FLEX FUNDS, 497, 1997-05-02

FLEX FUNDS
497, 1997-05-02

Previous: NORFOLK SOUTHERN CORP, S-3/A, 1997-05-02

Next: FLEX FUNDS, 497, 1997-05-02

Rule 497(c) & (g)
File Nos. 2-85378
811-3462

PROSPECTUS April 30, 1997

THE FLEX-FUNDS
THE HIGHLANDS GROWTH FUND
6000 Memorial Drive
Dublin, OH 43017
614-760-2159

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 Highlands Growth 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" and
"Other Information -- Shares of Beneficial Interest and Investment Structure"
elsewhere in this prospectus.

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.

ADDITIONAL INFORMATION

This Prospectus sets forth basic information about the Trust and The
Highlands Growth Fund that a prospective investor should know before investing
and it should be retained for future reference. A STATEMENT OF ADDITIONAL
INFORMATION, dated April 30, 1997, 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) 760-2159.

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 OF CONTENTS

Highlights 2 Performance Information and Reports 21
Synopsis of Financial Information 3 Other Information 22
Financial Highlights 4 SHAREHOLDER MANUAL
Performance Comparison 5 How to Buy Shares 24
Performance of Mr. Gurner and How to Make Withdrawals (Redemptions) 25
Subadviser 6 Exchange Privilege 27
Investment Objectives and Policies 7 Flex-funds Retirement Plans 28
Additional Investment Policies 9 Other Shareholder Services 28
The Trust and Its Management 12 Shareholder Accounts 29
Portfolio Transaction Policies 18
Distribution Plan 19
Income Dividends, Capital Gains,
Distributions and Taxes 19
How Net Asset Value is Determined 21

<PAGE>

- --------------------------------------------------------------------------------
Highlights
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The Highlands Growth Fund (formerly, 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."

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" and "How to Make Withdrawals
(Redemptions)."

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

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, Simplified Employee Pension (SEP) 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", "Other Shareholder
Services", and "Shareholder Accounts."

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 January, 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."

DISTRIBUTION PLAN: The Highlands Growth 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."

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" and "How Net Asset Value is Determined."

2
<PAGE>

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." 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."

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 HIGHLANDS GROWTH FUND

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sale Load Imposed on Purchases..... none
Maximum Deferred Sales Load................ none
Maximum Sales Load Imposed on
Reinvested Dividends.................. 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)**........................ 0.14%
Other Expenses............................. 0.51%
-----

TOTAL FUND OPERATING EXPENSES*............. 1.65%

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.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- ------- --------

The Highlands Growth Fund $17 $52 $90 $195

3
<PAGE>

*Expenses used in these illustrations are based upon expenses actually
incurred for both The Highlands Growth Fund (formerly known as "The Highlander
Fund" and prior to that "The Growth Fund") and its corresponding Portfolio, the
Growth Stock Portfolio, for the year ended December 31, 1996.

**Distribution Plan Expense: The Trust is party to agreements whereby
consultant companies or individuals (including two Trustees) 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 or expenses, as actual rates of
return and expenses may be more or less than the rate and amounts shown.

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The financial highlights for The Highlands Growth Fund (formerly known as
"The Highlander Fund" and prior to that "The Growth Fund") are listed below.
This information has been audited in conjunction with the annual audit of the
financial statements of The 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, 1996; and by other
certified public accountants for the earlier periods.

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of $15.34 $13.08 $13.45 $12.70 $12.05 $10.21 $10.33 $9.67 $11.27 $10.52
Period

Net Investment income 0.31 0.5 0.27 0.09 0.18 0.34 0.57 0.29 0.59 0.21
Net Gains or (Losses) on Securities
(both realized and unrealized) 1.07 2.68 (0.37) 0.82 0.58 1.84 (0.12) 0.69 (1.22) 0.59
Total From Investment Operations 1.38 3.18 (0.10) 0.91 0.76 2.18 0.45 0.98 (0.63) 0.80
LESS DISTRIBUTIONS

4
<PAGE>

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends (from net investment (0.31) (0.50) (0.27) (0.16) (0.11) (0.34) (0.57) (0.32) (0.78) (0.05)
income)
Distributions (from capital gains) ---- (0.42) ----- ----- ----- ----- ----- ----- (0.19) -----
Total Distributions (0.31) (0.92) (0.27) (0.16) (0.11) (0.34) (0.57) (0.32) (.097) (0.05)

NET ASSET VALUE, END OF PERIOD $16.41 $15.34 $13.08 $13.45 $12.70 $12.05 $10.21 $10.33 $9.67 $11.27

TOTAL RETURN 9.08% 24.61% (0.69%) 7.21% 6.35% 21.46% 4.31% 10.71% (5.79%) 7.61%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 24,204 24,631 22,176 26,171 25,534 32,654 24,664 29,711 4,478 12,822
Ratio of Expenses to Average Net
Assets 1.65% 1.64% 1.63% 1.51% 1.51% 1.42% 1.46% 1.55% 1.50% 1.48%
Ratio of Net Income (Loss) to
Average Net Assets 1.92% 3.38% 1.95% 0.69% 1.31% 2.98% 4.90% 2.63% 2.06% 1.79%
Portfolio Turnover Rate 82% 338% 103% 100% 39% 265% 436% 50% 313% 326%
Average Brokerage Commission
Per Share $0.0910 $0.0506 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>

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

THE HIGHLANDS GROWTH
THE HIGHLANDS GROWTH FUND, THE S&P 500 INDEX, FUND AVERAGE ANNUAL
AND THE MORNINGSTAR'S AVERAGE GROWTH MUTUAL FUND TOTAL RETURNS FOR
The Growth of $10,000 (1/1/87 to 12/31/96) THE PERIODS ENDED
DECEMBER 31, 1996
The Highlands The S&P Morningstar's Average
Growth Fund 500 Index* Growth Mutual Fund
----------- --------- ------------------ 1 YEAR
$10,000 $10,000 $10,000 ------
1987 $10,761 $10,526 $10,282 9.08%
1988 $10,138 $12,274 $11,813
1989 $11,169 $16,163 $15,064 5 YEARS
1990 $11,650 $15,659 $14,327 -------
1991 $14,151 $20,431 $19,691 9.01%
1992 $15,049 $21,988 $21,422
1993 $16,134 $24,200 $23,982 10 YEARS
1994 $16,023 $24,520 $23,565 --------
1995 $19,966 $33,722 $30,854 8.45%
1996 $21,779 $41,461 $36,793

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

* The S&P 500 Composite Stock Price 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.

5
<PAGE>

1996 IN REVIEW.

The Growth 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" and the Portfolio engaged the Subadviser and the Sector Advisers to
manage the Portfolio. On April 16, 1997, The Highlander Fund changed its name to
The Highlands Growth Fund. Consequently, the performance information shown above
reflects the performance of The Highlands Growth 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 total return of The Highlands Growth Fund was 9.08 percent during 1996.
For the same period, the return of the average Growth Fund, as reported by
Morningstar, Inc., was 19.25 percent. The S&P 500 Index provided a total return
of 22.95 percent during 1996.

Periods of volatility in the stock market during 1996 caused the Highlands
Growth Fund to adopt several fully or partially defensive positions over the
course of the year. The Fund achieved a partially defensive position, of as much
as 50 percent, on several occasions during the first half of the year, when the
investment adviser's evaluation of market conditions indicated a growing level
of risk in the stock market. The Fund's only fully defensive position of 1996
came during the third quarter, from mid-July until late August. While the
investment adviser's evaluation of the risk present in the market improved as
the year drew to a close, the Fund did not return to a fully invested position
until mid-November.

The performance comparison above includes an additional index,
Morningstar's Average Growth Mutual Fund, because it reflects the mutual fund
peer group in which the Fund is often categorized.

- --------------------------------------------------------------------------------
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 of 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 December
31, 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

6
<PAGE>

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 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 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.

- -----------------------
*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.

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.

PERFORMANCE

YEAR MR. GURNER THE SUBADVISER'S S&P 500(1)
- ---- ---------- ---------------- ----------

1991(2) 18.79% N.A. 16.66%
1992 8.26% N.A. 7.69%
1993 14.78% N.A. 10.00%
1994 0.97% N.A. 1.30%
1995 N.A. 45.79% 37.53%
1996 N.A. 26.27% 23.08%

(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.

7
<PAGE>

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------

The Highlands Growth 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 its corresponding 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 and at least 65% of the Portfolio's
total assets will be invested in growth 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.

8
<PAGE>

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 will be 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 proposed 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 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 Depositary 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.

9
<PAGE>

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 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.

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.

10
<PAGE>

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.

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.")

11
<PAGE>

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.

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

The Portfolio's portfolio turnover rate for 1996 was 82%. 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 90%. 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.

12
<PAGE>

- --------------------------------------------------------------------------------
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. Each of the Trust's
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

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 May of 1992, 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 six subsidiaries which are the Manager; Mutual Funds Service Co.,
the Trust's transfer agent; Adviser Dealer Services, Inc., a registered
broker-dealer; 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 and Chief Operating Officer; Donald F. Meeder, Vice
President and Secretary; Sherrie L. Acock, Vice President; Robert D. Baker, Vice
President, Wesley F. Hoag, Vice President and General Counsel; Steven T. McCabe,
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 and Trustee of The Flex-funds and
Senior Vice President of the Manager. Mr. Voelker has been associated with the
Manager since 1975.

13
<PAGE>

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 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 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 would be shared such that the Manager
would 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, payable monthly, of .05% of the Fund's
average net assets. These fees are reviewed annually by the respective Trustees
of the Trust and the Portfolio. For the year ended December 31, 1996, total
payments to Mutual Funds Service Co. amounted to $33,118 and $30,867 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
January, 1995. As of December 31, 1996, the Subadviser held discretionary
investment authority over approximately $96 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 January, 1995. Mr. Gurner, President, Administrator, Manager and a
Member of the Subadviser, is a Trustee of The Growth Stock Portfolio, the Trust
and The Flex-Partners, mutual funds whose corresponding portfolios are also
advised by the Manager.

14
<PAGE>

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 publicly traded domestic 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 0.25%.

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.

The Portfolio has filed 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

15
<PAGE>

Sub-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
Sub-subadvisory Agreements with Sector Advisers without such agreements being
approved by the shareholders of the Portfolio. In addition, the Portfolio's
Application includes the condition that within 90 days of the hiring of any new
Sector Advisers and executing a new Investment Sub-subadvisory Agreement, the
Subadviser will furnish shareholders with an information statement about the new
Sector Adviser and Investment Sub-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 among 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
December 31, 1996, Miller/Howard held discretionary investment authority over
approximately $183 million of assets. Lowell Miller and Helen Hamada who are,
respectively, Miller/Howard's President, Secretary and a director and its Vice
President, Treasurer and a director, each own more than 10% of the outstanding
voting securities of Miller/Howard. Mr. Miller is 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 Trustee of the Growth Stock Portfolio,
a Trustee and 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.

16
<PAGE>

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 is the
portfolio manager primarily responsible for the day-to-day management of those
assets of 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 December 31, 1996, Barrow held
discretionary investment authority over approximately $20.5 billion of assets.
Barrow is a wholly-owned subsidiary of United Asset Management. Bryant M.
Hanley, Jr., President and Chief Executive Officer, is the sole director of
Barrow. Michael C. Mewhinney is 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 December 31, 1996, The Mitchell Group held
discretionary investment authority over approximately $245 million of assets.
Rodney Mitchell, President, Chief Executive Officer, Chief Financial Officer and
sole director, owns more than 10% of the outstanding voting securities of The
Mitchell Group. Mr. Mitchell is 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, 77002.

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 December 31, 1996, Ashland managed accounts having a value of
approximately $1.45 billion. 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 owns more than 10% of the outstanding
voting securities of Ashland. Terence J. McLaughlin, Managing Director of
Ashland and Deborah C. Ohl, a Portfolio Management Associate, are 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 1984. 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>

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, Inc., 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, President of Kemper Funds Group, a unit of Zurich Kemper, Stephen B.
Timbers, President, Chief Executive Officer and Chief Investment Officer of
Zurich Kemper, and David N. Dreman, Chairman of the Board of Dreman. Jonathan
Kay is 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, NY 10017.

RCM CAPITAL MANAGEMENT, L.L.C. serves as Sector Adviser to the technology sector
of the Portfolio. RCM is a registered investment adviser that provides
investment services to institutional and individual clients and registered
investment companies, with approximately $25.6 billion of assets under
management as of December 31, 1996. RCM was established in April 1996, as the
successor to the business and 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, 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, Chief Investment Officer and Principal of RCM, Michael J. Apatoff,
President, Chief Operating Officer and Principal 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., Principal and Head of Equity
Trading of RCM. Walter C. Price and Huachen Chen, each Principals of RCM, are
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

18
<PAGE>

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 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 Highlands Growth 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) 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 Highlands Growth 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.

19
<PAGE>

Total payments made in The Highlands Growth Fund under the Distribution
Plan for the period ended December 31, 1996, as a percentage of average net
assets, amounted to 0.14%. (See "Synopsis of Financial Information.")

The Manager or the Subadviser may use it 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 Highlands Growth 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 Highlands Growth Fund expects to make such a distribution
in future years.

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.

20
<PAGE>

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. 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 eleven 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 Highlands Growth 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.

21
<PAGE>

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.

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.

22
<PAGE>

meetings of shareholders for the purpose of electing Trustees unless and until
such 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 the Trust 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 the 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 the 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 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 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) 760-2159.

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>

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 Subadviser", "Investment Sub-subadvisers" and "Trustees and
Officers" in the Statement of Additional Information.

- --------------------------------------------------------------------------------
SHAREHOLDER MANUAL
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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 Highlands Growth Fund are sold at the net asset value per share
next determined after receipt by The Highlands Growth 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 Highlands Growth 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) 760-2159. 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>

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

ATTENTION: THE FLEX-FUNDS
THE HIGHLANDS GROWTH FUND

Credit Account Number: 9304932
Account Name (your name)
Personal Account No. (your Highlands Growth 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 Highlands Growth 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--New Account Applications for The Highlands
Growth Fund when accompanied by payment, are accepted immediately and the shares
are priced at the next determined net asset value per share. Subsequent purchase
orders are handled the same way, except when purchases are made by telephone,
payment is due within three business days.

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.

25
<PAGE>

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 within three business
days. 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) 760-2159. 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
redemptions. 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.

26
<PAGE>

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.")

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 (614)
760-2159. 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>

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 Highlands Growth 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), a Simple IRA and a Simplified Employee
Pension (SEP). 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 (614) 760-2159.

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.

DIRECT DEPOSIT: Investments of $100 or more may be directly deposited into
your account. Shareholders wishing to have one or more institutions
electronically transfer funds into their account should contact the Trust for
information on this service. There is no charge associated with 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 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.

28
<PAGE>

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 its 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) 760-2159.

- --------------------------------------------------------------------------------
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>

INVESTMENT ADVISER
R. Meeder & Associates, Inc.

ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-760-2159 (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
614-760-2159 (in Central Ohio)

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

THE FLEX-FUNDS
THE HIGHLANDS GROWTH FUND
PROSPECTUS

APRIL 30, 1997

<PAGE>

Rule 497(c) & (g)
File Nos. 2-85378
811-3462

PROSPECTUS APRIL 30,1997
INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.
U.S. GOVERNMENT BOND FUND
6000 Memorial Dr. Dublin, OH 43017
800-325-FLEX 614-760-2159

The Flex-funds are a family of mutual funds organized as a business trust
(the "Trust") consisting of five separate series or portfolios, each of which
has separate investment objectives and policies. The U.S. Government Bond Fund
(the "Fund") is an open-end investment management company known as a mutual
fund. The Fund's objective is to maximize current income through investment in
securities which are issued, or guaranteed as to payment of principal and
interest, by the U.S. government or any of its agencies or instrumentalities.

The Trust seeks to achieve the investment objective of the Fund by
investing all of the investable assets of the Fund in the Bond 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" and "Other Information
- -- Shares of Beneficial Interest and Investment Structure."

The Portfolio places a high degree of importance on maintaining and
protecting portfolio values from adverse market conditions. Consequently, the
Portfolio employs flexible investment strategies.

There are no commissions, fees or charges for the purchase or redemption of
shares, although the Fund has adopted a Rule 12b-1 distribution plan to aid in
the distribution of shares. (See "Distribution Plan".)

FLEXIBLE INVESTMENT STRATEGIES

The Portfolio may be invested defensively, for temporary periods, if the
Portfolio's investment adviser deems it advisable because of adverse market
conditions.

A defensive position will be adopted in a manner which the investment
adviser considers to be most consistent with the Portfolio's objective, policies
and restrictions. Because the Fund may invest defensively, it is classified as
an asset allocation fund.

ADDITIONAL INFORMATION

This Prospectus sets forth basic information about the Trust and The U.S.
Government Bond Fund that a prospective investor should know before investing
and it should be retained for future reference. A STATEMENT OF ADDITIONAL
INFORMATION, dated April 30, 1997, 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) 760-2159.

TABLE OF CONTENTS

Highlights 2 Performance Information 15
Synopsis of Financial Information 3 How Net Asset Value is Determined 16
Financial Highlights 5 Other Information 16
Performance Comparisons 6 SHAREHOLDER MANUAL
Investment Objectives and Policies 7 How to Buy Shares 19
Additional Investment Policies 8 How to Make Withdrawals
Risk Factors 10 (Redemptions) 21
The Trust and Its Management 11 Exchange Privilege 22
Distribution Plan 13 Flex-funds Retirement Plans 23
Income Dividends, Capital Gains, Other Shareholder Services 24
Distributions and Taxes 14 Shareholder Accounts 25

<PAGE>

- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The U.S. Government Bond Fund's objective is to maximize
current income through investment in securities which are issued, or guaranteed
as to payment of principal and interest, by the U.S. government or any of its
agencies or instrumentalities.

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

DIVERSIFICATION: The Fund is diversified because 75% of the assets of the
Portfolio is restricted by the following rules: (1) No more than 5% may be
invested in the securities of a single company and (2) the Portfolio may not
purchase more than 10% of any company's outstanding voting securities.

INVESTMENT ADVISER AND MANAGER: 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.

DISTRIBUTION PLAN: The Fund has adopted a distribution plan in accordance with
Rule 12b-1 under the Investment Company Act of 1940. Under this plan, as much as
2/10 of 1% of the Fund's average net assets may be paid annually to aid in the
distribution of shares. See "Distribution Plan."

2
<PAGE>

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 by Mutual Funds
Service Co., the Transfer Agent for the Fund, or the Fund's authorized service
agent or sub-agent.

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 only if the shareholder identifies the account by account
number or by the social security number listed on the account.

FOR MORE INFORMATION ABOUT SPECIFIC SHAREHOLDER ISSUES, PLEASE SEE THE
SHAREHOLDER MANUAL.

SYNOPSIS OF FINANCIAL INFORMATION

U.S.
GOVERNMENT
BOND FUND
---------
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------

Maximum Sales Load Imposed on Purchases None
- ------------------------------------------------------------
Maximum Deferred Sales Load None
- ------------------------------------------------------------
Maximum Sales Load Imposed on
Reinvested Dividends None
- ------------------------------------------------------------
Redemption Fees None
- ------------------------------------------------------------
Exchange Fees None
- ------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
- ------------------------------------------------------------
Management Fees (Net of Fees Waived)* 0.34%
- ------------------------------------------------------------
Distribution Plan (12b-1 Fees)** 0.16%
- ------------------------------------------------------------
Other Expenses 0.50%
- ------------------------------------------------------------

TOTAL FUND OPERATING EXPENSES
(Net of Fees Waived)* 1.00%
- ------------------------------------------------------------

EXAMPLE

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

3
<PAGE>

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
The U.S. Government Bond Fund
Net of Fees Waived* $10 $32 $55 $122

*Expenses used in these illustrations summarize expenses actually incurred
for the Fund and its corresponding Portfolio, The Bond Portfolio, for the year
ended December 31, 1996.

During the year ended December 31, 1996, the Investment Adviser waived a
portion of its management fees in order to reduce the operating expenses of the
Fund. Expenses shown as "Net of Fees Waived" are based on actual fees paid by
the Fund. Had management fees not been waived, Management Fees and Other
Expenses, as a percentage of average net assets, would have been 0.40% and
0.16%, respectively. Total Fund Operating Expenses, as a percentage of average
net assets, would have been 1.06%.

The Investment Adviser presently intends to waive a portion of its
management fees in the Portfolio to the extent necessary to keep the expenses of
the Fund at or below 1% of average net assets in 1997. The Investment Adviser
may change this policy at any time without notice to shareholders. This would,
in some circumstances, have an adverse effect on the net income of the Fund, and
the yields earned by shareholders. For planning purposes, prospective investors
and shareholders should assume that management fees will not be waived.

**Distribution Plan Expense: The Trust is party to agreements whereby
consultant companies or individuals (including two Trustees), are paid for
explaining the Fund, its investment objective 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 tables on the preceding page are 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 and
403(b) accounts charges a $5.00 annual maintenance fee and the transfer agent
charges IRA and 403(b) accounts a $7.00 fee if the account is totally
liquidated. For more complete descriptions of the various costs and expenses of
the Trust, see "The Trust and Its Management" and "Distribution Plan."

Principally because there is no duplication of fees or expenses between the
Fund and the Portfolio, the Trustees of the Trust believe that the aggregate per
share expenses of the Fund and the Portfolio will, at a minimum, be
approximately equal to and may be less than the expenses that would be incurred
by the Fund if the Investment Adviser was not waiving fees and if the Fund
continued to retain the services of an investment adviser and to invest directly
in portfolio securities. There can, of course, be no assurance that any such
expense savings will be realized. For additional information concerning expenses
incurred by the Fund and the Portfolio, see "The Trust and Its Management"
herein, and "Investment Adviser and Manager" in the Statement of Additional
Information.

4
<PAGE>

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

FINANCIAL HIGHLIGHTS

The financial highlights for The U.S. Government Bond Fund are listed
below. This information has been audited in conjunction with the annual audits
of the financial statements of The U. S. Government Bond 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, 1996; and by other independent certified public accountants for the earlier
periods.

<TABLE>
THE U.S. GOVERNMENT BOND FUND
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $21.58 $19.25 $20.18 $19.46 $19.84 $18.37 $18.24 $18.25 $19.22 $21.31
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.96 1.11 0.72 0.86 0.99 1.23 1.33 1.54 1.49 1.66
Net Gains or (Losses) on Securities
(both realized and unrealized) (0.94) 2.33 (0.93) 0.71 (0.38) 1.47 0.13 (0.01) (0.97) (1.78)
- -----------------------------------------------------------------------------------------------------------------------------------

Total From Investment Operations 0.02 3.44 (0.21) 1.57 0.61 2.70 1.46 1.53 0.52 (0.12)
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.96) (1.11) (0.72) (0.85) (0.99) (1.23) (1.33) (1.54) (1.49) (1.66)
Distributions (from capital gains) - - - - - - - - (0.31) (0.17)
- -----------------------------------------------------------------------------------------------------------------------------------

TOTAL DISTRIBUTIONS (0.96) (1.11) (0.72) (0.85) (0.99) (1.23) (1.33) (1.54) (1.49) (1.97)
- -----------------------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE, END OF PERIOD $20.64 $21.58 $19.25 $20.18 $19.46 $19.84 $18.37 $18.24 $18.25 $19.22
- -----------------------------------------------------------------------------------------------------------------------------------

TOTAL RETURN 0.15% 18.32% (0.99%) 8.21% 3.26% 15.30% 8.35% 8.75% 2.74% (0.62%)
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Net Assets, End of Period ($000) 17,783 16,048 12,983 13,137 11,100 9,316 5,493 4,547 6,337 13,424
Ratio of Expenses to Average Net Assets 1.00% 1.00% 1.00% 0.99% 1.00% 0.94% 0.99% 0.81% 0.83% 0.75%
Ratio of Net Income to Average Net Assets 4.61% 5.41% 3.71% 4.25% 5.13% 6.59% 7.33% 8.54% 7.85% 8.13%
Ratio of Expenses to Average Net Assets,
before waiver of fees(1) 1.06% 1.14% 1.14% 1.09% 1.21% 1.23% 1.36% 1.15% 0.89% 0.81%
Ratio of Net Income to Average Net Assets,
before waiver of fees(1) 4.55% 5.27% 3.57% 4.15% 4.92% 6.30% 6.96% 8.20% 7.79% 8.25%
Portfolio Turnover Rate 779% 232% 708% 236% 101% 214% 500% 0.00% 188% 258%

<FN>
(1) See "Synopsis of Financial Information" for explanation of Investment
Adviser's waiver of fees.

Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information dated April 30, 1997.
</FN>
</TABLE>

5
<PAGE>

PERFORMANCE COMPARISONS

THE U.S. GOVERNMENT BOND FUND VS. THE LEHMAN BROS. AVERAGE ANNUAL TOTAL
INTERMEDIATE GOVERNMENT BOND INDEX AND MORNINGSTAR'S RETURNS FOR THE
AVERAGE GENERAL GOVERNMENT BOND FUND PERIODS ENDED
The Growth of $10,000 (1/1/87 to 12/31/96) DECEMBER 31, 1996

The
The U.S. Lehman Bros. Morningstar's 1 YEAR
Government Intermediate Average General ------
Bond Fund Govt. Index* Govt Bond Fund* 0.15%
--------- ------------ ---------------

$10,000 $10,000 $10,000 5 YEARS
1987 $ 9,938 $10,361 $10,135 -------
1988 $10,210 $11,024 $10,798 5.57%
1989 $11,104 $12,422 $12,075
1990 $12,031 $13,610 $13,086
1991 $13,872 $15,530 $14,921 10 YEARS
1992 $14,324 $16,606 $15,838 --------
1993 $15,500 $17,984 $17,096 6.16%
1994 $15,346 $17,670 $16,499
1995 $18,158 $20,219 $18,952
1996 $18,185 $21,073 $19,428

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

The Lehman Brothers Intermediate Government Bond 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.

1996 IN REVIEW.

The total return of The U.S. Government Bond Fund (formerly, The Bond Fund) was
0.15 percent during 1996. For the same, period, the total return of the Average
General Government Bond Fund, as reported by Morningstar, Inc., was 2.51
percent. The Lehman Brothers Intermediate Government Bond Index provided a total
return of 4.22 percent during 1996.

The U.S. Government Bond Fund was exposed to 10-year U.S. Treasuries as 1996
began, but achieved a fully defensive position by late February. The Fund
remained fully defensive, with only minor exceptions, through much of the first
nine months of 1996, regaining a fully-exposed position during October which it
held through late December. As a result of this limited exposure, the Fund
avoided several significant declines in the bond market. However, this fully
defensive position also meant that the Fund was largely invested in money market
instruments, which provide far less in the way of yield (and market risk) than
longer-term Treasuries.

