THE FLEX-FUNDS
ANNUAL REPORT 1997
[LOGO]
December 31, 1997
Investment Adviser - R. Meeder & Associates
<PAGE>
MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1997
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 9.0%
AEROSPACE/DEFENSE - 0.5%
Boeing Co. 7,000 $342,563
United Technologies Corp. 7,000 509,687
=======
852,250
-------
ALUMINUM - 0.3%
Aluminum Company of America 7,000 492,625
AUTO AND TRUCK - 0.3%
General Motors Corp. 7,000 424,375
BANKING - 0.5%
J.P. Morgan & Co. 7,000 790,125
BEVERAGE -- SOFT DRINK -0.3%
Coca-Cola Co. 7,000 466,375
CHEMICAL -- DIVERSIFIED - 0.5%
E.I. du Pont de Nemours & Co. 7,000 420,438
Union Carbide Corp. 7,000 300,562
=======
721,000
-------
COMPUTERS & PERIPHERALS - 0.5%
IBM 7,000 731,937
Raytheon Co. - Class A 446 22,013
======
753,950
-------
CONSUMER NON-DURABLE -0.4%
Proctor & Gamble Co. 7,000 558,687
DIVERSIFIED - 0.5%
Allied-Signal, Inc. 7,000 272,562
Minnesota Mining & Manufacturing Co. 7,000 574,438
=======
847,000
-------
DRUG - 0.5%
Merck & Co., Inc. 7,000 743,750
ELECTRICAL EQUIPMENT - 0.3%
General Electric Corp. 7,000 513,625
FINANCIAL SERVICES - 0.4%
American Express Co. 7,000 624,750
HEALTH - 0.3%
Johnson & Johnson 7,000 461,125
INSURANCE - MULTILINE - 0.2%
Travelers Group, Inc. 7,000 377,125
MACHINERY -- CONSTRUCTION & MINING - 0.2%
Caterpillar, Inc. 7,000 339,937
MULTIMEDIA - 0.5%
Walt Disney Co. 7,000 693,438
OFFICE AUTOMATION & EQUIPMENT - 0.3%
Hewlett Packard 7,000 437,500
OIL/GAS -- INTERNATIONAL - 0.6%
Chevron Corp. 7,000 539,000
Exxon Corp. 7,000 428,312
=======
967,312
-------
PAPER & FOREST PRODUCTS - 0.2%
International Paper 7,000 301,875
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 0.3%
Eastman Kodak Co. 7,000 425,688
RESTAURANT - 0.2%
McDonald's Corp. 7,000 334,250
RETAIL STORE - 0.4%
Sears, Roebuck & Co. 7,000 316,750
WalMart Stores, Inc. 7,000 276,062
=======
592,812
-------
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 0.3%
AT&T 7,000 428,750
TIRE & RUBBER - 0.3%
Goodyear Tire & Rubber 7,000 445,375
TOBACCO - 0.2%
Philip Morris Companies, Inc. 7,000 317,188
================================================================================
TOTAL COMMON STOCKS
(Cost $13,792,981 ) 13,910,887
- --------------------------------------------------------------------------------
MUTUAL FUNDS - 70.1%
Aim Constellation Fund 94 $2,467
Aim Weingarten Equity Fund 116 2,307
Federated S&P 500 Maxcap Fund 256,148 5,181,865
Federated Stock Trust Fund 201,166 7,058,906
Fidelity Growth & Income Fund 133,547 5,088,141
Fidelity Mid Cap Fund 400,450 6,683,512
Mutual Shares Fund 321 6,840
Neuberger & Berman Focus Trust Fund 7,406 151,231
Neuberger & Berman Partners Fund 49,971 1,314,226
Oppenheimer Quest Growth Fund 76,805 1,018,433
PBHG Growth Fund 624 15,849
Safeco Growth Fund 451,746 10,141,688
SteinRoe Young Investor Fund 43,783 1,019,702
Strong American Utility Fund 135,593 2,009,492
T. Rowe Price New Era Fund 147 3,820
T. Rowe Price New Horizons Fund 155 3,608
Vontobel U.S. Value Fund 61,162 1,009,786
Wasatch Micro-Cap Fund 151,876 571,055
================================================================================
TOTAL MUTUAL FUNDS
(Cost $42,109,119 ) 41,282,928
- --------------------------------------------------------------------------------
MONEY MARKET MUTUAL FUNDS - 70.1%
Charles Schwab Money Market Fund 15,369,715 15,369,715
Fidelity Core Money Market Fund 51,302,044 51,302,044
================================================================================
TOTAL MONEY MARKET MUTUAL FUNDS
(Cost $66,671,759 ) 66,671,759
- --------------------------------------------------------------------------------
U.S.TREASURY BILLS - 1.0%
** 5.27%, due 01/08/98 30,100 30,069
* 5.10%, due 03/05/98 $1,500,000 1,486,267
================================================================================
TOTAL U.S. TREASURY BILLS
(Cost $1,516,681 ) 1,516,336
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.4%
Merrill Lynch, 6.80%, 1/2/98,
(Collateralized by $13,165,000
Florida Power Corp. Commercial
Paper, 0.00%, 1/30/98, market
value - $13,165,000) 12,968,000 12,968,000
================================================================================
TOTAL REPURCHASE AGREEMENTS
(Cost $12,968,000 ) 12,968,000
- --------------------------------------------------------------------------------
OPTIONS PURCHASED - 11.5%
CALL OPTIONS
S&P 500 Index futures contract expiring
January 16, 1998 at 960 4,000 8,800,000
PUT OPTIONS
S&P 500 Index futures contract expiring
January 16, 1998 at 980 4,000 8,800,000
================================================================================
TOTAL OPTIONS PURCHASED
(Cost $27,378,320 ) 17,600,000
- --------------------------------------------------------------------------------
================================================================================
TOTAL INVESTMENTS - 100.0%
(Cost $164,436,860) $153,949,910
- --------------------------------------------------------------------------------
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
FUTURES CONTRACTS
Long, Midcap 400 Futures, face amount
$3,612,350 expiring March 1998. 22 3,686,650
Long, S&P 500 Futures, face amount
$21,452,550 expiring March 1998. 88 $21,540,200
================================================================================
TOTAL FUTURES CONTRACTS $25,226,850
- --------------------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING AS OF DECEMBER 31, 1997.
CALL OPTIONS
S&P 500 Index futures contracts expiring
January 16, 1998 at 980 (4,000) (4,604,000)
PUT OPTIONS
S&P 500 Index futures contracts expiring
January 16, 1998 at 960 (4,000) (5,000,000)
================================================================================
TOTAL OPTIONS WRITTEN
(Proceeds $19,383,673 ) ($9,604,000)
- --------------------------------------------------------------------------------
* Pledged $1,500,000 face amount as collateral on futures contracts.
** Pledged $30,100 face amount as collateral on Letter of Credit.
See accompanying notes to financial statements.
<PAGE>
GROWTH STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1997
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.7%
AEROSPACE/DEFENSE - 1.5%
Boeing Co. 819 $ 40,080
General Dynamics Corp. 730 63,099
Gulfstream Aerospace Corp. # 520 15,210
Lockheed Martin Corp. 980 96,530
Northrup Grumman Corp. 535 61,525
Raytheon Co. - Class B # 1,390 70,195
Textron, Inc. 1,060 66,250
Thiokol Corp. 450 36,563
United Technologies Corp. 740 53,881
=======
503,333
-------
AIR TRANSPORTATION - 0.4%
AMR Corp. # 445 57,183
Delta Air Lines, Inc. 175 20,825
Southwest Airlines 1,050 25,856
USAir Group # 410 25,625
=======
129,489
-------
ALUMINUM - 0.2%
Aluminum Company of America 860 60,523
AUTO & TRUCK - 1.8%
Chrysler Corp. 2,900 102,044
Ford Motor Co. 5,900 287,256
General Motors Corp. 3,100 187,938
Meritor Automotive, Inc. 279 5,876
Paccar, Inc. 218 11,445
TRW, Inc. 375 20,016
=======
614,575
-------
BANKING - 0.5%
J.P. Morgan & Co. 1,000 112,875
Washington Mutual Savings Bank 1,170 74,661
=======
187,536
-------
BEVERAGE--ALCOHOLIC - 0.8%
Canadaigua Wine Co. # 5,200 287,950
BEVERAGE--SOFT DRINK - 2.1%
Coca-Cola Co. 8,800 586,300
Pepsico, Inc. 3,000 109,313
=======
695,613
-------
BUILDING MATERIALS - 0.3%
Crane Co. 280 12,145
Masco Corp. 1,075 54,691
Willbros Group # 1,600 24,000
======
90,836
------
CAPITAL GOODS - 0.2%
Cooper Industries 345 16,905
Eaton Corp. 217 19,367
Ingersoll-Rand 478 19,359
======
55,631
------
CHEMICAL--DIVERSIFIED - 2.0%
Air Products & Chemicals, Inc. 535 44,004
Dow Chemical Co. 995 100,993
E.I. du Pont de Nemours & Co. 5,230 314,127
Monsanto Corp. 2,840 119,280
Praxair, Inc. 1,000 45,000
Rohm & Haas Co. 335 32,076
Union Carbide Corp. 460 19,751
=======
675,231
-------
CHEMICAL--SPECIALTY - 0.1%
Sigma Aldrich 440 17,490
W.R. Grace & Co. 410 32,979
======
50,469
------
COMMERCIAL SERVICES - 0.1%
Dun & Bradstreet 1,110 34,341
COMPUTERS & PERIPHERALS - 2.3%
Compaq Computer Corp. 1,905 107,513
Dell Computer Corp. # 1,600 134,400
EMC Corp./Mass # 5,150 141,303
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
IBM 3,395 354,990
Raytheon Co. - Class A 198 9,748
Sun Microsystems # 900 35,888
=======
783,842
-------
COMPUTER SOFTWARE & SERVICES - 4.8%
