<PAGE> 1
As filed with the Securities and Exchange Commission on April 22, 1996.
File No. 811-6648
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 5
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
BOND PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
P.O. Box 7177, 6000 Memorial Drive
Dublin, Ohio 43017
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 614-766-7000
Donald F. Meeder, P.O. Box 7177, 6000 Memorial Drive, Dublin, OH 43017
(Name and Address of Agent for Service)
Copy to:
James B. Craver
266 Summer Street
Boston, MA 02210
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Amendment to the Registration Statement of Bond Portfolio has been
filed by the Registrant pursuant to Section 8(b) of the Investment Company Act
of 1940, as amended (the "1940 Act"). However, beneficial interests in the
Registrant are not being registered under the Securities Act of 1933, as amended
(the "1933 Act"), since such interests will be offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Registrant may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any beneficial interests in the Registrant.
<PAGE> 3
PART A
Responses to Items 1 through 3 have been omitted pursuant to paragraph
4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
Bond Portfolio (the "Portfolio") is a diversified, open-end management
investment company which was organized as a trust under the laws of the State of
New York on November 1, 1991.
Beneficial interests in the Portfolio are offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities which are "accredited investors" as defined in
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.
The Portfolio's investment adviser is R. Meeder & Associates, Inc. (the
"Adviser"). The investment objective of the Bond Portfolio is to maximize,
consistent with its permitted universe of investments, current income through
investment only 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 Portfolio may invest temporarily in money market
instruments as often as necessary to meet changing conditions in the fixed
income market. Although realizing capital gains will not be an objective, some
gains or losses may be realized from the sale of fixed income securities when
the Portfolio's assets are changed to a defensive position.
The U.S. government securities in which the Portfolio invests are either
issued or guaranteed by the U.S. government, its agencies, or instrumentalities.
These securities are limited to: (1) direct obligations of the U.S. Treasury,
such as U.S. Treasury bills, notes, and bonds; (2) notes, bonds, and discount
notes of U.S. government agencies or instrumentalities, such as the: Farm Credit
System, including the National Bank for Cooperatives, Farm Credit Banks, and
Banks for Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation; Federal National Mortgage Association;
Government National Mortgage Association; and
A-1
<PAGE> 4
Student Loan Marketing Association; and (3) repurchase agreements relating to
any of the foregoing U.S. government securities.
Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government, such as Government National Mortgage Association
participation certificates, are backed by the full faith and credit of the U.S.
Treasury. No assurance can be given that the U.S. government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These agencies and instrumentalities are supported by: (1)
the issuer's right to borrow an amount limited to a specific line of credit from
the U.S. Treasury; (2) discretionary authority of the U.S. government to
purchase certain obligations of an agency or instrumentality; or (3) the credit
of the agency or instrumentality.
The prices of U.S. government securities fluctuate inversely to the
direction of interest rates.
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities to the
Portfolio and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does not repurchase
the securities from the Portfolio, it could receive less than the repurchase
price on any sale of such securities.
The Portfolio will invest in U.S. government securities of varying
maturities. Normally the average portfolio maturity will be approximately ten
years as long as the Investment Adviser believes interest rates are stable or
declining. The Portfolio's assets will be invested in money market instruments
when the Investment Adviser believes an unstable or rising interest rate trend
is occurring. If the Investment Adviser believes that long-term interest rates
offer an abnormally high current return versus inflation, the Bond Portfolio may
be invested in U.S. government securities with maturities as long as 30 years.
Information concerning the selection of money market instruments and bonds
is set forth in Part B of this Registration Statement.
HEDGING STRATEGIES
Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Financial futures contracts or related options used by a Portfolio to implement
its hedging strategies are considered derivatives. The value of derivatives can
be affected significantly by even small market movements, sometimes in
A-2
<PAGE> 5
unpredictable ways. They do not necessarily increase risk, and may in fact
reduce risk.
The Portfolio may engage in hedging transactions in carrying out its
investment policies. A hedging program may be implemented for the following
reasons: (1) To protect the value of specific securities owned or intended to be
purchased while the Adviser is implementing a change in the Portfolio's
investment position; (2) To protect portfolio values during periods of
extraordinary risk without incurring transaction costs associated with buying or
selling actual securities; and (3) To utilize the "designated hedge" provisions
of Subchapter M of the Internal Revenue Code as a permitted means of avoiding
taxes that would otherwise have to be paid on gains from the sale of portfolio
securities.
A hedging program involves entering into an "option" or "futures"
transaction in lieu of the actual purchase or sale of securities. At present,
government securities such as Treasury bonds and notes are among debt securities
currently covered by futures contracts.
The Portfolio will not engage in transactions in financial futures
contracts or related options for speculation but only as a hedge against changes
in the market value of securities held or intended for purchase, and where the
transactions are economically appropriate to the reduction of risks inherent in
the ongoing management of the Portfolio.
For certain regulatory purposes, the Commodity Futures Trading
Commission ("CFTC") limits the types of futures positions that can be taken in
conjunction with the management of a securities portfolio for management
investment companies, such as the Bond Portfolio. All futures transactions for
the Portfolio will consequently be subject to the restrictions on the use of
futures contracts established in CFTC rules, such as observation of the CFTC's
definition of "hedging". In addition, whenever the Portfolio establishes a long
futures position, it will set aside cash or cash equivalents equal to the
underlying commodity value of the long futures contracts held by the Portfolio.
Although all futures contracts involve leverage by virtue of the margin system
applicable to trading on futures exchanges, the Portfolio will not, on a net
basis, have leverage exposure on any long futures contracts that it establishes
because of the cash set aside requirement. All futures transactions can produce
a gain or a loss when they are closed, regardless of the purpose for which they
have been established. Unlike short futures contracts positions established to
protect against the risk of a decline in value of existing securities holdings,
the long futures positions established by the Portfolio to protect against
reinvestment risk are intended to protect the Portfolio against the risks of
reinvesting portfolio
A-3
<PAGE> 6
assets that arise during periods when the assets are not fully invested in
securities.
The Portfolio may not purchase or sell futures or purchase related
options if immediately thereafter the sum of the amount of margin deposits on
the Portfolio's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Portfolio's total assets.
The Portfolio expects that any gain or loss on hedging transactions
will be substantially offset by any gain or loss on the securities underlying
the contracts or being considered for purchase.
ITEM 5. MANAGEMENT OF THE PORTFOLIO.
The Portfolio's Board of Trustees provides broad supervision over the
affairs of the Portfolio. The address of the Adviser is P.O. Box 7177, 6000
Memorial Drive, Dublin, Ohio 43017. A majority of the Portfolio's Trustees are
not affiliated with the Adviser. Star Bank, N.A., Cincinnati ("Star Bank") is
the Portfolio's custodian and Mutual Funds Service Co. ("MFSCo") is the
Portfolio's transfer agent and dividend paying agent. The address of the
custodian is Star Bank Center, 425 Walnut Street, Cincinnati, Ohio 45202 and the
address of MFSCo is 6000 Memorial Drive, Dublin, Ohio 43017.
The Portfolio has not retained the services of a principal underwriter
or distributor, as interests in the Portfolio are offered solely in private
placement transactions. Signature Broker-Dealer Services, Inc. ("SBDS") has been
retained to serve without compensation as exclusive placement agent for the
Portfolio in connection with such transactions.
The Adviser has been an adviser to individuals and retirement plans
since 1974 and has served as investment adviser to registered investment
companies since 1982. The Adviser serves the Portfolio pursuant to an Investment
Advisory Agreement under the terms of which it has agreed to provide an
investment program within the limitations of the Portfolio's investment policies
and restrictions, and to furnish all executive, administrative, and clerical
services required for the transaction of Portfolio business, other than
accounting services and services which are provided by the Portfolio's
custodian, transfer agent, independent accountants and legal counsel.
The Adviser was incorporated in Ohio in 1974 and maintains its
principal offices at 6000 Memorial Drive, Dublin, Ohio 43017. The Adviser is a
wholly-owned subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled
by Robert S. Meeder, Sr. through the ownership of voting common stock. MII
conducts business only through its subsidiaries which are the Adviser, MFSCo,
Opportunities
A-4
<PAGE> 7
Management Co., a venture capital investor, Meeder Advisory Services, Inc., a
registered investment adviser and OMCO, Inc., which is a registered commodity
trading adviser and commodity pool operator.
The Adviser's officers and directors, their principal offices, are as
follows: Robert S. Meeder, Sr., Chairman and Sole Director; Robert S. Meeder,
Jr., President and Treasurer; G. Robert Kincheloe, Senior Vice President; Philip
A. Voelker, Senior Vice President and Chief Operating Officer; Donald F. Meeder,
Vice President and Secretary; Sherrie L. Acock, Vice President; Robert D. Baker,
Vice President; Wesley F. Hoag, General Counsel; and Steven T. McCabe, Vice
President.
G. Robert Kincheloe is the portfolio manager primarily responsible for
the day-to-day management of the Bond Portfolio. Mr. Kincheloe is Senior Vice
President of the Adviser and began managing the Bond Portfolio in 1994. Mr.
Kincheloe was a Senior Vice President with Advest from 1987 to 1993. Mr.
Kincheloe has been associated with the Adviser since 1993.
The Adviser earns an annual fee, payable in monthly installments, at
the rate of 0.40% of the first $100 million and 0.20% in excess of $100 million
of the Portfolio's average net assets.
Accounting, transfer agency and dividend disbursing services are
provided to the Portfolio by MFSCo, a wholly-owned subsidiary of MII. The
minimum annual fee for all such services for the Portfolio is $7,500. Subject to
the minimum fee, the Portfolio's annual fee, payable monthly, is computed at the
rate of 0.15% of the first $10 million, 0.10% of the next $20 million, 0.02% of
the next $50 million and 0.01% in excess of $80 million of the Portfolio's
average net assets. For the year ended December 31, 1995, total payments from
the Portfolio to MFSCo amounted to $18,951.
TRANSFER AGENT AND CUSTODIAN
The Portfolio has entered into an Administration and Accounting
Services Agreement with MFSCo pursuant to which MFSCo acts as transfer agent for
the Portfolio, maintains an account for each investor in the Portfolio, performs
other transfer agency functions, and acts as dividend disbursing agent for the
Portfolio. Pursuant to a Custody Agreement, Star Bank acts as the custodian of
the Portfolio's assets. See Part B for more detailed information concerning
custodial arrangements.