Along with its name change, the Fund changed its investment objective to invest
in U.S. government securities and repurchase agreements relating thereto. As a
result of this change in investment objective, The Bond Portfolio may no longer
invest in, among other securities, corporate fixed income securities.
Consequently, the above performance comparison no longer includes The Lehman
Brothers Intermediate Government/Corporate Bond Index, which includes corporate
fixed income securities. The Lehman Brothers Intermediate Government/Corporate
Bond Index provided a total return of 4.06% in 1996.

6
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The U.S. Government Bond Fund and the Bond 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 the Portfolio's investors. No such change would be made in a
Fund, or Portfolio, without 30 days 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 may invest in financial futures contracts or related options
as a hedge against changes, resulting from market conditions, in the values of
securities held or which the Portfolio intends to purchase. These financial
futures contracts for related options are considered derivatives. The value of
derivatives can be affected significantly by even small market movements,
sometimes in unpredictable ways. See "Additional Investment Policies - Hedging
Strategies."

The investment objective of the Bond Portfolio is to maximize, consistent
with its permitted universe of investments, current income through investment in
securities which are issued, or guaranteed as to payment of principal and
interest, by the U.S. government or any of its agencies or instrumentalities.
Under normal circumstances, at least 65% of the value of The Bond Portfolio's
total assets will be invested in U.S. government debt securities.

The U.S. government securities in which the Bond Portfolio invests are
either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities are limited to: (1) direct obligations of
the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds; (2) notes,
bonds, and discount notes of U.S. government agencies or instrumentalities, such
as the: Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives; Farmers Home Administration; Federal
Home Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association; and Student Loan
Marketing Association; and (3) repurchase agreements relating to any of the
foregoing U.S. government securities.

7
<PAGE>

Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government, such as Government National Mortgage Association
participation certificates, are backed by the full faith and credit of the U.S.
Treasury. No assurance can be given that the U.S. government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These agencies and instrumentalities are supported by: (1)
the issuer's right to borrow an amount limited to a specific line of credit from
the U.S. Treasury; (2) discretionary authority of the U.S. government to
purchase certain obligations of an agency or instrumentality; or (3) the credit
of the agency or instrumentality.

The prices of U.S. government securities fluctuate inversely to the
direction of interest rates.

Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities to the
Bond Portfolio and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the original seller does not
repurchase the securities from the Bond Portfolio, it could receive less than
the repurchase price on any sale of such securities.

The Bond Portfolio will invest in U.S. government securities of varying
maturities. Normally the average portfolio maturity will be approximately ten
years as long as the Investment Adviser believes interest rates are stable or
declining. The Bond Portfolio's assets will be invested in money market
instruments when the Investment Adviser believes an unstable or rising interest
rate trend is occurring. If the Investment Adviser believes that long-term
interest rates offer an abnormally high current return versus inflation, the
Bond Portfolio may be invested in U.S. government securities with maturities as
long as 30 years.

The Manager believes the appropriate way to defend assets against shifts in
interest rates is to be invested in long-term U.S. government securities only
when the trend of interest rates is stable or declining. To determine the U.S.
government securities market environment, the Manager monitors the following
technical indicators: (1) Momentum - the trend of U.S. government securities
prices versus various moving averages; (2) Real Rates - the 10-year treasury
bond yield as compared to the inflation rate; and (3) Yield Spread - the 10-year
treasury bond yield as compared to the T-bill yield.

Information concerning the selection of money market instruments is set
forth in the Trust's Statement of Additional Information.

ADDITIONAL INVESTMENT POLICIES

MONEY MARKET INSTRUMENTS

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 protect the value of specific securities owned or intended to be
purchased while the Investment Adviser is implementing a change in the
Portfolio's investment position; (2) To protect portfolio values during periods
of extraordinary risk without incurring transaction costs associated with buying
or selling actual securities; and (3) 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.

8
<PAGE>

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, while government securities such as Treasury Bonds and Notes
are among debt securities currently covered by futures contracts.

Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Accordingly, these financial futures contracts, related options, and forward
currency contracts used by the Portfolio to implement its hedging strategies are
considered derivatives. The value of derivatives can be affected significanatly
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 its portfolio, or which it intends to
purchase, and where the transactions are economically appropriate 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
Portfolio. 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.

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.

9
<PAGE>

RISK FACTORS

The Bond Portfolio will be invested in securities which fluctuate in market
value, so net asset value per share will fluctuate as well. The value of the
Bond Portfolio could fluctuate as interest rate levels change, i.e. it can go
down if interest rates increase and conversely its value can increase if
interest rates decline. Thus, 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 and defensive
investment strategies. Hedging involves risks which are not present in some
other mutual funds with similar objectives (See "Hedging Strategies").

Put and call option contracts involve some risk. For example, the total
premium paid for an option contract could be lost if the Portfolio does not sell
the contract or exercise the contract prior to its expiration date.

Futures contracts likewise involve some risk. It is possible that the
contract(s) selected by the Investment Adviser 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.

The Portfolio may invest in repurchase agreements with banks and securities
brokers. 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.

PORTFOLIO TURNOVER

Because the Manager intends to employ flexible defensive investment
strategies when market trends are not considered favorable, the Manager may
occasionally change the entire portfolio in the Portfolio. High transaction
costs could result when compared with other funds. Trading may also result in
realization of net short-term capital gains upon which shareholders may be taxed
at ordinary tax rates when distributed from the Fund.

This defensive investment strategy can produce high portfolio turnover
ratios when calculated in accordance with SEC rules. However, viewed in terms of
"round trips" The Bond Portfolio completed two and one-half "round trips" in the
bond market.

Management is presently unable to predict the portfolio turnover rate for
the current year in the Portfolio, as any major change in investment posture to
a defensive position, or vice versa, will result in high portfolio turnover. The
Portfolio had a portfolio turnover rate of 779% in 1996.

10
<PAGE>

THE TRUST AND ITS MANAGEMENT

The Trust was organized as a Massachusetts Business Trust on December 31,
1991 as the successor to a Pennsylvania Business Trust organized on April 30,
1982. Its constituent funds are diversified open-end management 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.

R. Meeder & Associates, Inc. (the "Manager"), has been an investment
adviser to individuals and retirement plans since 1974. The Manager served as
the Trust's investment adviser from its inception in 1982 until May of 1992, 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 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 six subsidiaries which are the Manager; Mutual Funds Service Co.,
the Trust's transfer agent; Opportunities Management Co., a venture capital
investor; Adviser Dealer Services, Inc., a registered broker-dealer; 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, and their principal offices are as
follows: Robert S. Meeder, Sr., Chairman and Sole Director; Robert S. Meeder,
Jr., President; 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; Wesley F. Hoag, Vice President and
General Counsel; Steven T. McCabe, Vice President; and Roy E. Rogers, Vice
President.

11
<PAGE>

The Manager earns an annual fee, payable in monthly installments, at the
rate of 0.40% of the first $100 million and 0.20% in excess of $100 million, of
average net assets. These fees are higher than the fees charged to most other
investment companies.

The Manager presently intends to waive a portion of its management fees for
the Bond Portfolio, but may change this policy at any time without notice to
shareholders. For planning purposes prospective investors and shareholders
should assume that expenses will be based on the maximum fees. (See footnotes to
"Synopsis of Financial Information.")

Accounting, stock transfer, dividend disbursing, and shareholder services
are provided to the Fund and the Portfolio by Mutual Funds Service Co., 6000
Memorial Drive, Dublin, Ohio 43017, a wholly-owned subsidiary of MII. The
minimum annual fee for accounting services for the Bond 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 each 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 0.06% of the Fund's average net assets, payable monthly,
for stock transfer and dividend disbursing services. In The U.S. Government Bond
Fund, this annual fee is the greater of $15 per shareholder account or 0.06% of
the Fund's average net assets. Mutual Funds Service Co. also serves as
Administrator to the Trust pursuant to an Administrative Services Agreement.
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
administrative fee, payable monthly, of 0.05% 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, 1996, total payments to Mutual
Funds Service Co. amounted to $38,145 for the Fund and Portfolio collectively.

The Manager may take into account sales of shares of the Fund and other
funds advised by the Manager in selecting broker-dealers to effect portfolio
transactions on behalf of the Portfolio.

A broker-dealer may use a portion of the commissions paid by the Portfolio
to reduce the Portfolio or the Fund's expenses.

Information concerning the Trustees and officers of both the Trust and the
Portfolio appears in the Statement of Additional Information.

12
<PAGE>

PORTFOLIO MANAGER

Joseph A. Zarr is the portfolio manager primarily responsible for the
day-to-day management of the Portfolio. Mr. Zarr was the portfolio manager of
the Short-Term Global Portfolio from May of 1992 until May of 1996. Mr. Zarr is
also a portfolio manager for the Manager. He has been associated with the
Manager since 1991. Mr. Zarr has been a licensed stockbroker since 1978.

DISTRIBUTION PLAN

The Trust has adopted a distribution expense plan (the "Plan") which
authorizes the Fund to bear a portion of the expense of any activity which is
primarily intended to result in the sale of Fund shares. The 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 the Fund's average net assets annually pursuant to the Plan.

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
Trustees) 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 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 by the Fund under the Plan in 1996, as a percentage of
average net assets, amounted to 0.16%. (See "Synopsis of Financial
Information.")

13
<PAGE>

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 Bond Portfolio, less expenses. The Fund also intends to
distribute its net capital gains, if any, to its shareholders annually.

In the Fund, net income is calculated daily and declared as a dividend to
shareholders of record at the close of the previous business day. If a
shareholder requests a redemption and the request is received by 3:00 p.m., then
the shares so redeemed that day will not be paid that day's dividend. Net income
earned by the Fund on a weekend or a holiday is declared as a dividend on Friday
or the day prior to the holiday. 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. If the entire account of a shareholder is
withdrawn, all dividends accrued at the time of withdrawal will be paid at that
time.

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, 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 the 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 U. S. Government Bond 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. In the case of the Fund,
which frequently liquidates its portfolio for defensive purposes and therefore
tends not to realize large capital gains accumulated over a long period of time,
the effect is not expected to be substantial.

14
<PAGE>

PERFORMANCE INFORMATION

From time to time, the Fund may publish performance information and may
include such information in advertisements, sales literature or shareholder
reports. It will do so in accordance with methods which are described in the
Statement of Additional Information.

The yield quotation for the Fund is based upon a 30-day period ended on a
specific date, computed by dividing the Fund's net investment income per share
earned during the period by the Fund's price per share on the last day of the
period. Quotations of yield for the Fund will be accompanied by total return
calculations to the most recent quarter (see "Total Return" below). "Total
return" quotations for the Fund will be expressed in terms of average annual
compounded rates of return for the periods quoted, and will assume that all
dividends and distributions were reinvested in additional shares. When
applicable, the periods of time shown will be for a one-year period; a five-year
period; a ten-year period; and since inception.

15
<PAGE>

Comparative performance information may be used from time to time in
advertising or marketing information relative to the Fund, including data from
Lipper Analytical Services, Inc., Morningstar Mutual Fund Report, other
publications, various indices or results of the Consumer Price Index, other
mutual funds or investment or savings vehicles.

Both the yield and the total return figure included in advertisements,
sales literature or shareholder reports will be based on historical performance
and are not intended to indicate future performance.

HOW NET ASSET VALUE IS DETERMINED

In The U.S. Government Bond Fund, the net asset value per share (the price
at which shares are purchased and redeemed) will be calculated each day the New
York Stock 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. The net asset value per share will be calculated on each
such day on the basis of portfolio values at 3:00 p.m. Eastern time. The U.S.
Government Bond Fund shares will not be priced on Good Friday or on any holiday
observed by the Federal Reserve system. These presently include New Year's Day,
Martin Luther King Day, President's Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day. 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 liabilities, by the total number of its shares of
beneficial interest outstanding at the time.

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 in the
Fund and to create additional Funds. All shares have a par value of $.10 per
share, are fully paid, nonassessable and fully transferable when issued. All
shares are issued as full or fractional shares.

16
<PAGE>

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 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 the Trust 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.

INVESTMENT STRUCTURE

17
<PAGE>

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) 760-2159.

(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.

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
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
expressly 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" and
"Officers and Trustees" in the Statement of Additional Information.

18
<PAGE>

SHAREHOLDER MANUAL

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 Fund are sold at net asset value per share next determined after
receipt of both a purchase order and payment by the Fund's transfer agent or the
Fund's authorized service agent or sub-agent. Net asset value generally changes
each day. (See "How Net Asset Value Is Determined.")

MINIMUM INVESTMENT

The minimum investment to open an account in the Fund 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 U.S. Government Bond
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) 760-2159. Advise the Fund of the amount you wish
to invest and obtain an account number and instructions. Have your bank
wire federal funds to:

STAR BANK, N.A. CINTI/TRUST
(ABA #: 042-00001-3)
ATTENTION: THE FLEX-FUNDS
THE U.S. GOVERNMENT BOND FUND
Credit Account Number 9305152
Account Name (your name)
Personal account number (your U.S. Government Bond Fund
account number)

19
<PAGE>

SUBSEQUENT INVESTMENTS--Subsequent investments in an existing account in
the Fund may be made by mailing a check payable to The U.S. Government Bond
Fund. Please include your account number on the check and mail as follows:

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

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 U.S. Government Bond Fund are sold at net asset value per
share next determined after receipt of both a purchase order and payment. Income
dividends in The U.S. Government Bond Fund begin as of the first business day
following the day of purchase.

If a shareholder's check is dishonored, the purchase and any dividends paid
thereon 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.

20
<PAGE>

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 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.

21
<PAGE>

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.")

WHEN PAYMENTS ARE MADE--Amounts withdrawn by telephone are normally mailed
or wired on the next Columbus, Ohio bank 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 the 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

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.

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.

22
<PAGE>

BY TELEPHONE:

Exchange requests may be made by telephone: call 1-800-325-FLEX, or call
(614) 760-2159. 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. 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.

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 Fund reserves the right to reject any exchange
request and to limit a shareholder's use of the exchange privilege.

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), a Simple IRA and a Simplified Employee
Pension (SEP) Plan. 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) 760-2159.

23
<PAGE>

OTHER SHAREHOLDER SERVICES

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 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 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.

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.

24
<PAGE>

ACCOUNTS BELOW MINIMUMS--The Trust 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).

25
<PAGE>

INVESTMENT ADVISER
R. Meeder & Associates, Inc.

ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-760-2159 (in Central Ohio)

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
614-760-2159 (in Central Ohio)

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

THE U.S. GOVERNMENT BOND FUND

PROSPECTUS

APRIL 30, 1997

<PAGE>

Rule 497(c) & (g)
File Nos. 2-85378
811-3462

PROSPECTUS -- APRIL 30, 1997
THE FLEX-FUNDS
THE MONEY MARKET FUND
INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.

6000 Memorial Drive
Dublin, OH 43017
614-760-2159

The Flex-funds are a family of mutual funds organized as a business trust
(the "Trust") consisting of five separate portfolios (the "Funds"), each of
which has separate investment objectives and policies. The Money Market Fund's
objective is current income and stable asset values through investment in a
portfolio of money market instruments. The Trust seeks to achieve the investment
objective of The Money Market Fund (the "Fund") by investing all of the
investable assets of the fund in the Money Market 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 Objective and Policies" and "Other Information -- Shares of
Beneficial Interest and Investment Structure."

The Fund will seek to maintain a constant net asset value of $1 per share,
although there is no assurance it will be able to do so. Investments in Fund
shares are neither insured nor guaranteed by the U. S. Government.

There are no commissions, fees or charges for the purchase or redemption of
shares, although the Trust has adopted Rule 12b-1 distribution plans for using
as much as 2/10 of 1% of net assets annually to aid in the distribution of
shares.

This Prospectus sets forth basic information about the Trust and The Money
Market Fund that a prospective investor should know before investing and it
should be retained for future reference. A STATEMENT OF ADDITIONAL INFORMATION,
dated April 30, 1997, 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 Trust at the
address given above or by calling: 1-800-325-FLEX, or (614) 760-2159.

TABLE OF CONTENTS
Page
Highlights..............................2
Shareholder Inquiries...................3
Synopsis of Financial Information.......3
Financial Highlights....................5
Investment Objective and Policies.......6
The Trust and Its Management............7
Distribution Plan.......................9
Income Dividends and Taxes.............10
How Net Asset Value is Determined......11
Money Market Fund Yield................11
Other Information......................12
How to Buy Shares......................14
How to Make Withdrawals (Redemptions)..16
Check-writing Redemption Procedure.....17
Exchange Privilege.....................18
Flex-funds Retirement Plans............18
Other Shareholder Services.............18
Shareholder Accounts...................19

<PAGE>

- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The Money Market Fund's investment objective is current
income and stable asset values through investment in a portfolio of money market
instruments. The Trust seeks to achieve the Fund's objective by investing all of
the investable assets of the Fund in a corresponding open-end management
investment company (the "Portfolio") having the same investment objective as the
Fund. See "Investment Objective and Policies."

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

DIVERSIFICATION: The Fund is a diversified mutual fund because the assets of the
Portfolio are restricted by the following rules: (1) No more than 5% may be
invested in the securities of a single company, and (2) the Portfolio may not
purchase more than 10% of any company's outstanding voting securities.

FREE CHECK-WRITING REDEMPTION: A supply of drafts will be supplied to any
shareholder when requested. Drafts may be written in any amount not less than
$100. Mutual Funds Service Co., the Transfer Agent for the Fund, will return
drafts drawn on funds from purchases made by check(s) for a period of fifteen
(15) calendar days after receipt of the check(s) used to purchase shares. See
"How to Make Withdrawals (Redemptions)."

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, Simplified Employee Pension (SEP), 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 Trust 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", "Other Shareholder
Services" and "Shareholder Accounts."

INVESTMENT ADVISER AND MANAGER: 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. See "The Trust and Its Management."

2
<PAGE>

DISTRIBUTION PLAN: The Money Market 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."

HOW TO BUY SHARES: Complete the New Account Application and forward with payment
as directed. Investments in The Money Market Fund are priced at the net asset
value next determined after an order is received by Mutual Funds Service Co.,
the Transfer Agent for the Fund, provided Star Bank, N.A., (the "Bank"), the
Custodian for the Fund, receives federal funds by 4:00 p.m. Eastern time that
same day. The Money Market Fund intends to maintain a constant net asset value
of $1.00 per share, although there is no assurance it will be able to do so. See
"How to Buy Shares" and "How Net Asset Value is Determined."

- --------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES
- --------------------------------------------------------------------------------

Shareholder inquiries should be directed to the Trust by writing or
telephoning the Trust 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 only if the shareholder identifies the account by account
number or by the social security number listed on the account.

FOR MORE INFORMATION ABOUT SPECIFIC SHAREHOLDER ISSUES, PLEASE SEE THE
SHAREHOLDER MANUAL.

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

THE MONEY
MARKET FUND
-----------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sale Load Imposed on Purchases............ none
Maximum Deferred Sales Load....................... none
Maximum Sales Load Imposed on
Reinvested Dividends......................... none
Maximum Redemption Fees........................... none
Exchange Fee...................................... none

ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees
(Net of Fees Waived*)........................ 0.15%
Distribution Plan
(12b-1 Fees)**............................... 0.07%
Other Expenses
(After Expense Reimbursements*).............. 0.18%
-----

3
<PAGE>

TOTAL FUND OPERATING EXPENSES*
(Net of Fees Waived and After
Expense Reimbursements*).................. 0.40%

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.

FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------- ------ ------- ------- --------

The Money Market Fund--Net
of Fees Waived* $ 4 $13 $22 $51

*Expenses used in these illustrations are based upon expenses actually
incurred for both The Money Market Fund and its proportionate share of expenses
from its corresponding Portfolio, the Money Market Portfolio, for the year ended
December 31, 1996. During the year, the Investment Adviser reimbursed a portion
of Fund expenses and waived a portion of its management fees in order to reduce
the operating expenses of The Money Market Fund. Management fees shown as "Net
of Fees Waived" are based on actual fees paid by the Fund. Had the fees not been
waived and expenses not been reimbursed, Management Fees and Other Expenses, as
a percentage of average net assets, would have been 0.29% and 0.22%,
respectively. Total Fund Operating Expenses, as a percentage of average net
assets, would have been 0.58%.

The Investment Adviser presently intends to waive a portion of its
management fees in the Money Market Portfolio to the extent necessary to achieve
an effective yield for The Money Market Fund that will rank within the top 10%
of yields for all general purpose money market funds in 1997. There is no
guarantee that waiver of fees alone will accomplish this objective. The
Investment Adviser may change this policy at any time without notice to
shareholders. This would, in some circumstances, have a material adverse effect
on the net income of the Fund, and the yield earned by shareholders. For
planning purposes, prospective investors and shareholders should assume that
expenses will be based on the maximum fee.

**Distribution Plan Expense: The Fund is party to agreements whereby
consultant companies or individuals (including two Trustees), are paid for
explaining the Fund, its investment objective 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 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."

4
<PAGE>

The Board of Trustees of the Fund 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" in the Statement of
Additional Information.

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The financial highlights for The Money Market Fund are listed below. This
information has been audited in conjunction with the annual audits of the
financial statements of The Flex-funds and their corresponding Portfolios by
KPMG Peat Marwick LLP, independent certified public accountants, for each of the
years ended December 31, 1987 through December 31, 1996 and by other independent
certified public accountants for the earlier periods.

<TABLE>
<CAPTION>
THE MONEY MARKET FUND
--------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06
Net Gains or (Losses) on Securities
(both realized and unrealized) - - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------

Total From Investment Operations 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06)
Distributions (from capital gains) - - - - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------

TOTAL DISTRIBUTIONS (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL RETURN 5.27% 5.85% 4.10% 2.98% 3.70% 6.12% 8.21% 9.32% 7.59% 6.62%
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 119,947 141,087 164,838 200,030 245,259 316,951 247,481 264,078 217,183 145,376
Ratio of Expenses to Average Net Assets 0.40% 0.40% 0.37% 0.37% 0.35% 0.38% 0.38% 0.39% 0.35% 0.41%
Ratio of Expenses to Average Net Assets 5.15% 5.70% 4.02% 2.94% 3.68% 5.96% 7.92% 8.94% 7.50% 6.63%
before waiver of fees and
reimbursement of expenses(1) 0.58% 0.64% 0.57% 0.57% 0.56% 0.56% 0.55% 0.59% 0.60% 0.66%
Ratio of Net Income to Average Net
Assets before waiver of fees and
reimbursement of expenses (1) 4.97% 5.46% 3.82% 2.74% 3.47% 5.78% 7.75% 8.74% 7.25% 6.40%

<FN>
(1) See "Synopsis of Financial Information" for explanation of Investment
Adviser's waiver of fees and reimbursement of expenses.

Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information.
</FN>
</TABLE>

5
<PAGE>

The Money Market Fund advertises performance data, and this is limited to
yield quotations. The method by which these yield quotations are computed is set
forth in the Trust's Statement of Additional Information.

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The Money Market Fund and the Money Market 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. No such change would be
made in the Fund, or Portfolio, without 30 days 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 a corresponding
Portfolio, see "Other Information--Investment Structure."

The investment objective of the Portfolio is current income and stable
asset values through investment in money market instruments. The Portfolio will
seek to maintain a constant net asset value of $1 per share, although there is
no assurance it will be able to do so. The Portfolio will seek to achieve its
objective by investing in a portfolio of high-quality money market instruments
which mature in 397 days or less. Further, the Portfolio will seek to minimize
changes in the value of its assets caused by market factors by maintaining a
dollar-weighted average portfolio maturity of 90 days or less.

The Portfolio will value its securities by the amortized cost method and
will normally include any accrued discount or premium in its daily dividend and
thereby keep constant the value of its assets and its net asset value per share.
This method does not take into account unrealized capital gains or losses.

Further, the Portfolio may change its average portfolio maturity or level
of quality to protect its and the Fund's net asset value when it is perceived
that changes in the liquidity of major financial institutions may adversely
affect the money markets. Consequently, for temporary defensive purposes, the
Portfolio may shorten the average maturity of its investments and/or invest only
in the highest quality debt instruments, including, for example, U.S. government
or agency obligations.

6
<PAGE>

The Portfolio will invest exclusively in money market instruments which are
deemed eligible securities pursuant to rules under the Investment Company Act
applying to money market funds. At least 95% of the Portfolio's assets will be
invested in securities defined by the rules as "first-tier" securities.
First-tier securities must have two quality rating which are in the highest
rating category, or one if rated by only one organization. Second-tier
securities must have ratings in the highest two rating categories and will be
limited to a maximum of five percent of assets with each position limited to the
greater of $1,000,000 or 1% of assets. The Portfolio also intends to comply with
all other quality and credit quality monitoring criteria applying to money
market funds. The Portfolio will limit its purchases to U.S. government
securities and securities of its agencies and instrumentalities, bank
obligations and instruments secured thereby, high quality commercial paper, high
grade corporate obligations and repurchase agreements. Information concerning
specific quality criteria is set forth in the Trust's Statement of Additional
Information.

RISK FACTORS

The Investment Adviser exercises due care in the selection of the
Portfolio's 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 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 Fund's shares.

The Portfolio may invest in repurchase agreements with banks and securities
brokers. 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 or 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. Repurchase agreements usually are for short periods, such as
one week or less, but could be longer.

The Portfolio may invest in private placement commercial paper. 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 TRUST AND ITS MANAGEMENT
- --------------------------------------------------------------------------------

The Trust is a diversified, 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. 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.

7
<PAGE>

The Manager's officers and directors, their principal offices are as
follows: Robert S. Meeder, Sr., Chairman and Sole Director; Robert S. Meeder,
Jr., President; 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, Wesley F. Hoag, Vice President and
General Counsel; Steven T. McCabe, Vice President; and Roy E. Rogers, Vice
President.

Philip A. Voelker, is the portfolio manager primarily responsible for the
day-to-day management of the Money Market Portfolio. Mr. Voelker is Vice
President and Trustee of the Money Market Portfolio, Vice President and Trustee
of The Flex-funds and Senior Vice President and Chief Operating Officer of the
Manager. Mr. Voelker has been associated with the Manager since 1975 and has
managed the Portfolio since 1985.

The Manager earns an annual fee, payable in monthly installments, for the
Portfolio at the rate of 0.40% of the first $100 million and 0.25% in excess of
$100 million, of average net assets.

The Investment Adviser presently intends to waive a portion of its
management fee in the Portfolio, and may change this policy at any time without
notice to shareholders. For planning purposes prospective investors and
shareholders should assume that expenses will be based on the maximum fee. (See
footnotes to "Synopsis of Financial Information.")

