<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 11
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11
The Flex-Partners
(Exact Name of Registrant as Specified in Charter)
P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017
(Address of Principal Executive Offices-Zip Code)
Registrant's Telephone Number, including Area Code: (614)766-7000
Commission File No. 33-48922
Commission File No. 811-6720
Donald F. Meeder, Secretary - R. Meeder & Associates, Inc.
P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective
(check appropriate box).
/XXX/ immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on pursuant to paragraph (b) of Rule 485.
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1).
/ / 75 days after filing pursuant to paragraph (a)(2).
/ / on (date) pursuant to paragraph (a)(2) on Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Indefinite number of shares registered under Rule 24f-2 by filing of a
Pre-Effective Amendment No. 1, effective July 6, 1992. The 24(f)-2 Notice for
the fiscal year ended December 31,1995 was filed with the Commission on February
14, 1996.
The Mutual Fund Portfolio, the Utilities Stock Portfolio and the Money Market
Portfolio have also executed this Registration Statement.
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THE FLEX-PARTNERS BTB FUND AND TAA FUND
CROSS REFERENCE SHEET TO FORM N-1A
Part A.
Item A. Prospectus Caption
1 Cover Page
2 Highlights
Synopsis of Financial Information
3 Financial Highlights
4 The Trust and its Management
Investment Objectives and Policies
5 The Trust and its Management
5A Performance Comparisons
6(a) Other Information - Shares of Beneficial Interest
6(b) Not Applicable
6(c) Other Information - Shares of Beneficial Interest
6(d) Not Applicable
6(e) Highlights
6(f)(g) Income Dividends and Taxes
6(h) Cover Page
Highlights
Investment Objective and Policies
How to Buy Shares
How Net Asset Value is Determined
Other Information - Investment Structure
7(a) The Trust and its Management
7(b) How Net Asset Value is Determined
How to Buy Shares
7(c) How To Buy Shares
Exchange Privilege
7(d) How To Buy Shares
7(e) How To Buy Shares
7(f) Distribution Plans
8(a) How To Make Withdrawals (Redemptions)
8(b) How To Make Withdrawals (Redemptions)
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8(c) Shareholder Accounts
8(d) How To Make Withdrawals (Redemptions)
9 Not Applicable
<PAGE> 4
THE FLEX-PARTNERS
6000 Memorial Drive
Dublin, OH 43017
800-494-FLEX
614-766-7074
THE FLEX-PARTNERS' FUNDS ARE A FAMILY OF MUTUAL FUNDS ORGANIZED AS A
BUSINESS TRUST (THE "TRUST"). TWO OF THE SEPARATE PORTFOLIOS OF THE TRUST ARE
THE BTB FUND AND THE TAA FUND (EACH A "FUND" AND COLLECTIVELY THE "FUNDS"). EACH
OF THE FUNDS HAS SEPARATE INVESTMENT OBJECTIVES AND POLICIES. THE TRUST SEEKS TO
ACHIEVE THE INVESTMENT OBJECTIVE OF EACH FUND BY INVESTING ALL OF THE INVESTABLE
ASSETS OF A FUND IN A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AS THAT FUND (EACH A "PORTFOLIO" AND
COLLECTIVELY THE "PORTFOLIOS"). ACCORDINGLY, INVESTORS SHOULD CAREFULLY CONSIDER
THIS INVESTMENT APPROACH. FOR ADDITIONAL INFORMATION REGARDING THIS UNIQUE
CONCEPT, SEE "INVESTMENT OBJECTIVES AND POLICIES" ON PAGE 7 AND "OTHER
INFORMATION -- SHARES OF BENEFICIAL INTEREST AND INVESTMENT STRUCTURE" ON PAGES
21 THROUGH 23.
FLEXIBLE INVESTMENT STRATEGIES
EACH OF THE PORTFOLIOS MAY BE INVESTED DEFENSIVELY, FOR TEMPORARY PERIODS,
IF THE PORTFOLIO'S INVESTMENT ADVISER OR SUBADVISER DEEMS IT ADVISABLE BECAUSE
OF ADVERSE MARKET CONDITIONS.
ADDITIONAL INFORMATION
This Prospectus sets forth basic information about the Trust and each of
the Funds that a prospective investor should know before investing and it should
be retained for future reference. A STATEMENT OF ADDITIONAL INFORMATION, dated
April __, 1996, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available upon request and without charge by contacting the Trust at the address
given above or by calling 1-800-494-FLEX, or (614) 766-7074.
THE FUNDS AND THEIR INVESTMENT OBJECTIVES
THE BTB FUND
THE BTB FUND'S investment objective is to seek a high level of current
income and growth of income by investing primarily in equity securities of
domestic and foreign public utility companies; however, the Fund will not invest
in electric utilities whose generation of power is derived from nuclear
reactors. The Fund also seeks capital appreciation, but only when consistent
with its primary investment objective.
THE TAA FUND
THE TAA FUND'S objective is growth of capital through investment in the
shares of other mutual funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.
PROSPECTUS DATED APRIL __, 1996
<PAGE> 5
HIGHLIGHTS
INVESTMENT OBJECTIVES: The Flex-Partners (the "Trust") is a family of
mutual funds. Two of the separate portfolios of the Trust are The BTB Fund and
The TAA Fund (collectively the "Funds"), each with separate investment
objectives and policies. See "Investment Objectives and Policies."
LIQUIDITY: As an open-end investment company, each Fund continuously offers
and redeems shares of beneficial interest at the next determined net asset value
per share plus any applicable sales charge. See "How to Buy Shares" and "How to
Make Withdrawals (Redemptions)."
DIVERSIFICATION: The BTB Fund is a diversified mutual fund because 75% of
its assets are restricted by the following rules: (1) No more than 5% of the
Fund's assets may be invested in the securities of a single issuer (other than
U.S. Government Securities) and (2) the Fund may not purchase more than 10% of
any issuer's outstanding voting securities.
The TAA Fund is by definition a non-diversified fund. Its Portfolio may
invest more than 5% in the securities of a single company and may invest all of
its assets in the shares of other mutual funds.
SALES CHARGES: Investors in each Fund may select Class A or Class C shares,
each with a public offering price that reflects different sales charges and
expense levels. Class A shares are offered at net asset value plus the
applicable sales charge (maximum of 4.00% of public offering price). Class C
shares are sold at net asset value without an initial sales charge but if
redeemed within 18 months of purchase, a contingent deferred sales charge equal
to 1.50% of the lesser of the current market value or the cost of the shares
being redeemed will apply and if redeemed more than 18 months after purchase and
before 24 months after purchase, a contingent deferred sales charge equal to
.75% of the lesser of the current market value or the cost of the shares being
redeemed will apply. See "How to Buy Shares" and "Distribution Plans."
RETIREMENT PLANS AND OTHER SHAREHOLDER SERVICES: The Trust offers
retirement plans, which include a prototype Profit Sharing Plan, Money Purchase
Pension Plan, Salary Savings Plan--401(k), Individual Retirement Account (IRA),
Simplified Employee Pension Plan (SEP), and a number of other special
shareholder services. See "Retirement Plans."
MINIMUM INVESTMENT: A minimum investment of $2,500 is required to open an
account, except an IRA account for which the minimum is $500. Subsequent
investments must be at least $100. Each Fund has the right to redeem the shares
in an account and pay the proceeds to the shareholder if the value of the
account drops below $1,000 ($500 for an IRA) because of shareholder redemptions.
The shareholder will be given 30 days written notice and an opportunity to
restore the account to $1,000 ($500 for an IRA). See "How to Buy Shares", "Other
Shareholder Services" and "Shareholder Accounts."
INVESTMENT ADVISER AND MANAGER: R. Meeder & Associates, Inc. is each
Portfolio's Investment Adviser and Manager (the "Investment Adviser" or the
"Manager"). The Manager has been an investment adviser to individuals,
retirement plans, corporations and foundations since 1974 and to mutual funds
since 1982. See "The Trust and Its Management."
2
<PAGE> 6
SUBADVISER: Miller/Howard Investments, Inc. is the subadviser (the
"Subadviser") for the Utilities Stock Portfolio, the Portfolio in which all of
the investable assets of The BTB Fund are invested. The Subadviser has been an
investment adviser to broker-dealers, investment advisers, employee benefit
plans, endowment funds, foundations and other institutions and individuals since
1984. See "The Trust and Its Management."
SHARES AVAILABLE THROUGH: The Funds' transfer agent, Mutual Funds Service
Co. ("MFSCO"). See "The Trust and Its Management."
DISTRIBUTION PLANS: Each Fund has adopted a Rule 12b-1 distribution plan
for using as much as 25/100 of 1% and 75/100 of 1% of net assets annually to aid
in the distribution of Class A shares and Class C shares, respectively. Each
Fund has adopted a service plan for using as much as 25/100 of 1% of net assets
annually to aid in the distribution of each of Class A shares and Class C
shares. See "Distribution Plans."
HOW TO BUY SHARES: Complete the New Account Application and forward with
payment as directed. Orders accompanied by payment (ordinary check, bank check,
bank wire, and money order) are accepted immediately and priced at the next
determined net asset value per share after receipt of the order. See "How to Buy
Shares" and "How Net Asset Value is Determined."
SHAREHOLDER INQUIRIES: Shareholder inquiries should be directed to the
Trust by writing or telephoning the Trust at the address or telephone numbers
indicated on the cover page of this Prospectus. To protect the confidentiality
of shareholder accounts, information relating to a specific account will be
disclosed pursuant to a telephone inquiry if the shareholder identifies the
account by account number or by the taxpayer identification number listed on the
account.
RISKS: For a discussion of the risks associated with an investment in the
Funds, see "Risk Factors." Neither of the Funds should be considered a complete
investment program.
SYNOPSIS OF FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THE BTB FUND THE TAA FUND
------------ ------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS C(1) CLASS A CLASS C(1)
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Maximum Initial Sales Charge Imposed
on Purchases (as a percentage
of offering price) ......................... 4.00%(2) none 4.00%(2) none
Maximum Sales Charge Imposed on Reinvested
Dividends ................................. none none none none
Maximum Contingent Deferred Sales Charge (as
a percentage of original purchase price
or redemption proceeds, as applicable) (3) . none 1.50% none 1.50%
Redemption Fees ................................ none none none none
Exchange Fees .................................. none none none none
ANNUAL FUND OPERATING EXPENSES**
(As a percentage of average net assets)
Management Fees .............................. 1.00% 1.00% 0.86% 0.86%
Rule 12b-1 Fees(4) ........................... 0.25% 0.75% 0.25% 0.75%
Other Expenses (After Expense
Reimbursements*) ........................ 0.25% 0.00% 0.39% 0.11%
Service Fees(5) ............................ 0.25% 0.25% 0.25% 0.25%
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES* ................ 1.75% 2.00% 1.75% 1.97%
(After Expense Reimbursement Fees*)
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 7
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES CUMULATIVE EXPENSES
PAID FOR THE PERIOD OF: PAID FOR THE PERIOD OF:
EXAMPLE: 1 YEAR 3 YEARS 1 YEAR 3 YEARS
------ ------- ------ -------
- ---------------------------------------------------------------------------------------------------------------
An investor would pay the following expense on a $1,000
investment, assuming (1)
an operating expense ratio of 1.75% for Class A Shares of each Fund, 2.00%
for Class C Shares of The BTB Fund and 1.97% for Class C Shares of the TAA Fund,
(2) a 5% annual return throughout the period and (3) redemption at the end of
each time period: THE BTB FUND THE TAA FUND
------------ ------------
<S> <C> <C> <C> <C>
Class A Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57 $93 $57 $93
Class C Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35 $63 $35 $63
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Class A Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57 $93 $57 $93
Class C Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20 $63 $20 $63
</TABLE>
*The Manager presently intends to reimburse each Fund through an expense
reimbursement fee to the extent necessary to keep total expenses at 1.75% of
average daily net assets for Class A Shares and 2.00% of average daily net
assets for Class C shares. The Manager may change this policy at any time
without notice to shareholders. This would, in some circumstances, have a
material adverse effect on the net income of the Fund, and the return earned by
shareholders. For planning purposes, prospective investors and shareholders
should assume that expense reimbursements will not be made.
Expenses used in these illustrations are based on expenses actually incurred for
Class A and Class C shares of The BTB Fund and Class C shares of The TAA Fund
which includes their proportionate share of expenses of the Utilities Stock
Portfolio and the Mutual Fund Portfolio, respectively, for the period ending
December 31, 1995. Expenses used in the illustration for Class A shares of The
TAA Fund are estimated and encompass expenses of the Fund and its proportionate
share of expenses of the Mutual Fund Portfolio.
Expenses shown as "After Expense Reimbursement Fees" for each Class of shares in
The BTB Fund and Class C shares of The TAA Fund are based on actual fees paid by
those Classes. Had expenses not been reimbursed, Total Fund Operating Expenses,
as a percentage of average net assets, would have been as follows: The BTB Fund
- -- Class A Shares 22.70%, Class C Shares 13.27%; and The TAA Fund -- Class C
Shares 2.80%.
(1) Class C Shares convert tax free to Class A Shares after seven calendar
years.
(2)The sales charge applied to purchases of Class A Shares declines as the
amount invested increases. See "How to Buy Shares."
(3)A deferred sales charge on Class C shares applies only if redemption occurs
within twenty-four months from purchase. See page 26.
(4)The NASD limits asset based sales charges to 6.25% of new sales, plus
interest. Long-term shareholders of Class C Shares may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
NASD. (See "How to Buy Shares - Purchasing Shares - Purchase Options").
(5)The Service Fee pertains to Class A Shares and Class C Shares, 100% of which
is allocated to National Association of Securities Dealers, Inc. ("NASD") member
firms for continuous personal service by such members to investors in Class A
Shares and Class C Shares of each Fund, such as responding to shareholder
inquiries, quoting net asset values, providing current marketing material and
attending to other shareholder matters.
The expense table is meant to assist an investor in understanding the
various costs and expenses that an investor in each Fund will bear directly or
indirectly. The Funds do not impose an exchange fee or redemption fee. For more
complete descriptions of the various costs and expenses of the Funds see "The
Trust and Its Management" and "Distribution Plans."
The Board of Trustees of the Trust believes that the aggregate per share
expenses of each Fund and corresponding Portfolio will be less than or
approximately equal to the expenses which the Fund would incur if it retained
the services of an investment adviser and the assets of the Fund were invested
directly in the type of securities being held by the Portfolio. For additional
information concerning expenses incurred by the Trust and the Portfolios, see
"The Trust and Its Management" herein and "Investment Adviser and Manager" in
the Statement of Additional Information.
The table and hypothetical examples above are for illustrative purposes
only. The investment rate of return and expenses should not be considered a
representation of past or future
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<PAGE> 8
performance as actual rates of return and expenses may be more or less than the
rate and amounts shown.
