As filed with the Securities and Exchange Commission on April 30, 1999.
File No. 811-6646
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 8
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
MUTUAL FUND 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
P. O. Box 811
Dover, MA 02030-0811
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EXPLANATORY NOTE
This Amendment to the Registration Statement of Mutual Fund 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
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.
Mutual Fund 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 Portfolio is growth of capital. To
pursue this goal, the Portfolio invests primarily in other growth mutual funds
that are not affiliated with the fund. The Portfolio pursues its investment goal
through asset allocation and mutual fund selection. Normally, at least 65% of
the value of the Portfolio's total assets will be invested in mutual funds. The
mutual funds in which the Portfolio invests are primarily growth funds investing
in common stocks. In the underlying mutual funds, current income will usually be
of secondary importance. The adviser overweights mutual fund types that it
believes represent above average market potential with below average market
risk. The adviser continually evaluates market capitalization (for example, blue
chip versus small capitalization) and sector rotation (for example, high tech
versus industrial companies) when selecting mutual funds.
The Portfolio may invest up to 100% of its assets in money market
securities and investment grade bonds as a defensive tactic. When invested
defensively, the Portfolio could be unable to achieve its investment objective.
The Portfolio places a high degree of importance on maintaining and protecting
portfolio values from adverse market conditions. The Portfolio strives to avoid
losses during high risk market environments and strives to provide attractive
returns during low risk markets. When the adviser's evaluation of the stock
market indicates that the risks of the stock market are grater than the
potential rewards, the Portfolio will reduce or eliminate its position in growth
mutual funds in order to attempt to preserve your capital. The Portfolio may
also invest in common stock directly.
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The Portfolio may invest in "traditional" derivatives, such as financial
futures contracts and related options as a hedge against changes, resulting form
market conditions, in the value of securities held or intended to be held by the
Portfolio.
The Portfolio will seek to achieve its investment goal through asset
allocation and mutual fund selection. Under normal circumstances, at least 65%
of the value of the Portfolio's total assets will be invested in mutual funds.
The underlying mutual funds will consist of diversified mutual funds which
invest primarily in common stock or securities convertible into or exchangeable
for common stock (such as convertible preferred stock, convertible debentures or
warrants) and which seek long-term growth or appreciation, with current income
typically of secondary importance. The Portfolio will not invest in other funds
of the Flex-funds family of funds or the Flex-Partners family of funds, the
corresponding portfolios of which are also managed by the adviser.
The Portfolio will generally purchase "no-load" mutual funds, which are
sold and purchased without a sales charge. However, the Portfolio may purchase
"load" mutual funds only if the load, or sales commission, is waived for
purchases or sales made by the Portfolio.
The Portfolio may at times desire to gain exposure to the stock market
through the purchase of "index" funds (funds which purchase stocks represented
in popular stock market averages) with a portion of its assets.
The manager addresses asset allocation decisions by making shifts in the
mix of stocks, bonds and cash in the Portfolio. The Portfolio may at times
assume a defensive position by investing up to 100% of its assets in money
market securities and investment grade bonds.
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 the Portfolio to
implement its hedging strategies are considered derivatives. The value of
derivatives can be affected significantly by even small market movements,
sometimes in 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.
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A hedging program involves entering into an "option" or "futures"
transaction in lieu of the actual purchase or sale of securities. At present,
many groups of common stocks (stock market indices) may be made the subject of
futures contracts, while 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 Mutual Fund 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 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. Firstar, N.A., Cincinnati ("Firstar") is the
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Portfolio's custodian and Mutual Funds Service Co. is the Portfolio's transfer
agent and dividend paying agent. The address of the custodian is 425 Walnut
Street, Cincinnati, Ohio 45202 and the address of Mutual Funds Service Co. 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.
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; Mutual
Funds Service Co.; Adviser Dealer Services, Inc., a registered broker-dealer;
Opportunities Management Co., a venture capital investor; Meeder Advisory
Services, Inc., a registered investment adviser; and OMCO, Inc., a registered
commodity trading adviser and commodity pool operator.
The Adviser's officers and directors and their principal offices are as
follows: Robert S. Meeder, Sr., Chairman and Sole Director; Robert S. Meeder,
Jr., President and Treasurer; Philip A. Voelker, Senior Vice President and Chief
Investment Officer; Donald F. Meeder, Vice President and Secretary; Thomas E.
Line, Chief Operating Officer; Michael J. Sullivan, Vice President of Sales and
Marketing; and Wesley F. Hoag, Vice President and General Counsel.
Robert S. Meeder, Jr. and Philip A. Voelker are the portfolio managers
primarily responsible for the day-to-day management of the Mutual Fund
Portfolio. Mr. Meeder, is a Trustee and Vice President of The Flex-funds and The
Flex-Partners, Trustee and Vice President of the Mutual Fund Portfolio and
President of R. Meeder & Associates ("the Manager"). Mr. Meeder has been
associated with the Manager since 1983 and has been managing the Portfolio since
1988.
Mr. Voelker is a Vice President and Trustee of the Portfolio, Vice
President of The Flex-funds and The Flex-Partners, and Senior Vice President of
the Manager. Mr. Voelker has been associated with the Manager since 1975 and
began co-managing the Portfolio on April 30, 1998.
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The Adviser earns an annual fee, payable in monthly installments, at the
rate of 1% 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.
Accounting, transfer agency and dividend disbursing services are provided
to the Portfolio by Mutual Funds Service Co., 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, 1998, total
payments from the Portfolio to Mutual Funds Service Co. amounted to
$1,058,035.
TRANSFER AGENT AND CUSTODIAN
The Portfolio has entered into an Administration and Accounting Services
Agreement with Mutual Funds Service Co. pursuant to which Mutual Funds Service
Co. 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,
Firstar 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; governmental 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 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
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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.
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.
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Investor inquiries may be directed to the Portfolio at 6000 Memorial Drive,
Dublin, Ohio 43017.
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 listed or traded on any
national securities exchange are valued at each closing of the New York Stock
Exchange 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 has been no sale. Money market
instruments (certificates of deposit, commercial paper, etc.) 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 return 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.
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
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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 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.
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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-4
Control Persons and Principal Holders of Securities . . B-8
Investment Advisory and Other Services . . . . . . . . B-8
Brokerage Allocation and Other Practices . . . . . . . B-9
Capital Stock and Other Securities . . . . . . . . . . B-11
Purchase, Redemption and Pricing of Securities . . . . B-13
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 Mutual Fund 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. Consequently, the Portfolio's assets may at times
be invested for defensive purposes in bonds and 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.
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The defensive investment strategy can produce high turnover rates when
calculated in accordance with SEC rules. The portfolio turnover rate for the
Portfolio was 128% for the year ended December 31, 1998 (395% in 1997). The
Portfolio turnover rate decreased in 1998 because the Portfolio implemented
defensive strategies less frequently than in 1997.
The Adviser will select mutual funds for inclusion in the Portfolio on the
basis of the industry classifications represented in their portfolios, their
specific portfolio holdings, their performance records, their expense ratios,
and the compatibility of their investment policies and objectives with those of
the Portfolio.
The Adviser utilizes an asset allocation system for deciding when to invest
in mutual funds or alternatively in temporary investments such as are described
below. The use of this system entails recurring changes from a fully invested
position to a fully defensive position and vice-versa. (See "Hedging Strategies"
in Part A.)
In purchasing shares of other mutual funds the Portfolio will agree to vote
the shares in the same proportion as the vote of all other holders of such
shares.
The Portfolio has adopted certain investment restrictions which cannot be
changed except with the vote of a majority of the Portfolio's outstanding voting
securities. These restrictions are applicable to the Portfolio and are described
elsewhere in this Part B. Investment restrictions for the Portfolio permit it to
purchase the shares of other investment companies (mutual funds); and to invest
25% or more of its assets in any one industry.
The Portfolio may only purchase up to 3% of the total outstanding
securities of any underlying mutual fund. The holdings of any "affiliated
persons" of the Portfolio, as defined in the Investment Company Act of 1940 (the
"1940 Act"), must be included in the computation of the 3% limitation.
Accordingly, when "affiliated persons" hold shares of an underlying mutual fund,
the Portfolio will be limited in its ability to fully invest in that mutual
fund. The Adviser may then, in some instances, select alternative investments.
The 1940 Act also provides that an underlying mutual fund whose shares are
purchased by the Portfolio may be allowed to delay redemption of its shares in
an amount which exceeds 1% of its total outstanding securities during any period
of less than 30 days. Shares held by the Portfolio in excess of 1% of a mutual
fund's outstanding securities therefore may not be considered readily disposable
securities.
Under certain circumstances, an underlying mutual fund may determine to
make payment of a redemption by the Portfolio wholly or partly by a distribution
in kind of securities from its portfolio, in lieu of cash, in conformity with
rules of the Securities and Exchange Commission. In such cases, the Portfolio
may hold securities distributed by an underlying mutual fund until the Adviser
determines that it is appropriate to dispose of such securities.
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Portfolio investment decisions by an underlying mutual fund will be made
independent of investment decisions by other underlying mutual funds. Therefore,
an underlying mutual fund may be purchasing shares of a company whose shares are
simultaneously being sold by some other underlying mutual fund. The result of
this would be an indirect transaction expense (principally commissions) for the
Portfolio, without its having changed its investment position.
The Portfolio may invest in common stocks based upon criteria described in
its investment objective. Because the Portfolio will only invest directly in
common stocks to replicate the performance of popular stock market indices the
selection of stocks would be limited to those stocks found in a particular
index.