8
<PAGE>

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
$30,000. 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 $20 per shareholder account or 0.06% 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 pursuant to an Administration Services
Agreement. 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 .05% 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, 1996, total payments to Mutual Funds Service Co.
amounted to $228,208 for the Fund and Portfolio collectively.

Information concerning the Trustees and officers of both the Trust and the
Portfolio appears in the Statement of Additional Information.

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

The Trust has adopted a distribution expense plan (the "Plan") which
authorizes The Money Market 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 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
Trustees) are paid for their assistance in explaining and interpreting the
Trust, its investment objective 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 Money Market 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.

9
<PAGE>

Total payments made in The Money Market Fund under the Plan for the period
ended December 31, 1996, as a percentage of average net assets, amounted to
0.07%. (See "Synopsis of Financial Information.")

- --------------------------------------------------------------------------------
INCOME DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------

It is the policy of the Trust to distribute substantially all of its net
income, which for the Fund consists of the income it earns from its investment
in the Portfolio, less expenses. The Fund's net income is calculated daily and
declared as a dividend to shareholders of record at the close of the previous
business day, and to the holders of shares purchased that same day prior to 3:00
p.m., with one exception. If a shareholder requests a redemption and the request
is received by 3:00 p.m., then the shares so redeemed that day will not be paid
that day's dividend. Net income earned by The Money Market Fund on a weekend or
a holiday is declared as a dividend on Friday or the day prior to the holiday.
All such dividends of net income are automatically reinvested in additional
shares of the Fund at the net asset value on the last business day of each
month. A shareholder may elect to receive dividends in cash either by checking
the appropriate box on the New Account Application, or by notifying the Fund in
writing. If the entire account of a shareholder is withdrawn, all dividends
accrued at the time of withdrawal will be paid at that time.

The Internal Revenue Code of 1986 imposes on the Trust a nondeductible
excise tax unless the Trust distributes annually at least 98% of its net
investment income earned during the calendar year, 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
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.

Dividends and capital gains distributions will be taxable to the
shareholder as income in the year distributed, 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 to him during the
calendar year. The Trust files federal income tax returns for each of the Funds.
Each Fund is treated as a separate entity for federal income tax purposes.

The Trust qualified as a "regulated investment company" for each of the
last fourteen fiscal years.

10
<PAGE>

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 Trust 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 (the price at which shares are purchased and
redeemed) is determined each day the Trust is open for business. The Fund's
shares will not be priced on Good Friday or on any holiday observed by the
Federal Reserve system. These presently include New Year's Day, Martin Luther
King Day, President's Day, Memorial Day, Independence Day, Columbus Day,
Veterans Day, Thanksgiving Day and Christmas Day. 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 liabilities, by the total number of its
shares of beneficial interest outstanding at the time. The assets of the
Portfolio are valued on the basis of amortized cost method, which involves
valuing a portfolio instrument at its cost initially and, thereafter, assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. The
Fund will seek to maintain a constant net value of $1.00 per share.

- --------------------------------------------------------------------------------
MONEY MARKET FUND YIELD
- --------------------------------------------------------------------------------

The Money Market Fund will advertise its yield and effective yield. The
simple annualized yield represents the net income for a seven-day period,
expressed on an annualized basis. The effective yield will be higher than the
yield because of the compounding effect of the assumed reinvestment of dividends
over a period of one year. Both yield figures are based upon historical earnings
and are not intended to indicate future performance. Yields will fluctuate daily
as net income fluctuates. The method by which the Fund computes its yield is
described in the Statement of Additional Information. For current yield
information call 1-800-325-FLEX, or in central Ohio (614) 760-2159.

11
<PAGE>

- --------------------------------------------------------------------------------
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, nonassessable and fully
transferable when issued. All shares are issued as full or fractional shares.

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 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.

12
<PAGE>

Each 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. Each
Portfolio's Declaration of Trust provides that a Fund and other entities
investing in that 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 a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and that Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither a
Fund nor its shareholders will be adversely affected by reason of a Fund's
investing in the corresponding Portfolio. In addition, whenever the Trust is
requested to vote on matters pertaining to the fundamental policies of a
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 objective by
investing all of its assets in the Portfolio, a separate registered investment
company with the same investment objective 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) 760-2159.

13
<PAGE>

The Fund may withdraw the investment of any Fund from its corresponding
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 objective as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies with respect the 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 Objective and Policies," the Fund's investment
objective 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 objective and policies of the Portfolio,
see "Investment Objective and Policies." For descriptions of the management and
expenses of the Portfolio, see "The Trust and Its Management" herein, and
"Investment Adviser and Manager" and "Officers and Trustees" in the Statement of
Additional Information.

- --------------------------------------------------------------------------------
SHAREHOLDER MANUAL
- --------------------------------------------------------------------------------

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

Shares are offered continuously and sold without a direct sales charge,
although the Fund 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
Money Market Fund are sold at the net asset value per share next determined
after receipt of both a purchase order and payment in federal funds. The Money
Market Fund intends to maintain a constant net asset value of $1.00 per share.
(See "How Net Asset Value Is Determined.")

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 Money Market 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

14
<PAGE>

STAR BANK, N.A. CINTI/TRUST
(ABA #: 042-00001-3)
ATTENTION: THE MONEY MARKET FUND
Credit Account Number: 930-5533
Account Name (your name)
Your Money Market Fund account number

SUBSEQUENT INVESTMENTS--Subsequent investments in an existing account in
the Fund may be made by mailing a check payable to The Money Market 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 prior to 3:00 p.m. Eastern time 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--An Initial Wire Purchase and subsequent wire
purchase orders for The Money Market Fund which are received prior to 3:00 p.m.,
Eastern time on a business day, earn dividends for that entire day, provided
payment in federal funds (bank wire) is received by the bank by 4:00 p.m.
Eastern time that day. Purchase orders which are received after 3:00 p.m., or
for which payment is not received by 4:00 p.m. Eastern time, are accepted as a
purchase the following day.

Investments made by check are credited to shareholder accounts, and begin
to earn dividends, on the next business day following receipt.

If a shareholder's check is dishonored, his purchase and any dividends paid
thereon 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.

15
<PAGE>

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 Trust 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 Trust may waive these requirements in certain instances.

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

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

Neither the Trust 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
Trust 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 (stabilized at a $1.00 per share as a matter of policy) next
determined after receipt of a redemption request in good order. (See "How Net
Asset Value Is Determined.")

16
<PAGE>

WHEN PAYMENTS ARE MADE--If a telephone request for a redemption is received
prior to 3:00 p.m., Eastern time the redemption request will be processed that
day. Requests received after 3:00 p.m., will be processed the next business day.
Amounts withdrawn by telephone are normally mailed on the next business day
following the effective date of the order for withdrawal. If the request is for
a wire redemption, funds will be wired on the same day. 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.")

- --------------------------------------------------------------------------------
CHECK-WRITING REDEMPTION PROCEDURE
- --------------------------------------------------------------------------------

Mutual Funds Service Co., as Dividend Disbursing and Transfer Agent for The
Money Market Fund, will provide a supply of drafts to any shareholder when
requested. Drafts are mailed to the shareholder's address of record normally
within two weeks following the date of the initial investment. These drafts may
be used to draw against the shareholder's Money Market Fund account. Drafts may
be written in any amount not less than $100. To use this privilege an investor
must complete the check-writing redemption provision of the New Account
Application form and complete the signature card, or notify the Trust after
making an initial investment.

A commercial check package consisting of 300 drafts is available for a
nominal charge. Shareholders interested in a commercial check package should
contact the Trust for additional information.

When a draft is presented to the Bank for payment, the Bank (as agent for
the shareholder) will cause the Fund to redeem sufficient shares to cover the
amount of the draft. Shares continue earning dividends until the day on which
the draft is presented to the Bank for payment. Due to the delay caused by the
requirement that redemptions be priced at the next computed net asset value, the
Bank will only accept drafts for payment which are presented through normal bank
clearing channels. If shares are purchased by check, Mutual Funds Service Co.
will return drafts drawn on funds from purchases made by check(s), or any
portion thereof, until the check(s) used to purchase shares has cleared, which
may take up to fifteen (15) calendar days, or more. If you anticipate draft
redemptions soon after you purchase shares, you are advised to wire funds to
avoid the return of any draft(s). If the amount of the draft is greater than the
value of the shares held in a shareholder's account, the draft will be returned
and the shareholder's account will be charged a fee of $15. To avoid the
possibility that a draft may not be accepted due to insufficient share balances,
no shareholder should attempt to withdraw the full amount of an account or to
close out an account by using this procedure. Neither the Trust, The Money
Market Fund, Mutual Funds Service Co., nor the Bank, will be liable for any loss
or expenses associated with returned drafts. Use of this procedure will be
subject to the Bank's rules and regulations governing checking accounts.

17
<PAGE>

Shareholders may request a stop payment on any draft and Mutual Funds
Service Co. will attempt to carry out your request. Mutual Funds Service Co.
cannot guarantee that such efforts will be successful. As the Bank charges the
Trust for this service, the shareholder's account will be charged a $12.50 fee
for any such request that becomes effective.

No charge, other than those specified above, will be made to a shareholder
for participation in the check-writing redemption procedure or for the clearance
of any drafts.

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

A shareholder may exchange shares of The Money Market Fund for shares of
any other Fund offered by the Trust that are available for sale in your state at
their respective net asset values.

The Flex-funds family of funds has a variety of investment objectives. Read
the prospectus for relevant information concerning the Fund that meets your
investment goals. A prospectus may be obtained from The Flex-funds, c/o R.
Meeder & Associates, Inc., P. O. Box 7177, Dublin, Ohio 43017 or by telephone:
1-800-325-FLEX, in Ohio call (614) 760-2159.

- --------------------------------------------------------------------------------
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), Simple IRA and a Simplified Employee
Pension (SEP) Plan. 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) 760-2159.

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

AUTOMATIC ACCOUNT BUILDER: Regular investments in any Fund of $100 or more
will be deducted from a shareholder's checking or savings account and invested
in shares of the Fund(s) selected. 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 having a value of at least
$10,000 and advise the Trust 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 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.

18
<PAGE>

SUB-ACCOUNTING FOR INSTITUTIONAL INVESTORS: The Trust'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
Trust.

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

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

CONFIRMATION STATEMENTS--You will receive a statement of your account
confirming your initial purchase of shares. Thereafter, you will receive a
monthly confirmation statement which contains a summary of transactions for the
month as well as dividend reinvestment information. Monthly statements are
mailed promptly after the last business day of the month. A shareholder may
elect to receive a confirmation statement after each transaction by notifying
the Trust.

ACCOUNTS BELOW MINIMUMS--The Trust 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 as
a result of redemptions by the shareholder. The Trust 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
Trust to make an additional investment sufficient to bring the value of shares
in the account to $1,000 ($500 for an IRA).

19
<PAGE>

INVESTMENT ADVISER
R. Meeder & Associates, Inc.

ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-760-2159 (in Central Ohio)

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

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

THE FLEX-FUNDS

THE MONEY MARKET FUND

PROSPECTUS

APRIL 30, 1997

<PAGE>

<PAGE>
Rule 497(c) & (g)
File Nos. 2-85378
811-3462

PROSPECTUS APRIL 30, 1997

THE FLEX-FUNDS
THE MUIRFIELD FUND

6000 Memorial Drive
Dublin, OH 43017
614-760-2159

The Flex-funds are a family of mutual funds organized as a business trust
(the "Trust") consisting of five separate portfolios (the "Funds"), each of
which has separate investment objectives and policies. The Muirfield Fund's
objective is growth of capital through investment in the shares of other mutual
funds. The Trust seeks to achieve the investment objective of The Muirfield Fund
(the "Fund") by investing all of the investable assets of the Fund in the Mutual
Fund 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" and
"Other Information -- Shares of Beneficial Interest and Investment Structure."

The Portfolio places a high degree of importance on maintaining and
protecting portfolio values from adverse market conditions. Consequently, the
Portfolio employs flexible investment strategies.

There are no commissions, fees or charges for the purchase or redemption of
shares, although the Fund has adopted a Rule 12b-1 distribution plan for using
as much as 2/10 of 1% of net assets annually to aid in the distribution of
shares.

FLEXIBLE INVESTMENT STRATEGIES

The Mutual Fund Portfolio may be invested defensively, for temporary
periods, if the Portfolio's investment adviser deems it advisable because of
adverse market conditions. A defensive position will be adopted in a manner
which the investment adviser considers to be most consistent with the
Portfolio's objective, policies and restrictions. Because the Fund may invest
defensively, it is classified as an asset allocation fund.

ADDITIONAL INFORMATION

This Prospectus sets forth basic information about the Trust and The
Muirfield Fund that a prospective investor should know before investing and it
should be retained for future reference. A STATEMENT OF ADDITIONAL INFORMATION,
dated April 30, 1997, 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 Trust at the
address given above or by calling: 1-800-325-FLEX, or (614) 760-2159.

INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.
PROSPECTUS -- APRIL 30, 1997

<PAGE>

- --------------------------------------------------------------------------------
Highlights
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: The Muirfield Fund's investment objective is growth of
capital through investment in the shares of other mutual funds. The Trust seeks
to achieve the Fund's objective by investing all of the investable assets of the
Fund in a corresponding open-end management investment company (the "Portfolio")
having the same investment objective as the Fund. See "Investment Objectives and
Policies."

LIQUIDITY: The Trust is an open-end investment company. The Muirfield Fund
continuously offers and redeems shares of beneficial interest at prevailing net
asset value per share. See "How to Buy Shares" and "How to Make Withdrawals
(Redemptions)."

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, Simplified Employee Pension (SEP), 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 Trust 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", "Other Shareholder
Services" and "Shareholder Accounts."

INVESTMENT ADVISER AND MANAGER: 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. See "The Trust and Its Management."

DISTRIBUTION PLAN: The Muirfield 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."

2
<PAGE>

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

THE MUIRFIELD
FUND
----
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sale Load Imposed on Purchases........... none
Maximum Deferred Sales Load...................... none
Maximum Sales Load Imposed on
Reinvested Dividends........................ none
Redemption Fees.................................. none
Exchange Fee..................................... none

ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees.................................. 0.80%
Distribution Plan
(12b-1 Fees)**.............................. 0.13%
Other Expenses................................... 0.26%
-----

TOTAL FUND OPERATING EXPENSES*................... 1.19%

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.

FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------ ------ ------- ------- --------

The Muirfield Fund $12 $38 $65 $144

*Expenses used in these illustrations are based upon expenses actually
incurred for both The Muirfield Fund and its proportionate share of expenses
from its corresponding Portfolio, the Mutual Fund Portfolio, for the year ended
December 31, 1996.

3
<PAGE>

The table on the preceding 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 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 or past or future expenses,
respectively, as actual rates of return and expenses may be more or less than
the rate and amounts shown.

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The financial highlights for The Muirfield Fund are listed below. This
information has been audited in conjunction with the annual audit of the
financial statements of The Muirfield 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, 1996.

<TABLE>
<CAPTION>
THE MUIRFIELD FUND
-------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988*
---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $5.73 $5.34 $5.36 $6.25 $6.43 $5.22 $5.84 $5.31 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.10 0.06 0.14 (0.01) 0.06 0.07 0.22 0.10 0.08
Net Gains or (Losses) on Securities
(both realized an d unrealized) 0.25 1.31 0.00 0.45 0.34 1.41 (0.10) 0.62 0.23
- -----------------------------------------------------------------------------------------------------------------------

Total From Investment Operations 0.35 1.37 0.14 0.44 0.40 1.48 0.12 0.72 0.31
- -----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.10) (0.06) (0.14) (0.02) (0.06) (0.27) (0.10) (0.08) -
Distributions (form capital gains) (0.51) (0.92) (0.02) (1.31) (0.52) - (0.64) (0.11) -
- -----------------------------------------------------------------------------------------------------------------------

Total Distributions (0.61) (0.98) (0.16) (1.33) (0.58) (0.27) (0.74) (0.19) -
- -----------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE, END OF PERIOD $5.47 $5.73 $5.34 $5.36 $6.25 $6.43 $5.22 $5.84 $5.31
- -----------------------------------------------------------------------------------------------------------------------

Total Return 5.99% 25.82% 2.70% 8.11% 6.91% 29.83% 2.33% 13.95% 6.20%
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Net Assets, End of Period ($000) 121,335 111,751 83,119 73,063 55,280 43,276 29,482 26,031 24,589
Ratio of Expenses to Average Net Assets 1.19% 1.26% 1.22% 1.26% 1.40% 1.50% 1.52% 1.53% 1.42%+
Ratio of Net Income (Loss) to Average
Net Assets 1.54% 0.97% 2.55% (0.13%) 1.05% 1.25% 4.46% 1.65% 5.02%+
Portfolio Turnover Rate 297% 186% 168% 280% 324% 107% 649% 202% 63%

<FN>
*For the period August 10, 1988 to December 31, 1988
+Annualized

Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information Dated April 30, 1997.
</FN>
</TABLE>

4
<PAGE>

- --------------------------------------------------------------------------------
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------

THE MUIRFIELD FUND VS. THE S&P 500 COMPOSITE STOCK THE MUIRFIELD FUND
PRICE INDEX, AND MORNINGSTAR'S AVERAGE ASSET ALLOCATION FUND AVERAGE ANNUAL
The Growth of $10,000 (8/10/88* to 12/31/96) TOTAL RETURNS FOR
TOTAL RETURN THE PERIODS ENDED
DECEMBER 31, 1996
The The S&P Morningstar's
Muirfield 500 Composite Average Asset
Fund Stock Price Index Allocation Fund 1 YEAR
---- ----------------- --------------- ------
5.99%
$10,000 $10,000 $10,000
1988 $10,620 $10,382 $10,270
1989 $12,101 $13,671 $12,022 5 YEARS
1990 $12,383 $13,244 $12,176 -------
1991 $16,077 $17,281 $14,969 9.61%
1992 $17,188 $18,598 $16,216
1993 $18,582 $20,469 $18,104
1994 $19,084 $20,739 $17,787 INCEPTION
1995 $24,011 $28,523 $22,086 (8/10/88)
1996 $25,450 $35,069 $24,836 ---------
11.77%

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

The S&P 500 Composite Stock Price 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 various indexes are from the beginning or end of the month
nearest the Fund's inception to the end of the calendar year.

1996 IN REVIEW.

The total return of The Muirfield Fund was 5.99 percent during 1996. For the
same period, the return of the average asset allocation mutual fund, as reported
by Morningstar, Inc., was 12.45 percent. The S&P 500 Composite Stock Price Index
provided a total return of 22.95 percent during 1996.

Periods of volatility in the stock market during 1996 caused The Muirfield Fund
to adopt several fully or partially defensive positions over the course of the
year. The Fund achieved a partially defensive position, of as much as 50
percent, on several occasions during the first half of the year, when the
Investment Adviser's evaluation of market conditions indicated a growing level
of risk in the stock market. The Fund's only fully defensive position of 1996
came during the third quarter, from mid-July until late August. While the
Investment Adviser's evaluation of the risk present in the market improved as
the year drew to a close, the Fund did not return a fully invested position
until mid-November.

The performance comparison above includes an additional index, Morningstar's
average asset allocation mutual fund, because it is a more narrowly based index
which reflects the market sector in which the Portfolio invests.

5
<PAGE>

PERFORMANCE INFORMATION

"Total return" quotations for The Muirfield Fund will be expressed in terms
of average annual compounded rates of return for the periods quoted, and will
assume that all dividends and distributions were reinvested in additional
shares. When applicable, the periods of time shown will be for a one-year
period; a five-year period and since inception.

The total return figures included in advertisements, sales literature or
shareholder reports will be based on historical performance and are not intended
to indicate future performance.

The Muirfield Fund and the Mutual Fund 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. No such change would be
made in the Fund, or Portfolio, without 30 days 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 a corresponding
Portfolio, see "Other Information--Investment Structure."

The investment objective of the Portfolio is growth of capital. The
Portfolio will seek to attain its investment objective through investment in the
shares of open-end investment companies--commonly called mutual funds. Under
normal circumstances, at least 65% of the value of the Portfolio's total assets
will be invested in mutual funds. The underlying mutual funds will consist of
diversified mutual funds which invest primarily in common stock or securities
convertible into or exchangeable for common stock (such as convertible preferred
stock, convertible debentures or warrants) and which seek long-term growth or
appreciation, with current income typically of secondary importance. Underlying
funds may include funds which concentrate investments in a particular industry
sector, or which leverage their investments. The Portfolio will not invest in
other Funds of the Flex-funds family of funds or the Flex-Partners family of
funds, the corresponding portfolios of which are also managed by the Investment
Adviser.

6
<PAGE>

The Portfolio will generally purchase "no-load" mutual funds, which are
sold and purchased without a sales charge. However, the Portfolio may purchase
"load" mutual funds only if the load, or sales commission, is by previous
agreement waived for purchases or sales made by the Portfolio.

The Portfolio may at times desire to gain exposure to the stock market
through the purchase of "Index" funds (funds which purchase stocks represented
in popular stock market averages) with a portion of its assets. "Index" funds
may be purchased with a portion of the Portfolio's assets at times when the
Investment Adviser's selection process identifies the characteristics of a
particular index to be more favorable than those of other mutual funds available
for purchase. If, in the Investment Adviser's opinion, the Portfolio should have
exposure to certain stock indices and the Portfolio can efficiently and
effectively implement such a strategy by directly purchasing the common stocks
of a desired index for the Portfolio itself, it may do so.

An investor in the Fund should recognize that he may invest directly in
mutual funds and that by investment in mutual funds indirectly through the
Portfolio, he will bear not only his proportionate share of the expenses of the
Portfolio (including operating costs and investment advisory and administrative
fees) but also indirectly similar expenses of the underlying mutual funds.

See the Trust'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 Mutual Fund 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.

7
<PAGE>

o Repurchase Agreements Pertaining to the Above -- The Portfolio may
invest without limit in any of the above securities subject to
repurchase agreements with any Federal Reserve reporting dealer or
member bank of the Federal Reserve System. Repurchasing agreements
usually are for short periods, such as one week or less, but could be
longer. The Portfolio will not invest more than 10% of its net assets,
at time of purchase, in repurchase agreements which mature in excess
of seven days or in other illiquid or not readily marketable
securities.

The Fund is an asset allocation fund. The Manager's tactical asset
allocation discipline, called "defensive investing", has addressed the asset
allocation decision by making shifts in the mix of stocks, bonds and cash in a
portfolio.

HEDGING STRATEGIES

The Portfolio may engage in hedging transactions in carrying out their
investment policies. A hedging program may be implemented for the following
reasons: (1) To protect the value of specific securities owned or intended to be
purchased while the Investment Adviser is implementing a change in the
Portfolio's investment position; (2) To protect portfolio values during periods
of extraordinary risk without incurring transaction costs associated with buying
or selling actual securities; and (3) 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.

Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Accordingly, these financial futures contracts or related options used by the
Portfolio to implement is 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, or which it intends to
purchase, and where the transactions are economically appropriate to the
reduction of risks inherent in the ongoing management of the Portfolio.

8
<PAGE>

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.

RISK FACTORS

The Mutual Fund Portfolio will be invested in securities which fluctuate in
market value, so net asset value per share will fluctuate as well. If the
underlying fund performs poorly, this could negatively affect the value of the
Portfolio. Thus, 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 a selection of diversified
funds and, at times, the use of hedging techniques and defensive investment
strategies. Hedging involves risks which are not present in some other mutual
funds with similar objectives (See "Hedging Strategies.")

Although the Portfolio will invest in a number of underlying mutual funds,
this practice will not eliminate investment risk. To the extent that the Mutual
Fund Portfolio invests in underlying funds which leverage investments or
concentrate investments in one industry, an investment in the Portfolio will
indirectly entail the additional risks associated with these practices.
Leveraged mutual funds may have higher volatility than the over-all market or
other mutual funds. This may result in greater gains or losses than the over-all
market or other non-leveraged mutual funds. Mutual funds which concentrate
investments in a single industry lack normal diversification and are exposed to
losses stemming from negative industry-wide developments.

The Portfolio may invest in private placement commercial paper and
repurchase agreements with banks and securities brokers.

9
<PAGE>

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.

PORTFOLIO TURNOVER

This defensive investment strategy can produce high portfolio turnover
ratios when calculated in accordance with SEC rules. However, viewed in terms of
"round trips", The Mutual Fund completed one "round trip" in the stock market
during the year ended December 31, 1996.

The Portfolio's portfolio turnover rate for 1996 was 297%. The Portfolio's
annual portfolio turnover rate is not expected to exceed 300%.

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

10
<PAGE>

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.

Robert S. Meeder, Jr., is the portfolio manager primarily responsible for
the day-to-day management of the Mutual Fund Portfolio. Mr. Meeder is a Trustee
and Vice President of The Flex-funds, Trustee and Vice President of the Mutual
Fund Portfolio and President of R. Meeder & Associates, Inc. Mr. Meeder has been
associated with the Manager since 1983 and has managed the Portfolio since 1988.

The Manager earns an annual fee, payable in monthly installments, for the
Portfolio 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. These fees are higher than the fees charged to most other investment
companies.

11
<PAGE>

Agreement. 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
administrative fee, payable monthly, of .05% 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, 1996, total payments to Mutual
Funds Service Co. amounted to $206,826 for the Fund and Portfolio collectively.

Information concerning the Trustees and officers of both the Trust and the
Portfolio appears in the Statement of Additional Information.

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

The Trust has adopted a distribution expense plan (the "Plan") which
authorizes The Muirfield 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 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
Trustees) 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 Muirfield 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.

12
<PAGE>

Total payments made in The Muirfield Fund under the Plan for the period
ended December 31, 1996, as a percentage of average net assets, amounted to
0.13%. (See "Synopsis of Financial Information.")

- --------------------------------------------------------------------------------
INCOME DIVIDENDS 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 Mutual Fund Portfolio, less expenses. The Fund also intends to
distribute its net capital gains, if any, to its shareholders annually.

The Muirfield 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, 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 Muirfield 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. In the case of The
Muirfield Fund, which frequently liquidates its portfolio for defensive purposes
and therefore tends not to realize large capital gains accumulated over a long
period of time, the effect is not expected to be substantial.

13
<PAGE>

The Trust files federal income tax returns for each of its Funds. Each 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. 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 fourteen fiscal years.

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

- --------------------------------------------------------------------------------
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, nonassessable and fully
transferable when issued. All shares are issued as full or fractional shares.

14
<PAGE>

15
<PAGE>

INVESTMENT STRUCTURE

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 objective, 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.

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
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," the Fund's investment
objective 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" and
"Officers and Trustees" in the Statement of Additional Information.