EXPENSES
The expenses of the Portfolio include the compensation of its Trustees
who are not affiliated with the Adviser or SBDS; governmental
A-5
<PAGE> 8
fees; interest charges; taxes; fees and expenses of independent auditors, of
legal counsel and of any transfer agent, custodian, registrar or dividend
disbursing agent of the Portfolio; insurance premiums; expenses of calculating
the net asset value of, and the net income on, the Portfolio; all fees under its
Administration and Accounting Services and Subadministrative Services
Agreements; the expenses connected with the execution, recording and settlement
of security transactions; fees and expenses of the Portfolio's custodian for all
services to the Portfolio, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to governmental officers and commissions; expenses of
meetings of investors and Trustees; and the advisory fees payable to the Adviser
under the Investment Advisory Agreement.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is organized as a trust under the laws of the State of
New York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors in the
Portfolio (e.g., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations.
The net income of the Portfolio is determined each day on which the New
York Stock Exchange is open for trading (and on such other days as are deemed
necessary in order to comply with Rule 22c-1 under the 1940 Act) ("Fund Business
Day"). This determination is made once during each such day. All the net income
of the Portfolio, as defined below, so determined is allocated pro rata among
the investors in the Portfolio at the time of such determination.
For this purpose the net income of the Portfolio (from the time of the
immediately preceding determination thereof) shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles. Interest income
includes discount earned (including both original issue and market discount) on
discount paper accrued ratably to the date of maturity and any net realized
gains or losses on the assets of the Portfolio.
A-6
<PAGE> 9
Investments in the Portfolio have no preemptive or conversion rights
and are fully paid and nonassessable, except as set forth below. The Portfolio
is not required to hold annual meetings of investors but the Portfolio will hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Investors have
the right to communicate with other investors to the extent provided in Section
16(c) of the 1940 Act in connection with requesting a meeting of investors for
the purpose of removing one or more Trustees, which removal requires a
two-thirds vote of the Portfolio's beneficial interests. Investors also have
under certain circumstances the right to remove one or more Trustees without a
meeting. Upon liquidation or dissolution of the Portfolio, investors would be
entitled to share pro rata in the net assets of the Portfolio available for
distribution to investors.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's taxable income, gain,
loss, deductions and credits in determining its income tax liability. The
determination of such share will be made in accordance with the Internal Revenue
Code of 1986, as amended, and regulations promulgated thereunder.
The Portfolio's assets, income and distributions are managed in such a
way that an investor in the Portfolio will be able to satisfy the requirements
of Subchapter M of the Internal Revenue Code of 1986, as amended, assuming that
the investor invested all of its investable assets in the Portfolio.
Investor inquiries may be directed to SBDS at 6 St. James Avenue, Suite
900, Boston, Massachusetts 02116.
ITEM 7. PURCHASE OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.
An investment in the Portfolio may be made without a sales load at the
net asset value next determined after an order is received in "good order" by
the Portfolio. Securities owned by the Portfolio and
A-7
<PAGE> 10
listed or traded on any national securities exchange are valued each Fund
Business Day at 3:00 p.m. If there has been no sale on that day, or if the
security is not listed, it is valued at its last bid quotation on the exchange
or, in the case of unlisted securities, as obtained from an established market
maker. Futures contracts are valued on the basis of the cost of closing out the
liability; i.e., at the settlement price of a closing contract or at the asked
quotation for such a contract if there has been no sale. Money market
instruments having maturities of 60 days or less are valued at amortized cost if
not materially different from market value. Portfolio securities for which
market quotations are not readily available are to be valued by the Adviser in
good faith at its own expense under the direction of the Trustees.
There is no minimum initial or subsequent investment in the Portfolio.
However, since the Portfolio intends to be as fully invested at all times as is
reasonably practicable in order to enhance the yield on its assets, investments
must be made in federal funds (i.e., monies credited to the account of the
Portfolio's custodian bank by a Federal Reserve Bank).
The Portfolio reserves the right to cease accepting investments at any
time or to reject any investment order.
The exclusive placement agent for the Portfolio is SBDS, whose
principal business address is 6 St. James Avenue, Boston, Massachusetts 02116.
SBDS receives no additional compensation for serving as such agent.
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Fund Business Day. As of 4:00 p.m., New York time, on each
such day, the value of each investor's beneficial interest in the Portfolio will
be determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions, which are to be effected as of 4:00 p.m., New York time, on such
day, will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the percentage
equal to the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of 4:00 p.m., New York time, on such day plus or
minus, as the case may be, the amount of net additions to or reductions in the
investor's investment in the Portfolio effected as of 4:00 p.m., New York time,
on such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of 4:00 p.m., New York time, on such day, plus or minus, as
the case may be, the amount of net additions to or reductions in the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
so determined will then be
A-8
<PAGE> 11
applied to determine the value of the investor's interest in the Portfolio as of
4:00 p.m., New York time, on the following Fund Business Day.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may reduce any portion or all of its
investment at any time at the net asset value next determined after a request in
"good order" is furnished by the investor to the Portfolio. The proceeds of a
reduction will be paid by the Portfolio in federal funds normally on the next
business day after the reduction is effected, but in any event within seven
days. Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
reduction may be suspended or the payment of the proceeds therefrom postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted, or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
A-9
<PAGE> 12
PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS.
Page
General Information and History . . . . . . . . . . . . B-1
Investment Objective and Policies . . . . . . . . . . . B-1
Management of the Portfolio . . . . . . . . . . . . . . B-6
Control Persons and Principal Holders of Securities . . B-8
Investment Advisory and Other Services . . . . . . . . B-9
Brokerage Allocation and Other Practices . . . . . . . B-10
Capital Stock and Other Securities . . . . . . . . . . B-11
Purchase, Redemption and Pricing of Securities . . . . B-12
Tax Status . . . . . . . . . . . . . . . . . . . . . . B-13
Underwriters . . . . . . . . . . . . . . . . . . . . . B-14
Calculation of Performance Data . . . . . . . . . . . . B-14
Financial Statements . . . . . . . . . . . . . . . . . B-14
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
Part A contains additional information about the investment objective
and policies of the Bond Portfolio (the "Portfolio"). This Part B should only be
read in conjunction with Part A.
The investment policies set forth below represent the Portfolio's
policies as of the date of this Registration Statement. The investment policies
are not fundamental and may be changed by the Trustees of the Portfolio without
investor approval. No such change would be made, however, without 30 days'
written notice to investors.
R. Meeder & Associates, Inc., the investment adviser of the Portfolio
(the "Adviser"), places a high degree of importance on protecting portfolio
values from severe market declines.
B-1
<PAGE> 13
Consequently, the Portfolio's assets may at times be invested for defensive
purposes in money market instruments.
Because the Adviser intends to employ flexible defensive investment
strategies when market trends are not considered favorable, the Adviser may
occasionally change the entire Portfolio.
This defensive investment strategy can produce high portfolio turnover
ratios when calculated in accordance with SEC rules. The portfolio turnover rate
for the Portfolio was 232% for the year ended December 31, 1995 (708% in 1994;
236% in 1993).
The Portfolio began 1995 in a fully defensive position with 100% of its
investments being in money market instruments. By the end of January the
Portfolio was 100% invested in 10-year U.S. Treasuries. Based on concerns that
inflation was on the rise exposure was reduced to 80% during the first week of
February until late May when a 100% invested position was re-employed. The bond
market was very volatile during the third quarter which necessitated the
development of a 50% defensive posture during the latter part of July. By late
August, the level of risk in the bond market had subsided and the Portfolio
returned to a fully invested position in 10-year U.S. treasuries where it
remained throughout the remainder of 1995.
The Adviser is presently unable to predict the portfolio turnover rate
for the current year, as any major change in investment posture to a defensive
position, or vice versa, will result in a portfolio turnover of 100% or more. It
is conceivable that the turnover rate of the Portfolio will exceed 200% in the
current year.
The Portfolio intends to comply with the short-term trading
restrictions of Subchapter M of the Internal Reverse Code of 1986, as amended,
although these restrictions could inhibit a rapid change in the Portfolio's
investment. The Portfolio will strive for a positive investment return each
calendar year.
The Portfolio will limit its purchases, denominated in U.S. dollars, to
the following securities:
- U.S. Government Securities and Securities of its Agencies and
Instrumentalities - obligations issued or guaranteed as to
principal or interest by the United States or its agencies
(such as the Export Import Bank of the United States, Federal
Housing Administration, and Government National Mortgage
Association) or its instrumentalities (such as the Federal
Home Loan Bank, Federal Intermediate Credit Banks and Federal
Land Bank), including Treasury bills, notes and bonds.
B-2
<PAGE> 14
- Repurchase Agreements - The Portfolio may invest in repurchase
obligations relating to U.S. Government Securities. The
Portfolio may invest without limit in repurchase agreements
with any Federal Reserve reporting dealer or member bank of
the Federal Reserve System. A repurchase agreement is an
instrument under which the purchaser (i.e., the Portfolio)
acquires ownership of a debt security and the seller agrees,
at the time of the sale, to purchase the obligation at a
mutually agreed upon time and price, thereby determining the
yield during the purchaser's holding period. This results in a
fixed rate of return insulated from market fluctuations during
such period. The underlying securities could be any of those
described above, some of which might bear maturities exceeding
one year. The Portfolio's risk is that the seller may fail to
repurchase the security on the delivery date. If the seller
defaults, the underlying security constitutes collateral for
the seller's obligation to pay. It is a policy of the
Portfolio to make settlement on repurchase agreements only
upon proper delivery of the underlying collateral. Repurchase
agreements usually are for short periods, such as one week or
less, but could be longer. The Portfolio may enter into
repurchase agreements with its custodian (Star Bank, N.A.,
Cincinnati) when it is advantageous to do so. The Portfolio
will invest more than 10% of its assets, at time of purchase,
in repurchase agreements which mature in excess of seven days.
When investing in money market instruments, the Portfolio will limit
its purchases, denominated in U.S. dollars, to securities which are issued, or
guaranteed as to payment of principal and interest, by the U.S. government or
any of its agencies or instrumentalities.
The Manager exercises due care in the selection of money market
instruments and bonds. However, there is a risk that the issuers of the
securities may not be able to meet their obligations to pay interest or
principal when due. There is also a risk that some of the Portfolio's securities
might have to be liquidated prior to maturity at a price less than original
amortized cost or value, face amount or maturity value to meet larger than
expected redemptions. Any of these risks, if encountered, could cause a
reduction in net income or in the net asset value of the Portfolio.
B-3
<PAGE> 15
HEDGING STRATEGIES
The Adviser may conduct a hedging program on behalf of the Portfolio
for any of the reasons described in Part A. Such a program would involve
entering into options or futures transactions.