For temporary defensive purposes, the Portfolio may invest in (or enter
into repurchase agreements with banks and broker-dealers with respect to)
corporate bonds, U.S. Government securities, commercial paper, certificates of
deposit or other money market instruments. The Portfolio may engage in hedging
transactions to the extent and for the purposes set forth in Part A.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Portfolio as
fundamental policies. Under 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
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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 or
other investment companies; (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 25% or more of its total assets at
time of purchase (taken at value) in the securities of companies in any one
industry (U.S. Government Securities and securities of other investment
companies are exempt from this restriction); (l) 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; (m) 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; (n) Purchase participations or other direct interests in oil,
gas or other mineral exploration or development programs; (o) Invest in
warrants; and (p) 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.
NAME, ADDRESS AND AGE POSITION HELD PRINCIPAL OCCUPATION
ROBERT S. MEEDER, SR.*+, 70 Trustee/President Chairman of R. Meeder &
Associates, Inc., an
investment adviser;
Chairman and Director of
Mutual Funds Service Co.,
the Funds' transfer agent.
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<PAGE>
MILTON S. BARTHOLOMEW, 70 Trustee Retired; formerly a
1424 Clubview Boulevard, S. practicing attorney in
Worthington, OH 43235 Columbus, Ohio; member of
each Fund's Audit
Committee.
ROGER D. BLACKWELL, 58 Trustee Professor of Marketing and
Blackwell Associates, Inc. Consumer Behavior, The
3380 Tremont Road Ohio State University;
Columbus, OH 43221 President of Blackwell
Associates, Inc., a
strategic consulting firm.
ROBERT S. MEEDER, JR.*, 38 Trustee and President of R. Meeder &
Vice President Associates, Inc.
WALTER L. OGLE, 60 Trustee Executive Vice President
400 Interstate North Parkway of Aon Consulting, an
Suite 1630 employee benefits
Atlanta, GA 30339 consulting group.
CHARLES A. DONABEDIAN, 56 Trustee President, Winston
Winston Financial, Inc. Financial, Inc., which
200 TechneCenter Drive provides a variety of
Suite 200 marketing and consulting
Milford, OH 45150 services to investment
management companies; CEO,
Winston Advisors, Inc., an
investment adviser.
JAMES W. DIDION, 68 Trustee Retired; formerly
8781 Dunsinane Drive Executive Vice President
Dublin, OH 43017 of Core Source, Inc., an
employee benefit and
Workers' Compensation
administration and
consulting firm
(1991-1997).
JACK W. NICKLAUS II, 38 Trustee Designer, Nicklaus Design,
11780 U.S. Highway #1 a golf course design firm
North Palm Beach, FL 33408 and division of Golden
Bear International, Inc.
B-5
<PAGE>
PHILIP A. VOELKER*+, 45 Trustee and Vice Senior Vice President and
President Chief Investment Officer
of R. Meeder & Associates,
Inc.
JAMES B. CRAVER*, 55 Assistant Secretary Assistant Secretary and
42 Miller Hill Road Assistant Treasurer of
Box 811 Adviser Dealer Services,
Dover, MA 02030 Inc.; Practicing Attorney;
Special Counsel to
Flex-Partners, Flex-funds
and their Portfolios;
Senior Vice President of
Signature Financial Group,
Inc. (January 1991 to
August 1995).
DONALD F. MEEDER*+, 60 Secretary/Treasurer Vice President of R.
Meeder & Associates, Inc.;
Secretary of Mutual Funds
Service Co., the Funds'
transfer agent.
WESLEY F. HOAG*+, 42 Vice President Vice President and General
Counsel of R. Meeder &
Associates, Inc. and
Mutual Funds Service Co.
(since July 1993);
Attorney, Porter, Wright,
Morris & Arthur, a law
firm (October 1984 to
June 1993).
RICHARD A. CLEMENS*+, 31 Assistant Treasurer Manager/Financial
Reporting, Mutual Funds
Service Co., the Funds'
transfer agent (since
March 1997); Manager,
Financial Administration,
BISYS Fund Services (May
1995 to February 1997);
Supervising Senior
Accountant, Ernst & Young
LLP (October 1990 to
May 1995)
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<PAGE>
* Interested Person of the Trust (as defined in the Investment Company Act of
1940), The Flex-funds, Flex-Partners and each Portfolio.
+ P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017.
Robert S. Meeder, Sr. is Donald F. Meeder's uncle and Robert S. Meeder,
Jr.'s. father.
The following table shows the compensation paid by the Portfolio and all
other mutual funds advised by the Adviser, including The Flex-funds, The
Flex-Partners and the corresponding portfolios of The Flex-Partners and The
Flex-funds (collectively, the "Fund Complex") as a whole to the Trustees of the
Portfolio during the fiscal year ended December 31, 1998.
COMPENSATION TABLE
Pension or Total
Retirement Compensation
Benefits from
Aggregate Accrued as Estimated Registrant and
Compensation Part of Annual Fund Complex
from the Portfolio Benefits Upon Paid TO
TRUSTEE PORTFOLIO(1) EXPENSE RETIREMENT TRUSTEE(1)(2)
----------- ------- ------------- -----------
Robert S. Meeder, Sr. None None None None
Milton S. Bartholomew $9,447 None None $13,525
John M. Emery $6,855 None None $9,867
Richard A. Farr $6,396 None None $9,367
William F. Gurner None None None None
Russel G. Means $5,646 None None $36,913
Lowell G. Miller None None None None
Robert S. Meeder, Jr. None None None None
Walter L. Ogle $10,374 None None $16,582
Philip A. Voelker None None None None
Roger A. Blackwell $9,446 None None $13,525
Charles A. Donabedian $9,153 None None $12,525
James W. Didion None None None None
Jack W. Nicklaus II $4,242 None None $6,325
(1) Compensation figures include cash and amounts deferred at the election of
certain non-interested Trustees. For the calendar year ended December 31, 1998,
participating non-interested Trustees accrued deferred compensation from the
funds as follows: Milton S. Bartholomew - $4,705.57, Roger A. Blackwell -
$9,445.98, Charles A. Donabedian - $9,153.08, and Jack W. Nicklaus II -
$4,242.46.
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<PAGE>
2The Fund Complex consists of 15 investment companies.
Each Trustee who is not an "interested person" is paid a meeting fee of
$250 per meeting for each of the five Portfolios. In addition, each such Trustee
earns an annual fee, payable quarterly, based on the average net assets in each
Portfolio based on the following schedule: Money Market Portfolio, 0.0005% of
the amount of average net assets between $500 million and $1 billion; 0.0025% of
the amount of average net assets exceeding $1 billion. For the other four
Portfolios, including the Portfolio, each Trustee is paid a fee of 0.00375% of
the amount of each Portfolio's average net assets exceeding $15 million. Members
of the Audit and Strategic Planning Committees for each of The Flex-funds and
The Flex-Partners Trusts, and the Portfolios are paid $500 for each Committee
meeting. All other officers and Trustees serve without compensation from the
Portfolios or the Trust. Trustee fees for the Mutual Fund Portfolio totaled
$43,430 for the year ended December 31, 1998 ($36,242 in 1997).
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.
As of April 22, 1999, the Flex-funds The Muirfield Fund and The
Flex-Partners Tactical Asset Allocation Fund (the "Funds") have an investment in
the Portfolio equaling approximately 89% and 11%, respectively of the
Portfolio's interests. No Trustee or officer of the Portfolio or any other
person, except the Funds, 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.
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<PAGE>
The Adviser earns an annual fee, payable in monthly installments at the
rate of 1% 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, 1998, the Portfolio paid fees to the Adviser totaling $1,058,035
($1,130,843 in 1997; $1,083,553 in 1996).
TRANSFER AGENT
The Portfolio has entered into an Administration and Accounting Services
Agreement with Mutual Funds Service Co., which acts as transfer agent for the
Portfolio. Mutual Funds Service Co. 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, Firstar, 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 AUDITORS
KPMG LLP, Two Nationwide Plaza, Columbus, Ohio 43215, serves as the
Portfolio's independent auditors. The auditors audit financial statements for
the Portfolio and provide other assurance, tax, and related services.
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.
B-9
<PAGE>
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.
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.
The Manager is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance in the
distribution of shares of the Funds or shares of other Flex-funds funds or
Flex-Partners funds to the extent permitted by law.
The Manager may allocate brokerage transactions to broker-dealers who have
entered into arrangements with the Manager under which the broker-dealer
allocates a portion of the commissions paid by the Portfolio toward payment of
the Portfolio or the Funds' expenses, such as transfer agent fees of Mutual
Funds Service Co. or custodian fees. The transaction quality must, however, be
comparable to those of other qualified broker-dealers.
The Portfolio may effect portfolio transactions with or through the
Manager, or its affiliates, when the Manager determines that the Portfolio will
B-10
<PAGE>
receive the best net price and execution. This standard would allow the Manager,
or its affiliates, to receive no more than the remuneration that would be
expected to be received by an unaffiliated broker in a commensurate arm's-length
transaction.
The Trustees of the Portfolio periodically review the Manager's performance
of its responsibilities in connection with the placement of portfolio
transactions on behalf of the Portfolio and review the commissions paid by the
Portfolio over representative periods of time to determine if they are
reasonable in relation to the benefits to the Portfolio.
During the year ended December 31, 1998, the Mutual Fund Portfolio paid
total commissions of $52,146.
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.
B-11
<PAGE>
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 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.
B-12
<PAGE>
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, Martin
Luther King 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.
The assets of the Portfolio consist primarily of shares of underlying
mutual funds, which are valued at their respective net asset values under the
1940 Act. The underlying funds value securities in their portfolios for which
market quotations are readily available at their current market value (generally
the last reported sale price) and all other securities and assets at fair value
pursuant to methods established in good faith by the board of directors of the
underlying fund. Money market funds with portfolio securities that mature in one
year or less may use the amortized cost or penny-rounding methods to value their
securities. Securities having 60 days or less remaining to maturity generally
are valued at their amortized cost which approximates market value.
