SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
| | Preliminary proxy statement
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE FLEX-FUNDS
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box): N/A
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THE FLEX-FUNDS
THE HIGHLANDER FUND
THE MUIRFIELD FUND
THE TOTAL RETURN UTILITIES FUND
THE U.S. GOVERNMENT BOND FUND
THE MONEY MARKET FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held April 18, 1997
A Special Meeting of Shareholders of the captioned Funds (each a "Fund" and
collectively the "Funds"), each a series of The Flex-funds (the "Trust"), will
be held on April 18, 1997 at the offices of the Trust, 6000 Memorial Drive,
Dublin, Ohio 43017, at 9:00 A.M. for the purpose of considering and acting on
the following proposals by the Board of Trustees of the Trust (the "Fund
Trustees"):
FOR SHAREHOLDERS OF ALL FUNDS:
(1) To elect Fund Trustees.
(2) To ratify the selection of KPMG Peat Marwick, LLP ("Peat Marwick") as
the independent certified public accountants of the Trust.
FOR SHAREHOLDERS OF EACH FUND:
(3) With respect to each Fund's corresponding open-end management
investment company (each a "Portfolio") having substantially the same
investment objective, policies and restrictions as such Fund, to authorize the
Trust to vote at a meeting of holders of interests in such Portfolio to (A)
elect Trustees of the Portfolio and (B) ratify the selection of Peat Marwick
as the independent certified public accountants of the Portfolio.
FOR SHAREHOLDERS OF THE MONEY MARKET FUND:
(4) To eliminate an investment restriction of this Fund and its
corresponding Portfolio to permit them to invest in other money market funds.
FOR SHAREHOLDERS OF THE TOTAL RETURN UTILITIES FUND:
(5) With respect to this Fund's corresponding Utilities Stock Portfolio, to
authorize the Trust to vote at a meeting of holders of interests in such
Portfolio to approve amending the Investment Subadvisory Agreement to adopt a
new compensation schedule for the Portfolio's Subadviser.
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The transfer books will not be closed, but only those shareholders of
record at the close of business on February 21, 1997 will be entitled to vote
at the meeting.
Shareholders are cordially invited to attend the meeting in person. If you
plan to attend, please so indicate on the enclosed proxy card(s) and return
same promptly in the enclosed envelope. Whether you will be able to attend or
not, PLEASE VOTE, SIGN AND DATE THE PROXY CARD(S) AND RETURN SAME PROMPTLY IN
THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Board of Trustees
Robert S. Meeder, Sr., President
Dublin, Ohio
March 5, 1997
PLEASE RETURN PROXY CARD(S) IMMEDIATELY
TO PREVENT ADDITIONAL SOLICITATION EXPENSE
<PAGE>
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is being furnished in connection with the solicitation
of proxies by and on behalf of the Board of Trustees (the "Fund Trustees") of
The Flex-funds (the "Trust") to be used at a Special Meeting (the "Meeting")
of the shareholders of the five series funds of the Trust (each a "Fund" and
collectively the "Funds"). The Meeting will be held at the offices of the
Trust, 6000 Memorial Drive, Dublin, Ohio 43017 on April 18, 1997 at 9:00 A.M.
for the purpose set forth in the accompanying notice of meeting and relating,
among other things, to meetings of holders of interests in the five
corresponding Portfolios (each a "Portfolio" and collectively the
"Portfolios") of the Funds. If the enclosed form of proxy is executed and
returned, it may nevertheless be revoked prior to its exercise by a signed
writing delivered at the Meeting or filed with the Secretary of the Trust at
the foregoing address, which is also the mailing address of the Trust, each
Fund and each Portfolio. Solicitation of proxies is being made by the mailing
of these proxy materials on or about March 5, 1997 to shareholders of record
at the close of business on February 21, 1997 (the "Record Date"). On the
Record Date, the numbers of shares of beneficial interest of each Fund
outstanding and entitled to vote at the Meeting were: Highlander
Fund--1,537,677; Muirfield Fund--21,329,916; Total Return Utilities
Fund--344,694; U.S. Government Bond Fund--862,499; and Money Market
Fund--125,410,345. On the Record Date, all Trustees and officers of the Trust,
as a group, owned less than 1% of the outstanding shares of the Trust.
