S O C I A L
I N V E S T M E N T
P O L I C Y
F L E X F U N D S
T O T A L R E T U R N
U T I L I T I E S F U N D
The Flex-funds
P.O. Box 7177
Dublin, Ohio 43017
(800) 325-3539
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THE FLEX FUNDS' TOTAL RETURN UTILITIES FUND OFFERS INVESTORS THE OPPORTUNITY FOR
CAPITAL APPRECIATION, CURRENT INCOME, AND GROWTH OF INCOME, IN ENVIRONMENTALLY
AND SOCIALLY PREFERABLE EQUITY INVESTMENT STRATEGIES. THE FUND PROVIDES A UNIQUE
OPPORTUNITY TO BE INVOLVED IN THE EQUITY MARKET WITHOUT BEING INVOLVED IN MANY
AREAS OF THE ECONOMY THAT MAY BE OBJECTIONABLE TO AN INVESTOR. THE FUND COMBINES
CAREFULLY SELECTED AND SCREENED PORTFOLIOS WITH POSITIVE SOCIAL ACTION ON POLICY
ISSUES THROUGH PROXY VOTING AND SHAREHOLDER ADVOCACY.
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STOCK SELECTION PROCESS
MILLER/HOWARD INVESTMENTS, INC. IS THE SUBADVISER TO THE FUND. AS THE PORTFOLIO
MANAGER, THEY MAKE USE OF THIRD PARTY RESEARCH FROM SOURCES SUCH AS INVESTOR
RESPONSIBILITY RESOURCE CENTER (IRRC), THE COUNCIL ON ECONOMIC PRIORITIES (CEP),
FRANKLIN RESEARCH AND DEVELOPMENT CORP., KINDER, LYNDENBERG, AND DOMINI, VALUE
LINE, AND THE INTERNET TO DEVELOP AN OVERALL SOCIAL PROFILE AND SCREEN COMPANIES
THAT MEET ITS FINANCIAL CRITERIA, PAYING PARTICULAR ATTENTION TO THE FOLLOWING:
EXCLUSIONARY SCREENS
TOBACCO/ALCOHOL/GAMBLING/FIREARMS
The portfolio is free from companies with primary or subsidiary businesses
involved in the alcohol, tobacco, gambling and firearms industries.
WEAPONS/MILITARISM
None of the companies in the portfolio has a primary involvement in the defense
industry, and companies with greater than three percent dependence on revenues
from weapons production will be screened out.
NUCLEAR POWER
The fund will not invest in any company involved in nuclear power production. If
a company merges with, acquires or is acquired by a company that is involved in
nuclear power production, the fund will divest.
ANIMAL TESTING
The fund will not invest in any company involved in animal testing or animal
usury.
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EQUAL EMPLOYMENT OPPORTUNITY/LABOR ISSUES
The fund is committed to promoting workplace diversity (see section on proxy
voting/shareholder activism).
If a company has unremediated or egregious problems in the area of Equal
Employment Opportunity (such as discrimination or harassment), Workplace Safety
(such as OSHA safety violations), or Union/Labor Issues (such as WARN act
violations), the fund will either divest or participate in shareholder action in
an attempt to work with the company to address the issues.
THE ENVIRONMENT
Excluding companies involved in nuclear power generation is not the only
positive environmental feature of the Total Return Utilities Fund.
The investment portfolio typically invests across all the essential service
areas: telephone, electric, water, and natural gas. Consideration is given to
natural gas not only because it's an environmentally preferable alternative
fuel, but because the industry shows tremendous potential as an area of growth.
In addition, the fund seeks to invest in companies involved in energy production
from renewable and alternative resources, whenever such investments are in
keeping with the financial objectives and liquidity concerns of the strategy.
The fund seeks to exclude companies that have a history of environmental
negligence or a pattern of violation of environmental regulations. If a company
has unremediated or egregious problems in the area of environmental performance,
the Subadviser will either divest or participate in shareholder action in an
attempt to work with the company to address the issues.
INTERNATIONAL LABOR ISSUES
Sweatshop operations and slave labor are other potential areas of concern. If
these issues exist at companies the Portfolio invests in, the portfolio manager
will work to open dialogue in an attempt to encourage the company to adopt
comprehensive supplier standards.
In the case of companies with Maquiladora operations, the fund's portfolio
manager will work to encourage the company to address any environmental problems
or labor related issues, such as below subsistence wages or unsafe working
conditions.
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SHAREHOLDER ADVOCACY/PROXY VOTING GUIDELINES
Socially responsible investing is a complex process involving education and
choice. All companies have the potential to improve their performance in a
number of areas that affect the environment and quality of life. Investors have
an opportunity to engage corporate management in dialogue about issues that are
of concern to them.
Proxy voting is one of the best ways for an investor to communicate support or
disagreement with management policy. Miller/Howard Investments votes proxies on
a case by case basis, but will generally vote with management on most standard
business issues such as the appointment of independent auditors and the election
of board directors. In cases where a company's board lacks representation of
women and minorities, MHI will vote against the board and send a letter to
management explaining their position and encourage diversity on the board.
In addition to the "standard" issues placed on the ballot by management, there
may be a number of other important issues put forward by shareholders for
inclusion on the ballot in the form of shareholder resolutions. Shareholder
resolutions can cover a wide range of issues, such as workplace diversity,
militarism, labor relations, and the environment. The primary goal of the
resolution process is not a vote, but to engage the company in a dialogue on an
issues. These resolutions are filed well in advance of the annual meeting, and
if dialogue with the company is fruitful, the filers may withdraw the resolution
before it even comes to a vote.
Miller/Howard Investments is an associate member of the Interfaith Center on
Corporate Responsibility (ICCR), and makes use of information from ICCR as well
as research from Investor Responsibility Resource Center (IRRC) to keep track of
resolutions as they are filed. When a resolution is filed on an issue of concern
for the fund, a letter is sent to the company echoing the concern of the filers
and encouraging the company to enter a dialogue on the subject. In addition, MHI
co-files resolutions on issues such as the implementation of the Coalition for
Environmentally Responsible Economies (CERES) principles (1997: Enron
Corporation, U.S. West, Inc.) and foreign military sales reporting (1997: GTE
Corporation).
MHI will likely support and vote for resolutions such as those requesting
reports on workplace diversity, the implementation of the CERES principles,
reports on foreign military sales, implementation of the MacBride principles,
shareholder approval of golden parachute plans and other social and
environmental issues. When a vote on such a resolution is made, a position
letter is sent to management, in an effort to re-enforce the importance of the
issues, and to urge a greater level of management awareness.
FOR MORE INFORMATION REGARDING THE TOTAL RETURN UTILITIES FUND, INCLUDING
HOW TO OBTAIN A FREE PROSPECTUS, PLEASE CALL OR WRITE THE FLEX-FUNDS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
