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As filed with the Securities and Exchange Commission on December 6, 1995.
File No. 811-6647
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 5
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
GROWTH STOCK 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
One Lewis Wharf
Boston, MA 02110
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EXPLANATORY NOTE
This Amendment to the Registration Statement of Growth Stock 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.
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PART A
Not applicable.
A-1
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PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS.
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Page
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General Information and History . . . . . . . . . . . B-1
Investment Objective and Policies . . . . . . . . . . B-1
Management of the Portfolio . . . . . . . . . . . . . B-10
Control Persons and Principal Holders of Securities . B-12
Investment Advisory and Other Services . . . . . . . B-12
Brokerage Allocation and Other Practices . . . . . . B-14
Capital Stock and Other Securities . . . . . . . . . B-16
Purchase, Redemption and Pricing of Securities . . . B-18
Tax Status . . . . . . . . . . . . . . . . . . . . . B-18
Underwriters . . . . . . . . . . . . . . . . . . . . B-19
Calculation of Performance Data . . . . . . . . . . . B-19
Financial Statements . . . . . . . . . . . . . . . . B-19
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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 Growth Stock 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.
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Consequently, the Portfolio's assets may at times be invested for defensive
purposes in bonds and money market instruments. (See "Money Market Instruments
and Bonds" below.)
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. High transaction costs could result
compared with other investment companies.
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 103% for the year ended December 31, 1994 (100% in 1993).
The Portfolio began the year with 50% of the portfolio invested in the
stock market and became fully invested in early January. The Portfolio remained
fully invested in the stock market through 1994's first quarter rally. The
Portfolio was invested defensively from March through the end of the year. The
assets of the Portfolio were defensive via the implementation of hedging
strategies or by investment in short-term bonds or money market instruments due
to the Adviser's evaluation that the level of risk in the stock and bond markets
was high and it was not prudent to have exposure to those markets.
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 Revenue Code of 1986, as amended,
although these restrictions could inhibit a rapid change in the Portfolio's
investments. The Portfolio will strive for a positive investment return each
calendar year.
The Portfolio will invest in two representative groups of common
stocks; one comprised of large capitalization stocks, the other of small
capitalization stocks. At times, the Portfolio may invest more heavily in one
group than the other. For the purposes of this policy, "large capitalization"
stocks are defined as stocks of companies that rank in the top one third of the
common stocks listed on the New York Stock Exchange ("N.Y.S.E."), based upon
their equity capitalization. The "small capitalization" group are defined as
stocks of companies that rank in the middle one third of the common stocks
listed on the N.Y.S.E., based upon their equity capitalization. This group of
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stocks would generally rank near or slightly below the average capitalization of
all common stocks listed on the N.Y.S.E.
Stocks may be deleted from either group in order to meet
diversification requirements or due to mergers, takeovers, or bankruptcies.
In seeking to attain the objective of the Portfolio, the Adviser will
change its investments from common stocks to a defensive position and back again
to meet changing conditions in the stock market. Although earning current income
will not be an objective, some income may be realized from stocks, from
convertible securities, or, when the Portfolio takes a defensive position, from
debt instruments.
The Portfolio's assets will be invested in stocks except when invested
in bonds or money market instruments for defensive purposes. The Portfolio will
invest in common stocks when the Adviser believes the stock market environment
is favorable. Assets will be invested in money market instruments or bonds when
the Adviser believes a weak or declining trend in the stock market is occurring.
The Portfolio will not invest in bonds or money market instruments except for
defensive purposes, nor will it invest in bonds for capital appreciation.
MONEY MARKET INSTRUMENTS AND BONDS
When investing in money market instruments or bonds, 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.
- Bank Obligations and Instruments Secured Thereby--obligations
(including certificates of deposit, time deposits and bankers'
acceptances) of domestic banks having total assets of $1,000,000,000 or
more, instruments secured by such obligations and obligations of
foreign branches of such banks, if the domestic parent bank is
unconditionally liable to make payment on the instrument if the foreign
branch fails to make payment for any reason. The Portfolio may also
invest in obligations (including certificates of deposit and bankers'
acceptances) of domestic branches of foreign banks having assets
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of $1,000,000,000 or more, if the domestic branch is subject to the
same regulation as United States banks. The Portfolio will not invest
at time of purchase more than 25% of its assets in obligations of
banks, nor will the Portfolio invest more than 10% of its assets in
time deposits.
- High Quality Commercial Paper--the Portfolio may invest in
commercial paper rated no lower than "A-2" by Standard & Poor's
Corporation ("Standard & Poor's") or "Prime-2" by Moody's Investors
Service, Inc. ("Moody's"), or, if not rated, issued by a company having
an outstanding debt issue rated at least A by Standard & Poor's or
Moody's.