Shareholders of record at the close of business on the Record Date will be
entitled to one vote for each share held. If an accompanying proxy is executed
and returned in time for the Meeting, the shares covered thereby will be voted
in accordance with the proxy.
This is a joint proxy statement and is being used to reduce the
preparation, printing, handling and postage expenses that would result from
the use of a separate proxy statement for each Fund and, since many
shareholders own shares of more than one Fund, to avoid burdening shareholders
with multiple proxy statements. Proposals 1 and 2 described below relate to
all of the Funds and shareholders of all Funds will vote together on these
proposals. Proposal 3 relates to each of the Funds. Shareholders of each Fund
will vote separately on Proposal 3, and the Trust will cast its votes at the
upcoming meeting of each Portfolio with respect to the subject matter of
Proposal 3 in proportion to the votes for each Portfolio's corresponding Fund.
Proposal 4 will be voted on only by shareholders of the Money Market Fund and
Proposal 5 will be voted on only by shareholders of the Total Return Utilities
Fund. Separate proxy cards are enclosed for each Fund in which a shareholder
is a record owner of shares.
COMMON BOARD OF TRUSTEES
Proposals 1 and 3(A) would, if approved, implement the unanimous
recommendation of the Fund Trustees and the Trustees of each Portfolio (the
"Portfolio Boards" or the "Portfolio Trustees") that the Trust and the
Portfolios share the same persons as Trustees. When the Trust was organized,
there was a single board of trustees. In mid-1991, following the approval of
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the shareholders of the Trust, the Trust converted to a master/feeder
structure in which, rather than directly investing each Fund's assets, such
assets were invested in one of the Portfolios with the objective of realizing
certain economies of scale, based on the premise that certain of the expenses
of managing an investment portfolio are relatively fixed and that a larger
investment portfolio may therefore achieve a lower ratio of operating expenses
to net assets, as well as other potential benefits. No such economies of scale
or other benefits were anticipated following the conversion unless other
investors (i.e., "feeder" funds) joined a Fund and invested in the same
Portfolio. Since 1991, three of the five Portfolios have attracted additional
feeder funds and a fourth is in the process of accepting one. The Boards of
the Trust and the Portfolios believe that the conversion to the master/feeder
structure is producing the anticipated economies and other benefits, at least
for those Funds whose Portfolios have more than one feeder fund.
When the conversion to a master/feeder structure was decided upon, the
structure was relatively new and untested. Because of certain unsettled legal
and/or regulatory issues, the Trust was advised that it would be prudent to
have at least a majority of the persons serving on the Board of a Portfolio be
different from a majority of the persons who served on the Trust Board. This
was done. Accordingly, the Trust presently has a board of five Trustees, only
one of whom also serves as a Portfolio Trustee. Each Portfolio also has a
board of five Trustees and the same five individuals serve on all five
Portfolio boards. Thus a total of ten persons comprise all the Trustees of the
Trust and the Portfolios.
To date all of the additional feeder funds of the Portfolios are series of
Flex-Partners, a Massachusetts business trust similar to the Trust. The Trust
and Flex-Partners share four common Trustees and two additional persons who
are not Trustees of the Trust or the Portfolios serve as Flex-Partners
trustees. Thus a total of eleven persons comprise all the Trustees of the
Trust and the Portfolios and the trustees of Flex-Partners. In effect, the
Trust, Flex-Partners and the Portfolios are a single mutual fund complex
organized in a master/feeder structure (the "Complex") for mutual advantage.
Because of the commonality of interests of the entities in the Complex,
meetings of each entity's board of trustees are held at the same time and
place as the meetings of the other entities' boards of trustees. The minutes
of these meetings are also combined documents so that only one set of minutes
serves for all entities.