Other assets of the Portfolio are valued at their current market value if
market quotations are readily available and, if market quotations are not
available, they are valued at fair value pursuant to methods established in good
faith by the Board of Trustees. Securities having 60 days or less remaining to
maturity are valued at their amortized cost.
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
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<PAGE>
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.
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 Adviser Dealer Services,
Inc., 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 Mutual Fund 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 Statements.
B-14
<PAGE>
Growth Stock Portfolio
Portfolio of Investments as of December 31, 1998
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
COMMON STOCKS - 94.3%
ADVERTISING SALES - 0.4%
Outdoor Systems, Inc. # 7,600 $ 228,000
AEROSPACE/DEFENSE - 1.3%
B.F. Goodrich Co. 1,891 67,840
Boeing Co. 3,900 127,481
General Dynamics Corp. 440 25,960
Lockheed Martin Corp. 820 69,495
Northrup Grumman Corp. 250 18,281
Raytheon Co. - Class B # 2,000 106,500
Textron, Inc. 1,240 94,163
United Technologies Corp. 1,480 160,950
670,670
AIR TRANSPORTATION - 0.3%
AMR Corp. # 910 54,031
Delta Air Lines, Inc. 770 40,040
Southwest Airlines 1,685 38,228
USAir Group # 470 24,440
156,739
ALUMINUM - 0.2%
Aluminum Company of America 1,230 91,712
AUTO & TRUCK - 1.5%
Ford Motor Co. 6,500 381,469
General Motors Corp. 5,000 357,812
TRW, Inc. 620 34,759
774,040
BANKING - 0.2%
Washington Mutual Savings Bank 2,303 88,378
BEVERAGE--ALCOHOLIC - 0.6%
Anheuser-Busch Cos., Inc. 2,400 157,500
Canadaigua Wine Co. # 2,400 138,750
296,250
BEVERAGE--SOFT DRINK - 1.8%
Coca-Cola Co. 6,000 402,000
Pepsico, Inc. 7,300 298,388
Whitman Corp. 9,400 238,525
938,913
BUILDING MATERIALS - 0.2%
Crane Co. 495 14,943
Masco Corp. 1,860 53,475
Willbros Group # 1,500 8,344
76,762
CAPITAL GOODS - 0.1%
Ingersoll-Rand 611 28,870
CHEMICAL--DIVERSIFIED - 1.1%
Air Products & Chemicals, Inc. 1,550 62,000
E.I. du Pont de Nemours & Co. 4,780 255,730
Monsanto Corp. 2,950 140,125
Praxair, Inc. 1,140 40,185
Rohm & Haas Co. 1,685 50,761
548,801
CHEMICAL--SPECIALTY - 0.1%
Sigma Aldrich 910 26,731
COMMERCIAL SERVICES - 0.1%
Dun & Bradstreet 1,470 46,397
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
COMPUTERS & PERIPHERALS - 4.5%
Allied Waste Industries, Inc. # 1,260 29,768
Compaq Computer Corp. 8,850 371,700
Dell Computer Corp. # 6,100 446,444
EMC Corp./Mass # 2,825 240,125
Gateway 2000, Inc. # 600 30,712
IBM 4,890 901,594
Micron Technology, Inc. # 1,270 64,214
Seagate Technology, Inc. # 1,470 44,468
Sun Microsystems # 1,880 160,975
2,290,000
COMPUTER SOFTWARE & SERVICES - 4.6%
America Online, Inc. # 210 32,550
BMC Software, Inc. # 1,260 56,149
Ceridian Co. # 420 29,321
Computer Associates International, Inc. 2,895 123,399
Computer Sciences Corp. # 600 38,550
Electronic Data System Corp. 1,700 85,319
Microsoft Corp. # 12,110 1,679,506
National Data Corp. 770 37,489
Network Associates, Inc. # 400 26,500
Novell, Inc. # 1,800 32,625
Oracle Corp. # 4,940 213,038
Parametric Technology Co. # 1,400 22,750
2,377,196
CONSTRUCTION - 0.1%
Centex Corp. 830 37,402
CONSUMER NON-DURABLE - 2.7%
Fortune Brands, Inc. 7,800 246,675
Haggar Corp. 11,500 131,531
Procter & Gamble Co. 10,000 913,125
Tupperware Corp. 6,500 106,844
1,398,175
CONTAINERS - METAL/GLASS - 0.0%
Crown Cork & Seal Co., Inc. 670 20,644
COPPER - 0.0%
Phelps Dodge Corp. 380 19,332
COSMETICS - 1.3%
International Flavors & Fragrances, Inc. 6,700 296,056
Playtex Products, Inc. # 23,300 374,256
670,312
DATA PROCESSING - 0.6%
Automatic Data Processing, Inc. 1,800 144,337
Fiserv, Inc. # 920 47,323
First Data Corp. 2,820 89,888
281,548
DIVERSIFIED - 1.2%
Allied Signal, Inc. 2,190 97,044
Minnesota Mining & Manufacturing Co. 1,650 117,356
National Service Industries 500 19,000
Norfolk Southern Corp. 1,830 57,988
PPG Industries, Inc. 1,130 65,752
Tyco International 3,483 262,749
619,889
DRUG - 8.2%
Abbott Labs 6,700 328,300
Bristol Myers Squibb 5,940 794,846
Elan Corp. plc # 451 31,507
Eli Lilly & Co. 4,290 381,274
Merck & Co., Inc. 5,800 855,500
Pfizer, Inc. 7,780 972,500
Schering Plough Corp. 10,500 580,125
Warner Lambert Co. 3,730 280,449
4,224,501
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
DRUGSTORE - 0.1%
Longs Drug Stores 2,000 75,000
ELECTRIC--INTEGRATED - 0.4%
Edison International 1,830 51,011
FPL Group, Inc. 860 52,998
Texas Utilities Co. 1,930 90,107
194,116
ELECTRIC UTILITY - 0.6%
AES Corp. 3,850 182,394
American Electric Power, Inc. 740 34,826
Duke Power Co. 1,690 108,266
325,486
ELECTRICAL EQUIPMENT - 3.3%
General Electric Corp. 16,519 1,684,938
ELECTRONIC COMPONENT SEMICONDUCTORS - 3.3%
Applied Materials, Inc. # 1,880 80,252
Intel 9,880 1,171,398
KLA -Tencor Corp. # 700 30,362
Linear Tech Corp. 250 22,391
Motorola, Inc. 2,960 180,745
STMicroelectronic NV # 250 19,516
Texas Instruments, Inc. 2,300 196,938
1,701,602
ELECTRONIC COMPONENTS - 0.4%
AMP, Inc. 900 46,856
Emerson Electric 2,544 153,912
200,768
ELECTRONICS - 0.1%
Rockwell International Corp. 1,360 66,045
FINANCE - 9.4%
Banc One Corp. 8,926 455,784
Bank of Boston Corp. 3,300 128,494
Chase Manhattan Corp. 3,900 276,900
Citigroup, Inc, 7,997 397,351
Equifax, Inc. 1,250 42,734
Federal Home Loan Mortgage Corp. 5,700 367,294
Federal National Mortgage Corp. 6,600 488,400
First Union Corp. 7,968 484,554
Fleet Financial Group, Inc. 3,100 138,531
Lehman Brothers Holdings, Inc. 1,500 66,094
Mellon Bank Corp. 3,600 247,500
Merrill Lynch & Co. 800 53,400
Morgan Stanley Dean Witter & Co. 1,800 127,800
Metris Cos., Inc. 2,200 110,687
PNC Bank Corp. 3,100 167,400
Providian Financial Corp. 7,350 551,250
Ryder Systems, Inc. 360 9,360
SunTrust Banks, Inc. 900 68,850
Wells Fargo & Co. 15,900 635,006
4,817,389
FINANCIAL SERVICES - 3.9%
American Express Co. 1,700 174,250
Associates First Capital 10,400 440,700
Avery Dennison Corp. 620 27,939
BankAmerica Corp. 10,214 614,117
Capital One Financial Corp. 6,200 713,000
H&R Block, Inc. 1,370 61,650
2,031,656
FOOD - MISCELLANEOUS - 0.5%
International Home Foods, Inc. # 14,900 251,437
FOREST PRODUCTS - 0.2%
Georgia Pacific Corp. 430 25,182
Weyerhauser Co. 1,120 56,910
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
Willamette Industries, Inc. 640 21,440
103,532
HEALTH - 1.4%
American Home Products 5,670 319,646
Johnson & Johnson 5,040 422,730
742,376
INSTRUMENTS--CONTROLS - 0.2%
Honeywell, Inc. 500 37,656
Parker Hannifin Corp. 1,770 57,967
95,623
INSTRUMENTS--SCIENTIFIC - 0.0%
Perkin Elmer Corp. 190 18,537
INSURANCE--LIFE - 0.5%
AFLAC, Inc. 2,000 87,750
SunAmerica, Inc. 2,000 164,000
251,750
INSURANCE--MULTILINE - 1.6%
Allstate 4,400 169,400
American International Group 6,725 649,803
819,203
MACHINERY - 0.4%
Caterpillar, Inc. 1,499 68,954
Deere & Co. 2,484 81,662
Dover Corp. 840 30,765
Lancer Corp. # 3,700 40,700
222,081
MACHINERY--CONSTRUCTION & MINING - 0.2%
Case Corp. 3,192 69,626