The objective of an option or futures transaction could be to protect a
profit or offset a loss in the Portfolio from future price erosion. Or, the
objective could be to acquire the right to purchase a fixed amount of securities
at a future date for a definite price. In either case, it would not be necessary
for the Portfolio to actually buy or sell the securities currently. Instead, the
option or futures contract would give the Portfolio the right at a future date
to sell, or in other instances buy, the particular securities under
consideration or similar securities. The quantity of the securities covered by
the futures contract would be the same, or approximately the same, as the
quantity held in the Portfolio or the quantity under consideration for purchase.
In lieu of the sale of a security, an option transaction could involve
the purchase of a put option contract, which would give the Portfolio the right
to sell a security or futures contract on an index (see below) at a specified
price until the expiration date of the option. A Portfolio will only purchase a
put option contract when the quantity of the underlying security involved in the
option transaction is equal to that owned by the Portfolio. Limitations on the
use of put option contracts on an index are described below.
Also, in lieu of the sale of securities, a futures transaction could
involve the sale of a futures contract which would require a Portfolio either
(a) to deliver to the other party to the contract the securities specified and
receive payment at the price contracted for, prior to the expiration date of the
contract, or (b) to make or entitle it to receive payments representing
(respectively) the loss or gain on the security or securities involved in the
futures contract.
In lieu of the purchase of a security, an option transaction could
involve the purchase of a call option which would give the Portfolio the right
to buy a specified security or index aggregate at a specified price until the
expiration date of the option contract. Sufficient cash or money market
instruments will be segregated and maintained in reserve to complete the
purchase.
In lieu of the purchase of securities, a futures transaction could
involve the purchase of a futures contract which would either (a) require the
Portfolio to receive and pay for the securities specified in the futures
contract at the price contracted for prior to the expiration date of the
contract or (b) require the Portfolio to
B-4
<PAGE> 16
make payment or receive payment representing respectively the loss or gain on
the security or securities involved in the contract.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Portfolio as
fundamental policies. Under the Investment Company Act of 1940 (the "1940 Act"),
a "fundamental" policy may not be changed without the vote of a majority of the
outstanding voting securities of the Portfolio, which is defined in the 1940 Act
with respect to the Portfolio as the lesser of (a) 67 percent or more of the
Portfolio's beneficial interests represented at a meeting of investors if the
holders of more than 50 percent of the outstanding beneficial interests are
present or represented by proxy, or (b) more than 50 percent of the outstanding
beneficial interests ("Majority Vote"). The percentage limitations contained in
the restrictions listed below apply at the time of the purchase of the
securities.
The Portfolio may not: (a) Issue senior securities; (b) Borrow money
except as a temporary measure, and then only in an amount not to exceed 5% of
the value of its net assets (whichever is less) taken at the time the loan is
made, or pledge its assets taken at value to any extent greater than 15% of its
gross assets taken at cost; (c) Act as underwriter of securities of other
issuers; (d) Invest in real estate except for office purposes; (e) Purchase or
sell commodities or commodity contracts, except that it may purchase or sell
financial futures contracts involving U.S. Treasury securities, corporate
securities, or financial indexes; (f) Lend its funds or other assets to any
other person; however, the purchase of a portion of publicly distributed bonds,
debentures or other debt instruments, the purchase of certificates of deposit,
U.S. Treasury debt securities, and the making of repurchase agreements are
permitted, provided repurchase agreements with fixed maturities in excess of
seven days do not exceed 10% of its total assets; (g) Purchase more than 10% of
any class of securities, including voting securities of any issuer, except that
the purchase of U.S. Treasury debt instruments shall not be subject to this
limitation; (h) Invest more than 5% of its total assets (taken at value) in the
securities of any one issuer, other than obligations of the U.S. Treasury; (i)
Purchase securities on margin, or participate in any joint or joint and several
trading account; (j) Make any so-called "short" sales of securities, except
against an identical portfolio position (i.e., a "short sale against the box");
(k) Invest more than 25% of its net assets at time of purchase (taken at value)
in the securities of companies in any one industry; (l) Purchase the securities
of another investment company except where such purchase is part of a plan of
merger or consolidation; (m) Purchase or retain any securities of an issuer, any
of whose officers, directors or security holders is an officer or director of
the Portfolio, if such officer or
B-5
<PAGE> 17
director owns beneficially more than 1/2 of 1% of the issuer's securities or
together they own beneficially more than 5% of such securities; (n) Invest in
securities of companies which have a record of less than three years' continuous
operation, if at the time of such purchase, more than 5% of its assets (taken at
value) would be so invested; (o) Purchase participations or other direct
interests in oil, gas or other mineral exploration or development programs; (p)
Invest in warrants; and (q) Invest more than 10% of its assets in restricted
securities and securities for which market quotations are not readily available
and repurchase agreements which mature in excess of seven days; however, this
shall not prohibit the purchase of money market instruments or other securities
which are not precluded by other particular restrictions.
In order to comply with certain state investment restrictions, the
Portfolio's operating policy is not to: (a) Notwithstanding (b) above, pledge
assets having a value in excess of 10% of its gross assets; (b) Invest in oil,
gas or mineral leases or programs; and (c) Purchase real estate limited
partnerships.
ITEM 14. MANAGEMENT OF THE PORTFOLIO.
The Trustees and officers of the Portfolio and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period. Asterisks indicate those Trustees who are
"interested persons" (as defined in the 1940 Act) of the Portfolio. Unless
otherwise indicated, the address of each Trustee and officer is P.O. Box 7177,
6000 Memorial Drive, Dublin, Ohio 43017.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Position
Name and Address Held Principal Occupation
---------------- -------- --------------------
<S> <C> <C>
ROBERT S. MEEDER, Trustee/President Chairman of
SR.* R. Meeder &
Associates, Inc., an
Investment Adviser.
MILTON S. Trustee Retired, formerly a
BARTHOLOMEW, ESQ. practicing attorney
1424 Clubview in Columbus, Ohio.
Blvd. S. Comprises the
Worthington, OH 43235 Portfolio's Audit
Committee.
</TABLE>
B-6
<PAGE> 18
<TABLE>
<S> <C> <C>
RUSSEL G. MEANS Trustee Chairman of Employee
4789 Rings Road Benefit Management
Dublin, OH 43017 Corporation,
consultants and
administrators of
self-funded health
and retirement plans.
WALTER L. OGLE Trustee Executive Vice
One Corporate Drive President, Godwins
Clearwater, FL 34622 Booke & Dickensen,
employee benefit,
compensation and
human resource
consultants.
PHILIP A. VOELKER* Trustee Senior Vice President
and Vice and Chief Operating
President Officer of
R. Meeder &
Associates, Inc.
WESLEY F. HOAG Vice President General Counsel of R.
Meeder & Associates,
Inc. (since July
1993); Attorney,
Porter, Wright,
Morris & Arthur, a
law firm (October
1984 to June 1993).
DONALD F. MEEDER Secretary/ Vice President of
Treasurer R. Meeder &
Associates, Inc., and
President of Mutual
Funds Service Co.
ROBERT S. MEEDER, JR. Vice President President, R. Meeder
& Associates, Inc.
</TABLE>
B-7
<PAGE> 19
<TABLE>
<S> <C> <C>
STEVEN T. McCABE Assistant Treasurer Vice President, R.
Meeder & Associates,
Inc. and Vice
President of Mutual
Funds Service Co.
JAMES B. CRAVER Assistant Secretary Managing Director,
266 Summer Street Eagle Institutional
Boston, MA 02210 Financial Services,
Inc. (since September
in 1995); Senior Vice
President of
Signature Financial
Group, Inc. (January
1991 to August 1995).
</TABLE>
Robert S. Meeder, Sr. is Donald F. Meeder's uncle and Robert S. Meeder,
Jr.'s father.
Each Trustee and each officer of the Portfolio hold the same positions
with other Portfolios, each a corresponding Portfolio of The Flex-funds or
Flex-Partners, each a Massachusetts business trust consisting of several
separate series.
Each Trustee who is not an "interested person" receives an annual fee
of $3,000, plus $750 for each meeting of the Board of Trustees attended
regardless of the number of Boards of Trustees on which each Trustee serves. Mr.
Bartholomew comprises the Audit Committee for each corresponding Portfolio of
The Flex-funds and the Flex-Partners Trusts. Mr. Bartholomew is paid $400 for
each meeting of the Audit Committees attended regardless of the number of Audit
Committees on which he serves. Trustees fees for the Bond Portfolio totaled
$3,925 for the year ended December 31, 1995 ($3,750 in 1994). Audit Committee
fees for the Portfolio totaled $147 for the year ended December 31, 1995 ($160
in 1994) All other officers and Trustees serve without compensation from the
Portfolio.
The Declaration of Trust provides that the Portfolio will indemnify its
Trustees and officers as described below under Item 18.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
The Flex-funds The Bond Fund (the "Fund") has an investment in the
Portfolio equaling approximately 100% of the Portfolio's interests. No Trustee
or officer of the Portfolio or any other
B-8
<PAGE> 20
person, except the Fund, own in the aggregate more than a 1% interest in the
Portfolio as of the date of this Registration Statement.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
ADVISER
R. Meeder & Associates, Inc. (the "Adviser") is the investment adviser
for the Portfolio. The Adviser serves the Portfolio pursuant to an Investment
Advisory Agreement which has been approved by a vote of a majority of the
Trustees, including a majority of those Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Portfolio and which will remain in
force so long as renewal thereof is specifically approved at least annually by a
majority of the Trustees or by a majority vote of the investors in the Portfolio
(with the vote of each being in proportion to the amount of its investment)
("Majority Portfolio Vote"), and in either case by vote of a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) at a
meeting called for the purpose of voting on such renewal.
The Investment Advisory Agreement will terminate automatically if
assigned and may be terminated without penalty at any time upon 60 days' prior
written notice by Majority Portfolio Vote, by the Trustees of the Portfolio, or
by the Adviser.
The Adviser earns an annual fee, payable in monthly installments at the
rate of 0.40% of the first $100 million and 0.20% in excess of $100 million of
the Portfolio's average net assets. For the year ended December 31, 1995, the
Portfolio paid fees to the Adviser totaling $38,275 ($33,422 in 1994; $35,998 in
1993).
TRANSFER AGENT
The Portfolio has entered into an Administration and Accounting
Services Agreement with Mutual Funds Service Co. ("MFSCo"), which acts as
transfer agent for the Portfolio. MFSCo maintains an account for each investor
in the Portfolio, performs other transfer agency functions and acts as dividend
disbursing agent for the Portfolio.