As the Trustees have become more familiar with the master/feeder structure
and as the structure itself has become not only more accepted by the mutual
fund industry and those governmental entities responsible for its regulation,
but also more popular in terms of the number of mutual fund complexes choosing
to adopt the structure, the number of unsettled issues referred to above has
substantially diminished to the point that there is general acceptance of the
structure. In addition, many of the fund complexes adopting the structure are
doing so with common boards of trustees or directors at the master fund and
the feeder fund levels. Accordingly, the Trustees of the Complex believe
unanimously that each trust in the Complex should have the same persons
serving as trustees (the "Common Board"). The shareholders of the funds
comprising the Flex-Partners trust are also being asked to approve the Common
Board proposal. The details are more fully described below in Proposals 1 and
3(A).
<PAGE>
PROPOSAL 1: ELECTION OF FUND TRUSTEES
Proxies returned to the Trust will, unless authority to vote for the
election of one or more nominees is specifically withheld, be used to vote FOR
the election of the eleven nominees indicated below as Fund Trustees. Each
Fund Trustee so elected will hold office for a term of unlimited duration
until his successor is elected and qualified, as provided in the Trust's
Declaration of Trust. Please note that Messrs. Meeder, Sr., Emery, Farr,
Blackwell and Meeder, Jr., currently serve as Fund Trustees and that all
nominees have consented to serve if elected at the Meeting. Pursuant to the
Trust's Declaration of Trust, the Fund Trustees have the power to establish
and alter the number and the terms of office of Fund Trustees (subject to
certain removal procedures, including shareholder vote), to appoint successor
Fund Trustees and to fill vacancies, including vacancies existing by reason of
an increase in the number of Fund Trustees, provided that always at least a
requisite majority of Fund Trustees has been elected by the shareholders.
Generally, there will not be meetings of shareholders for the purpose of
electing Fund Trustees.
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<TABLE>
<CAPTION>
The following table sets forth certain information about the Fund Trustee nominees:
NAME AGE TRUSTEE SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
<S> <C> <C> <C>
Robert S. Meeder, Sr.* 67 1982 Chairman of R. Meeder & Associates (an investment
advisory firm whose clients include the Portfolios);
President of the Trust; President and a Trustee of the
Portfolios and Flex-Partners
Milton S. Bartholomew 67 ** Retired; formerly a practicing attorney in Columbus,
Ohio; member of each Portfolio's Audit Committee
Roger D. Blackwell 56 1994 Professor of Marketing and Consumer Behavior, The
Ohio State University; President of Blackwell
Associates, Inc., a strategic consulting firm; Flex-
Partners Trustee
John M. Emery 76 1982 Retired, formerly Vice President & Treasurer of
Columbus & Southern Ohio Electric Co.; Flex-Partners
Trustee; member of the Audit Committees of the Trust
and Flex-Partners
Richard A. Farr 78 1982 President of R&R Supply Co. and Farrair Concepts,
Inc., two companies involved in engineering,
consulting and sales of heating and air conditioning
equipment; Flex-Partners Trustee
William L. Gurner* 50 ** President, Sector Capital Management, an investment
adviser (since January 1995); Manager of Trust
Investments, Federal Express Corporation (1987-1994);
Flex-Partners Trustee
Russel G. Means 70 ** Chairman of Employee Benefit Management
Corporation, consultants and administrators of self-
funded health and retirement plans; Portfolio Trustee
Robert S. Meeder, Jr.* 35 1991 President of R. Meeder & Associates; Vice President of
Flex-Partners and each Portfolio
Lowell G. Miller* 48 ** President, Miller/Howard Investments, Inc., an
investment adviser whose clients include the Utilities
Stock Portfolio and the Growth Stock Portfolio; Flex-
Partners Trustee; and Vice President of the Flex-Partners
Walter L. Ogle 59 ** Executive Vice President of AON Consulting, an
employee benefits consulting group; Portfolio Trustee
Philip A. Voelker* 42 ** Senior Vice President of R. Meeder & Associates;
Portfolio Trustee; Vice President of the Trust, Flex-
Partners and each Portfolio
<FN>
*Interested person
**Not currently a Trustee of the Trust
</FN>
</TABLE>
<PAGE>
Mr. Emery comprises the Audit Committee of each of the Trust and
Flex-Partners. Mr. Bartholomew comprises the Audit committee of each
Portfolio. Each Audit Committee, among other things, (1) serves as the
liaison between its trust's management and the trust's independent public
accountants as their duties relate to assuring the integrity of each
trust's financial reporting and the safeguarding of its assets; (2) seeks
to assure the independence of the auditors, the integrity of management
and the adequacy of financial disclosure to investors; and (3) reviews the
scope of the audit, the financial results of the trust for the year and the
auditors' evaluation of the overall adequacy of internal controls, thereby
assisting the Trustees in fulfilling their fiduciary responsibilities as
to accounting policies and reporting practices. Messrs. Emery and
Bartholomew each receive $500 for each Audit Committee meeting attended
regardless of the number of Audit Committees on which they serve. Two Audit
Committee meetings were held in the last fiscal year. Messrs. Emery and
Bartholomew attended each meeting.
