shared such that

21
<PAGE> 54
the Manager will receive 0.35% and the Subadviser 0.40%. For net assets of $100
million and more, the applicable 0.60% fee will be shared such that the Manager
will receive 0.25% and the Subadviser 0.35%. For the year ending December 31,
1995, the Growth Stock Portfolio paid fees to the Manager totaling $238,640
($240,045 in 1994; $259,462 in 1993).

R. Meeder & Associates, Inc. was incorporated in Ohio on February 1,
1974 and maintains its principal offices at 6000 Memorial Drive, Dublin, Ohio
43017. The Manager is a wholly-owned subsidiary of Muirfield Investors, Inc.
("MII"), which is controlled by Robert S. Meeder, Sr. through the ownership of
voting common stock. The Manager's officers and directors are as set forth as
follows: Robert S. Meeder, Sr. Chairman and Sole Director; Philip A. Voelker,
Senior Vice President and Chief Operating Officer; Donald F. Meeder, Vice
President and Secretary; Sherrie L. Acock, Vice President; Robert D. Baker, Vice
President; Robert S. Meeder, Jr., President; Wesley F. Hoag, General Counsel;
Steven T. McCabe, Vice President; Elyse Jurman, Vice President; and Roy E.
Rogers, Vice President. Mr. Robert S. Meeder, Sr. is President and a Trustee of
the Trust and the Portfolio. Each of Mr. Robert S. Meeder, Jr., Donald F.
Meeder, Wesley F. Hoag and Steven T. McCabe is an officer of the Trust and the
Portfolio. Mr. Philip A. Voelker is a Trustee and officer of the Portfolio and
an officer of the Trust.

INVESTMENT SUBADVISER

Sector Capital Management L.L.C. serves as the Portfolio's subadviser.
The Subadviser is a Georgia limited liability company. William L. Gurner and
John K. Donaldson control the Subadviser. Messrs. Gurner and Donaldson are
Managers and Members of the Subadviser. The Subadviser's officers are as set
forth as follows: William L. Gurner, President and Administrator; George S.
Kirk, Director, Sales and Marketing; and Kenneth L. Riffle, Director, Client
Relations. Mr. Gurner is a Trustee of the Flex-Partners, mutual funds whose
corresponding portfolios are also advised by the Manager. The Investment
Subadvisory Agreement provides that the Subadviser shall furnish investment
advisory services in connection with the management of the Portfolio. The
Portfolio and the Manager have entered into an Investment Subadvisory Agreement
with the Subadviser which, in turn, has entered into a investment
sub-subadvisory agreement with each of the Sector Advisers selected for the
Portfolio. Under the Investment Subadvisory Agreement, the Subadviser is
required to (i) supervise the general management and investment of the assets
and securities portfolio of the Portfolio; (ii) provide overall investment
programs and strategies for the Portfolio and (iii) select Sector Advisers for
the Portfolio and, except as otherwise provided, allocate the Portfolio's assets
among such Sector Advisers. The Subadviser is obligated to keep certain books
and records of the Portfolio. The Manager continues to have responsibility for
all investment advisory services pursuant to the Investment Advisory Agreement
and supervises the Subadviser's performance of such services. Under the
Investment Subadvisory Agreement, the Manager pays the Subadviser an investment
advisory fee in an amount described above under "Investment Adviser and
Manager."

The Subadviser may invest the Portfolio's assets in financial futures
contracts and related options.

22
<PAGE> 55

The Investment Subadvisory Agreement provides that the Subadviser will
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the Portfolio, except a loss resulting from
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Investment Subadvisory Agreement provides that it will terminate automatically
if assigned, and that it may be terminated without penalty to the Fund or the
Portfolio by the Manager, the Trustees of the Portfolio or by the vote of a
majority of the outstanding voting securities of the Portfolio upon not less
than 30 days written notice. The Investment Subadvisory Agreement will continue
in effect for a period of more than two years from the date of execution only
so long as such continuance is specifically approved at least annually in
conformity with the 1940 Act. The Investment Subadvisory Agreement was approved
by the Board of Trustees of the Portfolio, including all of the Trustees who
are not parties to the contract or "interested persons" of any such party,
and by the shareholders of the Portfolio.