16
<PAGE>

- --------------------------------------------------------------------------------
SHAREHOLDER MANUAL
- --------------------------------------------------------------------------------

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

Shares are offered continuously and sold without a direct sales charge,
although the Fund 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
Muirfield Fund are sold at the net asset value per share next determined after
receipt by The Muirfield Fund or the authorized service agent or sub-agent of
both a purchase order and payment. (See "How Net Asset Value is Determined.")

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 Muirfield 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

STAR BANK, N.A. CINTI/TRUST
(ABA #: 042-00001-3)
ATTENTION: THE FLEX-FUNDS
MUIRFIELD FUND
Credit Account Number (account number for Fund as follows):
Muirfield Fund--
Account Number 930-5731
Account Name (your name)
Personal Account No. (your Muirfield Fund account number)

17
<PAGE>

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

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

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

WHEN PURCHASES ARE EFFECTIVE--New account applications for The Muirfield
Fund, when accompanied by payment, are accepted immediately and the shares are
priced at the next determined net asset value per share. Subsequent purchase
orders are handled the same way, except on purchases made by telephone, payment
is due within one business day.

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

18
<PAGE>

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 Trust 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 Trust may waive these requirements in certain instances.

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

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.")

19
<PAGE>

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
- --------------------------------------------------------------------------------

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.

BY MAIL:

BY TELEPHONE:

Exchange requests may be made by telephone: call 1-800-325-FLEX, or call
(614) 760-2159. 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.

20
<PAGE>

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 Fund reserves the right to reject any exchange
request and to limit a shareholder's use of the exchange privilege.

- --------------------------------------------------------------------------------
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), Simple IRA and a Simplified Employee
Pension (SEP) Plan. 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) 760-2159.

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

21
<PAGE>

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 having a value of at least
$10,000 and advise the Trust 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 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.

- --------------------------------------------------------------------------------
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.

22
<PAGE>

INVESTMENT ADVISER
R. Meeder & Associates, Inc.

ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-760-2159 (in Central Ohio)

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
614-760-2159 (in Central Ohio)

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

TABLE OF CONTENTS
Page
Highlights..............................2
Synopsis of Financial Information.......3
Financial Highlights....................4
Performance Comparison..................5
Investment Objectives and Policies......6
Additional Investment Policies..........7
The Trust and Its Management...........10
Distribution Plan......................12
Income Dividends and Taxes.............13
How Net Asset Value is Determined......14
Other Information......................14
SHAREHOLDER MANUAL
How to Buy Shares......................17
How to Make Withdrawals (Redemptions)..19
Exchange Privilege.....................20
Flex-funds Retirement Plans............21
Other Shareholder Services.............21
Shareholder Accounts...................22

THE FLEX-FUNDS

THE MUIRFIELD FUND

PROSPECTUS

APRIL 30,1997

<PAGE>

THE FLEX-FUNDS
6000 Memorial Drive
Dublin, Ohio 43017
Statement of Additional Information
April 30, 1997

This Statement of Additional Information pertains to the following Funds of The
Flex-funds: The Muirfield Fund, The U.S. Government Bond Fund and The Money
Market Fund. This Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Prospectus of each respective Fund dated
April 30, 1997. A copy of each Fund's Prospectus may be obtained from The
Flex-funds, at the above address, or by calling: 1-800-325-FLEX, or (614)
760-2159. Capitalized terms used and not otherwise defined herein have the same
meanings as defined in the Prospectus.

TABLE OF CONTENTS
Page
----
Investment Policies and Related Matters 2
General 2
Defensive Investing 2
The Mutual Fund Portfolio 4
The Money Market Portfolio 6
Money Market Instruments and Bonds 6
Ratings 8
Hedging Strategies 11
Investment Restrictions 14
Portfolio Turnover 16
Purchase and Sale of Portfolio Securities 17
Valuation of Portfolio Securities 18
Calculation of Yield - The Money Market Fund 18
Calculation of Total Return 19
Calculation of Yield - The U.S. Government
Bond Fund 20
Investment Adviser and Manager 21
Officers and Trustees 23
Distribution Plans 27
Flex-funds Retirement Plans 29
Other Services 31
Principal Holders of Outstanding Shares 32
Additional Information 33
Financial Statements 33

<PAGE>

- --------------------------------------------------------------------------------
INVESTMENT POLICIES AND RELATED MATTERS
- --------------------------------------------------------------------------------

GENERAL

As described in the Prospectus, the Trust seeks to achieve the investment
objective of each Fund by investing all of its investable assets in a
corresponding Portfolio having the same investment objective, policies and
restrictions as that Fund. Since the investment characteristics of the Funds
correspond directly to those of each Fund's respective Portfolio, the following
is a discussion of the various investments of and techniques employed by the
Portfolios.

The investment policies set forth below in this section represent the
Portfolios' policies as of the date of this Statement of Additional Information.
The investment policies are not fundamental and they may be changed by the
Trustees of the Portfolios without shareholder approval. (No such change would
be made, however, without 30 days' written notice to shareholders.) The Manager
of the Portfolios places a high degree of importance on protecting portfolio
values from severe market declines. Consequently, a Portfolio's assets may at
times be invested for defensive purposes in bonds and money market instruments
(See "Defensive Investment Strategy" and "Money Market Instruments and Bonds,"
below.)

All Portfolios intend 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 a Portfolio's investments. All
Portfolios will strive for a positive investment return each calendar year.

DEFENSIVE INVESTMENT STRATEGY

The Flex-funds are asset allocation mutual funds. The Manager has been
involved in the application of tactical asset allocation with over 20 years
experience managing market risk in all stock and bond market conditions.

Studies have reviewed the importance of the asset allocation decision. The
Manager believes the choice of the correct asset class has often contributed
more to investment performance than the selection of a sector or individual
security. Yet the typical investor and mutual fund manager often focus instead
on an individual security or sector.

2
<PAGE>

Since 1974, the Manager's tactical asset allocation discipline, called
"Defensive Investing", has addressed the asset allocation decision by making
shifts in the mix of stocks, bonds and cash in a portfolio. "Defensive
Investing" is based on mathematical principles and historical precedent.

The Manager's tactical asset allocation discipline is based upon daily
monitoring of over 50 technical and fundamental market indicators. Among the
factors that the Manager monitors in an attempt to assess the current market
environment are the following:

o INDEX EVALUATION. The trend of stock market indexes and comparative
analysis of the various indexes to evaluate the markets relative
strengths and weaknesses.

o DIVERGENT MARKET ACTIVITY. Comparison of internal measurements of the
market to the trend of prices.

o MONETARY AND INTEREST RATE TRENDS. The trends of interest rates and
monetary conditions.

o INVESTOR SENTIMENT. The effect of current opinion on the market
environment.

o VOLUME RELATIONSHIP TO PRICE. Comparison of volume measurements to
price trends.

o EXTREME MARKET ACTIVITY. Short-term overbought or oversold
conditions.

The Manager maintains the flexibility to be fully invested in the stock or
bond markets during favorable market conditions.

The stock market has historically offered returns that have exceeded those
available from bonds or money market instruments. Through the Manager's asset
allocation process, it strives to protect shareholders during unfavorable, high
risk markets and participate in rising low risk markets.

Investors seeking a higher level of income than Treasury bills or money
market instruments have often invested in intermediate to long-term bonds. Bond
investors have historically been most vulnerable not to defaults on individual
bonds, but to changes in interest rates that drive bond prices up or down.

The Manager believes the appropriate way to defend assets against shifts in
interest rates is to be invested in long-term bonds only when the trend of
interest rates is stable or declining. To determine the bond market environment,
the Manager monitors the following technical indicators:

3
<PAGE>

o MOMENTUM. The trend of bond prices versus various moving
averages.

o REAL RATES. The 10-year treasury bond yield as compared to the
inflation rate.

o YIELD SPREAD. The 10-year treasury bond yield as compared to the
T-bill yield.

"Defensive Investing" examines and incorporates past market history in
order to learn something about the markets of the future.

For example, the gains offered by the U.S. stock market during the 1980s
were surpassed only by the returns available during the 1950s. Therefore, the
Manager believes that the stock market of the 1990s will look less like the
1980s and more like the historical average in terms of returns and volatility.

Further, there has never been a time when investors in U.S. bonds have been
rewarded as well as they were during the 1980s. The Manager believes absolute
returns for bond investors in the 1990s will decrease from the 1980s. In order
for the 1990s returns to approach those of the 1980s, long-term interest rates
would have to fall below 3%.

DECADES OF THE PAST

STOCKS BONDS
--------------------------------------
DOWN DOWN
DECADE RETURN YEARS RETURN YEARS
- ---------------------------------------------------------------------------
1980s 405.5% 1 220.8% 1
1970s 77.4% 3 70.8% 3
1960s 111.9% 3 14.9% 3
1950s 488.0% 2 (1.0%) 2
1940s 141.1% 3 37.0% 3
1930s (1.0%) 6 61.3% 6
- ---------------------------------------------------------------------------
Source: DeMarche Associates

The Flex-funds will strive to reduce or eliminate downside risk during
adverse stock, bond and foreign currency markets and to participate in positive
risk reward market conditions, without excessive risk to principal.

THE MUTUAL FUND PORTFOLIO

The Manager will select mutual funds for inclusion in the Mutual Fund
Portfolio on the basis of the industry classifications represented in their
portfolios, their specific portfolio holdings, their performance records, their
expense ratios, and the compatibility of their investment policies and
objectives with those of the Mutual Fund Portfolio.

4
<PAGE>

The Manager utilizes an asset allocation system for deciding when to invest
in mutual funds or alternatively in temporary investments such as are described
below. The use of this system entails recurring changes from a fully invested
position to a fully defensive position and vice-versa. (See "Additional
Investment Policies" in the Fund's Prospectus.)

In purchasing shares of other mutual funds the Mutual Fund Portfolio will
agree to vote the shares in the same proportion as the vote of all other holders
of such shares.

The Mutual Fund Portfolio has adopted certain investment restrictions which
cannot be changed except with the vote of a majority of the Mutual Fund
Portfolio's outstanding shares. These restrictions are applicable to the Mutual
Fund Portfolio and are described elsewhere in this Statement of Additional
Information. Investment restrictions for the Mutual Fund Portfolio differ from
the restrictions applicable to the other Portfolios, in that the Mutual Fund
Portfolio is permitted to invest more than 5% of its assets in the securities of
any one issuer; is permitted to purchase the shares of other investment
companies (mutual funds); and may invest more than 25% of its assets in any one
industry.

The Mutual Fund Portfolio may only purchase up to 3% of the total
outstanding securities of any underlying mutual fund. The holdings of any
"affiliated persons" of the Trust and the Portfolios, as defined in the
Investment Company Act, must be included in the computation of the 3%
limitation. Accordingly, when "affiliated persons" hold shares of an underlying
mutual fund, the Mutual Fund Portfolio will be limited in its ability to fully
invest in that mutual fund. The Manager may then, in some instances, select
alternative investments.

The Investment Company Act also provides that an underlying mutual fund
whose shares are purchased by the Mutual Fund Portfolio may be allowed to delay
redemption of its shares in an amount which exceeds 1% of its total outstanding
securities during any period of less than 30 days. Shares held by the Mutual
Fund Portfolio in excess of 1% of a mutual fund's outstanding securities
therefore may not be considered readily disposable securities.

Under certain circumstances, an underlying mutual fund may determine to
make payment of a redemption by the Mutual Fund Portfolio wholly or partly by a
distribution in kind of securities from its portfolio, in lieu of cash, in
conformity with rules of the Securities and Exchange Commission. In such cases
the Mutual Fund Portfolio may hold securities distributed by an underlying
mutual fund until the Manager determines that it is appropriate to dispose of
such securities.

5
<PAGE>

Portfolio investment decisions by an underlying mutual fund will be made
independent of investment decisions by other underlying mutual funds. Therefore,
an underlying mutual fund may be purchasing shares of a company whose shares are
simultaneously being sold by some other underlying mutual fund. The result of
this would be an indirect transaction expense (principally commissions) for the
Mutual Fund Portfolio, without its having changed its investment position.

The Mutual Fund Portfolio may invest in common stocks based upon the
criteria described in its investment objectives. Because the Mutual Fund
Portfolio will only invest directly in common stocks to replicate the
performance of popular stock market indices the selection of stocks would be
limited to those stocks found in a particular index. Generally, investments in
common stocks will not exceed 25% of the Portfolio's net assets.

For temporary defensive purposes, the Mutual Fund Portfolio may invest in
(or enter into repurchase agreements with banks and broker-dealers with respect
to) corporate bonds, U.S. Government securities, commercial paper, certificates
of deposit or other money market instruments. The Mutual Fund Portfolio may
engage in hedging transactions to the extent and for the purposes set forth in
the Fund's Prospectus.

THE MONEY MARKET PORTFOLIO

The Money Market Portfolio seeks to maintain a constant net asset value of
$1.00 per share, although there is no assurance it will be able to do so. To do
so, the Portfolio utilizes the amortized cost method of valuing its portfolio
securities pursuant to a rule adopted by the Securities and Exchange Commission.
The rule also prescribes portfolio quality and maturity standards. The Portfolio
will be managed in accordance with the requirements of this rule.

MONEY MARKET INSTRUMENTS AND BONDS

THE MUTUAL FUND AND MONEY MARKET PORTFOLIOS

When investing in money market instruments or bonds, the Mutual Fund and
Money Market Portfolios will limit their 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.

6
<PAGE>

* Bank Obligations and Instruments Secured Thereby - Bank obligations
and instruments secured thereby are 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. A 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. A Portfolio will not invest at time
of purchase more than 25% of its assets in obligations of banks, nor
will a Portfolio invest more than 10% of its assets in time deposits.

* High Quality Commercial Paper - The Mutual Fund 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.

* High Quality Commercial Paper - The Money Market Portfolio, which is
subject to specific quality criteria and diversification requirements,
may invest in commercial paper rated in either one of the two highest
categories by at least two nationally recognized rating services, or,
if not rated, guaranteed by a company having commercial paper rated in
either one of the two highest categories by at least two nationally
recognized rating services. See The Money Market Portfolio above.

* Private Placement Commercial Paper - Private placement commercial
paper ("Rule 144A securities") consists of unregistered securities
which are traded in public markets to qualified institutional
investors, such as The Mutual Fund Portfolio. A 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 - Each of these three Portfolios may
invest in high grade corporate obligations. High grade corporate
obligations are obligations rated at least A by Standard & Poor's or
Moody's. See rating information below.

* Repurchase Agreements Pertaining to the Above - Each of these three
Portfolios may invest without limit in any of the above securities
subject to repurchase agreements with any Federal Reserve reporting
dealer or member bank of the Federal Reserve System.

7
<PAGE>

A repurchase agreement is an instrument under which the purchaser
(i.e., a Portfolio) acquires ownership of a debt security and the
seller agrees, at the time of the sale, to purchase the obligation at
a mutually agreed upon time and price, thereby determining the yield
during the purchaser's holding period. This results in a fixed rate of
return insulated from market fluctuations during such period. The
underlying securities could be any of those described above, some of
which might bear maturities exceeding one year. A 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 each
Portfolio to make settlement on repurchase agreements only upon proper
delivery of the underlying collateral. Repurchase agreements usually
are for short periods, such as one week or less, but could be longer.
A Portfolio may enter into repurchase agreements with its custodian
(Star Bank, N.A., Cincinnati) when it is advantageous to do so. No
Portfolio will invest more than 10% of its assets, at time of
purchase, in repurchase agreements which mature in excess of seven
days.

THE BOND PORTFOLIO

When investing in money market instruments, The Bond Portfolio will limit
its purchases, denominated in U.S. dollars, to securities which are issued, or
guaranteed as to payment of principal and interest, by the U.S. government or
any of its agencies or instrumentalities, and repurchase agreements relating
thereto. Unlike the other Portfolios, The Bond Portfolio (whether invested
defensively or otherwise) may not invest in bank obligations and instruments
secured thereby, high quality commercial paper, private placement commercial
paper or corporate obligations. The provisions relating to repurchase agreements
in the immediately preceding paragraph also apply to The Bond Portfolio's
investment in repurchase agreements.

The Manager exercises due care in the selection of money market instruments
and bonds. 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 a 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 a particular 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 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.

8
<PAGE>

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 greeter 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 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.

9
<PAGE>

3. A-1 and P-1 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 - A repurchase transaction occurs when an investor
buys a security and simultaneously agrees to resell it at a later date to the
person from whom it was bought, at a higher price. The price differential
represents interest for the period the security is held. Repurchase transactions
will normally be entered into with banks and securities brokers. A Portfolio
could suffer a loss if the bank or securities broker with which the Portfolio
had a repurchase agreement were to default.

10
<PAGE>

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.

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.

HEDGING STRATEGIES

The Investment Adviser may conduct a hedging program on behalf of a
Portfolio for any of the reasons described in the Prospectus. Such a program
would involve entering into options, futures or forward contracts (hedge
transactions).

Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Financial futures contracts or related options used by a 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 objective of an option, futures or forward contract transaction could
be to protect a profit or offset a loss in a Portfolio from future price
erosion. Or, the objective could be to acquire the right to purchase a fixed
amount of securities or currency at a future date for a definite price. In
either case it would not be necessary for a Portfolio to actually buy or sell
the securities or currency currently. Instead, the hedge transaction would give
the Portfolio the right at a future date to sell, or in other instances buy, the
particular securities or currency under consideration or similar securities. The
value of shares of common stock, the face amount of currency or the face amount
of government bonds or notes covered by the hedge transaction would be the same
or approximately the same, as the quantity held by the Portfolio or the quantity
under consideration for purchase.

In lieu of the sale of a security or currency, an option transaction could
involve the purchase of a put option contract, which would give a Portfolio the
right to sell a common stock, government bond, currency or futures contract on
an index (see below), at a specified price until the expiration date of the
option. A Portfolio will only purchase a put option contract on a stock,
currency or bond when the number of shares of the issuer's stock, face amount of
currency or the face amount of government bonds involved in the option
transaction are equal to those owned by the Portfolio. Limitations on the use of
put option contracts on an index are described below.

11
<PAGE>

Also, in lieu of the sale of securities or currency, a futures transaction
could involve the sale of a futures contract which would require a Portfolio
either (a) to deliver to the other party to the contract the securities
specified and receive payment at the price contracted for, prior to the
expiration date of the contract, or (b) to make or entitle it to receive
payments representing (respectively) the loss or gain on the currency, security
or securities involved in the futures contract.

Also, in lieu of the sale of a currency, a forward contract could involve
the sale of a currency for future delivery. A forward contract will specify a
specific price and a specific date for the transaction to occur. A forward
contract will only be entered into for specific amounts of currency which match
the amount of foreign currency which the Portfolio will possess on the delivery
date. Entering into a forward contract will reduce the affect on net asset
values of currency exchange rates on the portion of the currency which is sold.

The securities involved in an option or futures contract may be currency,
stocks or government bonds, or a group of stocks represented by a popular stock
market index, and they need not be exactly the same as those owned by a
Portfolio. The Investment Adviser will select the futures contract which
involves a security, group of securities, or index which it feels is closest to
a mirror image of the investments held by the Portfolio. However, the securities
involved in the contract need not be exactly the same as those owned by a
Portfolio, and this may entail additional risk, as described below.

To the extent that a Portfolio enters into futures contracts which sell an
index or group of securities short and which therefore could require the
Portfolio to pay the other party to the contract a sum of money measured by any
increase in a market index, the Portfolio will be exposing itself to an
indeterminate liability. On the other hand, a Portfolio should increase or
decrease in value to approximately the same extent as the market index or group
of securities, so any loss incurred on the contract should be approximately
offset by unrealized gains in Portfolio positions. Such an outcome is not
guaranteed, and it would be possible for the value of the index and the
Portfolio to move in opposite directions, in which case the Portfolio would
realize an unexpected gain or loss.

A Portfolio will only sell an index short when the Investment Adviser has
decided to reduce a Portfolio's risk for defensive purposes, and will close out
the open liability as soon as the Investment Adviser decides that a defensive
posture is no longer appropriate or the open liability represents an
inappropriate risk in the circumstances. In shorting an index, a Portfolio will
segregate assets to the full value of the contract and maintain and supplement
such segregation to the extent necessary until the short position is eliminated.

In lieu of the purchase of a security or currency, an option transaction
could involve the purchase of a call option which would give the Portfolio the
right to buy a specified security (common stock or government bonds) or currency
or index aggregate at a specified price until the expiration date of the option
contract. Sufficient cash or money market instruments will be segregated and
maintained in reserve to complete the purchase. The Portfolio will only purchase
call options when the shares of stock or face amount of currency or face amount
of bonds or value of the index aggregate included in the option are equal to
those planned to be purchased by the Portfolio.

12
<PAGE>

In lieu of the purchase of securities or currency, a futures transaction
could involve the purchase of a futures contract which would either (a) require
the Portfolio to receive and pay for the securities or currency specified in the
futures contract at the price contracted for prior to the expiration date of the
contract or (b) require the Portfolio to make payment or receive payment
representing (respectively) the loss or gain on the currency, security or
securities involved in the contract. The securities may be government bonds,
stocks, or a group of stocks such as a popular stock market index, and need not
be exactly the same as those intended to be purchased by the Portfolio. The
Investment Adviser will select the contract (therefore the group of securities)
which it believes is most similar to those desired to be purchased by the
Portfolio.

Also, in lieu of the purchase of a currency, a forward contract could
involve the purchase of a currency for future delivery. A forward contract will
specify a specific price and a specific date for the transaction to occur. A
forward contract will only be entered into for specific amounts of currency
which match the amount of foreign currency which the Portfolio will need to
possess on the delivery date. Entering into a forward contract for the purchase
of a foreign currency will cause the fluctuations of currency exchange rates to
affect the net asset value for the portion of the currency which is purchased.

A Portfolio may sell any put or call option contracts it enters into. Such
a transaction would normally be used to eliminate or close out a hedged
position. A Portfolio may also buy or sell futures contracts to eliminate or
close out a hedged position.

Option contracts will be purchased through organized exchanges and will be
limited to those contracts which are cleared through the Options Clearing
Corporation. Organized exchanges which presently trade option contracts are the
Chicago Board Options Exchange, the American Stock Exchange, the Philadelphia
Stock Exchange, the Pacific Stock Exchange, and the New York Stock Exchange.

Futures contracts will only be entered into through an organized exchange.
The exchanges which presently trade financial futures contracts are the New York
Futures Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade,
the Kansas City Board of Trade, and the International Monetary Market (at the
Chicago Mercantile Exchange).

Forward contracts for foreign currency will only be entered into with
security brokers which are also primary dealers for U.S. Government securities
as recognized by the U.S. Federal Reserve Banks or U.S. banks which are members
of the Federal Reserve System.

13
<PAGE>

Put and call options and financial futures contracts are valued on the
basis of the daily settlement price or last sale on the exchanges where they
trade. If an exchange is not open, or if there is no sale, the contract is
valued at its last bid quotation unless the Trustees determine that such is not
a fair value. Forward contracts are valued based upon currency dealer quotations
for reversing the position. In the case of a futures contract which entails a
potential liability for a gain in a market index, the liability is valued at the
last sale of an offsetting contract or if there was no sale, at the last asked
quotation unless the Trustees determine that such does not fully reflect the
liability.

In conducting a hedging program for the Portfolios, the Investment Adviser
may occasionally buy a call on an index or futures contract and simultaneously
sell a put on the same index or futures contract. Or, in other circumstances, it
may sell a call and simultaneously buy a put on the same index or futures
contract.

When conducting a hedging program on behalf of a Portfolio, the Portfolio
will establish and maintain with the Custodian segregated accounts for the
deposit and maintenance of margin requirements. Such deposits will be in the
form of cash or U.S. Government securities in amounts as shall be required from
time to time by the broker or the exchange on which the transactions are
effected for the Portfolio.

INVESTMENT RESTRICTIONS

The investment restrictions below have been adopted by the Trust with
respect to each of the Funds and by the Portfolios as fundamental policies.
Under the Investment Company Act of 1940 (the "Act"), a "fundamental" policy may
not be changed without the vote of a majority of the outstanding voting
securities of the Fund or Portfolio, respectively, to which it relates, which is
defined in the Act as the lesser of (a) 67 percent or more of the shares present
at a shareholder meeting if the holders of more than 50 percent of the
outstanding shares are present or represented by proxy, or (b) more than 50
percent of the outstanding shares ("Majority Voters). The percentage limitations
contained in the restrictions listed below apply at the time of the purchase of
the securities. Whenever a Fund is requested to vote on a change in the
investment restrictions of a Portfolio, the Trust will hold a meeting of Fund
shareholders and will cast its votes as instructed by the shareholders.

Provided that nothing in the following investment restrictions shall
prevent the Trust from investing all or part of a Fund's assets in an open-end
management investment company with the same investment objective or objectives
as such Fund, no Fund or Portfolio may: (a) Issue senior securities; (b) Borrow
money except as a temporary measure, and then only in an amount not to exceed 5%
of the value of its net assets (whichever is less) taken at the time the loan is
made, or pledge its assets taken at value to any extent greater than 15% of its
gross assets taken at cost; (c) Act as underwriter of securities of other
issuers; (d) Invest in real estate except for office purposes; (e) Purchase or
sell commodities or commodity contracts, except that it may purchase or sell
financialfutures contracts involving U.S. Treasury Securities, corporate
securities, or financial indexes; (f) Lend its funds or other assets to any
other person; however, the purchase of a portion of publicly distributed bonds,

14
<PAGE>

debentures or other debt instruments, the purchase of certificates of deposit,
U.S. Treasury Debt Securities, and the making of repurchase agreements are
permitted (except in the case of The Bond Portfolio which is not permitted to
purchase corporate bonds, debentures or other corporate debt instruments; and
certificates of deposit), provided repurchase agreements with fixed maturities
in excess of 7 days do not exceed 10% of its total assets; (g) Purchase more
than 10% of any class of securities, including voting securities of any issuer,
except that the purchase of U.S. Treasury debt instruments shall not be subject
to this limitation; (h) Invest more than 5% of its total assets (taken at value)
in the securities of any one issuer, other than obligations of the U.S.
Treasury; provided, however, that this restriction shall not be applicable to
any separate investment series of the Trust or a Portfolio which is created
specifically to invest in the shares of other investment companies; (i) Purchase
any securities on margin, or participate in any joint or joint and several
trading account, provided, however, that it may open a margin account to the
extent necessary to engage in hedging transactions which are not precluded by
other particular restrictions; (j) Make any so-called "short" sales of
securities, except against an identical portfolio position (i.e., a "short sale
against the box"), but this restriction shall not preclude a futures contract
which sells short an index or group of securities; (k) Invest more than 25% of
its total assets at time of purchase (taken at value) in the securities of
companies in any one industry provided, however, that this restriction shall not
be applicable to any separate investment series of the Trust or a Portfolio
which is created specifically to invest in the shares of other investment
companies; (l) Purchase the securities of another investment company except
where such purchase is part of a plan of merger or consolidation; provided,
however, that this restriction shall not be applicable to any separate
investment series of the Trust or a Portfolio which is created specifically to
invest in the shares of other investment companies; (m) Purchase or retain any
securities of an issuer, any of whose officers directors or security holders is
an officer or director of the Trust or a Portfolio, if such officer or director
owns beneficially more than 1/2 of 1% of the issuer's securities or together
they own beneficially more than 5% of such securities; (n) Invest in securities
of companies which have a record of less than three years' continuous operation
if, at the time of such purchase, more than 5% of its assets (taken at value)
would be so invested- (o) Purchase participations or other direct interests in
oil, gas or other mineral exploration or development programs; (p) Invest in
warrants; and (q) Invest more than 10% of its assets in restricted securities
and securities for which market quotations are not readily available and
repurchase agreements which mature in excess of seven days; however, this shall
not prohibit the purchase of money market instruments or other securities which
are not precluded by other particular restrictions.