Each Trustee who is not an "interested person" is paid a meeting fee of
$250 per meeting for each of the five Portfolios. In addition each such
Trustee earns an annual fee, payable quarterly, based on the average net
assets in each Portfolio according to the following schedule: Money Market
Portfolio, 0.0005% of the amount of average net assets between $500 million
and $1 billion; 0.00025% of the amount of average net assets exceeding $1
billion. For the other four Portfolios, each Trustee is paid a fee of 0.00375%
of the amount of each Portfolio's average net assets exceeding $15 million.
During the year ended December 31, 1996, the Trustees of the Trust and the
Portfolios held four regular and two special meetings with each Trustee
attended at least 75% of the aggregate of the number of meetings of the
respective Board of Trustees and any committee on which he served, except for
Mr. Blackwell, who was unable to attend one regular and two special meetings.
BOARD RECOMMENDATION AND REQUIRED VOTE.
THE FUND TRUSTEES RECOMMEND THAT THE SHAREHOLDERS OF THE TRUST VOTE TO
ELECT EACH NOMINEE AS A FUND TRUSTEE. The Fund Trustee nominees receiving the
affirmative vote of a majority of the shares cast for the election of Fund
Trustees at the meeting will be elected, provided a quorum is present. Shares
of all Funds vote together as a single class for the Fund Trustees.
PROPOSAL 2: RATIFICATION OF AUDITORS
A majority of the Fund Trustees who are not "interested persons" of the
Trust, as defined in the Investment Company Act of 1940 (the "1940 Act"), have
selected KPMG Peat Marwick, LLP ("Peat Marwick"), Two Nationwide Plaza,
Columbus, Ohio 43215, as independent certified public accountants to sign or
certify any financial statements which may be filed by the Trust with the
Securities and Exchange Commission in respect of all or any part of the
Trust's current fiscal year, such employment being expressly conditioned upon
the right of the Trust, by vote of a majority of the outstanding "voting
securities" of the Trust at any meeting called for the purpose, to terminate
such employment forthwith without any penalty. Such selection will be
submitted for ratification or rejection by the shareholders of the Trust at
<PAGE>
the Meeting. Peat Marwick currently serves as the independent certified public
accountants of the Trust, as well as of Flex-Partners and each Portfolio. No
member of Peat Marwick has any direct or material indirect interest in the
Trust, Flex-Partners or any Portfolio.
The Trust's independent certified public accountants provide customary
professional services in connection with the audit function for a management
investment company such as the Trust and its Funds, and their fees for such
services include fees for work leading to the expression of opinions on the
financial statements included in annual reports to the shareholders of the
Trust, opinions on the financial statements and other data included in the
Trust's annual report to the Securities and Exchange Commission, opinions on
financial statements included in amendments to the Trust's registration
statement, and preparation of the Trust's federal and state income tax
returns.
Representatives of Peat Marwick are not expected to be present at the
Meeting but will have been given the opportunity to make a statement if they
so desire and will be available should any matter arise requiring their
presence. If the Trust receives a written request from any shareholder at
least five days prior to the Meeting stating that the shareholder will be
present in person at the Meeting and desires to ask questions of the
accountants, the trust will arrange to have a representative of Peat Marwick
present at the Meeting who will respond to appropriate questions and have an
opportunity to make a statement.