INVESTMENT SUB-SUBADVISERS

Except as otherwise described above under "Investment Adviser and
Manager" and "Investment Subadviser", the assets of the Portfolio are managed by
asset managers (each a "Sector Manager" and collectively, the "Sector Managers")
selected by the Subadviser, subject to the review and approval of the Trustees
of the Portfolio. The Subadviser recommends, to the Trustees of the Portfolio,
Sector Advisers for each industry sector based upon its continuing quantitative
and qualitative evaluation of the Sector Advisers' skills in managing assets
pursuant to specific investment styles and strategies. The Portfolio has applied
for an exemptive order from the SEC permitting the Subadviser, subject to
certain conditions, to enter into sub-subadvisory agreements with Sector
Advisers approved by the Trustees of the Portfolio but without the requirement
of shareholder approval. At a meeting held on December 20, 1996, the
shareholders of the Portfolio approved the operation of the Portfolio in this
manner. Pursuant to the terms of the exemptive application, the Subadviser is to
be able, subject to the approval of the Trustees of the Portfolio, but without
shareholder approval, to employ new Sector Advisers for the Portfolio. Although
shareholder approval will not be required for the termination of sub-subadvisory
agreements, shareholders of the Portfolio will continue to have the right to
terminate such agreements for the Portfolio at any time by a vote of a majority
of outstanding voting securities of the Portfolio.

Except as otherwise provided above under "Investment Adviser and Manager"
and "Investment Subadviser", the assets of the Portfolio are allocated by the
Subadviser among the Sector Advisers selected for the Portfolio. Each Sector
Adviser has discretion, subject to oversight by the Trustees and the Subadviser,
to purchase and sell portfolio assets, consistent with the Portfolio's
investment objectives, policies and restrictions. For its services, the
Subadviser receives a management fee from the Manager. A part of the fee paid to
the Subadviser is used by the Subadviser to pay the advisory fees of the Sector
Advisers. Each Sector Adviser is paid a fee for its investment advisory services
that is computed daily and paid monthly based on the value of the average net
assets of the
23
<PAGE> 56
Portfolio assigned by the Subadvisor to the Sector Adviser at an annual rate
equal to .25%

The Investment Sub-subadvisory Agreements provide that the Sector
Advisers will not be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in the
execution of portfolio transactions for the Portfolio, except a loss resulting
from misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Investment Sub-subadvisory Agreements provide that they will terminate
automatically if assigned, and that they may be terminated without penalty to
the Fund or the Portfolio by the Subadviser, the Trustees of the Portfolio or
by the vote of a majority of the outstanding voting securities of the Portfolio
upon not less than 15 days written notice. The Investment Sub-subadvisory
Agreements will continue in effect for a period of more than two years from the
date of execution only so long as such continuance is specifically approved at
least annually in conformity with the 1940 Act. The Investment Sub-subadvisory
Agreements were approved by the Board of Trustees of the Portfolio, including
all of the Trustees who are not parties to the contract or "interested persons"
of any such party, and by the shareholders of the Portfolio.

A Sector Adviser may also serve as a discretionary or non-discretionary
investment adviser to management or advisory accounts unrelated in any manner to
the Portfolio or its affiliates. The investment subadvisory agreements among the
Sector Advisers, the Portfolio and the Subadviser require fair and equitable
treatment to the Portfolio in the selection of the Portfolio investments and the
allocation of investment opportunities, but does not obligate the Sector
Advisers to give the Portfolio exclusive or preferential treatment.

Although the Sector Advisers make investment decisions for the
Portfolio independent of those for their other clients, it is likely that
similar investment decisions will be made from time to time. When the Portfolio
and another client of a Sector Adviser are simultaneously engaged in the
purchase or sale of the same security, the transactions are, to the extent
feasible and practicable, averaged as to price and allocated as to amount
between the Portfolio and the other client(s). In specific cases, this system
could have detrimental effect on the price or volume of the security to be
purchased or sold, as far as the Portfolio is concerned. However, the Trustees
of the Portfolio believe, over time, that coordination and the ability to
participate in volume transactions should be to the benefit of the Portfolio.

Listed below are the Sector Advisers selected by the Subadviser to
invest certain of the Portfolio's assets:

MILLER/HOWARD INVESTMENTS, INC. serves as Sector Adviser to the
utilities and transportation sectors of the Portfolio. Miller/Howard is a
registered investment adviser which has been providing investment services to
broker-dealers, investment advisers, employee benefit plans, endowment
portfolios, foundations and other institutions and individuals since 1984. As of
June 30, 1996, Miller/Howard held discretionary investment authority over
approximately $ 203 million of assets. Lowell Miller and Helen Hamada who are,
respectively, Miller/Howard President, Secretary and a director and its
Treasurer and a director, each own more than 10% of the outstanding voting
securities of Miller/Howard. Mr. Miller will be the portfolio manager primarily
responsible for the day-to-day management of those assets of the Portfolio
allocated to Miller/Howard. Mr. Miller has been associated with Miller/Howard
since 1984. Mr. Miller is a Vice President of the Trust and a trustee and a Vice
President of the Flex-Partners, mutual funds who corresponding portfolios are
also advised by RMA. Miller/Howard's principal executive offices are located at
141 Upper Byrdcliffe Road, Post Office Box 549, Woodstock, New York, 12498.