Halliburton Co. 1,900 56,287
125,913
MANUFACTURING - 0.2%
Corning, Inc. 1,110 49,950
Mueller Industries, Inc. # 1,750 35,547
Owens Illinois # 780 23,888
109,385
MARKETING SERVICES - 0.1%
Omnicom Group, Inc. 1,135 65,830
MATERIALS & SERVICES - 0.7%
Champion International Corp. 425 17,213
Dana Corp. 970 39,649
Deluxe Corp. 910 33,272
Ecolab, Inc. 1,970 71,289
Hercules, Inc. 660 17,985
Illinois Tool Works, Inc. 1,730 100,340
Service Corp. International 1,570 59,758
Sherwin-Williams Co. 1,070 31,431
370,937
MEDICAL PRODUCTS - 1.0%
Algos Pharmaceutical Corp. # 2,240 58,240
Amgen, Inc. # 900 94,106
Centor, Inc. # 1,500 67,688
GelTex Pharmaceuticals, Inc. # 5,140 116,293
IDEC Pharmaceuticals Corp. # 1,020 47,940
MedImmune, Inc. # 1,550 154,128
538,395
MEDICAL SERVICES - 0.8%
Columbia/HCA Healthcare Corp. 2,620 64,845
Genzyme Corp. # 2,050 101,987
Genzyme Molecular Oncology # 1 2
HBO & Co. 3,940 113,029
IMS Health, Inc. 540 40,736
Shared Medical Systems 490 24,439
Tenet Healthcare Corp. # 1,820 47,775
392,813
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
MEDICAL SUPPLIES - 0.5%
Boston Scientific Co. # 1,000 26,813
IDEXX Laboratories, Inc. # 1,370 36,862
Medtronic, Inc. 2,860 212,444
276,119
MINING - 0.1%
Barrick Gold Corp. 2,090 40,755
Newmont Mining Corp. 1,510 27,558
68,313
MULTIMEDIA - 0.5%
CBS Corp. # 7,300 239,531
NATURAL GAS DISTRIBUTOR - 0.1%
Williams Companies, Inc. 1,300 40,544
NETWORKING PRODUCTS - 1.6%
3Com Corp. # 1,900 85,144
Cisco Systems, Inc. # 8,027 745,006
830,150
OFFICE AUTOMATION & EQUIPMENT - 1.1%
Hewlett Packard 5,770 394,163
Pitney Bowes, Inc. 1,325 87,533
Xerox Corp. 890 105,020
586,716
OIL/GAS--DOMESTIC - 1.7%
Amoco Corp. 4,000 238,000
Atlantic Richfield 1,100 71,912
Baker Hughes 1,640 28,905
Burlington Resources 1,500 53,719
Devon Energy 1,200 36,825
Enron Corp. 400 22,825
Mobil Corp. 4,000 348,500
Murphy Oil Corp. 400 16,500
Noble Drilling Co. # 1,300 16,819
USX Marathon Group 1,800 54,225
888,230
OIL/GAS--INTERNATIONAL - 2.1%
Chevron Corp. 3,500 290,281
Exxon Corp. 11,050 808,031
1,098,312
OILFIELD SERVICES/EQUIPMENT - 0.4%
Coastal Corp. 1,900 66,737
Kerr-McGee Corp. 1,000 38,250
Schlumberger LTD 2,200 101,888
Union Pacific Resources 1,500 13,594
220,469
OIL & NATURAL GAS - 0.4%
Amerada Hess 500 24,875
K N Energy, Inc. # 1,100 41,319
MCN Energy Group, Inc. 4,840 92,263
Ocean Energy, Inc. # 1,560 9,945
Seagull Energy Corp. # 2,900 18,306
186,708
PAPER & FOREST PRODUCTS - 0.3%
Bemis Co., Inc. 360 13,657
Fort James Corp. 1,060 42,400
International Paper 1,615 72,372
Mead Corp. 840 24,623
153,052
PETROLEUM--INTEGRATED - 1.6%
Occidental Petroleum Corp. 1,600 27,000
Phillips Petroleum 1,600 68,200
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
Royal Dutch Petroleum 11,400 545,775
Texaco 2,900 153,700
Unocal Corp. 1,000 29,188
823,863
PROTECTION--SAFETY EQUIPMENT - 0.6%
Lo-Jack Corp. # 25,500 302,812
PUBLISHING - 0.7%
The Reader's Digest Association, Inc. 14,000 352,625
RADIO - 0.8%
Chancellor Media Corp. # 4,900 234,587
Infinity Broadcasting Corp. # 6,200 169,725
404,312
RAILROAD TRANSPORTATION - 0.3%
Burlington Northern Santa Fe 2,370 81,172
Union Pacific Corp. 1,240 55,877
137,049
RENTAL--AUTO/EQUIPMENT - 0.6%
Budget Group Inc. # 9,400 149,225
The Hertz Corp. 3,600 164,250
313,475
RESTAURANT - 1.2%
Brinker International, Inc. # 8,300 239,662
Wendy's International, Inc. 17,100 372,994
612,656
RETAIL GROCERY - 0.6%
Albertsons, Inc. 5,000 318,438
RETAIL STORE - 3.4%
Kmart # 40,000 612,500
PETsMART, Inc. # 22,500 247,500
Sears, Roebuck & Co. 5,000 212,500
WalMart Stores, Inc. 8,000 651,500
1,724,000
SERVICES - 0.1%
Paychex, Inc. 1,397 71,858
TELECOMMUNICATION EQUIPMENT - 1.0%
General Instrument Corp. # 620 21,041
Loral Space & Communications Ltd. # 5,460 97,256
Newbridge Networks Corp. # 1,700 51,638
Nokia Corp. - ADR - A 380 45,766
Northern Telecom LTD 2,470 123,500
P-Com, Inc. # 8,760 34,903
QUALCOMM, Inc. # 2,550 132,122
506,226
TELECOMMUNICATION SERVICES - 10.5%
Airtouch Communications # 2,730 197,754
Ameritech Corp. 5,510 349,196
Ascend Communications, Inc. # 1,280 84,160
AT&T 9,000 681,750
BCE, Inc. 3,420 129,746
Bell Atlantic Corp. 7,730 417,420
BellSouth Corp. 9,600 478,800
Frontier Corp. 3,470 117,980
GTE Corp. 4,580 297,700
Leap Wireless International, Inc. # 550 3,987
Lucent Technologies, Inc. 6,205 682,162
MediaOne Group, Inc. # 3,130 147,110
MCI Communication 10,288 738,164
PT Indosat - ADR 7,370 90,282
Qwest Communications International, Inc. # 4,240 212,000
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
SBC Communications 7,550 404,869
Sprint Corp. 1,890 158,996
Sprint Corp. - PCS Group # 945 21,853
Tellabs, Inc. # 820 56,221
U.S. West, Inc. 1,825 117,941
5,388,091
TOBACCO - 3.2%
Gallaher Group, plc - ADR 7,200 195,750
Imperial Tobacco 5,000 105,625
Philip Morris Companies 16,900 904,150
UST, Inc. 12,000 418,500
1,624,025
TRANSPORTATION - 0.1%
FDX Corp. # 738 65,820
TRUCKING/TRANSPORTATION LEASING - 0.1%
CSX, Corp. 1,097 45,525
WASTE DISPOSAL--NON-HAZARDOUS - 0.3%
Waste Management, Inc. 3,048 142,113
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost 37,878,933 ) 48,537,106
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 0.8%
U.S. Treasury Bills
** 5.02%, 01/07/99 6,000 5,996
* 4.33%, 02/04/99 200,000 199,182
* 4.37%, 03/04/99 200,000 198,470
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost 403,673 ) 403,648
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 4.9%
Prudential Securities, 5.10%, 01/04/99,
(Collateralized by $2,468,000 FNMA Remic Series
Pool #93020J, 7.00%, 03/25/23,
market value - $2,557,465) 2,509,000 2,509,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost 2,509,000 ) 2,509,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost 40,791,606 ) 51,449,754
- --------------------------------------------------------------------------------
FUTURES CONTRACTS CONTRACTS VALUE
Long, S&P 500 Futures, face amount $2,055,875
expiring March 1999 7 2,179,625
- --------------------------------------------------------------------------------
TOTAL FUTURES CONTRACTS 2,179,625
- --------------------------------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION***
Flex-funds Highlands Growth Fund 230 4,888
Flex-funds Muirfield Fund 247 1,702
Flex-funds Total Return Utilities Fund 30 573
Flex-Partners International Equity Fund 154 2,234
- --------------------------------------------------------------------------------
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost 8,594) 9,397
- --------------------------------------------------------------------------------
ADR American Depositary Receipt
FNMA Federal National Mortgage Association
Remic Real Estate Mortgage Investment Conduit
# Represents non-income producing securities.
* Pledged as collateral on futures contracts.
** Pledged as collateral on Letter of Credit.
***Assets of affiliates to the Growth Stock Portfolio held for the benefit of
the Portfolio's Trustees in connection with the Trustee Deferred
Compensation Plan.
See accompanying notes to financial statements.