CUSTODIAN
Pursuant to a Custody Agreement, Star Bank, N.A., Cincinnati, acts as
the custodian of the Portfolio's assets (the "Custodian"). The Custodian's
responsibilities include safeguarding and controlling the Portfolio's cash and
securities, handling the receipt and delivery of securities, determining income
and collecting interest on the Portfolio's investments and maintaining books of
original entry for
B-9
<PAGE> 21
Portfolio accounting and other required books and accounts. Securities held by
the Portfolio may be deposited into the Federal Reserve-Treasury Department Book
Entry System or the Depository Trust Company and may be held by a subcustodian
bank if such arrangements are reviewed and approved by the Trustees of the
Portfolio. The Custodian does not determine the investment policies of the
Portfolio or decide which securities the Portfolio will buy or sell. The
Portfolio may, however, invest in securities of the Custodian and may deal with
the Custodian as principal in securities transactions. For its services, the
Custodian will receive such compensation as may from time to time be agreed upon
by it and the Portfolio.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Portfolio seeks to obtain the best available prices on, and firm
execution of, all purchases and sales of portfolio securities. In order to do
so, it may buy securities from or sell securities to broker-dealers acting as
principals and may use primary markets in the purchase or sale of
over-the-counter securities, unless best price and execution can be obtained in
some other way.
Satisfied that it is obtaining the best available price and favorable
execution, the Portfolio may, from time to time, place orders for the purchase
or sale of portfolio securities with broker-dealers who provide research,
statistical or other financial information or services ("research") to it or to
the Adviser, or to any other client for which the Adviser acts as investment
adviser. The Portfolio's portfolio transactions are reviewed periodically by its
Board of Trustees.
The Adviser is the principal source of information and advice to the
Portfolio and is responsible for making and initiating the execution of
investment decisions for the Portfolio. However, it is recognized by the
Trustees that it is important for the Adviser, in performing its
responsibilities to the Portfolio, to continue to receive and evaluate the broad
spectrum of economic and financial information which many securities
broker-dealers have customarily furnished in connection with portfolio
transactions and that, in compensating broker-dealers for their services, it is
in the interest of the Portfolio to take into account the value of the
information received for use in advising the Portfolio. The extent, if any, to
which the obtaining of such information may reduce the expenses of the Adviser
in providing management services to the Portfolio is not determinable. In
addition, it is understood by the Trustees that other clients of the Adviser
might also benefit from the information obtained for the Portfolio, in the same
manner that the Portfolio might also benefit from information obtained by the
Adviser in performing services to others.
B-10
<PAGE> 22
It is the opinion of the Trustees of the Portfolio and of the Adviser
that the receipt of research from broker-dealers will not materially reduce the
Adviser's own research activities or the overall cost of fulfilling its
contractual obligations to the Portfolio.
During the year ended December 31, 1995, the Bond Portfolio paid total
commissions of $10,398 on the purchase and sale of futures contracts.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio are issued only
upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees of the Portfolio if they
choose to do so and in such event the other investors in the Portfolio would not
be able to elect any Trustee. The Portfolio is not required to hold annual
meetings of investors but the Portfolio will hold special meetings of investors
when in the judgment of the Portfolio's Trustees it is necessary or desirable to
submit matters for an investor vote. No material amendment may be made to the
Portfolio's Declaration of Trust without the affirmative majority vote of
investors (with the vote of each being in proportion to the amount of their
investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two-thirds of its
investors (with the vote of each being in proportion to the amount of their
investment), except that if the Trustees of the Portfolio recommend such sale of
assets, the approval by vote of a majority of the investors (with the vote of
each being in proportion to the amount of their investment) will be sufficient.
The Portfolio may also be terminated (i) upon liquidation and distribution of
its assets, if approved by the vote of two-thirds of its investors (with the
vote of each being in proportion to the amount of their
B-11
<PAGE> 23
investment), or (ii) by the Trustees of the Portfolio by written notice to its
investors.
The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Portfolio,
its investors, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The Declaration of Trust provides
that the trustees and officers will be indemnified by the Portfolio against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their offices with the Portfolio, unless, as to
liability to the Portfolio or its investors, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect to any
other matter it is finally adjudicated that they did not act in good faith in
the reasonable belief that their actions were in the best interests of the
Portfolio. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination, based upon a review of
readily available facts, by vote of a majority of disinterested Trustees or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public
B-12
<PAGE> 24
offering" within the meaning of Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). Investments in the Portfolio may only be made by
investment companies, insurance company separate accounts, common or commingled
trust funds or similar organizations or entities which are "accredited
investors" as defined in Regulation D under the 1933 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
The Portfolio determines its net asset value as of 3:00 p.m., New York
time, each Fund Business Day by dividing the value of the Portfolio's net assets
by the value of the investment of the investors in the Portfolio at the time the
determination is made. (Net asset value will not be determined on Good Friday or
any holiday observed by the Federal Reserve System. These presently include New
Year's Day, Martin Luther King Day, President's Day, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas.)
Purchases and reductions will be effected at the time of determination of net
asset value next following the receipt of any purchase or reduction order.
Securities owned by the Portfolio and listed or traded on any national
securities exchange are valued at 3:00 p.m. each day that the exchange is open
for business. If there is no sale on that day, or if the security is not listed,
it is valued at its last bid quotation on the exchange or, in the case of
unlisted securities, as obtained from an established market maker. Futures
contracts are valued on the basis of the cost of closing out the liability;
i.e., at the settlement price of a closing contract or at the asked quotation
for such a contract if there is no sale. Money market instruments having
maturities of 60 days or less are valued at amortized cost if not materially
different from market value. Portfolio securities for which market quotations
are not readily available are to be valued by the Adviser in good faith at its
own expense under the direction of the Trustees.
ITEM 20. TAX STATUS.
The Portfolio is organized as a trust under New York law. Under the
method of operation of the Portfolio, the Portfolio is not subject to any income
tax. However, each investor in the Portfolio is taxable on its share (as
determined in accordance with the governing instruments of the Portfolio) of the
Portfolio's ordinary income and capital gain in determining its income tax
liability. The determination of such share is made in accordance with the
Internal Revenue Code of 1986, as amended, and regulations promulgated
thereunder.
B-13
<PAGE> 25
The Portfolio's taxable year-end is December 31. Although, as described
above, the Portfolio is not subject to federal income tax, it files appropriate
federal income tax returns.
The Portfolio's assets, income and distributions are managed in such a
way that an investor in the Portfolio will be able to satisfy the requirements
of Subchapter M of the Internal Revenue Code of 1986, as amended, assuming that
the investor invested all of its investable assets in the Portfolio.
ITEM 21. UNDERWRITERS.
The exclusive placement agent for the Portfolio is SBDS, which receives
no additional compensation for serving in this capacity. Investment companies,
insurance company separate accounts, common and commingled trust funds and
similar organizations and entities may continuously invest in the Portfolio.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
The following financial statements are intended to provide information
only with respect to the Bond Portfolio. Persons interested in obtaining
information about any of the other Portfolios should contact the Investment
Adviser to obtain a copy of such Portfolio's current Registration Statement.
B-14
<PAGE> 26
<TABLE>
<CAPTION>
MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
SHARES OR VALUE
FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS - 81.6%
Acorn International Fund 60 $1,000
Charles Schwab Money Market Fund 8,376,894 8,376,894
Constellation Fund 83 1,879
Fidelity Core Money Market Fund 5,549,983 5,549,983
Fidelity Equity Portfolio Growth Fund 333,197 12,628,156
Fidelity Growth & Income Fund 267,791 7,243,753
Founders Growth Fund 897,745 13,259,700
Neuberger & Berman Focus Fund 387,385 10,819,650
Neuberger & Berman Guardian Fund 457,705 10,540,947
Neuberger & Berman Manhattan Fund 173,284 2,103,666
PBNG Growth Fund 50,605 1,210,472
Pin Oak Aggressive Stock Fund (1) 23,041 384,793
T.Rowe Price New Era Fund 122 2,771
T.Rowe Price New Horizons Fund 724,089 14,843,822
Twentieth Century Ultra Fund 52,948 1,382,468
Twentieth Century Vista Fund 114,172 1,666,912
Weingarten Equity Fund 477,272 8,462,030
White Oak Growth Stock Fund 14,307 256,096
- --------------------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $93,054,647) 98,734,992
- --------------------------------------------------------------------------------------------
U.S.TREASURY BILLS - 1.2%
*U.S. Treasury Bill, 5.29%, due 1/04/96 $150,000 149,912
*U.S. Treasury Bill, 5.22%, due 1/04/96 250,000 249,891
*U.S. Treasury Bill, 5.26%, due 1/04/96 1,000,000 999,486
U.S. Treasury Bill, 6.66%, due 1/11/96 25,200 25,149
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $1,424,438) 1,424,438
- --------------------------------------------------------------------------------------------
*Pledged $1,400,000 face amount as collateral on futures contracts
REPURCHASE AGREEMENTS - 17.2%
(Collateralized by U.S. government obligations -
market value $21,328,465)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 2,550,000 2,550,000
Smith Barney, dated 12/28/95, 5.90%, due 1/02/96 18,250,000 18,250,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $20,800,000) 20,800,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $115,279,085) $120,959,430
============================================================================================
FUTURES CONTRACTS
CONTRACTS
- --------------------------------------------------------------------------------------------
Long, S&P 500 futures contracts
face amount $32,468,625 expiring in March, 1996. 105 36,750
Long, Midcap futures contracts
face amount $1,962,450 expiring in March, 1996. 18 9,000
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS 45,750
- --------------------------------------------------------------------------------------------
</TABLE>
(1) No dividend paid on security in 1995.