In order to comply with certain state investment restrictions, each of the
Trust's and the Portfolios' operating policy is not to: (a) Notwithstanding (b)
above, pledge assets having a value in excess of 10% of its gross assets; (b)
Invest in oil, gas or mineral Leases or programs; and (c) Purchase real estate
Limited partnerships.

15
<PAGE>

PORTFOLIO TURNOVER

The portfolio turnover rate for the fiscal year ended December 31, 1996, in
the Mutual Fund Portfolio was 297% (1995 - 186%); and in the Bond Portfolio was
779% (1995 - 232%). 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 the Mutual Fund and Bond Portfolios to change their portfolios
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.

THE MUTUAL FUND PORTFOLIO. The Portfolio began the year fully invested in
the stock market. For approximately two months (early March through early May)
50% of the Portfolio's assets were invested defensively in money market
securities. Also, in the period from mid-July through October, various portions
of the Portfolio were invested defensively in cash equivalents and/or Treasury
Bonds. The periods of defensive positions in March-May and July-October were in
response to technical weakness and negative trends in the equity markets.

The Mutual Fund Portfolio has an investment objective of long term growth
of capital. Major changes in its portfolio has resulted in portfolio turnover
rates of as much as 649%, which is greater than that of most other investment
companies, including many which emphasize capital appreciation as a basic
policy.

THE BOND PORTFOLIO. The Portfolio began the year in a fully invested
posture with 100% of its investments being in ten-year U.S. Treasuries. By
mid-February the Portfolio reduced its exposure to 50%, and to a fully defensive
position by the start of March, due to concerns that the Federal Reserve would
not be reducing interest rates in the coming months. An increase in yields
ensued while the Portfolio remained defensive in short-term U.S. obligations
until late June. During June and July, exposure fluctuated between 0% and 20% as
we perceived the risk reward relationship to be either positive or negative.

During the April-June time frame the market had turned its attention to a
potential Fed rate increase. As economic data came forth during the summer,
however, the market stabilized and started a slow rally. By the first week of
October, the Portfolio was once again fully invested and remained so until the
end of the year at which point the rally had exhausted itself and a 50%
defensive position was reinstated on increasing evidence that economic growth
was greater than anticipated.

Management is presently unable to predict the portfolio turnover rate for
the current year in any of the Portfolios, as any major change in investment
posture to a defensive position, or vice versa, will result in a portfolio
turnover of 100% or more. It is conceivable that the turnover rate for one or
more of the Portfolios will exceed 700% in the current year.

16
<PAGE>

PURCHASE AND SALE OF PORTFOLIO SECURITIES

Each Portfolio seeks to obtain the best available prices on, and firm
execution of, all purchases and sales of portfolio securities. In order to do
so, it may buy securities from or sell securities to broker/dealers acting as
principals and may use primary markets in the purchase or sale of
over-the-counter securities, unless best price and execution can be obtained in
some other way.

Satisfied that it is obtaining the best available price and favorable
execution, a Portfolio may, from time to time, place orders for the purchase or
sale of portfolio securities with broker/dealers who provide research,
statistical or other financial information or services ("research") to it or to
R. Meeder & Associates, Inc. ("RMA"), or to any other client for which RMA acts
as investment adviser. The reasonableness of brokerage commissions paid by a
Portfolio in relation to transaction and research services received is evaluated
by the staff of RMA on an ongoing basis. The general level of brokerage charges
and other aspects of each Portfolio's portfolio transactions are reviewed
periodically by its Board of Trustees.

RMA is the principal source of information and advice to each Portfolio and
is responsible for making and initiating the execution of investment decisions
for each Portfolio. However, it is recognized by the Trustees that it is
important for RMA, in performing its responsibilities to each Portfolio, to
continue to receive and evaluate the broad spectrum of economic and financial
information which many securities brokers have customarily furnished in
connection with brokerage transactions and that, in compensating brokers for
their services, it is in the interest of each Portfolio to take into account the
value of the information received for use in advising each Portfolio. The
extent, if any, to which the obtaining of such information may reduce the
expenses of RMA in providing management services to each Portfolio is not
determinable. In addition, it is understood by the Trustees that other clients
of RMA might also benefit from the information obtained for a Portfolio, in the
same manner that a Portfolio might also benefit from information obtained by RMA
in performing services to others.

RMA utilizes brokers who have demonstrated an ability to execute orders on
a favorable basis, or who are able to provide research or other services. RMA
does not knowingly authorize a higher rate of commission to one broker than to
any other. In order to assure itself that a Portfolio is paying reasonable
commissions, RMA will periodically attempt to determine the rates being paid by
other institutional investors of similar size.

17
<PAGE>

Brokerage commissions paid on the purchase and sales of futures and option
contracts for the year ending December 31, 1996 were as follows: $4,766 ($10,398
in 1995) in the Bond Portfolio; and $9,964 ($30,008 in 1995) in the Mutual Fund
Portfolio.

VALUATION OF PORTFOLIO SECURITIES

Except for securities owned by The Money Market Portfolio, securities owned
by a Portfolio and listed or traded on any national securities exchange are
valued at each closing of the New York Stock Exchange on the basis of the last
sale on such exchange each day that the exchange is open for business. If there
is no sale on that day, or if the security is not listed, it is valued at its
last bid quotation on the exchange or, in the case of unlisted securities, as
obtained from an established market maker. Futures contracts are valued on the
basis of the cost of closing out the liability i.e. at the settlement price of a
closing contract or at the asked quotation for such a contract if there is no
sale. The Money Market Portfolio will value its securities by the amortized cost
method as it maintains a dollar weighted average portfolio maturity of 90 days
or less. Money market instruments (certificates of deposit commercial paper,
etc.) in the other Portfolios, having maturities of 60 days or less, are valued
at amortized cost if not materially different from market value. Portfolio
securities for which market quotations are not readily available are to be
valued by the Manager in good faith at its own expense under the direction of
the Trustees. In The Bond Portfolio, securities are valued each day at 3:00 p.m.

Other assets, which include cash, prepaid and accrued items and amounts
receivable as income on investments and from the sale of portfolio securities
are carried at book value, as are all liabilities. Liabilities include accrued
expenses, sums owed for securities purchased, and dividends payable.

18
<PAGE>

CALCULATION OF YIELD - THE MONEY MARKET FUND

The Money Market Fund calculates its yield quotations based on the net
change, exclusive of realized and unrealized gains or losses, in the value of a
hypothetical account over a seven calendar day base period. The following is an
example of the yield calculations for the seven days ended December 31, 1996.

Simple yield:

Value of hypothetical account at end of period $1.00100701
Value of hypothetical account at beginning of
period 1.00000000
----------
Base period return $ .00100701
============

Current seven day yield (.00100701 x (365/7) 5.25%

Effective yield:

Effective yield [(.00100701 + 1)365/7 ] - 1 5.39%

These yields reflect the Manager's decision to voluntarily waive a portion
of its management fee. Therefore, the Fund realized a higher yield as a result
of reduced expenses. Investors should recognize that yields are not necessarily
representative of future results, but will vary as a function of market
conditions and expenses incurred.

The Manager presently intends to waive a portion of its management fee in
the Money Market Portfolio to the extent necessary to achieve for The Money
Market Fund a compound annualized yield that will rank within the top 10% of
yields for all general purpose money market funds in 1996. There is no guarantee
that waiver of fees alone will accomplish this objective. The Manager may change
this policy at any time without notice to shareholders. This would, in some
circumstances, have an adverse effect on the net income of the Fund, and the
yields earned by shareholders. For planning purposes prospective investors and
shareholders should assume that expenses will be based on the maximum fee. (See
"Synopsis of Financial Information" in the Trust's Prospectus.)

CALCULATION OF TOTAL RETURN

From time to time The Muirfield and U.S. Government Bond Funds may
advertise their average annual total returns for various periods of time. When
applicable, depending on the Fund, the periods of time shown will be for a
one-year period; a five-year period; a ten-year period (or relevant portion
thereof) and since inception. The calculation assumes the reinvestment of all
dividends and distributions. Below is an example of the total return calculation
for The Muirfield Fund assuming a hypothetical investment of $1,000 at the
beginning of each period.

19
<PAGE>

It 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)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

THE MUIRFIELD FUND:

Total Return
---------------------------------------------------------
1 Year 5 Years 8.4 Years
Period Ended Period Ended Period Ended
December 31, 1996 December 31, 1996 December 31, 1996
----------------- ----------------- -----------------
Value of Account
At end of Period $1,059.94 $1,583.22 $2,544.95

Value of Account
At beginning of Period 1,000.00 1,000.00 1,000.00
--------- --------- --------

Base Period Return $ 59.94 $ 583.22 $1,544.95

Average Total Return 5.99% 9.61% 11.77%

Values were computed according to the following formulas:

1 Year: $1,000 (1 + .0599) = $1,059.94
5 Years: $1,000 (1 + .0961)5th power = $1,583.22
8.4 Years: $1,000 (1 + .1177)8.4th power = $2,544.95

The Total Return performance data in this hypothetical example represents past
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Total Return quotations, when advertised for The U.S.
Government Bond Fund, are calculated in the same manner as described above.

20
<PAGE>

CALCULATION OF YIELD - THE U.S. GOVERNMENT BOND FUND

From time to time The U.S. Government Bond Fund may advertise its
thirty-day yield quotation. It is computed by dividing the net investment income
per accumulation unit earned during the period by the maximum offering price per
unit on the last day of the period, according to the following formula:

YIELD = 2 [(a - b + 1)6 - 1]
--------------------
cd

a = income earned during the period
b = expense accrued for the period
c = average number of shares outstanding during the period
d = offering price per share on the last day of the period

Below is an example of calculation of The U.S. Government Bond Funds yield for
the thirty days ended December 31, 1996:

5.10% = 2 [($93,162 - 15,136 +1)6 - 1]
-------------------------------
893,826 x 20.78

Quotations of yield for The U.S. Government Bond Fund will be accompanied
by total return calculations current to the most recent calendar quarter. Total
return will be calculated in the manner described above (See "Calculation of
Total Return"). Below is an example of the total return calculation for The U.S.
Government Bond Fund assuming a hypothetical investment of $1,000 at the
beginning of each period.

THE U.S. GOVERNMENT BOND FUND:
Total Return

1 Year 5 Year 10 Year 11.65 Years
Period Ended Period Ended Period Ended Period Ended
Dec. 31, 1996 Dec. 31, 1996 Dec. 31, 1996 Dec. 31, 1996
------------- ------------- ------------- -------------

Value of Account
At end of Period $1,001.54 $1,311.07 $1,821.46 $2,243.55
Value of Account
At beginning of
Period 1,000.00 1,000.00 1,000.00 1,000.00
--------- --------- --------- ---------

Base Period Return $ 1.54 $ 311.07 $ 821.46 $1,243.55

Average Total Return 0.15% 5.57% 6.16% 7.18%

21
<PAGE>

The Total Return performance data in this hypothetical example, represents
past performance and the investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.

INVESTMENT ADVISER AND MANAGER

R. Meeder & Associates, Inc. (the 'Manager") is the investment adviser and
manager for, and has a separate Investment Advisory Contract with, each
Portfolio. Previously, the Manager managed the assets of the Funds pursuant to
separate investment advisory contracts until May of 1992, at which time the
investment by the Funds in the Portfolios was implemented.

The Investment Advisory Contract for each 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. Each of these contracts 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 outstanding shares of each 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 renewals.

Each Investment Advisory Contract will terminate automatically if assigned
and 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; 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 2/10 of 1% limitation of each Fund's Distribution Plan, including the
cost of printing and mailing of prospectuses and other materials incident to
soliciting new accounts; and other miscellaneous expenses.

The respective expenses of each Portfolio include the compensation of their
respective Trustees who are not affiliated with the Adviser; registration fees;
membership dues allocable to the Portfolio; fees and expenses of independent
accountants, of legal counsel and of any transfer agent, accountant, custodian
of the Portfolio; insurance premiums and other miscellaneous expenses.

22
<PAGE>

Expenses of each Portfolio also include all fees under its 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
Adviser under the Advisory Contract and other miscellaneous expense.

The Board of Trustees of the Trust believe that the aggregate per share
expenses of any Fund and its corresponding Portfolio will be less than or
approximately equal to the expenses which a 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 as
follows. The fee for the Mutual Fund Portfolio is based upon the average net
assets of the Portfolio and is 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 average net
assets. Annual fees for the Bond Portfolio are at the rate of 0.40% of the first
$100 million of average net assets and 0.20% in excess of $100 million. The
annual fee for the Money Market Portfolio is at the rate of 0.40% of the first
$100 million and 0.25% in excess of $100 million, of average net assets.

For the year ended December 31, 1996, the Mutual Fund Portfolio paid fees
to the Manager totaling $1,083,553 ($874,473 in 1995; $743,058 in 1994; $658,238
in 1993); in the Bond Portfolio $59,346 ($38,275 in 1995; $33,422 in 1994;
$35,998 in 1993); in the Money Market Portfolio $548,106 ($299,240 in 1995;
$243,359 in 1994; $232,839 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. The Manager's officers and
directors, and the principal offices held by each in MII are as set forth in the
Prospectus under the caption "The Trust and its Management." Mr. Robert S.
Meeder, Sr. is President and a Trustee of the Trust and each Portfolio. Mr.
Robert S. Meeder, Jr. and Philip A. Voelker each are a Trustee and officer of
the Trust and each Portfolio. Each of Messrs. Donald F. Meeder, Wesley F. Hoag
and Steven T. McCabe is an officer of the Trust and each Portfolio.

OFFICERS AND TRUSTEES

23
<PAGE>

The Trust and the Portfolios are managed by their trustees and officers.
Their names, positions and principal occupations during the past five years are
listed below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. Except as otherwise
shown, all persons named as Trustees also serve in similar capacities for all
other mutual funds advised by the Manager, including The Flex-funds, The
Flex-Partners and the corresponding portfolios of the Flex-Partners and The
Flex-funds (collectively, the "Fund Complex"). 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 Fund Complex are indicated by an asterisk
(*).

<TABLE>
<CAPTION>
Name, Address and Age Position Held Principal Occupation
- --------------------- ------------- --------------------
<S> <C> <C>
ROBERT S. MEEDER, SR.*+, 68 Trustee/President Chairman, R. Meeder & Associates,
Inc., an investment adviser.

MILTON S. BARTHOLOMEW, 68 Trustee Retired; formerly a practicing
1424 Clubview Boulevard, S. attorney in Columbus, Ohio; member
Worthington, OH 43235 of each Fund's Audit Committee.

ROGER D. BLACKWELL, 56 Trustee Professor of Marketing and Consumer
Blackwell Associates, Inc. Behavior, The Ohio State University;
3380 Tremont Road President of Blackwell Associates,
Columbus, OH 43221 Inc., a strategic consulting firm.

JOHN M. EMERY, 76 Trustee Retired; formerly Vice President and
2390 McCoy Road Treasurer of Columbus & Southern
Columbus, OH 43220 Ohio Electric Co.; member of each
Fund's Audit Committee.

RICHARD A. FARR, 78 Trustee President of R&R Supply Co. and
3250 W. Henderson Road Farrair Concepts, Inc., two
Columbus, OH 43220 companies involved in engineering,
consulting and sales of heating and
air conditioning equipment.

24
<PAGE>

<S> <C> <C>
WILLIAM L. GURNER*, 50 Trustee President, Sector Capital
Sector Capital Management, Inc. Management, an investment adviser
5350 Poplar Avenue, Suite 490 (since January 1995); Manager of
Memphis, TN 38119 Trust Investments of Federal Express
Corporation (1987-1994).

RUSSEL G. MEANS, 71 Trustee Retired; formerly Chairman of
5711 Barry Trace Employee Benefit Management
Dublin, OH 43017 Corporation, consultants and
administrators of self-funded health
and retirement plans.

ROBERT S. MEEDER, JR.*+, 36 Trustee and Vice President President of R. Meeder & Associates,
Inc.

LOWELL G. MILLER*, 48 Trustee President, Miller/Howard
Miller/Howard Investments, Inc. Investments, Inc., an investment
141 Upper Byrdcliffe Road adviser whose clients include the
P. O. Box 549 Growth Stock Portfolio and the
Woodstock, NY 12498 Utilities Stock Portfolio.

WALTER L. OGLE, 58 Trustee Executive Vice President of Aon
400 Interstate North Parkway, Suite 1630 Consulting, an employee benefits
Atlanta, GA 30339 consulting group.

PHILIP A. VOELKER*+, 43 Trustee and Vice President Senior Vice President and Chief
Operating Officer of R. Meeder &
Associates, Inc.

JAMES B. CRAVER*, 53 Assistant Secretary Practicing Attorney; Special Counsel
42 Miller Hill Road to Flex-Partners, Flex-funds and
Box 811 their Portfolios; Senior Vice
Dover, MA 02030 President of Signature Financial
Group, Inc. (January 1991 to August
1995).

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

25
<PAGE>

<S> <C> <C>
DONALD F. MEEDER*+, 58 Secretary/Treasurer Vice President of R. Meeder &
Associates, Inc., and President of
Mutual Funds Service Company.

WESLEY F. HOAG*+, 40 Vice President Vice President and General Counsel
of R. Meeder & Associates, Inc.
(since July 1993); Attorney, Porter,
Wright, Morris & Arthur, a law firm
(October 1984 to June 1993).

<FN>
* Interested Person of the Trust (as defined in the Investment Company Act of
1940), The Flex-funds, Flex-Partners and each Portfolio.

+ P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017.
</FN>
</TABLE>

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

The following table shows the compensation paid by the Portfolios and the
Fund Complex as a whole to the Trustees of the Portfolios and the Fund Complex
during the fiscal year ended December 31, 1996.

<TABLE>
<CAPTION>
COMPENSATION TABLE

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

Milton S. Bartholomew $1,485 None None None $7,550

John M. Emery None $933 None None $7,550

Richard A. Farr None $833 None None $6,750

William F. Gurner None $1,750 None None $5,250

Russel G. Means $1,325 None None None $6,750

Lowell G. Miller None None None None None

Robert S. Meeder, Jr. None None None None None

Walter L. Ogle $1,200 None None None $6,000

Philip A. Voelker None None None None None

Roger A. Blackwell None $646 None None $5,250
</TABLE>

26
<PAGE>

Neither the Trust nor any other member of the Fund Complex pays any pension
or retirement benefits to any Trustee or officer or maintains any plan for such
purpose.

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 based on 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. Mr. Emery comprises the
Audit Committee for each of The Flex-Funds and The Flex-Partners Trusts. Mr.
Emery is paid $500 for each meeting of the Audit Committees attended regardless
of the number of Audit Committees on which he serves. Trustees fees for each of
the Bond, Muirfield and Money Market Funds amounted to $1,479 for the year ended
December 31, 1996 ($2,167 in 1995). Mr. Emery comprises each Fund's Audit
Committee. Audit Committee meeting fees for each Fund totaled $100 for the year
ended December 31, 1996 ($124 in 1995). All other officers and Trustees serve
without compensation from the Trust. Mr. Bartholomew comprises the Audit
Committee for each of the corresponding Portfolios of The Flex-funds and The
Flex-Partners Trusts. Mr. Bartholomew is paid $500 for each meeting of the Audit
Committee attended regardless of the number of Audit Committees on which he
serves. All other officers and Trustees serve without compensation from the
Portfolios. Trustee fees for each of the Bond, Mutual Fund and Money Market
Portfolios totaled $3,850 for the year ended December 31, 1996 ($3,925 in 1995).
Mr. Bartholomew comprises each Portfolio's Audit Committee. Audit Committee
meeting fees for each Portfolio totaled $160 for the year ended December 31,
1996 ($147 in 1995). All other officers and Trustees of the Portfolios serve
without compensation from any Portfolio.

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

27
<PAGE>

DISTRIBUTION PLANS

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
Trust 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 Trust shares

The Trust has adopted a Distribution Plan for each of the three Funds
described herein. These Plans permit, 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, setting 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 Trust 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 Trust shareholders and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Trust 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. 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 Trust may expend in each of the three Funds as described herein as much
as, but not more than 2/10 of 1% of the Fund's average net assets annually
pursuant to the Plan. A report of the amounts so expended in each such 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 for each such Fund 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.

28
<PAGE>

The Plan for each of the Trust's Funds 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 Trust'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 any of the Plans or in any of 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 Trust's shares, or, upon 15 days'
notice, by a party to a service agreement.

Each Plan was approved by the Trust's Board of Trustees, who made a
determination that there is a reasonable likelihood that the Plans will benefit
the Funds. The Plans were approved by shareholders and they 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 Funds, their investment objectives and policies, and the
Trust's retirement plans, to clients. These include: Russel G. Means, a Trustee
of the Trust and each Portfolio; and the firm of Ogle and Waters, Inc. with
which Walter L. Ogle, a Trustee of the Trust and each Portfolio, is affiliated.
Total payments made by the Trust to parties with service agreements for the year
ended December 31, 1996 amounted to $167,872 ($134,047 in 1995; $117,477 in
1994). In addition, expenditures were approved by the Board of Trustees for the
printing and mailing of prospectuses, periodic reports and other sales materials
to prospective investors; advertising; the services of public relations and
marketing consultants; and the cost of special telephone service to encourage
the sale of Fund shares. These expenditures amounted to $190,244 for the year
ended December 31, 1996 ($172,584 in 1995; $174,876 in 1994).

The table below states the amounts paid under each current Fund's
distribution plan for the year ended December 31, 1996.

DISTRIBUTION PLAN EXPENSES PAID BY THE FUNDS*

U.S.
Government Money
Type of Expense Muirfield Bond Market
- --------------- --------- ---------- ------

Payments to Consultants $ 84,669 $ 5,143 $ 65,948

Public Relations $ 39,683 $ 8,658 $ 11,684

Marketing/Advertising $ 13,743 $ 9,294 $ 10,128

Wats Telephone Service $ 3,178 $ 465 $ 4,562

Printing and Mailing $ 23,094 $ 3,863 $ 17,136
-------- ------- --------
Total $164,367 $27,423 $109,458

29
<PAGE>

*Distribution expenses of the Trust attributable to a particular Fund are
borne by that Fund. Distribution expenses which are not readily identifiable as
attributable to a particular Fund are allocated among each of the five Funds of
the Trust based on the relative size of their average net assets.

In order to comply with certain state requirements, each Fund of the Trust
and its corresponding Portfolio in the aggregate (i) will not pay or charge
sales fees, which may not be used for sales expenses or in lieu of an additional
sales charge or redemption fee; and (ii) the total charges against net assets
for sales distribution activities and/or the servicing of shareholder accounts
will not be in excess of .25% of average net assets per annum.

In addition, any Agent or Consultant that contemplates entering into an
agreement with the Trust for payment in connection with the distribution of Fund
shares, under any Fund's distribution plan, shall be responsible for complying
with any applicable securities or other laws which may be applicable to the
rendering of any such services. It would appear that any Agent or Consultant
would need to be registered as broker/dealer in the state of Texas if Texas
residents are their clients.

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.

DEDUCTIBLE CONTRIBUTIONS

Individual Retirement Accounts (IRA):

Regular - Contributions to an IRA (except for rollovers) cannot exceed the
amount of compensation includible in gross income for the tax year or $2,000,
whichever is less. If neither you nor your spouse is an active participant in an
employer plan, you may make a contribution up to this limit and take a deduction
for the entire amount contributed. If you or your spouse is an active
participant and your adjusted gross income (AGI) is below a certain level you
may also make a contribution and take a deduction for the entire amount
contributed. However, if you or your spouse is an active participant and your
AGI is above the specified level, the dollar limit of the deductible
contribution you make to your IRA may be reduced or eliminated.

30
<PAGE>

Regular contributions are not allowed for the year in which you attain age
70-1/2 or for any year thereafter. Contributions for a year may be made during
such year or by the tax return filing date for such year (not including
extensions), if irrevocably designated for such year, in writing, when such
contribution is made.

If you and your spouse each receive compensation during the year and are
otherwise eligible, each of you may establish your own IRA.

Spousal - You may make spousal IRA contributions for a year, if: 1) your
spouse has "compensation" that is includible in gross income for such year; 2)
you have less compensation than your spouse for such year; 3) you do not reach
age 70-1/2 by the end of such year; and 4) you file a joint federal income tax
return for such year.

For a tax year before 1997, the spousal contribution rules limit the
aggregate amount of the contributions to both of your IRAs for a year to the
lesser of $2,250 or the amount of the compensated spouse's compensation for such
year. The contributions do not have to be split equally between the IRAs
belonging to you and your spouse. However, the total contribution to either of
your IRAs may not exceed $2,000.

For tax years after 1996, if you are the compensated spouse, your
contribution must be made in accordance with the regular contribution rules
above. If you are the noncompensated (or lower compensated) spouse, your
contribution may not exceed the lesser of $2,000 or 100% of the combined
compensation of you and your spouse, reduced by the amount of your spouse's IRA
contribution.

Contributions for your spouse must be made to a separate IRA established by
your spouse as the depositor or grantor of his or her own IRA and your spouse
becomes subject to all of the privileges, rules, and restrictions generally
applicable to IRAs.

Active Participant - If you are not self-employed, your Form W-2 should
indicate your participation status. If you have questions about your
participation status, check with your employer or your tax advisor.

You are covered by a retirement plan for a year if your employer or union
has a retirement plan under which money is added to your account, or you are
eligible to earn retirement credits, even if you are not yet vested in your
retirement plan. Also, if you make required contributions or voluntary
contributions to an employer-sponsored retirement plan, you are an active
participant.