Proxies not limited to the contrary will be voted in favor of ratifying the
selection of Peat Marwick as the independent certified public accountants for
the Trust.
BOARD RECOMMENDATION AND REQUIRED VOTE
THE FUND TRUSTEES RECOMMEND THAT THE SHAREHOLDERS OF THE TRUST VOTE TO
RATIFY THE SELECTION OF PEAT MARWICK AS THE INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS OF THE TRUST AT THE MEETING. Such ratification requires the
affirmative vote of a majority of the cast with respect to Proposal 2 at the
meeting, provided a quorum is present. Shares of all Funds vote together as a
single class for Proposal 2.
PROPOSAL 3: AUTHORIZATION TO VOTE AT MEETING OF PORTFOLIO INVESTORS
Shareholders of the Trust are being asked to vote on certain matters with
respect to the Portfolios because each Portfolio will call a meeting of its
investors (including a corresponding Fund) to vote on such matters. These
Portfolio meetings are planned to take place as promptly as practicable after
the holding of the Meeting to which this proxy statement relates and a similar
meeting of Flex-Partners shareholders. Specifically, each Portfolio will ask
its investors to vote to (A) elect Trustees of the Portfolio and (B) ratify
the selection of Peat Marwick as the independent certified public accountants
of the Portfolio.
<PAGE>
PROPOSAL 3(A): AUTHORIZATION TO ELECT PORTFOLIO TRUSTEES
Proxies returned to the Trust will, unless authority to vote for the
election of one or more nominees is specifically withheld, be used for the
purpose of authorizing the Trust to vote FOR the election as Portfolio
Trustees of the same eleven persons who are nominees for election as Fund
Trustees and who are listed and identified under Proposal 1 above. Each
Portfolio Trustee so elected will continue to hold office for a term of
unlimited duration until his successor is elected and qualified, as provided
in each Portfolio's Declaration of Trust. Please note that Messrs. Meeder,
Sr., Bartholomew, Means, Ogle and Voelker currently serve as Portfolio
Trustees and that all nominees have consented to serve if elected. Pursuant to
each Portfolio's Declaration of Trust, the Portfolio Trustees have the power
to establish and alter the number and the terms of office of Portfolio
Trustees (subject to certain removal procedures, including shareholder vote),
to appoint successor Portfolio Trustees and to fill vacancies, including
vacancies existing by reason of an increase in the number of Portfolio
Trustees, provided that always at least a requisite majority of Portfolio
Trustees has been elected by the investors in each Portfolio. Generally, there
will not be meetings of investors for the purpose of electing Portfolio
Trustees.
See Proposal 1 above for a discussion of the Audit Committee of each
Portfolio and the compensation received by Portfolio Trustees.
BOARD RECOMMENDATION AND REQUIRED VOTE
THE FUND TRUSTEES RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND VOTE TO
AUTHORIZE THE TRUST TO ELECT EACH NOMINEE AS A PORTFOLIO TRUSTEE AT EACH
MEETING OF THE INVESTORS IN SUCH PORTFOLIO. The nominees for a Portfolio Board
receiving the affirmative vote of a majority of the beneficial interests cast
for the election of the Portfolio's Trustees will be elected, provided a
quorum is present. The Trust, on behalf of the Funds, will cast its votes at a
meeting of the holders of the beneficial interests in each Fund's
corresponding Portfolio on Proposal 3(A) in the same proportions as the votes
cast by each Fund's shareholders.
PROPOSAL 3(B): RATIFICATION OF AUDITORS
A majority of the Portfolio Trustees who are not "interested persons" of
any Portfolio, as defined in the 1940 Act, have selected Peat Marwick as
independent certified public accountants for each Portfolio. See Proposal 2
above for a discussion and description of the services provided by such
auditors, the purpose of submitting such selection to investors in the
Portfolio for their ratification, the independence of the auditors and related
matters.
Proxies not limited to the contrary will be voted in favor of authorizing
the Trust to ratify the selection of Peat Marwick as the independent certified
public accountants for each Portfolio.