<PAGE>
Mutual Fund Portfolio
Portfolio of Investments as of December 31, 1998
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
-------------------------- --------------------- -----
MUTUAL FUNDS - 96.6%
Federated S&P 500 Maxcap Fund 632,669 $ 16,057,133
Fidelity OTC Portfolio Fund 856,653 37,375,785
Gabelli Growth 720,481 25,505,045
Janus Twenty Fund 546,887 29,149,088
MFS Investor Growth - Class A 690,955 10,993,091
Mutual Shares Fund 352 6,870
Rydex OTC Fund 375,152 15,516,274
- --------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $111,404,738) 134,603,286
- --------------------------------------------------------------------------------
MONEY MARKET MUTUAL FUNDS - 1.9%
Charles Schwab Money Market Fund 889,006 889,006
Fidelity Core Money Market Fund 1,771,471 1,771,471
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET MUTUAL FUNDS
(Cost $2,660,477 ) 2,660,477
- --------------------------------------------------------------------------------
U.S.TREASURY BILLS - 1.4%
** 5.02%, due 01/07/99 30,100 30,075
* 4.39%, due 02/04/99 $2,000,000 1,991,708
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $2,021,783 ) 2,021,783
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 0.1%
Prudential Securities, 5.10%, 01/04/99,
(Collateralized by $90,000 FNMA Remic
Series Pool #93020J, 7.00%, 03/25/23,
market value - $93,263) 91,000 91,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $91,000 ) 91,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost $116,177,998) $139,376,546
- --------------------------------------------------------------------------------
FUTURES CONTRACT CONTRACTS VALUE
Long, S&P 500 Futures, face amount $6,274,000
expiring March 1999 20 $6,227,500
- --------------------------------------------------------------------------------
TOTAL FUTURES CONTRACT $6,227,500
- --------------------------------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION***
Flex-funds Highlands Growth Fund 687 14,585
Flex-funds Muirfield Fund 778 5,355
Flex-funds Total Return Utilities Fund 76 1,437
Flex Partners International Equity Fund 442 6,390
- --------------------------------------------------------------------------------
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $25,368 ) $27,767
- --------------------------------------------------------------------------------
FNMA Federal National Mortgage Association
Remic Real Estate Mortgage Investment Conduit
* Pledged as collateral on futures contracts.
** Pledged as collateral on Letter of Credit.
***Assets of affiliates to the Mutual Fund Portfolio held for the benefit of the
Portfolio's Trustees in connection with the Trustee Deferred Compensation
Plan.
See accompanying notes to financial statements.
<PAGE>
Utilities Stock Portfolio
Portfolio of Investments as of December 31, 1998
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
COMMON STOCKS - 97.5%
ELECTRIC/GAS UTILITY - 8.0%
AGL Resources, Inc. 12,100 $ 279,056
MDU Resources Group, Inc. 5,000 131,562
NIPSCO Industries, Inc. 9,400 286,113
UtiliCorp United, Inc. 10,000 366,875
1,063,606
ELECTRIC UTILITY - 10.9%
Cinergy Corp. 7,800 268,125
LG&E Energy Corp. 13,944 394,789
New Century Energies, Inc. 5,600 273,000
PacifiCorp 9,800 206,413
TECO Energy, Inc. 10,400 293,150
1,435,477
NATURAL GAS (DISTRIBUTOR) - 21.1%
Bay State Gas Co.
Consolidated Natural Gas Co. 8,200 442,800
KeySpan Energy Corp. 22,100 685,100
MCN Corp. 22,270 424,522
Peoples Energy Corp. 6,990 278,726
TransCanada Pipelines Ltd. 8,100 119,475
WICOR, Inc. 11,200 244,300
Williams Cos., Inc. 19,140 596,929
2,791,852
OIL/GAS (DOMESTIC) - 11.8%
El Paso Natural Gas Co. 8,440 293,817
Enron Corp. 5,830 332,674
Kinder Morgan Energy Partners, L.P. 14,824 537,370
Questar Corp. 20,200 391,375
1,555,236
TELECOMMUNICATION EQUIPMENT - 2.9%
Loral Space & Communications Ltd. 14,890 265,228
P-Com, Inc. # 30,000 119,531
384,759
TELECOMMUNICATION SERVICES - 40.0%
AT&T Corp. 4,000 303,000
AirTouch Communications, Inc. # 5,400 391,162
Alltel Corp. 7,900 472,519
BCE, Inc. 12,040 456,768
Frontier Corp. 19,300 656,200
GTE Corp. 5,000 325,000
MCI WorldCom, Inc. # 7,420 532,385
Qwest Communications International, Inc.# 13,491 674,550
SBC Communications, Inc. 12,740 683,183
Sprint Corp. 4,300 361,737
Sprint Corp. - PCS Group # 2,150 49,719
U.S. West Communications Group 5,900 381,288
5,287,511
WATER UTILITY - 2.8%
American Water Works Co., Inc. 10,900 367,875
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $9,492,932 ) $12,886,316
- --------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.0%
* 5.02%, due 01/07/99 1,000 999
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $999 ) 999
- --------------------------------------------------------------------------------
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
REPURCHASE AGREEMENT - 2.5%
Prudential Securities, 5.10%, 01/04/99,
(Collateralized by $320,00 FNMA Remic
Series Pool #93020J, 7.00%, 03/25/23,
market value - $331,600 325,000 325,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $325,000 ) 325,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost $9,818,931 ) $13,212,315
- --------------------------------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION**
Flex-funds Highlands Growth Fund 120 2,550
Flex-funds Muirfield Fund 120 826
Flex-funds Total Return Utilities 14 274
Flex Partners International Equit 85 1,231
- --------------------------------------------------------------------------------
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $4,465 ) $4,881
- --------------------------------------------------------------------------------
FNMA Federal National Mortgage Association
Remic Real Estate Mortgage Investment Conduit
# Represents non-income producing securities.
* Pledged as collateral on Letter of Credit.
** Assets of affiliates to the Utility Stock Portfolio held for the benefit
with the Trustees Deferred Compensation Plan.
See accompanying notes to financial statements.
<PAGE>
Bond Portfolio
Portfolio of Investments as of December 31, 1998
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE VALUE
-------------------------- -------------- -----
U.S.TREASURY OBLIGATIONS - 99.5%
U.S. Treasury Bills
* 5.02%, 01/07/99 4,800 $ 4,796
4,796
U.S. Treasury Bonds
5.63%, 05/15/08 3,300,000 3,521,719
4.75%, 11/15/08 7,300,000 7,357,031
10,878,750
- --------------------------------------------------------------------------------
TOTAL U.S.TREASURY OBLIGATIONS
(Cost $10,939,407 ) 10,883,546
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 0.5%
Prudential Securities, 5.10%, 01/04/99,
(Collateralized by $52,000 FNMA Remic Series
Pool #93020J, 7.00%, 03/25/23,
market value - $53,885) 53,000 53,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $53,000 ) 53,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost $10,992,407 ) 10,936,546
- --------------------------------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION**
Flex-funds Highlands Growth Fund 124 2,625
Flex-funds Muirfield Fund 124 854
Flex-funds Total Return Utilities Fund 14 273
Flex Partners International Equity Fund 87 1,257
- --------------------------------------------------------------------------------
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $4,582 ) $5,009
- --------------------------------------------------------------------------------
FNMA Federal National Mortgage Association
Remic Real Estate Mortgage Investment Conduit
* Pledged as collateral on Letter of Credit.
** Assets of affiliates to the Bond Portfolio held for the benefit of the
Portfolio's with the Trustee Deferred Compensation Plan.
See accompanying notes to financial statements.
<PAGE>
Money Market Portfolio
Portfolio of Investments as of December 31, 1998
<TABLE>
<CAPTION>
COUPON/ FACE