PERFORMANCE COMPARISON
THE TAA FUND CLASS "C" SHARES
VS. THE S&P 500 INDEX
The Growth of $10,000 (6/01/95 to 12/31/95)
<TABLE>
<CAPTION>
The TAA Fund The S&P 500 Index*
<S> <C> <C>
$10,000 $10,000
1995 $11,307 $11,527
</TABLE>
THE TAA FUND TOTAL RETURN
WITH SALES CHARGE
13.07%
WITHOUT SALES CHARGE
14.57%
Shareholders in The TAA Fund were exposed to the stock market for much of the
market's advance during the last 7 months of 1995. From its inception on June 1,
1995 through December 31, 1995, The TAA Fund C Shares provided shareholders with
a total return of 14.57% without a sales charge and a total return of 13.07%
after sales charge. For the same period, the average Asset Allocation
mutual fund monitored by Morningstar, Inc. provided a return of 10.95% and The
S&P 500 Index provided a total return of 15.27%. Technology stocks, which served
as a catalyst for the market's 1995 advance, played a significant role in the
Portfolio of The TAA Fund during 1995. As technology issues cooled during the
fourth quarter, The TAA Fund adjusted its portfolio accordingly, reducing
exposure to funds with significant high-tech exposure. Further, the Fund
emphasized exposure to the S&P 500 Index and mutual funds with exposure to large
capitalization stocks.
The graph depicting the growth of $10,000 and the total return for The
Fund are representative of past performance and are not intended to
indicate future performance.
*The returns of the various indexes are from the beginning or end of the month
nearest the Fund's inception to the end of the calendar year. The index does
not reflect a sales charge or the deduction of expenses associated with a
mutual fund, such as investment management and accounting fees. The Fund's
performance reflects a sales charge of 1.50% and the deduction of fees for
these value added services.
THE BTB FUND CLASS "A" SHARES
VS. THE DOW JONES UTILITY AVERAGE
The Growth of $10,000 (07/11/95 to 12/31/95)
<TABLE>
<CAPTION>
The BTB Fund The Dow Jones Utility Average*
<S> <C> <C>
$10,000 $10,000
1995 $11,050 $11,355
</TABLE>
THE BTB FUND TOTAL RETURN
WITH SALES CHARGE
10.50%
WITHOUT SALES CHARGE
15.11%
From its inception on July 11, 1995 to December 31, 1995, The BTB Fund
A shares provided a total return of 15.11% without a sales charge and a total
return, after sales charge, of 10.50%. For the same period, the Dow Jones
Utility Average offered a total return of 13.55%. The entire utilities market
was strong during the fourth quarter for many reasons. First, interest rates
not only remained low but also declined substantially, particularly at the long
end of the bond market. There was little show of strength in the economy - a
circumstance which is typically met with rate declines. Second, though the
telecommunications legislation we thought would
5
<PAGE> 9
pass in the fourth quarter was caught in the budget bottleneck, investors
continued to focus on the benefits for the Regional Bell stocks, and these
performed extremely well. Third, the spread between utility yields and bond
yields, which had become inverted, made progress back to normalcy--thus
permitting utilities to overcome even a strong bond market in terms of
performance. Fourth, both demand and pricing for natural gas boomed as "normal"
winter returned to the land, helping our significant gas industry position to
recover.
The graph depicting the growth of $10,000 and the total return for The Fund
are representative of past performance and are not intended to indicate
future performance.
*The returns of the various indexes are from the beginning or end of
the month nearest the Fund's inception to the end of the calendar year. The
index does not reflect a sales charge or the deduction of expenses associated
with a mutual fund, such as investment management and accounting fees. The
Fund's performance reflects a sales charge of 4.00% and the deduction of fees
for these value added services.
THE BTB FUND CLASS "C" SHARES
VS. THE DOW JONES UTILITY AVERAGE
The Growth of $10,000 (07/11/95 to 12/31/95)
<TABLE>
<CAPTION>
The BTB Fund The Dow Jones Utility Average*
<S> <C> <C>
$10,000 $10,000
1995 $11,357 $11,355
</TABLE>
THE BTB FUND TOTAL RETURN
WITH SALES CHARGE
13.57%
WITHOUT SALES CHARGE
15.07%
From its inception on July 11, 1995 to December 31, 1995, The BTB Fund
C shares provided a total return of 15.07% without a sales charge and a total
return, after sales charge, of 13.57%. For the same period, the Dow Jones
Utility Average offered a total return of 13.55%. The entire utilities market
was strong during the fourth quarter for many reasons. First, interest rates
not only remained low but also declined substantially, particularly at the long
end of the bond market. There was little show of strength in the economy - a
circumstance which is typically met with rate declines. Second, though the
telecommunications legislation we thought would pass in the fourth quarter was
caught in the budget bottleneck, investors continued to focus on the benefits
for the Regional Bell stocks, and these performed extremely well. Third, the
spread between utility yields and bond yields, which had become inverted, made
progress back to normalcy--thus permitting utilities to overcome even a strong
bond market in terms of performance. Fourth, both demand and pricing for
natural gas boomed as "normal" winter returned to the land, helping our
substantial gas industry position to recover previous lost ground and show fine
gains.
The graph depicting the growth of $10,000 and the total return for The Fund
are representative of past performance and are not intended to indicate
future performance.
*The returns of the various indexes are from the beginning or end of
the month nearest the Fund's inception to the end of the calendar year. The
index does not reflect a sales charge or the deduction of expenses associated
with a mutual fund, such as investment management and accounting fees. The
Fund's performance reflects a sales charge of 1.50% and the deduction of fees
for these value added services.
FINANCIAL HIGHLIGHTS
The financial highlights of The BTB Fund and The TAA Fund are listed below.
This information has been audited in conjunction with the audits of the
Utilities Stock Portfolio and The Mutual Fund Portfolio by KPMG Peat Marwick
LLP, independent certified public accountants for the period from July 11, 1995
through December 31, 1995 for the BTB Fund and for the period from June 1, 1995
through December 31, 1995 for the TAA Fund.
<TABLE>
<CAPTION>
BTB FUND TAA FUND
For the Period For the Period
July 11, 1995(2) to June 1, 1995(2) to
December 31, 1995 December 31, 1995
Class A Class C Class C
<S> <C> <C> <C>
Asset Value, Beginning of Period $12.50 $12.50 $12.50
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (Loss) 0.12 0.10 (0.02)
- -----------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities
(both realized and unrealized 1.76 1.77 1.84
- -----------------------------------------------------------------------------------------------------
Total from Investment Operations 1.88 1.87 1.82
- -----------------------------------------------------------------------------------------------------
Less Distributions
- ------------------
Dividends (from net investment income) (0.12) (0.10) --
- -----------------------------------------------------------------------------------------------------
Distributions (from capital gains) -- -- (1.06)
- -----------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.10) (1.06)
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.26 $14.27 $13.26
- -----------------------------------------------------------------------------------------------------
Total Return 15.11% 15.07% 14.57%
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
Net Assets, End of Period ($000) $641 $782 $11,524
- ---------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.75%(1) 2.00%(1) 1.97%(1)
- ---------------------------------------------------------------------------------------------------------
Ratio of Net Income (Loss) to Average Net Assets 2.17%(1) 1.72%(1) (0.29%)(1)
- ---------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets,
before reimbursement of fees 22.70%(1) 13.27%(1) 2.80%(1)
- ---------------------------------------------------------------------------------------------------------
Ratio of Net Income (Loss) to Average Net Assets,
before reimbursement of fees (18.78%)(1) (9.55%)(1) (1.12%)(1)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
(2) Date of commencement of operations
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional information Dated April __, 1996.
INVESTMENT OBJECTIVES AND POLICIES
Each Fund and each Portfolio has its own separate investment objectives and
policies, as set forth below. Except as otherwise expressly provided herein,
these investment objectives and policies, which are identical for a Fund and its
corresponding Portfolio, are not fundamental and may be changed by their
respective Trustees without approval of the Fund's shareholders, or approval of
the Portfolio's investors. No such change would be made in a Fund, or a
Portfolio, without 30 days prior written notice to shareholders. Each Fund seeks
to achieve its investment objective by investing all of its investable assets in
its corresponding Portfolio. As a result, The BTB Fund invests in the Utilities
Stock Portfolio and The TAA Fund invests in the Mutual Fund Portfolio. For more
information concerning the investment structure of a Fund which invests its
assets in a corresponding Portfolio, see "Other Information - Investment
Structure."
Since the investment characteristics of each Fund will correspond directly
to those of its corresponding Portfolio, the following is a discussion of the
various investments of and techniques employed by each Portfolio. Additional
information about the investment policies of each Portfolio appears in the
Statement of Additional Information. There can be no assurance that the
investment objectives of either Portfolio will be achieved.
THE UTILITIES STOCK PORTFOLIO (THE BTB FUND)
The Portfolio's investment objective is to seek a high level of current
income and growth of income by investing primarily in equity securities of
domestic and foreign public utility companies; however, the Portfolio 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. There can be no assurance that
such objective will be achieved.
The Portfolio seeks to achieve its objective by investing, under normal
conditions, at least 65% of its total assets in a diversified portfolio of
common stocks, preferred stocks, warrants and rights, and securities convertible
into common or preferred stock of public utility companies. Public utility
companies include domestic or foreign companies that provide electricity,
natural gas, water, telecommunications or sanitary services to the public. The
Portfolio will not invest more than 5% of its assets in equity securities of
issuers whose debt securities are rated below investment grade, that is, rated
below one of the four highest rating categories by Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's") or deemed to be of
7
<PAGE> 11
equivalent quality in the judgment of the Subadviser. Debt securities rated
below investment grade are rated below Baa or BBB.
The remaining 35% of the Portfolio's assets may be invested in debt
securities issued by public utility companies, and/or equity and debt securities
of issuers outside of the public utility industry which in the opinion of the
Subadviser stand to benefit from developments in the public utilities industry.
The Portfolio will not invest more than 40% of its assets in the telephone
industry. The Portfolio may invest up to 25% of its assets in securities of
foreign issuers. The Portfolio will not invest more than 10% of its assets in
securities that are deemed to be illiquid. See "Investment Policies and
Limitations" in the Statement of Additional Information.
Investments are selected on the basis of fundamental analysis to identify
those securities that, in the judgment of the Subadviser, provide a high level
of current income and growth of income and secondarily, capital appreciation,
but only when consistent with its primary investment objective.
Fundamental analysis involves assessing a company and its business
environment, management, balance sheet, income statement, anticipated earnings
and dividends and other related measures of value. The Subadviser monitors and
evaluates the economic and political climate of the area in which each company
is located. The relative weightings among common stocks, debt securities and
preferred stocks will vary from time to time based upon the Subadviser's
judgment of the extent to which investments in each category will contribute to
meeting the Portfolio's investment objective.
The Subadviser emphasizes quality in selecting investments for the
Portfolio, and in addition to looking for high credit ratings, the Subadviser
ordinarily looks for several of the following characteristics: above average
earnings growth; above average growth of book value; an above average balance
sheet; high earnings to debt service coverage; low ratio of dividends to
earnings; high return on equity; low debt to equity ratio; an above-average
rating with respect to government regulation; growing rate base; lack of major
construction programs and strong management.
The Portfolio may invest up to 35% of its total assets in debt securities
of issuers in the public utility industries. Debt securities in which the
Portfolio invests are limited to those rated A or better by S&P or Moody's or
deemed to be of equivalent quality in the judgment of the Subadviser.
A change in prevailing interest rates is likely to affect the Portfolio's
net asset value because prices of debt securities and equity securities of
utility companies tend to increase when interest rates decline and decrease when
interest rates rise.
During periods when the Subadviser deems it necessary for temporary
defensive purposes, the Portfolio may invest without limit in high quality money
market instruments. These instruments consist of commercial paper, certificates
of deposit, banker's acceptances and other bank obligations, obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, high
grade corporate obligations and repurchase agreements.
8
<PAGE> 12
Except as otherwise expressly provided herein, all investment objectives
and policies stated throughout this prospectus are not fundamental and may be
changed without approval of the Fund's shareholders. No such change would be
made in the Fund without 30 days prior written notice to shareholders. The
Portfolio may not purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Portfolio's total
assets would be invested in the securities of companies whose principal business
activities are in the same industry, except that the Portfolio may invest more
than 25% of its total assets in securities of public utility companies. The
Portfolio may not, with respect to 75% of its total assets, purchase the
securities of any issuer (other than obligations issued or guaranteed by the
government of the United States, or any of its agencies or instrumentalities)
if, as a result thereof, (a) more than 5% of the Portfolio's total assets would
be invested in the securities of such issuer, or (b) the Fund would hold more
than 10% of the voting securities of such issuer. The foregoing investment
policies regarding concentration and diversification are fundamental and may not
be changed without shareholder approval. See "Investment Policies and
Limitations" in the Statement of Additional Information.
THE MUTUAL FUND PORTFOLIO
(THE TAA FUND)
The Portfolio's investment objective is growth of capital.
The Portfolio will seek to attain its investment objective through
investment in the shares of open-end investment companies--commonly called
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.
Underlying funds may include funds which concentrate investments in a
particular industry sector, or which leverage their investments. The Portfolio
will not invest in other funds of The Flex-Partners family of funds or The
Flex-funds family of funds, the corresponding portfolios of which are also
managed by the Manager.
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 by previous
agreement 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. "Index" funds
may be purchased with a portion of the Portfolio's assets at times when the
Manager's selection process identifies the characteristics of a particular index
to be more favorable than those of other mutual funds available for purchase.
If, in the Manager's opinion, the Portfolio should have exposure to certain
stock indices and the Portfolio can efficiently and effectively implement such a
strategy by directly purchasing the common stocks of a desired index for the
Portfolio itself, it may invest up to 100% of its assets to do so.
9
<PAGE> 13
The Portfolio may invest temporarily in money market instruments for
defensive purposes, if the Manager deems it advisable to do so. See the Fund's
Statement of Additional Information for other details.
During periods when the Manager deems it necessary for temporary defensive
purposes, or pending investment of proceeds from new sales of Fund shares or to
meet its ordinary daily cash needs, the Portfolio may invest without limit in
high quality money market instruments. These instruments may include commercial
paper, certificates of deposit, banker's acceptances and other bank obligations,
short-term obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, and short-term obligations of foreign issuers, denominated
in U.S. dollars and traded in the United States.
Except as otherwise expressly provided herein, all investment objectives
and policies stated throughout this prospectus are not fundamental and may be
changed without approval of the Fund's shareholders. No such change would be
made in a Fund without 30 days prior written notice to shareholders. The BTB
Fund's policy regarding concentration is fundamental and may not be changed
without shareholder approval. Notwithstanding the fact that the TAA Fund is a
non-diversified fund, neither of the Funds may change from a diversified to a
non-diversified fund without shareholder approval.
ADDITIONAL INVESTMENT POLICIES
MONEY MARKET INSTRUMENTS AND BONDS
When investing in money market instruments or bonds, the Portfolios will
limit their purchases, denominated in U.S. dollars, to the following securities:
- U.S. Government Securities and Securities of its Agencies and
Instrumentalities
- Bank Obligations and Instruments Secured Thereby
- High Quality Commercial Paper--The Portfolio may invest in commercial
paper rated no lower than "A-2" by S&P or "Prime-2" by Moody's, or, if
not rated, issued by a company having an outstanding debt issue rated
at least A by S&P's or Moody's.