<PAGE>
BOARD RECOMMENDATION AND REQUIRED VOTE
THE FUND TRUSTEES RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND VOTE TO
AUTHORIZE THE TRUST TO RATIFY THE SELECTION OF PEAT MARWICK AS THE INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS OF EACH PORTFOLIO AT ITS MEETING OF INVESTORS IN
SUCH PORTFOLIO. With respect to each Portfolio, such ratification requires the
affirmative vote of a majority of the beneficial interests of the Portfolio
cast with respect to Proposal 3(B) at the Portfolio's meeting, provided a
quorum is present. The Trust, on behalf of the Funds, will cast its votes at a
meeting of the holders of the beneficial interests in each Fund's
corresponding Portfolio on Proposal 3(B) in the same proportions as the votes
cast by each Fund's shareholders.
PROPOSAL 4: TO PERMIT THE MONEY MARKET FUND AND MONEY MARKET PORTFOLIO TO
INVEST IN OTHER MONEY MARKET FUNDS
The Boards of Trustees of the Trust and the Money Market Portfolio propose
the elimination of a fundamental investment policy (the "Policy") that
prohibits the Trust's Money Market Fund ("MMF") and its corresponding
Portfolio, the Money Market Portfolio ("MMP") from purchasing "the securities
of another investment company except where such purchase is part of a plan of
merger or consolidation" (and except for the permitted investment by the MMF
in the MMP).
Section 12 of the 1940 Act generally prohibits an investment company such
as MMF or MMP from (i) owning more than 3% of the total outstanding voting
stock of any other investment company, (ii) investing more than 5% of its
total assets in the securities of any one other investment company, and (iii)
investing more than 10% of its total assets (in the aggregate) in the
securities of other investment companies. Elimination of the Policy would make
the investment restrictions applicable to MMF and MMP co-extensive with the
provisions of the 1940 Act.
Rule 2a-7 under the 1940 Act prohibits investment companies from holding
themselves out as money market funds unless they meet, among other things,
specific portfolio composition requirements, including the types of securities
they may purchase, their quality, their liquidity and their diversification.
Together, Section 12 of and Rule 2a-7 under the 1940 Act limit MMF and MMP to
investment in money market instruments meeting the requirements of Rule 2a-7
and prohibit their purchase of shares of non-money market funds.
The reasons for the proposed change are: Management's objectives for MMF
and MMP include earning the highest possible yield consistent with the
quality, liquidity and diversification requirements applicable to money market
funds as referred to above. Management believes that it would be in the best
interests of shareholders to permit assets at times to be invested in other
money market funds. The nature of a money market fund is such that a certain
portion of its assets must be maintained in very liquid form, typically
through entering into overnight repurchase agreements. At times, higher yields
may be available through the purchase of shares of other money market funds,
but this is currently prohibited by the investment policy proposed for
elimination. In addition, there are also times, e.g., during rapidly rising
<PAGE>
interest rate environments, when management wishes to maintain a relatively
short average maturity structure for the investment portfolio of MMP. The
ability to invest in other money market funds would permit MMP to receive
higher yields (from money market funds with longer average maturity
structures) while retaining the daily liquidity necessary to obtain new higher
rates that may become available in individual money market securities.
BOARD RECOMMENDATION AND REQUIRED VOTE
THE FUND TRUSTEES AND THE PORTFOLIO TRUSTEES RECOMMEND APPROVAL OF THE
PROPOSED ELIMINATION OF THE POLICY. Such approval requires the affirmative
vote of a "majority of the outstanding voting securities" of each of MMF and
MMP, which term as used in this proxy statement means the vote of the lesser
of (a) more than 50% of the outstanding voting securities of each fund, or (b)
67% of the voting securities of a fund present at the meeting if the holders
of more than 50% of the outstanding voting securities are present or
represented by proxy at the meeting.