America Online, Inc. # 520 46,377
Cambridge Technologies Partners, Inc. # 970 40,376
Ceridian Co. # 2,850 130,566
Citrix Systems, Inc. # 380 28,880
Computer Associates International, Inc. 3,255 172,108
Computer Sciences Corp. # 980 81,830
First Data Corp. 2,220 64,935
Manugistics Group, Inc. # 690 30,791
Microsoft Corp. # 4,757 614,842
National Data Corp. 540 19,508
Network Associates, Inc. # 600 31,725
Orcale Corp. # 3,500 78,094
Peoplesoft, Inc. # 2,510 97,890
Sterling Commerce, Inc. # 1,600 61,500
Sungard Data Systems, Inc. # 3,190 98,890
Wind River Systems # 350 13,891
=========
1,612,203
---------
COMPUTER SYSTEMS - 0.1%
Visio Corp. # 690 26,479
CONSUMER DURABLES - 0.4%
Snap-On, Inc. 1,600 69,800
Sunbeam Corp. 1,600 67,400
=======
137,200
-------
CONSUMER NON-DURABLE - 3.8%
Chattem, Inc. # 8,700 128,325
Colgate Palmolive 2,000 147,000
EKCO Group # 11,400 88,350
Haggar Corp. 12,800 201,600
Procter & Gamble Co. 5,800 462,912
RJR Nabisco Holdings Corp. 1,600 60,000
Tupperware Corp. 7,200 200,700
=========
1,288,887
---------
CONTAINERS--PAPER & PLASTIC - 0.5%
First Brands Corp. 4,500 121,219
Sealed Air Corp. # 700 43,225
=======
164,444
-------
COPPER - 0.0%
Phelps Dodge Corp. 240 14,940
COSMETICS - 1.0%
Avon Products, Inc. 1,700 104,444
Estee Lauder Co. 4,600 235,472
=======
339,916
-------
DATA PROCESSING - 0.2%
I2 Technologies, Inc. # 1,040 54,860
DIVERSIFIED - 2.9%
Allied Signal, Inc. 2,080 80,990
Corning, Inc. 740 27,472
FMC Corp. # 859 57,821
Minnesota Mining & Manufacturing Co. 610 50,058
National Service Industries 430 21,312
Norfolk Southern Corp. 1,830 56,387
PPG Industries, Inc. 890 50,841
Ralston Purina 1,000 92,938
Raychem Corp. 540 23,254
Tenneco 615 24,292
Tyco International 1,140 51,371
Westinghouse Electric 9,500 279,656
Whitman Corp. 6,500 169,406
=======
985,798
-------
DRUG - 7.2%
Abbott Labs 3,432 225,011
Bristol Myers Squibb 4,443 420,419
Eli Lilly & Co. 4,916 342,276
Merck & Co., Inc. 5,425 576,406
Pfizer, Inc. 5,714 426,050
Pharmacia & Upjohn 2,213 81,051
Schering Plough Corp. 3,524 218,929
Warner Lambert Co. 1,221 151,404
=========
2,441,546
---------
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
DRUGSTORE - 0.2%
Longs Drug Stores 2,000 64,250
ELECTRIC--INTEGRATED - 0.9%
FPL Group, Inc. 840 49,718
Houston Industries, Inc. 1,600 42,700
Texas Utilities Co. 2,810 116,791
Unicom Corp. 3,270 100,552
=======
309,761
-------
ELECTRIC PRODUCTION - 0.1%
Sundstrand Corp. 820 41,307
ELECTRIC UTILITY - 0.7%
American Electric Power, Inc. 1,250 64,531
Duke Power Co. 1,640 90,815
Southern Co. 2,690 69,604
=======
224,950
-------
ELECTRICAL EQUIPMENT - 3.5%
General Electric Corp. 15,742 1,155,069
Thomas & Betts 350 16,581
=========
1,171,650
---------
ELECTRONIC COMPONENT SEMICONDUCTORS - 1.5%
Analog Devices # 1,000 27,688
Intel 4,370 306,992
KLA -Tencor Corp. # 430 16,609
Linear Tech Corp. 490 28,236
Maxim Integrated Products, Inc. # 1,600 55,200
Motorola, Inc. 930 53,068
Texas Instruments, Inc. 620 27,900
=======
515,693
-------
ELECTRONIC COMPONENTS - 0.3%
Emerson Electric 1,905 107,513
ELECTRONICS - 0.1%
Rockwell International Corp. 840 43,890
ENERGY - 0.1%
Western Atlas # 700 51,800
FINANCE - 9.4%
Banc One Corp. 3,000 162,938
Bank of Boston Corp. 800 75,150
Bankers Trust New York Co. 600 67,462
Barnett Banks, Inc. 1,200 86,250
Chase Manhattan Corp. 3,300 361,350
Citicorp 2,300 290,806
Corestates Financial 1,000 80,063
Equifax, Inc. 1,070 37,918
Federal Home Loan Mortgage Corp. 3,100 130,006
Federal National Mortgage Corp. 2,300 131,244
First Chicago NBD Corp. 1,700 141,950
First Union Corp. 3,800 194,750
Firstplus Financial Group # 4,600 176,525
Fleet Financial Group, Inc. 1,200 89,925
KeyCorp 1,400 99,137
Lehman Brothers Holdings, Inc. 1,300 66,300
Mellon Bank Corp. 1,000 60,625
Merrill Lynch & Co. 600 43,763
NationsBank Corp. 3,800 231,087
Norwest Corp. 6,200 239,475
PNC Bank Corp. 2,400 136,950
Ryder Systems, Inc. 370 12,118
SunTrust Banks, Inc. 900 64,237
Wells Fargo & Co. 600 203,663
=========
3,183,692
---------
FINANCIAL SERVICES - 2.2%
American Express Co. 1,500 133,875
Associates First Capital 1,900 135,137
Avery Dennison Corp. 720 32,220
BankAmerica Corp. 4,400 321,200
HF Ahmanson & Co. 800 53,550
Nationwide Financial Services - Class A 1,900 68,638
=======
744,620
-------
FOOD DIVERSIFIED - 2.4%
CPC International 1,800 193,950
General Mills 3,200 229,200
IBP, Inc. 11,000 230,606
International Home Foods # 1,900 53,200
Kellogg Co. 1,800 89,325
=======
796,281
-------
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
FOOD WHOLESALER - 0.3%
Nabisco 2,400 116,250
FOREST PRODUCTS - 0.3%
Georgia Pacific Corp. 430 26,122
Timber Group # 430 9,756
Weyerhauser Co. 1,010 49,553
Willamette Industries, Inc. 640 20,600
=======
106,031
-------
HEALTH - 1.9%
Allergan, Inc. 283 9,498
American Home Products 2,701 206,627
Humana, Inc. # 751 15,583
Johnson & Johnson 6,062 399,334
=======
631,042
-------
INSTRUMENTS--CONTROLS - 0.2%
Honeywell, Inc. 650 44,525
Johnson Controls, Inc. 237 11,317
Parker Hannifin Corp. 315 14,451
======
70,293
------
INSTRUMENTS--SCIENTIFIC - 0.0%
Perkin Elmer Corp. 50 3,553
INSURANCE--LIFE - 0.6%
American Heritage Life Investment Co. 1,000 36,000
AmerUs Life Holdings, Inc. 4,841 178,522
=======
214,522
-------
INSURANCE--MULTILINE - 3.3%
Allstate 1,800 163,575
American International Group 2,250 244,687
Conseco, Inc. 5,700 258,994
Leucadia National 1,600 55,200
PAULA Financial # 5,000 115,000
Travelers Group, Inc. 5,347 288,070
=========
1,125,526
---------
LASERS--SYSTEMS & COMPONENTS - 0.2%
Uniphase Corp. # 1,680 69,510
MACHINE TOOL - 0.2%
Cincinnati Milacron 2,471 64,100
MACHINERY - 0.4%
Deere & Co. 981 57,205
Dover Corp. 608 21,964
Lancer Corp. # 4,100 45,100
W.W. Grainger 146 14,189
=======
138,458
-------
MACHINERY--CONSTRUCTION & MINING - 0.6%
Case Corp. 211 12,752
Caterpillar, Inc. 1,581 76,777
Halliburton Co. 1,000 51,938
Harnischfeger Industries 1,990 70,272
=======
211,739
-------
MANUFACTURING - 0.8%
Black & Decker 2,400 93,750
Mueller Industries, Inc. # 750 44,250
Owens Illinois # 670 25,418
Samsonite Corp. # 3,100 102,516
=======
265,934
-------
MATERIALS & SERVICES - 0.8%
Champion International Corp. 425 19,258
Dana Corp. 370 17,575
Deluxe Corp. 300 10,350
Hercules, Inc. 570 28,536
Illinois Tool Works, Inc. 1,270 76,359
Service Corp. International 1,650 60,947
Sherwin-Williams Co. 920 25,530
Waste Management, Inc. 990 27,225
=======
265,780
-------
MEDICAL SERVICES - 1.0%
Amgen, Inc. # 1,159 62,731
Beverly Enterprise # 445 5,785
Columbia/HCA Healthcare Corp. 2,897 85,824
HBO & Co. 1,010 48,480
Healthsouth Rehab # 1,321 36,658
Manor Care, Inc. 264 9,240
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
Shared Medical Systems 420 27,720
Tenet Healthcare # 1,371 45,414
=======
321,852
-------
MEDICAL SUPPLIES - 1.1%
Alza Corp. # 389 12,375
BIOMET 471 12,069
Bausch & Lomb, Inc. 249 9,867
Baxter International, Inc. 1,237 62,391
Becton Dickinson 545 27,250
Boston Scientific Co. # 855 39,223
Cardinal Health, Inc. 150 11,269
CR Bard, Inc. 250 7,828
Guidant Corp. 662 41,209
Mallinckrodt, Inc. 331 12,578
Medtronic, Inc. 2,240 117,180
St. Jude Medical, Inc. # 347 10,584
U.S. Surgical 311 9,116
=======
372,939
-------
MEDICAL--HMO - 0.1%
United Healthcare Co. 836 41,539
METAL--DIVERSIFIED - 0.0%
Inco LTD 610 10,370
MINING - 0.1%
Tubos de Acero de Mexico SA # 2,100 45,412
MULTIMEDIA - 0.2%
Walt Disney Co. 800 79,250
NATURAL GAS DISTRIBUTOR - 0.1%
Williams Companies, Inc. 1,400 39,725
NETWORKING PRODUCTS - 1.0%
3Com Corp. # 1,060 37,034
Cisco Systems, Inc. # 5,205 290,179
=======
327,213
-------
OFFICE AUTOMATION & EQUIPMENT - 1.4%
Hewlett Packard 4,610 288,125
Pitney Bowes, Inc. 900 80,944
Xerox Corp. 1,300 95,956
=======
465,025
-------
OIL/GAS--DOMESTIC - 2.5%
Amoco Corp. 2,200 187,275
Apache Corp. 200 7,012
Atlantic Richfield 1,200 96,150
Baker Hughes 1,100 47,988
Burlington Resources 900 40,331
Chieftan International # 1,000 20,250
Devon Energy 700 26,819
Enron Corp. 400 16,625
Mitchell Energy & Development - Class B 1,500 43,687
Mobil Corp. 3,000 216,563
Murphy Oil Corp. 400 21,675
Noble Drilling Co. # 1,400 42,875
Sonat, Inc. 500 22,875
USX Marathon Group 1,900 64,125
=======
854,250
-------
OIL/GAS--INTERNATIONAL - 2.5%