24
<PAGE> 57
pension, profit sharing, and other retirement plans; trusts; endowments;
foundations; and other charitable organizations since 1986. As of September 30,
1996, Hallmark held discretionary investment authority over approximately $ 113
million of assets. Peter S. Hagerman owns more than 10% of the outstanding
voting securities of Hallmark. Mr. Hagerman, Chairman of the Board, President,
and Chief Executive Officer, Thomas S. Moore, Senior Vice President and Chief
Investment Officer, and Kathryn A. Skwieralski, Senior Vice President,
Treasurer, Chief Financial and Administrative Officer, are the directors of
Hallmark. Mr. Hagerman will be the portfolio manager primarily responsible for
the day-to-day management of those assets off the Portfolio allocated to
Hallmark. Mr. Hagerman has been associated with Hallmark since 1986. Hallmark's
principal executive offices are located at One Greenbrook Corporate Center, 100
Passaic Avenue, Fairfield, New Jersey, 07004.

ASHLAND MANAGEMENT INCORPORATED serves as Sector Adviser to the materials
and services sector of the Portfolio. Ashland is a registered investment adviser
which has been providing investment services to individuals, pension and profit
sharing plans, charitable organizations, corporations and other institutions
since 1975. As of September 30, 1996, Ashland managed accounts having a value of
approximately $1.5 billion of assets. Charles C. Hickox, Chairman of the Board,
Chief Executive Officer and a director, and Perry V. S. Jones, President, Chief
Operating Officer and a director, each own more than 10% of the outstanding
voting securities of Ashland. Terrence J. McLaughlin, Managing Director of
Ashland and Deborah C. Ohl, a Portfolio Management Associate, will be the
portfolio managers primarily responsible for the day-to-day management of those
assets of the Portfolio allocated to Ashland. Mr. McLaughlin has been
associated with Ashland since 1987. Ms. Ohl has been employed by Ashland since
August, 1992 and has served as a Portfolio Management Associate for Ashland
since 1993. From May, 1991 until July, 1992, Ms. Ohl was a research and sales
assistant with Kidder, Peabody & Co. Incorporated. Ashland's principal
executive offices are located at 26 Broadway, New York, New York, 10004.

<PAGE> 58

26
<PAGE> 59

DISTRIBUTION PLAN

Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the
"Act") describes the circumstances under which an investment company such as the
Fund may, directly or indirectly, bear the expenses of distributing its shares.
The Rule defines such distribution expenses to include the cost of any activity
which is primarily intended to result in the sale of Fund shares.

The Distribution Plan permits, among other things, payment for
distribution in the form of commissions and fees, advertising the services of
public relations consultants, and direct solicitation. possible recipients
include securities brokers, attorneys, accountants, investment advisers,
investment performance consultants, pension actuaries, and service
organizations. Another class of recipients is banks. Currently, The
Glass-Steagall Act and other applicable laws, among other things, prohibit banks
from engaging in the business of underwriting, selling or distributing
securities. Since the only function of banks who may be engaged as participating
organizations, is to perform administrative and shareholder servicing functions,
the Fund believes that such laws should not preclude banks from acting as
participating organizations; however, future changes in either federal or state
statutes or regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as judicial or administrative
decisions or interpretations of statutes or regulations, could prevent a bank
from continuing to perform all or a part of its shareholder service activities.
If a bank were prohibited from so acting, its shareholder customers would be
permitted to remain Fund shareholders and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Fund might occur and a shareholder being serviced by such bank
might no longer be able to avail himself, or itself, of any automatic investment
or other services then being provided by the bank. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.

27
<PAGE> 60
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.

The Fund may expend as much as, but not more than .20% of its average
net assets annually pursuant to the Plan. A report of the amounts so expended by
the Fund and the purpose of the expenditures must be made to and reviewed by the
Board of Trustees at least quarterly. In addition, the Plan provides that it may
not be amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Plan without shareholder approval of the Plan, and
that other material amendments of the Plan must be approved by the Board of
Trustees, and by the Trustees who are not "interested persons" of the Trust (as
defined in the Act) and who have no direct or indirect financial interest in the
operation of the Plan or in the related service agreements, by vote cast in
person at a meeting called for the purpose of voting on the Plan.