PROPOSAL 5: TO APPROVE A NEW COMPENSATION SCHEDULE FOR THE SUBADVISER TO THE
UTILITIES STOCK PORTFOLIO
The Total Return Utilities Fund ("TRUF") and its corresponding Portfolio,
the Utilities Stock Portfolio ("USP") were organized in 1994 with R. Meeder &
Associates, Inc. (the "Adviser") serving as investment adviser and
Miller/Howard Investments, Inc. (the "Subadviser") serving as subadviser to
USP. The Subadviser serves pursuant to an Investment Subadvisory Agreement
dated August 4, 1994 (the "Subadvisory Agreement") under which the Adviser,
not USP, pays the Subadviser a fee in an amount equal to 90% of the investment
advisory fees received by the Adviser under its investment advisory contract
with USP, provided that if a shareholder purchasing shares in the Fund was
solicited by the Adviser, the Subadviser's compensation is in an amount equal
to 60% of the investment advisory fees received by the Adviser with respect to
such shareholder. The Adviser is responsible for all investment advisory and
related services in accordance with its investment advisory contract with USP
and for supervising the Subadviser's performance of subadvisory services. The
Subadvisory Agreement provides that the Subadviser will furnish investment
advisory services in connection with the management of USP. In connection
therewith, the Subadviser is obligated to keep certain books and records of
USP.
The Subadvisory Agreement also 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 USP, except a loss resulting from misfeasance, bad faith,
gross negligence or reckless disregard of duty. The Subadvisory Agreement
provides that it will terminate automatically if assigned, and that it may be
terminated by the Adviser without penalty to the Fund or USP by the Adviser,
the Trustees of USP or by the vote of a majority of the outstanding voting
securities of USP upon not less than 30 days' written notice. The Subadvisory
Agreement will continue in effect for a period of more than two years from its
date of execution only so long as such continuance is specifically approved at
least annually in conformity with the 1940 Act.
<PAGE>
The Trustees of USP, with the consent of the Fund Trustees, have approved a
proposal by the Adviser and the Subadviser that the subadvisory fee
arrangement be modified to consist of a more conventional fee schedule based
on the assets of USP rather than the fee paid by USP to the Adviser.
Accordingly, the Trustees recommend that Article III, Compensation, of the
Subadvisory Agreement dated August 4, 1994 (the "Subadvisory Agreement")
between the Adviser and the Subadviser be amended in its entirety to read as
follows:
For the services to be rendered by the Subadviser hereunder, the
Adviser shall pay to the Subadviser a fee, based on the value of the
average daily net assets of the Portfolio determined in accordance
with the Portfolio's Declaration of Trust, payable in monthly
installments, and computed as follows:
AVERAGE DAILY NET ASSET FEE
First $10 million 0.00%
Next $50 million 0.40%
Next $40 million 0.30%
Over $100 million 0.25%
It is important to note that the proposed change would have NO EFFECT on
the investment advisory fee paid to the Adviser by USP (and indirectly by
TRUF). The advisory fee paid by USP to the Adviser will remain unchanged. Only
the portion of such fee passed along by the Adviser to the Subadviser would
change as described above. During the fiscal year ended December 31, 1996, USP
paid the Adviser an advisory fee of $65,190, of which $51,518 was allocated by
the Adviser to the Subadviser. All of such fees paid to the Adviser and such
amount allocated to the Subadviser were used to reimburse Fund operating
expenses of USP's feeder funds, TRUF and the Flex-Partners BTB Fund. Had the
proposed fee schedule been in effect during such period, the fee to the
Adviser would have been the same and the fee to the Subadviser would have been
zero. The Subadvisory Agreement was approved by the initial investors in USP
on March 1, 1995. The revised fee schedule is the only change proposed to be
made to the Subadvisory Agreement.
The Subadviser 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 December 31, 1996, the Subadviser held
discretionary investment authority over approximately $183 million of assets.
Lowell G. Miller and Helen Hamada who are, respectively, the Subadviser's
President, Secretary and a director and its Treasurer and a director, each own
more than 10% of the outstanding voting securities of the Subadviser. Mr.
Miller controls the Subadviser through his stock ownership. Miller/Howard is
also the sub-subadviser to a portion of the assets of the Growth Stock
Portfolio, another member of the Complex. Mr. Miller is the portfolio manager
primarily responsible for the day-to-day management of such assets and the
assets of USP. Mr. Miller has been associated with the Subadviser since 1984.