Chevron Corp. 2,500 192,500
Exxon Corp. 10,600 648,588
=======
841,088
-------
OILFIELD SERVICES/EQUIPMENT - 1.1%
Dresser Industries 500 20,969
Enron Exchangeable Notes 1,000 20,625
Schlumberger LTD 2,200 177,100
Union Pacific Resources 800 19,400
Union Texas Petroleum Holdings 1,100 22,894
United Meridian Co. # 1,300 36,562
Veritas DGC, Inc. # 800 31,600
Weatherford Enterra # 800 35,000
=======
364,150
-------
<PAGE>
OIL & NATURAL GAS - 0.1%
Amerada Hess 500 27,438
PAPER & FOREST PRODUCTS - 0.5%
Bemis Co., Inc. 310 13,659
Bowater, Inc. 220 9,776
Fort James Corp. 785 30,026
International Paper 1,485 64,041
Mead Corp. 720 20,160
Union Camp Corp. 450 24,159
=======
161,821
-------
PETROLEUM--INTEGRATED - 2.1%
Occidental Petroleum Corp. 400 11,725
Phillips Petroleum 1,500 72,937
Royal Dutch Petroleum 8,900 482,269
Texaco 2,000 108,750
Unocal Corp. 1,000 38,813
=======
714,494
-------
PHARMACEUTICAL - 0.0%
PharMerica, Inc. # 202 2,096
PROTECTION--SAFETY EQUIPMENT - 0.9%
Lo-Jack Corp. # 20,000 295,000
RAILROAD TRANSPORTATION - 0.4%
Burlington Northern Santa Fe 740 68,774
Union Pacific Corp. 1,210 75,549
=======
144,323
-------
RECREATION - 0.2%
Polaris Industries 2,000 61,125
RECYCLING - 0.1%
Philip Services Corp. # 2,070 29,756
RESTAURANT - 0.4%
McDonald's Corp. 3,000 143,250
RETAIL GROCERY - 0.4%
Albertsons, Inc. 2,500 118,437
RETAIL STORE - 2.7%
Dillard Department Stores 1,300 45,825
Kmart # 16,700 193,094
OfficeMax # 8,000 114,000
Sears, Roebuck & Co. 4,000 181,000
Toys "R" Us, Inc. # 1,500 47,156
WalMart Stores, Inc. 8,000 315,500
=======
896,575
-------
SERVICES - 0.4%
Automatic Data Processing, Inc. 1,540 94,518
Paychex, Inc. 525 26,578
=======
121,096
-------
STEEL--INTEGRATED - 0.0%
Nucor Corp. 320 15,460
TELECOMMUNICATION EQUIPMENT - 0.8%
Advanced Fibre Communication, Inc. # 410 11,941
General Signal Corp. 1,567 63,659
Newbridge Networks Corp. # 3,170 110,554
Nokia Corp. - Sponsored ADR - Class A 750 52,406
Northern Telecom LTD 295 26,255
=======
264,815
-------
TELECOMMUNICATION SERVICES - 9.1%
Airtouch Communications # 7,630 317,122
Ameritech Corp. 2,540 204,470
AT&T 7,520 460,600
BellSouth Corp. 4,260 239,891
British Telecom plc 3,860 310,006
Cia de Telecomunicaciones de Chile - Sponsore 1,870 55,866
DSC Communications # 620 14,880
Frontier Corp. 2,880 69,300
GTE Corp. 4,420 230,945
LCI International, Inc. # 3,500 107,625
Lucent Technologies, Inc. 3,645 291,144
MCI Communication 3,070 131,434
SBC Communications 4,100 300,325
Sprint Corp. 1,620 94,972
Telefonaktiebolaget LM Ericsson - ADR 400 14,925
Tellabs, Inc. # 950 50,231
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. West, Inc. 1,470 66,334
Worldcom, Inc. # 4,280 129,470
=========
3,089,540
---------
TOBACCO - 3.3%
Gallaher Group, plc - ADR 11,400 243,675
Imperial Tobacco 4,900 60,025
Philip Morris Companies 13,200 598,125
UST, Inc. 5,600 206,850
=========
1,108,675
---------
TOYS - 0.3%
Hasbro Bradley, Inc. 3,700 116,550
TRANSPORTATION - 0.2%
Alaska Air Group # 530 20,538
Caliber Systems, Inc. 190 9,251
Federal Express Corp. # 530 32,363
======
62,152
------
TRUCKING/TRANSPORTATION LEASING - 0.2%
CSX, Corp. 1,027 55,458
WASTE DISPOSAL--NON-HAZARDOUS - 0.3%
Browning Ferris Industries, Inc. 1,180 43,660
USA Waste Services, Inc. # 1,398 54,871
======
98,531
------
================================================================================
TOTAL COMMON STOCKS
(Cost $27,190,038 ) 33,063,192
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 0.9%
U.S. Treasury Bills
** 5.27%, 01/08/98 6,000 5,994
* 5.10%, 03/05/98 300,000 297,254
================================================================================
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $303,317 ) 303,248
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 1.4%
Merrill Lynch, 6.80%, 1/2/98, (Collateralized
by $470,000 Florida Power Corp. Commercial
Paper, 0.00%, 1/30/98, market value - $470,000) 463,000 463,000
================================================================================
TOTAL REPURCHASE AGREEMENTS
(Cost $463,000 ) 463,000
- --------------------------------------------------------------------------------
================================================================================
TOTAL INVESTMENTS - 100.0%
(Cost $27,956,355 ) $33,829,440
- --------------------------------------------------------------------------------
================================================================================
FUTURES CONTRACTS
Long, S&P 500 Futures, face amount $1,711,037
expiring March 1998. 7 $1,713,425
- --------------------------------------------------------------------------------
================================================================================
TOTAL FUTURES CONTRACTS $1,713,425
- --------------------------------------------------------------------------------
* Pledged $300,000 face amount as collateral on futures contracts.
** Pledged $6,000 face amount as collateral on Letter of Credit.
# Represents non-income producing securities.
See accompanying notes to financial statements.
<PAGE>
UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1997
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.1%
DIVERSIFIED UTILITY - 1.2%
Citizens Utilities Co.--Class B # 13,808 $132,899
ELECTRIC/GAS UTILITY - 10.7%
AGL Resources, Inc. 16,100 329,044
MDU Resources Group, Inc. 6,000 189,750
NIPSCO Industries, Inc. 4,700 232,356
UtiliCorp United, Inc. 10,000 388,125
=========
1,139,275
---------
ELECTRIC UTILITY - 16.1%
Cinergy Corp. 7,800 298,838
IPALCO Enterprises, Inc. 5,900 247,431
KU Energy Corp. 3,200 125,600
LG&E Energy Corp. 8,600 212,850
New Century Energies, Inc. 5,600 268,450
PacifiCorp 9,800 267,662
TECO Energy, Inc. 10,400 292,500
=========
1,713,331
---------
ENERGY - 2.2%
CalEnergy Co., Inc. # 8,000 230,000
NATURAL GAS (DISTRIBUTOR) - 19.1%
Bay State Gas Co. 11,100 412,088
Consolidated Natural Gas Co. 3,800 229,900
KeySpan Energy Corp. 10,900 401,256
MCN Corp. 6,000 242,250
Pacific Enterprises 6,800 255,850
TransCanada Pipelines Ltd. 8,100 181,237
UGI Corp. 1,900 55,694
WICOR, Inc. 5,600 260,050
=========
2,038,325
---------
OIL/GAS (DOMESTIC) - 5.4%
El Paso Natural Gas Co. 4,220 280,630
Questar Corp. 5,100 227,588
Santa Fe Pacific Pipeline Partners, L.P. 1,600 73,200
=======
581,418
-------
TELECOMMUNICATION EQUIPMENT - 5.3%
Andrew Corp. # 10,000 240,000
QUALCOMM, Inc. # 6,520 329,260
=======
569,260
-------
TELECOMMUNICATION SERVICES - 33.3%
AirTouch Communications, Inc. # 5,400 224,437
Alltel Corp. 7,900 324,394
Bell Atlantic Corp. 2,300 209,300
Frontier Corp. 19,300 464,406
GTE Corp. 5,000 261,250
LCI International, Inc. # 15,000 461,250
MCI Communications Corp. 10,000 428,125
Sprint Corp. 4,300 252,088
Tele Denmark A/S - Sponsored ADR 4,900 150,981
Telecom New Zealand - ADR 5,000 193,750
Telefonica de Espana 3,460 315,076
U.S. West Communications Group 5,900 266,238
=========
3,551,295
---------
WATER UTILITY - 3.8%
American Water Works Co., Inc. 14,900 406,956
================================================================================
TOTAL COMMON STOCKS
(Cost $8,095,774 ) 10,362,759
- --------------------------------------------------------------------------------
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.0%
* 5.27%, due 01/08/98 1,000 1,000
================================================================================
TOTAL U.S. TREASURY BILLS
(Cost $1,000 ) 1,000
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 2.9%
Merrill Lynch, 6.80%, 1/2/98, (Collateralized
by $309,000 Florida Power Corp. Commercial
Paper, 0.00%, 1/30/98, market value - $309,000) 304,000 304,000
================================================================================
TOTAL REPURCHASE AGREEMENTS
(Cost $304,000 ) 304,000
- --------------------------------------------------------------------------------
================================================================================
TOTAL INVESTMENTS - 100.0%
(Cost $8,400,774 ) $10,667,759
- --------------------------------------------------------------------------------
* Pledged $1,000 face amount as collateral on Letter of Credit.
# Represents non-income producing securities.
See accompanying notes to financial statements.
