THE FLEX-FUNDS
1999 ANNUAL REPORT [PHOTO]
December 31, 1999
LETTER TO SHAREHOLDERS page 1
1999 YEAR IN REVIEW page 2
THE MUIRFIELD FUND page 6
THE TOTAL RETURN UTILITIES FUND page 8
THE HIGHLANDS GROWTH FUND page 10
THE U.S. GOVERNMENT BOND FUND page 12
THE MONEY MARKET FUND page 14
FINANCIAL STATEMENTS page 16
THE FLEX-FUNDS
P.O. Box 7177 Dublin OH 43017
TOLL FREE (800)325-FLEX
E-Mail: [email protected]
Internet: www.flexfunds.com
<PAGE>
PERFORMANCE CAPSULE Period & Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
The Muirfield The Total Return The Highlands The U.S. GovernmentThe Money Market
Fund Utilities Fund Growth Fund** Bond Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year 16.43% 20.01% 21.16% 0.35% 4.96%
Three Years 21.32% 18.87% 24.66% 5.83% 5.22%
Five Years 18.95% -- 21.37% 7.03% 5.36%
Ten Years 14.15% -- 14.21% 6.86% 5.18%
Life of Fund 14.22%1 18.89%2 11.57%3 6.91%4 5.98%5
The Money Market Fund as of 12/31/99 7-day Simple Yield* 5.49% 7-day Compound Yield* 5.63%
<FN>
1 Inception Date 8/10/88. 2 Inception Date 6/21/95. 3 Inception Date 3/20/85. 4
Inception Date 5/9/85. 5 Inception Date 3/27/85.
</FN>
</TABLE>
To obtain a prospectus containing more complete information about The
Flex-funds, including other fees and expenses that apply to a continued
investment in the Funds, you may call The Flex-funds at (800)325-3539 or write
P.O. Box 7177, Dublin OH 43017. Please read the prospectus carefully before
investing.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. All performance figures
represent period total returns and average annual total returns for the periods
ended 12/31/99. Investment performance represents total return and assumes
reinvestment of all dividend and capital gain distributions. The investment
value and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. The
Investment Adviser waived a portion of its management fees and/or reimbursed
expenses in order to reduce the operating expenses of The Money Market, The U.S.
Government Bond, and The Total Return Utilities Funds during each of the periods
shown above. The Investment Adviser waived a portion of its management fees
during 1999 in order to reduce the operating expenses on The Highlands Growth
Fund.
An investment in The Money Market Fund is neither insured nor guaranteed
by the Federal Deposit Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund. * Yield quotations
more closely reflect the current earnings of The Money Market Fund than do total
return quotations.
** The results achieved by The Highlands Growth Fund since
12/31/96 were achieved with the Sector strategy as implemented by Sector Capital
Management LLC, the Fund's subadviser. The average annual rates of return for 5
years, 10 years, and over the life of the Fund reflect a combination of the
Fund's previous tactical asset allocation discipline and the new Sector
discipline.
<PAGE>
LETTER TO SHAREHOLDERS
Dear Flex-funds Shareholder:
Happy New Year, and Happy New Millennium. It is not often that one has the
opportunity to greet clients to a new century, so I would like to take this
moment to wish you the best for the coming year and the new millennium.
Every company goes through a period of transition, and after 26 years now
is the time for transition for The Flex-funds and R. Meeder & Associates. In the
coming year, you will notice a number of changes that we hope will make us a
more responsive and a more focused investment management firm.
The first change you will notice in the Year 2000 is the addition of two
new no-load mutual funds to our fund family - THE DYNAMIC GROWTH FUND AND THE
AGGRESSIVE GROWTH FUND. These funds evolved from the separately-managed
portfolios we have managed for clients of R. Meeder & Associates since 1995. The
addition of these two funds expands the range of investment options available in
The Flex-funds family. Both the Dynamic Growth and Aggressive Growth Funds will
be available to investors in March 2000.
Many Flex-funds shareholders have asked us about internet access to their
account information. We intend to begin providing shareholders secure access to
their Flex-funds account through our web site - www.flexfunds.com -- by
mid-year. This information will include current account values, recent
transactions, and daily prices for The Flex-funds.
Finally, and perhaps most significantly, R. Meeder & Associates will adopt
a new identity in the Year 2000. This corporate makeover has required much "soul
searching" on our part. In this process, we have learned a great deal about who
we are as a company, and how you see us as a trusted partner in your financial
success. Our new identity will reflect our experience and expertise, our vision
for the future, and our commitment to remaining a client-focused investment
management firm.
After more than 25 years of helping investors achieve their financial
goals, we have grown from a small, family-owned company with a handful of
specialized mutual funds, to a complete financial service provider with over $2
billion in assets and seven mutual funds under management. Such growth has given
us many challenges over the years - challenges we believe we have met
successfully. We appreciate your continued trust in our investment management
services. We are excited about the year ahead at The Flex-funds and R. Meeder &
Associates, and look forward to growing with you in the years to come.
Sincerely,
/s/ Robert S. Meeder, Sr.
Robert S. Meeder, Sr.
President
The Flex-funds Annual Report * December 31, 1999 Page 1
<PAGE>
1999 YEAR IN REVIEW
1999 was another "Year of the Bull" on Wall Street, as the major equity
market indices finished at or near record levels. A closer examination of the
financial markets, however, shows that 1999 looks less like a bull and more like
a bumblebee, which according to modern aerodynamic theory should not be able to
fly. If you take a pea and lima bean, attach four fragile wings, six scrawny
legs, stubbly fur and an oversized head, what you get looks more like a
paperweight than an airborne insect.
The bumblebee defies most traditional models, and the same can be said of
the financial markets in 1999. In fact, this year marked the first time we ever
heard the term "new metrics" from an analyst explaining his methodology for
justifying the valuations of Internet stocks. It seems that one needs the new
"new math" to understand this methodology.
Sticking with the traditional metrics, a review of 1999 shows a rising
interest rate environment with yields on 30-year Treasury bonds increasing from
5.1% to almost 6.5% -- their highest level in over two years. (See Chart A at
right.) In the equity market, the indices pushed higher into record territory,
even though twice as many stocks declined (2557) as advanced (1182) on the New
York Stock Exchange. Advance/decline lines for most major indices finished the
year in strong down trends. (See Chart B at right.) And, as late as December 14,
the stock market was recording days with over 560 stocks making new 12-month
lows. (See Chart C at right.)
Valuations that began the year in the nosebleed seats surged higher to
finish the year up near the blimp. (See Chart D on Page 3.) Participation was
limited to a few sectors, as only a handful of investors' favorite stocks
contributed to the majority of the market's annual gains. (See 1999 Highlights
sidebar on Page 3.) If one took all these variables, threw in a wildcard called
"Y2K", and plugged them into a traditional market model, one could reasonably
expect a lower equity market. Yet, like the bumblebee, the market refused to
obey the laws of finance and defied the investment models.
This year's returns for the various market indices mask the true nature of
the Market of 1999. It turns out that for the vast majority of stocks, the
traditional models did apply. An unweighted average of all the stocks on the New
York Stock Exchange only returned 1.0% for all of 1999. Small-cap and mid-cap
indices underperformed large-caps, as the mid-cap S&P 400 Index (+14.7%) and the
small-cap S&P 600 Index (+12.4%) trailed the S&P 500 for the year.*
* The S&P 500, S&P 400, and S&P 600 Indices are unmanaged indices based on
market capitalization, incurring no sales charges, expenses, or fees. Past
performance of an index does not guarantee future results. It is not possible to
invest directly in an index.
[GRAPH] Chart A: 30 Year Treasury Bond Rate from December 1997 through December
1999. Source: Reuters Datalink.
[GRAPH] Chart B: NYSE Advance Decline Line from December 1998 through December
1999. Source: Reuters Datalink.
[GRAPH] Chart C: NYSE New Lows from December 1998 through December 1999.
Source: Reuters Datalink.
The Flex-funds Annual Report * December 31, 1999 Page 2
<PAGE>
[GRAPH] Chart D: S&P 500 Historical P/E Ratio from 1929 through 1999.
1999 FINANCIAL MARKETS HIGHLIGHTS
ANNUAL ADVANCING & DECLINING ISSUES
ADVANCING DECLINING
ISSUES ISSUES
NYSE 1182 2557
S&P 500 241 256
NASDAQ 2629 2497
AMEX 352 561
Source: Columbus Dispatch
CONTRIBUTION TO 1999 TOTAL RETURN
OF THE S&P 500
Largest 100 Stocks 17 points
(over 80%)
Other 400 Stocks 4 points
(less than 20%)
Technology Sector 14 points
(over 65%)
Source: Salomon Smith Barney
As late as mid-October, most major indices were near or below where they were in
early January.
The vast majority of 1999's market gains came after mid-October in a very
narrow market. Of the annual returns of the major indices, over 90% of the S&P
500, 60% of the Dow Jones Industrial Average, and 70% of the NASDAQ came in the
final 11 weeks of the year.** To add some perspective to this extraordinary
rally, the NASDAQ Index climbed from 3000 to 4000 in just seven weeks. Ten of
the NASDAQ's largest all-time point gains occurred in 1999, with 7 of these
occurring in the 4th Quarter alone.
While many indices were making new highs, most stocks were not. Nearly half
of the stocks on the NASDAQ exchange fell in price in 1999. The numbers are even
worse for the S&P 500, where less than half of the stocks had a positive return
for 1999, and almost two-thirds of those stocks returned less than 10% for the
year. (See sidebar on Page 4.) The largest 100 companies in the S&P 500
contributed 17.1% to the Index's total annual return - that's over 80% of the
S&P 500's 21.04% annual return. To put it another way, the other 400 stocks
returned only 3.93%. If an investor did not own these 100 stocks, they most
likely did not participate in 1999's gains. Some analysts have described 1999 as
a "stealth bear market."
What then separated the winners from the losers? In a word, technology.
Technology stocks were responsible for 14 points of the S&P 500's 21% return for
the year. That means the technology sector contributed 65% to the gain of the
S&P 500 for 1999. Technology was also largely responsible for the divergence
between the S&P BARRA Growth and Value Indices during 1999, which returned
28.25% and 12.72% respectively. While both indices have technology stocks, the
Growth Index holds a greater concentration. In hindsight, it is easy to see why
we favored growth and technology stocks in many of our equity funds for most of
1999.
Technology and growth funds played a large part in helping The Flex-funds
Muirfield Fund achieve another year of double-digit gains, with a 16.43% annual
total return. In such a high-risk market, our "Defensive Investing" strategy was
able to produce solid returns and manage risk by reducing the Fund's exposure to
equities when our investment discipline indicated the risk/reward relationships
were not 100% positive.
** The Dow Jones Industrial Average is an unmanaged index of 30 selected stocks.
The NASDAQ Composite Index is an unmanaged index of all the stocks traded on the
NASDAQ exchange. These indices incur no sales charges, expenses, or fees. Past
performance of an index does not guarantee future results. It is not possible to
invest directly in an index.
The Flex-funds Annual Report * December 31, 1999 Page 3
<PAGE>
1999 YEAR IN REVIEW (Continued)
Our other equity funds were also aided by the top-performing sectors of the
1999 stock market. Telecommunications stocks enjoyed a strong year of returns,
which helped The Total Return Utilities Fund return 20.01% for the year,
outperforming both the 15.13% annual return for the average utility fund
according to Morningstar, and the -6.02% annual return of the Dow Jones Utility
Average. Global markets also experienced a positive year, rallying strongly from
the turmoil of 1998. (For information on the performance of The Flex-Partners
International Equity Fund, please see the enclosed insert.) And, The Flex-funds
Highlands Growth Fund achieved its investment objective -- outperforming the S&P
500 Index -- with its "sector neutral, style neutral" investment strategy.
In our fixed income portfolios, the negative trend in interest rates
mandated a defensive position in The U.S. Government Bond Fund throughout most
of 1999. Our defensive strategy helped the Fund outperform the average general
government bond for the year, according to Morningstar. The Flex-funds Money
Market Fund took advantage of the increasing interest rate environment in 1999
and outperformed the average money market fund this year by 0.47%, according to
Lipper.
We believe the Year 2000 will be a challenging year for the financial
markets. It appears that we will finally be over Y2K, but its effects may still
linger through the economy. People who withdrew cash in preparation for an
emergency will have it burning a hole in their pockets, possibly perpetuating
consumers' spending spree. Inventories that were built up will need to be
reduced. 401(k) contributions and money withheld out of fear of a computer
glitch may also be reinvested back into the markets. Firms will have money once
spent on Y2K preparations go toward their bottom lines. If the market has
discounted a Y2K risk premium, it will disappear in the new year. However, Alan
Greenspan may throw cold water on the party by hiking interest rates. The Year
2000 is also an election year, and depending on the outcome, there may be relief
rallies in downtrodden sectors such as healthcare, pharmaceuticals and tobacco.
This is why we believe the high-risk market conditions we have grown accustomed
to in previous years may continue into the new year.