He is also a trustee and vice president of Flex-Partners and a nominee to
serve as a Fund Trustee and a Portfolio Trustee. The Subadviser's principal
executive offices are located at 141 Upper Byrdcliffe Road, Post Office Box
549, Woodstock, New York 12498.
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BOARD RECOMMENDATION AND REQUIRED VOTE
THE FUND TRUSTEES AND THE PORTFOLIO TRUSTEES RECOMMEND APPROVAL OF THE
PROPOSED COMPENSATION SCHEDULE FOR THE SUBADVISER TO THE UTILITIES STOCK
PORTFOLIO. Such approval requires the affirmative vote of a "majority of the
outstanding voting securities" as defined in the 1940 Act and described in
Proposal 4 of this proxy statement.
ADDITIONAL INFORMATION
PRINCIPAL UNDERWRITER
The Funds have no principal underwriter. As no-load funds they offer their
shares directly to the public without any sales charge.
BENEFICIAL OWNERS
At the close of business on the Record Date, no person, to the knowledge of
management, owned beneficially more than 5% of the outstanding shares of a
Fund except as follows:IBEW Local 683 Pension Plan, 23 W. Second Street,
Columbus, OH, owned 2,283,386 shares (10.7%) and 76,619 shares (8.9%),
respectively, of the Muirfield Fund and the U.S. Government Bond Fund. Roofers
Local 86 Pension Fund, 77 West Elmwood Drive, Centerville, OH; Plumbers &Pipe
Fitters Local 168 Retirement Fund, P.O. Box 7177, Dublin, OH and Plumbers and
Steamfitters Local 565 Pension Plan, P.O. Box 1683, Charleston, WV, owned
56,101 shares (6.5%), 180,203 shares (20.9%) and 146,147 shares (16.9%),
respectively, of the U.S. Government Bond Fund. Frieda K. Stewart, P.O. Box
7177, Dublin, OH; Key Trust Co., P.O. Box 94871, Cleveland, OH and Martin
Obsatz Money Purchase Plan, 2195 Olasco Turnpike, Woodstock, NY,owned 17,570
shares (5.0%), 32,000 shares (9.3%) and 22,246 shares (6.5%), respectively, of
the Total Return Utilities Fund.
OTHER MATTERS
Neither the Trust nor any Fund holds annual shareholder meetings.
Shareholders of the Trust wishing to submit proposals for consideration in a
proxy statement for the next shareholders' meeting should send their written
proposals to the Trust at Post Office Box 7177, 6000 Memorial Drive, Dublin,
Ohio 43017, c/o Donald F. Meeder, Secretary/Treasurer.
The Trust's Annual Report has previously been delivered to shareholders. A
shareholder may obtain a copy of the Trust's most recent annual and
semi-annual reports upon written or oral request, without charge, by
contacting the Trust at the address shown in the preceding paragraph, or by
calling 800-325-3539.
<PAGE>
The expense of the preparation, printing and mailing of the enclosed proxy
card(s), the notice of meeting and this proxy statement will be borne by the
Trust.
To obtain the necessary representation at the Meeting, supplementary
solicitations may be made by mail, telephone, or interview by officers or
employees of the Trust, the Adviser or the Trust's transfer agent, the cost of
which, it is anticipated, would be nominal. No business other than the matters
described above is expected to come before the Meeting, but should any matter
requiring a vote of shareholders arise, including any question as to an
adjournment or postponement of the Meeting, the persons named on the enclosed
proxy card(s) will vote thereon according to their best judgment in the
interests of the Trust and its Funds. In determining whether to adjourn the
Meeting, the following factors may be considered: the nature of the proposals
which are the subject of the Meeting, the percentage of votes actually cast,
the percentage of actual negative votes, the nature of any further
solicitation and the information to be provided to shareholders with respect
to the reasons for such solicitation.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD(S) AND RETURN SAME IN THE ENCLOSED
ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES
IT IS IMPORTANT THAT PROXIES BE RETURNED
Dated: March 5, 1997