The Plan is terminable at any time by vote of a majority of the
Trustees who are not "interested persons" and who have no direct or indirect
financial interest in the operation of the Plan or in any of the related service
agreements or by vote of a majority of the Fund's shares. Any service agreement
terminates upon assignment and is terminable without penalty at any time by a
vote of a majority of the Trustees who are not "interested persons" and who have
no direct or indirect financial interest in the operation of the Plan or in the
related service agreements, upon not more than 60 days written notice to the
service organization, or by the vote of the holders of a majority of the Fund's
shares, or, upon 15 days notice, by a party to a service agreement.
The Plan was approved by the Trust's Board of Trustees who made a
determination that there is a reasonable likelihood that the Plan will benefit
the Fund. The Plan was approved by shareholders and it will continue in effect
only if approved at least annually by the Board of Trustees. The Trust has
entered into agreements whereby a Trustee and a company with which one of the
Trustees is affiliated will be paid for their assistance in explaining and
interpreting the Fund, its investment objectives and policies, and the Trust's
retirement plans, to clients. These include: Russel G. Means, a Trustee of the
Portfolio; and the firm of Ogle and Waters, Inc. with which Walter L. Ogle, a
Trustee of the Portfolio, is affiliated. Total payments made by the Fund to
parties with service agreements for the year ended December 31, 1995 amounted to
$30,863. In addition, expenditures were approved by the Board of Trustees in the
amount of $3,019 for the printing and mailing of prospectuses, periodic reports
and other sales materials to prospective investors; $10,773 for advertising,
$16,182 for the services of public relations and marketing consultants; and $889
for the cost of special telephone service to encourage the sale of Fund shares.
TRUSTEES AND OFFICERS

The Trustees and executive officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the

28
<PAGE> 61
last five years. Except as otherwise shown, all persons named as Trustees also
serve in similar capacities for other funds advised by the Manager. Unless
otherwise noted, the business address of each Trustee and officer is 6000
Memorial Drive, Dublin, Ohio 43017, which is also the address of the Manager.
Those Trustees who are "interested persons" (as defined in the Investment
Company Act of 1940) by virtue of their affiliation with the Portfolio,
the Trust, the Manager, the Subadviser or the Sector Advisers are indicated by
an asterisk (*) .
The Trust and the Portfolio are managed by its trustees and officers.
Their names, positions and principal occupations during the past five years are
listed below:

<TABLE>
<CAPTION>
Position Principal
Name, Address, and Age Held Occupation
- -------------- -------- ----------
<S> <C> <C>

ROBERT S. MEEDER, SR.*+, 67 Trustee/ Chairman, R. Meeder &
President (1)(2) & Associates, Inc. an
Investment Adviser

MILTON S. BARTHOLOMEW, 67 Trustee (2) Retired, formerly a practicing
1424 Clubview Boulevard, S. attorney in Columbus Ohio
Worthington, OH 43235 Member of the Portfolio's
Audit Committee.

JOHN M. EMERY, 76 Trustee (1) Retired, formerly Vice
2390 McCoy Road President & Treasurer of
Columbus, OH 43220 Columbus & Southern Ohio
Electric Co. Member of the
Trust's Audit Committee.

RICHARD A. FARR, 78 Trustee (1) President of R&R Supply Co.
3250 W. Henderson Rd. and General Manager of
Columbus, OH 43220 RAFCo., Inc., two companies
involved in engineering,
consulting & sales of
heating & air conditioning
equipment.

RUSSELL G. MEANS, 70 Trustee (2) Chairman of Employee
4789 Rings Road Employee Benefit
Dublin, OH 43017 Management Corporation,
consultants and
administrators of
self-funded health and
retirement plans.
</TABLE>

29
<PAGE> 62

<TABLE>
<S> <C> <C>
ROBERT S. MEEDER, JR.*+, 35 Trustee (1)/ President of R. Meeder &
Vice President (1)(2) Associates, Inc.

WALTER L. OGLE, 58 Trustee (2) Executive Vice President of
One Corporate Drive AON Consulting, an
Suite 600 employee benefits
Clearwater, FL 43622 consulting group

PHILIP A. VOELKER*+, 42 Trustee (2)/ Senior Vice President and
Vice President (1)(2) Chief Operating Officer of
R. Meeder & Associates, Inc.

JAMES B CRAVER*, 53 Assistant Managing Director, Eagle
266 Summer Street Secretary (1)(2) Institutional Financial
Boston, MA 02210 Services, Inc. (since
September 1995); Senior
Vice President of Signature
Financial Group,
Inc. (January 1991
to August 1995).

STEVEN T. MCCABE*+, 32 Assistant Vice President, R. Meeder &
Treasurer (1)(2) Associates, Inc., and Vice
President of Mutual Funds Service Co.