An evaluation such as this may give some investors cause for concern. We
remain fully confident that our investment disciplines will enable us to
recognize new trends developing in the constantly changing financial markets,
giving us the flexibility to invest the Fund's portfolios in those market
sectors or securities that we believe have the most attractive prospects for
returns.
- --------------------------------------------------------------------------------
Average Stock Decline from 52-week High
as of December 31, 1999
- --------------------------------------------------------------------------------
NYSE 28.0%
S&P 500 23.2%
NASDAQ 31.3%
- --------------------------------------------------------------------------------
Percentage of Stocks Down 10% or More
from 52-week Highs as of December 31, 1999
- --------------------------------------------------------------------------------
NYSE 80.8%
S&P 500 76.0%
NASDAQ 82.4%
- --------------------------------------------------------------------------------
Percentage of Stocks Down 20% or More
from 52-week Highs as of December 31, 1999
- --------------------------------------------------------------------------------
NYSE 61.7%
S&P 500 52.8%
NASDAQ 61.6%
- --------------------------------------------------------------------------------
Percentage of Stocks Down 30% or More
from 52-week Highs as of December 31, 1999
- --------------------------------------------------------------------------------
NYSE 41.2%
S&P 500 32.8%
NASDAQ 46.1%
The Flex-funds Annual Report * December 31, 1999 Page 4
<PAGE>
THE FLEX-FUNDS FAMILY OF NO-LOAD MUTUAL FUNDS
Announcing two new no-load mutual funds to The Flex-funds family -- THE DYNAMIC
GROWTH FUND AND THE AGGRESSIVE GROWTH FUND. The addition of these two funds will
offer Flex-funds investors the opportunity to invest in some of the
fastest-growing areas of the market, and the flexibility to diversify your
Flex-funds portfolio.
The chart below illustrates how each investment option available in The
Flex-funds family can fit with your individual investment style and financial
goals.
The Flex-Partners
The Money The Muirfield The Highlands International
Market Fund Fund Growth Fund Equity Fund**
- --------------------------------------------------------------------------------
CONSERVATIVE AGGRESSIVE
- --------------------------------------------------------------------------------
The U.S. Govt. The Total Return The Dynamic The Aggressive
Bond Fund Utilities Fund Growth Fund* Growth Fund*
* Coming in March 2000
** The Flex-Partners International Equity Fund
is a load mutual fund that charges a front-end
sales charge of 5.75%. However, the Fund is
available to Flex-funds shareholders with no
front-end sales charge.
The Flex-funds Annual Report * December 31, 1999 Page 5
<PAGE>
The Flex-funds 1999 Annual Report
THE MUIRFIELD FUND
[PHOTO] Robert S. Meeder, Jr., Portfolio Manager
[PHOTO] Philip A. Voelker, Portfolio Manager
1999 was another year of double-digit returns for The Muirfield Fund. For
the 12 months ended December 31, the Fund returned 16.43%, comparing favorably
with the 9.40% return of the average asset allocation fund, according to
Morningstar.
This was another year, as well, for volatility and narrowness in the stock
market. Of the annual returns of the major stock market indices, over 90% of the
S&P 500, 60% of the Dow Jones Industrial Average, and 70% of the NASDAQ came in
the final 11 weeks of the year. And, for the year, the 100 largest
capitalization stocks in the S&P 500 contributed over 80% of the 21% gain of the
Index, and the technology sector contributed 65% to the gain of the S&P 500.
The advance of stock market indices was dramatic, but the Fund spent part
of the year in a defensive position with large allocations to cash equivalent
securities. Two reasons for this decision were the narrowness of the market and
the increasing interest rate environment. As of December 31, over 60% of the
stocks listed on the New York Stock Exchange and the NASDAQ were down more than
20% from their annual highs. This condition is normally not a good sign for the
future health of the stock market.
The increase in interest rates was influenced partially by Y2K concerns,
but a large part was due to fears of future inflation. These two areas - the
breadth of the market and interest rates -- are two of the most important
components in our Defensive Investing discipline, and both were negative much of
the year. In fact, we never owned bonds this year due to our negative evaluation
of the interest rate environment.
When the Fund was exposed to the risk of the stock market, fund selection
was extremely important because of the narrowness of the market. During the
first 4 months of the year, fund positions were selected to emphasize large cap
growth and technology. In the second 4 months of the year (from mid April to mid
August) our fund selection emphasized value stocks and energy issues. From mid
August through the end of the year, our fund selection emphasis returned to
large-cap and technology funds.
As we begin the Year 2000, we remain cautious when looking to increase our
exposure to the equity market. We continue to see a high-risk market, due to
extreme valuations, narrow advance/decline statistics, and an increasing
interest rate environment.
The Flex-funds Annual Report * December 31, 1999 Page 6
<PAGE>
1999 PERFORMANCE
Annual Total Returns as of 12/31/99
The Muirfield Avg. Asset
Fund Allocation Fund1
One Year 16.43% 9.40%
Three Years 21.32% 13.55%
Five Years 18.95% 15.68%
Ten Years 14.15% 11.42%
1 According to Morningstar Principia
- --------------------------------------------------------------------------------
1999 Quarterly Performance
First Quarter.........................................5.81%
Second Quarter........................................5.64%
Third Quarter........................................-4.51%
Fourth Quarter....................................... 9.07%
[GRAPH] The following information was presented as a graph:
GROWTH OF $10,000
Morningstar Average
The Muirfield Fund Asset Allocation Fund
12/31/89 $10,000 $10,000
12/31/90 10,233 10,109
12/31/91 13,285 12,417
12/31/92 14,203 13,462
12/31/93 15,354 15,034
12/31/94 15,769 14,837
12/31/95 19,840 18,387
12/31/96 21,029 20,684
12/31/97 24,939 24,180
12/31/98 32,252 26,882
12/31/99 37,550 29,205
[GRAPH] The following information was presented as a pie chart:
PORTFOLIO HOLDINGS as of December 31, 1999
1) Cash Equivalents 47.98%
2) Janus Mercury 33.51%
3) Federated S&P 500 Max Cap 9.82%
4) Invesco Strategic Financial Svcs 8.69%
Please see inside front cover for additional fund performance information.
The Flex-funds Annual Report * December 31, 1999 Page 7
<PAGE>
The Flex-funds 1999 Annual Report
THE TOTAL RETURN UTILITIES FUND
[PHOTO] Lowell G. Miller, Portfolio Manager
For 1999, The Total Return Utilities Fund returned 20.01%, outperforming
the 15.13% return for the average utility fund, according to Morningstar, and
the -6.02% return for the Dow Jones Utility Average for the same time period.
Utility stocks suffered greatly in 1999 - their worst annual performance
since 1994 - even as the robust economy drove up demand for utility services and
improved the financial performance of many utility companies. Our strategy of
industry diversification, notably in our weighting toward the telecommunications
sector, helped the Fund outperform most large-cap utility stocks this past year.
We have been saying for many years that the distribution of returns in the
utility sector was widening, and that deregulation would separate the winners
from the losers. The performance of the Fund in 1999 stamped a seal of approval
on this view.
We also overcame an increasing interest rate environment in 1999,
demonstrating to investors that a yield-oriented portfolio does not have to
decline when interest rates rise. The connection between interest rates and
prices for utility stocks has weakened in recent years, and the results of the
Fund's individual stock picking strategy -- seeking out companies that we
believe offer sustainable and reliable growth -- affirms this view.
Strong performance from the telecom stocks in our portfolio helped the Fund
achieve good returns throughout the year. The gas and electric distribution
sector has also been ripe with opportunities, with deregulation driving
consolidations and buyouts within the industry. General lack of interest in the
utility sector, however, resulted in declines in some of our more traditional
holdings, even as they increased earnings and dividends. The silver lining here
is that the depressed values of these stocks allows us to add to our positions
at lower prices.
It has been more than five years since our expectations for the Fund were
as high as they are today. Should the interest rate environment stabilize, the
Fund is in a good position to participate in any upswing that may develop in the
utilities sector.
The Flex-funds Annual Report * December 31, 1999 Page 8
<PAGE>
1999 PERFORMANCE
Annual Total Returns as of 12/31/99
The Total Return Dow Jones
Utilities Fund Utility Average1
One Year 20.01% -6.02%
Two Years 14.25% 5.70%
Three Years 18.87% 11.18%
Life of Fund2 18.89% --
1 According to Morningstar Principia
2 Inception Date 6/21/95
- -------------------------------------------------------------------------------
1999 Quarterly Performance
First Quarter.........................................0.63%
Second Quarter.......................................11.99%
Third Quarter.........................................0.74%
Fourth Quarter....................................... 5.70%
[GRAPH] The following information was presented as a graph:
GROWTH OF $10,000
The Total Return Dow Jones
Utilities Fund Utility Average
6/21/95 $10,000 $10,000
12/31/95 11,500 11,318
6/30/96 12,103 11,384
12/31/96 13,032 12,347
6/30/97 13,749 12,343
12/31/97 16,770 15,187
6/30/98 17,910 16,663
12/31/98 18,241 18,054
6/30/99 20,556 18,627
12/31/99 21,891 16,968
[GRAPH] The following information was presented as a pie chart:
Sector Weightings as of December 31, 1999
1) Telecomm. Services 31.35%
2) Oil/Gas Domestic 12.98%
3) Natural Gas (Distributor) 12.76%
4) Water Utility 7.33%
5) Electric/Gas Utility 7.18%
6) Pipelines 7.16%
7) Natural Gas (diversified) 5.48%
8) Electric Integrated 4.67%
9) Electric Utility 4.07%
10) Utility 3.13%
11) Telecomm. Equipment 0.95%
12) Cash Equivalents 2.94%
Please see inside front cover for additional fund performance information.
The Flex-funds Annual Report * December 31, 1999 Page 9
<PAGE>
The Flex-funds 1999 Annual Report
THE HIGHLANDS GROWTH FUND
[PHOTO] William L. Gurner, Portfolio Manager
For 1999, The Highlands Growth Fund performed exactly as expected --
outperforming the S&P 500 -- thanks in large part to the Fund's "sector neutral,
style neutral" investment strategy. Through the market fluctuations of this past
year, the Fund held to its investment strategy and avoided the underperformance
that hampered other equity funds that employ a more style-focused strategy. For
the 12 months ended December 31, 1999, the Fund returned 21.16%, while the S&P
500 Index returned 21.04%
The stock market was relatively tame through the first half of the year,
and performance was broad across many market sectors. Investors seemed more
willing to consider other sectors and styles besides technology and growth, as
the market rotated to energy, cyclical, and small-cap stocks. Overall
performance for the first six months of the year were by and large more balanced
than we had seen in a year.
This broadening trend, however, fizzled after June, as interest rate
worries and inflation fears rattled investors in the 3rd Quarter. No sector or
style seemed to be in favor, save for a handful of energy and technology
companies. The market surged back with an impressive 4th Quarter, as technology
stocks carried many indices into record territory by year-end.
Advance/decline statistics for many market indices were narrower in 1999
than they were the previous year, making it difficult to outperform the market
with a diversified portfolio. Only two sectors of the S&P 500 outperformed the
index as a whole during 1999: technology gained 71.46% and capital goods gained
42.16%. The other sectors enjoyed positive performance for the year, with the
exception of transportation which declined -9.61%, and healthcare which declined
- -9.60%.
Looking ahead to the coming year, we anticipate some moderation of the
volatility which has characterized the market over the last two years.
Technology should continue to fuel growth, although we see compelling valuation
and sound fundamental progress in the healthcare and finance sectors.
The Flex-funds Annual Report * December 31, 1999 Page 10
<PAGE>
1999 PERFORMANCE
Annual Total Returns as of 12/31/99
The Highlands S&P 500
Growth Fund Index1
One Year 21.16% 21.04%
Three Years 24.66% 27.55%
Five Years 21.37% 28.54%
Ten Years 14.21% 18.20%
1 According to Morningstar Principia
- -------------------------------------------------------------------------------
Quarterly Performance
First Quarter.........................................5.56%
Second Quarter........................................8.66%
Third Quarter........................................-6.90%
Fourth Quarter...................................... 13.46%
[GRAPH] The following information was presented as a graph:
GROWTH OF $10,000
The Highlands
Growth Fund S&P 500 Index
12/31/89 $10,000 $10,000
12/31/90 $10,431 9,688
12/31/91 $12,670 12,641
12/31/92 $13,475 13,604
12/31/93 $14,447 14,972
12/31/94 $14,346 15,169
12/31/95 $17,878 20,863
12/31/96 $19,501 25,650
12/31/97 $25,211 34,205
12/31/98 $31,179 43,980
12/31/99 $37,777 53,234
[GRAPH] The following information was presented as a pie chart:
SECTOR WEIGHTINGS as of December 31, 1999
SECTOR % OF
SECTOR MANAGER PORTFOLIO
- ------ ------- ---------
1) Technology RCM 27.54%
2) Finance Delta Capital 13.04%
3) Utilities Miller Howard 11.62%
4) Cons. Non-Dur. Barrow Hanley 9.26%
5) Health Alliance 8.87%
6) Energy Mitchell Group 5.93%
7) Cons. Durables Barrow Hanley 5.88%
8) Matls & Services Ashland 5.14%
9) Capital Goods Hallmark 4.91%
10) Transportation Miller Howard 0.64%
11) S&P 500 Futures 5.68%
12) Cash Equivalents 1.49%
Please see inside front cover for additional fund performance information.