See accompanying notes to financial statements
1995 Flex-funds Annual Report 13
<PAGE> 27
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 36.7%
AEROSPACE/DEFENSE - (1.6%)
Boeing Company 6,300 $493,763
- --------------------------------------------------------------------------------------------
ALUMINUM - (1.1%)
Aluminum Company of America 6,300 333,113
- --------------------------------------------------------------------------------------------
AUTO AND TRUCK - (1.1%)
General Motors Corporation 6,300 333,113
- --------------------------------------------------------------------------------------------
BANKING - (1.7%)
J.P. Morgan & Company 6,300 505,575
- --------------------------------------------------------------------------------------------
BEVERAGE - (1.5%)
Coca Cola Company 6,300 467,775
- --------------------------------------------------------------------------------------------
CHEMICAL (BASIC) - (2.2%)
Dupont E.I. Nemours 6,300 440,212
Union Carbide Corporation 6,300 236,250
- --------------------------------------------------------------------------------------------
676,462
- --------------------------------------------------------------------------------------------
CHEMICAL (DIVERSIFIED) - (1.4%)
Minnesota Mining & Manufacturing 6,300 417,375
- --------------------------------------------------------------------------------------------
COMPUTER AND PERIPHERALS - (1.9%)
International Business Machines 6,300 578,025
- --------------------------------------------------------------------------------------------
DRUG - (1.4%)
Merck & Co., Incorporated 6,300 414,225
- --------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - (1.8%)
General Electric Company 6,300 453,600
Westinghouse Electric Corporation 6,300 103,950
- --------------------------------------------------------------------------------------------
557,550
- --------------------------------------------------------------------------------------------
FINANCIAL SERVICES - (.9%)
American Express Company 6,300 260,663
- --------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - (1.7%)
Proctor & Gamble Company 6,300 522,900
- --------------------------------------------------------------------------------------------
MACHINERY (CONSTRUCTION & MINING) - (1.2%)
Caterpillar Incorporated 6,300 370,125
- --------------------------------------------------------------------------------------------
MULTIFORM - (3.0%)
Allied-Signal Incorporated 6,300 299,250
United Technologies Corporation 6,300 597,712
- --------------------------------------------------------------------------------------------
896,962
- --------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS - (.8%)
International Paper Company 6,300 238,612
- --------------------------------------------------------------------------------------------
</TABLE>
14 1995 Flex-funds Annual Report
<PAGE> 28
<TABLE>
<S> <C> <C>
PETROLEUM (INTEGRATED) - (4.4%)
Chevron Corporation 6,300 330,750
Exxon Corporation 6,300 504,788
Texaco 6,300 494,550
- --------------------------------------------------------------------------------------------
1,330,088
- --------------------------------------------------------------------------------------------
PRECISION INSTRUMENT - (1.4%)
Eastman Kodak Company 6,300 422,100
- --------------------------------------------------------------------------------------------
RECREATION - (1.2%)
Walt Disney Company 6,300 371,700
- --------------------------------------------------------------------------------------------
RESTAURANT - (.9%)
McDonalds Corporation 6,300 284,287
- --------------------------------------------------------------------------------------------
RETAIL STORE - (1.1%)
Sears Roebuck & Company 6,300 245,700
Woolworth Corporation 6,300 81,900
- --------------------------------------------------------------------------------------------
327,600
- --------------------------------------------------------------------------------------------
STEEL (INTEGRATED) - (.3%)
Bethlehem Steel Corporation (1) 6,300 88,200
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (1.3%)
American Telephone & Telegraph Corporation 6,300 407,925
- --------------------------------------------------------------------------------------------
TIRE AND RUBBER - (.9%)
Goodyear Tire & Rubber Company 6,300 285,862
- --------------------------------------------------------------------------------------------
TOBACCO - (1.9%)
Philip Morris Companies Incorporated 6,300 570,150
- --------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $11,071,620) 11,154,150
- --------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 2.5%
*U.S. Treasury Bill, 5.19%, due 1/04/96 $600,000 599,741
*U.S. Treasury Bill, 5.26%, due 1/04/96 100,000 99,956
*U.S. Treasury Bill, 5.29%, due 1/04/96 50,000 49,978
U.S. Treasury Bill, 6.66%, due 1/11/96 6,700 6,687
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $756,362) 756,362
- --------------------------------------------------------------------------------------------
*Pledged $703,000 face amount as collateral on futures and options contracts
REPURCHASE AGREEMENTS - 30.8%
(Collateralized by U.S. government obligations -
market value $9,527,687)
Everen Securities, dated 12/29/95, 5.90%,
due 1/02/96 3,344,000 3,344,000
Smith Barney, dated 12/28/95, 5.90%,
due 1/02/96 6,000,000 6,000,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $9,344,000) 9,344,000
- --------------------------------------------------------------------------------------------
CONTRACTS
OPTIONS PURCHASED - 30.0%
CALL OPTIONS
S&P 500 futures contract expiring March, 1996 at 570 1,650 8,332,500
- --------------------------------------------------------------------------------------------
</TABLE>
Continued on next page
1995 Flex-funds Annual Report 15
<PAGE> 29
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
Portfolio of Investments, continued
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
PUT OPTIONS
S&P 500 futures contract expiring March, 1996 at 590 1,650 792,000
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost $8,122,488) 9,124,500
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS HELD LONG - 100%
(Cost $29,294,470) $30,379,012
============================================================================================
FUTURES CONTRACTS
Long, S&P 500 futures contracts
face amount $13,527,000 expiring in March, 1996. 43 $17,650
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $17,650
- --------------------------------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING AS OF DECEMBER 31, 1995.
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
CALL OPTIONS
S&F 500 futures contract expiring March, 1996 at 590 1,650 $(5,436,750)
- --------------------------------------------------------------------------------------------
PUT OPTIONS
S&P 500 futures contract expiring March, 1996 at 570 1,650 (420,750)
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Proceeds $4,881,362) $(5,857,500)
============================================================================================
</TABLE>
(1)No dividend paid in 1995.
See accompanying notes to financial statements
16 1995 Flex-funds Annual Report
<PAGE> 30
<TABLE>
<CAPTION>
UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.6%
ELECTRIC/GAS UTILITY - (6.9%)
MDU Resources Group Incorporated 2,100 $41,738
Montana Power Company 1,300 29,412
Nipsco Industries Incorporated 1,700 65,025
Utilicorp United Incorporated 5,500 161,563
- --------------------------------------------------------------------------------------------
297,738
- --------------------------------------------------------------------------------------------
ELECTRIC UTILITY - (15.0%)
AES Corporation(1) 2,600 62,075
Cinergy Corporation 3,900 119,437
Ipalco Enterprises Incorporated 2,000 76,250
KU Energy Corporation 1,300 39,000
LG&E Energy Corporation 2,300 97,175
Pacificorp 8,000 170,000
Teco Energy Incorporated 3,000 76,875
- --------------------------------------------------------------------------------------------
640,812
- --------------------------------------------------------------------------------------------
DIVERSIFIED UTILITY - (3.8%)
Citizens Utilities Company Class B 12,686 160,158
- --------------------------------------------------------------------------------------------
NATURAL GAS (DISTRIBUTOR) - (19.8%)
Bay State Gas Company 1,700 47,175
Brooklyn UN Gas Company 3,900 114,075
Consolidated Natural Gas Company 2,900 131,587
MCN Corporation 6,200 144,150
Nicor Incorporated 1,800 49,500
Panhandle Eastern Corporation 5,500 153,313
Transcanada Pipelines Ltd. 3,200 44,000
UGI Corporation 2,000 41,500
Wicor Incorporated 3,800 122,550
- --------------------------------------------------------------------------------------------
847,850
- --------------------------------------------------------------------------------------------
OIL/GAS (DOMESTIC) - (7.3%)
Enron Corporation 3,000 114,375
Sante Fe Pacific Pipeline Partners 1,600 58,600
Williams Companies Incorporated 3,200 140,400
- --------------------------------------------------------------------------------------------
313,375
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT - (1.7%)
DSC Communications(1) 2,000 73,750
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (33.4%)
Alltel Corporation 5,100 150,450
American Telephone & Telegraph Corporation 1,500 97,125
Ameritech Corporation 2,500 147,500
Bell Atlantic Corporation 1,400 93,625
Century Telephone Enterprise 5,500 174,625
Cincinnati Bell Incorporated 2,000 69,500
Frontier Corporation 6,500 195,000
GTE Corporation 3,200 140,800
Nynex Corporation 300 16,200
Sprint Corporation 2,400 95,700
U.S. West Incorporated 6,000 214,500
United Media Group 2,000 38,000
- --------------------------------------------------------------------------------------------
1,433,025
- --------------------------------------------------------------------------------------------
</TABLE>
Continued on next page
1995 Flex-funds Annual Report 17
<PAGE> 31
UTILITIES STOCK PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
WATER UTILITY - (3.7%)
American Water Works Incorporated 4,100 159,387
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,503,676) 3,926,095
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.4%
(Collateralized by U.S. government obligations -
market value $360,995)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 $360,000 360,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $360,000) 360,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $3,863,676) $4,286,095
============================================================================================
</TABLE>
(1)No dividend paid in 1995.
See accompanying notes to financial statements.