- Private Placement Commercial Paper--unregistered securities which are
traded in public markets to qualified institutional investors, such as
the Portfolios.
- High Grade Corporate Obligations--obligations rated at least A by S&P's
or Moody's.
- Repurchase Agreements Pertaining to the Above--The Portfolios may
invest without limit in any of the above securities subject to
repurchase agreements with any Federal Reserve reporting dealer or
member bank of the Federal Reserve System. Repurchase agreements
usually are for short periods, such as one week or less, but could be
longer. No Portfolio will invest more than 10% of its assets, at time
of purchase, in repurchase agreements
10
<PAGE> 14
which mature in excess of seven days or in other illiquid or not
readily marketable securities.
HEDGING STRATEGIES
Each Portfolio may engage in hedging transactions in carrying out their
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 Manager or Subadviser (in the case of the Utilities Stock
Portfolio) is implementing a change in a specific 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 Sub-Chapter M of the Internal
Revenue Code as a permitted means of avoiding taxes that would otherwise have to
be paid on gains from the sale of portfolio securities.
A hedging program involves entering into an "option" or "futures"
transaction in lieu of the actual purchase or sale of securities. At present,
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.
A 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 in its portfolio, or which it intends to
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 mutual funds, such as The
Flex-Partners. All futures transactions for a 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 a 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, a
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 a 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.
These financial futures contracts or related options used by a Portfolio
to implement its hedging strategies are considered derivatives. The value of
derivatives can be affected significantly by even small market movements,
sometimes in unpredictable ways. (See "Risk Factors.")
A Portfolio may not purchase or sell financial 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 Portfolios expect 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.
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<PAGE> 15
There can be no guaranty that the Portfolios will be able to realize this
objective and, as noted below under "Risk Factors," there are some risks in
utilizing a hedging strategy.
RISK FACTORS
By itself, the Utilities Stock Portfolio does not constitute a balanced
investment plan; the Utilities Stock Portfolio seeks a high level of current
income and growth of income, with capital appreciation as a secondary objective.
The Utilities Stock Portfolio invests primarily in common stock, preferred stock
and securities convertible into common or preferred stock. Changes in interest
rates may also affect the value of the Utilities Stock Portfolio's investments,
and rising interest rates can be expected to reduce the Utilities Stock
Portfolio's net asset value. The Fund's share price and total return fluctuate
and your investment may be worth more or less than your original cost when you
redeem your shares.
Because the Utilities Stock Portfolio concentrates its investments in
public utility companies, its performance will depend in large part on
conditions in the public utility industries. Utility stocks have traditionally
been popular among more conservative stock market investors because they have
generally paid above average dividends. However, utility stocks can still be
affected by the risks of the stock market, as well as factors specific to public
utility companies.
Governmental regulation of public utility companies can limit their ability
to expand their business or to pass cost increases on to customers. Companies
providing power or energy-related services may also be affected by fuel
shortages or cost increases, environmental protection or energy conservation
regulations, as well as fluctuating demand for their services. Some public
utility companies are facing increased competition, which may reduce their
profits. All of these factors are subject to rapid change, which may affect
utility companies independently from the stock market as a whole.
In seeking its investment objectives, the Utilities Stock Portfolio may
invest in securities of foreign issuers. Foreign securities may involve a higher
degree of risk and may be less liquid or more volatile than domestic
investments. Foreign securities usually are denominated in foreign currencies,
which means their value will be affected by changes in the strength of foreign
currencies relative to the U.S. dollar as well as the other factors that affect
security prices. Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there often is less
publicly available information about their operations. Generally, there is less
governmental regulation of foreign securities markets, and security trading
practices abroad may offer less protection to investors such as the Utilities
Stock Portfolio.
The value of such investments may be adversely affected by changes in
political or social conditions, diplomatic relations, confiscatory taxation,
expropriation, nationalization, limitation on the removal of portfolios or
assets, or imposition of (or change in) exchange control or tax regulations in
those foreign countries. Additional risks of foreign securities include
settlement delays and costs, difficulties in obtaining and enforcing judgments,
and taxation of dividends at the source of payment.
The Subadviser intends to manage the Utilities Stock Portfolio actively in
pursuit of its investment objective. The Utilities Stock Portfolio does not
expect to trade in securities for
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<PAGE> 16
short-term profits but, when circumstances warrant, securities may be sold
without regard to the length of time held.
The Mutual Fund Portfolio will be invested in securities which fluctuate in
market value, so net asset value per share will fluctuate as well. The Mutual
Fund Portfolio is by definition a non-diversified fund. It may have more than
five percent of its assets invested in one fund. If the underlying fund performs
poorly, this could negatively impact the value of the Mutual Fund Portfolio.
Thus, there is no guarantee that a shareholder will receive the full amount of
his investment upon the redemption of shares. The Mutual Fund Portfolio does,
however, seek to minimize the risk of loss through diversification and, at
times, the use of hedging techniques and defensive investment strategies.
Hedging involves risks which are not present in some other mutual funds with
similar objectives (See "Hedging Strategies.")
Put and call option contracts involve some risk. For example, the total
premium paid for an option contract could be lost if a Portfolio does not sell
the contract or exercise the contract prior to its expiration date.
Futures contracts likewise involve some risk. It is possible that the
contract(s) selected by the Manager or the Subadviser will not follow exactly
the price movement of the securities covered by the contract. If this occurs,
the objective of the hedging strategy may not be successful.
Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Accordingly, these financial futures contracts or related options used by the
Mutual Fund Portfolio and the Utilities Stock Portfolio to implement their
hedging strategies (see "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.
Although the Mutual Fund Portfolio will invest in a number of underlying
mutual funds, this practice will not eliminate investment risk. To the extent
that the Mutual Fund Portfolio invests in underlying funds which leverage
investments or concentrate investments in one industry, an investment in the
Mutual Fund Portfolio will indirectly entail the additional risks associated
with these practices. Leveraged mutual funds may have higher volatility than the
over-all market or other mutual funds. This may result in greater gains or
losses than the over-all market or other non-leveraged mutual funds. Mutual
funds which concentrate investments in a single industry lack normal
diversification and are exposed to losses stemming from negative industry-wide
developments.
An investor in the TAA Fund should recognize that he may invest directly in
mutual funds and that by investing in mutual funds indirectly through the Mutual
Fund Portfolio, he will bear not only his proportionate share of the expenses of
the Mutual Fund Portfolio (including operating costs and investment advisory and
administrative fees) but also indirectly similar expenses of the underlying
mutual funds.
Each of the Portfolios may invest in private placement commercial paper and
repurchase agreements with banks and securities brokers.
All repurchase agreements entered into by a Portfolio will be fully
collateralized. The Portfolio's risk is that the seller may fail to repurchase
the security on the delivery date. If the seller defaults, the underlying
security constitutes collateral for the seller's obligation to pay. It is a
policy of the Portfolio to make settlement on repurchase agreements only upon
proper delivery of the underlying collateral. In the event of a bankruptcy or
other default of a seller of a repurchase agreement to the Portfolio, the
Portfolio could encounter delays and expenses in
13
<PAGE> 17
enforcing its rights and could experience losses, including a decline in the
value of the underlying securities and loss of income.
Private placement commercial paper ("Rule 144A securities") consists of
unregistered securities which are traded in public markets to qualified
institutional investors, such as the Portfolios. A Portfolio's risk is that the
universe of potential buyers for the securities, should the Portfolio desire to
liquidate a position, is limited to qualified dealers and institutions, and
therefore such securities could have the effect of being illiquid.
PORTFOLIO TURNOVER
Because the Manager and the Subadviser (in the case of the Utilities Stock
Portfolio) may employ flexible defensive investment strategies when market
trends are not considered favorable, the Manager and the Subadviser may
occasionally change the entire portfolios in the Portfolios. High transaction
costs could result when compared with other funds. Trading may also result in
realization of net short-term capital gains upon which shareholders may be taxed
at ordinary tax rates when distributed from a Fund.
This defensive investment strategy can produce high portfolio turnover
ratios when calculated in accordance with SEC rules. However, viewed in terms of
"round trips," The Mutual Fund Portfolio completed one and one-half "round
trips" in the stock market during the year. The Utilities Stock Portfolio was
totally invested and did little trading during the year. A Portfolio would have
one "round trip," for example, if 100% of the Portfolio were invested
defensively in money market instruments at the beginning of the year, then 100%
of the Portfolio was fully invested in accordance with its investment objective
in the middle of the year and finally, the Portfolio went 100% defensive again
at the end of the year.
The Utilities Stock Portfolio's annual portfolio turnover rate is not
expected to exceed 50%. The Mutual Fund Portfolio's annual portfolio turnover
rate is not expected to exceed 300%. See "Income Dividends and Taxes."
The Portfolios intend to comply with the short-term trading restrictions of
Subchapter M of the Internal Revenue Code of 1986, as amended, although these
restrictions could inhibit a rapid change in the Portfolios' investments. The
Portfolios will strive for a positive investment return each calendar year.
THE TRUST AND ITS MANAGEMENT
The Trust was organized as a Massachusetts business trust on June 22, 1992.
Two of its three constituent funds are diversified open-end management
companies. The TAA Fund is a non-diversified open-end management company. The
Trust's offices are at 6000 Memorial Drive, Dublin, OH 43017. The business and
affairs of the Trust are under the direction of its Board of Trustees.
The Trust has no investment adviser because the Trust seeks to achieve its
investment objective of each Fund by investing each Fund's assets in the
corresponding Portfolio. Each Portfolio has retained the services of R. Meeder &
Associates, Inc. as investment adviser.
R. Meeder & Associates, Inc. (the "Manager"), has been an investment
adviser to individuals and retirement plans since 1974 and to mutual funds since
1982. The Manager serves the Portfolios pursuant to Investment Advisory
Contracts under the terms of which it has agreed to
14
<PAGE> 18
provide an investment program within the limitations of each 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 each
Portfolio's custodian, transfer agent, independent accountants and legal
counsel, and investment advisory services provided by the Subadviser to the
Utilities Stock Portfolio.
The Manager was incorporated in Ohio in 1974 and maintains its principal
offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a wholly-owned
subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled by Robert S.
Meeder, Sr. through ownership of voting common stock. MII conducts business only
through its five subsidiaries which are R. Meeder & Associates, Inc.; Mutual
Funds Service Co., the Fund's transfer agent; 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 Manager earns an annual fee, payable in monthly installments, from each
Portfolio at the rate of 1.00% of the first $50 million, .75% of the next $50
million and .60% in excess of $100 million, of average net assets. These fees
are higher than the fees charged to most other investment companies.
Accounting, stock transfer, and dividend disbursing services are provided
to each Fund and Portfolio by Mutual Funds Service Co., 6000 Memorial Drive,
Dublin, Ohio 43017, a wholly-owned subsidiary of MII. The minimum annual fee,
payable monthly, for accounting services for each of the Portfolios is $7,500.
Subject to the applicable minimum fee, each Portfolio's annual fee is computed
at the rate of .15% of the first $10 million, .10% of the next $20 million, .02%
of the next $50 million and .01% in excess of $80 million of each Portfolio's
average net assets. In addition, each class of shares of each Fund incurs
(subject to a $4,000 annual minimum fee) an annual fee of the greater of $15 per
shareholder account or .10% of each Fund's average net assets, payable monthly,
for stock transfer and dividend disbursing services. Mutual Funds Service Co.
also serves as Administrator to each Fund pursuant to an Administration Services
Agreement which was effective February 1, 1995. Services provided to each Fund
include coordinating and monitoring any third party services to each Fund;
providing the necessary personnel to perform administrative functions for each
Fund; assisting in the preparation, filing and distribution of proxy materials,
periodic reports to Trustees and shareholders, registration statements and other
necessary documents. Each Fund incurs an annual fee, payable monthly, of .03% of
each Fund's average net assets. These fees are reviewable annually by the
respective Trustees of the Trust and the Portfolio. For the period ended
December 31, 1995, total payments to Mutual Funds Service Co. amounted to
$56,102 from The BTB and TAA Funds and their corresponding Portfolio's
collectively.
A broker-dealer may use a portion of the commissions paid by the Portfolio
to reduce the Portfolio or a Fund's expenses. The Manager or the Subadviser may
take into account sales of shares of the Funds and other funds advised by the
Manager in selecting broker-dealers to effect portfolio transactions on behalf
of the Portfolios.
Information concerning the Trustees and officers of both the Trust and the
Portfolios appears in the Statement of Additional Information.
15
<PAGE> 19
SUBADVISER
Miller/Howard Investments, Inc. (the "Subadviser"),141 Upper Byrdcliffe
Road, Woodstock, New York 12498, serves as the Utilities Stock Portfolio's
subadviser under an Investment Subadvisory Agreement between the Manager and the
Subadviser. The Subadviser furnishes investment advisory services in connection
with the management of the Utilities Stock Portfolio. The Subadviser is
compensated for its services by the Manager in an amount equal to 90% of the
investment advisory fees received by the Manager under its investment advisory
contract with the Utilities Stock Portfolio, provided that if a shareholder
purchasing shares in The BTB Fund was solicited by the Manager, the Subadviser
is compensated by the Manager in an amount equal to 60% of the investment
advisory fees received by the Manager with respect to such shareholder. The
Manager continues to have responsibility for all investment advisory services in
accordance with the investment advisory contract and supervises the Subadviser's
performance of such services.
The Subadviser, a Delaware corporation, is a registered investment adviser
which has been providing investment services to broker-dealers, investment
advisers, employee benefit plans, endowment portfolios, foundations and other
institutions and individuals since 1984. As of December 31, 1995, the Subadviser
held discretionary investment authority over approximately $195 million of
assets. The Subadviser is controlled by Lowell Miller through ownership of
voting common stock. Lowell Miller, a director and the President of the
Subadviser, is a Trustee of the Trust.
PORTFOLIO MANAGERS
The individuals primarily responsible for the management of each of the
Portfolios are listed below:
Robert S. Meeder, Jr. is the portfolio manager primarily responsible for
the day to day management of the Mutual Fund Portfolio. Mr. Meeder, a Vice
President of the Mutual Fund Portfolio and The Flex-Partners, is the
President/Portfolio Manager of the Manager. Mr. Meeder has been associated with
the Manager since 1983 and has managed the Portfolio since 1988.
Lowell G. Miller is the portfolio manager primarily responsible for the day
to day management of the Utilities Stock Portfolio. Mr. Miller is a Trustee of
The Flex-Partners and is a director and the President of the Subadviser. Mr.
Miller has been associated with the Subadviser and its predecessor since 1984,
has managed the Utilities Stock Portfolio since its inception in 1995 and
controls the Subadviser through ownership of voting common stock.
DISTRIBUTOR
Roosevelt & Cross, Incorporated (the "Distributor"), 20 Exchange Place, New
York, New York 10005, is a corporation organized under the laws of the State of
New York and serves as the distributor of the shares of each Fund. The Manager
or the Subadviser may select the Distributor to execute transactions for the
Portfolios, provided that the commissions, fees or other remuneration received
by the Distributor are reasonable and fair compared to those paid to other
brokers in connection with comparable transactions.