DONALD F. MEEDER*+, 58 Secretary/ Vice President of R. Meeder
Treasurer(1)(2) & Associates, Inc., and
President of Mutual Funds Service Company

WESLEY F. HOAG*+, 39 Vice President (1)(2) General Counsel of R.
Meeder & Associates, Inc. (since July
1993); Attorney, Porter, Wright,
Morris & Arthur, a law firm
(October 1984 to June 1993)

ROGER D. BLACKWELL, 56 Trustee (1) Professor of Marketing and
Blackwell Associates, Inc. Consumer Behavior, The
3380 Tremont Road Ohio State University, and
Columbus, OH 43221 President of Blackwell
Associates, Inc., a
</TABLE>

30
<PAGE> 63
strategic consulting firm

(1) Trustee and/or officer of The Flex-funds
(2) Trustee and/or officer of the Portfolio

*"Interested Person" of the Trust (as defined in the Investment Company Act of
1940) and Portfolio.

+P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017

Robert S. Meeder, Sr. is Robert S. Meeder, Jr.'s father and Donald F.
Meeder's uncle.

Several Trustees and each officer of the Trust hold the same positions
with The Flex-Partners, a Massachusetts business trust consisting of three
separate series. Each Trustee and officer of the Portfolio hold the same
positions with each corresponding Portfolio of The Flex-funds. The Manager
serves as the investment adviser to each Portfolio of The Flex-Partners.

The following table shows the compensation paid by the Portfolio and
the Fund to the Trustees of the Portfolio and the Fund during the fiscal year
ended December 31, 1995:

COMPENSATION TABLE

<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Estimated Total
Aggregate Accrued as Annual Compensation
Compensation Part of Benefits from Registrant
from the Portfolio Portfolio or Upon and Fund Complex
Trustee and the Fund Fund Expenses Retirement Paid to Trustees
- ------- ------------------ ------------- ---------- ----------------
<S> <C> <C> <C> <C>
Robert S. Meeder, Sr. None None None None

Milton S. Bartholomew $1,197 None None $6,800

John M. Emery $874 None None $6,800

Richard A. Farr $750 None None $6,000

Russel G. Means $900 None None $5,250

Robert S. Meeder, Jr. None None None None

Walter L. Ogle $1,050 None None $6,000

Philip A. Voelker None None None None
</TABLE>

31
<PAGE> 64
<TABLE>
<S> <C> <C> <C> <C>
Roger D. Blackwell $6,000 None None $6,000

Neil Ramsey $925 None None $5,250
</TABLE>

The Trust pays each Trustee who is not an "interested person" an annual
fee of $3,000, plus $750 for each meeting of the Board of Trustees attended
regardless of the number of Boards of Trustees on which each Trustee serves. Mr.
Emery comprises the Audit Committee for each of The Flex-Partners and The
Flex-funds Trusts. Mr. Emery is paid $400 for each meeting of the Audit
Committees attended regardless of the number of Audit Committees on which he
serves. Trustees fees for the Fund totaled $2,291 for the year ended December
31, 1995. Audit Committee fees for the Fund totaled $124 for the year ended
December 31, 1995. All other officers and Trustees serve without compensation
from the Trust.

Each Trustee who is not an "interested person" with each corresponding
Portfolio of The Flex-funds and Flex-Partners is paid an annual fee of $3,000,
plus $750 for each meeting of the Board of Trustees attended regardless of the
number of Boards of Trustees each Trustee serves. Mr. Bartholomew comprises the
Audit Committee for each corresponding Portfolio of The Flex-funds and the
Flex-Partners Trusts. Mr. Bartholomew is paid $400 for each meeting of the Audit
Committees attended regardless of the number of Audit Committees on which he
serves. Trustee fees for the Growth Stock Portfolio totaled $4,072 for the year
ended December 31, 1995. Audit Committee fees for the Growth Stock Portfolio
totaled $147 for the year ended December 31, 1995. All other officers and
Trustees serve without compensation from the Portfolio.

The Trustees and officers of the Fund and the Portfolio own, in the
aggregate, less than 1% of the Fund's total outstanding shares.

FLEX-FUNDS RETIREMENT PLANS

The Trust offers retirement plans which are described in the
Prospectus. Minimum purchase requirements for retirement plan accounts are
subject to the same requirements as regular accounts, except for an IRA, which
has a $500 minimum purchase requirement. Information concerning contribution
limitations for IRA accounts are described below.

Individual Retirement Accounts (IRA):

Limitation on Deductible Contributions - Under prior law an individual
with earned income, not yet 70 1/2 years of age, was allowed a deductible IRA
contribution, limited to the lesser of earned income or $2,000. Effective for
years beginning after December 31, 1986, applicable law limits the deductibility
of IRA contributions where the taxpayer is a participant in an employer-
sponsored retirement plan and had adjusted gross income (AGI) in excess of
$40,000 (joint) and $25,000 (single). For every dollar that AGI exceeds these
limits, the maximum deduction is reduced by twenty cents. Thus, a joint filer
with AGI greater than $50,000 who is covered by an employer sponsored plan will
not be able to make a deductible IRA contribution. The deductible limits for
individuals not covered by an employer-sponsored plan were not changed.