18 1995 Flex-funds Annual Report
<PAGE> 32
<TABLE>
<CAPTION>
BOND PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S.TREASURY OBLIGATIONS - 85.7%
U.S. Treasury Note, 6.50%, due 8/15/2005 $7,700,000 8,214,938
U.S. Treasury Note, 6.50%, due 5/15/2005 5,000,000 5,327,344
*U.S. Treasury Bill, 5.17%, due 6/06/96 50,000 48,893
U.S. Treasury Bill, 6.66%, due 1/11/96 3,900 3,892
- --------------------------------------------------------------------------------------------
TOTAL U.S.TREASURY OBLIGATIONS
(Cost $12,924,502) 13,595,067
- --------------------------------------------------------------------------------------------
*Pledged $50,000 face amount as collateral on futures and options contracts
REPURCHASE AGREEMENTS - 14.3%
(Collateralized by U.S. Government obligations -
market value $2,271,669)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 2,262,000 2,262,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $2,262,000) 2,262,000
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS HELD LONG - 100%
(Cost $15,186,502) $15,857,067
============================================================================================
FUTURES CONTRACTS
CONTRACTS
Long, 10 Year Bond futures contracts
face amount $2,291,875 expiring in March, 1996. 20 $5,625
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $5,625
- --------------------------------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING AS OF DECEMBER 31, 1995:
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
CALL OPTIONS
U.S. Treasury Note Contract Expiring
February, 1996 at 114 20 $19,063
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Proceeds $10,850) $19,063
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
1995 Flex-funds Annual Report 19
<PAGE> 33
<TABLE>
<CAPTION>
SHORT-TERM GLOBAL PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
FACE AMOUNT VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S.TREASURY - 42.4%
U.S. Treasury Note, 5.875%, due 8/15/98 $1,300,000 $1,321,531
*U.S. Treasury Bill, 5.34%, due 2/15/96 50,000 49,651
U.S. Treasury Bill, 6.66%, due 1/11/96 1,200 1,198
- --------------------------------------------------------------------------------------------
TOTAL U.S.TREASURY BILLS
(Cost $1,355,357) 1,372,380
- --------------------------------------------------------------------------------------------
*Pledged $10,000 face amount as collateral on futures contracts
U.S. GOVERNMENT OBLIGATIONS - 15.5%
Federal National Mortgage Association Discount Note,
5.60%, due 1/04/96 500,000 499,767
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $499,767) 499,767
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 42.1%
(Collateralized by U.S. government obligations -
market value $1,386,192)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 612,000 612,000
Smith Barney, dated 12/28/95, 5.90%, due 1/02/96 750,000 750,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $1,362,000) 1,362,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $3,217,124) $3,234,147
============================================================================================
FUTURES CONTRACTS - 0.0%
CONTRACTS
Long, Canadian Dollar futures contracts
face amount $366,550 expiring in March, 1996. 5 $(1,150)
- --------------------------------------------------------------------------------------------
NET PAYABLE FOR FUTURES CONTRACTS SETTLEMENTS $(1,150)
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
20 1995 Flex-funds Annual Report
<PAGE> 34
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 39.1%
American Honda Finance, 5.73%, due 2/23/96 $10,000,000 $9,915,642
American Honda Finance, 5.62%, due 4/02/96 3,000,000 2,956,913
BOT Financial, 6.20%, due 1/05/96 11,000,000 10,992,422
Dupont Corporation, 6.25%, due 1/03/96 275,000 274,905
Duff & Phelps, 5.47%, due 5/09/96 6,000,000 5,882,395
GTE Corporation, 5.83%, due 2/16/96 10,000,000 9,925,506
Idaho Power, 6.25%, due 1/11/96 140,000 139,757
Jefferson Smurfit, 5.70%, due 3/01/96 1,200,000 1,188,600
Jefferson Smurfit, 5.70%, due 3/19/96 4,000,000 3,950,600
Laclede Gas, 6.25%, due 1/22/96 432,000 430,425
Marsh MacClellan, 5.58%, due 3/14/96 3,120,000 3,084,697
Mitsubishi Motor Credit Corporation, 6.25%, due 1/18/96 518,000 516,471
National Utilities, 5.58%, due 3/12/96 2,000,000 1,977,990
Nynex Corporation, 5.74%, due 2/06/96 3,000,000 2,982,780
Nynex Corporation, 5.77%, due 1/12/96 10,000,000 9,982,369
Pacific Bell, 6.25%, due 1/22/96 390,000 388,578
Public Services Electric & Gas, 5.93%, due 1/11/96 8,142,000 8,128,588
Public Services Electric & Gas, 5.90%, due 1/17/96 3,061,000 3,052,973
Tambrands, 5.50%, due 6/04/96 3,500,000 3,417,118
Torchmark, 5.75%, due 2/14/96 10,600,000 10,525,506
Whirlpool Corporation, 5.77%, due 1/31/96 10,700,000 10,648,551
- --------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $100,362,786) 100,362,786
- --------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 47.9%
American Telephone & Telegraph Capital Corporation, 4.52%,
due 8/30/96 250,000 247,743
American Telephone & Telegraph Capital Corporation, 7.40%,
due 11/01/96 500,000 505,230
Associates Corporation, 7.50%, due 10/15/96 150,000 151,722
Associates Corporation, 4.75%, due 8/01/96 250,000 248,321
BP America, Incorporated, 10.00%, due 3/08/96 5,000,000 5,034,208
BP, Incorporated, 10.15%, due 3/15/96 190,000 191,649
Bank One, Dayton, 5.95%, due 10/02/96 5,000,000 5,000,000
*Bank One Capital Demand Note, 5.83%,
next redemption date 7/11/96, due 4/01/2113 3,510,000 3,510,000
Barnett Bank, 10.00%, due 1/08/96 3,500,000 3,502,308
Bat Industries, 8.60%, due 8/30/96 550,000 558,052
*Bear Stearns Floating Rate Note, 5.76%, due 3/01/96 10,000,000 10,000,000
*Best Sands Corporation Floating Rate Note,
5.95%, next redemption date 1/04/96, due 7/01/2002 850,000 850,000
*Care Life Project Floating Rate Note, 5.95%,
next redemption date 1/04/96, due 8/01/2111 1,375,000 1,375,000
Conrail, 5.20%, due 2/12/96 1,000,000 999,051
Continental Bankcorp, 9.875%, due 6/15/96 1,250,000 1,272,500
Dean Witter, 8.92%, due 3/15/96 1,000,000 1,005,634
Dow Capital Corporation, 8.25%, due 2/15/96 65,000 65,146
Dupont Corporation, 8.45%, due 10/15/96 860,000 897,347
Eastman Kodak, 10.00%, due 6/15/96 125,000 126,948
Eli Lilly Corporation, 6.58%, due 12/20/96 250,000 252,275
*Espanola/Nambe Variable Rate Demand Note, 5.95%,
next redemption date 1/04/96, due 6/01/2006 2,500,000 2,500,000
*Exxon Shipping Floating Rate Note, 5.78%,
next redemption date 1/04/96, due 10/01/2111 7,000,000 7,000,000
Ford Motor Credit Corporation, 8.00%, due 10/01/96 1,800,000 1,825,930
Ford Motor Credit Corporation, 9.07%, due 7/05/96 893,000 906,417
</TABLE>
Continued on next page
1995 Flex-funds Annual Report 21
<PAGE> 35
MONEY MARKET PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Ford Motor Credit Corporation, 4.85%, due 8/23/96 400,000 397,132
Ford Motor Credit Corporation, 8.25%, due 7/15/96 171,000 172,927
Ford Motor Credit Corporation, 9.10%, due 7/05/96 1,000,000 1,015,476
Ford Motor Credit Corporation, 8.25%, due 5/15/96 1,200,000 1,209,494
General Electric Capital Corporation,
4.615%, next redemption date 5/30/96 1,000,000 994,514
General Motors Acceptance Corporation, 9.00%, due 2/06/96 400,000 401,185
General Motors Acceptance Corporation, 8.00%, due 10/01/96 275,000 279,485
*General Motors Acceptance Corporation Floating Rate Note,
5.805%, next redemption date 4/13/96, due 4/13/98 10,000,000 10,000,000
*Hancor Incorporated Floating Rate Note, 5.95%,
next redemption date 1/04/95, due 12/01/2004 900,000 900,000
Hertz Corporation, 9.125%, due 8/01/96 2,850,000 2,902,407
Honeywell Corporation, 7.875%, due 5/14/96 1,445,000 1,453,511
Household Financial Corporation, 9.375%, due 2/15/96 2,000,000 2,007,835
IBM Corporation, 5.00%, due 2/26/96 250,000 249,698
IBM Credit Corporation, 5.06%, due 11/15/96 1,350,000 1,340,236
IBM Credit Corporation, 4.85%, due 11/05/96 3,000,000 2,973,731
International Bank, 8.75%, due 9/06/96 100,000 101,972
John Deere Corporation, 8.50%, due 4/10/96 200,000 201,383
Lockheed Corporation, 4.875%, due 2/15/96 85,000 84,848
Merrill Lynch & Company, Floating Rate Note, 5.925%,
due 11/18/96 10,000,000 10,000,000
Morgan Stanley Incorporated, 8.875%, due 4/01/96 400,000 402,793
Morgan Stanley Incorporated, 7.32%, due 1/15/97 500,000 507,941
Pacific Gas & Electric, 5.03%, due 3/22/96 800,000 798,800
Pepsico Incorporated, 7.875%, due 8/15/96 2,350,000 2,375,767
Philip Morris Companies, 8.875%, due 7/01/96 1,150,000 1,165,600
*Presrite Corporation Floating Rate Note, 5.95%,
next redemption date 1/04/96, due 1/01/2004 2,880,000 2,880,000
Regions Bank, Louisiana, 6.71%, due 4/11/96 5,000,000 5,011,262
Sears Roebuck & Company, 9.00%, due 9/15/96 1,000,000 1,020,902
Sears Roebuck & Company, 8.55%, due 8/01/96 2,000,000 2,028,466
Smith Barney Holding Company, 5.375%, due 6/01/96 5,380,000 5,365,423
Southwestern Bell, 7.90%, due 8/23/96 1,500,000 1,518,192
Southwestern Bell, 8.30%, due 6/01/96 100,000 101,028
Suntrust Banks, 8.375%, due 3/01/96 1,130,000 1,134,467
U.S. West Capital Funding Corporation, 8.00%, due 10/15/96 290,000 294,634
Unilever, 8.00%, due 5/28/96 450,000 453,838
Union Electric, 5.50% due 5/01/96 100,000 99,868
Virginia Electric & Power, 6.35%, due 5/30/96 3,000,000 3,005,191
Virginia Electric & Power, 8.35%, due 6/15/96 1,000,000 1,010,524
WMX Technologies, 4.875%, due 6/15/96 215,000 213,945
Waste Management Corporation, 7.875%, due 8/15/96 1,000,000 1,011,214
Waste Management Corporation, 4.875%, due 6/15/96 100,000 99,547
Weyerhaeuser Corporation, 8.41%, due 5/17/96 100,000 100,863
White Castle Corporation, Floating Rate Note, 5.95%,
next redemption date 1/04/96 7,000,000 7,000,000
World Book Finance Corporation, 8.125%, due 9/01/96 500,000 506,839
- --------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $122,818,621) 122,818,621
- --------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.1%
U.S. Treasury Bill, 6.66%, due 1/11/96 66,000 67,874
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $67,874) 67,874
- --------------------------------------------------------------------------------------------
</TABLE>
22 1995 Flex-funds Annual Report
<PAGE> 36
<TABLE>
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS - 4.6%
Federal Farm Credit Note, 5.91%, due 6/24/96 500,000 500,614
*Student Loan Marketing Association Floating Rate Note,
5.70%, due 11/10/98, next redemption date 1/02/96 5,000,000 5,000,000
*Student Loan Marketing Association Floating Rate Note,
5.75%, due 8/03/99, next redemption date 1/02/96 4,350,000 4,355,249
*Student Loan Marketing Association Floating Rate Note,
5.68%, due 11/24/97, next redemption date 1/02/96 2,000,000 1,999,610
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $11,855,473) 11,855,473
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.3%
(Collateralized by U.S. government obligations -
market value $21,644,319)
Everen Securities, dated 12/29/95, 5.90%,
due 1/02/96 20,556,000 20,556,000
Star Bank N.A., dated 12/29/95, 5.30%,
due 1/02/96 950,000 950,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $21,506,000) 21,506,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $256,610,754) $256,610,754
============================================================================================
</TABLE>
*Floating Rate as of 12/31/95.