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<PAGE> 20
TRANSFER AGENT
Mutual Funds Service Co. ("MFSCO"), 6000 Memorial Drive, Dublin, Ohio 43017
is a corporation organized under the laws of the State of Ohio and provides
stock transfer, dividend disbursing and administrative services to each Fund.
DISTRIBUTION PLANS
Each Fund has adopted two plans of distribution pursuant to Rule 12b-1
(the "Distribution Plans") in accordance with the regulations under the
Investment Company Act of 1940, as amended (the "1940 Act"). Under the
provisions of the Distribution Plans, each Fund makes payments to the
Distributor based on an annual percentage of the average daily value of the net
assets of each class of shares as follows:
<TABLE>
<CAPTION>
CLASS DISTRIBUTION FEE
----- ----------------
<S> <C>
A 0.25%
C 0.75%
</TABLE>
Each Fund has adopted two service plans (the "Service Plans"). Under the
provisions of the Service Plans, each fund makes payments to the Distributor
based on an annual percentage of the average daily value of the net assets of
each class of shares as follows:
<TABLE>
<CAPTION>
CLASS SERVICE FEE
----- -----------
<S> <C>
A 0.25%
C 0.25%
</TABLE>
Some or all of the service fees are used to reimburse securities dealers
(including securities dealers that may be affiliates of the Distributor) for
personal services and/or the maintenance of shareholder accounts. A portion of
any initial commission paid to dealers for the sale of shares of each Fund
represents payment for personal services and/or the maintenance of shareholder
accounts by such dealers. Dealers who have sold Class A shares are eligible for
further reimbursement commencing as of the time of such sale. Dealers who have
sold Class C shares are eligible for further reimbursement after the first
twelve months during which such shares have been held of record by such dealer
as nominee for its clients (or by such clients directly). Any service fees
received by the Distributor and not allocated to dealers may be applied by the
Distributor in reduction of expenses incurred by it directly for personal
services and the maintenance of shareholder accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to securities dealers for selling such shares. Any distribution
fees received by the Distributor and not allocated to dealers may be applied by
the Distributor in connection with sales or marketing efforts, including special
promotional fees and cash and noncash incentives based upon sales by securities
dealers.
The Manager or the Subadviser may use its resources to pay expenses
associated with the sale of the Funds' shares. This may include payments to
third parties, such as banks or broker-
17
<PAGE> 21
dealers, that provide shareholder support services or engage in the sale of the
Funds' shares. However, the Funds do not pay the Manager or the Subadviser any
separate fees for this service.
A rule of the National Association of Securities Dealers, Inc. ("NASD")
limits the annual expenditures which each Fund may incur under the Distribution
Plans and the Service Plans to a total of 1%, of which 0.75% may be used to pay
distribution expenses and 0.25% may be used to pay shareholder service fees. The
NASD rules also limits the aggregate amount which each Fund may pay for such
distribution costs to 6.25% of gross share sales of a class since the inception
of any asset-based sales charge plus interest at the prime rate plus 1% on
unpaid amounts thereof (less any contingent deferred sales charge). Such
limitation does not apply to shareholder service fees.
INCOME DIVIDENDS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. The BTB Fund's dividends are
distributed at the end of the month and declared payable to shareholders on the
last business day of each month to shareholders of record as of the previous
business day.
The TAA Fund's dividends are declared payable to shareholders on a
quarterly basis.
In December, the Funds may distribute an additional ordinary income
dividend (consisting of net short-term capital gains and undistributed income)
in order to preserve its status as a registered investment company (mutual fund)
under the Internal Revenue Code. Net long-term capital gains, if any, also are
declared and distributed in December. Dividends paid by each Fund with respect
to Class A shares and Class C shares, to the extent any dividends are paid, will
be calculated in the same manner at the same time, on the same day and will be
in the same amount except that each class will bear its own distribution
charges, resulting in lower dividends for Class C shares. Distributions of net
capital gains, if any, will be paid in the same amount for Class A shares and
Class C shares.
DISTRIBUTION OPTIONS. You may choose to receive dividends and capital gain
distributions in cash or to reinvest them in additional shares. Please indicate
your choice on your New Account Application or contact your dealer. If you elect
to receive dividends or capital gain distributions in cash and the U.S. Postal
Service returns your checks to us, the checks will be reinvested in your account
at the Fund's then-current net asset value. Until we receive instructions to the
contrary, subsequent distributions will be reinvested in your account. In
addition, we may reinvest, at the Fund's then-current net asset value, any
distribution checks that remain uncashed for six months.
TAXES. Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code by distributing all, or substantially
all, of its net investment income and net realized capital gains to shareholders
each year. Each Fund qualified as a "regulated investment company" for the year
ended December 31, 1995.
Each Fund's dividends and capital gain distributions are subject to federal
income tax whether they are received in cash or reinvested in additional shares.
Distributions declared in
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<PAGE> 22
October, November, December and paid in January of the following year are
taxable as if they were paid on December 31. The TAA Fund expects to make such a
distribution in future years.
Dividends from net investment income (including net short-term capital
gains) are taxable as ordinary income. Distributions from net long-term capital
gains, if any, are taxable as long-term capital gains, regardless of how long
you have held your shares.
A portion of each Fund's dividends may qualify for the dividends-received
deduction available to corporations. A Fund will send you a tax statement by
January 31 showing the tax status of distributions you received in the previous
year and will file a copy with the IRS.
Form 1099-DIV, Dividends and Distributions will not be provided to
individuals if gross dividends and other distributions are less than $10 or to
corporations, retirement plans (including IRA's), tax-exempt organizations or to
registered securities dealers.
You may realize a capital gain or loss when you redeem (sell) or exchange
shares of each Fund. For most types of accounts, the proceeds from your
redemption transactions will be reported to you and the IRS annually. However,
because the tax treatment depends on your purchase price and personal tax
position, you should keep your regular account statements to use in determining
your taxes.
"BUYING A DIVIDEND." The timing of your investment in the Funds could have
undesirable tax consequences.
If you opened a new account or bought more shares for your current account
just before the day a dividend or capital gain distribution was reflected in the
Fund's share price, you would receive a portion of your investment back as a
taxable distribution. This practice is sometimes referred to as "buying a
dividend."
BACKUP WITHHOLDING. Each Fund is required by federal law to withhold 31% of
reportable dividends, capital gain distributions, or redemptions payable to
shareholders who have not complied with IRS regulations. To avoid this
withholding requirement, you must certify on your account application (or on IRS
Form W-9) that your social security or taxpayer identification number (TIN) is
correct and that you are not subject to back-up withholding for previous under
reporting to the IRS, or that you are exempt from backup withholding.
The Funds may refuse to sell shares to investors who have not complied with
these requirements, either before or at the time of purchase. Until we receive
your certified TIN, we may redeem your shares in the Funds at any time.
HOW NET ASSET VALUE IS DETERMINED
Net asset value per share is determined at each closing of the New York
Stock Exchange each day the Exchange is open for business and each other day
during which there is a sufficient degree of trading that the current net asset
value of a Fund's shares might be materially affected by changes in the value of
the securities held by a Fund's Portfolio. Net asset value is obtained
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<PAGE> 23
by dividing the value of a Fund's assets (i.e., the value of its investment in
the corresponding Portfolio and other assets), less its liabilities, by the
total number of its shares of beneficial interest outstanding at the time. Net
asset value is determined separately for Class A shares and Class C shares.
Although the legal rights of Class A shares and Class C shares are substantially
identical, the different expenses borne by each class will result in different
net asset values and dividends. The net asset value of Class C shares will
generally be lower than the net asset value of Class A shares as a result of the
larger distribution fee accrual with respect to Class C shares.
PERFORMANCE INFORMATION AND REPORTS
A Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include a Fund's investment results
and/or comparisons of its investment results to the Standard & Poor's 500
Composite Stock Price Index or other various unmanaged indices or results of
other mutual funds or investment or savings vehicles. Each Fund's investment
results as used in such communications will be calculated on a total rate of
return basis in the manner set forth below. From time to time, fund rankings may
be quoted from various sources, such as Lipper Analytical Services, Inc. and
Morningstar Mutual Fund Report.
A Fund may provide period and average annualized "total return" quotations.
A Fund's "total return" refers to the change in the value of an investment in
the Fund over a stated period based on any change in net asset value per share
and including the value of any shares purchasable with any dividends or capital
gains distributed during such period. Period total return may be annualized.
Period and average annualized total return are calculated separately for Class A
shares and Class C shares. Average annual total return smoothes out variations
in performance and takes into account any applicable initial or contingent
deferred sales charges.
An annualized total return is a compounded total return which assumes that
the period total return is generated over a one-year period, and that all
dividends and capital gain distributions are reinvested. An annualized total
return will be slightly higher than a period total return if the period is
shorter than one year, because of the assumed reinvestment.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the total return of each Fund will vary depending upon
interest rates, the current market value of the securities held by the Fund's
corresponding Portfolio and changes in the Fund's expenses. In addition, during
certain periods for which total return quotations may be provided, the Manager
may have voluntarily agreed to waive portions of its fees or reimburse Fund
expenses on a month-to-month basis. Such waivers and reimbursements will have
the effect of increasing the Fund's net income (and therefore its total return)
during the period such waivers are in effect.
Shareholders will receive financial reports semi-annually that include each
Fund's financial statements, including listings of investment securities held by
each Fund's corresponding Portfolio at those dates. Annual reports are audited
by independent accountants.
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<PAGE> 24
OTHER INFORMATION
SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest in each of
the Trust's existing funds and to create additional funds. All shares have a par
value of $.10 per share, are fully paid, non-assessable and fully transferable
when issued. All shares are issued as full or fractional shares.
A fraction of a share has the same rights and privileges as a full share.
Each Fund of the Trust issues its own series of shares of beneficial interest.
The shares of each Fund represent an interest only in the Fund's assets (and
profits or losses) and in the event of liquidation, each share of a particular
Fund would have the same rights to dividends and assets as every other share of
the Fund. The Trust's Board of Trustees may authorize the creation of additional
series under the Declaration of Trust, each of which would invest its assets in
separate, individually managed portfolios.
Each full or fractional share has a proportionate vote. On some issues,
such as the election of Trustees, all shares of the Trust vote together as one
series. On an issue affecting a particular Fund, only its shares vote as a
separate series. An example of such an issue would be a fundamental investment
restriction pertaining to only one Fund. In voting on a Distribution Plan,
approval of the Plan by the shareholders of a particular Fund would make the
Plan effective as to that Fund, whether or not it had been approved by the
shareholders of any other Fund.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss as a
result of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Fund itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of each Fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. A separate vote of a Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
one Fund are not entitled to vote on a matter that does not affect that Fund but
that does require a separate vote of any other Fund. There normally will be no
meetings of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of Trustees holding office have been elected
by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. Shareholders have under
certain circumstances (e.g., upon application and submission of certain
specified documents to the Trustees of the Fund by a specified number of
shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees.
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<PAGE> 25
Each Portfolio, in which all the investable assets of a corresponding Fund
will be invested, is organized as a trust under the laws of the State of New
York. Each Portfolio's Declaration of Trust provides that a Fund and other
entities investing in the Portfolio (e.g., other investment companies, insurance
company separate accounts, and common and commingled trust funds) will each be
liable for all obligations of that Portfolio. However, the risk of a Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and that Portfolio
itself was unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither a Fund nor its shareholders will be adversely
affected by reason of a Fund's investing in the corresponding Portfolio. In
addition, whenever the Trust is requested to vote on matters pertaining to the
fundamental policies of a Portfolio, the Trust will hold a meeting of the
corresponding Fund's shareholders and will cast its vote as instructed by the
Fund's shareholders.
Each class of shares represents identical interests in the applicable
Fund's investment portfolio. As such, they have the same rights, privileges and
preferences, except with respect to the: (a) designation of each class, (b)
effect of the respective sales charges, if any, for each class, (c) distribution
fees borne by each class, (d) expenses allocable exclusively to each class, (e)
voting rights on matters exclusively affecting a single class, (f) exchange
privilege of each class and (g) any conversion feature applicable to a class.
INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, each Fund seeks to achieve its investment objectives by
investing all of its investable assets in a corresponding Portfolio, a separate
registered investment company with the same investment objectives as the Fund.
Therefore, an investor's interest in the Portfolio's securities is indirect. In
addition to selling a beneficial interest to the Fund, the Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund. Investors in the Fund should be
aware that these differences may result in differences in returns experienced by
investors in the different funds that invest in the Portfolio. Such differences
in returns are also present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available by
contacting the Trust by calling: 1-800-494-FLEX, or (614) 766-7074.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. (However, this
possibility also exists for traditionally structured funds which have large or
institutional investors.) Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes in the same proportion as do the Fund's shareholders.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Trust to withdraw the Fund's interest in the
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from the Portfolio). If
such
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<PAGE> 26
securities are distributed, the Fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments or adversely affect the
liquidity of the Fund.
The Trust may withdraw the investment of any Fund from its corresponding
Portfolio at any time, if the Board of Trustees of the Trust determines that it
is in the best interests of the Fund to do so. Upon any such withdrawal, the
Board of Trustees would consider what action might be taken, including the
investment of all the assets of the Fund in another pooled investment entity
having the same investment objectives as that Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies with respect to that Fund's corresponding Portfolio. The inability to
find an adequate investment pool or investment adviser could have a significant
impact on shareholders' investment in the Fund.
As stated in "Investment Objectives and Policies," except as otherwise
expressly provided herein, a Portfolio and a Fund's investment objective and
policies are not fundamental and may be changed by their respective Trustees
without shareholder approval. (No such change would be made, however, without 30
days written notice to shareholders.)
For descriptions of the investment objective and policies of the
Portfolios, see "Investment Objective and Policies." For descriptions of the
management and expenses of the Portfolios, see "The Trust and Its Management"
herein, and "Investment Adviser and Manager", "Investment Subadviser" and
"Trustees and Officers" in the Statement of Additional Information.
HOW TO BUY SHARES
MINIMUM INVESTMENT -- The minimum investment to open an account is $2,500,
except an Individual Retirement Account (IRA) which has a $500 minimum.
Subsequent investments in any account may be made in amounts of at least $100.
You may open an account and make an investment by purchasing shares through
securities dealers having sales agreements with the Distributor. A minimum
investment of $2,500 ($500 for an IRA) is required to establish an account in
each Fund. The minimum for subsequent investments in each Fund is $100.
Direct purchase orders may be made by submitting a check. In the case of a
new account, fill out the New Account Application accompanying this Prospectus.
Be sure to specify the name of the Fund and class of shares in which you wish to
invest. A check payable to each Fund you specify must accompany the New Account
Application. Payments may be made by check or Federal Reserve Draft payable to
the particular Fund(s) specified on the application (The BTB Fund, The TAA Fund)
and should be mailed to the following address: THE FLEX-PARTNERS, C/O MUTUAL
FUNDS SERVICE CO., P. O. BOX 7177, DUBLIN, OHIO 43017.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred in the
transaction. All orders for the purchase of shares are subject to acceptance or
rejection by each Fund or by the Distributor. Direct purchase orders received by
MFSCO by 4:00 p.m., Eastern time, are confirmed at that
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<PAGE> 27
day's public offering price. Direct purchase orders received by MFSCO after 4:00
p.m., Eastern time, are confirmed at the public offering price on the following
business day.