YIELD MATURITY AMOUNT AMORTIZED COST
----- -------- ------ --------------
COMMERCIAL PAPER - 56.2%
<S> <C> <C> <C> <C>
AlliedSignal, Inc. 5.60% 01/29/99 30,000,000 $ 29,869,333
American Home Products Corp.*** 5.10% 02/19/99 5,000,000 4,965,292
American Home Products Corp.*** 5.00% 03/12/99 3,000,000 2,970,833
American Honda Finance Corp. 5.20% 01/29/99 22,000,000 21,911,022
Bankers Trust Corp. 5.04% 05/10/99 25,000,000 24,548,500
CSW Credit, Inc. 5.22% 03/12/99 32,650,000 32,318,603
Carolina Power & Light Co. 4.82% 08/20/99 20,000,000 19,381,433
Credit Suisse First Boston 5.20% 02/24/99 15,350,000 15,230,270
Duff & Phelps Utility and Corporate Bond Trust, Inc. 5.00% 04/20/99 1,000,000 984,861
Duff & Phelps Utility and Corporate Bond Trust, Inc. 5.00% 04/28/99 6,815,000 6,704,256
Duff & Phelps Utility and Corporate Bond Trust, Inc. 4.92% 05/13/99 5,000,000 4,909,800
Duff & Phelps Utility and Corporate Bond Trust, Inc. 4.95% 05/17/99 7,000,000 6,869,100
Eaton Corp.*** 5.38% 03/02/99 10,000,000 9,910,333
Eaton Corp.*** 4.87% 07/19/99 7,475,000 7,273,771
Edison International*** 5.51% 01/22/99 22,227,000 22,156,722
Ford Motor Credit Co. 5.46% 02/17/99 30,000,000 29,786,150
General Electric Capital Corp. 5.44% 03/09/99 20,000,000 19,797,511
Greenwich Asset Funding, Inc.*** 5.34% 01/14/99 30,000,000 29,942,150
J.P. Morgan & Co., Inc. 5.05% 02/19/99 18,311,000 18,185,137
LG&E Capital Corp. 4.92% 05/21/99 25,000,000 24,521,667
Monsanto Co. 5.10% 03/02/99 21,300,000 21,109,897
S.C. Johnson & Son, Inc. 5.20% 03/09/99 20,000,000 19,806,445
Signet Finance*** 5.51% 01/26/99 25,000,000 24,904,340
Toronto-Dominion Holdings USA, Inc. 5.46% 02/02/99 35,000,000 34,830,133
Xerox Credit Corp. 5.47% 02/03/99 7,000,000 6,964,901
Xerox Credit Corp. 5.40% 05/03/99 7,000,000 6,871,900
- ----------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost$446,724,360 ) 446,724,360
- ----------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 41.1%
ABT 95 Series A-3 5.54%* 01/15/99 20,000,000 20,000,000
Aquarium Holdings KY*** 5.60%* 01/07/99 12,000,000 12,000,000
Bank One Corp. 5.75% 05/17/99 500,000 500,060
Bank One Wisconsin 5.74% 05/11/99 1,000,000 1,000,082
Bear Stearns Corp. 5.24%* 01/05/99 20,000,000 20,000,000
Boeing Capital Corp. 5.87%* 02/27/99 5,000,000 5,011,669
Care Life Project*** 5.30%* 01/07/99 1,225,000 1,225,000
Caterpillar Financial Services Corp. 6.07% 02/09/99 2,135,000 2,135,556
Caterpillar, Inc. 6.80% 08/24/99 500,000 503,499
Chase Manhattan Bank 8.50% 02/15/99 8,300,000 8,326,515
Chase Manhattan Bank 10.00% 06/15/99 3,750,000 3,819,869
Chrysler Financial Corp. 6.37% 06/21/99 2,700,000 2,708,468
Clark Grave Vault Co.*** 5.60%* 01/07/99 2,700,000 2,700,000
Comerica 9.75% 05/01/99 5,000,000 5,061,659
Consolidated Edison*** 5.44%* 01/04/99 8,250,000 8,251,244
Coughlin Family Properties, Inc.*** 5.60%* 01/07/99 4,220,000 4,220,000
D.E.D.E. Realty*** 5.60%* 01/07/99 3,850,000 3,850,000
Danis Construction Co.*** 5.60%* 01/07/99 900,000 900,000
Doren, Inc.*** 5.30%* 01/07/99 500,000 500,000
Eaton Corp. 6.38% 04/01/99 1,742,000 1,745,032
Espanola/Nambe*** 5.30%* 01/07/99 2,115,000 2,115,000
First USA/Bank One 5.75% 01/15/99 1,000,000 999,996
First USA/Bank One 5.42% 01/15/99 5,000,000 5,000,313
Ford Motor Credit Co. 5.63% 01/15/99 1,100,000 1,099,938
General America Life Insurance**** 5.35%* 03/21/99 10,000,000 10,000,000
General Motors Acceptance Corp. 7.75% 01/15/99 100,000 100,068
General Motors Acceptance Corp. 6.55% 06/04/99 2,400,000 2,408,192
General Motors Acceptance Corp. 8.63% 06/15/99 5,420,000 5,489,411
Hancor, Inc.*** 5.30%* 01/07/99 600,000 600,000
Household Finance 7.13% 04/30/99 10,000,000 10,044,817
Isaac Tire, Inc.*** 5.60%* 01/07/99 1,000,000 1,000,000
J.C. Penney Co., Inc. 6.88% 06/15/99 1,000,000 1,004,847
John Deere 6.43% 08/09/99 10,000,000 10,044,974
Key Corp. 6.63% 06/01/99 20,000,000 20,103,102
Merrill Lynch 7.75% 03/01/99 1,650,000 1,655,294
<PAGE>
COUPON/ FACE
YIELD MATURITY AMOUNT AMORTIZED COST
----- -------- ------ --------------
Merrill Lynch 6.38% 03/30/99 500,000 501,270
Merrill Lynch 5.49%* 02/25/99 10,280,000 10,292,233
Morgan Stanley 5.63% 03/01/99 4,850,000 4,849,711
Mubea, Inc.*** 5.30%* 01/07/99 5,400,000 5,400,000
Mubea, Inc.*** 5.30%* 01/07/99 3,750,000 3,750,000
National City Bank 6.00% 03/23/99 14,200,000 14,211,842
NationsBank Corp. 5.39%* 03/17/99 3,000,000 3,003,134
NationsBank Corp. 8.50% 03/01/99 1,095,000 1,099,645
O.K.I. Supply Co.*** 5.60%* 01/07/99 2,150,000 2,150,000
Osco Industries, Inc.*** 5.30%* 01/07/99 2,700,000 2,700,000
Presrite Corp.*** 5.30%* 01/07/99 1,870,000 1,870,000
Pro Tire, Inc.*** 5.60%* 01/07/99 1,200,000 1,200,000
R.I. Lampus Co.*** 5.30%* 01/07/99 2,275,000 2,275,000
RSD Technology*** 5.30%* 01/07/99 4,305,000 4,305,000
Seariver Maritime, Inc. 5.20%* 01/04/99 6,400,000 6,400,000
Surgery Financing Co.*** 5.30%* 01/07/99 6,585,000 6,585,000
Signa Finance 5.71% 03/02/99 3,000,000 3,000,660
Signature Brands (called 8/15/99) 13.00% 08/15/02 18,500,000 20,767,190
SunAmerica, Inc. 9.00% 01/15/99 2,500,000 2,502,839
Transamerica Finance 6.80% 03/15/99 6,435,000 6,452,728
Travelers 5.50% 01/15/99 500,000 500,002
Triangle Funding 5.32%* 03/29/99 7,500,000 7,500,000
Westpac Banking Corp. 5.67% 01/07/99 10,000,000 9,999,787
White Castle Project*** 5.30%* 01/07/99 9,000,000 9,000,000
World Trade Finance 5.48%* 03/01/99 20,000,000 20,000,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost$326,440,646 ) 326,440,646
- ----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.5%
Student Loan Marketing Assoc. 4.89% 08/03/99 4,350,000 4,350,856
- ----------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $4,350,856 ) 4,350,856
- ----------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 0.0%
** U.S. Treasury Bill 5.02% 01/07/99 63,100 63,048
- ----------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $63,048 ) 63,048
- ----------------------------------------------------------------------------------------------------------------
<PAGE>
COUPON/ FACE
YIELD MATURITY AMOUNT AMORTIZED COST
----- -------- ------ --------------
REPURCHASE AGREEMENTS - 2.2%
Prudential Securities, 5.10%, 01/04/99,
(Collateralized by $16,750,00001/04/99
FNMA Remic Series Pool #93020J, 7.00%, 03/25/23,
market value - $17,357,188) 5.10% 01/04/99 17,022,000 17,022,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $17,022,000 ) 17,022,000
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost$794,600,910 )(a) $794,600,910
- ----------------------------------------------------------------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION***** SHARES VALUE
Flex-funds Highlands Growth Fund 260 5,573
Flex-funds Muirfield Fund 351 2,429
Flex-funds Total Return Utilities Fund 56 1,074
Flex Partners International Equity Fund 167 2,429
- ----------------------------------------------------------------------------------------------------------------
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $10,454 ) $11,505
- ----------------------------------------------------------------------------------------------------------------
<FN>
(a)Cost for federal income tax and financial reporting purposes are the same.
FNMA Federal National Mortgage Association
Remic Real Estate Mortgage Investment Conduit
* Variable rate security. Interest rate is as of December 31, 1998. Maturity
date reflects the next rate change date.
** Pledged as collateral on Letter of Credit.
***Security is restricted as to resale to institutional investors, but has been
deemed liquid in accordance with guidelines approved by the Board of
Trustees.
****Illiquid security. The sale or disposition of such security would not be
possible in the ordinary course of business within seven days at which the
Fund has valued the security.