32
<PAGE> 65
Nondeductible Contributions - Individuals who may not make a deductible
contribution due to the limits noted above, may continue to make nondeductible
contributions subject to the prior $2,000 limitation. The earnings on such
contributions will still accumulate on a tax deferred basis. Individuals will be
required to report such contributions on their tax returns.

Rollover Contributions - individuals who receive certain lump-sum
distributions from employer-sponsored retirement plans may make roll-over
contributions to an IRA and by doing so defer taxes on the distribution and
shelter any investment earnings.

A Spousal IRA is also available.

CONTRACTS WITH COMPANIES AFFILIATED WITH THE MANAGER

Mutual Funds Service Co. provides accounting, stock transfer, dividend
disbursing, and shareholder services to the Fund and the Portfolio. The minimum
annual fee for accounting services for the Portfolio is $7,500. Subject to the
applicable minimum fee, the Portfolio's annual fee, payable monthly, is computed
at the rate of 0.15% of the first $10 million, 0.10% of the next $20 million,
0.02% of the next $50 million and 0.01% in excess of $80 million of the
Portfolio's average net assets. Subject to a $4,000 annual minimum fee, the Fund
will incur an annual fee, payable monthly, which will be the greater of $15 per
shareholder account or 0.10% of the Fund's average net assets, payable monthly,
for stock transfer and dividend disbursing services. Mutual Funds Service Co.
also serves as Administrator to the Fund pursuant to an Administration Services
Agreement which was effective February 1, 1995. Services provided to the Fund
include coordinating and monitoring any third party services to the Fund;
providing the necessary personnel to perform administrative functions for the
Fund; assisting in the preparation, filing and distribution of proxy materials,
periodic reports to Trustees and shareholders, registration statements and other
necessary documents. The Fund incurs an annual fee, payable monthly, of .03% of
the Fund's average net assets. These fees are reviewable annually by the
respective Trustees of the Trust and the Portfolio.

For the year ended December 31, 1995, total payments to Mutual Funds
Service Co. by the Fund and the Portfolio amounted to $29,772 and $28,335,
respectively.

DESCRIPTION OF THE TRUST

TRUST ORGANIZATION. The assets of the Trust received for the issue or
sale of the shares of the Fund and all income, earnings, profits, and proceeds
thereof, subject only to the rights of creditors, are especially allocated to
the Fund and constitute the underlying assets of the Fund. The underlying assets
of the Fund are segregated on the books of account, and are to be charged with
the liabilities with respect to the Fund and with a share of the general
expenses of the Trust. Expenses with respect to the Trust are to be allocated in
proportion to the asset value of the respective funds except where allocations

33
<PAGE> 66
of direct expense can otherwise be fairly made. The officers of the Trust,
subject to the general supervision of the Board of Trustees, have the power to
determine which expenses are allocable to a given fund, or which are general or
allocable to all of the funds. In the event of the dissolution or liquidation of
the Trust, shareholders of each fund are entitled to receive as a class the
underlying assets of such fund available for distribution.

SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of Trust
provides that the Trust shall not have any claim against shareholders except for
the payment of the purchase price of shares and requires that each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees
include a provision limiting the obligations created thereby to the Trust and
its assets.

The Declaration of Trust provides for indemnification out of each
Fund's property of any shareholder held personally liable for the obligations of
the Fund. The Declaration of Trust also provides that each Fund shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Fund and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations. The Manager believes that, in view of the above, the risk of
personal liability to shareholders is remote.

The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees against
any liability to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of their office.

VOTING RIGHTS. The Fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each share you own. The
shares have no preemptive or conversion rights; the voting and dividend rights,
the right of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth under
the heading "Shareholder and Trustee Liability" above. Shareholders representing
10% or more of the Trust or the Fund may, as set forth in the Declaration of
Trust; call meetings of the Trust or the Fund for any purpose related to the
Trust or Fund, as the case may be, including, in the case of a meeting of the
entire Trust, the purpose of voting on removal of one or more Trustees. The
Trust or any Fund may be terminated upon the sale of its assets to another
open-end management investment company, if approved by vote of the holders of a
majority of the Trust or the Fund, as determined by the current value of each
shareholder's investment in the Fund or Trust, or upon liquidation and
distribution of its assets, if approved by a majority of the Trustees of the
Trust. If not so terminated, the Trust and the Fund will continue indefinitely.

34
<PAGE> 67
CUSTODIAN Star Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is
custodian of the assets of the Portfolio. The custodian is responsible for the
safekeeping of the Portfolio's assets and the appointment of subcustodian banks
and clearing agencies. The custodian takes no part in determining the investment
policies of the Portfolio or in deciding which securities are purchased or sold
by the Portfolio. The Portfolio may, however, invest in obligations of the
custodian and may purchase or sell securities from or to the custodian.