See accompanying notes to financial statements
1995 Flex-funds Annual Report 23
<PAGE> 37
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES SHORT-TERM MONEY
FUND STOCK STOCK BOND GLOBAL MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS :
Investments at market value* $100,159,430 $21,035,012 $3,926,095 $13,595,067 $1,872,147 $235,104,754
Repurchase Agreements* 20,800,000 9,344,000 360,000 2,262,000 1,362,000 21,506,000
Cash -- -- 121 124 85 206
Receivable for futures contracts
settlement 45,750 17,650 -- 5,625 -- --
Interest receivable 61,492 5,577 177 232,124 29,641 2,245,756
Dividends receivable 1,139,291 21,609 11,374 -- -- --
Prepaid/Other assets 454 109 -- 68 19 1,251
Unamortized organization costs 10,377 7,538 40,146 7,537 7,181 7,538
Total Assets 122,216,794 30,431,495 4,337,913 16,102,545 3,271,073 258,865,505
LIABILITIES:
Payable for securities purchased -- -- -- -- -- 2,680,949
Payable to corresponding Fund -- -- -- -- -- 1,477,153
Payable for futures contracts settlement -- -- -- -- 1,150 --
Written options at market value* -- 5,857,500 -- 19,063 -- --
Payable to investment adviser 85,828 21,414 3,325 4,275 -- 33,706
Accrued fund accounting fees 4,159 2,496 628 1,699 636 4,818
Other accrued liabilities 17,678 13,055 43,090 11,486 7,042 20,505
Total Liabilities 107,665 5,894,465 47,043 36,523 8,828 4,217,131
NET ASSETS:
Capital 116,428,784 24,428,626 3,868,451 15,403,670 3,245,222 254,648,374
Net unrealized gain on investments 5,680,345 108,404 422,419 662,352 17,023 --
Net Assets $122,109,129 $24,537,030 $4,290,870 $16,066,022 $3,262,245 $254,648,374
*Securities at cost 115,279,085 24,413,108 3,863,676 15,175,652 3,217,124 256,610,754
</TABLE>
See accompanying notes to financial statements
24 1995 Flex-funds Annual Report
<PAGE> 38
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES SHORT-TERM MONEY
FUND STOCK STOCK BOND GLOBAL MARKET
PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME - NET:
Interest $1,911,196 $1,070,422 $8,057 $924,478 $236,424 $12,128,882
- -------------------------------------------------------------------------------------------------------------------------------
Dividends 329,219 127,830 54,996 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Income 2,240,415 1,198,252 63,053 924,478 236,424 12,128,882
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 874,473 238,640 14,297 57,855 15,829 648,665
Legal fees 1,853 1,679 1,100 1,679 1,609 1,555
Audit fees 13,482 10,234 3,028 9,125 5,544 15,695
Custodian fees 11,483 7,236 1,755 3,624 3,649 17,104
Accounting fees 47,427 28,335 4,065 18,951 7,457 58,111
Trustees fees and expenses 5,223 5,223 3,776 5,223 5,130 5,385
Insurance 2,241 661 -- 369 161 5,920
Amortization of organization cost 5,438 4,978 4,744 4,979 4,745 4,978
Other expenses 399 399 1,611 399 432 432
- -------------------------------------------------------------------------------------------------------------------------------
Total Expenses 962,019 297,385 34,376 102,204 44,556 757,845
Investment advisory fees waived -- -- -- (19,580) (15,829) (349,425)
Directed brokerage payments received -- -- (1,212) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Expenses - net 962,019 297,385 33,164 82,624 28,727 408,420
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME - NET 1,278,396 900,867 29,889 841,854 207,697 11,720,462
===============================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures
contracts 2,494,274 3,480,775 -- (47,455) (13,514) --
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 13,060,418 835,258 (1,067) 1,035,942 43,853 --
- -------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
of investments 5,680,803 111,506 422,419 667,977 17,441 --
- -------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 21,235,495 4,427,539 421,352 1,656,464 47,780 --
===============================================================================================================================
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $22,513,891 $5,328,406 $451,241 $2,498,318 $255,477 $11,720,462
===============================================================================================================================
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31, 1995.
See accompanying notes to financial statements
<PAGE> 39
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1994 and December 31, 1995
<TABLE>
<CAPTION>
MUTUAL FUND GROWTH STOCK UTILITIES STOCK
PORTFOLIO PORTFOLIO PORTFOLIO*
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994 1995
INCREASE(DECREASE)
IN NET ASSETS:
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income- net $ 1,278,396 $ 2,272,777 $ 900,867 $ 565,496 $ 29,889
Net realized gain (loss)
on investments
and futures contracts 15,554,692 302,941 4,316,003 705,537 (1,067)
Net change in unrealized
appreciation (depreciation)
of investments 5,680,803 (252,062) 111,506 (1,392,790) 422,419
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 22,513,891 2,323,656 5,328,406 (121,757) 451,241
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 34,671,819 26,769,231 1,680,821 1,440,673 3,908,655
Withdrawals (18,261,284) (27,513,563) (4,640,744) (5,322,563) (69,026)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
transactions of investors'
beneficial interests 16,410,535 (744,332) (2,959,923) (3,881,890) 3,839,629
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 38,924,426 1,579,324 2,368,483 (4,003,647) 4,290,870
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 83,184,703 81,605,379 22,168,547 26,172,194 --
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $ 122,109,129 $ 83,184,703 $ 24,537,030 $ 22,168,547 $ 4,290,870
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BOND SHORT-TERM GLOBAL MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994 1995 1994
INCREASE(DECREASE)
IN NET ASSETS:
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income- net $ 841,854 $ 526,976 $ 207,697 $ 279,212 $ 11,720,462 $ 8,115,651
Net realized gain (loss)
on investments
and futures contracts 988,487 (614,421) 30,339 (147,601) -- --
Net change in unrealized
appreciation (depreciation)
of investments 667,977 (5,626) 17,441 (5,068) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 2,498,318 (93,071) 255,477 126,543 11,720,462 8,115,651
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 2,890,694 2,140,676 1,159,854 1,025,710 753,617,719 733,486,217
Withdrawals (2,330,962) (2,217,176) (2,087,949) (11,962,648) (735,213,083) (717,226,708)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
transactions of investors'
beneficial interests 559,732 (76,500) (928,095) (10,936,938) 18,404,636 16,259,509
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 3,058,050 (169,571) (672,618) (10,810,395) 30,125,098 24,375,160
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 13,007,972 13,177,543 3,934,863 14,745,258 224,523,276 200,148,116
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $ 16,066,022 $ 13,007,972 $ 3,262,245 $ 3,934,863 $ 254,648,374 $ 224,523,276
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31, 1995.
See accompanying notes to financial statements
26 1995 Flex-funds Annual Report
<PAGE> 40
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Fund Portfolio
Year Ended Dec. 31,
Ratios/Supplemental Data 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Assets, End of Period ($000) 122,109 83,185 81,605
Ratio of Expenses to Average Net Assets* 0.95% 1.01% 1.03%
Ratio of Net Investment Income to Average Net Assets 1.26% 2.76% 0.09%
Portfolio Turnover Rate 186.13% 168.17% 279.56%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Growth Stock Portfolio
For The Period
Year Ended Dec. 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 24,537 22,169 26,172 25,556
Ratio of Expenses to Average Net Assets* 1.25% 1.23% 1.23% 1.22%(1)
Ratio of Net Investment Income to Average Net Assets 3.78% 2.35% 0.99% 2.04%(1)
Portfolio Turnover Rate 337.57% 102.76% 99.54% 129.44%
Average brokerage commission per share $0.0806 N/A N/A N/A
</TABLE>
(1)Annualized
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
UTILITIES STOCK PORTFOLIO
For The Period
June 21, 1995*
Ratios/Supplemental Data to Dec. 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Assets, End of Period ($000) 4,291
Ratio of Expenses to Average Net Assets* 2.32%(1)
Ratio of Net Investment Income to Average Net Assets 2.09%(1)
Ratio of Expenses to Average Net Assets
before directed brokerage payments 2.40%(1)
Ratio of Net Investment Income to Average Net Assets
before directed brokerage payments 2.01%(1)
Portfolio Turnover Rate 5.06%
Average brokerage commission per share $0.0600
</TABLE>
(1)Annualized
*Date of commencement of operations
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Bond Portfolio
For The Period
Year Ended December 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec. 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 16,066 13,008 13,178 11,126
Ratio of Expenses to Average Net Assets* 0.57% 0.56% 0.60% 0.58%(1)
Ratio of Net Investment Income to Average Net Assets 5.82% 4.15% 4.62% 5.40%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 0.71% 0.70% 0.71% 0.80%(1)
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 5.68% 4.01% 4.51% 5.18%(1)
Portfolio Turnover Rate 232.34% 707.57% 235.74% 132.53%
</TABLE>
(1) Annualized
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Global Portfolio
For The Period
Year Ended December 31, May 27, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec. 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 3,262 3,935 14,745 34,809
Ratio of Expenses to Average Net Assets* 0.73% 0.62% 0.64% 0.66%(1)
Ratio of Net Investment Income to Average Net Assets 5.24% 3.62% 4.58% 3.88%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 1.13% 0.86% 0.64% 0.72%(1)
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 4.84% 3.38% 4.58% 3.82%(1)
Portfolio Turnover Rate 369.36% 0.00% 780.99% 380.28%(1)
</TABLE>
(1) Annualized
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Money Market Portfolio
For the Period
Year Ended Dec. 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec. 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 254,648 224,523 200,148 244,272
Ratio of Expenses to Average Net Assets* 0.21% 0.19% 0.19% 0.18%(1)
Ratio of Net Investment Income to Average Net Assets 5.87% 4.28% 3.09% 3.60%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 0.38% 0.39% 0.40% 0.40%(1)
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 5.70% 4.08% 2.88% 3.38%(1)
Portfolio Turnover Rate N/A N/A N/A N/A
</TABLE>
(1)Annualized
*Please refer to pages 27-29 for total expense ratios relating to each
corresponding Fund.
See accompanying notes to financial statements
1995 Flex-funds Annual Report 27
<PAGE> 41
MUTUAL FUND PORTFOLIO
GROWTH STOCK PORTFOLIO
UTILITIES STOCK PORTFOLIO
BOND PORTFOLIO
SHORT-TERM GLOBAL PORTFOLIO
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Each separate Portfolio (the "Portfolios") is registered under the Investment
Company Act of 1940, as amended, as a no-load, open-end management investment
company which was organized as a trust under the laws of the State of New York.
Each Declaration of Trust permits the Trustees, who are the same for all the
Portfolios, to issue beneficial interests in each Portfolio. The following is a
summary of significant accounting policies followed by the Portfolios.
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 - Money market securities held in the Money Market Portfolio are
valued at amortized cost, which approximates market value in accordance with
Rule 2a-7 of the Investment Company Act of 1940. Money market securities held in
the five remaining Portfolios maturing more than sixty days after the valuation
date are valued at the last sales price as of the close of business on the day
of valuation, or, lacking any sales, at the most recent bid price or yield
equivalent as obtained from dealers that make markets in such securities. When
such securities are valued within sixty days or less to maturity, the difference
between the valuation existing on the sixty-first day before maturity and
maturity value is amortized on a straight-line basis to maturity. Securities
maturing within sixty days from their date of acquisition are valued at
amortized cost.
Securities which are traded on stock exchanges are valued at the last sales
price as of the close of business of the New York Stock Exchange on the day of
valuation, or, lacking any sales, at the closing bid prices. Securities traded
on the over-the-counter market are valued at the most recent bid price or yield
equivalent as obtained from one or more dealers that make markets in such
securities. Mutual funds are valued at the daily redemption value determined by
the underlying fund. Valuations in The Bond and Short-Term Global Portfolios are
determined as of 3:00 p.m. Eastern time.