*****Assets of affiliates to the Money Market Portfolio held for the benefit of
the Portfolio's Trustees in connection with the Trustee Deferred
Compensation Plan.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
Assets:
<S> <C> <C> <C> <C> <C>
Investments, at market value* $139,285,546 $48,940,754 $12,887,315 $10,883,546 $777,578,910
Repurchase agreements, at cost* 91,000 2,509,000 325,000 53,000 17,022,000
Trustee deferred compensation investments, at 27,767 9,397 4,881 5,009 11,505
market value
Cash 3,600 3,954 3,499 2,920 59,912
Receivable for securities sold 12,500,000 --- --- --- ---
Receivable for net variation margin on futures 16,350 5,300 --- --- ---
Interest receivable 8,018 356 46 69,118 4,790,576
Dividends receivable --- 45,431 22,698 --- ---
Prepaid/Other assets 13,925 1,819 3,437 507 8,722
Total Assets 151,946,206 51,516,011 13,246,876 11,014,100 799,471,625
Liabilites:
Payable for securities purchased 11,000,000 262,923 --- --- ---
Payable for Trustee Deferred Compensation Plan 27,767 9,397 4,881 5,009 11,505
Payable to corresponding Fund --- --- --- --- 1,055,191
Payable to investment adviser 92,531 43,454 10,658 3,202 107,200
Accrued audit fees 6,136 5,775 6,356 5,518 9,231
Accrued legal fees 919 458 915 1,630 660
Accrued custodian fees 3,293 5,131 799 625 6,635
Accrued trustee fees 2,108 --- --- --- ---
Accrued fund accounting fees 4,447 3,470 1,547 1,414 10,510
Other accrued liabilities 1,318 17,660 2,175 1,081 1,370
Total Liabilities 11,138,519 348,268 27,331 18,479 1,202,302
Net Assets $140,807,687 $51,167,743 $13,219,545 $10,995,621 $798,269,323
Net Assets:
Capital 117,592,789 40,504,295 9,826,161 11,051,482 798,269,323
Net unrealized appreciation (depreciation) 23,214,898 10,663,448 3,393,384 (55,861) ---
from investments
Net Assets $140,807,687 $51,167,743 $13,219,545 $10,995,621 $798,269,323
*Securities at cost $116,177,998 $40,791,606 $9,818,931 $10,992,407 $794,600,910
</TABLE>
See accompanying notes to financial statements
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
NET INVESTMENT INCOME
<S> <C> <C> <C> <C> <C>
Interest $2,842,845 $351,842 $24,854 $704,138 $41,916,923
Dividends 385,119 526,542 375,953 --- ---
Total Investment Income 3,227,964 878,384 400,807 704,138 41,916,923
Expenses:
Investment advisory fees 1,058,035 435,886 126,301 50,844 2,029,468
Audit fees 9,823 9,599 10,135 8,937 15,235
Custodian fees 13,496 27,603 3,257 3,678 49,680
Trustees fees and expenses 44,320 15,022 7,382 8,213 24,375
Legal fees 1,576 10,572 1,066 1,807 5,664
Amortization of organization cost 224 --- 8,357 --- ---
Accounting fees 50,050 38,204 18,154 17,711 112,179
Insurance 1,918 373 88 285 5,759
Other expenses 7,553 10,278 9,568 1,465 9,492
Total Expenses 1,186,995 547,537 184,308 92,940 2,251,852
Investment advisory fees waived --- (4,431) --- (20,584) (901,787)
Directed brokerage payments received --- --- (2,246) --- ---
Total Net Expenses 1,186,995 543,106 182,062 72,356 1,350,065
NET INVESTMENT INCOME 2,040,969 335,278 218,745 631,782 40,566,858
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
Net realized gain from futures contracts 3,842,750 1,087,862 --- 27,219 ---
Net realized gain (loss) from investments 4,379,433 3,495,938 (364,390) 1,075,386 ---
Net change in unrealized appreciation
(depreciation) of investments 23,909,375 4,790,713 1,126,399 (591,219) ---
NET GAIN ON INVESTMENTS 32,131,558 9,374,513 762,009 511,386 ---
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $34,172,527 $9,709,791 $980,754 $1,143,168 $40,566,858
</TABLE>
See accompanying notes to financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income $2,040,969 $335,278 $218,745 $631,782 $40,566,858
Net realized gain (loss) from investments
and futures contracts 8,222,183 4,583,800 (364,390) 1,102,605 ---
Net change in unrealized appreciation
(depreciation) of investments 23,909,375 4,790,713 1,126,399 (591,219) ---
Net increase in net assets
resulting from operations 34,172,527 9,709,791 980,754 1,143,168 40,566,858
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 21,876,913 74,136,798 6,977,776 2,292,244 3,894,846,315
Withdrawals (59,774,446) (66,072,809) (5,408,703) (9,348,465)(3,724,162,497)
Net increase (decrease) in net assets resulting
from transactions of investors' beneficial
interests (37,897,533) 8,063,989 1,569,073 (7,056,221) 170,683,818
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,725,006) 17,773,780 2,549,827 (5,913,053) 211,250,676
NET ASSETS - Beginning of period 144,532,693 33,393,963 10,669,718 16,908,674 587,018,647
NET ASSETS - End of period $140,807,687 $51,167,743 $13,219,545 $10,995,621 $798,269,323
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES MONEY
FUND STOCK STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income $2,965,765 $264,643 $158,538 $877,445 $28,315,164
Net realized gain (loss) from investments
and futures contracts 22,734,137 5,302,202 769,055 (256,151) ---
Net change in unrealized appreciation
(depreciation) of investments (1,244,081) 2,709,218 1,487,258 649,921 ---
Net increase in net assets
resulting from operations 24,455,821 8,276,063 2,414,851 1,271,215 28,315,164
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 27,375,051 40,513,401 2,517,724 4,973,499 3,784,994,914
Withdrawals (42,837,747) (39,809,183) (2,227,211) (7,127,634)(3,579,221,656)
Net increase (decrease) in net assets resulting
from transactions of investors' beneficial
interests (15,462,696) 704,218 290,513 (2,154,135) 205,773,258
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,993,125 8,980,281 2,705,364 (882,920) 234,088,422
NET ASSETS - Beginning of period 135,539,568 24,413,682 7,964,354 17,791,594 352,930,225
NET ASSETS - End of period $144,532,693 $33,393,963 $10,669,718 $16,908,674 $587,018,647
</TABLE>
See accompanying notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
MUTUAL FUND PORTFOLIO
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $140,808 $144,533 $135,540 $122,109 $83,185
Ratio of Expenses to Average Net Assets 0.91% 0.89% 0.87% 0.95% 1.01%
Ratio of Net Investment Income to
Average Net Assets 1.56% 2.08% 1.86% 1.26% 2.76%
Portfolio Turnover Rate 128.31% 395.42% 297.41% 186.13% 168.17%
</TABLE>
<TABLE>
GROWTH STOCK PORTFOLIO
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $51,168 $33,394 $24,414 $24,537 $22,169
Ratio of Expenses to Average Net Assets 1.25% 1.34% 1.24% 1.25% 1.23%
Ratio of Net Investment Income to
Average Net Assets 0.77% 0.83% 2.33% 3.78% 2.35%
Ratio of Expenses to Average Net Assets
before waiver of fees 1.26% 1.34% 1.24% 1.25% 1.23%
Ratio of Net Investment Income to Average
Net Assets before waiver of fees 0.76% 0.83% 2.33% 3.78% 2.35%
Portfolio Turnover Rate 79.98% 129.79% 81.66% 337.57% 102.76%
</TABLE>
<TABLE>
UTILITIES STOCK PORTFOLIO
<CAPTION>
Period
Year Ended December 31, June 21, 1995* to
1998 1997 1996 December 31, 1995
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) $13,220 $10,670 $7,964 $4,291
Ratio of Expenses to Average Net Assets 1.44% 1.60% 1.61% 2.32%(1)
Ratio of Net Investment Income to
Average Net Assets 1.73% 1.79% 2.24% 2.09%(1)
Ratio of Expenses to Average Net Assets
before directed brokerage payments 1.46% 1.65% 1.66% 2.40%(1)
Ratio of Net Investment Income to Average Net
Assets before directed brokerage payments 1.71% 1.74% 2.19% 2.01%(1)
Portfolio Turnover Rate 51.36% 41.22% 50.79% 5.06%
<FN>
(1) Annualized
* Date of commencement of operations
</FN>
</TABLE>
See accompanying notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
BOND PORTFOLIO
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $10,996 $15,274 $17,792 $16,066 $13,008
Ratio of Expenses to Average Net Assets 0.57% 0.57% 0.61% 0.57% 0.56%
Ratio of Net Investment Income to
Average Net Assets 4.97% 5.27% 4.99% 5.82% 4.15%
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.73% 0.71% 0.68% 0.71% 0.70%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 4.81% 5.13% 4.92% 5.68% 4.01%
Portfolio Turnover Rate 225.11% 375.64% 778.59% 232.34% 707.57%
</TABLE>
<TABLE>
MONEY MARKET PORTFOLIO
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $798,269 $587,019 $352,930 $256,126 $224,523
Ratio of Expenses to Average Net Assets 0.18% 0.18% 0.19% 0.21% 0.19%
Ratio of Net Investment Income to
Average Net Assets 5.39% 5.47% 5.34% 5.87% 4.28%
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.30% 0.31% 0.33% 0.37% 0.39%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 5.27% 5.34% 5.20% 5.70% 4.08%
</TABLE>
See accompanying notes to financial statements
<PAGE>
MUTUAL STOCK PORTFOLIO, GROWTH STOCK PORTFOLIO,
UTILITIES STOCK PORTFOLIO, BOND PORTFOLIO,
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION
Each Fund of The Flex-funds Trust (the "Trust") invests all of its investable
assets in a corresponding open-end management investment company (each a
"Portfolio" and collectively the "Portfolios") having the same investment
objective as the Fund. Each Portfolio is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a no-load, open-end management
investment company which was organized as a trust under the laws of the State of
New York. Each Declaration of Trust permits the Trustees, who are the same for
each Portfolio, to issue beneficial interests in each Portfolio. Each Fund, each
Portfolio into which the Fund invests and the percentage of each Portfolio owned
by the respective Fund is as follows:
The investment objective of each Portfolio is as follows:
The Mutual Fund Portfolio seeks growth of capital through investment in the
shares of other mutual funds.
The Growth Stock Portfolio seeks capital growth by investing in a diversified
portfolio of domestic common stocks with greater than average growth
characteristics selected primarily from the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500").
The Utilities Stock Portfolio seeks a high level of current income and growth of
income by investing primarily in equity securities of domestic and foreign
public utility companies; however, it will not invest in electric utilities
whose generation of power is derived from nuclear reactors. The Portfolio also
seeks capital appreciation, but only when consistent with its primary investment
objective.
The Bond Portfolio seeks to maximize current income through investment in
securities, which are issued or guaranteed as to payment of principal and
interest, by the U.S. government or any of its agencies or instrumentalities.
The Money Market Portfolio seeks current income and stable net asset values
through investment in a portfolio of money market instruments.
The financial statements of the Funds are included elsewhere in this report.
2. SIGNIFICANT ACCOUNTING POLICES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
Securities which are traded on stock exchanges are valued at the last sales
price as of the close of business of the New York Stock Exchange on the day of
valuation or, lacking any sales, at the closing bid prices. Securities traded
over-the-counter are valued at the most recent bid price or yield equivalent as
obtained from one or more dealers that make markets in such securities. Mutual
funds are valued at the daily redemption value as reported by the underlying
fund. The Bond Portfolio values the securities held at 3:00 pm eastern time. The
Portfolios obtain prices from independent pricing services which use valuation
techniques approved by the Board of Trustees.
<PAGE>
Money market securities held in the Money Market Portfolio are valued at
amortized cost, which approximates market value. Money market securities held in
the four remaining Portfolios maturing more than sixty days after the valuation
date are valued at the last sales price as of the close of business on the day
of valuation, or, lacking any sales, at the most recent bid price or yield
equivalent as obtained from dealers that make markets in such securities. When
such securities are valued within sixty days or less to maturity, the difference
between the valuation existing on the sixty-first day before maturity and
maturity value is amortized on a straight-line basis to maturity. Securities
maturing within sixty days from their date of acquisition are valued at
amortized cost.