The Flex-funds Annual Report * December 31, 1999 Page 11
<PAGE>
The Flex-funds 1999 Annual Report
THE U.S. GOVERNMENT BOND FUND
[PHOTO] Joseph A. Zarr, Portfolio Manager
For the 12 months ended December 31, The Flex-funds U.S. Government Bond
Fund returned 0.35%, outperforming the average general government bond fund
which declined -1.31% for the year, according to Morningstar. The Lehman
Brothers Intermediate Government/Corporate Bond Index returned 0.39% for the
year.
The Fund ranked in the top 22% (#81 of 382) general government bond funds
for 1-year total return as of December 31, 1999, according to Morningstar. Over
longer periods, the Fund ranks in the top 10% (#26 of 261) general government
bond funds for 5-year average annual total return, and in the top 25% (#21 of
87) funds for 10-year average annual total return, according to Morningstar.
The increasing interest rate environment in 1999 hampered the performance
on many bond funds. In contrast, the U.S. Government Bond Fund's "Defensive
Investing" discipline helped investors gain a positive return on their
investment by maintaining a fully defensive position for most of year. We began
1999 with a fully invested position in 10-year Treasury notes, foreseeing a flat
interest rate environment as dictated by global economic conditions. However,
continued strength in the U.S. economy and fears of Fed rate increases led to a
decline in the bond market and triggered a sell signal in our investment
discipline. During the first six months of 1999, the rate on the 30-year
Treasury bond increased by nearly one full percentage point, from 5.12% on
December 31, 1998, to 6.10% on June 30, 1999.
Brief bond market rallies following the Federal Reserve's three interest
rate hikes this summer were not enough to turn our investment discipline
decidedly positive. Except for a partially-invested position during two weeks in
July, we were fully defensive in the Fund as the bond market virtually collapsed
from November 16 through year-end.
As we enter year 2000, the market is saying that the Fed will raise rates
again. We anticipate that rates could increase by as much as 0.75% by mid-year.
As long as this negative interest rate environment remains prevalent, we will
maintain this defensive position and our commitment to preserving shareholder
capital as mandated by our investment discipline.
The Flex-funds Annual Report * December 31, 1999 Page 12
<PAGE>
1999 PERFORMANCE
Annual Total Returns as of 12/31/99
The U.S. Government Avg. General
Bond Fund Gov't Bond Fund1
One Year 0.35% -1.31%
Three Years 5.83% 4.57%
Five Years 7.03% 6.17%
Ten Years 6.86% 6.46%
1 According to Morningstar Principia
- --------------------------------------------------------------------------------
Quarterly Performance
First Quarter........................................-2.01%
Second Quarter........................................0.94%
Third Quarter.........................................0.37%
Fourth Quarter....................................... 1.08%
[GRAPH] The following information was presented as a graph:
GROWTH OF $10,000
The U.S. Govt. Morningstar Average
Bond Fund General Govt. Bond Fund
12/31/89 $10,000 $10,000
12/31/90 10,835 10,850
12/31/91 12,493 12,367
12/31/92 12,900 13,097
12/31/93 13,960 14,119
12/31/94 13,821 13,610
12/31/95 16,354 15,663
12/31/96 16,379 16,064
12/31/97 17,645 17,340
12/31/98 19,343 18,628
12/31/99 19,412 18,380
[GRAPH] The following information was presented as a pie chart:
PORTFOLIO HOLDINGS as of December 31, 1999
Cash Equivalents 100%
Please see inside front cover for additional fund performance information.
The Flex-funds Annual Report * December 31, 1999 Page 13
<PAGE>
The Flex-funds 1999 Annual Report
THE MONEY MARKET FUND
The Money Market Fund finished 1999 retaining its #1 ranking out of 83
general purpose money market funds for cumulative total return since inception
(March 1985) according to Lipper.* The Fund also continues to rank among the top
10% of all general purpose money market funds for total return for every
12-month period since inception.
1999 was a year of rising short-term interest rates, but like everything in
the financial world it was not simple and obvious as it developed. 90-day
commercial paper rates started the year at 4.75% and ended the year at 6.00%.
Most of the increase came during the summer and early fall as the Federal
Reserve increased rates, and corporate America pre-funded a large part of their
borrowing needs months before the normal year-end rush. During this period, we
shortened the average maturity of the portfolio to 27 days, in anticipation of
higher rates. As higher rates became available in late summer and early fall,
due to the early rush by companies to borrow, we invested in longer-maturing
paper to "tack down" those higher rates. During this period, our average
maturity once again reached over 80 days.
In the last several months, we let our average maturity settle to the
60-day range as we waited for the year-end to pass. Interest rates normally tick
up at the end of the year, but this year they were abnormally depressed because
many investors had extra cash on hand as a precaution against potential Y2K
calamities. Short-term interest rates on overnight investments had reached as
low as 3.25% on December 30.
The market's ability to forecast the need for interest rate adjustments,
and the Federal Reserve's de facto policy of "hinting" at the direction interest
rates may take in the future, have made today's interest rate environment less
volatile and less subject to surprise. We also believe these two factors have
helped to sustain the steady growth of the U.S. economy in recent years. We
continue to structure the portfolio with high quality, first-tier securities,
and strive to provide competitive yields for investors.
* The Money Market Fund ranked among general purpose money market funds for the
time periods as follows: 1 year - #27 out of 339; 5 years - #13 out of 220; 10
years - #5 out of 132. The Investment Advisor waived a portion of its management
fees and/or reimbursed expenses in order to reduce the operating expenses of the
Fund for each period shown above. Without such waivers, the Fund's rankings may
have been lower.
The Flex-funds Annual Report * December 31, 1999 Page 14
<PAGE>
1999 Performance
Annual Total Returns as of 12/31/99
The Money Average Money
Market Fund Market Fund1
One Year 4.96% 4.49%
Three Years 5.22% 4.78%
Five Years 5.36% 4.95%
Ten Years 5.18% 4.79%
1 According to Lipper Inc.
- --------------------------------------------------------------------------------
Quarterly Performance
First Quarter.........................................1.17%
Second Quarter........................................1.14%
Third Quarter.........................................1.22%
Fourth Quarter....................................... 1.34%
Current & Effective Yields
as of 12/31/99
7-day Simple Yield....................................5.49%
7-day Compound Yield..................................5.63%
An investment in The Money Market Fund is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other governmental agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. Yield rates more closely
reflect the current earnings of The Money Market Fund than do total return
quotations.
[GRAPH] The following information was presented as a pie chart:
PORTFOLIO HOLDINGS as of DECEMBER 31, 1999
1) Commercial Paper 56.30%
2) Variable Rate Notes 15.61%
3) Repurchase Agreements 15.28%
4) Corporate Notes 9.26%
5) U.S. Govt. Agency Notes 3.19%
Please see inside front cover for additional fund performance information.
The Flex-funds Annual Report * December 31, 1999 Page 15
<PAGE>
THE FLEX-FUNDS ANNUAL REPORT * DECEMBER 31, 1999
PORTFOLIO HOLDINGS & FINANCIAL STATEMENTS
The Flex-funds Annual Report * December 31, 1999 Page 16
<PAGE>
MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1999
<TABLE>
<CAPTION>
SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE
-------------------------- ----------- -----
<S> <C> <C>
MUTUAL FUNDS - 52.1%
Federated S&P 500 Maxcap Fund 584,857 $ 17,528,154
Invesco Strategic Financial Services Fund 582,951 15,518,157
Janus Mercury Fund 1,365,662 59,829,654
Mutual Shares Fund 387 7,901
TOTAL MUTUAL FUNDS
(Cost $75,578,885 ) 92,883,866
MONEY MARKET MUTUAL FUNDS - 42.9%
Charles Schwab Money Market Fund 923,528 923,528
Fidelity Cash Reserve Money Market Fund 35,695,344 35,695,344
Fidelity Core Money Market Fund 40,000,000 40,000,000
TOTAL MONEY MARKET MUTUAL FUNDS
(Cost $76,618,872 ) 76,618,872
U.S.TREASURY BILLS - 0.0%
* 4.30%, due 01/06/00 30,100 30,083
TOTAL U.S. TREASURY BILLS
(Cost $30,083 ) 30,083
REPURCHASE AGREEMENT - 5.0%
Bank of America Securities LLC, 4.60%, 01/03/00,
(Collateralized by $9,262,172 various commercial
papers, 5.50%, 03/14/00 - 03/24/00,
market value - $9,155,608) 8,976,000 8,976,000
TOTAL REPURCHASE AGREEMENT
(Cost $8,976,000 ) 8,976,000
TOTAL INVESTMENTS - 100.0%
(Cost $161,203,840) $178,508,821
TRUSTEE DEFERRED COMPENSATION**
Flex-funds Highlands Growth Fund 1,305 29,087
Flex-funds Muirfield Fund 2,048 12,962
Flex-funds Total Return Utilities Fund 421 8,516
Flex-Partners International Equity Fund 959 16,451
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $62,776 ) $67,016
<FN>
* Pledged as collateral on Letter of Credit.
** Assets of affiliates to the Mutual Fund Portfolio held for the benefit
of the Portfolio's Trustees in connection with the Trustee Deferred
Compensation Plan.
</FN>
</TABLE>
See accompanying notes to financial statements.
The Flex-funds Annual Report * December 31, 1999 Page 17
<PAGE>
UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1999
<TABLE>
<CAPTION>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
-------------------------- --------------------- -----
<S> <C> <C>
COMMON STOCKS - 100.0%
ELECTRIC/GAS UTILITY - 7.2%
AGL Resources, Inc. 21,955 $ 373,235
MDU Resources Group, Inc. 14,220 284,400
NiSource Inc. 16,355 292,346
UtiliCorp United, Inc. 19,998 388,701
1,338,682
ELECTRIC UTILITY - 11.9%
Cinergy Corp. 11,420 273,366
Keyspan Corp. 25,190 584,093
LG&E Energy Corp. 27,864 485,879
Scottish Power PLC - ADR 10,469 293,121
TECO Energy, Inc. 31,115 577,572
2,214,031
NATURAL GAS (DISTRIBUTOR) - 18.3%
Columbia Energy Group 8,905 563,241
Eastern Enterprises 7,975 458,064
MCN Energy Group Inc. 40655 965,556
Nicor Inc. 4,975 161,687
WICOR, Inc. 14075 410,814
Williams Cos., Inc. 27550 841,997
3,401,359
OIL/GAS (DOMESTIC) - 20.2%
Enron Corp. 10,445 463,497
El Paso Natural Gas Co. 28,420 1,103,051
Kinder Morgan Energy Partners, L.P. # 19,724 817,313
Kinder Morgan Inc. 25,680 518,415
Peoples Energy Corp. 10,585 354,598
Questar Corp. 33,345 500,175
3,757,049
TELECOMMUNICATION EQUIPMENT - 0.9%
P-Com, Inc. # 20,000 176,875
176,875
TELECOMMUNICATION SERVICES - 34.2%
Alltel Corp. 7,420 613,541
AT&T Corp. 10,635 535,073
BCE, Inc. 9,395 847,312
CenturyTel, Inc. 17,035 807,033
Global Crossings Ltd. # 21,585 1,079,237
GTE Corp. 9,585 676,342
MCI Worldcom Inc. # 10,613 563,126
SBC Communications, Inc. 9,650 470,438
U.S. West Communications Group 10,950 788,400
6,380,502
WATER UTILITY - 7.3%
American Water Works Co., Inc. 33,600 714,000
Azurix Corp. # 73,000 652,437
1,366,437
TOTAL COMMON STOCKS
(Cost $16,563,595 ) 18,634,935
The Flex-funds Annual Report * December 31, 1999 Page 18
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
-------------------------- --------------------- -----
U.S. TREASURY BILLS - 0.0%
* 4.30%, due 01/06/00 1,000 1,000
TOTAL U.S. TREASURY BILLS
(Cost $1,000 ) 1,000
TOTAL INVESTMENTS - 100.0%
(Cost $16,564,595 ) $18,635,935
TRUSTEE DEFERRED COMPENSATION**
Flex-funds Highlands Growth Fund 234 5,206
Flex-funds Muirfield Fund 349 2,210
Flex-funds Total Return Utilities Fund 66 1,333
Flex-Partners International Equity Fund 183 3,133
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $11,090 ) $11,882
<FN>
ADR:American Depositary Receipts
L.P.Limited Partnership
# Represents non-income producing securities.
* Pledged as collateral on Letter of Credit.