<PAGE>
BOND PORTFOLIO
Portfolio of Investments as of December 31, 1997
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 1.5%
Federal National Mortgage Association
5.33%,06/26/98 250,000 $249,566
================================================================================
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $249,429 ) 249,566
- --------------------------------------------------------------------------------
U.S.TREASURY OBLIGATIONS - 93.8%
U.S. Treasury Bills
* 5.27%, 01/08/98 4,800 4,795
5.01%, 03/12/98 100,000 98,988
==== == == == =======
103,783
-------
U.S. Treasury Bonds
6.63%, 05/15/07 1,500,000 1,587,656
6.13%, 08/15/07 13,500,000 13,875,469
==== == == == ==========
15,463,125
----------
================================================================================
TOTAL U.S.TREASURY OBLIGATIONS
(Cost $15,031,687 ) 15,566,908
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 4.7%
Merrill Lynch, 6.80%, 1/2/98, (Collateralized
by $794,000 Florida Power Corp. Commercial
Paper, 0.00%, 1/30/98, market value - $794,000) 782,000 782,000
================================================================================
TOTAL REPURCHASE AGREEMENTS
(Cost $782,000 ) 782,000
- --------------------------------------------------------------------------------
================================================================================
TOTAL INVESTMENTS - 100.0%
(Cost $16,063,116 ) $16,598,474
- --------------------------------------------------------------------------------
* Pledged $4,800 face amount as collateral on Letter of Credit.
See accompanying notes to financial statements.
<PAGE>
MONEY MARKET PORTFOLIO
Portfolio of Investments as of December 31, 1997
AMORTIZED
YIELD MATURITY FACE AMOUNT COST
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 2.6%
BB&T Financial Corp. 5.70% 02/11/98 $15,000,000 $15,000,000
================================================================================
TOTAL CERTIFICATES OF DEPOSIT
(Cost $15,000,000 ) 15,000,000
- --------------------------------------------------------------------------------
COMMERCIAL PAPER - 45.1%
American Trading & Products** 5.75% 03/03/98 5,000,000 4,951,285
American Trading & Products** 5.75% 03/10/98 $9,000,000 $8,902,250
Bear Stearns Co., Inc.** 5.73% 03/25/98 25,000,000 24,669,729
Coopertime Tractor 5.57% 04/21/98 4,100,000 4,030,220
Duff & Phelps Utilities & Corp.** 5.70% 02/17/98 4,500,000 4,466,513
Duff & Phelps Utilities & Corp.** 5.55% 04/02/98 6,500,000 6,408,810
Duff & Phelps Utilities & Corp.** 5.58% 04/23/98 5,000,000 4,913,200
Duff & Phelps Utilities & Corp.** 5.56% 05/21/98 2,741,000 2,681,733
Duff & Phelps Utilities & Corp.** 5.65% 07/02/98 5,000,000 4,857,181
Engelhard Corp. 5.62% 06/09/98 7,435,000 7,250,451
Engelhard Corp. 5.70% 06/10/98 10,000,000 9,746,667
Ford Motor Credit Co. 5.47% 06/24/98 20,000,000 19,471,234
GE Capital Corp. 5.68% 02/19/98 15,000,000 14,884,033
GE Capital Corp. 5.56% 05/20/98 8,000,000 7,828,258
GTE Funding, Inc. 6.10% 01/20/98 24,822,000 24,742,087
LG&E Capital Corp. 5.60% 02/19/98 20,000,000 19,847,555
LG&E Capital Corp. 5.70% 04/01/98 5,700,000 5,618,775
LOCAP, Inc.** 5.70% 01/29/98 18,700,000 18,617,097
MCI Communications Corp.** 5.80% 04/15/98 14,500,000 14,257,044
Merrill Lynch & Co., Inc. 5.65% 05/27/98 10,000,000 9,770,861
Merrill Lynch & Co., Inc. 5.59% 06/02/98 15,000,000 14,645,967
Monsanto Co. 5.53% 04/27/98 10,000,000 9,821,811
Safeco Corp.** 5.57% 01/07/98 20,000,000 19,981,433
================================================================================
TOTAL COMMERCIAL PAPER
(Cost $262,364,194 ) 262,364,194
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 35.5%
AT&T Corp. 5.63% 04/08/98 3,893,000 3,889,653
Albertsons, Inc. 5.65% 03/26/98 1,000,000 999,554
American General Finance Corp. 8.25% 01/15/98 400,000 400,317
American General Finance Corp. 7.25% 03/01/98 5,295,000 5,306,059
Associates Corp., N.A. 7.30% 03/15/98 200,000 200,476
Associates Corp., N.A. 5.25% 09/01/98 180,000 179,007
Barnett Banks, Inc. 6.25% 07/28/98 1,500,000 1,503,172
Care Life Project 6.05%* 01/02/98 1,275,000 1,275,000
Chrysler Financial Corp. 5.66% 01/16/98 1,875,000 1,874,850
Chrysler Financial Corp. 8.26% 01/26/98 10,000,000 10,014,254
Chubb Capital Corp. 6.00% 02/01/98 663,000 662,983
Clark Grave Vault Co. 6.00%* 01/02/98 3,000,000 3,000,000
Comerica Bank 6.75% 05/12/98 4,000,000 4,013,379
Coughlin Family Properties, Inc. 6.00%* 01/15/98 4,675,000 4,675,000
Danis Construction Co. 6.00%* 01/02/98 1,000,000 1,000,000
Dean Witter Discover & Co. 6.00% 03/01/98 2,000,000 2,000,098
Doren, Inc. 6.05%* 01/02/98 675,000 675,000
E.I. du Pont de Nemours & Co. 8.50% 06/25/98 3,095,000 3,129,566
Espanola/Nambe 6.05%* 01/02/98 2,315,000 2,315,000
First Chicago NBD Corp. 5.70% 01/07/98 5,000,000 4,999,808
First Chicago NBD Corp. 8.50% 06/01/98 180,000 181,767
First Fidelity Bancorp. 8.50% 04/01/98 2,000,000 2,012,401
First Union Corp. 6.75% 01/15/98 6,219,000 6,220,662
Ford Motor Credit Co. 6.25% 02/26/98 938,000 938,472
Ford Motor Credit Co. 9.13% 05/01/98 550,000 555,647
General Motors Acceptance Corp. 6.22%* 04/13/98 10,000,000 10,000,000
General Motors Acceptance Corp. 7.13% 05/11/98 11,100,000 11,149,261
GTE California, Inc. 6.25% 01/15/98 1,500,000 1,500,218
Gannett, Inc. 5.25% 03/01/98 2,525,000 2,521,635
GE Capital Corp. 8.63% 03/12/98 5,203,000 5,228,186
Georgia Power Co. 5.50% 04/01/98 1,000,000 999,112
Goldman Sachs Group, L.P. 6.10% 04/15/98 7,550,000 7,554,539
H.J. Heinz Co. 8.00% 01/05/98 5,130,000 5,130,626
Hancor, Inc. 6.05%* 01/02/98 700,000 700,000
Hertz Corp. 8.30% 02/02/98 200,000 200,393
Huntington Bancshares, Inc. 5.91% 06/23/98 5,000,000 5,001,908
<PAGE>
AMORTIZED
YIELD MATURITY FACE AMOUNT COST
- --------------------------------------------------------------------------------
Huntington Bancshares, Inc. 6.15% 10/15/98 2,000,000 2,003,222
IBM Credit Corp. 5.90% 08/10/98 2,050,000 2,050,041
Lehman Brother Holdings Corp. 5.75% 02/15/98 1,250,000 1,249,434
Liberty Mutual Capital Corp. 5.96% 06/01/98 7,000,000 7,002,592
Merrill Lynch & Co., Inc. 6.52% 06/22/98 1,000,000 1,002,838
Midwest Power System, Inc. 6.25% 02/01/98 1,750,000 1,750,325
Morgan Stanley, Inc. 9.25% 03/01/98 1,750,000 1,758,938
Morgan Stanley, Inc. 9.40% 03/05/98 1,000,000 1,006,101
Mubea, Inc. 6.05%* 01/02/98 4,375,000 4,375,000
Mubea, Inc. 6.05%* 01/02/98 6,000,000 6,000,000
National Rural Utilities 8.50% 02/15/98 125,000 125,345
NationsBank Corp. 6.63% 01/15/98 615,000 615,143
Nordstrom, Inc. 8.88% 02/15/98 1,000,000 1,003,462
Nynex Credit Co. 6.72% 06/15/98 10,000,000 10,034,980
Osco Industries, Inc. 6.05%* 01/02/98 3,000,000 3,000,000
Pepsico, Inc. 6.13% 01/15/98 283,000 283,025
Potomac Electric Power Co. 4.38% 02/15/98 100,000 99,807
Presrite Corp. 6.05%* 01/02/98 2,210,000 2,210,000
Proctor & Gamble Co. 9.50% 02/11/98 4,450,000 4,465,491
R.I. Lampus Co. 6.05%* 01/02/98 2,440,000 2,440,000
RSD Technology 6.05%* 01/02/98 3,500,000 3,500,000
Salomon, Inc. 6.92% 04/14/98 3,550,000 3,559,833
Salomon, Inc. 7.25% 05/01/98 2,035,000 2,043,998
Seariver Maritime, Inc. 5.65%* 02/12/98 6,700,000 6,700,000
Southern California Edison Co. 5.88% 02/01/98 600,000 599,955
Surgery Financing Co. 6.05%* 01/12/98 6,585,000 6,585,000
Toyota Motor Corp. 5.63% 03/17/98 2,407,000 2,405,639
Toyota Motor Credit Corp. 5.13% 01/19/98 2,255,000 2,254,036
Toyota Motor Credit Corp. 5.88% 06/26/98 803,000 802,610
Travelers Group, Inc. 5.75% 04/15/98 1,500,000 1,499,727
Unilever Capital Corp. 8.88% 03/26/98 1,400,000 1,408,965
WalMart Stores, Inc. 7.00% 04/27/98 1,100,000 1,103,000
White Castle Project 6.05%* 01/02/98 9,500,000 9,500,000
Wisconsin Public Service Corp. 5.25% 07/01/98 320,000 319,019
================================================================================
TOTAL CORPORATE OBLIGATIONS
(Cost $206,765,529 ) 206,765,529
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.4%
Federal National Mortgage Assoc. 5.73% 04/13/98 500,000 499,519
Federal National Mortgage Assoc. 6.72% 04/27/98 140,000 140,398
Federal Home Loan Bank 6.00% 01/13/98 200,000 199,977
Federal Home Loan Bank 5.85% 10/15/98 2,785,000 2,785,000
Student Loan Marketing Assoc. 5.62%* 01/06/98 5,000,000 5,000,000
Student Loan Marketing Assoc. 5.68%* 01/06/98 4,350,000 4,352,319
Student Loan Marketing Assoc. 5.76% 01/14/98 1,000,000 999,913
Tennessee Valley Authority -
callable 1/20/98 @ 104 7.75% 12/15/22 250,000 260,125
================================================================================
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $14,237,251 ) 14,237,251
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 1.7%
***U.S. Treasury Bill 5.27% 01/08/98 63,100 63,036
U.S. Treasury Note 6.00% 09/30/98 10,000,000 10,019,615
================================================================================
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $10,082,651 ) 10,082,651
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 12.7%
Merrill Lynch, (Collateralized
by $65,582,000 various Discount
Commercial Papers, 1/7/98-1/30/98,
market value - $65,582,000) 6.80%* 01/02/98 64,413,000 64,413,000
Star Bank, (Collateralized by
$9,615,000 GNMA, 7.00%, 3/20/24,
market value - $9,835,784) 5.50%* 01/02/98 9,635,000 9,635,000
================================================================================
TOTAL REPURCHASE AGREEMENTS
(Cost $74,048,000 ) 74,048,000
- --------------------------------------------------------------------------------
================================================================================
TOTAL INVESTMENTS - 100.0%
(Cost $582,497,625 ) $582,497,625
- --------------------------------------------------------------------------------
* Variable rate security. Interest rate is as of December 31, 1997. Maturity
date reflects the next rate change date.