Wire orders for shares of the Funds received by dealers prior to 4:00 p.m.,
Eastern time, and received by MFSCO before 5:00 p.m., Eastern time, on the same
day are confirmed at that day's public offering price. Orders received by
dealers after 4:00 p.m., Eastern time, are confirmed at the public offering
price on the following business day. It is the dealer's obligation to place the
order with MFSCO before 5:00 p.m., Eastern time, and to forward payment to Star
Bank, N.A., the Custodian for the Funds.
If the wire order is for a new account, or to open an account in a
different Fund, you must telephone the Fund prior to making your initial
investment. Call 1-800-494-FLEX, or (614) 766-7074. Be sure to specify the name
of the Fund and class of shares in which you wish to invest. Advise the Fund of
the amount you wish to invest and obtain an account number and instructions.
Money sent by a single wire can only be invested in one Fund. Have your bank
wire federal funds to:
Star Bank, N.A. Cinti/Trust
ABA #: 042-00001-3
Attention: The Flex-Partners
(and Name of Fund - see below)
Credit Account Number (account
number for Fund as follows):
BTB FUND--
Account Number 483608964
TAA FUND--
Account Number 483608972
Account Name (your name)
Your Flex-Partners account number
Direct purchase orders received by MFSCO by 4:00 p.m., Eastern time, are
confirmed at that day's net asset value. Direct investments received by MFSCO
after 4:00 p.m. and orders received by dealers after 5:00 p.m. are confirmed at
the net asset value next determined on the following business day.
No stock certificates will be issued. Instead, an account with MFSCO is
established for each investor and all shares purchased or received, including
those acquired through the reinvestment of dividends and distributions, are
registered on the books of each Fund and credited to such account.
Each Fund will not permit redemptions until it receives the New Account
Application in good order.
SUBSEQUENT INVESTMENTS -- Subsequent investments in an existing account in
either Fund may be made by mailing a check payable to The BTB Fund or The TAA
Fund. Please include your account number and the class of shares in which you
wish to invest on the check and mail as follows:
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<PAGE> 28
THE FLEX-PARTNERS
C/O MUTUAL FUNDS SERVICE CO.
P. O. BOX 7177
DUBLIN, OHIO 43017
Subsequent investments may also be made by bank wire as described above. It
is necessary to notify the Fund prior to each wire purchase. Wires sent without
notifying the Fund will result in a delay of the effective date of your
purchase.
PURCHASING SHARES -- PURCHASE OPTIONS -- You may purchase "Class A" Shares
or "Class C" Shares of each Fund. Class A and Class C Shares bear sales charges
in different forms and amounts. Class A Shares are sold with a sales charge at
the time of purchase, which varies with the amount invested. Class C Shares have
no initial sales charge but are subject to a contingent deferred sales charge if
redeemed within twenty four months from purchase. Under a Rule 12b-1
distribution plan that provides for distribution fees and a service plan that
provides for asset based service fees, Class C Shares have a higher distribution
fee which may cause a long-term shareholder to pay more than the economic
equivalent of the maximum Class A Share initial sales charge. You should choose
the method of purchasing shares (Class A or Class C) that is most beneficial
given the amount of your purchase, the length of time you expect to hold the
shares and other relevant circumstances. Maximum sales charges and fees are set
forth in the "Synopsis of Financial Information" on page 3 of this Prospectus
and quantity discounts for the Class A initial sales charge are set forth below.
CLASS A SHARES of each Fund are sold at net asset value plus the applicable
sales charge as shown in the table below (the "Offering Price") for purchases
made at one time by a single purchaser, by an individual, his or her spouse and
their children under age 21, or by a single trust account. Class A Shares also
bear a Rule 12b-1 fee of .25% per annum (paid to the Distributor, Roosevelt &
Cross, Incorporated), of their average net asset value. In addition, Class A
shares bear an asset based service fee of .25% per annum. The sales charge on
Class A Shares is allocated between your investment dealer and Roosevelt &
Cross, Incorporated as shown below:
<TABLE>
<CAPTION>
AS A PERCENTAGE AS A PERCENTAGE
OF OFFERING OF NET ASSET
PRICE OF THE VALUE OF THE DEALER'S
SHARES SHARES SALES
AMOUNT INVESTED PURCHASED PURCHASED CONCESSION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Up to $50,000 4.00% 4.17% 3.25%
$50,001 to $100,000 4.00% 4.17% 3.50%
$100,001 to $250,000 3.50% 3.63% 3.00%
$250,001 to $500,000 3.00% 3.09% 2.50%
$500,001 to $600,000 2.60% 2.67% 2.10%
$600,001 to $700,000 2.35% 2.41% 1.85%
$700,001 to $800,000 2.15% 2.20% 1.65%
$800,001 to $1,000,000 2.00% 2.04% 1.50%
$1,000,001 or more 1.00% 1.01% 0.75%
</TABLE>
CUMULATIVE QUANTITY DISCOUNT. The above tables of reduced sales charges
also apply if the dollar amount of a purchase plus the net asset value of Class
A Shares then owned by the purchaser is more than $100,000. The sales charge on
the shares being purchased will then be at
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<PAGE> 29
the rate applicable to the aggregate value of such shares then owned plus the
amount of the purchase.
To receive the cumulative quantity discount, the investor or securities
dealer must request the discount at the time of placing the purchase order and
give the Transfer Agent sufficient information to determine and confirm that the
purchase will qualify for the discount. The cumulative quantity discount may be
amended or terminated at any time as to all purchases occurring thereafter.
LETTER OF INTENTION. An investor may also pay reduced sales charges by
signing and fulfilling the Letter of Intention on the New Account Application
which expresses the investor's intention to invest within the specified 13-month
period the amount in Class A Shares indicated. The Letter of Intention may be
back dated to include purchases made within 90 days prior the signing of the
Letter of Intention. The Letter of Intention will not be a binding obligation on
either the purchaser or the Fund.
Purchases made under the Letter of Intention are made at the sales charge
applicable to the aggregate amount to be invested under the Letter of Intention
as if all shares were purchased in a single transaction. During the period
covered by the Letter of Intention, the Transfer Agent will escrow shares
representing 5% of the intended purchase. If the intention is not completed, a
price adjustment is made, based upon the actual amount invested within the
period covered by the Letter of Intention, by redemption of escrowed shares. A
Letter of Intention can be amended: (a) during the 13-month period if the
purchaser files an amended Letter of Intention with the same expiration date as
the original and (b) automatically after the end of the period, if the total
purchases credited to the Letter of Intention qualify for an additional
reduction in sales charge.
CLASS C SHARES are sold at net asset value without an initial sales charge
but if redeemed within eighteen months of purchase (the "CDSC Period") a
contingent deferred sales charge ("CDSC") equal to 1.50% of the lesser of the
current market value or the cost of the shares being redeemed will apply and if
redeemed after eighteen months of purchase and before twenty four months after
purchase, a CDSC equal to .75% of the lesser of the current market value or the
cost of the shares being redeemed will apply. No CDSC will be imposed on Class C
Shares acquired by reinvestment of distributions. In determining whether a CDSC
is applicable, it will be assumed that a redemption is made first of shares
derived from reinvestment of distributions and second of shares purchased during
the CDSC Period. Class C Shares bear an asset based service fee of 0.25% and a
Rule 12b-1 fee, shown in the Fee Table on page 3, that is higher than the Rule
12b-1 fee for Class A Shares. Class C Shares provide the benefit of putting all
of an investor's dollars to work from the time the investment is made but will
have a higher annual expense ratio and pay lower dividends than Class A Shares
due to the higher Rule 12b-1 fee.
All CDSC's imposed on redemptions are paid to the Distributor. The
Distributor intends to pay a commission of 1% of the purchase amount to
participating dealers at the time the investor purchases Class C shares.
CONVERSION OF CLASS C SHARES: Class C shares will automatically convert to
Class A shares seven years after the end of the calendar month in which the
purchase order for Class C shares was accepted, on the basis of the relative net
asset values of the two classes and subject to the following terms: Class C
shares acquired through the reinvestment of dividends and
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<PAGE> 30
distributions ("reinvested Class C shares") will be converted to Class A shares
on a pro-rata basis only when Class C shares not acquired through reinvestment
of dividends or distributions ("purchased Class C shares") are converted. The
portion of reinvested Class C shares to be converted will be determined by the
ratio that the purchased Class C shares eligible for conversion bear to the
total amount of purchased Class C shares in the shareholder's account. For the
purposes of calculating the holding period, Class C shares will be deemed to
have been issued on the sooner of: (a) the date on which the issuance of Class C
shares occurred, or (b) for Class C shares obtained by an exchange or series of
exchanges, the date on which the issuance of the original Class C shares
occurred. This conversion to Class A shares will relieve Class C shares that
have been outstanding for at least seven years (a period of time sufficient for
Roosevelt & Cross, Incorporated to have been compensated for distribution
expenses related to such Class C shares) from the higher ongoing distribution
fee paid by Class C shares. Only Class C shares have this conversion feature.
Conversion of Class C shares to Class A shares is contingent on the availability
of a private letter revenue ruling from the Internal Revenue Service or an
opinion of counsel affirming that such conversion does not constitute a taxable
event for the shareholder under the Internal Revenue Code. If such revenue
ruling or opinion of counsel is no longer available, conversion of Class C
shares to Class A shares would have to be suspended, and Class C shares would
continue to be subject to the Class C distribution fee until redeemed.
SALES CHARGE WAIVERS: Directors, Trustees, officers and full-time employees
of the Portfolios, the Trust, the Manager, the Subadviser or the Distributor,
including members of the immediate families of such individuals and employee
benefit plans established by such entities, may purchase shares of the Funds at
net asset value.
The Funds may also sell Class A shares at net asset value without an
initial sales charge to clients of the Manager or the Subadviser by making
arrangements to do so with the Trust and the transfer agent.
Shares of the Funds may be purchased at net asset value by broker-dealers
who have a sales agreement with the Distributor and by their registered
personnel and employees, including members of the immediate families of such
registered personnel and employees (i.e., spouse and minor children only).
Each Fund may waive the CDSC on redemption following the death of a
shareholder, or if a shareholder becomes unable to engage in any substantial
gainful activity by reason of a medically determinable physical or mental
impairment which can be expected to result in death or be of long-continued and
indefinite duration; and when a total or partial redemption is made in
connection with a distribution from IRAs or other qualified retirement plans
after attaining age 59-1/2. See "Other Shareholder Services - Systematic
Withdrawal Program" and the Statement of Additional Information.
Each of the Funds may waive the CDSC on the redemption of Class C Shares
owned by banks and bank trust departments, either in their fiduciary capacities
or for their own accounts. A bank or bank trust department may charge fees to
clients for whose account it purchases shares for which the CDSC has been
waived.
No sales charge will be charged on accounts that are opened for
shareholders by dealers where the amount invested represents redemption proceeds
from funds distributed other than by
27
<PAGE> 31
Roosevelt & Cross, Incorporated, and where the shareholder has paid a sales
charge in connection with the purchase of such other fund's shares; provided
that (i) shares of the Fund are purchased within 30 days after redemption of
such other fund's shares; and (ii) sufficient documentation of such redemption
as the Transfer Agent may require shall be provided at the time Fund shares are
purchased. In addition, shareholders who have redeemed shares of a mutual fund
which is a series of The Flex-Partners (each a "Flex-Partners Fund") may
reinvest the proceeds in any Flex-Partners Fund at net asset value if such
proceeds are reinvested within 30 days after the date of redemption.
HOW TO MAKE WITHDRAWALS (REDEMPTIONS)
Shares are redeemed and funds withdrawn at net asset value per share, and
there are no redemption fees. (See "How Net Asset Value Is Determined.")
BY MAIL -- A shareholder may redeem shares by mailing a written request in
good order to The Flex-Partners, c/o Mutual Funds Service Co., P. O. Box 7177,
Dublin, OH 43017. Good order means that the request must be signed by the
shareholder(s) and the signature(s) must be guaranteed by an eligible guarantor
institution (a bank, broker-dealer, credit union, securities exchange, clearing
agency or savings association). Further documentation may be required as to the
authority of the person requesting redemption of shares held of record in the
name of corporations or trustees, and other fiduciaries.
Amounts withdrawn are mailed without charge to the address printed on your
account statement.
BY BANK WIRE -- A shareholder may redeem by telephone by placing a wire
redemption through a securities dealer. Wire redemption requests received by
dealers prior to 4:00 p.m., Eastern time, and received by MFSCO before 5:00
p.m., Eastern time on the same day, are confirmed at that day's net asset value
per share. Direct wire redemption requests must be received by 4:00 p.m. to be
confirmed at that day's net asset value.
WHEN REDEMPTIONS ARE EFFECTIVE -- Redemptions are made at the net asset
value per share next determined after receipt of a redemption request in good
order. (See "How Net Asset Value Is Determined.")
WHEN PAYMENTS ARE MADE -- Shares are redeemed at their net asset value per
share next determined after receipt by MFSCO of the redemption request in the
form described above, less, in the case of Class C shares, any applicable
contingent deferred sales charge. Payment is normally made within seven days
after the redemption request, provided that payment in redemption of shares
purchased by check will be effected only after the check has been collected,
which may take up to fifteen (15) days from the purchase date. To eliminate this
delay it is advisable to purchase shares of the Funds by certified check or
wire.
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<PAGE> 32
EXCHANGE PRIVILEGE
An exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes.
Your exchange will be processed at the net asset value next determined
after the Transfer Agent receives your exchange request. You will receive a
prospectus along with your confirmation if you exchange into a fund not offered
in this Prospectus. The exchange feature may be modified or discontinued at any
time, upon notice to shareholders in accordance with applicable rules adopted by
the Securities and Exchange Commission.
Your exchange may be processed only if the shares of the fund to be
acquired are eligible for sale in your state and if the amount of your
transaction meets the minimum requirements for that fund. The exchange privilege
is only available in states in which it may be legally offered.
EXCHANGES OF CLASS A SHARES: You may exchange your Class A shares for Class
A shares of any Flex-Partners Fund and for shares of The Flex-funds Money Market
Fund, a single-class money market fund managed by the Manager.
EXCHANGES OF CLASS C SHARES: Class C shares of each Fund are exchangeable
at net asset value only for Class C shares of any other Flex-Partners Fund.
Class C shares of the Funds cannot be exchanged for Class A shares of any
Flex-Partners Fund.
Each Fund reserves the right at any time, without prior notice, to refuse
exchange purchases by any person or group if in the Manager or Subadviser's (in
the case of The BTB Fund) judgment, the Fund would be unable to invest
effectively in accordance with its investment objectives and policies, or would
otherwise potentially be adversely affected.
IF YOU HAVE ANY QUESTIONS ON EXCHANGE OR REDEMPTION PROCEDURES, CALL YOUR DEALER
OR THE TRANSFER AGENT.