** Assets of affiliates to the Utility Stock Portfolio held for the
benefit of the Portfolio's Trustees in connection with the Trustees
Deferred Compensation Plan.
</FN>
</TABLE>
See accompanying notes to financial statements.
The Flex-funds Annual Report * December 31, 1999 Page 19
<PAGE>
GROWTH STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1999
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
- -------------------------- ------ -----
COMMON STOCKS - 92.9%
AEROSPACE/DEFENSE - 0.7%
Boeing Co. 3,900 $ 161,606
General Dynamics Corp. 600 31,650
Lockheed Martin Corp. 1,870 40,906
Northrup Grumman Corp. 200 10,813
Raytheon Co. - Class B 1,000 26,563
Textron, Inc. 740 56,749
United Technologies Corp. 2,000 130,000
458,287
AIR TRANSPORTATION - 0.3%
AMR Corp. # 725 48,575
Delta Air Lines, Inc. 685 34,122
Frontier Airlines # 1,990 22,636
Southwest Airlines 2,437 39,297
USAir Group # 1,000 32,063
176,693
ALUMINUM - 0.3%
Aluminum Company of America 2,460 204,180
AUTO & TRUCK - 1.2%
Ford Motor Co. 4,900 261,231
General Motors Corp. 5,000 363,438
Genuine Parts Co. 5,400 133,988
TRW, Inc. 620 32,201
790,858
BANKING - 1.1%
Washington Mutual Savings Bank 2,303 59,590
Wells Fargo Co. 15,900 642,956
702,546
BEVERAGE -- ALCOHOLIC - 0.3%
Anheuser-Busch Cos., Inc. 2,900 205,538
BEVERAGE -- SOFT DRINK - 1.2%
Coca-Cola Co. 9,000 524,250
Pepsico, Inc. 7,600 267,900
792,150
BROADCASTING - 0.3%
SFX Entertainment Inc. # 3,900 141,131
World Wrestling Federation Entertainment Co. # 1,000 17,250
158,381
BUILDING MATERIALS - 0.1%
Masco Corp. 1,860 47,198
Vulcan Materials Co. 590 23,563
70,761
CAPITAL GOODS - 0.1%
Eaton Corp. 367 26,653
Ingersoll-Rand 839 46,197
72,850
The Flex-funds Annual Report * December 31, 1999 Page 20
<PAGE>
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
- -------------------------- ------ -----
CHEMICAL -- DIVERSIFIED - 1.0%
Air Products & Chemicals, Inc. 570 19,131
Dow Chemical Co. 1,210 161,686
E.I. du Pont de Nemours & Co. 3,650 240,444
Imperial Chemical Industries 680 28,943
Monsanto Corp. 2,900 103,313
Praxair, Inc. 840 42,263
Rohm & Haas Co. 1,185 48,215
643,995
CHEMICAL -- SPECIALTY - 0.1%
Eastman Chemical Co. 500 23,844
MacDermid Inc. 800 32,850
Sigma Aldrich 610 18,338
75,032
COMMERCIAL SERVICES - 0.3%
Cendant Corp. # 4,600 122,188
Dun & Bradstreet 1,470 43,365
165,553
COMPUTERS & PERIPHERALS - 4.8%
Apple Computer # 720 74,025
Compaq Computer Corp. 6,710 182,428
Dell Computer Corp. # 10,210 520,710
EMC Corp./Mass # 5,460 596,505
Gateway 2000, Inc. # 1,500 108,094
IBM Corp. 7,830 845,640
Micron Technology, Inc. # 820 63,755
QRS Corporation Delaware # 320 33,380
Sanmina Corp # 850 84,894
Seagate Technology Inc. # 950 44,234
Sun Microsystems # 7,460 577,684
3,131,349
COMPUTER SOFTWARE & SERVICES - 8.0%
America Online, Inc. # 10,710 806,597
BMC Software, Inc. # 1,460 116,709
Ceridian Co. # 840 18,113
Computer Associates International Inc. 2,380 166,451
Computer Sciences Corp. # 790 74,754
Compuware Corp. # 820 30,545
Electronic Data System Corp. 2,450 163,997
Microsoft Corp. # 25,100 2,930,425
Novell, Inc. # 1,490 59,507
Oracle Corp. # 7,400 829,263
Unisys Corp. # 1,270 40,561
5,236,922
CONSUMER NON-DURABLE - 2.3%
Corning Inc. 1,240 159,883
Fortune Brands, Inc. 7,800 257,888
Gillette Co. 5,800 238,888
Haggar Corp. 11,500 130,813
Procter & Gamble Co. 6,500 712,156
1,499,628
COSMETICS - 0.5%
Avon Products Inc. 3,300 108,900
Kimberly Clark 3,300 215,325
324,225
Growth Stock Portfolio, continued on next page
The Flex-funds Annual Report * December 31, 1999 Page 21
<PAGE>
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
- -------------------------- ------ -----
Growth Stock Portfolio, continued
DATA PROCESSING - 0.5%
Automatic Data Processing, Inc. 3,300 177,788
First Data Corp. 2,170 107,008
Fiserv, Inc. # 910 34,864
319,660
DIVERSIFIED - 1.2%
Honeywell International Inc. 3,402 196,253
Minnesota Mining & Manufacturing Co. 1,570 153,664
Norfolk Southern Corp. 1,830 37,515
PPG Industries, Inc. 830 51,927
Tyco International 7,860 306,540
745,899
DRUG - 5.5%
Abbott Labs 6,830 248,014
Bristol Myers Squibb 10,870 697,718
Eli Lilly & Co. 4,550 302,575
Merck & Co., Inc. 10,830 726,287
Pfizer, Inc. 20,210 655,562
Pharmacia & Upjohn 1,470 66,150
Schering Plough Corp. 9,550 404,681
Warner Lambert Co. 4,800 393,300
3,494,287
DRUGSTORE - 0.2%
Rite Aid Corp. 11,400 127,538
ELECTRIC -- INTEGRATED - 0.2%
Edison International 1,800 47,138
FPL Group, Inc. 960 41,100
Teco Energy Inc. 2,930 54,388
142,626
ELECTRIC UTILITY - 0.5%
AES Corp. # 2,460 183,885
Duke Power Co. 2,940 147,368
331,253
ELECTRICAL EQUIPMENT - 4.3%
General Electric Corp. 17,552 2,712,858
ELECTRONIC COMPONENT SEMICONDUCTORS - 4.6%
Advanced Micro Devices Inc. # 1,520 43,985
Applied Materials, Inc. # 1,880 238,173
Caliper Technology # 580 38,715
Epcos AG - Sponsored ADR # 1,650 122,925
Intel 14,750 1,214,109
KLA -Tencor Corp. # 600 66,825
LSI Logic Corp. # 810 54,675
Maxim Integrated Products Inc. # 1,100 51,906
Motorola, Inc. 3,600 530,100
STMicroelectronics NV 860 130,236
Texas Instruments Inc. 3,620 349,783
Xilinx Inc. # 2,360 107,306
2,948,738
The Flex-funds Annual Report * December 31, 1999 Page 22
<PAGE>
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
- -------------------------- ------ -----
ELECTRONIC COMPONENTS - 0.3%
Emerson Electric 3,674 210,796
ELECTRONICS - 0.1%
Rockwell International Corp. 840 40,215
Scientific Atlanta 680 37,995
78,210
FINANCE - 6.3%
Bank One Corp. 4,326 138,432
BankAmerica Corp. 10,214 512,615
Chase Manhattan Corp. 3,900 302,981
Equifax, Inc. 710 16,729
Fannie Mae 6,600 412,088
First Union Corp. 4,968 163,634
FleetBoston Financial Corp. 7,008 243,966
Freddie Mac 9,300 437,681
Lehman Brothers Holdings, Inc. 1,500 127,031
Mellon Bank Corp. 7,200 245,250
Merrill Lynch & Co. 800 66,650
Metris Cos., Inc. 10,000 356,875
Morgan Stanley Dean Witter & Co. 1,800 256,950
PNC Bank Corp. 3,100 137,950
Providian Financial Corp. 5,650 514,503
Ryder Systems, Inc. 310 7,576
SLM Holding Corp. 4,000 169,000
4,109,911
FINANCIAL SERVICES - 3.6%
American Express Co. 1,700 282,625
Associates First Capital 10,400 285,350
Avery Dennison Corp. 920 67,045
Capital One Financial Corp. 20,600 992,663
Citigroup Inc. 11,995 667,972
Concord EFS Inc. # 690 17,768
H&R Block, Inc. 1,370 59,938
2,373,361
FOOD -- DIVERSIFIED - 1.3%
General Mills 4,800 171,600
Hershey Food Corp. 2,700 128,081
Safeway Inc. # 3,300 117,975
Sara Lee Corp. 10,200 225,038
Sysco Corp. 5,700 225,506
868,200
FOREST PRODUCTS - 0.2%
Georgia Pacific Corp. 860 43,645
Weyerhauser Co. 1,120 80,430
Willamette Industries, Inc. 640 29,720
153,795
GOLD/SILVER MINING - 0.1%
Barrick Gold Corp. 2,090 36,967
HEALTH - 1.3%
American Home Products 5,820 228,435
Johnson & Johnson 6,910 644,358
872,793
Growth Stock Portfolio, continued on next page
The Flex-funds Annual Report * December 31, 1999 Page 23
<PAGE>
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
- -------------------------- ------ -----
Growth Stock Portfolio, continued
INSTRUMENTS -- CONTROLS - 0.0%
Johnson Controls Inc. 432 24,570
24,570
INSTRUMENTS -- SCIENTIFIC - 0.1%
PE Biosystems Group 380 45,719
INTERNET SERVICE - 0.5%
Yahoo, Inc. # 740 320,189
INSURANCE -- MULTILINE - 2.2%
Allstate 6,700 160,800
American International Group 10,543 1,139,962
PMI Group 3,300 161,081
1,461,843
MACHINERY - 0.3%
Caterpillar, Inc. 1,813 85,324
Deere & Co. 1,197 51,920
Dover Corp. 1,071 48,597
185,841
MANUFACTURING - 0.1%
Mueller Industries, Inc. # 1,150 41,688
Owens Illinois # 780 19,549
61,237
MARKETING SERVICES - 0.2%
Omnicom Group, Inc. 1,205 120,500
MATERIALS & SERVICES - 0.4%
Champion International Corp. 425 26,323
Dana Corp. 970 29,039
Ecolab, Inc. 1,970 77,076
Illinois Tool Works, Inc. 1,730 116,883
Sherwin-Williams Co. 1,070 22,470
271,791
MEDICAL PRODUCTS - 1.3%
Amgen, Inc. # 4,600 276,288
Biogen Inc.# 400 33,800
Guidant Corp. # 810 38,070
Human Genome # 890 135,836
IDEC Pharmaceuticals Corp. # 980 96,285
MedImmune, Inc. # 1,260 209,003
Millennium Pharmaceutical # 400 48,800
838,082
MEDICAL HMO - 0.0%
Wellpoint Health Networks # 390 25,716
MEDICAL SERVICES - 0.4%
Columbia/HCA Healthcare Corp. 2,410 70,643
Health Management # 5,120 68,480
IMS Health, Inc. 1,080 29,363
Shared Medical Systems 310 15,791
Tenet Healthcare Corp. # 2,230 52,405
236,682
MEDICAL SUPPLIES - 0.5%
Boston Scientific Co. # 1,200 26,250
Cardinal Health Inc 1,220 58,408
The Flex-funds Annual Report * December 31, 1999 Page 24
<PAGE>
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
- -------------------------- ------ -----
Medtronic, Inc. 6,970 253,969
338,627
MULTIMEDIA - 1.0%
Time Warner Inc. 6,300 456,356
Viacom Inc Class B # 3,000 181,313
637,669
NATURAL GAS DISTRIBUTOR - 0.3%
MCN Corp. 4,770 113,288
Williams Cos., Inc. 2,600 79,463
192,751
NETWORKING PRODUCTS - 2.9%
3COM Corp. # 980 46,060
Cisco Systems, Inc. # 16,860 1,806,128
Network Appliance # 840 69,773
1,921,961
OFFICE AUTOMATION & EQUIPMENT - 1.2%
Hewlett Packard 5,620 639,275
Pitney Bowes, Inc. 1,325 64,014
Xerox Corp. 2,180 49,595
752,884
OIL/GAS -- DOMESTIC - 0.8%
Atlantic Richfield 1,700 147,050
Baker Hughes 1,540 32,436
Burlington Resources 1,000 33,063
Devon Energy 1,200 39,450
Enron Corp. 3,000 133,125
Noble Affiliates Inc. 2,100 45,019
Noble Drilling Co. # 1,300 42,575
USX Marathon Group 2,800 69,125
541,843
OIL/GAS -- INTERNATIONAL - 2.7%
Chevron Corp. 3,200 277,200
Exxon Corp. 18,362 1,479,289
Transocean Sedco 621 20,913
1,777,402
OILFIELD SERVICES/EQUIPMENT - 0.6%
Coastal Corp. 1,900 67,331
Kerr-McGee Corp. 1,000 62,000
Schlumberger Ltd. 3,200 179,600
Smith International Inc. # 1,500 74,531
383,462
OIL & NATURAL GAS - 0.1%
Apache Corp. 1,200 44,325