** Security is restricted as to resale to institutional investors, but has been
deemed liquid in accordance with guidelines approved by the Board of Trustees.
***Pledged as collateral on Letter of Credit.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
THE U.S.
HIGHLANDS TOTAL RETURN GOVERNMENT MONEY
MUIRFIELD GROWTH UTILITIES BOND MARKET
FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investment in corresponding portfolio at value $129,939,845 $33,065,501 $8,128,657 $16,908,674 $169,269,183
Receivable for capital stock issued 1,142,143 756,704 287,168 75,690 ---
Unamortized organization costs --- --- 12,124 --- ---
Other assets 5,772 29,681 4,304 2,472 85,894
Total Assets 131,087,760 33,851,886 8,432,253 16,986,836 169,355,077
==============================================================================================================================
Liabilites:
Payable for capital stock redeemed 44,606 2,584 (1,912) 349 ---
Dividends payable 112,260 70,501 13,229 2,475 6,915
Accrued 12b-1 distribution fees 115,451 17,221 --- 3,588 ---
Accrued transfer agent and administrative fees 25,788 5,322 1,174 1,607 7,365
Other accrued liabilities 7,062 4,385 14,774 5,898 5,923
Total Liabilities 305,167 100,013 27,265 13,917 20,203
==============================================================================================================================
Net Assets 130,782,593 33,751,873 8,404,988 16,972,919 169,334,874
==============================================================================================================================
Net Assets:
==============================================================================================================================
Capital 129,454,449 27,973,431 6,728,394 17,586,660 169,334,874
Accumulated undistributed net realized
gain (loss) from investments 1,330,199 (89,329) 12 (1,149,099) ---
Net unrealized appreciation of investments (2,055) 5,867,771 1,676,582 535,358 ---
Net Assets $130,782,593 $33,751,873 $8,404,988 $16,972,919 $169,334,874
==============================================================================================================================
Capital Stock Outstanding 23,911,234 1,819,493 474,265 801,162 169,334,874
(indefinite number of shares authorized, $0.10 par value)
Net Asset Value, Offering and
Redemption Price Per Share $5.47 $18.55 $17.72 $21.19 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
THE U.S.
HIGHLANDS TOTAL RETURN GOVERNMENT MONEY
MUIRFIELD GROWTH UTILITIES BOND MARKET
FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
Net Investment Income from Corresponding Portfolio:
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Interest $2,768,595 $204,460 $10,004 $972,641 $7,911,734
Dividends 1,026,093 483,516 199,520 --- ---
Expenses (1,138,106) (424,305) (99,159) (95,196) (257,032)
Total Net Investment Income from Corresponding Portfolio 2,656,582 263,671 110,365 877,445 7,654,702
===============================================================================================================================
Fund Expenses:
===============================================================================================================================
Administrative fee 62,592 15,930 2,276 7,515 64,760
Transfer agent fees 135,254 30,185 5,820 9,904 107,918
Audit fees 3,446 2,940 2,610 2,458 3,506
Legal fees 2,340 12,783 3,114 2,331 3,150
Printing 20,157 13,622 2,233 3,068 33,714
Amortization of organizational costs --- --- 5,022 --- ---
Distribution plan 238,990 63,425 15,544 27,682 106,810
Postage 19,249 7,172 1,775 2,988 32,771
Registration and filing fees 7,932 13,924 10,888 9,835 12,289
Insurance 1,843 397 62 261 2,162
Other expenses 17,828 7,766 5,100 4,930 28,264
Total Expenses 509,631 168,144 54,444 70,972 395,344
===============================================================================================================================
Expenses reimbursed by investment adviser --- --- (41,788) --- (92,400)
Net Expenses 509,631 168,144 12,656 70,972 302,944
===============================================================================================================================
NET INVESTMENT INCOME 2,146,951 95,527 97,709 806,473 7,351,758
===============================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
===============================================================================================================================
Net realized gains (losses) from futures contracts 6,583,775 850,449 --- 178,131 ---
Net realized gains (losses) from investments 13,220,546 4,450,390 534,844 (434,282) ---
Net change in unrealized appreciation
of investments (579,123) 2,704,273 1,123,897 649,920 ---
NET GAIN (LOSS) FROM INVESTMENTS 19,225,198 8,005,112 1,658,741 393,769 ---
===============================================================================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $21,372,149 $8,100,639 $1,756,450 $1,200,242 $7,351,758
===============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
U.S.
HIGHLANDS TOTAL RETURN GOVERNMENT MONEY
MUIRFIELD GROWTH UTILITIES BOND MARKET
FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
===============================================================================================================================
OPERATIONS:
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net investment income $2,146,951 $95,527 $97,709 $806,473 $7,351,758
Net realized gain (loss) from investments
and futures contracts 19,804,321 5,300,839 534,844 (256,151) ---
Net change in unrealized appreciation/(depreciation)
of investments (579,123) 2,704,273 1,123,897 649,920 ---
Net increase in net assets
resulting from operations 21,372,149 8,100,639 1,756,450 1,200,242 7,351,758
===============================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,146,950) (95,536) (97,709) (806,470) (7,351,758)
Net realized gain from investments
and futures contracts (18,486,618) (4,050,674) (534,832) --- ---
Net decrease in net assets resulting
from dividends and distributions (20,633,568) (4,146,210) (632,541) (806,470) (7,351,758)
===============================================================================================================================
CAPITAL TRANSACTIONS:
Issued 27,440,621 40,445,381 2,971,480 4,843,059 440,552,839
Reinvested 20,501,858 4,073,675 609,798 771,226 7,195,653
Redeemed (39,233,074) (38,925,468) (1,374,317) (6,817,743) (398,361,115)
Net increase (decrease) in net assets resulting
from capital share transactions 8,709,405 5,593,588 2,206,961 (1,203,458) 49,387,377
TOTAL INCREASE (DECREASE) IN NET ASSETS 9,447,986 9,548,017 3,330,870 (809,686) 49,387,377
===============================================================================================================================
NET ASSETS - Beginning of period 121,334,607 24,203,856 5,074,118 17,782,605 119,947,497
NET ASSETS - End of period $130,782,593 $33,751,873 $8,404,988 $16,972,919 $169,334,874
===============================================================================================================================
SHARE TRANSACTIONS:
Issued 4,484,460 2,120,698 186,359 236,594 440,552,839
Reinvested 3,695,889 220,003 34,996 37,521 7,195,653
Redeemed (6,468,067) (1,996,447) (85,714) (334,564) (398,361,115)
Change in shares 1,712,282 344,254 135,641 (60,449) 49,387,377
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
U.S.