Repurchase Agreements
Each Portfolio may engage in repurchase agreement transactions whereby the
Portfolio takes possession of an underlying debt instrument subject to an
obligation of the seller to repurchase the instrument from the Portfolio and an
obligation of the Portfolio to resell the instrument at an agreed upon price and
term. At all times, the Portfolio maintains the value of collateral, including
accrued interest, at least 100% of the amount of the repurchase agreement, plus
accrued interest. If the seller defaults or the fair value of the collateral
declines, realization of the collateral by the Portfolios may be delayed or
limited.
Deferred Trustee Compensation
Under a Deferred Compensation Plan (the "Plan") non-interested Trustees may
elect to defer receipt of a portion of their annual compensation. Under the
Plan, deferred amounts are invested in the shares of the Flex-funds and
Flex-Partners Funds. Deferred amounts remain in the Portfolios until distributed
in accordance with the Plan.
Futures & Options
Each Portfolio, except the Money Market Portfolio, may engage in transactions in
financial futures contracts and options contracts in order to manage the risk of
unanticipated changes in market values of securities held in the portfolio, or
which it intends to purchase. Such transactions may be considered trading
activity under generally accepted accounting principles. The expectation is that
any gain or loss on such transactions will be substantially offset by any gain
or loss on the securities in the underlying portfolio or on those which are
being considered for purchase.
To the extent that the Portfolio enters into futures contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change in
the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit an initial margin, which is either cash or
securities in an amount equal to a certain percentage of the contract value.
Subsequently, the variation margin, which is equal to changes in the daily
settlement price or last sale price on the exchanges where they trade, is
received or paid. The Portfolios record realized gains or losses for the daily
variation margin when they are recorded as a gains or losses from futures
contracts.
Call and put option contracts involve the payment of a premium for the right to
purchase or sell an individual security or index aggregate at a specified price
until the expiration of the contract. Such transactions expose the Portfolio to
the loss of the premium paid if the Portfolio does not sell or exercise the
contract prior to the expiration date. In the case of a call option, sufficient
cash or money market instruments will be segregated to complete the purchase.
Options are valued on the basis of the daily settlement price or last sale on
the exchanges where they trade and the changes in value are recorded as an
unrealized appreciation or depreciation until closed, exercised or expired.
The Portfolios may write covered call or put options for which premiums received
are recorded in as liabilities and are subsequently adjusted to current market
value of the options written. When written options are closed or exercised,
premiums received are offset against the proceeds paid, and the Portfolio
records realized gains or losses for the difference. When written options
expire, the liability is eliminated, and the Portfolio records realized gains
for the entire amount of premiums received.
<PAGE>
During the year ended December 31, 1998 the Portfolios had the following
activity in futures contracts and written option contracts:
Long futures contracts Number of contracts Notional amount
- ---------------------- ------------------- ---------------
Mutual Fund Portfolio:
Outstanding, beginning of year 110 $25,064,900
Contracts opened 1,282 132,898,050
Contracts closed (1,372) (151,688,950)
Outstanding, end of period 20 6,274,000
Growth Stock Portfolio:
Outstanding, beginning of year 7 $1,711,037
Contracts opened 321 82,010,900
Contracts closed (321) (81,666,062)
Outstanding, end of period 7 2,055,875
Bond Portfolio:
Outstanding, beginning of year 0 $0
Contracts opened 90 10,320,938
Contracts closed (90) (10,320,938)
Outstanding, end of period 0 0
Letter of Credit
Each Portfolio has pledged as collateral a U.S. Government Security, cash or
other high-grade debt security solely for the benefit of ICI Mutual Insurance
Co. for the Portfolios' fidelity bond coverage.
Income Taxes
The Prtfolios will be treated as a partnership for Federal income tax purposes.
As such, each investor in the Portfolios will be subject to taxation on its
share of the Portfolios' ordinary income and capital gains. It is each
Portfolio's policy to comply with the requirements of the Internal Revenue Code
applicable to it. Therefore, no Federal income tax provision is required.
Organizational Costs
The costs related to the organization of each Portfolio have been deferred and
are being amortized by the Portfolio on a straight-line basis over a five-year
period. Such costs for Mutual Fund Portfolio, Growth Stock Portfolio, Utility
Stock Portfolio, Bond Portfolio and Money Market Portfolio have been fully
amortized.
Securities Transactions
The Portfolios record security transactions on the trade date. Gains and losses
realized from the sale of securities are determined on the specific
identification basis. Dividend income is recognized on the ex-dividend date, and
interest income (including amortization of premium and accretion of discount) is
recognized as earned.
<PAGE>
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield Investors,
Inc. (MII), provides each Portfolio with investment management, research,
statistical and advisory services. Under separate Investment Subadvisory
Agreements with RMA, Sector Capital Management, Inc. and Miller/Howard
Investments, Inc. serve as subadvisor of the Growth Stock Portfolio and the
Utilities Stock Portfolio, respectively. Sub-subadvisers, selected by Sector
Capital Management, Inc., subject to the review and approval of the Trustees of
the Growth Stock Portfolio, are responsible for the selection of individual
portfolio securities for the assets of the Portfolio assigned to them by Sector
Capital Management, Inc.
For such services the Portfolios pay monthly a fee at the following annual
rates: Mutual Fund Portfolio, Growth Stock Portfolio, and Utilities Stock
Portfolio, 1.00% of average daily net assets up to $50 million, 0.75% of average
daily net assets exceeding $50 million up to $100 million and 0.60% of average
daily net assets exceeding $100 million; Bond Portfolio, 0.40% of average daily
net assets up to $100 million and 0.20% of average daily net assets exceeding
$100 million; Money Market Portfolio, 0.40% of average daily net assets up to
$100 million and 0.25% of average daily net assets exceeding $100 million.
During the year ended December 31, 1998, RMA voluntarily waived a portion of its
investment advisory fees in the Money Market and Bond Portfolios.
Mutual Funds Service Co. ("MFSCo"), a wholly-owned subsidiary of MII, serves as
accounting services agent for each Portfolio. In compensation for such services,
each Portfolio pays MFSCo an annual fee equal to the greater of: a) 0.15% of the
first $10 million of average daily net assets, 0.10% of the next $20 million of
average daily net assets, 0.02% of the next $50 million of average daily net
assets, and 0.01% in excess of $80 million of average daily net assets, or b)
$7,500 for each Portfolio, except $30,000 for the Money Market Portfolio.
Certain officers and trustees of the Portfolios are also officers or directors
of MII, RMA and MFSCo.
4. SECURITIES TRANSACTIONS
For the year ended December 31, 1998, the cost of purchases and proceeds from
sales or maturities of long-term investments for the Portfolios were as follows:
Portfolio Purchases Sales
- --------- --------- -----
Mutual Fund Portfolio $199,485,528 $145,269,691
Growth Stock Portfolio 37,169,893 29,958,979
Utilities Stock Portfolio 7,985,042 6,219,080
Bond Portfolio 23,126,049 28,533,409
As of December 31, 1998, the aggregate cost basis of investments and unrealized
appreciation (depreciation) for Federal income tax was as follows:
Net unrealized
Cost basis of Unrealized Unrealized appreciation
Portfolio investments appreciation depreciation (depreciation)
- --------- ----------- ------------ ------------ --------------
Mutual Fund Portfolio $116,197,093 $23,275,127 ($79,324) $23,195,803
Growth Stock Portfolio 40,817,038 11,886,639 (1,248,623) 10,638,016
Utilities Stock Portfolio 9,818,931 3,663,864 (270,480) 3,393,384
Bond Portfolio 10,996,767 0 (60,221) (60,221)
Money Market Portfolio 794,600,910 --- --- ---
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio and Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio and Money Market Portfolio (Portfolios), including the portfolios of
investments, as of December 31, 1998, 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, 1998, by confirmation with the custodian and brokers and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio and Money Market Portfolio at December 31, 1998, the results of their
operations, the changes in their net assets and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
February 19, 1999
<PAGE>
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, 1998; Statements of Assets and
Liabilities - December 31, 1998; Statements of Operations - for the
year ended December 31, 1998; Statements of Changes in Net Assets for
the periods ended December 31, 1998 and 1997; Financial Highlights for
the periods indicated therein; Notes to Financial Statements;
Independent Auditors' Report dated February 19, 1999.
(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 LLP, Independent Certified Public Accountants,
filed herewith.
**13. Investment representation letters of initial investors.
- -------------------
*Filed April 30, 1992.
**Filed June 8, 1992 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
C-1
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Beneficial Interests 3 (as of December 31, 1998)
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
Mutual Funds Service Co. 6000 Memorial Drive
(transfer and accounting Dublin, OH 43017
services agent)
R. Meeder & Associates, Inc. 6000 Memorial Drive
(investment adviser) Dublin, OH 43017
C-2
<PAGE>
Firstar, N.A., Cincinnati 425 Walnut Street
(custodian) Cincinnati, OH 45202
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-3
<PAGE>
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 30th day of April, 1999.
MUTUAL FUND PORTFOLIO
By /S/ WESLEY F. HOAG
--------------------------
Wesley F. Hoag
Vice President
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees of
Mutual Fund Portfolio:
We consent to the use of our report included herein dated February 19, 1999 on
the financial statements of the Mutual Fund Portfolio, Growth Stock Portfolio,
Utilities Stock Portfolio, Bond Portfolio, and Money Market Portfolio as of
December 31, 1998 and for the periods indicated therein and to the reference to
our firm under the heading "Independent Auditors" in Part B of the Registration
Statement.
KPMG LLP
Columbus, Ohio
April 29, 1999
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