AUDITOR. KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio
43215, serves as the trust's independent accountant. KPMG audits financial
statements for the Fund and provides other audit, tax, and related services.

FINANCIAL STATEMENTS

The audited Financial Statements and the Notes thereto for the Fund and
the Portfolio, and the auditor's reports of KPMG Peat Marwick L.L.P, independent
public accountants, are herein incorporated by reference from The Flex-fund's
Annual Reports dated December 31, 1995 and December 31, 1994.

35
<PAGE> 68

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Index to Financial Statements

Financial Statements included in Part A
Not applicable.

Financial Statements included in Part B
Not applicable.

(b) Exhibits:

1. Declaration of Trust (effective December 30, 1991) -- filed as
an exhibit to Registrant's Post-Effective Amendment No. 18 on
January 16, 1992, which exhibit is incorporated herein by
reference.

2. By-laws of the Trust -- filed as an exhibit to Registrant's
Post-Effective Amendment No. 18 on January 16, 1992, which
exhibit is incorporated herein by reference.

3. Not applicable.

4. Not applicable.

5. Not applicable.

6. Not applicable.

7. Not applicable.

8. Custodian Agreement -- filed as an exhibit to Registrant's
Post-Effective Amendment No. 16 on April 9, 1991, which
exhibit is incorporated herein by reference.

9. Administrative Services Agreement between The Flex-funds and
Mutual Funds Service Co.--filed as an Exhibit to Registrant's
Post-Effective Amendment No. 31 on or about February 28, 1995,
which exhibit is incorporated by reference herein.

<PAGE> 69

10. Not applicable.

11. Not applicable.

12. Not applicable.

13. Agreements etc. for initial capital, etc. -- reference is made
to Part II, Item 1(b)(13) of Registrant's First Pre-effective
Amendment to the Registration Statement on Form N-1 filed with
the Commission on or about July 20, 1982, and is incorporated
herein by reference.

14. Model Plans and related documents to be used in the
establishment of retirement plans in conjunction with shares
of the Registrant -- incorporated by reference to Part II,
Item 1(b)(14) of Registrant's First Pre-effective Amendment of
the Registration Statement on Form N-1 filed with the
Commission on or about July 20, 1982, and is incorporated
herein by reference.

15. 12b-1 Plan for The Highlander Fund (formerly known as The
Growth Fund) -- reference is made to the exhibits referred to
in Part C, Item 26 (b)(15) of Registrant's Third
Post-Effective Amendment to the Registration Statement on Form
N-1A filed with the Commission on or about March 1, 1985, and
is incorporated herein by reference.

16. Schedules for computation of performance quotations for The
Growth Fund -- filed as an Exhibit to Registrant's
Post-Effective Amendment No. 36 on or about April 30, 1996,
which exhibit is incorporated by reference herein.

17. Financial Data Schedule for The Highlander Fund (formerly
known as The Growth Fund) is filed herewith.

18. Not applicable.

19. Powers of Attorney of Trustees of Registrant. Previously filed
and incorporated herein by reference.

20. Powers of Attorney of Trustees of the Growth Stock Portfolio.
Previously filed and incorporated herein by reference.

Item 25. Persons Controlled by or under Common Control with Registrant.

None.
<PAGE> 70

Item 26. Number of Holders of Securities at October 21, 1996.

<TABLE>

Title of Number of
Class Fund Record Holders
----- ---- --------------

<S> <C> <C>
Shares of Growth Fund 1,212
Beneficial
Interest
</TABLE>

Item 27. Indemnification

Reference is made to Section 5.3 of the Declaration of Trust filed
as an original exhibit to Registrant's Post-Effective Amendment
No. 18 on January 16, 1992. As provided therein, the Trust is
required to indemnify its officers and trustees against claims and
liability arising in connection with the affairs of the Trust,
except liability arising from breach of trust, bad faith, willful
misfeasance, gross negligence or reckless disregard of duties. The
Trust is obligated to undertake the defense of any action brought
against any officer, trustee or shareholder, and to pay the
expenses thereof if he acted in good faith and in a manner he
reasonably believed to in or not opposed to the best interest of
the Trust, and with respect to any criminal action had no
reasonable cause to believe his conduct was unlawful. Other
conditions are applicable to the right of indemnification as set
forth in the Declaration of Trust. In applying these provisions,
the Trust will comply with the provisions of the Investment
Company Act.

Item 28. Business and Other Connections of Investment Adviser.

Not applicable.

Item 29. Principal Underwriters.

Not applicable.

Item 30. Location of Accounts and Records.