31
<PAGE>

Adjusted Gross Income (AGI) - If you are an active participant, the amount
of your AGI for the year (if you and your spouse file a joint tax return, your
combined AGI) will be used to determine if you can make a deductible IRA
contribution. If you are at or below a certain AGI level, called the Threshold
Level, you can make a deductible contribution under the same rules as a person
who is not an active participant.

If you are single, or treated as being single, your AGI Threshold Level is
$25,000. If you are married and file a joint tax return, your AGI Threshold
Level is $40,000. If you are married, file a separate tax return, and live with
your spouse for any part of the year, your AGI Threshold Level is $0.

NONDEDUCTIBLE CONTRIBUTIONS

Eligibility - Even if your deduction limit is less than $2,000, you may
still contribute using the rules in the "Deductible Contributions" section
above. The portion of your IRA contribution that is not deductible will be a
nondeductible contribution. You may choose to make a nondeductible IRA
contribution even if you could have deducted part or all of the contribution.
Generally, interest or other earnings on your IRA contribution, whether from
deductible or nondeductible contributions, will not be taxed until distributed
from your IRA.

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

OTHER SERVICES

Custodian - Star Bank, N.A., Star Bank Center, 425 Walnut Street,
Cincinnati, Ohio 45202, is custodian of all of the Trust's assets.

Auditors - KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio,
43215, has been retained as independent auditors for the Trust.

Stock Transfer Agent - Mutual Funds Service Co., 6000 Memorial Drive,
Dublin, Ohio 43017, a wholly owned subsidiary of Muirfield Investors, Inc., is
the Trust's stock transfer and dividend disbursing agent.

Reports to Shareholders - The Trust provides shareholders with quarterly
reports of investments and other information, semi-annual financial statements,
and annual reports.

PRINCIPAL HOLDERS OF OUTSTANDING SHARES

As of April 11, 1997, the following persons owned 5% or more of a class of
the Trust's outstanding shares of beneficial interest:

32
<PAGE>

Name Name & Address Amount of Record Percent
of Fund of Beneficial Owner and Beneficially of Class
- ------- ------------------- ---------------- --------

U.S. Government
Bond Fund Roofers Local No. 86 56,522.002 shares 6.732%
Pension Fund Dtd 5-1-64
c/o Qualified Benefits Mgmt.
77 West Elmwood Drive
Centerville, OH 45459

IBEW Local 688 Ret Fund 77,192,491 9.194%
Kenneth W. Cooper Chairman
P. Thomas Pasheilich Secretary
c/o Sandy Rucker
P. O. Box 1384
Mansfield, OH 44901

Plumbers & Pipe Fitters Local 181,552.967 21.622%
#168 Ret Fund Dtd 09/01/87
c/o R. Meeder & Associates
P.O. Box 7177
Dublin, OH 43017

Plumbers & Steamfitters 137,709.696 16.402%
Local 565 Pension Plan
c/o Merrill Lynch/Diana Hamm
P. O. Box 1683
Charleston, WV 25324

Muirfield Fund IBEW Local 683 Pension Plan 2,283,386.481 10.900%
Attn: Ken Brotherton
23 W. 2nd Street
P.O. Box 8127 - Station A
Columbus, OH 43201

The shareholders listed above own shares for investment purposes and have
no known intention of exercising any control of the Trust.

ADDITIONAL INFORMATION

Registration Statement: This Statement of Additional Information omits
certain of the information contained in the Registration Statement filed with
the Securities and Exchange Commission by the Trust. Items of information which
are thus omitted may be obtained from the Commission upon payment of the fee
prescribed by its Rules and Regulations, or may be examined at the offices of
the Commission without charge.

33
<PAGE>

FINANCIAL STATEMENTS

Financial statements for all of the Trust's funds and for each Portfolio
are presented on the following pages.

34
<PAGE>

<PAGE>

THE HIGHLANDS GROWTH FUND
A FUND OF THE FLEX-FUNDS TRUST
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1997

This Statement is not a prospectus but should be read in conjunction with the
Fund's current Prospectus (dated April 30, 1997). 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 OF CONTENTS PAGE
Investment Policies and Limitations 2
Portfolio Transactions 12
Valuation of Portfolio Securities 14
Performance 15
Additional Purchase and Redemption Information 18
Distributions and Taxes 20
Investment Adviser and Manager 21
Investment Subadviser 23
Investment Sub-subadvisers 24
Distribution Plan 28
Trustees and Officers 30
Flex-funds Retirement Plans 34
Contracts With Companies Affiliated With Manager 36
Description of the Trust 36
Financial Statements 38

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

INVESTMENT SUBADVISER
Sector Capital Management, L.L.C.

<PAGE>

- --------------------------------------------------------------------------------
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 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;

2
<PAGE>

(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 only 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.

(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.

3
<PAGE>

(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." For the
Portfolio's limitations on short sales, see the section entitled "Short Sales."

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>

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:

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.

5
<PAGE>

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

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.

3. Commercial Paper Ratings:

6
<PAGE>

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.

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.

7
<PAGE>

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 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.

8
<PAGE>

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.

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.

9
<PAGE>

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 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

10
<PAGE>

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.

PORTFOLIO TURNOVER.

The Portfolio's portfolio turnover rate for the fiscal year ended December
31, 1996 was 82% (1995 - 338%). The Portfolio began the year fully invested in
the stock market. For approximately two months (early March through early May)
50% of the Portfolio's assets were invested defensively in money market
securities. Also, in the period from mid-July through October, various portions
of the Portfolio were invested defensively in cash equivalents and/or Treasury
Bonds. The periods of defensive positions in March-May and July-October were in
response to technical weakness and negative trends in the equity markets.

11
<PAGE>

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

12
<PAGE>

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.

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.

13
<PAGE>

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 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, 1996 to December
31, 1996, the Growth Stock Portfolio paid total commissions of $5,137 ($44,655
in 1995; $135,422 in 1994) 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, 1996 were $17,339 ($22,399 in
1995).

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.

14
<PAGE>

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.

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:

15
<PAGE>

P (1+T)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

THE HIGHLANDS GROWTH FUND:

Total Return
-------------------------------------------------
1 Year 5 Years 10 Years
Period Ended Period Ended Period Ended
Dec. 31, 1996 Dec. 31, 1996 Dec. 31, 1996
------------- ------------- -------------

Value of Account
At end of Period $1,090.81 $1,539.16 $2,178.19

Value of Account
At beginning of Period 1,000.00 1,000.00 1,000.00
---------- --------- ---------

Base Period Return $ 90.81 $ 539.16 $1,178.19

Average Total Return 9.08% 9.01% 8.10%

Values were computed according to the following formulas:

1 Year: $1,000 (1 + .0908) = $1,090.81
5 Years: $1,000 (1 + .0901)5th power = $1,539.16
10 Years: $1,000 (1 + .0810)10th power = $2,178.19

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 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.

16
<PAGE>

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 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.

17
<PAGE>

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 1997: 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 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.

18
<PAGE>

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.

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.

19
<PAGE>

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 Manger, 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 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.

20
<PAGE>

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 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.

21
<PAGE>

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 the Manager would 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, 1996, the Growth Stock
Portfolio paid fees to the Manager totaling $258,239 ($238,640 in 1995; $240,045
in 1994).

22
<PAGE>

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, Vice President and General
Counsel; Steven T. McCabe, 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. and Philip A. Voelker is a Trustee
and officer of the Trust and the Portfolio. Each of Donald F. Meeder, Wesley F.
Hoag and Steven T. McCabe is an officer of the Trust and the Portfolio.

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 Trust and the Portfolio. 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, except as otherwise provided, and 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.

23
<PAGE>

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 by the Manager 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 Portfolio assigned by the Subadvisor to the Sector Adviser at an
annual rate equal to .25%.

24
<PAGE>

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:

25
<PAGE>

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
December 31, 1996, Miller/Howard held discretionary investment authority over
approximately $183 million of assets. Lowell Miller and Helen Hamada who are,
respectively, Miller/Howard's President, Secretary and a director and its Vice
President, Treasurer and a director, each own more than 10% of the outstanding
voting securities of Miller/Howard. Mr. Miller is 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 Trustee of the Growth Stock Portfolio,
a Trustee and 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; pension, profit
sharing, and other retirement plans; trusts; endowments; foundations; and other
charitable organizations since 1986. As of December 31, 1996, Hallmark held
discretionary investment authority over approximately $120 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, and the directors of Hallmark. Mr. Hagerman is the
portfolio manager primarily responsible for the day-to-day management of those
assets of 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.

26
<PAGE>

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 December 31, 1996, The Mitchell Group held
discretionary investment authority over approximately $245 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 is 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, 77002.

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 December 31, 1996, Ashland managed accounts having a value of
approximately $1.45 billion. 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 owns more than 10% of the outstanding
voting securities of Ashland. Terence J. McLaughlin, Managing Director of
Ashland and Deborah C. Ohl, a Portfolio Management Associate, are 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.

DREMAN VALUE ADVISORS, L.P. 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 December 31, 1996, Dreman held
discretionary investment authority over approximately $3.8 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, Inc., 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, President of Kemper Funds Group, a unit of Zurich Kemper, Stephen B.
Timbers, President, Chief Executive Officer and Chief Investment Officer of
Zurich Kemper, and David N. Dreman, Chairman of the Board of Dreman. Jonathan
Kay is 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, NY 10017.

27
<PAGE>

RCM CAPITAL MANAGEMENT, L.L.C. serves as Sector Adviser to the technology
sector of the Portfolio. RCM is a registered investment adviser that provides
investment services to institutional and individual clients and registered
investment companies, with approximately $25.6 billion of assets under
management as of December 31, 1996. RCM was established in April 1996, as the
successor to the business and 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, 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, Chief Investment Officer and Principal of RCM, Michael J. Apatoff,
President, Chief Operating Officer and Principal 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., Principal Head of Equity
Trading of RCM. Walter C. Price and Huachen Chen, each Principals of RCM, are
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, as well as future interpretations of current
requirements, could present RCM from continuing to perform investment management
services for the Portfolio.

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.

28
<PAGE>

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. 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.

29
<PAGE>

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
Trust and the Portfolio; and the firm of Ogle and Waters, Inc. with which Walter
L. Ogle, a Trustee of the Trust and the Portfolio, is affiliated. Total payments
made by the Fund to parties with service agreements for the year ended December
31, 1996 amounted to $10,769. In addition, expenditures were approved by the
Board of Trustees in the amount of $3,052 for the printing and mailing of
prospectuses, periodic reports and other sales materials to prospective
investors; $4,961 for advertising, $13,783 for the services of public relations
and marketing consultants; and $684 for the cost of special telephone service to
encourage the sale of Fund shares.

TRUSTEES AND OFFICERS

The Trust and the Portfolio are managed by their trustees and officers.
Their names, positions and principal occupations during the past five years are
listed below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. Except as otherwise
shown, all persons named as Trustees also serve in similar capacities for all
other mutual funds advised by the Manager, including The Flex-funds, The
Flex-Partners and the corresponding portfolios of the Flex-Partners and The
Flex-funds (collectively, the "Fund Complex"). 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 Fund Complex, or the Fund Manager, are
indicated by an asterisk (*).

MILTON S. BARTHOLOMEW, 68 Trustee Retired; formerly a practicing
1424 Clubview Boulevard, S. attorney in Columbus, Ohio; member
Worthington, OH 43235 of each Fund's Audit Committee.

30
<PAGE>

<S> <C> <C>
ROGER D. BLACKWELL, 56 Trustee Professor of Marketing and Consumer
Blackwell Associates, Inc. Behavior, The Ohio State University;
3380 Tremont Road President of Blackwell Associates,
Columbus, OH 43221 Inc., a strategic consulting firm.

JOHN M. EMERY, 76 Trustee Retired; formerly Vice President and
2390 McCoy Road Treasurer of Columbus & Southern
Columbus, OH 43220 Ohio Electric Co.; member of each
Fund's Audit Committee.

WILLIAM L. GURNER*, 50 Trustee President, Sector Capital
Sector Capital Management, Inc. Management, an investment adviser
5350 Poplar Avenue, Suite 490 (since January 1995); Manager of
Memphis, TN 38119 Trust Investments of Federal Express
Corporation (1987-1994).

ROBERT S. MEEDER, JR.*+, 36 Trustee and Vice President President of R. Meeder & Associates,
Inc.

31
<PAGE>

<S> <C> <C>
WALTER L. OGLE, 58 Trustee Executive Vice President of Aon
400 Interstate North Parkway, Suite 1630 Consulting, an employee benefits
Atlanta, GA 30339 consulting group.

PHILIP A. VOELKER*+, 43 Trustee and Vice President Senior Vice President and Chief
Operating Officer of R. Meeder &
Associates, Inc.

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

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

<FN>
* Interested Person of the Trust (as defined in the Investment Company Act of
1940), The Flex-funds, Flex-Partners and each Portfolio.

+ P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017.
</FN>
</TABLE>

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

32
<PAGE>

The following table shows the compensation paid by the Fund and the Fund
Complex as a whole to the Trustees of the Fund and the Fund Complex during the
fiscal year ended December 31, 1996.

<TABLE>
<CAPTION>
COMPENSATION TABLE

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

Milton S. Bartholomew None None None $7,550

John M. Emery $933 None None $7,550

Richard A. Farr $833 None None $6,750

William F. Gurner None None None $5,250

Russel G. Means None None None $6,750

Lowell G. Miller None None None None

Robert S. Meeder, Jr. None None None None

Walter L. Ogle None None None $6,000

Philip A. Voelker None None None None

Roger A. Blackwell $646 None None $5,250
</TABLE>

Neither the Trust nor any other member of the Fund Complex pays any pension
or retirement benefits to any Trustee or officer or maintains any plan for such
purpose.

33
<PAGE>

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

DEDUCTIBLE CONTRIBUTIONS

Individual Retirement Accounts (IRA):

If you and your spouse each receive compensation during the year and are
otherwise eligible, each of you may establish your own IRA.

34
<PAGE>

NONDEDUCTIBLE CONTRIBUTIONS

35
<PAGE>

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. 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
administrative fee, payable monthly, of .05% 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, 1996, total payments to Mutual Funds
Service Co. by the Fund and the Portfolio amounted to $33,118 and $30,867,
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
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.

36
<PAGE>

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.

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.

37
<PAGE>

AUDITOR. KPMG Peat Marwick LLP ("KPMG"), 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 LLP, independent
public accountants, are presented on the following pages.

<PAGE>

MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1996

SHARES OR
FACE AMOUNT VALUE

MUTUAL FUNDS - 59.5%
Aim Constellation Fund 86 $2,185
Aim Weingarten Fund 99 1,832
Charles Schwab Money Market Fund 16,172,563 16,172,563
Fidelity Blue Chip Fund 235,580 7,701,108
Fidelity Core Money Market Fund 19,964,557 19,964,557
Fidelity Fund 236,798 5,848,911
Fidelity Growth & Income Fund 251,433 7,726,531
Mutual Series Fund 58 5,412
PBHG Growth Fund 624 16,398
Rydex U.S. Government Money Market Fund 5,927,310 5,927,310
Rydex Nova Fund 721,714 12,666,082
T. Rowe Price New Era Fund 132 3,443
T. Rowe Price New Horizons Fund 151 3,287
Value Line Fund 292,179 5,636,131

TOTAL MUTUAL FUNDS ==========
(Cost $81,126,588) 81,675,750
----------

U.S.TREASURY BILLS - 2.9%
*U.S. Treasury Bill, 5.34%, due 3/06/97 $1,650,000 1,635,222
*U.S. Treasury Bill, 5.00%, due 3/06/97 1,000,000 991,044
*U.S. Treasury Bill, 4.84%, due 3/06/97 900,000 891,940
*U.S. Treasury Bill, 4.90%, due 3/06/97 200,000 198,209
*U.S. Treasury Bill, 4.99%, due 3/06/97 150,000 148,657
U.S. Treasury Bill, 4.90%, due 1/09/97 30,100 30,068

TOTAL U.S. TREASURY BILLS =========
(Cost $3,894,698) 3,895,140
---------

<FN>
*Pledged $2,960,000 face amount as collateral on futures contracts
</FN>
<PAGE>
<CAPTION>

MUTUAL FUND PORTFOLIO, continued

REPURCHASE AGREEMENTS - 37.6%
(Collateralized by U.S. government
obligations - market value $52,366,298)
Paine Webber Incorporated, dated 12/30/96,
6.35%, due 1/02/97 25,000,000 25,000,000
Prudential Bache Securities, dated 12/31/96,
6.75%, due 1/02/97 14,343,000 14,343,000
State Street Bank, dated 12/31/96,
6.00%, due 1/02/97 12,318,000 12,318,000

TOTAL REPURCHASE AGREEMENTS ==========
(Cost $51,661,000) 51,661,000
----------

TOTAL INVESTMENTS - 100% ============
(Cost $136,682,286) $137,231,890
------------

CONTRACTS

FUTURES CONTRACTS
Long, S&P 500 futures contracts,
face amount $90,456,750 expiring in March, 1997. 243 (1,773,830)
Long, Midcap futures contracts,
face amount $2,181,100 expiring in March, 1997. 17 (11,475)

-----------
NET PAYABLE FOR FUTURES CONTRACTS SETTLEMENTS (1,785,305)
-----------

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

GROWTH STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1996

SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE

COMMON STOCKS - 67.6%
AEROSPACE/DEFENSE - (3.4%)
Boeing Company 7,850 $835,044
--------

ALUMINUM - (2.0%)
Aluminum Company of America 7,850 500,438
--------

AUTO AND TRUCK - (1.8%)
General Motors 7,850 437,637
--------

BANKING - (3.1%)
J.P. Morgan & Company, Inc. 7,850 766,356
--------

BEVERAGE - (1.7%)
Coca Cola 7,850 413,106
--------

CHEMICAL (BASIC) - (4.3%)
Dupont 7,850 740,844
Union Carbide 7,850 320,869
========

1,061,713
--------

CHEMICAL (DIVERSIFIED) - (2.7%)
Minnesota Mining & Manufacturing 7,850 650,569
--------

COMPUTER AND PERIPHERALS - (4.8%)
International Business Machines 7,850 1,185,350
--------

DRUG - (2.5%)

Merck & Company, Inc. 7,850 622,112
--------

GROWTH STOCK PORTFOLIO, continued

ELECTRICAL EQUIPMENT - (3.8%)
General Electric Company 7,850 776,169
Westinghouse Electric Corporation 7,850 156,018

========
932,187
--------

FINANCIAL SERVICES - (1.8%)
American Express 7,850 443,525
--------

HOUSEHOLD PRODUCTS - (3.4%)
Procter & Gamble 7,850 843,875
--------

MACHINERY (CONSTRUCTION & MINING) - (2.4%)
Caterpillar Inc. 7,850 590,713
--------

MULTIFORM - (4.3%)

Allied-Signal Inc. 7,850 525,950
United Technologies 7,850 518,100

========
1,044,050
--------

PAPER AND FOREST PRODUCTS - (1.3%)
International Paper 7,850 316,943
--------

PETROLEUM (INTEGRATED) - (8.3%)
Chevron Corporation 7,850 510,250
Exxon 7,850 769,300
Texaco 7,850 770,281

========
2,049,831
--------

Growth Stock Portfolio, continued

PRECISION INSTRUMENT - (2.7%)
Eastman Kodak 7,850 629,963
Imation Corporation 785 22,078

========
652,041
--------

RECREATION - (2.2%)
Walt Disney Company 7,850 546,556
--------

RESTAURANT - (1.5%)
McDonalds Corporation 7,850 355,213
--------

RETAIL STORE - (2.2%)
Sears 7,850 362,081
Woolworth Corporation 7,850 171,719

========
533,800
--------

STEEL (INTEGRATED) - (.3%)
Bethlehem Steel 7,850 70,650
--------

TELECOMMUNICATION EQUIPMENT & SERVICES - (1.9%)
American Telephone & Telegraph 7,850 341,475
Lucent Technologies Incorporated 2,544 117,660

========
459,135
--------

TIRE AND RUBBER - (1.6%)
Goodyear Tire & Rubber 7,850 403,294
--------

TOBACCO - (3.6%)
Philip Morris Companies, Inc. 7,850 884,106

TOTAL COMMON STOCKS ==========
(Cost $13,435,117) 16,598,244
----------

GROWTH STOCK PORTFOLIO, continued

U.S. TREASURY BILLS - 4.0%
*U.S. Treasury Bill, 5.34%, due 3/06/97 $800,000 792,836
U.S. Treasury Bill, 5.01%, due 3/06/97 100,000 99,105
U.S. Treasury Bill, 4.84%, due 3/06/97 100,000 99,104
U.S. Treasury Bill, 4.90%, due 1/09/97 6,000 5,994

TOTAL U.S. TREASURY BILLS ========
(Cost $996,649) 997,039
--------

<FN>
*Pledged $390,000 face amount as collateral on futures
</FN>

REPURCHASE AGREEMENTS - 28.4%
(Collateralized by U.S. government obligations
- market value $7,047,064)
Paine Webber Incorporated, dated 12/30/96,
6.35%, due 1/02/97 4,000,000 4,000,000
Prudential Bache Securities, dated 12/31/96,
6.75%, due 1/02/97 2,968,000 2,968,000

TOTAL REPURCHASE AGREEMENTS =========
(Cost $6,968,000) 6,968,000
---------

TOTAL INVESTMENTS - 100% ===========
(Cost $21,399,766) $24,563,283
-----------
CONTRACTS
FUTURES CONTRACTS
Long, S&P 500 futures contracts,
face amount $7,817,250 expiring in March, 1997. 21 (153,300)

=========
NET PAYABLE FOR FUTURES CONTRACTS SETTLEMENTS (153,300)
---------

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1996

SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE

COMMON STOCKS - 88.5%
ELECTRIC/GAS UTILITY - (4.1%)
MDU Resources Group Incorporated 6,100 $ 140,300
Nipsco Industries Incorporated 4,700 186,238

========
326,538
--------

ELECTRIC UTILITY - (18.1%)
Cinergy Corporation 7,900 263,663
Ipalco Enterprises Incorporated 6,000 163,500
KU Energy Corporation 3,300 99,000
LG&E Energy Corporation 8,600 210,700
Pacificorp 10,000 205,000
Public Service Company of Colorado 5,900 229,362
Teco Energy Incorporated 11,000 265,375

========
1,436,600
--------

DIVERSIFIED UTILITY - (1.9%)
Citizens Utilities Company Class B 13,514 150,341
--------

NATURAL GAS (DISTRIBUTOR) - (21.8%)
Bay State Gas Company 2,200 62,150
Brooklyn UN Gas Company 5,900 177,738
Consolidated Natural Gas Company 3,900 215,475
MCN Corporation 6,200 179,025
Nicor Incorporated 1,800 64,350
Pacific Enterprises 7,000 212,625
Panenergy Corporation 5,500 247,500
Transcanada Pipelines Ltd. 8,200 143,500
UGI Corporation 2,000 44,750
Wicor Incorporated 5,800 208,075
Williams Companies Incorporated 4,800 180,000

========
1,735,188
--------

Utilities Stock Portfolio, continued

OIL/GAS (DOMESTIC) - (7.9%)

El Paso Natural Gas Company 4,800 242,400
Enron Corporation 3,000 129,375
Questar Corporation 5,300 194,775
Sante Fe Pacific Pipeline Partners 1,600 60,800

========
627,350
--------

TELECOMMUNICATION EQUIPMENT - (2.1%)
LCC International A 5,000 92,500
Vanguard Cellular 4,700 74,025

========
166,525
--------

TELECOMMUNICATION SERVICES - (28.7%)
Airtouch Communications 5,600 141,400
Alltel Corporation 8,100 254,138
Bell Atlantic Corporation 2,400 155,400
Bellsouth Corporation 3,000 121,125
Century Telephone 8,500 262,437
Frontier Corporation 9,500 214,937
GTE Corporation 5,200 236,600
Intellicell Corporation 30,000 221,250
MCI Communications 5,000 163,437
Sprint Corporation 4,400 175,450
Tele Denmark 5,000 136,250
U.S. West Incorporated 6,000 193,500

=========
2,275,924
---------

WATER UTILITY - (3.9%)
American Water Works Incorporated 15,200 313,500
--------

TOTAL COMMON STOCKS
(Cost $6,252,239) 7,031,966
---------

UTILITIES STOCK PORTFOLIO, continued

U.S. TREASURY BILLS - 0.0%
U.S. Treasury Bill, 4.90%, due 1/09/97 $ 1,000 1,000
-------

TOTAL U.S. TREASURY BILLS
(Cost $1,000) 1,000
-------

REPURCHASE AGREEMENTS - 11.5%
(Collateralized by U.S. government
obligations - market value $922,418)
Prudential Bache Securities, dated 12/31/96,
6.75%, due 1/02/97 914,000 914,000
-------

TOTAL REPURCHASE AGREEMENTS
(Cost $914,000) 914,000
-------

TOTAL INVESTMENTS - 100% ==========
(Cost $7,167,239) $7,946,966
----------

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

BOND PORTFOLIO
Portfolio of Investments as of December 31, 1996

FACE AMOUNT VALUE

U.S.TREASURY NOTES - 66.6%
U.S. Treasury Note, 6.50%, due 10/15/2006 $ 9,000,000 $ 9,054,844

TOTAL U.S.TREASURY NOTES =========
(Cost $9,169,393) 9,054,844
---------

U.S. GOVERNMENT AGENCY - 29.9%
Federal National Mortgage Association Discount Note, 5.48%, due 1/06/97 2,000,000 1,998,478
Federal National Mortgage Association Discount Note, 5.48%, due 1/14/97 2,000,000 1,996,042
Federal National Mortgage Association Note, 4.80%, due 6/25/97 79,359 78,937

TOTAL U.S. GOVERNMENT AGENCY =========
(Cost $4,073,521) 4,073,457
---------

U.S.TREASURY BILLS - 1.9%
U.S. Treasury Bill, 4.97%, due 2/20/97 100,000 99,310
U.S. Treasury Bill, 5.34%, due 3/06/97 100,000 99,105
U.S. Treasury Bill, 4.99%, due 3/06/97 50,000 49,552
U.S. Treasury Bill, 4.90%, due 1/09/97 4,800 4,794

TOTAL U.S.TREASURY BILLS =========
(Cost $252,711) 252,761
---------

REPURCHASE AGREEMENTS - 1.6%
(Collateralized by U.S. government obligations - market value $227,072)
Prudential Bache Securities, dated 12/31/96, 6.75%, due 1/02/97 225,000 225,000
---------