Amerada Hess 500 28,375
Ocean Energy, Inc. # 10,160 78,740
151,440
PAPER & FOREST PRODUCTS - 0.2%
International Paper 2,185 123,316
Mead Corp. 840 36,488
159,804
Growth Stock Portfolio, continued on next page
The Flex-funds Annual Report * December 31, 1999 Page 25
<PAGE>
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
- -------------------------- ------ -----
Growth Stock Portfolio, continued
PETROLEUM -- INTEGRATED - 1.4%
Conoco, Inc. - Class B 4,500 111,938
Occidental Petroleum Corp. 3,600 77,850
Royal Dutch Petroleum 9,700 587,456
Texaco 3,100 168,369
945,613
PUBLISHING - 0.4%
The Reader's Digest Association, Inc. 9,500 277,875
RAILROAD TRANSPORTATION - 0.2%
Burlington Northern Santa Fe 2,005 48,621
Kansas City Southern Industries, Inc. 540 40,298
Union Pacific Corp. 765 33,421
122,340
RENTAL -- AUTO/EQUIPMENT - 0.4%
The Hertz Corp. 5,600 280,700
280,700
RESTAURANT - 0.7%
McDonalds Corp. 6,500 262,031
Wendy's International, Inc. 10,400 216,450
478,481
RETAIL GROCERY - 0.2%
Albertson's, Inc. 3,700 119,325
RETAIL STORE - 2.2%
Action Performance # 23,400 269,100
Amazon.Com # 500 38,063
Kmart # 40,000 402,500
PETsMART, Inc. # 30,000 172,500
WalMart Stores, Inc. 8,000 553,000
1,435,163
RUBBER/PLASTICS - 0.5%
Newell Rubbermaid Co. 10,700 310,300
S&L / THRIFTS -- SOUTHERN U.S. - 0.1%
Greater Atlantic Financial Corp. # 10,000 44,375
SERVICES - 0.1%
Paychex Inc. 1,675 67,000
STEEL - 0.0%
Nucor Corp. 410 22,473
TELECOMMUNICATION EQUIPMENT - 3.6%
General Instrument Corp. # 890 75,650
JDS Uniphase Corp. # 1,960 316,173
Loral Space & Communications Ltd. # 10,110 245,799
Metromedia Fiber Network Inc. - Class A # 3,880 185,998
Nokia Corp. - ADR - Class A 150 28,659
Nortel Networks 6,300 636,300
P-Com, Inc. # 8,760 77,471
QUALCOMM, Inc. # 3,280 577,690
Sprint Corp. PCS Group # 2,285 234,213
2,377,953
TELECOMMUNICATION SERVICES - 11.6%
AT&T Corp. 17,095 860,092
Bell Atlantic Corp. 8,590 528,822
BellSouth Corp. 10,980 514,001
The Flex-funds Annual Report * December 31, 1999 Page 26
<PAGE>
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
- -------------------------- ------ -----
CenturyTel, Inc. 1,730 81,959
Global Crossing LTD # 24,429 1,221,450
GTE Corp. 5,320 375,393
Lucent Technologies Inc. 14,700 1,102,500
MCI Worldcom, Inc. # 19,167 1,017,049
Nextel Communications # 2,630 271,219
Qwest Communications # 4,090 175,870
SBC Communications 17,674 861,608
Sprint Corp. FON Group 2,370 159,531
Teleglobe Inc. 5,720 129,773
Tellabs, Inc. # 1,590 102,058
U.S. West, Inc. 2,665 191,880
7,593,205
TOBACCO - 0.7%
Gallaher Group, PLC - ADR 11,400 175,275
Philip Morris Cos. 12,500 287,500
462,775
TOYS - 1.9%
Hasbro Bradley Inc. 9,450 179,550
JAKKS Pacific Co. # 7,600 142,025
Toys "R" Us Inc. # 64,000 916,000
1,237,575
TRANSPORTATION - 0.1%
FDX Corp. # 1,000 40,938
TRUCKING/TRANSPORTATION LEASING - 0.0%
CSX, Corp. 1,017 31,908
WATER UTILITY - 0.2%
Azurix Corp. # 16,095 143,849
TOTAL COMMON STOCKS
(Cost $43,996,840 ) 60,677,701
U.S. TREASURY OBLIGATIONS - 0.9%
U.S. Treasury Bills
** 4.30% 01/06/00 6,000 5,997
* 5.04% 03/09/00 600,000 594,112
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $600,285 ) 600,109
REPURCHASE AGREEMENT - 6.2%
Bank of America Securities LLC, 4.60%,
01/03/00, (Collateralized by $4,165,707
various commercial papers, 5.50%,
03/14/00 - 03/24 4,037,000 4,037,000
TOTAL REPURCHASE AGREEMENT
(Cost $4,037,000 ) 4,037,000
TOTAL INVESTMENTS - 100.0%
(Cost $48,634,125 ) $65,314,810
Growth Stock Portfolio, continued on next page
The Flex-funds Annual Report * December 31, 1999 Page 27
<PAGE>
Growth Stock Portfolio, continued
CONTRACTS VALUE
--------- -----
FUTURES CONTRACTS
Long, S&P 500 Futures, face amount 10 3,710,500
$3,610,500 expiring March 2000
$3,710,500
TRUSTEE DEFERRED COMPENSATION***
Flex-funds Highlands Growth Fund 483 10,771
Flex-funds Muirfield Fund 775 4,908
Flex-funds Total Return Utilities Fund 171 3,462
Flex-Partners International Equity Fund 377 6,458
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $24,138 ) $25,599
ADR: American Depositary Receipt
# Represents non-income producing securities.
* Pledged as collateral on futures contracts.
** Pledged as collateral on Letter of Credit.
*** Assets of affiliates to the Growth Stock Portfolio held for the
benefit of the Portfolio's Trustees in connection with the Trustee
Deferred Compensation Plan.
See accompanying notes to financial statements.
The Flex-funds Annual Report * December 31, 1999 Page 28
<PAGE>
BOND PORTFOLIO
Portfolio of Investments as of December 31, 1999
SHARES OR FACE
INDUSTRIES/CLASSIFICATIONS AMOUNT VALUE
-------------------------- ------ -----
U.S. GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS - 41.8%
Federal Farm Credit Bureau
5.56%, 01/18/00 3,400,000 $ 3,399,507
Federal National Mortgage Assoc.
5.69%, 08/11/00 1,740,000 1,733,572
* U.S. Treasury Bill
4.30%, 01/06/00 4,800 4,797
TOTAL U.S. GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,145,612 ) 5,137,876
VARIABLE RATE NOTES - 40.7%
Student Loan Marketing Assoc.
6.11%, 01/12/00 5,000,000 5,000,314
TOTAL VARIABLE RATE NOTE
(Cost 5,000,314 ) 5,000,314
REPURCHASE AGREEMENT - 17.5%
Bank of America Securities LLC,
4.60%, 01/03/00, (Collateralized by
$2,218,546 various commercial papers,
5.50%, 03/14/00 - 03/24/00, market
value - $2,193,021) 2,150,000 2,150,000
TOTAL REPURCHASE AGREEMENT
(Cost $2,150,000 ) 2,150,000
TOTAL INVESTMENTS - 100.0%
(Cost $12,295,926 ) 12,288,190
TRUSTEE DEFERRED COMPENSATION**
Flex-funds Highlands Growth Fund 232 5,178
Flex-funds Muirfield Fund 348 2,203
Flex-funds Total Return Utilities Fund 66 1,331
Flex-Partners International Equity Fund 185 3,166
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $11,060 ) $11,878
* Pledged as collateral on Letter of Credit.
** Assets of affiliates to the Bond Portfolio held for the benefit of the
Portfolio's Trustees in connection with the Trustee Deferred
Compensation Plan.
See accompanying notes to financial statements.
The Flex-funds Annual Report * December 31, 1999 Page 29
<PAGE>
<TABLE>
MONEY MARKET PORTFOLIO
Portfolio of Investments as of December 31, 1999
<CAPTION>
COUPON/YIELD MATURITY FACE AMOUNT AMORTIZED COST
--------------------- ----------- --------------
COMMERCIAL PAPER - 56.3%
<S> <C> <C> <C> <C>
Allied Signal, Inc. 5.69% 02/02/00 $50,000,000 $ 49,747,111
Archer Daniels Midland 5.62% 03/15/00 50,000,000 49,422,389
Bank of America 4.25% 01/03/00 20,000,000 19,995,278
CSW Credit, Inc. 5.70% 02/29/00 50,000,000 49,532,917
DPL, Inc.*** 5.95% 04/12/00 50,000,000 49,157,083
Duff & Phelps Utility & Corp.*** 5.97% 05/04/00 11,750,000 11,508,381
Duff & Phelps Utility & Corp.*** 5.80% 05/17/00 5,000,000 4,889,639
Eastman Kodak Co. 5.75% 01/26/00 50,000,000 49,800,347
Edison Asset Securities LLC*** 6.02% 02/16/00 30,000,000 29,769,233
Equilon Enterprises LLC 5.72% 02/23/00 10,000,000 9,915,789
Equilon Enterprises LLC 5.75% 02/16/00 20,000,000 19,853,055
Ford Motor Credit Co. 5.65% 01/12/00 50,000,000 49,913,680
FPL Group Capital, Inc.*** 5.70% 01/26/00 15,000,000 14,940,625
General Dynamics Corp.*** 5.92% 03/31/00 25,000,000 24,630,000
General Electric Capital Corp. 5.71% 06/14/00 30,000,000 29,214,875
General Motors Acceptance Corp. 5.71% 04/28/00 31,575,000 30,984,039
Johnson & Johnson 5.79% 07/05/00 25,000,000 24,252,125
J.P. Morgan & Co., Inc.*** 5.86% 04/14/00 29,841,000 29,335,825
Liberty Mutual Capital*** 5.80% 04/19/00 38,586,000 37,908,387
Mobil ESOP Trust*** 5.65% 02/29/00 25,000,000 24,768,507
Southern California Edison Co. 5.73% 02/11/00 10,000,000 9,934,742
TOTAL COMMERCIAL PAPER
(Cost$619,474,027 ) 619,474,027
CORPORATE OBLIGATIONS - 25.2%
Albertson's, Inc.*** 6.37% 06/01/00 1,500,000 1,502,370
American General Corp.*** 6.36% 06/30/00 2,000,000 2,003,987
American General Corp. 6.37% 06/15/00 275,000 275,392
Aquarium Holdings KY*** 6.50%* 01/06/00 15,108,000 15,108,000
Associates Corp., N.A. 7.44% 03/28/00 2,000,000 2,006,791
Associates Corp., N.A.*** 6.82% 05/22/00 1,500,000 1,504,306
Austin Printing Co., Inc.*** 6.80%* 01/06/00 2,515,000 2,515,000
Bank One Corp.*** 5.88% 06/21/00 40,000,000 40,000,000
Bath Technologies, Inc.*** 6.80%* 01/06/00 4,450,000 4,450,000
Bath Technologies, Inc.*** 6.83%* 01/06/00 1,480,000 1,480,000
Care Life Project*** 6.80% 01/06/00 3,600,000 3,600,000
Citigroup, Inc.*** 6.73% 05/15/00 3,400,000 3,409,584
Citigroup, Inc.*** 6.62% 06/01/00 500,000 500,648
Citigroup, Inc.*** 6.98% 05/15/00 250,000 250,885
Clark Grave Vault Co.*** 6.50%* 01/06/00 2,400,000 2,400,000
Coughlin Family Properties, Inc.*** 6.50%* 01/06/00 3,660,000 3,660,000
Damascus-Bishop Tire*** 6.80%* 01/06/00 3,500,000 3,500,000
Danis Construction Co.*** 6.50% 01/06/00 5,000,000 5,000,000
Doren, Inc.*** 6.80%* 01/06/00 300,000 300,000
E.I. du Pont de Nemours & Co. 9.07% 04/15/00 1,000,000 1,008,335
D.E.D.E. Realty*** 6.50%* 01/06/00 3,670,000 3,670,000
Espanola/Nambe*** 6.80%* 01/06/00 1,905,000 1,905,000
General Motors Acceptance Corp. 9.51% 05/15/00 10,000,000 10,123,135
General Motors Acceptance Corp.*** 6.88% 06/06/00 300,000 300,853
General Motors Acceptance Corp. 9.30% 04/01/00 370,000 372,814
General Motors Acceptance Corp.*** 6.63% 05/24/00 2,000,000 2,005,308
Goldman Sachs Group LP*** 5.29% 02/25/00 1,875,000 1,873,085
Gordon Flesch Co. Project*** 6.80%* 01/06/00 1,000,000 1,000,000
GTE Corp. 6.15%* 03/10/00 40,000,000 39,970,565
Hancor, Inc.*** 6.80%* 01/06/00 500,000 500,000
IBM Corp.*** 6.05% 08/07/00 3,000,000 2,996,121
IBM Corp.*** 8.94% 03/27/00 250,000 251,655
IBM Corp. 6.37% 06/15/00 1,000,000 1,001,094
Isaac Tire, Inc.*** 6.50%* 01/06/00 980,000 980,000
Jackson Tube Service, Inc.*** 6.50% 01/06/00 4,800,000 4,800,000
J.W. Harris Co., Inc.*** 6.50%* 01/06/00 2,100,000 2,100,000