RETIREMENT PLANS
The Trust offers retirement plans which include a prototype Profit Sharing
Plan, a Money Purchase Pension Plan, a Salary Savings Plan--401(k),
Tax-Sheltered Custodial Account - 403(b)(7), an Individual Retirement Account
(IRA), and a Simplified Employee Pension (SEP) Plan. Plan Adoption Agreements
and other information required to establish a Flex-Partners Retirement Plan are
available from The Flex-Partners, c/o R. Meeder & Associates, Inc., P.O. Box
7177, Dublin, Ohio 43017; or call 1-800-494-3539.
Minimum purchase requirements for retirement plan accounts are subject to
the same requirements as regular accounts, except for an IRA, which has a
reduced minimum purchase requirement. (See "How to Buy Shares.")
29
<PAGE> 33
OTHER SHAREHOLDER SERVICES
AUTOMATIC ACCOUNT BUILDER: Regular investments in either Fund of $100 or
more will be deducted from a shareholder's checking or savings account and
invested in shares of the Funds selected. A shareholder's bank must be a member
of the Automated Clearing House (ACH). Shareholders wishing to add to their
investment account must complete the Automatic Account Builder section of the
New Account Application. There is no additional charge for this service.
SYSTEMATIC WITHDRAWAL PROGRAM: A Systematic Withdrawal Program is offered
for any investor who wishes to receive regular distributions of $100 or more
from his account. The investor must either own or purchase shares having a value
of at least $10,000 and advise the Trust in writing of the amount to be
distributed and the desired frequency, i.e., monthly, quarterly or annually.
This option may be exercised by completing the appropriate section of the New
Account Application. The investor should realize that if withdrawals exceed
income dividends, the invested principal may be depleted.
Systematic withdrawals from investor accounts owning Class C Shares will be
subject to the contingent deferred sales charge with the following exceptions.
No CDSC will be imposed on withdrawals: (1) that are made in connection with a
distribution from an IRA or other qualified retirement plan after attaining age
59-1/2; or (2) on an amount which will not exceed 10% annually of the "initial
account value" -- i.e., the value of the Fund account at the time the
shareholder elects to participate in the systematic withdrawal program and
thereafter, the value of the account as of the first day of any calendar year.
The investor may make additional investments and may change or stop the program
at any time. There is no charge for this program.
SHAREHOLDER ACCOUNTS
The Trust maintains an account for each shareholder in full and fractional
shares. Each Fund reserves the right to reject any purchase order, and to waive
minimum purchase requirements.
CONFIRMATION STATEMENT -- All purchase and sale transactions, and dividend
reinvestments, are confirmed promptly after they become effective.
ACCOUNTS BELOW MINIMUM -- The Trust reserves the right to redeem shares in
any account for their then current net asset value and pay the proceeds to the
shareholder if at any time the account has shares valued at less than $1,000
($500 for an IRA) as a result of redemptions by the shareholder. The Trust also
reserves the right to redeem the shares in any account which may have been
opened under a waiver of minimum purchase requirements if sufficient additional
shares were not subsequently purchased to meet these requirements. Before a
redemption is processed, the shareholder will be allowed 30 days after written
notice from the Trust to make an additional investment sufficient to bring the
value of shares in the account to $1,000 ($500 for an IRA).
30
<PAGE> 34
INVESTMENT ADVISER
R. Meeder & Associates, Inc.
ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-494-FLEX
614-766-7074 (in Central Ohio)
SUBADVISER/UTILITIES STOCK PORTFOLIO
Miller/Howard Investments
141 Upper Byrdcliffe Road
P. O. Box 549
Woodstock, NY 12498
DISTRIBUTOR
Roosevelt & Cross, Incorporated
20 Exchange Place
New York, NY 10005
800-262-8642
CUSTODIAN
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, OH 43017
800-494-FLEX
614-766-7074 (in Central Ohio)
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Highlights................................ 2
Synopsis of Financial Information......... 3
Performance Comparison.................... 5
Financial Highlights...................... 6
Investment Objectives and Policies........ 7
Additional Investment Policies............ 10
Risk Factors......................... 12
The Trust and Its Management.............. 14
Distribution Plans........................ 17
Income Dividends and Taxes................ 18
How Net Asset Value is Determined......... 19
Performance Information and Reports....... 20
Other Information......................... 21
How To Buy Shares......................... 23
How To Make Withdrawals (Redemptions)..... 28
Exchange Privilege........................ 29
Retirement Plans.......................... 29
Other Shareholder Services................ 30
Shareholder Accounts...................... 30
</TABLE>
THE FLEX-PARTNERS
PROSPECTUS
APRIL __, 1996
<PAGE> 35
THE FLEX-PARTNERS
CROSS REFERENCE SHEET TO FORM N-1A
FOR THE INSTITUTIONAL FUND
Part A.
Item No. Prospectus Caption
1 Cover Page
2 Highlights
Synopsis of Financial Information
3 Financial Highlights
4 The Trust and its Management
Investment Objectives and Policies
5 The Trust and its Management
5A Not applicable
6(a) Other Information - Shares of Beneficial Interest
6(b) Not applicable
6(c) Other Information - Shares of Beneficial Interest
6(d) Not applicable
6(e) Highlights
6(f)(g) Income Dividends and Taxes
6(h) Other Information - Investment Structure
7(a) Not applicable
7(b) How Net Asset Value is Determined
Institutional Fund Yield
7(c) Exchange Privilege
Flex-funds Retirement Plans
Other Shareholder Services
7(d) How to Buy Shares
7(e) Not applicable
7(f) Distribution Plan
8(a) How to Make Withdrawals (Redemptions)
8(b) Not applicable
8(c) Shareholder Accounts
8(d) How to Make Withdrawals (Redemptions)
9 Not applicable
<PAGE> 36
PROSPECTUS APRIL __, 1996
THE INSTITUTIONAL FUND
A MONEY MARKET FUND
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000
The Institutional Fund (the "Institutional Fund" or the "Fund") is a member
of The Flex-Partners family of mutual funds, which is organized as a business
trust (the "Trust") consisting of three separate portfolios. The Fund, which
requires a minimum investment of $5 million, is designed primarily for
institutional investors as an economical and convenient means for investing in
money market instruments. The Fund's objective is current income and stable
asset values through investment in a portfolio of money market instruments. The
Fund seeks to achieve its investment objective by investing all of its
investable assets in the Money Market Portfolio (the "Portfolio"), a
corresponding open-end management investment company having the same investment
objective as the Fund. Accordingly, investors should carefully consider this
investment approach. For additional information regarding this unique concept,
see "Investment Objectives and Policies" on page 6 and "Other Information -
Shares of Beneficial Interest and Investment Structure" on pages 15 and 16.
The Fund will seek to maintain a constant net asset value of $1 per share,
although there is no assurance it will be able to do so. Investments in Fund
shares are neither insured nor guaranteed by the U.S. Government.
There are no commissions, fees or charges for the purchase or redemption of
shares, although the Fund has a Rule 12b-1 distribution plan for using as much
as 3/100 of 1% of net assets annually to aid in the distribution of shares.
This Prospectus sets forth basic information about the Fund that a
prospective investor should know before investing and it should be retained for
future reference. A STATEMENT OF ADDITIONAL INFORMATION, dated April __, 1996,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Statement of Additional Information is available upon
request and without charge by contacting the Fund at the address given above or
by calling: 1-800-325-FLEX, or (614) 766-7000.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.
PROSPECTUS -- APRIL __, 1996
<PAGE> 37
HIGHLIGHTS
INVESTMENT OBJECTIVE: The Institutional Fund's investment objective is current
income and stable asset values through investment in a portfolio of money market
instruments. The Fund seeks to achieve its objective by investing all of its
investable assets in a corresponding open-end management investment company (the
"Portfolio") having the same investment objective as the Fund. See "Investment
Objective and Policies."
LIQUIDITY: As an open-end investment company, The Institutional Fund
continuously offers and redeems shares of beneficial interest at next determined
net asset value per share. See "How to Buy Shares" and "How to Make Withdrawals
(Redemptions)."
DIVERSIFICATION: The Fund is a diversified mutual fund because the assets of the
Fund's Portfolio are restricted by the following rules: (1) No more than 5% may
be invested in the securities of a single company, and (2) the Fund's Portfolio
may not purchase more than 10% of any company's outstanding voting securities.
NO SALES OR REDEMPTION CHARGES: There are no commissions, fees, or charges for
the purchase or redemption of shares. See "Synopsis of Financial Information,"
"How to Buy Shares" and "How to Make Withdrawals (Redemptions)."
MINIMUM INVESTMENT: A minimum investment of $5 million is required to open an
account. The Fund has the right to redeem the shares in an account and pay the
proceeds to the shareholder if the value of the account drops below $5 million
because of shareholder redemptions. The shareholder will be given 30 days'
written notice and an opportunity to restore the account to $5 million. See "How
to Buy Shares" and "Shareholder Accounts."
INVESTMENT ADVISER AND MANAGER: R. Meeder & Associates, Inc. is the Portfolio's
Investment Adviser and Manager (the "Investment Adviser" or the "Manager"). The
Manager has been an Investment Adviser to individuals, retirement plans,
corporations and foundations since 1974 and to mutual funds since 1982. See "The
Fund and Its Management."
DISTRIBUTION PLAN: The Institutional Fund has adopted a Rule 12b-1 distribution
plan for using as much as 3/100 of 1% of net assets annually to aid in the
distribution of shares. See "Distribution Plan."
HOW TO BUY SHARES: Complete the New Account Application and forward with payment
as directed. Investments in The Institutional Fund are priced at the net asset
value next determined after an order is received by Mutual Funds Service Co.,
the Transfer Agent for the Fund, provided Star Bank, N.A. (the "Bank"), the
Custodian for the Fund, receives federal funds by 4:00 p.m. Eastern time that
same day. The Institutional Fund intends to maintain a constant net asset value
of $1.00 per share, although there is no assurance it will be able to do so. See
"How to Buy Shares" and "How Net Asset Value is Determined."
<PAGE> 38
SHAREHOLDER INQUIRIES: Shareholder inquiries should be directed to the Fund by
writing or telephoning the Fund at the address or telephone number indicated on
the cover page of this Prospectus. To protect the confidentiality of shareholder
accounts, information relating to a specific account will be disclosed pursuant
to a telephone inquiry only if the shareholder identifies the account by account
number or by the taxpayer identification number listed on the account.
FOR MORE INFORMATION ABOUT SPECIFIC SHAREHOLDER ISSUES, PLEASE SEE THE
SHAREHOLDER MANUAL THAT BEGINS ON PAGE 14.
SYNOPSIS OF FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES THE INSTITUTIONAL FUND
----------------------
<S> <C>
Maximum Sales Load Imposed
on Purchases.................................................. none
Maximum Sales Load Imposed
on Reinvested Dividends....................................... none
Deferred Sales Load............................................... none
Redemption Fees................................................... none
Exchange Fee...................................................... none
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee
(Net of Fees Waived)............................................ 0.15%
Distribution Plan
(12b-1 Fees)**................................................ 0.01%
Other Expenses
(After Expense Reimbursements)................................ 0.09%
TOTAL FUND OPERATING EXPENSES*
(After Fee Waivers and Expense Reimbursements).................... 0.25%
</TABLE>
EXAMPLE
An investor would pay the following expense on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
The Institutional Fund-Net of Expense Reimbursement $3 $8 $14 $32
</TABLE>
*Expenses used in these illustrations are based upon expenses actually
incurred for both The Institutional Fund and its proportionate share of expenses
from its corresponding Portfolio, the Money Market Portfolio, for the year ended
December 31, 1995. During the year, the Investment Adviser waived a portion of
its management fees in order to reduce the operating expenses of the Fund.
Expenses shown as "Net of Fees Waived" and "After Expense Reimbursements" are
based on actual fees paid by the Fund.
3
<PAGE> 39
The Investment Adviser presently intends to reimburse the Fund through an
expense reimbursement fee to the extent necessary to keep total expenses at
0.25% of average daily net assets.
Total operating expenses would have been 0.55% absent the voluntary waiver
of management fees and reimbursement of certain operating expenses by the
Investment Adviser. The Investment Adviser may change this policy at any time
without notice to shareholders. This would, in some circumstances, have a
material adverse effect on the net income of the Fund, and the yield earned by
shareholders. For planning purposes, prospective investors and shareholders
should assume that expenses will not be reimbursed.
**Distribution Plan Expense: The Fund has adopted a Rule 12b-1 distribution
plan to aid in the distribution of its shares. Permitted expenses include:
payment of incentives in the form of commissions and fees, periodic reports and
other sales materials to prospective investors; advertising; payment for
marketing programs and the services of public relations consultants; and the
cost of special telephone service to encourage the sale of Fund shares. (See
"Distribution Plans.")
The expense table is meant to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund does not impose a sales charge, exchange fee or redemption
fee. For more complete descriptions of the various costs and expenses of the
Fund see "The Fund and Its Management," and "Distribution Plan."
The Board of Trustees of the Fund believes that the aggregate per share
expenses of the Fund and the Portfolio will be less than or approximately equal
to the expenses which the Fund would incur if it retained the services of an
investment adviser and the assets of the Fund were invested directly in the type
of securities being held by the Portfolio. For additional information concerning
expenses incurred by the Fund and the Portfolio, see "The Fund and Its
Management" herein and "Investment Adviser and Manager" in the Statement of
Additional Information.
The table and hypothetical example above are for illustrative purposes
only. The investment rate of return and expenses should not be considered a
representation of past or future performance as actual rates of return and
expenses may be more or less than the rate and amounts shown.
FINANCIAL HIGHLIGHTS
The financial highlights of The Institutional Fund are listed below. This
information has been audited in conjunction with the audits of the financial
statements of the Institutional Fund by KPMG Peat Marwick LLP, independent
certified public accountants, for the year ended December 31, 1995; and for the
period from June 15, 1994 through December 31, 1994.
4
<PAGE> 40
THE INSTITUTIONAL FUND
<TABLE>
<CAPTION>
1995 1994*
---- -----
<S> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.06 0.026
Net Gains or Losses on Securities
(both realized and unrealized -- --
Total from Investment Operations 0.06 0.026
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.06) (0.026)
Distributions (from capital gains) -- --
Tax Return of Capital -- --
TOTAL DISTRIBUTIONS (0.06) (0.026)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
TOTAL RETURN 6.01% 4.80%(1)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 113,205 59,494
Ratio of Expenses to Average Net Assets 0.25% 0.20%(1)
Ratio of Net Income to Average Net Assets 5.87% 4.51%(1)
Ratio of Expenses to Average Net Assets,
before waiver and reimbursement of fees(2) 0.55% 0.46%(1)
Ratio of Net Income to Average Net Assets,
before waiver and reimbursement of fees(2) 5.57% 4.25%(1)
</TABLE>
(1) Annualized
(2) Includes proportionate share of fees waived in corresponding portfolio. See
"Synopsis of Financial Information" for explanation of Adviser's waiver of
fees and reimbursement of expense.