HIGHLANDS TOTAL RETURN GOVERNMENT MONEY
MUIRFIELD GROWTH UTILITIES BOND MARKET
FUND FUND FUND FUND FUND
INCREASE (DECREASE) IN NET ASSETS:
===========================================================================================================================
OPERATIONS:
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net investment income $1,865,318 $495,160 $94,951 $808,621 $8,138,831
Net realized gain (loss) from investments
and futures contracts 10,225,068 (1,313,621) 209,382 34,127 ---
Net change in unrealized appreciation
of investments (5,306,075) 3,055,094 219,393 776,909) ---
Net increase in net assets
resulting from operations 6,784,311 2,236,633 523,726 65,839 8,138,831
===========================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,865,319) (495,151) (94,951) 808,624) (8,138,831)
Net realized gain from investments
and futures contracts (9,879,664) --- (208,703) --- ---
Net decrease in net assets resulting
from dividends and distributions (11,744,983) (495,151) (303,654) (808,624) (8,138,831)
===========================================================================================================================
CAPITAL TRANSACTIONS:
Issued 31,306,972 3,904,506 2,105,006 4,221,575 389,806,633
Reinvested 11,652,407 488,159 261,364 731,408 7,883,875
Redeemed (28,415,321) (6,561,166) (393,419) (2,475,250) (418,830,047)
Net increase (decrease) in net assets resulting
from capital share transactions 14,544,058 (2,168,501) 1,972,951 2,477,733 (21,139,539)
TOTAL INCREASE (DECREASE) IN NET ASSETS 9,583,386 (427,019) 2,193,023 1,734,948 (21,139,539)
===========================================================================================================================
NET ASSETS - Beginning of period 111,751,221 24,630,875 2,881,095 16,047,657 141,087,036
NET ASSETS - End of period $121,334,607 $24,203,856 $5,074,118 $17,782,605 $119,947,497
===========================================================================================================================
SHARE TRANSACTIONS:
Issued 5,310,158 246,129 143,939 201,655 389,806,633
Reinvested 2,132,111 30,498 17,645 35,083 7,883,875
Redeemed (4,745,388) (406,881) (26,688) (118,887) (418,830,047)
Change in shares 2,696,881 (130,254) 134,896 117,851 (21,139,539)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE MUIRFIELD FUND
Years Ended December 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $5.47 $5.73 $5.34 $5.36 $6.25 $6.43
Income from Investment Operations
Net Investment Income 0.11 0.10 0.06 0.14 (0.01) 0.06
Net Gains or Losses from Securities
(both realized and unrealized) 0.91 0.25 1.31 - 0.45 0.34
Total From Investment Operations 1.02 0.35 1.37 0.14 0.44 0.40
Less Distributions
Dividends (from net investment income) (0.11) (0.10) (0.06) (0.14) (0.02) (0.06
Distributions (from capital gains) (0.91) (0.51) (0.92) (0.02) (1.31) (0.52)
Total Distributions (1.02) (0.61) (0.98) (0.16) (1.33) (0.58)
Net Asset Value, End of Period $5.47 $5.47 $5.73 $5.34 $5.36 $6.25
Total Return 18.59% 5.99% 25.82% 2.70% 8.11% 6.91%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $130,783 $121,335 $111,751 $83,119 $73,063 $55,280
Ratio of Expenses to Average Net Assets 1.29% 1.19% 1.26% 1.22% 1.26% 1.40%
Ratio of Net Investment Income to
Average Net Assets 1.69% 1.54% 0.97% 2.55% -0.13% 1.05%
Portfolio Turnover Rate* 395.42% 297.41% 186.13% 168.17% 279.56% 324.14%
<FN>
*Turnover rate of corresponding portfolio
</FN>
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE HIGHLANDS GROWTH FUND
Years Ended December 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.41 $15.34 $13.08 $13.45 $12.70 $12.05
Income from Investment Operations
Net Investment Income 0.06 0.31 0.50 0.27 0.09 0.18
Net Gains or Losses from Securities
(both realized and unrealized) 4.73 1.07 2.68 (0.37) 0.82 0.58
Total From Investment Operations 4.79 1.38 3.18 (0.10) 0.91 0.76
Less Distributions
Dividends (from net investment income) (0.06) (0.31) (0.50) (0.27) (0.16) (0.11)
Distributions (from capital gains) (2.59) -- (0.42) -- -- --
Total Distributions (2.65) (0.31) (0.92) (0.27) (0.16) (0.11)
Net Asset Value, End of Period $18.55 $16.41 $15.34 $13.08 $13.45 $12.70
Total Return 29.28% 9.08% 24.61% -0.69% 7.21% 6.35%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $33,752 $24,204 $24,631 $22,176 $26,171 $25,534
Ratio of Expenses to Average Net Assets 1.87% 1.65% 1.64% 1.63% 1.51% 1.51%
Ratio of Net Investment Income to
Average Net Assets 0.30% 1.92% 3.38% 1.95% 0.69% 1.31%
Portfolio Turnover Rate* 129.79% 81.66% 337.57% 102.76% 99.54% 39.03%
<FN>
*Turnover rate of corresponding portfolio
</FN>
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE TOTAL RETURN UTILITIES FUND
Period
Year Ended December 31, June 21, 1995*
1997 1996 to Dec. 31, 1995
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $14.98 $14.14 $12.50
Income from Investment Operations
Net Investment Income 0.25 0.37 0.21
Net Gains or Losses from Securities
(both realized and unrealized) 3.99 1.48 1.64
Total From Investment Operations 4.24 1.85 1.85
Less Distributions
Dividends (from net investment income) (0.25) (0.37) (0.21)
Distributions (from capital gains) (1.25) (0.64) --
Total Distributions (1.50) (1.01) (0.21)
Net Asset Value, End of Period $17.72 $14.98 $14.14
Total Return 28.68% 13.33% 15.00%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $8,405 $5,074 $2,881
Ratio of Expenses to Average Net Assets 1.80% 1.25% 1.25%(1)
Ratio of Net Investment Income to
Average Net Assets 1.57% 2.55% 3.18%(1)
Ratio of Expenses to Average Net Assets,
before waiver of fees(2) 2.51% 2.95% 4.35%(1)
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(2) 0.86% 0.85% 0.08%(1)
Portfolio Turnover Rate(3) 41.22% 50.79% 5.06%
<FN>
(1) Annualized
(2) Includes directed brokerage payments in corresponding portfolio.
(3) Turnover rate of corresponding portfolio
* Date of commencement of operations
</FN>
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE U.S. GOVERNMENT BOND FUND
Years Ended December 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $20.64 $21.58 $19.25 $20.18 $19.46 $19.84
Income from Investment Operations
Net Investment Income 0.99 0.96 1.11 0.72 0.86 0.99
Net Gains or Losses from Securities
(both realized and unrealized) 0.55 (0.94) 2.33 (0.93) 0.71 (0.38)
Total From Investment Operations 1.54 0.02 3.44 (0.21) 1.57 0.61
Less Distributions
Dividends (from net investment income) (0.99) (0.96) (1.11) (0.72) (0.85) (0.99)
Total Distributions (0.99) (0.96) (1.11) (0.72) (0.85) (0.99)
Net Asset Value, End of Period $21.19 $20.64 $21.58 $19.25 $20.18 $19.46
Total Return 7.70% 0.15% 18.32% -0.99% 8.21% 3.26%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $16,973 $17,783 $16,048 $12,983 $13,137 $11,100
Ratio of Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 0.99% 1.00%
Ratio of Net Investment Income to
Average Net Assets 4.85% 4.61% 5.41% 3.71% 4.25% 5.13%
Ratio of Expenses to Average Net Assets,
before waiver of fees(1) 1.14% 1.06% 1.14% 1.14% 1.09% 1.21%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 4.71% 4.55% 5.27% 3.57% 4.15% 4.92%
Portfolio Turnover Rate(2) 375.64% 778.59% 232.34% 707.57% 235.74% 100.53%
<FN>
(1) Includes fees waived in corresponding portfolio
(2) Represents turnover rate of corresponding portfolio
</FN>
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
MONEY MARKET FUND
Years Ended December 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
Net Investment Income 0.053 0.05 0.06 0.04 0.03 0.04
Total From Investment Operations 0.053 0.05 0.06 0.04 0.03 0.04
Less Distributions
Dividends (from net investment income) (0.053) (0.05) (0.06) (0.04) (0.03) (0.04)
Total Distributions (0.053) (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 $1.00
Total Return 5.38% 5.27% 5.85% 4.10% 2.98% 3.70%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $169,335 $119,947 $141,087 $164,838 $200,030 $245,259
Ratio of Expenses to Average Net Assets 0.40% 0.40% 0.40% 0.37% 0.37% 0.35%
Ratio of Net Investment Income to
Average Net Assets 5.26% 5.15% 5.70% 4.02% 2.94% 3.68%
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.59% 0.58% 0.64% 0.57% 0.57% 0.56%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 5.07% 4.97% 5.46% 3.82% 2.74% 3.47%
<FN>
(1) Includes fees waived in corresponding portfolio
</FN>
</TABLE>
See accompanying notes to financial statements
<PAGE>
THE FLEX-FUNDS NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
The Flex-funds Trust (the "Trust") was organized in 1982 and is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Trust offers five separate series,
and it is presently comprised of five separate funds as follows: The Muirfield
Fund, The Highlands Growth Fund (formerly The Growth Fund), The Total Return
Utilities Fund, The U.S. Government Bond Fund and The Money Market Fund (each a
"Fund" and collectively the "Funds"). Each Fund invests all of its 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. Each Fund, each Portfolio into which the Fund invests and
the percentage of each Portfolio owned by the respective Fund is as follows:
PERCENTAGE OF PORTFOLIO
OWNED BY FUND AS OF
FUND PORTFOLIO DECEMBER 31, 1997
The Muirfield Fund Mutual Fund Portfolio 90%
The Highlands Growth Fund Growth Stock Portfolio 99%
The Total Return Utilities Fund Utilities Stock Portfolio 76%
The U.S. Government Bond Fund Bond Portfolio 100%
The Money Market Fund Money Market Portfolio 29%
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
Each Fund values its investment in the corresponding Portfolio at fair value.
Valuation of securities held by each Portfolio is further described at Note 2 of
the Portfolios' Notes to Financial Statements which are included elsewhere in
this report.
Income Taxes
It is each Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income and net capital gains
to its shareholders. Therefore, no Federal income tax provision is required.
Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date. The Muirfield
Fund and The Highlands Growth Fund declare dividends from net investment income
on a quarterly basis. The Total Return Utilities Fund declares dividends from
net investment income on a monthly basis. The U.S. Government Bond Fund and The
Money Market Fund declare dividends from net investment income on a daily basis
and pay such dividends on a monthly basis. Each Fund distributes net capital
gains, if any, on an annual basis.
Distributions from net investment income and from net capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
deferrals of certain losses, expiring capital loss carryforwards, and differing
treatment of unrealized gains and losses of futures contracts held by the Fund's
corresponding Portfolio. Permanent book and tax basis differences have been
reclassified among the components of net assets.
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 Muirfield Fund, The Highlands Growth Fund,
The U.S. Government Bond Fund, and The Money Market Fund have been fully
amortized.
<PAGE>
Expenses
Expenses incurred by the Trust that do not specifically relate to an individual
Fund of the Trust are allocated to the Funds based on each Fund's relative net
assets or other appropriate basis. The Funds record daily their proportionate
share of the corresponding portfolio's income, expenses and realized and
unrealized gains and losses.
3. AGREEMENTS AND TRANSACTIONS 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. Under separate Investment Subadvisory
Agreements with RMA, Sector Capital Management, Inc. and Miller/Howard
Investments, Inc. serve as subadvisor of the Growth Stock Portfolio and the
Utilities Stock Portfolio, respectively. Sub-subadvisers, selected by Sector
Capital Management, Inc., subject to the review and approval of the Trustees of
the Growth Stock Portfolio, are responsible for the selection of individual
portfolio securities for the assets of the Portfolio assigned to them by Sector
Capital Management, Inc.
Mutual Funds Service Co. ("MFSCo"), a wholly-owned subsidiary of MII, serves as
stock transfer, dividend disbursing and shareholder services agent for each
Fund. In compensation for such services, each Fund pays MFSCo an annual fee
calculated as follows. For The Muirfield Fund, The Highlands Growth Fund, and
The Total Return Utilities Fund, such fee is equal to the greater of $15 per
active shareholder account or 0.10% of the Fund's average daily net assets. For
The U.S. Government Bond Fund, such fee is equal to the greater of $15 per
active shareholder account or 0.06% of the Fund's average daily net assets. For
The Money Market Fund, such fee is equal to the greater of $20 per active
shareholder account or 0.06% of the Fund's average daily net assets. MFSCo is
entitled to receive an annual minimum fee of $4,000 for each Fund.
MFSCo provides the Trust with certain administrative services. In compensation
for such services, each Fund pays MFSCo an annual fee equal to 0.05% of each
Fund's average daily net assets. Prior to January 31, 1997, such fees were
payable at an annual rate of 0.03% of average daily net assets.
RMA has voluntarily agreed to reimburse operating expenses of The Money Market
Fund and The Total Return Utilities Fund. For the year ended December 31, 1997,
such reimbursements, including fees waived in the corresponding portfolio were
0.19% and 0.71% of average daily net assets of The Money Market Fund and The
Total Return Utilities Fund, respectively. Such reimbursement, which is subject
to change, is limited to the total of fees charged the Fund by RMA.