Luken-Woodlawn LLC*** 6.50% 01/06/00 3,700,000 3,700,000
Merrill Lynch & Co.*** 6.34% 07/24/00 250,000 250,379
MetLife Insurance Co.*** 6.28% 03/21/00 20,000,000 20,000,000
Miami Valley Steel*** 6.80%* 01/06/00 2,050,000 2,050,000
Morgan Stanley Dean Witter & Co.*** 5.88% 04/24/00 5,000,000 4,995,924
Morgan Stanley Dean Witter & Co.*** 6.10% 02/11/00 9,000,000 8,999,158
Mubea Inc.*** 6.80% 01/06/00 3,125,000 3,125,000
Mubea Inc.*** 6.80%* 01/06/00 8,800,000 8,800,000
Nations Bank Corp. 5.39% 04/15/00 4,000,000 3,992,447
Norwest Financial, Inc.*** 7.11% 04/01/00 500,000 501,148
Osco Industries, Inc.*** 6.80%* 01/06/00 2,400,000 2,400,000
The Flex-funds Annual Report * December 31, 1999 Page 30
<PAGE>
COUPON/YIELD MATURITY FACE AMOUNT AMORTIZED COST
--------------------- ----------- --------------
O.K.I. Supply Co.*** 6.50%* 01/06/00 2,090,000 2,090,000
Presrite Corp.*** 6.80%* 01/06/00 1,530,000 1,530,000
Pro Tire, Inc.*** 6.50%* 01/06/00 1,175,000 1,175,000
RSD Technology*** 6.80%* 01/06/00 5,590,000 5,590,000
R.I. Lampus Co.*** 6.80%* 01/06/00 1,945,000 1,945,000
SBC Communications, Inc. 4.65% 05/01/00 7,730,000 7,692,448
Seariver Maritime, Inc. 5.80%* 02/01/00 6,000,000 6,000,000
SGS Tool Company*** 6.80%* 01/06/00 1,560,000 1,560,000
Firstar Corp.*** 6.74%* 05/01/00 4,000,000 4,007,790
Surgery Financing Co.*** 6.80%* 01/06/00 3,360,000 3,360,000
Surgery Financing Co.*** 6.80%* 01/06/00 3,000,000 3,000,000
TCI Communications, Inc. 7.37% 02/15/00 2,000,000 2,001,962
Wachovia Bank, N.A.*** 4.90% 01/10/00 2,000,000 1,999,660
White Castle Project*** 6.80%* 01/06/00 8,500,000 8,500,000
TOTAL CORPORATE OBLIGATIONS
(Cost $277,590,844 ) 277,590,844
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.2%
Federal Home Loan Bank 5.06% 06/09/00 25,000,000 25,000,000
Student Loan Martketing Assoc. 6.20% 03/09/00 10,000,000 9,999,801
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $34,999,801 ) 34,999,801
U.S. TREASURY OBLIGATIONS - 0.0%
** U.S. Treasury Bill 4.30% 01/06/00 63,100 63,063
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $63,063 ) 63,063
REPURCHASE AGREEMENTS - 15.3%
Banc of America Securities LLC, 4.60%,
01/03/00, (Collateralized by $59,916,222
various commercial papers, 5.50%,
03/14/00 - 03/24/00, market
value - $59,226,866) 4.60% 01/03/00 58,065,000 58,065,000
Salomon Smith Barney, Inc., 4.56%,
01/03/00, (Collateralized by $113,099,000
various commercial papers, 5.50% - 6.52%,
02/03/00 - 03/30/00, market value - $112,200,339) 4.56% 01/03/00 110,000,000 110,000,000
TOTAL REPURCHASE AGREEMENTS
(Cost $168,065,000 ) 168,065,000
TOTAL INVESTMENTS - 100.0%
(Cost$1,100,192,735) (a) $1,100,192,735
TRUSTEE DEFERRED COMPENSATION***** SHARES VALUE
Flex-funds Highlands Growth Fund 616 13,345
Flex-funds Muirfield Fund 1,141 7,252
Flex-funds Total Return Utilities Fund 287 5,818
Flex-Partners International Equity Fund 479 6,917
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $33,332 ) $33,332
<FN>
(a) Cost for federal income tax and financial reporting purposes are the
same.
ESOP: Employee Stock Option Plan
LLC: Limited Liability Company
* Variable rate security. Interest rate is as of December 31, 1999.
Maturity date reflects the next rate change date.
** Pledged as collateral on Letter of Credit.
*** Security is restricted as to resale to institutional investors, but
has been deemed liquid in accordance with guidelines approved by the
Board of Trustees.
**** Illiquid security. The sale or disposition of such security would not
be possible in the ordinary course of business within seven days at
approximately the value at which the Fund has valued the security.
Currently, only 1.8% of the Funds's total investments constitute an
illiquid security.
***** Assets of affiliates to the Money Market Portfolio held for the
benefit of the Portfolio's Trustees in connection with the Trustee
Deferred Compensation Plan.
</FN>
</TABLE>
See accompanying notes to financial statements.
The Flex-funds Annual Report * December 31, 1999 Page 31
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
U.S.
TOTAL RETURN HIGHLANDS GOVERNMENT MONEY
MUIRFIELD UTILITIES GROWTH BOND MARKET
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Assets:
Investment in corresponding portfolio $155,813,166 $13,804,393 $52,869,820 $12,426,703 $231,998,650
at value
Receivable for capital stock issued 2,702,313 309,222 316,431 295 ---
Receivable from investment adviser --- --- --- --- 10,717
Unamortized organization costs --- 2,272 --- --- ---
Other assets 23,424 19,181 27,053 8,071 82,080
Total Assets 158,538,903 14,135,068 53,213,304 12,435,069 232,091,447
Liabilities:
Payable for capital stock redeemed 2,512,153 220,013 57,438 1,000 ---
Dividends payable 8,337 1,247 --- 2,601 4,953
Accrued 12b-1 distribution fees 167,384 --- 56,854 5,895 46,307
Accrued transfer agent and administrative fees 17,676 1,445 6,574 1,175 12,968
Other accrued liabilities 6,286 19,027 5,518 2,235 3,986
Total Liabilities 2,711,836 241,732 126,384 12,906 68,214
Net Assets 155,827,067 13,893,336 53,086,920 12,422,163 232,023,233
Net Assets:
Capital 134,723,980 11,457,627 39,110,894 12,754,478 232,023,233
Accumulated undistributed (distributions in
excess of) net investment income 2,355,173 (15) 1,910 1,574 ---
Accumulated undistributed net realized
gain (loss) from investments 2,345,762 784,036 (281,610) (326,155) ---
Net unrealized appreciation (depreciation) 16,402,152 1,651,688 14,255,726 (7,734) ---
of investments
Net Assets $155,827,067 $13,893,336 $53,086,920 $12,422,163 $232,023,233
Capital Stock Outstanding 24,668,078 683,005 2,372,688 582,325 232,023,233
(indefinite number of shares authorized,
$0.10 par value)
Net Asset Value, Offering and
Redemption Price Per Share $6.32 $20.34 $22.37 $21.33 $1.00
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 32
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
U.S.
TOTAL RETURN HIGHLANDS GOVERNMENT MONEY
MUIRFIELD UTILITIES GROWTH BOND MARKET
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Net Investment Income from Corresponding
Portfolio:
Interest $3,347,890 $23,391 $232,263 $604,256 $11,431,569
Dividends 174,648 348,140 511,352 --- ---
Expenses net of waivers and/or (1,192,313) (152,356) (556,885) (64,352) (395,142)
reimbursements
Total Net Investment Income from 2,330,225 219,175 186,730 539,904 11,036,427
Corresponding Portfolio
Fund Expenses:
Administrative fee 69,173 5,668 24,202 5,930 108,060
Transfer agent fees 138,346 11,335 48,404 7,306 128,480
Audit fees 2,032 2,023 2,028 2,015 3,547
Legal fees 1,949 916 3,339 1,009 1,422
Printing 19,205 2,752 12,740 2,555 38,262
Amortization of organizational costs --- 5,022 --- --- ---
Distribution plan 215,037 28,338 75,394 23,721 172,895
Postage 14,656 3,438 13,590 2,753 25,425
Registration and filing fees 18,412 12,572 18,548 7,978 39,235
Insurance 1,042 120 365 90 1,762
Other expenses 5,342 1,678 5,209 732 3,706
Total Expenses 485,194 73,862 203,819 54,089 522,794
Expenses reimbursed by investment adviser --- (22,160) --- --- (40,270)
Net Expenses 485,194 51,702 203,819 54,089 482,524
NET INVESTMENT INCOME (LOSS) 1,845,031 167,473 (17,089) 485,815 10,553,903
NET REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
Net realized (losses) from futures (5,082,679) --- 200,007 --- ---
contracts
Net realized gains (losses) from 29,354,637 2,604,826 5,084,103 (476,420) ---
investments
Net change in unrealized appreciation
(depreciation) of investments (5,000,347) (862,933) 4,100,217 48,124 ---
NET GAIN (LOSS) FROM INVESTMENTS 19,271,611 1,741,893 9,384,327 (428,296) ---
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $21,116,642 $1,909,366 $9,367,238 $57,519 $10,553,903
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 33
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
U.S.
TOTAL RETURN HIGHLANDS GOVERNMENT MONEY
MUIRFIELD UTILITIES GROWTH BOND MARKET
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $1,845,031 $167,473 ($17,089) $485,815 $10,553,903
Net realized gain (loss) from
investments and futures contracts 24,271,958 2,604,826 5,284,110 (476,420) ---
Net change in unrealized appreciation
(depreciation) of investments (5,000,347) (862,933) 4,100,217 48,124 ---
Net increase in net assets
resulting from operations 21,116,642 1,909,366 9,367,238 57,519 10,553,903
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (1,844,594) (167,473) --- (485,815) (10,553,903)
In excess of net investment income --- --- --- --- ---
Net realized gain from investments
and futures contracts (26,315,111) (1,461,849) (6,597,219) --- ---
Net decrease in net assets resulting
from dividends and distributions (28,159,705) (1,629,322) (6,597,219) (485,815) (10,553,903)
CAPITAL TRANSACTIONS:
Issued 51,902,553 7,241,515 91,122,133 2,790,040 621,768,406
Reinvested 28,024,910 1,551,863 6,553,604 458,067 10,405,355
Redeemed (42,604,626) (5,634,736) (91,266,580) (1,691,655) (554,405,825)
Net increase in net assets resulting
from capital share transactions 37,322,837 3,158,642 6,409,157 1,556,452 77,767,936
TOTAL INCREASE IN NET ASSETS 30,279,774 3,438,686 9,179,176 1,128,156 77,767,936
NET ASSETS - Beginning of period 125,547,293 10,454,650 43,907,744 11,294,007 154,255,297
NET ASSETS - End of period $155,827,067 $13,893,336 $53,086,920 $12,422,163 $232,023,233
SHARE TRANSACTIONS:
Issued 7,800,886 331,544 3,995,692 129,747 621,768,406
Reinvested 4,779,728 76,776 304,498 21,351 10,405,355
Redeemed (6,156,981) (275,164) (3,995,764) (78,890) (554,405,825)
Change in shares 6,423,633 133,156 304,426 72,208 77,767,936
</TABLE>
See accompanying notes to financial statements
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
U.S.