TOTAL REPURCHASE AGREEMENTS
(Cost $225,000) 225,000
---------

TOTAL INVESTMENTS - 100% ===========
(Cost $13,720,625) $13,606,062
-----------

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Money Market Portfolio

Portfolio of Investments as of December 31, 1996

AMORTIZED
FACE AMOUNT COST

COMMERCIAL PAPER - 49.5%
American Trading & Production, 5.35%, due 1/14/97 $ 4,000,000 $ 3,992,272
Bell South, 5.42%, due 1/21/97 5,030,000 5,014,854
Calcot, 5.75%, due 2/21/97 3,000,000 2,975,562
Calcot, 5.40%, due 1/24/97 5,000,000 4,982,750
Calcot, 5.36%, due 1/22/97 5,000,000 4,984,367
Cargill Financial, 5.58%, due 6/16/97 5,000,000 4,871,350
Coca-Cola Company, 5.80%, due 1/17/97 15,000,000 14,961,333
Equitable of Iowa, 5.61%, due 1/17/97 12,000,000 11,970,080
Fingerhut Owners Trust, 5.50%, due 1/09/97 10,000,000 9,987,778
Fleet Funding, 5.48%, due 1/24/97 2,200,000 2,192,298
Hertz Corporation, 5.90%, due 1/03/97 10,000,000 9,996,722
Hitachi America Ltd., 5.35%, due 3/25/97 8,160,000 8,059,349
JC Penney Funding, 5.39%, due 3/27/97 15,000,000 14,809,104
Merrill Lynch & Company, 5.55%, due 6/13/97 5,000,000 4,874,354
Michigan Consolidated Gas, 5.33%, due 2/07/97 8,000,000 7,956,175
National Rural Utilities, 5.31%, due 2/14/97 4,200,000 4,172,742
PHH Corporation, 5.50%, due 1/17/9710,000,000 9,975,556
Portland General Electric, 5.33%, due 1/21/97 10,000,000 9,970,389
Receivables Capital Corporation, 5.75%, due 1/15/97 10,000,000 9,977,639
Toyota Motor Company, 5.31%, due 2/06/97 8,000,000 7,957,520
WMX Technologies, 5.60%, due 5/13/97 20,000,000 19,589,333

TOTAL COMMERCIAL PAPER ===========
(Cost $173,271,527) 173,271,527
-----------

CORPORATE OBLIGATIONS - 33.1%
American Home Products Corporation, 6.875%, due 4/15/97 1,005,000 1,008,499
American General Finance, 7.75%, due 1/15/97 450,000 450,335
Associates Corporation, 6.875%, due 1/15/97 425,000 425,179
*Bank One Capital Demand Note, 5.95%, next redemption
date 1/02/97, due 4/01/2113 3,536,000 3,536,000
Bell Atlantic Corporation, 7.22%, due 6/16/97 4,000,000 4,029,304
Bell Tri LSG, 8.05%, due 2/19/97 500,000 501,663
*Care Life Project Floating Rate Note, 5.80%, next
redemption date 1/02/97, due 8/01/2111 1,350,000 1,350,000
*Caterpillar Financial Incorporated Floating Rate
Note, 5.654%, due 6/20/97 1,000,000 1,000,473
Caterpillar Incorporated, 5.05%, due 1/15/97 500,000 499,933
Central Illinois Public Service, 6.125%, due 7/01/97 2,000,000 2,003,840
Chase Manhattan Bank, 7.875%, due 1/15/97 750,000 750,574

MONEY MARKET PORTFOLIO, continued

Consolidated Rail, 6.00%, due 7/01/97 142,000 141,977
Cooper Industries, 7.77%, due 10/21/97 5,000,000 5,063,808
Cooper Industries, 7.81%, due 10/15/97 3,000,000 3,038,398
*Espanola/Nambe Variable Rate Demand Note, 5.84%, next
redemption date 1/02/97, due 6/01/2006 2,500,000 2,500,000
Ford Capital, 9.75%, due 6/05/97 3,700,000 3,755,316
Ford Holdings, 9.25%, due 7/15/97 3,168,000 3,220,923
Ford Motor Credit Corporation, 6.75%, put date 7/15/97 350,000 351,922
GE Capital Corporation, 7.00%, due 4/03/97 1,518,000 1,522,190
GE Capital Corporation, 4.55%, due 10/27/97 2,500,000 2,471,888
*General Motors Acceptance Corporation Floating Rate Note,
5.68%, next redemption date 4/13/97, due 4/13/98 10,000,000 10,000,000
General Motors Acceptance Corporation, 7.40%, due 1/14/97 170,000 170,130
General Motors Acceptance Corporation, 7.80%, due 5/05/97 9,200,000 9,264,405
General Motors Acceptance Corporation, 7.90%, due 5/01/97 1,500,000 1,509,712
General Telephone, California, 6.75%, due 12/01/97 2,500,000 2,500,000
General Nutrition Corporation, 11.375%, redemption date 3/03/97 5,000,000 5,183,933
Golden West Financial, 10.25%, due 5/15/97 475,000 482,422
*Hancor Incorporated Floating Rate Note, 5.84%, next redemption
date 1/02/97, due 12/01/2004 800,000 800,000
Hertz Corporation, 10.125%, due 3/01/97 2,000,000 2,014,965
Marshall & Isley, 7.375%, due 10/31/97 10,000,000 10,125,300
Michigan Consolidated Gas, 6.25%, due 5/01/97 1,500,000 1,502,857
Minnesota Mining & Manufacturing, 6.375%, due 6/16/97 1,000,000 1,001,186
Morgan Stanley Incorporated, 7.32%, due 1/15/97 500,000 500,292
*Mubea, Incorporated Floating Rate Note, 5.84%, next redemption
date 1/02/97, due 12/01/2004 5,000,000 5,000,000
NBD Bank N.A., 7.875%, due 1/21/97 250,000 250,266
Philip Morris Companies, 9.25%, due 12/01/97 1,568,000 1,615,090
Philip Morris Companies, 9.75%, due 5/01/97 814,000 824,532
Philip Morris Companies, 8.75%, due 6/15/97 500,000 506,712
Philip Morris Companies, 7.50%, due 3/15/97 870,000 873,155
*Presrite Corporation Floating Rate Note, 5.84%, next redemption
date 1/02/97, due 1/01/2004 2,540,000 2,540,000
*Seariver Maritime Financial Holdings Floating Rate Note, 5.405%,
next redemption date 1/02/97, due 10/01/2111 7,000,000 7,000,000
Sears Roebuck & Company, 6.66%, due 5/20/97 1,000,000 1,003,456
Sears Roebuck & Company, 7.41%, due 6/11/97 100,000 100,629
Southern California Edison, 5.90%, due 1/15/97 1,000,000 1,000,237
Virginia Electric & Power, 7.25%, due 3/01/97 3,250,000 3,258,635
*White Castle Corporation, Floating Rate Note, 5.84%, next
redemption date 1/02/97, due 12/01/2010 9,000,000 9,000,000

TOTAL CORPORATE OBLIGATIONS ===========
(Cost $115,650,136) 115,650,136
-----------
U.S. TREASURY NOTES - 4.0%
U.S. Treasury Note, 6.00%, due 8/31/97 4,000,000 4,005,201
U.S. Treasury Note, 6.00%, due 11/30/97 10,000,000 10,043,606

Money Market Portfolio, continued

TOTAL U.S. TREASURY NOTES ==========
(Cost $14,048,807) 14,048,807
----------

U.S. TREASURY BILLS - 0.0% ==========
U.S. Treasury Bill, 4.906%, due 1/09/97 63,100 63,031
----------

TOTAL U.S. TREASURY BILLS
(Cost $63,031) 63,031

U.S. GOVERNMENT OBLIGATIONS - 4.1%
Federal Home Loan Mortgage Corporation, 5.10%, due 1/13/97 100,000 99,995
Federal Home Loan Mortgage Corporation, 6.47%, due 7/07/97 500,000 501,978
Federal Home Loan Bank Note, 5.50%, due 3/21/97 235,000 235,000
Federal Farm Credit, 5.32%, due 2/03/97 200,000 199,895
*Federal Home Loan Bank Floating Rate Note, 5.803%,
due 4/08/97, next redemption date 1/02/97 2,000,000 2,000,863
*Student Loan Marketing Association Floating Rate
Note, 5.48%, due 8/03/99, next redemption date
7/02/96 4,350,000 4,353,782
*Student Loan Marketing Association Floating Rate Note,
5.43%, due 11/10/98, next redemption date 7/02/96 5,000,000 5,000,000
*Student Loan Marketing Association Floating Rate Note,
5.41%, due 11/24/97, next redemption date 7/02/96 2,000,000 1,999,816
Tennesee Valley Authority, 6.00%, due 1/15/97 100,000 100,009

TOTAL U.S. GOVERNMENT OBLIGATIONS ==========
(Cost $14,491,338) 14,491,338
----------

REPURCHASE AGREEMENTS - 9.3%
(Collateralized by U.S. government obligations - market value $32,927,954)
Paine Webber Incorporated, dated 12/31/96, 6.35%, due 1/02/97 21,000,000 21,000,000
Prudential Bache Securities, dated 12/31/96, 6.75%, due 1/02/97 11,550,000 11,550,000

TOTAL REPURCHASE AGREEMENTS ==========
(Cost $32,550,000) 32,550,000
----------

TOTAL INVESTMENTS - 100% ============
(Cost $350,074,839) $350,074,839
------------
<FN>
* - Floating Rate as of 12/31/96.
</FN>

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996

The The The Total The U.S. The
Muirfield Growth Return Utilities Government Money Market
Fund Fund Fund Bond Fund Fund

Assets:

Investment in corresponding portfolio $ 121,425,042 $ 24,413,491 $ 5,089,213 $ 17,791,465 $ 119,987,807
Receivable for capital stock issued 3,616,683 2,717 39 383 -
Unamortized organizational costs - - - 17,146 - -
Other assets 452 15,835 8,822 2,610 7,666
============= ============= ============= ============= =============

Total Assets 125,042,177 24,432,043 5,115,220 17,794,458 119,995,473
------------- ------------- ------------- ------------- -------------

Liabilities:

Payable for capital stock redeemed 3,570,240 217,039 119 2,674 -
Dividends payable 93,203 2,942 27,385 2,532 11,207
Accrued transfer agent and
administrative fees 12,153 2,611 368 1,219 9,469
Other accrued liabilities 31,974 5,595 13,230 5,428 27,300
============= ============= ============= ============= =============

Total Liabilities 3,707,570 228,187 41,102 11,853 47,976
------------- ------------- ------------- ------------- -------------

Net Assets:
Capital 120,745,044 22,379,843 4,521,433 18,790,118 119,947,497
Accumulated undistributed net
investment income (loss) (1) 9 - (3) -
Accumulated undistributed net realized
gain (loss) on investments 12,496 (1,339,494) - (892,948) -
Net unrealized gain (loss) on
investments 577,068 3,163,498 552,685 (114,562) -
============= ============= ============= ============= =============

Net Assets $ 121,334,607 $ 24,203,856 $ 5,074,118 $ 17,782,605 $ 119,947,497
------------- ------------- ------------- ------------- -------------

Capital Stock Outstanding 22,198,952 1,475,239 338,624 861,611 119,947,497
------------- ------------- ------------- ------------- -------------

Net Asset Value, Offering and
Redemption Price Per Share $ 5.47 $ 16.41 $ 14.98 $ 20.64 $ 1.00
------------- ------------- ------------- ------------- -------------

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

STATEMENTS OF OPERATIONS
For the year ended December 31, 1996

The The The Total The U.S. The
Muirfield Growth Return Utilities Government Money Market
Fund Fund Fund Bond Fund Fund

Net Investment Income From
Corresponding Portfolio:
Interest $ 2,995,152 $599,913 $15,424 $983,780 $8,775,604
Dividends 311,660 321,265 126,220 - -
Expenses (1,052,259) (320,098) (61,617) (107,760) (294,611)
============= ============= ============= ============= =============

Total Net Investment Income From
Corresponding Portfolio 2,254,553 601,080 80,027 876,020 8,480,993
------------- ------------- ------------- ------------- -------------
Fund Expenses:
Legal fees 2,007 2,225 1,642 2,034 3,998
Audit fees 3,936 6,480 2,881 2,876 4,234
Printing 22,332 8,599 3,642 4,056 35,582
Postage 17,803 4,575 1,100 2,857 25,544
Transfer agent fees 120,161 25,406 4,026 10,228 111,421
Administrative fee 36,230 7,712 1,121 5,362 42,785
Trustees fees and expenses 2,931 2,949 3,832 2,495 2,914
Registration and filing fees 13,530 7,470 12,054 6,880 23,314
Insurance 1,778 387 36 256 2,501
Distribution plan 157,536 36,280 9,338 28,045 115,428
Amortization of organizational costs - - 5,036 - -
Other expenses 10,991 3,837 1,917 2,310 27,281
============= ============= ============= ============= =============
Total expenses 389,235 105,920 46,625 67,399 395,002
Expenses reimbursed by adviser - - (61,549) - (52,840)
============= ============= ============= ============= =============
Total Expenses - net 389,235 105,920 (14,924) 67,399 342,162

INVESTMENT INCOME - NET 1,865,318 495,160 94,951 808,621 8,138,831
------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS - NET:
Net realized gain (loss) on futures (385,498) (1,614,914) - 41,147 -
Net realized gain (loss) on investments 10,610,566 301,293 209,382 (7,020) -
Net change in unrealized appreciation
(depreciation) of investments (5,306,075) 3,055,094 219,393 (776,909) -
============= ============= ============= ============= =============
NET GAIN (LOSS) ON INVESTMENTS 4,918,993 1,741,473 428,775 (742,782) -
------------- ------------- ------------- ------------- -------------

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 6,784,311 $ 2,236,633 $523,726 $65,839 $8,138,831
------------- ------------- ------------- ------------- -------------

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31,

The The
Muirfield Growth
Fund Fund

INCREASE (DECREASE) IN NET ASSETS: 1996 1995 1996 1995

OPERATIONS:
Investment income - net $ 1,865,318 $ 938,690 $ 495,160 $ 807,065
Net realized gain (loss) on investments and
futures contracts 10,225,068 14,740,346 (1,313,621) 4,316,008
Net change in unrealized appreciation
(depreciation) of investments (5,306,075) 5,883,601 3,055,094 111,505
------------- ------------- ------------- -------------

Net increase in net assets resulting from operations 6,784,311 21,562,637 2,236,633 5,234,578
------------- ------------- ------------- -------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (1,865,319) (938,690) (495,151) (807,065)
Net realized gain from investments and futures
contracts (9,879,664) (15,073,253) - (659,136)
------------- ------------- ------------- -------------

Net decrease in net assets resulting
from dividends and distributions (11,744,983) (16,011,943) (495,151) (1,466,201)
------------- ------------- ------------- -------------

CAPITAL TRANSACTIONS:
Net proceeds from sales 31,306,972 26,530,545 3,904,506 1,775,837
Reinvestment of dividends 11,652,407 15,844,992 488,159 1,436,634
Cost of redemptions (28,415,321) (19,294,010) (6,561,166) (4,525,935)
------------- ------------- ------------- -------------

Net increase (decrease) in net assets
resulting from capital share transactions 14,544,058 23,081,527 (2,168,501) (1,313,464)
------------- ------------- ------------- -------------

TOTAL INCREASE (DECREASE) IN NET ASSETS 9,583,386 28,632,221 (427,019) 2,454,913

NET ASSETS - Beginning of period 111,751,221 83,119,000 24,630,875 22,175,962
============= ============= ============= =============

NET ASSETS - End of period $ 121,334,607 $ 111,751,221 $ 24,203,856 $ 24,630,875
============= ============= ============= =============

SHARE TRANSACTIONS:
Issued 5,310,158 4,353,780 246,129 120,106
Reinvested 2,132,111 2,767,237 30,498 96,212
Redeemed (4,745,388) (3,170,312) (406,881) (306,553)
------------- ------------- ------------- -------------

Change in shares 2,696,881 3,950,705 (130,254) (90,235)
============= ============= ============= =============

The The U.S.
Total Return Government
Utilities Fund Bond Fund

INCREASE (DECREASE) IN NET ASSETS: 1996 1995* 1996 1995

OPERATIONS:
Investment income - net $ 94,951 $ 39,143 $ 808,621 $ 780,338
Net realized gain (loss) on investments and
futures contracts 209,382 (679) 34,127 988,478
Net change in unrealized appreciation
(depreciation) of investments 219,393 333,292 (776,909) 667,973
------------- ------------- ------------- -------------

Net increase in net assets resulting from operations 523,726 371,756 65,839 2,436,789
------------- ------------- ------------- -------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (94,951) (39,143) (808,624) (780,352)
Net realized gain from investments and futures
contracts (208,703) - - -
------------- ------------- ------------- -------------

Net decrease in net assets resulting
from dividends and distributions (303,654) (39,143) (808,624) (780,352)
------------- ------------- ------------- -------------

CAPITAL TRANSACTIONS:
Net proceeds from sales 2,105,006 2,519,770 4,221,575 2,883,665
Reinvestment of dividends 261,364 33,121 731,408 686,353
Cost of redemptions (393,419) (4,409) (2,475,250) (2,161,626)
------------- ------------- ------------- -------------

Net increase (decrease) in net assets
resulting from capital share transactions 1,972,951 2,548,482 2,477,733 1,408,392
------------- ------------- ------------- -------------

TOTAL INCREASE (DECREASE) IN NET ASSETS 2,193,023 2,881,095 1,734,948 3,064,829

NET ASSETS - Beginning of period 2,881,095 - 16,047,657 12,982,828
============= ============= ============= =============

NET ASSETS - End of period $ 5,074,118 $ 2,881,095 $ 17,782,605 $ 16,047,657
============= ============= ============= =============

SHARE TRANSACTIONS:
Issued 143,939 201,499 201,655 142,467
Reinvested 17,645 2,569 35,083 33,492
Redeemed (26,688) (340) (118,887) (106,680)
------------- ------------- ------------- -------------

Change in shares 134,896 203,728 117,851 69,279
============= ============= ============= =============

The
Money Market
Fund

INCREASE (DECREASE) IN NET ASSETS: 1996 1995

OPERATIONS:
Investment income - net $ 8,138,831 $ 8,095,621
Net realized gain (loss) on investments and futures contracts - -
Net change in unrealized appreciation
(depreciation) of investments - -
------------ ------------

Net increase in net assets resulting from operations 8,138,831 8,095,621
------------ ------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (8,138,831) (8,095,621)
Net realized gain from investments and futures contracts - -
------------ ------------

Net decrease in net assets resulting
from dividends and distributions (8,138,831) (8,095,621)
------------ ------------

CAPITAL TRANSACTIONS:
Net proceeds from sales 389,806,633 365,251,080
Reinvestment of dividends 7,883,875 7,649,188
Cost of redemptions (418,830,047) (396,651,391)
------------ ------------

Net increase (decrease) in net assets
resulting from capital share transactions (21,139,539) (23,751,123)
------------ ------------

TOTAL INCREASE (DECREASE) IN NET ASSETS (21,139,539) (23,751,123)

NET ASSETS - Beginning of period 141,087,036 164,838,159
============ ============

NET ASSETS - End of period $ 119,947,497 $ 141,087,036
============ ============

SHARE TRANSACTIONS:
Issued 389,806,633 365,251,080
Reinvested 7,883,875 7,649,188
Redeemed (418,830,047) (396,651,391)
------------ ------------

Change in shares (21,139,539) (23,751,123)
============ ============
<FN>
*For period from June 21, 1995 through December 31, 1995
</FN>

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>

FINANCIAL HIGHLIGHTS

Selected per share data and ratios for an average share outstanding during
each period based upon audited financial statements

THE MUIRFIELD FUND
Years Ended December 31,

1996 1995 1994 1993 1992

NET ASSET VALUE, BEGINNING OF PERIOD $5.73 $5.34 $5.36 $6.25 $6.43

INCOME FROM INVESTMENT OPERATIONS

Net Investment Income 0.10 0.06 0.14 (0.01) 0.06

Net Gains or Losses on Securities
(both realized and unrealized) 0.25 1.31 - 0.45 0.34
===== ===== ===== ===== =====

Total From Investment Operations 0.35 1.37 0.14 0.44 0.40
===== ===== ===== ===== =====

LESS DISTRIBUTIONS

Dividends (from net investment income) (0.10) (0.06) (0.14) (0.02) (0.06)
Distributions (from capital gains) (0.51) (0.92) (0.02) (1.31) (0.52)
===== ===== ===== ===== =====

Total Distributions (0.61) (0.98) (0.16) (1.33) (0.58)
===== ===== ===== ===== =====

NET ASSET VALUE, END OF PERIOD $5.47 $5.73 $5.34 $5.36 $6.25
===== ===== ===== ===== =====

TOTAL RETURN 5.99% 25.82% 2.70% 8.11% 6.91%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 121,335 111,751 83,119 73,063 55,280
Ratio of Expenses to Average Net Assets 1.19% 1.26% 1.22% 1.26% 1.40%
Ratio of Net Investment Income to Average Net Assets 1.54% 0.97% 2.55% -0.13% 1.05%
Portfolio Turnover Rate* 297.41% 186.13% 168.17% 279.56% 324.14

<FN>
*Turnover rate of corresponding portfolio
</FN>

See Accompanying Notes to Financial Statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS

Selected per share data and ratios for an average share outstanding during
each period based upon audited financial statements

THE GROWTH FUND
Years Ended December 31,

1996 1995 1994 1993 1992

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

INCOME FROM INVESTMENT OPERATIONS

Net Investment Income 0.31 0.50 0.27 0.09 0.18

Net Gains or Losses on Securities
(both realized and unrealized) 1.07 2.68 (0.37) 0.82 0.58
====== ====== ======= ====== ======

Total From Investment Operations 1.38 3.18 (0.10) 0.91 0.76
====== ====== ======= ====== ======

LESS DISTRIBUTIONS

Dividends (from net investment income) (0.31) (0.50) (0.27) (0.16) (0.11)

Distributions (from capital gains) -- (0.42) -- -- --
====== ====== ======= ====== ======

Total Distributions (0.31) (0.92) (0.27) (0.16) (0.11)
====== ====== ======= ====== ======

NET ASSET VALUE, END OF PERIOD $16.41 $15.34 $13.08 $13.45 $12.70
====== ====== ======= ====== ======

TOTAL RETURN 9.08% 24.61% -0.69% 7.21% 6.35%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 24,204 24,631 22,176 26,171 25,534
Ratio of Expenses to Average Net Assets 1.65% 1.64% 1.63% 1.51% 1.51%
Ratio of Net Investment Income to Average Net Assets 1.92% 3.38% 1.95% 0.69% 1.31%
Portfolio Turnover Rate* 81.66% 337.57% 102.76% 99.54% 39.03%

<FN>
*Turnover rate of corresponding portfolio
</FN>

See Accompanying Notes to Financial Statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS

Selected per share data and ratios for an average share outstanding during
each period based upon audited and unaudited financial statements

THE TOTAL RETURN UTILITIES FUND

For The Period
For The Year Ended June 21, 1995 2
December 31, 1996 to Dec. 31, 1995

NET ASSET VALUE, BEGINNING OF PERIOD $14.14 $12.50

INCOME FROM INVESTMENT OPERATIONS

Net Investment Income 0.37 0.21

Net Gains or Losses on Securities (both realized and unrealized) 1.48 1.64
===== =====

Total From Investment Operations 1.85 1.85
===== =====

LESS DISTRIBUTIONS

Dividends (from net investment income) (0.37) (0.21)

Distributions (from capital gains) (0.64) --
===== =====

Total Distributions (1.01) (0.21)

NET ASSET VALUE, END OF PERIOD $14.98 $14.14
===== =====

TOTAL RETURN 13.33% 15.00%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 5,074 2,881
Ratio of Expenses to Average Net Assets 1.25% 1.25% 1
Ratio of Net Investment Income to Average Net Assets 2.55% 3.18% 1
Ratio of Expenses to Average Net Assets, before waiver of fees 2.95% 4.35% 1
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 0.85% 0.08% 1
Portfolio Turnover Rate* 50.79% 5.06%

<FN>
1 Annualized
2 Date of commencement of operations
*Turnover rate of corresponding portfolio
</FN>

See Accompanying Notes to Financial Statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS

Selected per share data and ratios for an average share outstanding during
each period based upon audited financial statements.

THE U.S. GOVERNMENT BOND FUND
Years Ended December 31,

1996 1995 1994 1993 1992

NET ASSET VALUE, BEGINNING OF PERIOD $21.58 $19.25 $20.18 $19.46 $19.84

INCOME FROM INVESTMENT OPERATIONS

Net Investment Income 0.96 1.11 0.72 0.86 0.99

Net Gains or Losses on Securities
(both realized and unrealized) (0.94) 2.33 (0.93) 0.71 (0.38)
====== ===== ===== ===== ======

Total From Investment Operations 0.02 3.44 (0.21) 1.57 0.61
====== ===== ===== ===== ======

LESS DISTRIBUTIONS

Dividends (from net investment income) (0.96) (1.11) (0.72) (0.85) (0.99)
====== ===== ===== ===== ======

Total Distributions (0.96) (1.11) (0.72) (0.85) (0.99)
====== ===== ===== ===== ======

Net Asset Value, End of Period $20.64 $21.58 $19.25 $20.18 $19.46
====== ===== ===== ===== ======

TOTAL RETURN 0.15% 18.32% -0.99% 8.21% 3.26%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 17,783 16,048 12,983 13,137 11,100
Ratio of Expenses to Average Net Assets 1.00% 1.00% 1.00% 0.99% 1.00%
Ratio of Net Investment Income to Average Net Assets 4.61% 5.41% 3.71% 4.25% 5.13%
Ratio of Expenses to Average Net Assets, before
waiver of fees * 1.06% 1.14% 1.14% 1.09% 1.21%
Ratio of Net Investment Income to Average Net Assets,
before waiver of fees * 4.55% 5.27% 3.57% 4.15% 4.92%
Portfolio Turnover Rate1 778.59% 232.34% 707.57% 235.74% 100.53%

<FN>
* Includes fees waived in corresponding portfolio
1 Turnover rate of corresponding portfolio
</FN>

See Accompanying Notes to Financial Statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS

Selected per share data and ratios for an average share outstanding during
each period based upon audited financial statements

THE MONEY MARKET FUND
Years Ended December 31,

1996 1995 1994 1993 1992

NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00

INCOME FROM INVESTMENT OPERATIONS

Net Investment Income 0.05 0.06 0.04 0.03 0.04
====== ===== ===== ===== ======

Total From Investment Operations 0.05 0.06 0.04 0.03 0.04
====== ===== ===== ===== ======

LESS DISTRIBUTIONS

Dividends (from net investment income) (0.05) (0.06) (0.04) (0.03) (0.04)
====== ===== ===== ===== ======

Total Distributions (0.05) (0.06) (0.04) (0.03) (0.04)
====== ===== ===== ===== ======

NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
====== ===== ===== ===== ======

TOTAL RETURN 5.27% 5.85% 4.10% 2.98% 3.70%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 119,947 141,087 164,838 200,030 245,259
Ratio of Expenses to Average Net Assets 0.40% 0.40% 0.37% 0.37% 0.35%
Ratio of Net Investment Income to Average
Net Assets 5.15% 5.70% 4.02% 2.94% 3.68%
Ratio of Expenses to Average Net Assets, before
waiver of fees * 0.58% 0.64% 0.57% 0.57% 0.56%
Ratio of Net Investment Income to Average Net
Assets, before waiver of fees * 4.97% 5.46% 3.82% 2.74% 3.47%

<FN>
* Includes fees waived in corresponding portfolio
</FN>

See Accompanying Notes to Financial Statements

</TABLE>
<PAGE>

NOTES TO FINANCIAL STATEMENTS
December 31, 1996

1. ORGANIZATION

The Flex-funds Trust (the Trust) was organized in 1982 and is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company which is presently comprised of five separate funds (each a
"Fund" and collectively the "Funds") offering six separate series. Effective
May 1, 1992, The Money Market, Growth, and Bond Funds began investing all of
their investable assets in a corresponding open-end management investment
company (each a "Portfolio" and collectively the "Portfolios") having the same
investment objective as the Fund. The Muirfield Fund began on January 3, 1993
investing all of its investable assets in a corresponding open-end management
investment company having the same investment objectives as the Fund. The
Total Return Utilities Fund commenced operations on June 21, 1995 when it
began investing all of its investable assets in a corresponding open-end
management investment company having the same investment objectives as the
Fund. The Money Market, Muirfield, Growth, Bond and Total Return Utilities
Funds, the Portfolios into which they invest and the percentage of each
portfolio owned by the respective Fund at December 31, 1996 is shown below:

Approximate Percentage
of Portfolio Held by Fund
Fund Portfolio at December 31, 1996

The Muirfield Fund Mutual Fund Portfolio 90%
The Growth Fund Growth Stock Portfolio 100%
The Total Return Utilities Fund Utilities Stock Portfolio 64%
The U.S. Government Bond Fund Bond Portfolio 100%
The Money Market Fund Money Market Portfolio 34%

</TABLE>

The financial statements of the Portfolios, including the Portfolios of
Investments, are included elsewhere in this report and should be read in
conjunction with the financial statements of each respective Fund.