Pursuant to Rule 12b-1 of the Act, each Fund has adopted a Distribution Plan
(the "Plan"). Under the provisions of each Plan, the Fund may incur certain
expenses associated with the distribution of fund shares in amounts not to
exceed an annual limitation. Such limitation, on an annual basis, is 0.20% of
the average daily net assets of each Fund, 0.25% of the average daily net assets
of The Total Return Utilities Fund.
Certain officers of the Funds and trustees of the Trust and the Portfolios are
also officers or directors of MII, RMA and MFSCo.
4. FEDERAL INCOME TAX INFORMATION
At December 31, 1997, The U.S. Government Bond Fund had unused capital loss
carryforwards available to offset future capital gains, if any, for Federal
income tax purposes. The following table sets forth the amount of such losses
and the years such losses expire.
AMOUNT OF CAPITAL LOSS CARRYFOWARD YEAR EXPIRES
$ 48,902 1998
614,421 2002
256,151 2005
5. CAPITAL GAIN DISTRIBUTIONS (UNAUDITED)
Capital gain distributions from long-term capital gains for the Funds for the
year ended December 31, 1997 were as follows:
FUND 28% RATE GAIN 20% RATE GAIN
Amount % of total Amount % of total
The Muirfield Fund $2,916,067 37.8% $4,788,136 61.2%
The Highlands Growth Fund 2,709,173 84.3% 504,852 15.7%
The Total Return Utilities Fund 53,313 16.1% 278,568 83.9%
<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 (including, respectively, The Muirfield Fund, The Highlands Growth
Fund (formerly The Growth Fund), The Total Return Utilities Fund, The U.S.
Government Bond Fund and The Money Market Fund), as of December 31, 1997, 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. 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, 1997, 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
February 12, 1998
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
MUTUAL GROWTH UTILITIES MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
Assets:
<S> <C> <C> <C> <C> <C>
Investments at market value* $123,381,910 $33,366,440 $10,363,759 $15,816,474 $508,449,625
Repurchase agreements, at cost* 12,968,000 463,000 304,000 782,000 74,048,000
Cash 947 507 347 851 551
Options purchased (cost $27,378,320) 17,600,000 --- --- --- ---
Receivable for net variation margin on
futures contracts 12,800 --- --- --- ---
Interest receivable 264,050 88 57 325,551 5,477,161
Dividends receivable 24,817 52,213 15,135 --- ---
Prepaid/Other assets 13,924 9,407 27 166 2,005
Unamortized organization costs --- --- 8,288 --- ---
Total Assets 154,266,448 33,891,655 10,691,613 16,925,042 587,977,342
=====================================================================================================================
Liabilites:
Payable for securities purchased --- 433,199 --- --- 261,255
Payable for net variation margin on futures contracts --- 350 --- --- ---
Options written (premiums received $19,383,673) 9,604,000 --- --- --- ---
Payable to investment adviser 97,671 30,236 8,829 3,349 78,989
Accrued audit fees 6,663 6,760 6,793 6,157 10,852
Accrued custodian fees 3,826 3,520 588 1,459 5,729
Accrued trustee fees 14,032 3,883 2,374 2,235 2,369
Accrued fund accounting fees 3,931 2,719 849 1,618 8,656
Other accrued liabilities 3,632 17,025 2,462 1,550 2,753
Total Liabilities 9,733,755 497,692 21,895 16,368 958,695
=====================================================================================================================
Net Assets 144,532,693 33,393,963 10,669,718 16,908,674 587,018,647
=====================================================================================================================
Net Assets:
=====================================================================================================================
Capital 145,227,170 27,521,228 8,402,733 16,373,316 587,018,647
Net unrealized appreciation (depreciation) of
investments (694,477) 5,872,735 2,266,985 535,358
Net Assets $144,532,693 $33,393,963 $10,669,718 $16,908,674 $587,018,647
=====================================================================================================================
*Securities at cost 137,058,540 27,956,355 8,400,774 16,063,116 582,497,625
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
MUTUAL GROWTH UTILITIES MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
NET INVESTMENT INCOME
================================================================================================================
<S> <C> <C> <C> <C> <C>
Interest $3,091,061 $205,328 $20,737 $972,641 $29,260,441
Dividends 1,145,496 485,616 279,789 --- ---
Total Investment Income 4,236,557 690,944 300,526 972,641 29,260,441
================================================================================================================
Expenses:
================================================================================================================
Investment advisory fees 1,130,843 317,772 88,486 66,626 1,436,168
Audit fees 9,215 9,421 9,223 8,564 14,851
Custodian fees 15,690 35,996 4,425 6,803 36,718
Trustees fees and expenses 42,679 9,347 7,454 7,570 7,762
Legal fees 3,331 11,491 3,053 3,339 3,307
Amortization of organization cost 4,924 2,545 8,972 2,545 2,545
Accounting fees 50,886 34,029 13,098 21,517 89,048
Insurance 2,242 467 80 285 5,027
Other expenses 10,982 5,233 11,131 1,470 11,241
Total Expenses 1,270,792 426,301 145,922 118,719 1,606,667
================================================================================================================
Investment advisory fees waived --- --- --- (23,523) (661,390)
Directed brokerage payments received --- --- (3,934) --- ---
Total Net Expenses 1,270,792 426,301 141,988 95,196 945,277
================================================================================================================
NET INVESTMENT INCOME 2,965,765 264,643 158,538 877,445 28,315,164
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
================================================================================================================
Net realized gain from futures contracts 7,384,735 851,686 --- 178,131 ---
Net realized gain (loss) from investments 15,349,402 4,450,516 769,055 (434,282) ---
Net change in unrealized appreciation
(depreciation) of investments (1,244,081) 2,709,218 1,487,258 649,921 ---
NET GAIN (LOSS) ON INVESTMENTS 21,490,056 8,011,420 2,256,313 393,770 ---
================================================================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $24,455,821 $8,276,063 $2,414,851 $1,271,215 $28,315,164
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
MUTUAL GROWTH UTILITIES MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INCREASE (DECREASE) IN NET ASSETS:
==========================================================================================================================
OPERATIONS:
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net investment income $2,965,765 $264,643 $158,538 $877,445 $28,315,164
Net realized gain (loss) from investments
and futures contracts 22,734,137 5,302,202 769,055 (256,151) ---
Net change in unrealized appreciation
(depreciation) of investments (1,244,081) 2,709,218 1,487,258 649,921 ---
Net increase in net assets
resulting from operations 24,455,821 8,276,063 2,414,851 1,271,215 28,315,164
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
==========================================================================================================================
Contributions 27,375,051 40,513,401 2,517,724 4,973,499 3,784,994,914
Withdrawals (42,837,747) (39,809,183) (2,227,211) (7,127,634)(3,579,221,656)
Net increase (decrease) in net assets resulting from
transactions of investors' beneficial interests (15,462,696) 704,218 290,513 (2,154,135) 205,773,258
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,993,125 8,980,281 2,705,364 (882,920) 234,088,422
==========================================================================================================================
NET ASSETS - Beginning of period 135,539,568 24,413,682 7,964,354 17,791,594 352,930,225
NET ASSETS - End of period $144,532,693 $33,393,963 $10,669,718 $16,908,674 $587,018,647
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
MUTUAL GROWTH UTILITIES MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INCREASE (DECREASE) IN NET ASSETS:
==========================================================================================================================
OPERATIONS:
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net investment income $2,510,343 $601,083 $146,376 $876,027 $19,455,266
Net realized gain (loss) from investments
and futures contracts 10,575,124 (1,313,610) 348,392 34,126 ---
Net change in unrealized appreciation
(depreciation) of investments (5,130,740) 3,055,094 357,308 (776,915) ---
Net increase in net assets
resulting from operations 7,954,727 2,342,567 852,076 133,238 19,455,266
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
==========================================================================================================================
Contributions 32,575,692 4,020,512 5,138,546 4,220,008 1,414,075,891
Withdrawals (27,099,980) (6,486,427) (2,317,138) (2,627,674)(1,335,249,306)
Net increase (decrease) in net assets resulting from
transactions of investors' beneficial interests 5,475,712 (2,465,915) 2,821,408 1,592,334 78,826,585
TOTAL INCREASE (DECREASE) IN NET ASSETS 13,430,439 (123,348) 3,673,484 1,725,572 98,281,851
==========================================================================================================================
NET ASSETS - Beginning of period 122,109,129 24,537,030 4,290,870 16,066,022 254,648,374
NET ASSETS - End of period $135,539,568 $24,413,682 $7,964,354 $17,791,594 $352,930,225
</TABLE>
See accompanying notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
MUTUAL FUND PORTFOLIO
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $144,533 $135,540 $122,109 $83,185 $81,605
Ratio of Expenses to Average Net Assets* 0.89% 0.87% 0.95% 1.01% 1.03%
Ratio of Net Investment Income to
Average Net Assets 2.08% 1.86% 1.26% 2.76% 0.09%
Portfolio Turnover Rate 395.42% 297.41% 186.13% 168.17% 279.56%
Average Commission Rate paid(2) $0.0800 --- --- n/a n/a
</TABLE>
<TABLE>
GROWTH STOCK PORTFOLIO
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $33,394 $24,414 $24,537 $22,169 $26,172
Ratio of Expenses to Average Net Assets 1.34% 1.24% 1.25% 1.23% 1.23%
Ratio of Net Investment Income to
Average Net Assets 0.83% 2.33% 3.78% 2.35% 0.99%
Portfolio Turnover Rate 129.79% 81.66% 337.57% 102.76% 99.54%
Average Commission Rate paid(2) $0.0623 $0.0910 $0.0806 N/A N/A
</TABLE>
<TABLE>
UTILITIES STOCK PORTFOLIO
<CAPTION>
Period
Year Ended December 31, June 21, 1995* to
1997 1996 December 31, 1995
<S> <C> <C> <C>
Net Assets, End of Period ($000) $10,670 $7,964 $4,291
Ratio of Expenses to Average Net Assets 1.60% 1.61% 2.32%(1)
Ratio of Net Investment Income to
Average Net Assets 1.79% 2.24% 2.09%(1)
Portfolio Turnover Rate 41.22% 50.79% 5.06%
Average brokerage commission per share(2) $0.0600 $0.0600 $0.0600
<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. Disclosure is not required for
periods ended before December 31, 1995.