Registrant's Declaration of Trust, By-laws, and Minutes of
Trustees' and Shareholders' Meetings, and contracts and like
documents are in the physical possession of Mutual Funds Service
Co., or R. Meeder & Associates, Inc., at 6000 Memorial Drive,
Dublin, Ohio 43017. Certain custodial records are in the custody
of Star Bank, N.A., the Trust's custodian, at 425 Walnut Street,
Cincinnati, Ohio 45202. All other records are kept in the custody
of R. Meeder & Associates, Inc. and Mutual Funds Service Co., 6000
Memorial Drive, Dublin, OH 43017.

Item 31. Management Services.

None

<PAGE> 71

Item 32. Undertakings.

(a) Not applicable.

(b) Not applicable.

(c) If the information called for by Item 5A of this Registration
Statement is contained in the latest annual report to
shareholders, Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.

(d) The Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of one
or more directors, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, and will
assist communications among shareholders as set forth within
Section 16(c) of the 1940 Act.

<PAGE> 72

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this Amendment to
its Registration Statement meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dublin, and the State of Ohio on the 23rd day of
December, 1996.

THE FLEX-FUNDS

BY: /s/ Donald F. Meeder
----------------------------
Donald F. Meeder, Secretary/Treasurer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

Date Signed December 23, 1996 /s/ Donald F. Meeder

------------------------------
Donald F. Meeder, Secretary/Treasurer

As Attorney-in-Fact pursuant to
Special Powers of Attorney,
copies of which are enclosed herewith
as Exhibits, for Roger D. Blackwell, Richard A. Farr,
John M. Emery, Robert Meeder, Jr., and Robert Meeder, Sr.,
Trustees of The Flex-funds

Date Signed December 23, 1996 /s/ Donald F. Meeder

---------------------------------
Donald F. Meeder, Attorney-in-Fact

<PAGE> 73

SIGNATURES

Growth Stock Portfolio (the "Portfolio") has duly caused this
Post-Effective Amendment to the Registration on Form N-1A of The Flex-funds
(File No. 2-85378) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 23rd day of
December, 1996.

GROWTH STOCK PORTFOLIO

By: /s/ Donald F. Meeder
____________________________
Donald F. Meeder

This Post-Effective Amendment to the Registration Statement on Form N-1A of
The Flex-funds (File No. 2-85378) has been signed below by the following persons
in the capacities with respect to the Portfolio indicated on December 23, 1996.

Signature Title
--------- -----

<TABLE>

<S> <C>
Robert S. Meeder, Sr.* President and Trustee
____________________________
Robert S. Meeder, Sr.

Milton S. Bartholomew* Trustee
____________________________
Milton S. Bartholomew

Russel G. Means* Trustee
____________________________
Russel G. Means

/s/ Donald F. Meeder
____________________________ Secretary/Treasurer, Principal Financial
Donald F. Meeder Officer and Principal Accounting Officer

Walter L. Ogle* Trustee
____________________________
Walter L. Ogle

Philip A. Voelker* Vice President and Trustee
____________________________
Philip A. Voelker

*By: /s/ Donald F. Meeder
_______________________
</TABLE>

Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney

<PAGE> 1
[ARTICLE] 6
[CIK] 0000702435
[NAME] FLEX-FUNDS
[SERIES]
[NUMBER] 2
[NAME] HIGHLANDER FUND
[MULTIPLIER] 1
[CURRENCY] U.S. DOLLARS
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 24,536,851
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 119,903
[ASSETS-OTHER] 15,821
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 24,672,575
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 41,700
[TOTAL-LIABILITIES] 41,700
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 24,522,471
[SHARES-COMMON-STOCK] 1,605,493
[SHARES-COMMON-PRIOR] 1,695,728
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 108,404
[NET-ASSETS] 24,630,875
[DIVIDEND-INCOME] 127,829
[INTEREST-INCOME] 1,070,416
[OTHER-INCOME] 0
[EXPENSES-NET] 391,180
[NET-INVESTMENT-INCOME] 807,065
[REALIZED-GAINS-CURRENT] 4,316,008
[APPREC-INCREASE-CURRENT] 111,505
[NET-CHANGE-FROM-OPS] 5,234,578
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 807,065
[DISTRIBUTIONS-OF-GAINS] 659,136
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 120,106
[NUMBER-OF-SHARES-REDEEMED] 306,553
[SHARES-REINVESTED] 96,212
[NET-CHANGE-IN-ASSETS] (90,235)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 391,180
[AVERAGE-NET-ASSETS] 23,861,445
[PER-SHARE-NAV-BEGIN] 13.08
[PER-SHARE-NII] 0.50
[PER-SHARE-GAIN-APPREC] 2.68
[PER-SHARE-DIVIDEND] 0.50
[PER-SHARE-DISTRIBUTIONS] 0.42
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.34
[EXPENSE-RATIO] 1.64
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>