*For the period June 15, 1994 to December 31, 1994.
5
<PAGE> 41
INVESTMENT OBJECTIVE AND POLICIES
The Institutional Fund and the Money Market Portfolio have their own
separate investment objectives and policies, as set forth below. These
investment objectives and policies, which are identical, are not fundamental and
may be changed by their respective Trustees without approval of the Fund's
shareholders, or approval of the Portfolio's investors. No such change would be
made in the Fund, or Portfolio, without 30 days' written notice to shareholders.
The Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio. For more information concerning the
investment structure of the Fund which invests its assets in a corresponding
Portfolio, see "Other Information - Investment Structure."
Since the investment characteristics of the Fund will correspond directly
to those of the Portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio. Additional information
about the investment policies of the Portfolio appears in the Statement of
Additional Information. There can be no assurance that the investment objectives
of the Fund and the Portfolio will be achieved.
The investment objective of the Portfolio is current income and stable
asset values through investment in money market instruments. The Portfolio will
seek to maintain a constant net asset value of $1 per share, although there is
no assurance it will be able to do so. The Portfolio will seek to achieve its
objective by investing in a portfolio of high-quality money market instruments
which mature in 397 days or less. Further, the Portfolio will seek to minimize
changes in the value of its assets caused by market factors by maintaining a
dollar-weighted average portfolio maturity of 90 days or less.
The Portfolio will value its securities by the amortized cost method and
will normally include any accrued discount or premium in its daily dividend and
thereby keep constant the value of its assets and its net asset value per share.
This method does not take into account unrealized capital gains or losses.
Further, the Portfolio may change its average portfolio maturity or level
of quality to protect its and the Fund's net asset value when it is perceived
that changes in the liquidity of major financial institutions may adversely
affect the money markets. Consequently, for temporary defensive purposes, the
Portfolio may shorten the average maturity of its investments and/or invest only
in the highest quality debt instruments, including, for example, U.S. Government
or Agency obligations.
The Portfolio will invest exclusively in money market instruments which are
deemed eligible securities pursuant to rules under the Investment Company Act
applying to money market funds. At least 95% of the Portfolio's assets will be
invested in securities defined by the rules as "first-tier" securities.
First-tier securities must have two quality ratings which are in the highest
rating category, or one if rated by only one organization. Second-tier
securities must have ratings in the highest two rating categories and will be
limited to a maximum of five percent of assets with each position limited to the
greater of $1,000,000 or 1% of assets. The Portfolio also intends to comply with
all other quality and credit quality monitoring criteria applying to money
market funds. The Portfolio will
6
<PAGE> 42
limit its purchases to U.S. Government Securities and Securities of its Agencies
and instrumentalities, Bank Obligations and instruments secured thereby, high
quality Commercial Paper, high grade corporate obligations and repurchase
agreements. The Portfolio will not invest more than 10% of its assets, at time
of purchase, in repurchase agreements which mature in excess of seven days or in
illiquid or not readily marketable securities. Information concerning specific
quality criteria is set forth in the Fund's Statement of Additional Information.
RISK FACTORS
The Investment Adviser exercises due care in the selection of the
Portfolio's money market instruments. However, there is a risk that the issuers
of the securities may not be able to meet their obligations to pay interest or
principal when due. There is also a risk that some of the Portfolio's securities
might have to be liquidated prior to maturity at a price less than original
amortized cost value, face amount, or maturity value, to meet larger than
expected redemptions. Any of these risks, if encountered, could cause a
reduction in net income or in the net asset value of the Fund's shares.
The Portfolio may invest in repurchase agreements with banks and securities
brokers. All repurchase agreements entered into by the Portfolio will be fully
collateralized. The Portfolio's risk is that the seller may fail to repurchase
the security on the delivery date. If the seller defaults, the underlying
security constitutes collateral for the seller's obligation to pay. It is a
policy of the Portfolio to make settlement on repurchase agreements only upon
proper delivery of the underlying collateral. In the event of a bankruptcy or
other default of a seller of a repurchase agreement to the Portfolio, the
Portfolio could encounter delays and expenses in enforcing its rights and could
experience losses, including a decline in the value of the underlying securities
and loss of income. Repurchase agreements usually are for short periods, such as
one week or less, but could be longer.
The Portfolio may invest in private placement commercial paper. Private
placement commercial paper ("Rule 144A securities") consists of unregistered
securities which are traded in public markets to qualified institutional
investors, such as the Portfolios. A Portfolio's risk is that the universe of
potential buyers for the securities, should the Portfolio desire to liquidate a
position, is limited to qualified dealers and institutions, and therefore such
securities could have the effect of being illiquid.
THE TRUST AND ITS MANAGEMENT
The Trust is a diversified, open-end management investment company
organized as a Massachusetts business trust, on June 22, 1992. The Fund and such
trust are collectively referred to as the "Fund." The Fund's offices are at 6000
Memorial Drive, Dublin, OH 43017. The business and affairs of the Fund are
managed under the direction of its Board of Trustees.
The Fund has no investment adviser because the Fund seeks to achieve its
investment objective by investing its assets in the Portfolio. The Portfolio has
retained the services of
7
<PAGE> 43
R. Meeder & Associates, Inc. as investment adviser.
R. Meeder & Associates, Inc. (the "Manager"), has been an investment
adviser to individuals and retirement plans since 1974 and to mutual funds since
1982. The Manager serves the Portfolio pursuant to an Investment Advisory
Contract 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 Manager was incorporated in Ohio in 1974 and maintains its principal
offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a wholly-owned
subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled by Robert S.
Meeder, Sr. through ownership of voting common stock. MII conducts business only
through its five subsidiaries which are the Manager; Mutual Funds Service Co.,
the Trust's transfer agent; 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 Manager's officers and directors, their principal offices are as
follows: Robert S. Meeder, Sr., Chairman of the Board and Sole Director; Robert
S. Meeder, Jr., President; G. Robert Kincheloe, Senior Vice President; Philip A.
Voelker, Vice President; Donald F. Meeder, Vice President and Secretary; Sherrie
L. Acock, Vice President; Robert D. Baker, Vice President; Wesley F. Hoag,
General Counsel and Chief Operating Officer; and Steven T. McCabe, Vice
President.
Philip A. Voelker is the portfolio manager primarily responsible for the
day-to-day management of the Money Market Portfolio. Mr. Voelker is Vice
President and Trustee of the Money Market Portfolio and Vice President of The
Flex-funds and the Manager. Mr. Voelker has been associated with the Manager
since 1975 and has managed the Money Market Portfolio since 1985.
The Manager earns an annual fee, payable in monthly installments, for the
Portfolio at the rate of 0.40% of the first $100 million and 0.25% in excess of
$100 million, of average net assets.
The Investment Adviser presently intends to reimburse the Fund through an
expense reimbursement fee to the extent necessary to keep total expenses at
0.25% of average daily net assets. The Investment Adviser may change this policy
at any time without notice to shareholders. For planning purposes prospective
investors and shareholders should assume that expenses will not be reimbursed.
(See "Synopsis of Financial Information.")
Accounting, stock transfer, dividend disbursing and shareholder services
are provided to the Portfolio and the Fund by Mutual Funds Service Co., 6000
Memorial Drive, Dublin, Ohio 43017, a wholly-owned subsidiary of MII. The
minimum annual fee, payable monthly, for accounting services in the Portfolio is
$30,000. Subject to the
8
<PAGE> 44
applicable minimum fee, the fee 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. In
addition, the Fund incurs (subject to a $4,000 annual minimum fee) an annual fee
of the greater of $20 per shareholder account or 0.06% of the Fund's average net
assets, payable monthly, for stock transfer,dividend disbursing and shareholder
support services. Mutual Funds Service Co. also serves as Administrator to the
Fund pursuant to an Administration Services Agreement which was effective
February 1, 1995. Services provided to the Fund include coordinating and
monitoring any third party services to the Fund; providing the necessary
personnel to perform administrative functions for the Fund; assisting in the
preparation, filing and distribution of proxy materials, periodic reports to
Trustees and shareholders, registration statements and other necessary
documents. The Fund incurs an annual fee, payable monthly, of .03% of the Fund's
average net assets. These fees are reviewable annually by the respective
Trustees of the Trust and the Portfolio. For the year ended December 31, 1995,
total payments to Mutual Funds Service Co. amounted to $102,946 for the Fund and
Portfolio collectively.
Pursuant to a Subadministrative Services Agreement with Mutual Funds
Service Co., Signature Broker-Dealer Services, Inc. ("Signature"), as
Subadministrator, is responsible for conducting certain day-to-day
administration of the Fund subject to the supervision and direction of Mutual
Funds Service Co.
Information concerning the Trustees and officers of both the Fund and the
Portfolio appears in the Statement of Additional Information.
DISTRIBUTION PLAN
The Trust has adopted a Rule 12b-1 distribution plan (the "Plan"), which
authorizes The Institutional Fund to bear a portion of the expense of any
activity which is primarily intended to result in the sale of Fund shares. This
Plan permits, among other things, payment for distribution in the form of
commissions and fees, advertising, the services of public relations consultants,
and direct solicitation. Possible recipients include securities brokers,
attorneys' accountants, investment advisers, investment performance consultants,
pension actuaries, banks, and service organizations, all of them being hereafter
referred to as "Consultants."
The Fund may expend as much as, but not more than, 3/100 of 1% of its
average net assets annually pursuant to the Plan. The Plan was approved by the
Board of Trustees, who made a determination that there is a reasonable
likelihood that the Plan will benefit the Fund.
The Fund may enter into agreements whereby Consultants are paid for their
assistance in explaining and interpreting the Fund, its investment objectives
and policies, and its retirement plans to their clients. Under these agreements,
Consultants are paid quarterly compensation by the Fund on the average value of
Fund shares held by their clients. Although the compensation is thus seen to be
continuing, the Fund retains the right to terminate any Consultant's agreement
on 60 days' notice, without further obligation
9
<PAGE> 45
beyond the date of termination.
Although the objective of the Fund is to pay Consultants for a portion of
the expenses they incur and to provide them with some incentive to be of
assistance to the Fund and its shareholders, no effort has been made to
determine the actual expenses incurred by Consultants. If any Consultant's
expenses are in excess of what the Fund pays, such excess will not be paid by
the Fund. Conversely, if the Consultant's expenses are less than what the Fund
pays, the Consultant is not obligated to refund the excess, and this excess
could represent a profit for the Consultant. The Securities and Exchange
Commission is presently reviewing the legality of certain arrangements by
investment companies, such as the Fund, which compensate Consultants with a
fixed percentage of assets.
Total payments made in The Institutional Fund under the Distribution Plan
for the period ended December 31, 1995, as a percentage of average net assets
amounted to 0.01% (See "Synopsis of Financial Information").
INCOME DIVIDENDS AND TAXES
It is the policy of the Trust to distribute substantially all of its net
income, which for the Fund consists of the income it earns from its investment
in the Portfolio, less expenses. The Fund's net income is calculated daily and
declared as a dividend to shareholders of record at the close of the previous
business day, and to the holders of shares purchased that same day prior to 3:00
p.m., with one exception. If a shareholder requests a redemption and the request
is received by 3:00 p.m., then the shares so redeemed that day will not be paid
that day's dividend. Net income earned by The Institutional Fund on a weekend or
a holiday is declared as a dividend on Friday or the day prior to the holiday.
All such dividends of net income are automatically reinvested in additional
shares of the Fund at the net asset value on the last business day of each
month. A shareholder may elect to receive dividends in cash either by checking
the appropriate box on the New Account Application, or by notifying the Fund in
writing. If the entire account of a shareholder is withdrawn, all dividends
accrued at the time of withdrawal will be paid at that time.
The Internal Revenue Code of 1986 imposes on the Fund a nondeductible
excise tax unless the Fund distributes annually at least 98% of its net
investment income earned during the calendar year, at least 98% of capital gain
net income realized in the 12 months preceding October 31, and any undistributed
balances from the previous year. In addition, the Tax Reform Act of 1986
provides that any dividend declared by the Fund in October, November, or
December and paid in January will be deemed to have been paid by the Fund and to
have been received by each shareholder in December.
Dividends and capital gains distributions will be taxable to the
shareholder as income in the year distributed, whether received in cash or
reinvested in additional shares. Shareholders not otherwise subject to tax on
their income will not be required to pay tax on amounts distributed to them.
Each shareholder will receive a statement annually informing him of the amount
of the income and capital gains which have been distributed
10
<PAGE> 46
to him during the calendar year.
The Trust files a federal income tax returns for each of the Funds. Each
Fund is treated as a separate entity for federal income tax purposes. The Fund
qualified as a "regulated investment company" for each of the last two fiscal
years.
The foregoing discussion of taxes is limited to federal income taxes.
Distributions, whether in cash or in kind, may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions relating to federal, state and local taxes.
The Fund is required to withhold and remit to the federal government 31% of
any reportable payments (which may include dividends, capital gains
distributions, if any, and redemptions) paid to certain shareholders. In order
to avoid this withholding requirement, each shareholder must certify on the New
Account Application that the social security or taxpayer identification number
is correct and that the shareholder is not currently subject to backup
withholding or is exempt from backup withholding.
HOW NET ASSET VALUE IS DETERMINED
Net asset value per share (the price at which shares are purchased and
redeemed) is determined each day the Fund is open for business. The Fund's
shares will not be priced on Good Friday or on any holiday observed by the
Federal Reserve system. These presently include New Year's Day, Martin Luther
King Day, President's Day, Memorial Day, Independence Day, Columbus Day,
Veterans Day, Thanksgiving Day, and Christmas Day. Net asset value is obtained
by dividing the value of the Fund's assets (i.e., the value of its investment in
the Portfolio and other assets), less liabilities, by the total number of its
shares of beneficial interest outstanding at the time. The assets of the
Portfolio are valued on the basis of amortized cost method, which involves
valuing a portfolio instrument at its cost initially and, thereafter, assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. The
Fund will seek to maintain a constant net asset value of $1.00 per share.
INSTITUTIONAL FUND YIELD
The Institutional Fund will advertise its yield and effective yield. The
simple annualized yield represents the net income for a seven day period,
expressed on an annualized basis. The effective yield will be higher than the
yield because of the compounding effect of the assumed reinvestment of dividends
over a period of one year. Both yield figures are based upon historical earnings
and are not intended to indicate future performance. Yields will fluctuate daily
as net income fluctuates. The method by which the Fund computes its yield is
described in the Statement of Additional Information. For current yield
information call 1-800- 325-FLEX, or in central Ohio (614) 766-7000.
11
<PAGE> 47
Comparative performance information may be used from time to time in
advertising or marketing information relative to the Fund, including data from
Lipper Analytical Services, Inc., IBC/Donoghue Money Fund Report and other
publications.
OTHER INFORMATION
SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest with a par
value of $.10 per share. Shares are fully paid, nonassessable and fully
transferable when issued. All shares are issued as full or fractional shares.
A fraction of a share has the same rights and privileges as a full share.
Each Fund of the Trust will issue its own series of shares of beneficial
interest. The Fund's Board of Trustees may authorize the creation of additional
series under the Declaration of Trust, each of which would invest its assets in
separate, individually managed portfolios. Presently, The Institutional Fund is
the only such series.