* Date of commencement of operations
</FN>
</TABLE>
See accompanying notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
BOND PORTFOLIO
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $15,274 $17,792 $16,066 $13,008 $13,178
Ratio of Expenses to Average Net Assets 0.57% 0.61% 0.57% 0.56% 0.60%
Ratio of Net Investment Income to
Average Net Assets 5.27% 4.99% 5.82% 4.15% 4.62%
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.71% 0.68% 0.71% 0.70% 0.71%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 5.13% 4.92% 5.68% 4.01% 4.51%
Portfolio Turnover Rate 375.64% 778.59% 232.34% 707.57% 235.74%
</TABLE>
<TABLE>
MONEY MARKET PORTFOLIO
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $587,019 $352,930 $256,126 $224,523 $200,148
Ratio of Expenses to Average Net Assets 0.18% 0.19% 0.21% 0.19% 0.19%
Ratio of Net Investment Income to
Average Net Assets 5.47% 5.34% 5.87% 4.28% 3.09%
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.31% 0.33% 0.37% 0.39% 0.40%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 5.34% 5.20% 5.70% 4.08% 2.88%
</TABLE>
See accompanying notes to financial statements
<PAGE>
MUTUAL FUND PORTFOLIO, GROWTH STOCK PORTFOLIO, UTILITIES STOCK PORTFOLIO, BOND
PORTFOLIO, MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
Each Fund of The Flex-funds Trust (the "Trust") invests all of its 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. Each Portfolio is registered under the Investment Company
Act of 1940, as amended (the "Act"), 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
each Portfolio, to issue beneficial interests in each Portfolio.
The investment objective of each Portfolio is as follows:
The Mutual Fund Portfolio seeks growth of capital through investment in the
shares of other mutual funds.
The Growth Stock Portfolio seeks capital growth by investing 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 Utilities Stock Portfolio seeks a high level of current income and growth of
income by investing primarily in equity securities of domestic and foreign
public utility companies; however, it will not invest in electric utilities
whose generation of power is derived from nuclear reactors. The Portfolio also
seeks capital appreciation, but only when consistent with its primary investment
objective.
The Bond Portfolio seeks 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 Money Market Portfolio seeks current income and stable net asset values
through investment in a portfolio of money market instruments.
The financial statements of the Funds are included elsewhere in this report.
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.
Investments
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
over-the-counter 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 as reported by the underlying
fund. The Bond Portfolio values the securities held at 3:00 pm eastern time. The
Portfolios obtain prices from independent pricing services which use valuation
techniques approved by the Board of Trustees.
Money market securities held in the Money Market Portfolio are valued at
amortized cost, which approximates market value. 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.
Repurchase Agreements
Each Portfolio may engage in repurchase agreement transactions whereby the
Portfolio takes possession of an underlying debt instrument subject to an
obligation of the seller to repurchase the instrument from the Portfolio and an
obligation of the Portfolio to resell the instrument at an agreed upon price and
term. At all times, the Portfolio maintains the value of collateral, including
accrued interest, at least 100% of the amount of the repurchase agreement, plus
accrued interest. If the seller defaults or the fair value of the collateral
declines, realization of the collateral by the Portfolios may be delayed or
limited.
<PAGE>
Futures & Options
Each Portfolio, except the Money Market Portfolio, may engage in transactions in
financial futures contracts and options contracts in order to manage the risk of
unanticipated changes in market values of securities held in the portfolio, or
which it intends to purchase. Such transactions may be considered trading
activity under generally accepted accounting principles. 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 an initial margin, which is either cash or
securities in an amount equal to a certain percentage of the contract value.
Subsequently, the variation margin, which is equal to changes in the daily
settlement price or last sale price on the exchanges where they trade, is
received or paid. The Portfolios record realized gains or losses for the daily
variation margin when they are recorded as gains or losses from 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 appreciation or depreciation until closed, exercised or expired.
The Portfolios may write covered call or put options for which premiums received
are recorded in as liabilities and are subsequently adjusted to current market
value of the options written. When written options are closed or exercised,
premiums received are offset against the proceeds paid, and the Portfolio
records realized gains or losses for the difference. When written options
expire, the liability is eliminated, and the Portfolio records realized gains
for the entire amount of premiums received.
During the year ended December 31, 1997 the Portfolios had the following
activity in futures contracts and written option contracts:
LONG FUTURES CONTRACTS NUMBER OF CONTRACTS NOTIONAL AMOUNT
================================================================================
Mutual Fund Portfolio:
Outstanding, beginning of year 260 $92,637,850
Contracts opened 1,173 383,416,903
Contracts closed (1,323) (450,989,853)
Outstanding, end of year 110 25,064,900
================================================================================
Growth Stock Portfolio:
Outstanding, beginning of year 21 $7,817,250
Contracts opened 139 47,173,843
Contracts closed (153) (53,280,056)
Outstanding, end of year 7 1,711,037
================================================================================
Bond Portfolio:
Outstanding, beginning of year --- ---
Contracts opened 306 $31,947,563
Contracts closed (306) (31,947,563)
Outstanding, end of year --- ---
<PAGE>
COVERED PUT OPTIONS COVERED CALL OPTIONS
Number of Number of
contracts Premiums contracts Premiums
================================================================================
Mutual Fund Portfolio:
Outstanding, beginning of year --- --- --- ---
Options written 4,000 $7,391,887 4,000 $11,991,787
Outstanding, end of year 4,000 7,391,887 4,000 11,991,787
================================================================================
Growth Stock Portfolio:
Outstanding, beginning of year --- --- --- ---
Options written --- --- 140 $34,315
Options expired --- --- (140) (34,315)
Outstanding, end of year --- --- --- ---
================================================================================
Bond Portfolio:
Outstanding, beginning of year --- --- --- ---
Options written --- --- 20 $15,495
Options exercised --- --- (20) (15,495)
Outstanding, end of year --- --- --- ---
================================================================================
Income Taxes
It is each Portfolio's 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 Portfolio have been deferred and
are being amortized by the Portfolio on a straight-line basis over a five-year
period. Such costs for Mutual Fund Portfolio, Growth Stock Portfolio, Bond
Portfolio and Money Market Portfolio have been fully amortized.
Securities Transactions
The Portfolios record security transactions on the trade date. Gains and losses
realized from the sale of securities are determined on the specific
identification basis. Dividend income is recognized on the ex-dividend date, and
interest income (including amortization of premium and accretion of discount) is
recognized as earned.
3. AGREEMENTS AND TRANSACTIONS 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. Under separate Investment Subadvisory
Agreements with RMA, Sector Capital Management, Inc. and Miller/Howard
Investments, Inc. serve as subadvisor of the Growth Stock Portfolio and the
Utilities Stock Portfolio, respectively. Sub-subadvisers, selected by Sector
Capital Management, Inc., subject to the review and approval of the Trustees of
the Growth Stock Portfolio, are responsible for the selection of individual
portfolio securities for the assets of the Portfolio assigned to them by Sector
Capital Management, Inc.
For such services the Portfolios pay monthly a fee at the following annual
rates: Mutual Fund Portfolio, Growth Stock Portfolio, and Utilities Stock
Portfolio, 1.00% of average daily net assets up to $50 million, 0.75% of average
daily net assets exceeding $50 million up to $100 million and 0.60% of average
daily net assets exceeding $100 million; Bond Portfolio, 0.40% of average daily
net assets up to $100 million and 0.20% of average daily net assets exceeding
$100 million; Money Market Portfolio, 0.40% of average daily net assets up to
$100 million and 0.25% of average daily net assets exceeding $100 million.
During the year ended December 31, 1997, RMA voluntarily waived a portion of its
investment advisory fees in the Bond and Money Market Portfolios.
Mutual Funds Service Co. ("MFSCo"), a wholly-owned subsidiary of MII, serves as
accounting services agent for each Portfolio. In compensation for such services,
each Portfolio pays MFSCo an annual fee equal to the greater of: (a.) 0.15% of
the first $10 million of average daily net assets, 0.10% of the next $20 million
of average daily net assets, 0.02% of the next $50 million of average daily net
assets, and 0.01% in excess of $80 million of average daily net assets, or (b.)
$7,500 for each Portfolio, except $30,000 for the Money Market Portfolio.
Certain officers and trustees of the Portfolios are also officers or directors
of MII, RMA and MFSCo.
<PAGE>
4. SECURITIES TRANSACTIONS
For the year ended December 31, 1997, the cost of purchases and proceeds from
sales or maturities of long-term investments for the Portfolios were as follows:
PORTFOLIO PURCHASES SALES
Mutual Fund Portfolio $480,151,975 $442,533,548
Growth Stock Portfolio 44,982,486 35,676,667
Utilities Stock Portfolio 4,565,204 3,490,778
Bond Portfolio 41,876,549 35,680,823
As of December 31, 1997, the aggregate cost basis of investments and unrealized
appreciation (depreciation) for Federal income tax purposes was as follows:
PORTFOLIO COST BASIS UNREALIZED UNREALIZED NET UNREALIZED
OF INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
(DEPRECIATION)
Mutual Fund Portfolio $137,376,306 $10,599,957 ($11,612,200) ($1,012,243)
Growth Stock Portfolio 28,054,467 6,346,447 (571,824) 5,774,623
Utilities Stock Portfolio 8,400,774 2,443,238 (176,253) 2,266,985
Bond Portfolio 16,063,116 535,396 (38) 535,358
Money Market Portfolio 582,497,625 --- --- ---
<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 (Portfolios), including the portfolios of
investments, as of December 31, 1997, 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.
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, 1997, by confirmation with the custodian and brokers 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 the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio and Money Market Portfolio at December 31, 1997, 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
February 12, 1998
<PAGE>
MANAGER AND INVESTMENT ADVISER
R. Meeder & Associates
6000 Memorial Drive
P.O. Box 7177
Dublin, Ohio 43017
SUBADVISER/THE UTILITIES STOCK PORTFOLIO
Miller/Howard Investments, Inc.
141 Upper Byrdcliffe Road, P.O. Box 549
Woodstock, New York 12498
SUBADVISER/THE GROWTH STOCK PORTFOLIO
Sector Capital Management L.L.C.
5350 Poplar Avenue, Suite 490
Memphis, Tennesse 38119
BOARD OF TRUSTEES
Milton S. Bartholomew
Dr. Roger D. Blackwell
Charles A. Donabedian
John M. Emery
Richard A. Farr
William L. Gurner
Robert S. Meeder, Sr.
Robert S. Meeder, Jr.
Russel G. Means
Lowell G. Miller
Walter L. Ogle
Philip A. Voelker
CUSTODIAN
Star Bank, N.A. Cincinnati
Cincinnati, Ohio 45201
TRANSFER AGENT DIVIDEND DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, Ohio 43017
AUDITORS
KPMG Peat Marwick LLP
Columbus, Ohio 43215
<PAGE>
THE FLEX-FUNDS
P.O. Box 7177
Dublin, Ohio 43017