TOTAL RETURN HIGHLANDS GOVERNMENT MONEY
MUIRFIELD UTILITIES GROWTH BOND MARKET
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $1,435,207 $134,250 $129,094 $576,536 $8,867,836
Net realized gain (loss) from investments
and futures contracts 7,320,005 (358,953) 4,292,178 1,102,589 ---
Net change in unrealized appreciation
(depreciation) of investments 21,404,554 838,039 4,287,738 (591,216) ---
Net increase in net assets
resulting from operations 30,159,766 613,336 8,709,010 1,087,909 8,867,836
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,433,944) (134,265) (128,963) (576,536) (8,867,836)
Net realized gain from investments
and futures contracts (1,907,816) --- (3,152,482) (37,210) ---
Net decrease in net assets resulting
from dividends and distributions (3,341,760) (134,265) (3,281,445) (613,746) (8,867,836)
CAPITAL TRANSACTIONS:
Issued 21,967,180 5,724,377 64,413,686 2,306,810 478,112,579
Reinvested 3,296,460 131,606 3,254,744 576,374 8,641,621
Redeemed (57,316,946) (4,285,392) (62,940,124) (9,036,259) (501,833,777)
Net increase (decrease) in net assets resulting
from capital share transactions (32,053,306) 1,570,591 4,728,306 (6,153,075) (15,079,577)
TOTAL INCREASE (DECREASE) IN NET ASSETS (5,235,300) 2,049,662 10,155,871 (5,678,912) (15,079,577)
NET ASSETS - Beginning of period 130,782,593 8,404,988 33,751,873 16,972,919 169,334,874
NET ASSETS - End of period $125,547,293 $10,454,650 $43,907,744 $11,294,007 $154,255,297
SHARE TRANSACTIONS:
Issued 3,737,873 309,337 3,158,058 106,049 478,112,579
Reinvested 521,019 7,373 153,489 26,662 8,641,621
Redeemed (9,925,681) (241,126) (3,062,778) (423,756) (501,833,777)
Change in shares (5,666,789) 75,584 248,769 (291,045) (15,079,577)
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 34
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE MUIRFIELD FUND
Years Ended December 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $6.88 $5.47 $5.47 $5.73 $5.34
Income from Investment Operations
Net Investment Income 0.09 0.08 0.11 0.10 0.06
Net Gains or Losses from Securities
(both realized and unrealized) 0.89 1.51 0.91 0.25 1.31
Total From Investment Operations 0.98 1.59 1.02 0.35 1.37
Less Distributions
Dividends (from net investment income) (0.09) (0.08) (0.11) (0.10) (0.06)
Distributions (from capital gains) (1.45) (0.10) (0.91) (0.51) (0.92)
Total Distributions (1.54) (0.18) (1.02) (0.61) (0.98)
Net Asset Value, End of Period $6.32 $6.88 $5.47 $5.47 $5.73
Total Return 16.43% 29.33% 18.59% 5.99% 25.82%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $155,827 $125,547 $130,783 $121,335 $111,751
Ratio of Expenses to Average Net Assets 1.21% 1.24% 1.29% 1.19% 1.26%
Ratio of Net Investment Income to
Average Net Assets 1.33% 1.23% 1.69% 1.54% 0.97%
Portfolio Turnover Rate1 787.66% 128.31% 395.42% 297.41% 186.13%
<FN>
1 Turnover rate of corresponding portfolio
</FN>
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 35
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE TOTAL RETURN UTILITIES FUND
Years Ended December 31, Period
--------------------------------------------------------- June 21, 1995*
1999 1998 1997 1996 to Dec. 31, 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $19.01 $17.72 $14.98 $14.14 $12.50
Income from Investment Operations
Net Investment Income 0.30 0.25 0.25 0.37 0.21
Net Gains or Losses from Securities
(both realized and unrealized) 3.45 1.29 3.99 1.48 1.64
Total From Investment Operations 3.75 1.54 4.24 1.85 1.85
Less Distributions
Dividends (from net investment income) (0.30) (0.25) (0.25) (0.37) (0.21)
Distributions (from capital gains) (2.12) --- (1.25) (0.64) --
Total Distributions (2.42) (0.25) (1.50) (1.01) (0.21)
Net Asset Value, End of Period $20.34 $19.01 $17.72 $14.98 $14.14
Total Return 20.01% 8.77% 28.68% 13.33% 15.00%(1)
Ratios/Supplemental Data
Net Assets, End of Period ($000) $13,893 $10,455 $8,405 $5,074 $2,881
Ratio of Expenses to Average Net Assets 1.80% 1.80% 1.80% 1.25% 1.25%(2)
Ratio of Net Investment Income to
Average Net Assets 1.48% 1.35% 1.57% 2.55% 3.18%(2)
Ratio of Expenses to Average Net Assets,
before waiver of fees(3) 1.99% 2.11% 2.51% 2.95% 4.35%(2)
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(3) 1.29% 1.04% 0.86% 0.85% 0.08%(2)
Portfolio Turnover Rate(4) 69.20% 51.36% 41.22% 50.79% 5.06%
<FN>
(1) Not Annualized.
(2) Annualized.
(3) Annualized ratio includes directed brokerage payments in corresponding
portfolio.
(4) Turnover rate of corresponding portfolio.
* Date of commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 36
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE HIGHLANDS GROWTH FUND
Years Ended December 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.23 $18.55 $16.41 $15.34 $13.08
Income from Investment Operations
Net Investment Income (0.01) 0.06 0.06 0.31 0.50
Net Gains or Losses from Securities
(both realized and unrealized) 4.37 4.32 4.73 1.07 2.68
Total From Investment Operations 4.36 4.38 4.79 1.38 3.18
Less Distributions
Dividends (from net investment income) --- (0.06) (0.06) (0.31) (0.50)
Distributions (from capital gains) (3.22) (1.64) (2.59) -- (0.42)
Total Distributions (3.22) (1.70) (2.65) (0.31) (0.92)
Net Asset Value, End of Period $22.37 $21.23 $18.55 $16.41 $15.34
Total Return 21.16% 23.67% 29.28% 9.08% 24.61%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $53,087 $43,908 $33,752 $24,204 $24,631
Ratio of Expenses to Average Net Assets 1.56% 1.69% 1.87% 1.65% 1.64%
Ratio of Net Investment Income to
Average Net Assets -0.04% 0.31% 0.30% 1.92% 3.38%
Ratio of Expenses to Average Net Assets
before waiver of fees(1) 1.57% 1.70% 1.87% 1.65% 1.64%
Ratio of Net Investment Income to Average
Net Assets(1) -0.05% 0.30% 0.30% 1.92% 3.38%
Portfolio Turnover Rate(2) 51.22% 79.98% 129.79% 81.66% 337.57%
<FN>
1 Ratio includes fees waived and/or directed brokerage payments received in
corresponding portfolio
2 Represents turnover rate of corresponding portfolio
</FN>
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 37
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE U.S. GOVERNMENT BOND FUND
Years Ended December 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $22.14 $21.19 $20.64 $21.58 $19.25
Income from Investment Operations
Net Investment Income 0.88 0.97 0.99 0.96 1.11
Net Gains or Losses from Securities
(both realized and unrealized) (0.81) 1.02 0.55 (0.94) 2.33
Total From Investment Operations 0.07 1.99 1.54 0.02 3.44
Less Distributions and Dividends
From net investment income (0.88) (0.97) (0.99) (0.96) (1.11)
From net realized gains --- (0.07) -- -- --
Total Distributions (0.88) (1.04) (0.99) (0.96) (1.11)
Net Asset Value, End of Period $21.33 $22.14 $21.19 $20.64 $21.58
Total Return 0.35% 9.62% 7.70% 0.15% 18.32%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $12,422 $11,294 $16,973 $17,783 $16,048
Ratio of Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income to
Average Net Assets 4.10% 4.52% 4.85% 4.61% 5.41%
Ratio of Expenses to Average Net Assets,
before waiver of fees(1) 1.18% 1.16% 1.14% 1.06% 1.14%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 3.92% 4.36% 4.71% 4.55% 5.27%
Portfolio Turnover Rate(2) 352.23% 225.11% 375.64% 778.59% 232.34%
<FN>
(1) Ratio includes fees waived in corresponding portfolio
(2) Represents turnover rate of corresponding portfolio
</FN>
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 38
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
MONEY MARKET FUND
Years Ended December 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
Net Investment Income 0.049 0.052 0.053 0.05 0.06
Total From Investment Operations 0.049 0.052 0.053 0.05 0.06
Less Distributions
Dividends (from net investment income) (0.049) (0.052) (0.053) (0.05) (0.06)
Total Distributions (0.049) (0.052) (0.053) (0.05) (0.06)
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
Total Return 4.96% 5.31% 5.38% 5.27% 5.85%
Ratios/Supplemental Data
Net Assets, End of Period ($000) $232,023 $154,255 $169,335 $119,947 $141,087
Ratio of Expenses to Average Net Assets 0.41% 0.40% 0.40% 0.40% 0.40%
Ratio of Net Investment Income to
Average Net Assets 4.88% 5.19% 5.26% 5.15% 5.70%
Ratio of Expenses to Average Net Assets,
before waiver of fees(1) 0.54% 0.59% 0.59% 0.58% 0.64%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 4.75% 5.00% 5.07% 4.97% 5.46%
<FN>
(1) Ratio includes fees waived in corresponding portfolio
</FN>
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 39
<PAGE>
THE FLEX-FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 Total Return Utilities Fund, The Highlands Growth Fund (formerly The
Growth 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, 1999
- ---- --------- -----------------
The Muirfield Fund Mutual Fund Portfolio 87%
The Total Return Utilities Fund Utilities Stock Portfolio 76%
The Highlands Growth Fund Growth Stock Portfolio 81%
The U.S. Government Bond Fund Bond Portfolio 100%
The Money Market Fund Money Market Portfolio 21%
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 POLICIES
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.
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. Accordingly, timing differences relating to shareholder
distributions are reflected in the components of net assets and permanent book
and tax differences relating to shareholder distributions have been reclassified
to capital.
The Flex-funds Annual Report * December 31, 1999 Page 40
<PAGE>
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.
INVESTMENT INCOME & EXPENSES
The Funds record daily their proportionate share of the Portfolios' income,
expenses, and realized and unrealized gains and losses. In addition, the Funds
accrue their own 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.
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, Miller/Howard Investments, Inc. and Sector Capital
Management, Inc. serve as subadvisor of the Utilities Stock Portfolio and the
Growth 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 Total Return Utilities Fund
and The Highlands Growth 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.
RMA has voluntarily agreed to reimburse The Total Return Utilities Fund and The
Money Market Fund for the amount by which annual expenses of such Funds
including expenses allocated from the respective Portfolio (excluding interest,
taxes, brokerage fees, and extraordinary expenses) exceed 1.80% and 0.41% of
average daily net assets of The Total Return Utilities Fund and The Money Market
Fund, respectively. Prior to April 28, 1999, The Money Market Fund's annual
expense limitation had been 0.40% of average daily net assets. Such
reimbursement is limited to the total of fees charged to the Fund by RMA and
MFSCo.
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 except for The Total Return Utilities
Fund which is 0.25% of average daily net assets.