- Private Placement Commercial Paper--private placement
commercial paper ("Rule 144A securities") consists of unregistered
securities which are traded in public markets to qualified
institutional investors, such as the Portfolio. The Portfolio's risk is
that the universe of potential buyers for the securities, should the
Portfolio desire to liquidate a position, is limited to qualified
dealers and institutions, and therefore such securities could have the
effect of being illiquid. A position in such Rule 144A securities would
ordinarily be subject to a 10% limitation. The Board of Trustees of the
Portfolio has identified the market for, and the categories of
qualified buyers of, Rule 144A securities and has determined that it is
sufficient to consider such securities to be liquid and not subject to
the 10% illiquid asset limitation. The Trustees have determined that
the Portfolio may invest up to 35% of its assets, at cost on the date
of purchase, in private placement commercial paper.
- High Grade Corporate Obligations--obligations rated at least A
by Standard & Poor's or by Moody's. See rating information below.
- Repurchase Agreements Pertaining to the Above--the Portfolio
may invest without limit in any of the above securities subject to
repurchase agreements with any Federal Reserve reporting dealer or
member bank of the Federal Reserve System. 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 repurchase 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.
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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
not invest more than 10% of its assets, at time of purchase, in
repurchase agreements which mature in excess of seven days.
RATINGS
1. Moody's Corporate Bond Ratings:
Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
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2. Standard & Poor's Corporate Bond Ratings:
AAA--Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they move
with interest rates, and hence provide the maximum safety on all counts.
AA--Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
A--Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions. Interest and principal are regarded
as safe. They predominantly reflect money rates in their market behavior but, to
some extent, also economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
3. A-1 and P-1 Commercial Paper Ratings:
Commercial paper rated A-1 by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A-1, A-2, or
A-3.
The rating P-1 is the highest commercial paper rating assigned by
Moody's Investors Service, inc. ("Moody's"). Among the factors considered by
Moody's in assigning ratings are the following: (1) evaluation of the management
of the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which
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exist with the issuer; and (8) recognition by the management of obligations
which may be present or may arise as a result of public interest questions and
preparations to meet such obligations.
4. Description of Permitted Money Market Instruments:
Commercial Paper--refers to promissory notes issued by corporations in
order to finance their short term credit needs.
U.S. Government Obligations--are bills, certificates of indebtedness,
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury such as, for example, the Government National Mortgage Association;
others by the right of the issuer to borrow from the Treasury, authority or
instrumentality such as, for example, Federal Home loan Mortgage and Federal
Home Loan Bank.
Repurchase Agreements--a repurchase transaction occurs when an investor
buys a security and simultaneously agrees to resell it at a later date to the
person from whom it was bought, at a higher price. The price differential
represents interest for the period the security is held. Repurchase transactions
will normally be entered into with banks and securities brokers. The Portfolio
could suffer a loss if the bank or securities broker with which the Portfolio
had a repurchase agreement were to default.
Certificates of Deposit--are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified or
variable rate of return and are normally negotiable.
Banker's Acceptances--are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
Corporation Obligations--include bonds and notes issued by corporations
in order to finance longer term credit needs.
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
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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 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
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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 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
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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
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Position
Name and Address Held Principal Occupation
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ROBERT S. MEEDER, SR.* Trustee/President Chairman of R. Meeder &
Associates, Inc., an
Investment Adviser.
MILTON S. Trustee Retired, formerly a
BARTHOLOMEW, ESQ. practicing attorney in
1424 Clubview Blvd.S. Columbus, Ohio.
Worthington, OH 43235 Comprises the Portfolio's
Audit Committee.
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.
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WALTER L. OGLE Trustee Executive Vice President,
One Corporate Drive Godwins Booke &
Clearwater, FL 34622 Dickenson, employee
benefit, compensation and
human resource
consultants.
NEIL P. RAMSEY Trustee President, Ramsey
Suite 215 Financial, a private
1230 Hurstbourne Parkway investment management
Louisville, KY 40222 company
PHILIP A. VOELKER* Trustee and Vice Senior Vice President of
President R. Meeder & Associates,
Inc.
WESLEY F. HOAG Vice President General Counsel and Chief
Operating Officer of R.
Meeder & Associates, Inc.
(since July 1993);
Attorney, Porter, Wright,
Morris & Arthur, a law
firm (October 1984 to
June 1993)
ROBERT S. MEEDER, JR. Vice President President, R. Meeder &
Associates, Inc.
DONALD F. MEEDER Secretary/Treasurer Vice President of R.
Meeder & Associates,
Inc., and President of
Mutual Funds Service Co.
STEVEN T. McCABE Assistant Treasurer Controller,R.Meeder &
Associates, Inc.
JAMES B. CRAVER Assistant Secretary Senior Vice President of
6 St. James Avenue Signature Financial
Boston, MA 02116 Group, Inc.