2. SIGNIFICANT ACCOUNTING POLICES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Valuation of Investments - Valuation of securities by the Portfolios is
discussed at Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report (See page 46).

Income Taxes - It is the Funds' policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to their shareholders. Therefore, no
Federal income tax provision is required.

Distributions to Shareholders - Dividends to shareholders are recorded on the
ex-dividend date.

Organizational Costs - The costs related to the organization of each of the
five Funds have been deferred and are being amortized by each Fund on a
straight-line basis over a five-year period. Such costs for The Growth, Bond,
Muirfield and Money Market Funds have been fully amortized.

3. INVESTMENT ADVISORY AND OTHER AGREEMENTS WITH AFFILIATES

R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield
Investors, Inc. (MII), provides each Portfolio with investment management,
research, statistical and advisory services. Miller/Howard Investments, Inc.
(Subadviser) serves as the Utilities Stock Portfolio's Subadviser under an
Investment Subadvisory Agreement between RMA and the Subadviser.

RMA has agreed to reimburse each Fund for the amount by which annual expenses
of the Fund and its respective Portfolio (excluding interest, taxes, brokerage
fees, and extraordinary expenses) exceed the most restrictive expense
limitation imposed by any State in which such Fund's shares are sold. Such
reimbursement is limited to the total fee charged by RMA. The investment
advisory fees reimbursed for the year ended December 31, 1996 were at the
request of RMA and were not the result of the aforementioned expense
limitations.

<PAGE>

Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of
MII, serves as stock transfer, dividend disbursing and shareholder services
for all of the Trust's separate Funds. Subject to a $4,000 annual minimum fee
The Growth, Muirfield, and Total Return Utilities Funds each incur an annual
fee equal to the greater of $15 per shareholder account, or .10% of each
Fund's average net assets, payable monthly. In The Bond Fund, the annual fee
is the greater of $15 per shareholder account, or .06% of the Fund's average
net assets, payable monthly. In The Money Market Fund, the annual fee is the
greater of $20 per shareholder account, or .06% of the Fund's average net
assets, payable monthly.

MFS also provides the Trust with certain administrative services. Each Fund
incurs an annual fee, payable monthly, of .03% of each Fund's average
net assets.

The Funds have adopted distribution expense plans pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Plans"). Pursuant to the Plans, the
Funds may annually incur certain expenses associated with the distribution of
fund shares in amounts not to exceed 2/10 of 1% of each Fund's average net
assets, with the exception of The Total Return Utilities Fund whose amount
cannot exceed 25/100 of 1% of average net assets.

Certain officers and/or trustees of the Funds and each Portfolio are officers
and/or directors of MII, RMA and MFS.

4. COMMITMENTS AND CONTINGENCIES

Fidelity Bond and Errors and Omissions insurance coverage for the Trust and
its officers and Trustees has been obtained through ICI Mutual Insurance
Company (ICI Mutual), an industry-sponsored mutual insurance company. As of
December 31, 1996, the Trust has made payments of $29,620, in addition to the
annual premiums paid, for the capital reserves of ICI Mutual.

The Trust is also committed to provide $51,055 should ICI Mutual experience
the need for additional capital contributions.

Total assets of $105,000 invested in U.S. Treasury Bills are held in
segregated accounts which collateralize a standby letter of credit in
connection with the Trust's participation in ICI Mutual.

5. CAPITAL SHARE TRANSACTIONS

At December 31, 1996, an indefinite number of shares of $0.10 par value stock
were authorized in each of the Funds, and paid-in capital amounted to
$119,947,497 in The Money Market Fund, $120,745,044 in The Muirfield Fund,
$22,378,542 in The Growth Fund, $18,790,130 in The Bond Fund, and $4,521,433
in The Total Return Utilities Fund. (See Statements of Changes in Net Assets
which are included elsewhere in this report for capital stock transactions.)

6. DISTRIBUTIONS

The Money Market and Bond Funds declare dividends daily and distribute monthly
all of their net investment income. The Total Return Utilities Fund declares
as dividends and distributes monthly substantially all of its net investment
income. The Muirfield and Growth Funds declare as dividends and distribute
quarterly substantially all of their net investment income. Net realized
capital gains for all Funds, if any, are distributed annually after deduction
of prior years' loss carryforwards. Dividends from net investment income and
any distributions of realized capital gains are distributed in cash or
reinvested in additional shares of the Funds at net asset value.

At December 31, 1996, The Growth and Bond Funds had available for Federal
income tax purposes unused capital loss carryforwards. The amount in the
Growth Fund is $1,339,495 which will expire in 2004, and the amount in the
Bond Fund is $700,493 which will expire in the years 1997 through 2002.

7. SUBSEQUENT EVENTS

On January 1, 1997 The Growth Fund changed its name to The Highlander Fund. In
addition, The Growth Stock Portfolio (the "Portfolio") in which the Growth
Fund invests all of its investable assets, changed its investment objective to
seek 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 Composite Stock Price Index (the
"S&P 500"). The new investment discipline calls for establishing separate
investment portfolio components of the Portfolio's existing portfolio of
assets, each such component representing one of the industry sectors
comprising the S&P 500. The industry sectors are then managed by one or more
subadvisers.

<PAGE>

Independent Auditors' Report

To the Shareholders and Board of Trustees of The Flex-funds:

We have audited the accompanying statements of assets and liabilities of The
Flex-funds (comprising, respectively, The Muirfield, Growth, Total Return
Utilities, U.S. Government Bond and Money Market Funds), as of December 31,
1996, and the related statements of operations, statements of changes in net
assets and the financial highlights for each of the periods indicated herein.
These financial statements and the financial highlights are the responsibility
of The Flex-funds' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of December 31, 1996, by correspondence with the custodian and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The Flex-funds at December 31, 1996,
the results of their operations, the changes in their net assets and the
financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Columbus, Ohio
January 31, 1997

STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996

Mutual Growth Utilities Money
Fund Stock Stock Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio

Assets:

Investments at market value* $85,570,890 $17,595,283 $7,032,966 $13,381,062 $317,524,839
Repurchase agreements* 51,661,000 6,968,000 914,000 225,000 32,550,000

Cash 520 689 583 581 248,915
Receivable for securities sold - - - 4,084,554 -
Interest receivable 193,699 1,968 171 125,001 3,167,087
Dividends receivable - 32,852 18,560 - -
Prepaid/Other assets 644 140 16 89 844
Unamortized organization costs 4,924 2,545 31,150 2,545 2,545
=========== =========== =========== =========== ============

Total Assets 137,431,677 24,601,477 7,997,446 17,818,832 353,494,230
----------- ----------- ----------- ----------- ------------

Liabilites:

Payable for futures contract settlement 1,785,305 153,300 - 8,625 -
Payable to corresponding Fund - - - - 505,357
Payable to investment adviser 91,065 21,868 6,264 6,077 46,355
Accrued fund accounting fees 4,248 2,648 644 1,910 6,313
Other accrued liabilities 11,491 9,979 26,184 10,626 5,980
=========== =========== =========== =========== ============

Total Liabilities 1,892,109 187,795 33,092 27,238 564,005
----------- ----------- ----------- ----------- ------------

Net Assets:

Capital 134,989,964 21,250,165 7,184,627 17,906,157 352,930,225
Net unrealized gain (loss) on investments 549,604 3,163,517 779,727 (114,563) -
=========== =========== =========== =========== ============

Net Assets $135,539,568 $24,413,682 $7,964,354 $17,791,594 $352,930,225
----------- ----------- ----------- ----------- ------------

*Securities at cost 136,682,286 21,399,766 7,167,239 13,720,625 350,074,839

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

STATEMENTS OF OPERATIONS
For the year ended December 31, 1996

Mutual Growth Utilities Money
Fund Stock Stock Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio

INVESTMENT INCOME - NET:
Interest $3,331,013 $599,916 $20,631 $983,788 $20,131,315
Dividends 348,105 321,268 230,516 - -
========== ========= ======== ======== ===========

Total Investment Income 3,679,118 921,184 251,147 983,788 20,131,315
---------- --------- -------- -------- -----------

Expenses:
Investment advisory fees 1,083,553 258,239 65,190 70,236 1,060,982
Legal fees 1,543 2,040 1,535 1,543 1,522
Audit fees 10,880 8,471 10,211 8,184 13,848
Custodian fees 15,407 6,451 3,066 4,980 21,008
Accounting fees 50,435 30,867 9,541 22,555 74,002
Trustees fees and expenses 4,870 7,192 5,558 4,956 4,938
Insurance 2,382 536 51 340 3,913
Amortization of organization cost 5,453 4,992 8,996 4,992 4,992
Other expenses 4,649 1,313 4,000 865 3,720
========== ========= ======== ======== ===========

Total Expenses 1,179,172 320,101 108,148 118,651 1,188,925
Investment advisory fees waived - - - (10,890) (512,876)
Directed brokerage payments received - - (3,377) - -
Other directed payments received (10,397) - - - -
========== ========= ======== ======== ===========

Total Expenses - net 1,168,775 320,101 104,771 107,761 676,049
---------- --------- -------- -------- -----------

INVESTMENT INCOME - NET 2,510,343 601,083 146,376 876,027 19,455,266
---------- --------- -------- -------- -----------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on futures contracts (425,664) (1,614,924) - 41,147 -
Net realized gain (loss) on investments 11,000,788 301,314 348,392 (7,021) -
Net change in unrealized appreciation
(depreciation) of investments (5,130,740) 3,055,094 357,308 (776,915) -
========== ========= ======== ======== ===========

NET GAIN (LOSS) ON INVESTMENTS 5,444,384 1,741,484 705,700 (742,789) -
========== ========= ======== ======== ===========

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $7,954,727 $2,342,567 $852,076 $133,238 $19,455,266
========== ========= ======== ======== ===========

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31,

Mutual Growth
Fund Stock
Portfolio Portfolio

1996 1995 1996 1995

INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income - net $2,510,343 $1,278,396 $601,083 $900,867
Net realized gain (loss) on investments and futures contracts 10,575,124 15,554,692 (1,313,610) 4,316,033
Net change in unrealized appreciation
(depreciation) of investments (5,130,740) 5,680,803 3,055,094 111,506
----------- ---------- ----------- ---------

Net increase in net assets resulting from operations 7,954,727 22,513,891 2,342,567 5,328,406
----------- ---------- ----------- ---------

TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 32,575,692 34,671,819 4,020,512 1,680,821
Withdrawals (27,099,980) (18,261,284) (6,486,427) (4,640,744)
----------- ---------- ----------- ---------

Net increase (decrease) in net assets resulting from
transactions of investors' beneficial interests 5,475,712 16,410,535 (2,465,915) (2,959,923)
----------- ---------- ----------- ---------

TOTAL INCREASE (DECREASE) IN NET ASSETS 13,430,439 38,924,426 (123,348) 2,368,483
=========== ========== =========== =========

NET ASSETS - Beginning of period 122,109,129 83,184,703 24,537,030 22,168,547
=========== ========== =========== =========

NET ASSETS - End of period $135,539,568 $122,109,129 $24,413,682 $24,537,030
=========== ========== =========== =========

Utilities
Stock Bond
Portfolio Portfolio

1996 1995* 1996 1995

INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income - net $146,376 $29,889 $876,027 $841,854
Net realized gain (loss) on investments and futures contracts 348,392 (1,067) 34,126 988,487
Net change in unrealized appreciation
(depreciation) of investments 357,308 422,419 (776,915) 667,977
----------- ---------- ----------- ---------

Net increase in net assets resulting from operations 852,076 451,241 133,238 2,498,318
----------- ---------- ----------- ---------

TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 5,138,546 3,908,655 4,220,008 2,890,694
Withdrawals (2,317,138) (69,026) (2,627,674) (2,330,962)
----------- ---------- ----------- ---------

Net increase (decrease) in net assets resulting from
transactions of investors' beneficial interests 2,821,408 3,839,629 1,592,334 559,732
----------- ---------- ----------- ---------

TOTAL INCREASE (DECREASE) IN NET ASSETS 3,673,484 4,290,870 1,725,572 3,058,050
=========== ========== =========== =========

NET ASSETS - Beginning of period 4,290,870 - 16,066,022 13,007,972
=========== ========== =========== =========

NET ASSETS - End of period $7,964,354 $4,290,870 $17,791,594 $16,066,022
=========== ========== =========== =========

Money
Market
Portfolio

1996 1995

INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income - net $19,455,266 $11,720,462
Net realized gain (loss) on investments and futures contracts - -
Net change in unrealized appreciation
(depreciation) of investments - -
------------- ------------

Net increase in net assets resulting from operations 19,455,266 11,720,462
------------- ------------

TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 1,414,075,891 753,617,719
Withdrawals (1,335,249,306) (735,213,083)
------------- ------------

Net increase (decrease) in net assets resulting from
transactions of investors' beneficial interests 78,826,585 18,404,636
------------- ------------

TOTAL INCREASE (DECREASE) IN NET ASSETS 98,281,851 30,125,098
============= ============

NET ASSETS - Beginning of period 254,648,374 224,523,276
============= ============

NET ASSETS - End of period $352,930,225 $254,648,374
============= ============

<FN>
*For the period June 21, 1995 through December 31, 1996
</FN>

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS
Ratios/Supplemental Data

MUTUAL FUND PORTFOLIO

Year Ended December 31,

1996 1995 1994 1993

Net Assets, End of Period ($000) 135,540 122,109 83,185 81,605
Ratio of Expenses to Average Net Assets* 0.87% 0.95% 1.01% 1.03%
Ratio of Net Investment Income to Average Net Assets 1.86% 1.26% 2.76% 0.09%
Portfolio Turnover Rate 297.41% 186.13% 168.17% 279.56%

<FN>
*Ratio of expenses both with and without effect of directed payments
</FN>
</TABLE>
<TABLE>
<CAPTION>

GROWTH STOCK PORTFOLIO

For The Period May 1, 1992
Year Ended December 31, to December 31, 1992
1996 1995 1994 1993

Net Assets, End of Period ($000) 24,414 24,537 22,169 26,172 25,556
Ratio of Expenses to Average Net Assets 1.24% 1.25% 1.23% 1.23% 1.22% 1
Ratio of Net Investment Income to Average Net Assets 2.33% 3.78% 2.35% 0.99% 2.04% 1
Portfolio Turnover Rate 81.66% 337.57% 102.76% 99.54% 129.44%
Average brokerage commission per share 2 $0.091 $0.0806 N/A N/A N/A

<FN>
1 Annualized
2 Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of shares purchased and sold by the
Portfolio for which commissions were charged.
</FN>
</TABLE>
<TABLE>
<CAPTION>

UTILITY STOCK PORTFOLIO

For The Period
For The Year Ended June 21, 1995 *
December 31, 1996 to December 31, 1995

Net Assets, End of Period ($000) 7,964 4,291
Ratio of Expenses to Average Net Assets 1.61% 2.32% 1
Ratio of Net Investment Income to Average Net Assets 2.24% 2.09% 1
Ratio of Expenses to Average Net Assets before directed brokerage payments 1.66% 2.40% 1
Ratio of Net Investment Income to Average Net Assets before
directed brokerage payments 2.19% 2.01% 1
Portfolio Turnover Rate 50.79% 5.06%
Average brokerage commission per share 2 $0.060 $0.0600

See accompanying notes to financial statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS
Ratios/Supplemental Data

BOND PORTFOLIO

For The Period May 1, 1992
Year Ended December 31, to December 31, 1992
1996 1995 1994 1993

Net Assets, End of Period ($000) 17,792 16,066 13,008 13,178 11,126
Ratio of Expenses to Average Net Assets 0.61% 0.57% 0.56% 0.60% 0.58% 1
Ratio of Net Investment Income to Average Net
Assets 4.99% 5.82% 4.15% 4.62% 5.40% 1
Ratio of Expenses to Average Net Assets, before
waiver of fees 0.68% 0.71% 0.70% 0.71% 0.80% 1
Ratio of Net Investment Income to Average Net
Assets, before waiver of fees 4.92% 5.68% 4.01% 4.51% 5.18% 1
Portfolio Turnover Rate 778.59% 232.34% 707.57% 235.74% 132.53%

<FN>
1 Annualized
</FN>
</TABLE>
<TABLE>
<CAPTION>

MONEY MARKET PORTFOLIO

For The Period
May 1, 1992
Year Ended December 31, to Dec. 31, 1992
1996 1995 1994 1993

Net Assets, End of Period ($000) 352,930 256,126 224,523 200,148 244,272
Ratio of Expenses to Average Net Assets 0.19% 0.21% 0.19% 0.19% 0.18% 1
Ratio of Net Investment Income to Average
Net Assets 5.34% 5.87% 4.28% 3.09% 3.60% 1
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.33% 0.37% 0.39% 0.40% 0.40% 1
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 5.20% 5.70% 4.08% 2.88% 3.38% 1
Portfolio Turnover Rate N/A N/A N/A N/A N/A

<FN>
1 Annualized
</FN>

See accompanying notes to financial statements

</TABLE>
<PAGE>

NOTES TO FINANCIAL STATEMENTS
December 31, 1996

1. SIGNIFICANT ACCOUNTING POLICIES

Each separate Portfolio (the "Portfolios") is registered under the Investment
Company Act of 1940, as amended, as a no-load, open-end management investment
company which was organized as a trust under the laws of the State of New
York. Each Declaration of Trust permits the Trustees, who are the same for all
the Portfolios, to issue beneficial interests in each Portfolio. The following
is a summary of significant accounting policies followed by the Portfolios.

Investments - Money market securities held in the Money Market Portfolio are
valued at amortized cost, which approximates market value in accordance with
Rule 2a-7 of the Investment Company Act of 1940. Money market securities held
in the four remaining Portfolios maturing more than sixty days after the
valuation date are valued at the last sales price as of the close of business
on the day of valuation, or, lacking any sales, at the most recent bid price
or yield equivalent as obtained from dealers that make markets in such
securities. When such securities are valued within sixty days or less to
maturity, the difference between the valuation existing on the sixty-first day
before maturity and maturity value is amortized on a straight-line basis to
maturity. Securities maturing within sixty days from their date of acquisition
are valued at amortized cost.

Securities which are traded on stock exchanges are valued at the last sales
price as of the close of business of the New York Stock Exchange on the day of
valuation, or, lacking any sales, at the closing bid prices. Securities traded
on the over-the-counter market are valued at the most recent bid price or
yield equivalent as obtained from one or more dealers that make markets in
such securities. Mutual funds are valued at the daily redemption value
determined by the underlying fund. Valuations in The Bond Portfolio are
determined as of 3:00 p.m. Eastern time.

Repurchase Agreements - It is the Portfolios' policy to take possession of the
collateral for repurchase agreements before payment is made to the seller.
Market value of the collateral must be at least 100% of the amount of the
repurchase agreement.

Options & Futures - Each Portfolio except the Money Market Portfolio may
engage in transactions in financial futures contracts and options as a hedge
against the change in market value of the securities held in the portfolio, or
which it intends to purchase. The expectation is that any gain or loss on such
transactions will be substantially offset by any gain or loss on the
securities in the underlying portfolio or on those which are being considered
for purchase.

To the extent that the Portfolio enters into futures contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change
in the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit either cash or securities in an amount
("initial margin") equal to a certain percentage of the contract value.
Subsequent payments ("variation margin") equal to changes in the daily
settlement price or last sale on the exchanges where they trade are paid or
received each day and are recorded as a gain or loss on futures contracts.

Call and put option contracts involve the payment of a premium for the right
to purchase or sell an individual security or index aggregate at a specified
price until the expiration of the contract. Such transactions expose the
Portfolio to the loss of the premium paid if the Portfolio does not sell or
exercise the contract prior to the expiration date. In the case of a call
option, sufficient cash or money market instruments will be segregated to
complete the purchase. Options are valued on the basis of the daily settlement
price or last sale on the exchanges where they trade and the changes in value
are recorded as an unrealized gain or loss until sold, exercised or expired.
In the case of a written option, premiums received by each portfolio upon
writing the option are recorded in the liability section of the Statement of
Assets and Liabilities and are subsequently adjusted to current market value.
When the written option is closed, exercised or expired, the portfolio
realizes a gain or loss and the liability is eliminated. During the period
ended December 31, 1996 the Portfolios wrote the following option contracts:

GROWTH STOCK PORTFOLIO BOND PORTFOLIO

Number of Contracts Number of Premiums Number of Contracts Number of Premiums

Outstanding at Beginning of Period 3,300 $4,881,362 20 $10,850

Options Written - - - -
Options Terminated (3,300) (4,881,362) (20) (10,850)
====== ========== ===== ========

Outstanding at End of Period 0 $0 0 $0

</TABLE>
<PAGE>

Income Taxes - It is the Portfolios' policy to comply with the requirements of
the Internal Revenue Code applicable to it. Therefore, no Federal income tax
provision is required.

Organizational Costs - The costs related to the organization of each of the
five Portfolios have been deferred and are being amortized by each Portfolio
on a straight-line basis over a five-year period.

Other - The Portfolios follow industry practice and record security
transactions on the trade date. Gains and losses on security transactions are
determined on the specific identification basis. Dividend income is recognized
on the ex-dividend date, and interest income (including amortization of premium
and discount) is recognized as earned.

2. INVESTMENT ADVISORY, AND OTHER AGREEMENTS WITH AFFILIATES

R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield
Investors, Inc. (MII), provides the Portfolios with investment management,
research, statistical and advisory services, and pays certain other expenses
of the Portfolios. Miller/Howard Investments, Inc. (Subadviser) serves as the
Utilities Stock Portfolio's Subadviser under an Investment Subadvisory
Agreement between RMA and the Subadviser. For such services the Portfolios pay
monthly a fee based upon the average daily value of each Portfolios' net
assets at the following annual rates: Mutual Fund, Growth Stock, and Utilities
Stock Portfolio, 1% of average net assets up to $50 million, 0.75% of average
net assets exceeding $50 million up to $100 million and 0.60% of average net
assets exceeding $100 million; Bond Portfolio, 0.40% of average net assets up
to $100 million and 0.20% of average net assets exceeding $100 million; Money
Market Portfolio, 0.40% of average net assets up to $100 million and 0.25% of
average net assets exceeding $100 million. During the year ended December 31,
1996, RMA voluntarily waived a portion of its investment advisory fees in the
Money Market and Bond Portfolios.

Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
accounting services agent for all of the Portfolios. The minimum annual fee
for all such services for the Mutual Fund, Growth Stock, Bond, and Utilities
Stock Portfolios is $7,500. Subject to the applicable minimum fee, each
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 respective Portfolio's
average net assets. In the Money Market Portfolio the minimum annual fee for
accounting services is $30,000. Subject to the applicable minimum fee, the
Money Market 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.

Certain officers and/or trustees of the Funds and each Portfolio are officers
and/or directors of MII, RMA and MFS.

3. PURCHASES AND SALES OF INVESTMENTS

Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the year ended December 31, 1996 were as
follows:

Purchases Sales

Mutual Fund Portfolio $127,926,031 $179,435,771
Growth Stock Portfolio $ 2,990,564 $ 792,118
Utilities Stock Portfolio $ 5,484,900 $ 3,084,727

</TABLE>

As of December 31, 1996, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised of
the following:

Net Unrealized
Unrealized Unrealized Appreciation
Investment Appreciation Depreciation (Depreciation)
Cost of Investments of Investments of Investments

Mutual Fund Portfolio $136,682,286 $1,034,293 $(484,688) $549,605
Growth Stock Portfolio $21,399,766 $3,267,845 $(104,329) $3,163,516
Bond Portfolio $13,720,625 $54 $(114,617) $(114,563)
Utilities Stock Portfolio $7,167,239 $902,962 $(123,235) $779,727

</TABLE>
<PAGE>

Independent Auditors' Report

To the Shareholders and Board of Trustees of the Mutual Fund Portfolio, Growth
Stock Portfolio, Utilities Stock Portfolio, Bond Portfolio, and Money Market
Portfolio:

We have audited the accompanying statements of assets and liabilities of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio and Money Market Portfolio, including the portfolios of investments,
as of December 31, 1996, and the related statements of operations, statements
of changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and the financial highlights are
the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio and Money Market Portfolio at December 31, 1996, the results of
their operations, the changes in their net assets and the financial highlights
for each of the periods indicated herein, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997