Repurchase Agreements - It is the Portfolios' policy to take possession of the
collateral for repurchase agreements before payment is made to the seller.
Market value of the collateral must be at least 100% of the amount of the
repurchase agreement. During the period ended December 31, 1995 the Portfolios
wrote the following option contracts:
<TABLE>
<CAPTION>
Growth Stock Portfolio Bond Portfolio Mutual Fund Portfolio Short-Term Global Portfolio
No. of No. of No. of No. of
Contracts Premiums Contracts Premiums Contracts Premiums Contracts Premiums
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Period 0 $ 0 0 $ 0 0 $ 0 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Options Written 3,342 4,927,214 185 67,650 173 186,057 24 7,470
- ------------------------------------------------------------------------------------------------------------------------------------
Options Terminated (42) (45,852) (165) (56,800) (173) (186,057) (24) (7,470)
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at End of Period 3,300 $4,881,362 20 $ 10,850 0 $ 0 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Options & Futures - Each Portfolio except the Money Market Portfolio may engage
in transactions in financial futures contracts and options as a hedge against
the change in market value of the securities held in the portfolio, or which it
intends to purchase. The expectation is that any gain or loss on such
transactions will be substantially offset by any gain or loss on the securities
in the underlying portfolio or on those which are being considered for purchase.
To the extent that the Portfolio enters into futures contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change in
the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit either cash or securities in an amount
("initial margin") equal to a certain percentage of the contract value.
Subsequent payments ("variation margin") equal to changes in the daily
settlement price or last sale on the exchanges where they trade are paid or
received each day and are recorded as a gain or loss on futures contracts.
In the case of the Short-Term Global Portfolio, futures and options contracts
entered into will typically be futures and options on futures of a foreign
currency. The Portfolio is presently engaging only in the buying and selling of
futures contracts on foreign currencies. The expectation is that the Portfolio
will be able to participate in interest rate differentials between the U.S.
dollar and foreign currencies by investing in futures on the foreign currencies
in lieu of investing in short-term foreign debt instruments. At the same time,
the Portfolio will take advantage of the favorable transaction cost associated
with the purchase of a futures contract in lieu of a cash instrument. To the
extent that the Portfolio enters into futures contracts on foreign currencies,
the Portfolio exposes itself to a liability, which at a maximum cannot exceed
the value given for the contracts, and will be required to pay or receive a sum
of money measured by the change in the market value of that currency's index.
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
28 1995 Flex-funds Annual Report
<PAGE> 42
instruments will be segregated to complete the purchase. Options are valued on
the basis of the daily settlement price or last sale on the exchanges where they
trade and the changes in value are recorded as an unrealized gain or loss until
sold, exercised or expired. In the case of a written option, premiums received
by each portfolio upon writing the option are recorded in the liability section
of the Statement of Assets and Liabilities and are subsequently adjusted to
current market value. When the written option is closed, exercised or expired,
the portfolio realizes a gain or loss and the liability is eliminated.
Income Taxes - It is the Portfolios' policy to comply with the requirements of
the Internal Revenue Code applicable to it. Therefore, no Federal income tax
provision is required.
Organizational Costs - The costs related to the organization of each of the six
Portfolios have been deferred and are being amortized by each Portfolio on a
straight-line basis over a five-year period.
Other - The Portfolios follow industry practice and record security transactions
on the trade date. Gains and losses on security transactions are determined on
the specific identification basis. Dividend income is recognized on the
ex-dividend date, and interest income (including amortization of premium and
discount) is recognized as earned.
2. INVESTMENT ADVISORY, AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield Investors,
Inc. (MII), provides the Portfolios with investment management, research,
statistical and advisory services, and pays certain other expenses of the
Portfolios. Miller/Howard Investments, Inc. (Subadviser) serves as the Utilities
Stock Portfolio's Subadviser under an Investment Subadvisory Agreement between
RMA and the Subadviser. For such services the Portfolios pay monthly a fee based
upon the average daily value of each Portfolios' net assets at the following
annual rates: Mutual Fund, Growth Stock, and Utilities Stock Portfolio, 1% of
average net assets up to $50 million, 0.75% of average net assets exceeding $50
million up to $100 million and 0.60% of average net assets exceeding $100
million; Bond and Short-Term Global Income Portfolios, 0.40% of average net
assets up to $100 million and 0.20% of average net assets exceeding $100
million; Money Market Portfolio, 0.40% of average net assets up to $100 million
and 0.25% of average net assets exceeding $100 million. During the year ended
December 31, 1995, RMA voluntarily waived a portion of its investment advisory
fees in the Money Market and Bond Portfolios, and all of its investment advisory
fees in the Short-Term Global Income Portfolio.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
accounting services agent for all of the Portfolios. The minimum annual fee for
all such services for the Mutual Fund, Growth Stock, Bond, Short-Term Global,
and Utilities Stock Portfolios is $7,500. Subject to the applicable minimum fee,
each Portfolio's annual fee, payable monthly, is computed at the rate of 0.15%
of the first $10 million, 0.10% of the next $20 million, 0.02% of the next $50
million, and 0.01% in excess of $80 million of the respective Portfolio's
average net assets. In the Money Market Portfolio the minimum annual fee for
accounting services is $30,000. Subject to the applicable minimum fee, the Money
Market Portfolio's annual fee, payable monthly, is computed at the rate of 0.15%
of the first $10 million, 0.10% of the next $20 million, 0.02% of the next $50
million and 0.01% in excess of $80 million of the Portfolio's average net
assets. Certain officers and/or trustees of the Funds and each Portfolio are
officers and/or directors of MII, RMA and MFS.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the year ended December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
- --------------------------------------------------------------------------------
<S> <C> <C>
Mutual Fund Portfolio $153,526,438 $77,373,285
- --------------------------------------------------------------------------------
Growth Stock Portfolio $ 20,462,275 $10,183,074
- --------------------------------------------------------------------------------
Utilities Stock Portfolio $ 3,636,056 $ 131,312
- --------------------------------------------------------------------------------
</TABLE>
As of December 31, 1995, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised of the
following:
<TABLE>
<CAPTION>
Net Unrealized
Unrealized Unrealized Appreciation
Investment Appreciation Depreciation (Depreciation)
Cost of Investments of Investments of Investments
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mutual Fund Portfolio $115,644,899 $6,814,624 $(1,500,093) $5,314,531
- ----------------------------------------------------------------------------------------------------------------------------
Growth Stock Portfolio $ 24,438,982 $4,474,745 $(4,392,215) $ 82,530
- ----------------------------------------------------------------------------------------------------------------------------
Utilities Stock Portfolio $ 3,863,676 $ 428,434 $ (6,015) $ 422,419
- ----------------------------------------------------------------------------------------------------------------------------
Bond Portfolio $ 15,173,624 $ 664,380 $ 0 $ 664,380
- ----------------------------------------------------------------------------------------------------------------------------
Short-Term Global
Portfolio $ 3,217,124 $ 17,023 $ 0 $ 17,023
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 43
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of the Mutual Fund Portfolio, Growth
Stock Portfolio, Utilities Stock Portfolio, Bond Portfolio, Short-Term Global
Portfolio, and Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio, Short-Term Global Portfolio, and Money Market Portfolio, including
the schedules of portfolio investments, as of December 31, 1995, 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, 1995, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio, Short-Term Global Portfolio, and Money Market Portfolio at December
31, 1995, 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.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Columbus, Ohio
February 2,1996
<PAGE> 44
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
The following report and financial statement are included in
Part B: Portfolio of Investments - December 31, 1995; Statements of
Assets and Liabilities - December 31, 1995; Statements of Operations -
for the year ended December 31, 1995; Statements of Changes in Net
Assets for the years ended December 31, 1995 and 1994; Financial
Highlights for the years ended December 31, 1995, 1994, 1993 and the
period May 1, 1992 to December 31, 1992; Notes to Financial Statements;
Independent Auditors' Report dated February 2, 1996.
(b) EXHIBITS
*1. Declaration of Trust of the Registrant.
*2. By-Laws of the Registrant.
*5. Form of Investment Advisory Agreement between the
Registrant and R. Meeder & Associates, Inc.
*6. Form of Exclusive Placement Agent Agreement between
the Registrant and Signature Broker-Dealer Services,
Inc.
**8. Form of Custody Agreement between the Registrant and
Star Bank, N.A., Cincinnati.
**9. (a) Form of Administration Agreement between the
Registrant and Mutual Funds Service Co. (MFSCo)
(b) Form of Accounting Services Agreement between
the Registrant and MFSCo.
11. Consent of KPMG Peat Marwick LLP, Independent
Certified Public Accountants, filed herewith.
**13. Investment representation letters of initial
investors.
-------------------
*Filed April 30, 1992 and incorporated herein by reference.
**Filed June 8, 1992 and incorporated herein by reference.
C-1
<PAGE> 45
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Beneficial Interests 2 (as of December 31, 1995)
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as Exhibit 1 to Registrant's initial Registration Statement on
April 30, 1992.
The Trustees and officers of the Registrant are insured under an errors
and omissions liability insurance policy and under the fidelity bond required by
Rule 17g-1 under the Investment Company Act of 1940 (the "1940 Act").
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
NAME ADDRESS
Signature Broker-Dealer 6 St. James Avenue,
Services, Inc. Suite 900
(exclusive placement agent) Boston, MA 02116
R. Meeder & Associates, Inc. 6000 Memorial Drive
(investment adviser) Dublin, OH 43017
Mutual Funds Service Co. 6000 Memorial Drive
(transfer and accounting services Dublin, OH 43017
agent)
Star Bank, N.A., Cincinnati Star Bank Center
(custodian) 425 Walnut Street
Cincinnati, OH 45202
C-2
<PAGE> 46
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-3
<PAGE> 1
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Trustees of
Bond Portfolio:
We consent to the use of our report included herein dated February 2, 1996 on
the financial statements of the Mutual Fund Portfolio, Growth Stock Portfolio,
Utilities Stock Portfolio, Bond Portfolio, Short-Term Global Portfolio, and
Money Market Portfolio as of December 31, 1995 and for the periods indicated
therein and to the reference to our firm under the heading "Independent
Accountants" in Part B of the Registration Statement.
KPMG Peat Marwick LLP
Columbus, Ohio
April 18, 1996
<PAGE> 2
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Dublin and State of Ohio on the 19th day of April, 1996.
BOND PORTFOLIO
By /s/ Donald F. Meeder
----------------------------
Donald F. Meeder
Secretary/Treasurer