</TABLE>
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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. Trustee fees for the Growth Stock Portfolio
totaled $3,750 for the year ended December 31, 1994 ($3,600 in 1993). Audit
Committee fees for the Portfolio totaled $160 for the year ended December 31,
1994 ($160 in 1993). 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 Growth 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 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
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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 1.00% of the first of the first $50 million, 0.75% of the next $50
million and 0.60% in excess of $100 million of the Portfolio's average net
assets. For the year ended December 31, 1994, the Portfolio paid fees to the
Adviser totaling $240,045 ($259,462 in 1993; $204,128 in 1992).
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 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.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick, LLP serves as the Portfolio's independent
accountants and provides audit and accounting services including (i) auditing
the annual financial statements, (ii) accounting assistance
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and consultation with respect to the preparation of filings with the Securities
and Exchange Commission and (iii) preparation of annual income tax returns.
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 reasonableness of brokerage commissions paid by the Portfolio in
relation to transaction and research services received is evaluated by the staff
of the Adviser on an ongoing basis. The general level of brokerage charges and
other aspects of 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 brokers
have customarily furnished in connection with brokerage transactions and that,
in compensating brokers 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.
The Adviser utilizes brokers who have demonstrated an ability to
execute orders on a favorable basis, or who are able to provide research or
other services. The Adviser does not knowingly authorize a higher rate of
commission to one broker than to any other. In order
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to assure itself that the Portfolio is paying reasonable commissions, the
Adviser will periodically attempt to determine the rates being paid by other
institutional investors of similar size.
Currently, the Adviser negotiates for commissions equal to no more than
20 basis points (1/5 of 1%) and is generally able to hold commissions at or
below that level. For the fiscal year ended December 31, 1994, this approach
resulted in an average commission of 5.8 cents per share on portfolio purchases
and sales. Debt securities are purchased on a net basis.
The Adviser, and the open-end management investment companies managed
by the Adviser (including the Portfolio) have previously purchased various
research and other services with brokerage commissions paid to or for the
benefit of certain entities, whose service, annual fees and charges for the year
ended December 31, 1994 were as follows: (1) Standard & Poors Securities, Inc.,
fixed income research, $7,762 per year, $6,385 paid in 1994. (2) The Clifton
Group, equity and fixed income research and trading $40,516 per year, $40,516
paid in 1994. (3) Yanni Bilkey, fixed income research, $7,500 per year, $7,500
paid in 1994. (4) Wellington & Co., miscellaneous research services and reports,
$7,343 per year, $7,343 paid in 1994. (5) Merrill Lynch Capital Markets,
miscellaneous research services and reports, $6,451 per year, $6,451 paid in
1994. (6) Bloomberg Financial, equity and fixed income research, $20,298 per
year, $20,298 paid in 1994. (7) Moody's Investor Services, fixed income
research, $11,736 per year, $11,736 paid in 1994. (8) Commodity Quote Graphics,
equity and fixed income research, $13,220 per year, $13,220 paid in 1994. These
entities receive payments through Wellington and Company and The Citation Group
which received $1.75 and $1.70 respectively for each $1 paid. The fees listed
above include those paid by both RMA and the Trust. Total commissions paid by
the Trust to Wellington and Company and The Citation Group amounted to $13,625
and $4,035, respectively.
The Board of Trustees of the Portfolio has approved an arrangement
between the Adviser and Miller/Howard Investments, Inc. under which
Miller/Howard Investments, Inc. will provide the Adviser with research services
regarding securities under consideration for purchase and sale by the Portfolio
and the timing of the purchase and sale of such securities. Miller/Howard
Investments, Inc. will be paid for such research services by one or more
broker/dealers executing securities transactions on behalf of the Portfolio.
Lowell Miller, the President and a director of Miller/Howard Investments, Inc.,
is a Vice President of The Flex-funds. Miller/Howard Investments, Inc. serves as
the subadviser to the Utilities Stock Portfolio. All of the assets of the Total
Return Utilities Fund, a series of The Flex-funds,
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and the BTB Fund, a series of The Flex-Partners, are invested in the Utilities
Stock Portfolio.
It is the opinion of the Trustees of the Portfolio and of the Adviser
that the receipt of research from brokers 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, 1994 the Growth Stock Portfolio paid
total commissions of $135,422 ($99,419 in 1993; $248,993 in 1992).
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
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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), 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.
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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 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 4:00 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. (As of the date of this Registration Statement, the New
York Stock Exchange is open for trading every weekday except for the following
holidays (or days on which such holiday is observed): New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor 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 each closing of the N.Y.S.E. on the basis of
the last sale on such exchange each day that the exchange is open for business.
If there is no sale on that day, or if the security is not listed, it is valued
at its last bid quotation on the exchange or, in the case of unlisted
securities, as obtained from an established market maker. Futures contracts are
valued on the basis of the cost of closing out the liability; i.e., at the
settlement price of a closing contract or at the asked quotation for such a
contract if there is no sale. 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
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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.
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.
Not applicable.
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PART C
Not Applicable.
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SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this 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 6th day of December, 1995.
GROWTH STOCK PORTFOLIO
By /s/ Wesley F. Hoag
---------------------
Wesley F. Hoag
Vice President