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 TAX INFORMATION (Unaudited)
At December 31, 1999, The U.S. Government Bond Fund had unused capital loss
carryforwards of $476,420 available to offset future gains, if any, for Federal
income tax purposes. The capital loss carryforward expires in 2007. During the
year ended December 31, 1999, the Funds declared long-term capital distributions
in the following amounts:
AMOUNT
------
The Muirfield Fund $3,662,528
The Total Return Utilities Fund 1,352,508
The Highlands Growth Fund 2,615,786
The Flex-funds Annual Report * December 31, 1999 Page 41
<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, The Total Return Utilities Fund, The U.S. Government Bond Fund, and The
Money Market Fund), as of December 31, 1999, 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 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, 1999, and
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 LLP
Columbus, Ohio
February 11, 2000
The Flex-funds Annual Report * December 31, 1999 Page 42
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MUTUAL UTILITIES GROWTH MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at market value* $169,532,821 $18,635,935 $61,277,810 $10,138,195 $932,127,735
Repurchase agreements, at cost* 8,976,000 --- 4,037,000 2,150,000 168,065,000
Trustee deferred compensation investments, 67,016 11,882 25,599 11,878 33,332
at market value
Cash 699 --- 556 328 5
Receivable for securities sold --- 695,684 --- --- ---
Receivable for net variation margin on futures --- --- 8,500 --- ---
contracts
Receivable from corresponding Fund --- --- --- --- 1,812,035
Interest and dividend receivable 168,932 45,025 43,604 151,233 4,430,043
Prepaid/Other assets 667 1,954 630 1,767 53,454
Total Assets 178,746,135 19,390,480 65,393,699 12,453,401 1,106,521,604
Liabilities:
Payable for securities purchased --- --- 64,139 --- 2,106,643
Payable for Trustee Deferred Compensation Plan 67,016 11,882 25,599 11,878 33,332
Payable to custodian for cash overdraft --- 1,292,032 --- --- ---
Payable to investment adviser 110,669 17,541 51,743 470 147,543
Accrued audit fees 12,952 13,984 14,813 10,973 12,014
Accrued custodian fees 2,531 958 8,237 917 11,291
Accrued trustee fees 4,988 --- 6,307 --- ---
Accrued fund accounting fees 4,737 2,198 3,690 1,527 13,011
Other accrued liabilities 2,148 792 1,699 778 1,168
Total Liabilities 205,041 1,339,387 176,227 26,543 2,325,002
Net Assets $178,541,094 $18,051,093 $65,217,472 $12,426,858$1,104,196,602
Net Assets:
Capital 161,236,113 15,979,753 48,528,287 12,434,589 1,104,196,602
Net unrealized appreciation (depreciation) of 17,304,981 2,071,340 16,689,185 (7,731) ---
investments
Net Assets $178,541,094 $18,051,093 $65,217,472 $12,426,858 1,104,196,602
*Securities at cost $161,203,840 $16,564,595 $48,634,125 $12,295,926 1,104,196,602
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 43
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
MUTUAL UTILITIES GROWTH MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
Interest $3,795,724 $32,181 $285,463 $604,264 $62,084,195
Dividends 197,740 459,721 627,091 --- ---
Total Investment Income 3,993,464 491,902 912,554 604,264 62,084,195
Expenses:
Investment advisory fees 1,214,387 149,369 570,139 47,278 3,103,028
Accounting fees 52,656 19,937 40,870 16,820 155,121
Trustees fees and expenses 47,730 8,682 27,375 6,670 29,340
Audit fees 12,967 13,999 14,827 10,156 12,036
Custodian fees 12,095 3,310 27,806 2,999 78,426
Other expenses 8,715 6,292 6,868 761 7,474
Legal fees 448 372 971 1,296 958
Insurance 193 85 109 264 101,408
Total Expenses 1,349,191 202,046 688,965 86,244 3,487,791
Investment advisory fees waived --- --- --- (21,890) (1,331,007)
Directed brokerage payments received --- --- (6,058) --- ---
Total Net Expenses 1,349,191 202,046 682,907 64,354 2,156,784
NET INVESTMENT INCOME 2,644,273 289,856 229,647 539,910 59,927,411
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
Net realized gain (loss) from futures (5,791,888) --- 245,618 --- ---
contracts
Net realized gain (loss) from investments 33,288,636 3,637,703 5,094,690 (476,427) ---
Net change in unrealized appreciation
(depreciation) of investments (5,909,917) (1,322,044) 6,025,737 48,130 ---
NET GAIN (LOSS) ON INVESTMENTS 21,586,831 2,315,659 11,366,045 (428,297) ---
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $24,231,104 $2,605,515 $11,595,692 $111,613 $59,927,411
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 44
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
MUTUAL UTILITIES GROWTH MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $2,644,273 $289,856 $229,647 $539,910 $59,927,411
Net realized gain (loss) from investments
and futures contracts 27,496,748 3,637,703 5,340,308 (476,427) ---
Net change in unrealized appreciation
(depreciation) of investments (5,909,917) (1,322,044) 6,025,737 48,130 ---
Net increase in net assets
resulting from operations 24,231,104 2,605,515 11,595,692 111,613 59,927,411
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 67,402,736 11,399,891 105,405,498 2,870,096 6,273,721,231
Withdrawals (53,900,433) (9,173,858) (102,951,461) (1,550,472)(6,027,721,363)
Net increase in net assets resulting from
transactions of investors' beneficial interests 13,502,303 2,226,033 2,454,037 1,319,624 245,999,868
TOTAL INCREASE IN NET ASSETS 37,733,407 4,831,548 14,049,729 1,431,237 305,927,279
NET ASSETS - Beginning of period 140,807,687 13,219,545 51,167,743 10,995,621 798,269,323
NET ASSETS - End of period $178,541,094 $18,051,093 $65,217,472 $12,426,858 $1,104,196,602
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL UTILITIES GROWTH MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $2,040,969 $218,745 $335,278 $631,782 $40,566,858
Net realized gain (loss) from investments
and futures contracts 8,222,183 (364,390) 4,583,800 1,102,605 ---
Net change in unrealized appreciation
(depreciation) of investments 23,909,375 1,126,399 4,790,713 (591,219) ---
Net increase in net assets
resulting from operations 34,172,527 980,754 9,709,791 1,143,168 40,566,858
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 21,876,913 6,977,776 74,136,798 2,292,244 3,894,846,315
Withdrawals (59,774,446) (5,408,703) (66,072,809) (9,348,465)(3,724,162,497)
Net increase (decrease) in net assets
resulting from transactions of investors'
beneficial interests (37,897,533) 1,569,073 8,063,989 (7,056,221) 170,683,818
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,725,006) 2,549,827 17,773,780 (5,913,053) 211,250,676
NET ASSETS - Beginning of period 144,532,693 10,669,718 33,393,963 16,908,674 587,018,647
NET ASSETS - End of period $140,807,687 $13,219,545 $51,167,743 $10,995,621 $798,269,323
See accompanying notes to financial statements
</TABLE>
The Flex-funds Annual Report * December 31, 1999 Page 45
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
MUTUAL FUND PORTFOLIO
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $178,541 $140,808 $144,533 $135,540 $122,109
Ratio of Expenses to Average Net Assets 0.86% 0.91% 0.89% 0.87% 0.95%
Ratio of Net Investment Income to
Average Net Assets 1.69% 1.56% 2.08% 1.86% 1.26%
Portfolio Turnover Rate 787.66% 128.31% 395.42% 297.41% 186.13%
</TABLE>
<TABLE>
UTILITIES STOCK PORTFOLIO
<CAPTION>
Period from
Year Ended December 31, June 21, 1995* to
1999 1998 1997 1996 December 31, 1995
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $18,051 $13,220 $10,670 $7,964 $4,291
Ratio of Expenses to Average Net Assets 1.35% 1.44% 1.60% 1.61% 2.32%(1)
Ratio of Net Investment Income to
Average Net Assets 1.94% 1.73% 1.79% 2.24% 2.09%(1)
Ratio of Expenses to Average Net Assets
before directed brokerage payments 1.35% 1.46% 1.65% 1.66% 2.40%(1)
Ratio of Net Investment Income to Average Net
Assets before directed brokerage payments 1.94% 1.71% 1.74% 2.19% 2.01%(1)
Portfolio Turnover Rate 69.20% 51.36% 41.22% 50.79% 5.06%
<FN>
(1) Annualized
* Date of commencement of operations
</FN>
</TABLE>
<TABLE>
GROWTH STOCK PORTFOLIO
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $65,217 $51,168 $33,394 $24,414 $24,537
Ratio of Expenses to Average Net Assets 1.15% 1.25% 1.34% 1.24% 1.25%
Ratio of Net Investment Income to
Average Net Assets 0.39% 0.77% 0.83% 2.33% 3.78%
Ratio of Expenses to Average Net Assets
before waiver of fees 1.16% 1.26% 1.34% 1.24% 1.25%
Ratio of Net Investment Income to Average
Net Assets before waiver of fees 0.38% 0.76% 0.83% 2.33% 3.78%
Portfolio Turnover Rate 51.22% 79.98% 129.79% 81.66% 337.57%
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 46
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
BOND PORTFOLIO
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $12,427 $10,996 $15,274 $17,792 $16,066
Ratio of Expenses to Average Net Assets 0.54% 0.57% 0.57% 0.61% 0.57%
Ratio of Net Investment Income to
Average Net Assets 4.57% 4.97% 5.27% 4.99% 5.82%
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.73% 0.73% 0.71% 0.68% 0.71%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 4.38% 4.81% 5.13% 4.92% 5.68%
Portfolio Turnover Rate 352.23% 225.11% 375.64% 778.59% 232.34%
</TABLE>
<TABLE>
MONEY MARKET PORTFOLIO
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $1,104,197 $798,269 $587,019 $352,930 $256,126
Ratio of Expenses to Average Net Assets 0.18% 0.18% 0.18% 0.19% 0.21%
Ratio of Net Investment Income to
Average Net Assets 5.07% 5.39% 5.47% 5.34% 5.87%
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.30% 0.30% 0.31% 0.33% 0.37%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 4.95% 5.27% 5.34% 5.20% 5.70%
</TABLE>
See accompanying notes to financial statements
The Flex-funds Annual Report * December 31, 1999 Page 47
<PAGE>
MUTUAL FUND PORTFOLIO, UTILITIES STOCK PORTFOLIO, GROWTH STOCK PORTFOLIO,
BOND PORTFOLIO, MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 an open-ended 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 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 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 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 POLICIES
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.
The Flex-funds Annual Report * December 31, 1999 Page 48
<PAGE>
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.
DEFERRED TRUSTEE COMPENSATION
Under a Deferred Compensation Plan (the "Plan") non-interested Trustees may
elect to defer receipt of a portion of their annual compensation. Under the
Plan, deferred amounts are invested in the shares of the Flex-funds and
Flex-Partners Funds. Deferred amounts remain in the Portfolios until distributed
in accordance with the Plan.
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 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, 1999 the Portfolios had the following
activity in futures contracts:
Long contracts Number of contracts Notional amount
Mutual Fund Portfolio:
Outstanding, beginning of year 20 $6,274,000
Contracts opened 1,052 23,319,887
Contracts closed (1,072) (29,593,887)
Outstanding, end of period --- $---
Growth Stock Portfolio:
Outstanding, beginning of year 7 $2,055,875
Contracts opened 324 107,321,562
Contracts closed (321) (105,766,937)
Outstanding, end of period 10 $3,610,500
The Flex-funds Annual Report * December 31, 1999 Page 49
<PAGE>
LETTER OF CREDIT
Each Portfolio has pledged as collateral a U.S. Government Security, cash or
other high-grade debt security solely for the benefit of ICI Mutual Insurance
Co. for the Portfolios' fidelity bond coverage.
INCOME TAXES
The Portfolios will be treated as a partnership for Federal income tax purposes.
As such, each investor in the Portfolios will be subject to taxation on its
share of the Portfolios' ordinary income and capital gains. 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.
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, Miller/Howard Investments, Inc. and Sector Capital
Management, Inc. serve as subadvisor of the Utilities Stock Portfolio and Growth
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, Utilities Stock Portfolio, and Growth 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. As subadviser to the Utilities Stock
Portfolio, Miller/Howard Investments, Inc. is paid 0.00% of the 1.00% of average
daily net assets up to $10 million, 0.40% of the 1.00% of average daily net
assets exceeding $10 million up to $50 million, 0.40% of the 0.75% of average
daily net assets net assets exceeding $50 million up to $60 million, 0.30% of
the 0.75% of average daily net assets exceeding $60 million up to $100 million
and 0.25% of the 0.60% of average daily net assets exceeding $100 million. As
subadviser to the Growth Stock Portfolio, Sector Capital Management, Inc. is
paid 0.30% of the 1.00% of average daily net assets up to $25 million, 0.70% of
the 1.00% of average daily net assets exceeding $25 million up to $50 million,
0.40% of the 0.75% of average daily net assets exceeding $50 million up to $100
million and 0.35% of the 0.60% of average daily net assets exceeding $100
million. Sector Capital Management, Inc. pays all sub-subadvisers 0.25% on all
average net assets. 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, 1999, RMA voluntarily waived a portion of its investment advisory
fees in the Money Market and Bond 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.
The Flex-funds Annual Report * December 31, 1999 Page 50
<PAGE>
4. SECURITIES TRANSACTIONS
For the year ended December 31, 1999, 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 $673,341,588 $671,730,867
Utilities Stock Portfolio 12,829,792 9,928,610
Growth Stock Portfolio 28,470,710 27,440,601
Bond Portfolio 11,305,884 19,953,093
As of December 31, 1999, the aggregate cost basis of investments and unrealized
appreciation (depreciation) for Federal income tax purposes was as follows:
NET UNREALIZED
COST BASIS UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO OF INVESTMENTS APPRECIATION DEPRECIATION (DEPRECIATION)
- --------- -------------- ------------ ------------ --------------
Mutual Fund Portfolio $161,988,907 $17,305,018 ($785,104) $16,519,914
Utilities Stock Portfolio 16,742,303 3,217,376 (1,323,744) 1,893,632
Growth Stock Portfolio 48,859,539 19,887,220 (3,423,449) 16,463,771
Bond Portfolio 12,295,926 --- (7,731) (7,731)
Money Market Portfolio 1,100,192,735 --- --- ---
The Flex-funds Annual Report * December 31, 1999 Page 51
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of the
Mutual Fund Portfolio, Utilities Stock Portfolio, Growth Stock
Portfolio, Bond Portfolio and Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of the
Mutual Fund Portfolio, Utilities Stock Portfolio, Growth Stock Portfolio, Bond
Portfolio and Money Market Portfolio (Portfolios), including the portfolios of
investments, as of December 31, 1999, 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, 1999, 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 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, 1999, 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 LLP
Columbus, Ohio
February 11, 2000
The Flex-funds Annual Report * December 31, 1999 Page 52
<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
James Didion
Charles Donabedian
Robert S. Meeder, Sr.
Robert S. Meeder, Jr.
Jack Nicklaus II
Walter L. Ogle
Philip A. Voelker
CUSTODIAN
Firstar Bank, N.A. Cincinnati
Cincinnati, Ohio 45201
TRANSFER AGENT DIVIDEND DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, Ohio 43017
AUDITORS
KPMG LLP
Columbus, Ohio 43215
<PAGE>
THE FLEX-FUNDS
R. Meeder & Associates, Investment Manager
P.O. Box 7177, Dublin, OH 43017