Each full or fractional share has a proportionate vote. On some issues,
such as the election of Trustees, all shares vote together as one series. On an
issue affecting a particular series, only its shares vote as a separate series.
An example of such an issue would be a fundamental investment restriction
pertaining to only one series. In voting on a Distribution Plan, approval of the
Plan by the shareholders of a particular series would make the Plan effective as
to that series, whether or not it had been approved by the shareholders of any
other series.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of each Fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. A separate vote of a Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of a
Fund are not entitled to vote on a matter that does not affect that Fund but
that does require a separate vote of any other Fund. There normally will be no
meetings of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of Trustees holding office have been elected
by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Fund's outstanding shares at a meeting called for that purpose. The Trustees are
required to call such a meeting upon the written request of shareholders holding
at least 10% of the Trust's outstanding shares. Shareholders have under certain
circumstances (e.g., upon application
12
<PAGE> 48
and submission of certain specified documents to the Trustees of a Fund by a
specified number of shareholders) the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees.
Each Portfolio, in which all the assets of a corresponding Fund will be
invested, is organized as a trust under the laws of the State of New York. Each
Portfolio's Declaration of Trust provides that a Fund and other entities
investing in that Portfolio (e.g., other investment companies, insurance company
separate accounts, and common and commingled trust funds) will each be liable
for all obligations of that Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and that Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither a
Fund nor its shareholders will be adversely affected by reason of a Fund's
investing in the corresponding Portfolio. In addition, whenever the Trust is
requested to vote on matters pertaining to the fundamental policies of the
Portfolio, the Trust will hold a meeting of shareholders and will cast its vote
as instructed by the Fund's shareholders.
INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, the Fund seeks to achieve its investment objectives by
investing all of its assets in a corresponding Portfolio, a separate registered
investment company with the same investment objectives as the Fund. Therefore,
an investor's interest in the Portfolio's securities is indirect. In addition to
selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in the different funds that invest in the Portfolio. Such differences in returns
are also present in other mutual fund structures. Information concerning other
holders of interests in the Portfolio is available by contacting the Trust by
calling: 1-800-325-FLEX, or (614) 766-7000.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. (However, this
possibility also exists for traditionally structured funds which have large or
institutional investors.) Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes in the same proportion as do the Fund's shareholders.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Trust to withdraw the Fund's interest in the
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from the Portfolio). In
addition,
13
<PAGE> 49
the distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund.
The Fund may withdraw the investment from its corresponding Portfolio at
any time, if the Board of Trustees of the Fund determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objectives as that Fund or the retaining of an investment adviser to
manage the Fund's assets in accordance with the investment policies with respect
to that Fund's corresponding Portfolio. The inability to find an adequate
investment pool or investment adviser could have a significant impact on
shareholders' investment in the Fund.
As stated in "Investment Objectives and Policies," the Fund's investment
objective and policies are not fundamental and may be changed by Trustees
without shareholder approval. (No such change would be made, however, without 30
days' written notice to shareholders.)
For descriptions of the investment objective and policies of the Portfolio,
see "Investment Objective and Policies." For descriptions of the management and
expenses of the Portfolio, see "The Fund and Its Management" herein, and
"Investment Adviser and Manager" and "Officers and Trustees" in the Statement of
Additional Information.
HOW TO BUY SHARES
Shares are offered continuously and sold without a direct sales charge.
(See "Distribution Plans" and "Synopsis of Financial Information".) Shares of
The Institutional Fund are sold at net asset value per share next determined
after receipt of both a purchase order and payment in federal funds. The
Institutional Fund intends to maintain a constant net asset value of $1.00 per
share. (See "How Net Asset Value Is Determined.")
MINIMUM INVESTMENT - The minimum investment to open an account is $5
million.
OPENING AN ACCOUNT - You may open an account by bank wire or mail as
follows:
By Bank Wire: If the wire order is for a new account in the Fund, you must
telephone the Fund prior to making your initial investment. Call
1-800-325-FLEX, or (614) 766-7000. Advise the Fund of the amount you wish
to invest and obtain an account number and instructions. Have your bank
wire federal funds to:
STAR BANK, N.A. CINTI/TRUST
(ABA #: 042-00001-3)
ATTENTION: THE INSTITUTIONAL FUND
Credit Account Number: 851-2204
Account Name (your name)
Your Institutional Fund account number
14
<PAGE> 50
By Mail: To purchase shares, fill out the New Account Application
accompanying this Prospectus. A check payable to The Institutional Fund
must accompany the New Account Application and should be mailed to the
following address:
THE FLEX-FUNDS, C/O R. MEEDER & ASSOCIATES, INC., P.O. BOX 7177, DUBLIN,
OHIO 43017
On new accounts, a completed application must be sent to The Flex-funds,
c/o R. Meeder & Associates, Inc., P.O. Box 7177, Dublin, OH 43017 on the same
day your wire is sent. THE FUND WILL NOT PERMIT REDEMPTIONS UNTIL IT RECEIVES
THE NEW ACCOUNT APPLICATION IN GOOD ORDER.
SUBSEQUENT INVESTMENTS -- Subsequent investments may also be made by
bank wire as described above. It is necessary to notify the Fund prior to each
wire purchase. Wires sent without notifying the Fund prior to 3:00 p.m. will
result in a delay of the effective date of your purchase. Subsequent investments
in an existing account in the Fund may be made by mailing a check payable to The
Institutional Fund (please include your account number on the check) and mail as
follows:
THE FLEX-FUNDS
LOCATION NUMBER: 00215
CINCINNATI, OHIO 45264-0215
WHEN PURCHASES ARE EFFECTIVE -- An Initial Wire Purchase and subsequent
wire purchase orders for The Institutional Fund which are received prior to 3:00
p.m., Eastern time on a business day, earn dividends for that entire day,
provided payment in federal funds (bank wire) is received by the bank by 4:00
p.m. Eastern time that day. Purchase orders which are received after 3:00 p.m.,
or for which payment is not received by 4:00 p.m. Eastern time, are accepted as
a purchase the following day.
Investments made by check are credited to shareholder accounts, and begin
to earn income dividends, on the second business day following receipt.
If a shareholder's check is dishonored, his purchase and any dividends paid
thereon will be reversed. If shares are purchased with federal funds, they may
be redeemed at any time thereafter and the shareholder may secure his funds as
explained below. (See "How to Make Withdrawals (Redemptions).") However, if
shares are purchased by check(s), Mutual Funds Service Co. will delay payment of
redemption proceeds until the check used to purchase shares has cleared which
could be fifteen (15) calendar days or more subsequent to the purchase of the
shares. The Fund will forward proceeds promptly once the check has cleared.
DISTRIBUTOR: Shares of the Fund are sold by the Fund itself in those states
where its shares have been registered for sale or a valid exemption exists.
States where registration or an exemption exists can be obtained by calling
1-800-325-FLEX or (614) 766-7000.
15
<PAGE> 51
HOW TO MAKE WITHDRAWALS (REDEMPTIONS)
Shares are redeemed and funds withdrawn at net asset value per share,
and there are no redemption fees. (See "How Net Asset Value Is Determined.")
BY TELEPHONE -- A shareholder may redeem by telephone: 1-800-325-FLEX,
or call (614) 766-7000. Shareholders who wish to use this procedure must so
elect on the New Account Application. Amounts withdrawn from an account by
telephone are mailed without charge to the address printed on your account
statement.
As a special service, a shareholder may arrange to have amounts in
excess of $10,000 wired in federal funds to a designated commercial bank
account. To use this procedure please designate on the New Account Application a
bank and bank account number to receive the proceeds of wire withdrawals. There
is no charge for this service.
A shareholder may change the bank account designated to receive
redemptions. This may be done at any time upon written request to the Fund. The
shareholder's signature must be guaranteed. Further documentation may be
required from corporations or trustees, and other fiduciaries.
Neither the Fund nor Mutual Funds Service Co. ("MFSCo") will be
responsible for any loss, expense, or cost arising from any telephone redemption
request made according to the authorization set forth in the New Account
Application if they reasonably believe such request to be genuine and follow
reasonable procedures designed to verify the identity of the person requesting
the redemption. If MFSCo fails to follow reasonable procedures MFSCo or the Fund
may be liable for losses due to unauthorized or fraudulent transactions. MFSCo
will provide each investor seeking telephone redemption privileges with a
personalized security code which, along with other information, will be required
of the caller upon request of a telephone redemption. Other information may also
be required and calls may be recorded.
BY MAIL -- A shareholder may redeem shares by mailing a written request
in good order to The Flex-funds, c/o R. Meeder & Associates, Inc., P.O. Box
7177, Dublin, OH 43017. Good order means that the request must be signed by the
shareholder(s) and the signature(s) must be guaranteed an eligible guarantor
institution (a bank, broker-dealer, credit union, securities exchange and
association, clearing agency and savings association). The Trust does not accept
signatures guaranteed by a notary public. Further documentation may be required
as to the authority of the person requesting redemption of shares held of record
in the name of corporations or trustees, and other fiduciaries. The Trust may
waive these requirements in certain instances.
Amounts withdrawn are mailed without charge to the address printed on
your account statement.
WHEN REDEMPTIONS ARE EFFECTIVE -- Redemptions are made at the net asset
value per share (stabilized at $1.00 per share as a matter of policy) next
determined after receipt of a redemption request in good order. (See "How Net
Asset Value Is Determined.")
16
<PAGE> 52
WHEN PAYMENTS ARE MADE -- If a telephone request for a redemption is
received prior to 3:00 p.m., Eastern time the redemption request will be
processed that day. Requests received after 3:00 p.m., will be processed the
next business day. Amounts withdrawn by telephone are normally mailed on the
next business day following the effective date of the order for withdrawal. If
the request is for a wire redemption, funds will be wired on the same day.
Amounts withdrawn by mail are normally sent by mail within one business day
after the request is received, and must be mailed within seven days with the
following exception: If shares are purchased by check, Mutual Funds Service Co.
will not pay a redemption until reasonably satisfied the check used to purchase
shares has been collected which could be fifteen (15) calendar days or more
after shares are first paid for, unless payment was made with federal funds. The
Fund will forward proceeds promptly once the check has cleared. (See "How to Buy
Shares.")
EXCHANGE PRIVILEGE
A shareholder may exchange shares of The Institutional Fund for shares
of any other Fund offered by The Flex-funds that are available for sale in your
state at their respective net asset values.
The Flex-funds family of funds has a variety of investment objectives.
Read the prospectus for relevant information concerning the Fund that meets your
investment goals. A prospectus may be obtained from The Flex-funds, c/o R.
Meeder & Associates, Inc., P.O. Box 7177, Dublin, Ohio 43017 or by telephone:
1-800-325-FLEX, in Ohio call (614) 766-7000.
SHAREHOLDER ACCOUNTS
The Fund maintains an account for each shareholder in full and
fractional shares. The Fund reserves the right to reject any purchase order, and
to waive minimum purchase requirements.
CONFIRMATION STATEMENTS -- You will receive a statement of your account
confirming your initial purchase of shares. Thereafter, you will receive a
confirmation statement on all purchase and sale transactions as well as dividend
reinvestment information.
ACCOUNTS BELOW MINIMUMS -- The Fund reserves the right to redeem shares
in any account for their then current net asset value and pay the proceeds to
the shareholder if at any time the account has shares valued at less than $5
million as a result of redemptions by the shareholder. The Fund also reserves
the right to redeem the shares in any account which may have been opened under a
waiver of minimum purchase requirements if sufficient additional shares were not
subsequently purchased to meet these requirements. Before a redemption is
processed, the shareholder will be allowed 30 days after written notice from the
Fund to make an additional investment sufficient to bring the value of shares in
the account to $5 million.
17
<PAGE> 53
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18
<PAGE> 54
--THIS PAGE LEFT BLANK INTENTIONALLY--
19
<PAGE> 55
INVESTMENT ADVISER
R. Meeder & Associates, Inc.
ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)
CUSTODIAN
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Highlights ............................... 2
Synopsis of Financial Information ........ 3
Financial Highlights ..................... 4
Investment Objective and Policies ........ 6
Risk Factors ........................ 7
The Trust and Its Management ............. 7
Distribution Plan ........................ 9
Income Dividends and Taxes ............... 10
How Net Asset Value is Determined ........ 11
Institutional Fund Yield ................. 11
Other Information ........................ 12
How To Buy Shares ........................ 14
How To Make Withdrawals (Redemptions) .... 16
Exchange Privilege ....................... 17
Shareholder Accounts ..................... 17
</TABLE>
THE INSTITUTIONAL FUND
PROSPECTUS
April __, 1996
<PAGE> 56
THE FLEX-PARTNERS THE BTB FUND
CROSS REFERENCE SHEET TO FORM N-1A
----------------------------------
Part B.
- -------
<TABLE>
<CAPTION>
Item No. Statement of Additional Information
- -------- -----------------------------------
<S> <C>
10 Cover Page
11 Table of Contents
12 Not applicable
13 Investment Policies and Limitations
14(a)(b) Trustees and Officers
14(c) Not applicable
15(a) Not applicable
15(b) Principal Holders of Outstanding Shares
15(c) Trustees and Officers
16(a)(b) Investment Adviser and Manager
Investment Subadviser
16(c) Not applicable
16(d) Contracts with Companies Affiliated With Manager
16(e) Not applicable
16(f) The Distributor
16(g) Not applicable
16(h) Description of the Trust
16(i) Contracts with Companies Affiliated With Manager
17 Portfolio Transactions
18(a) Cover Page
Description of the Trust
18(b) Not applicable
19(a) Additional Purchase and Redemption Information
Flex-Partners Retirement Plans
19(b) Valuation of Portfolio Securities
Additional Purchase and Redemption Information
20 Distributions and Taxes
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
<S> <C>
21(a) The Distributor
21(b) Not applicable
21(c) Not applicable
22(a) Not applicable
22(b) Performance
23 Financial Statements
</TABLE>
<PAGE> 58
THE BTB FUND
A FUND OF THE FLEX-PARTNERS TRUST
STATEMENT OF ADDITIONAL INFORMATION
APRIL __, 1996
This Statement is not a prospectus but should be read in conjunction
with the Prospectus of The Flex-Partners (dated April __, 1996). Please retain
this document for future reference. A copy of the Prospectus may be obtained
from The Flex-Partners, 6000 Memorial Drive, Dublin, Ohio 43017, or by calling
1-800-494-3539. Capitalized terms used and not otherwise defined herein have the
same meanings as defined in the Prospectus.
The Fund offers two classes of shares which may be purchased at the
next determined net asset value per share plus a sales charge which, at the
election of the investor, may be imposed (i) at the time of purchase (Class A
shares) or (ii) on a deferred basis (Class C shares). These alternatives permit
an investor to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor expects to
hold the shares and other circumstances.
Each share of Class A and Class C represents an identical legal
interest in the investment portfolio of the Fund and has the same rights, except
that the Class C shares bear the higher expenses of a distribution plan for such
class which will cause the Class C shares to have a higher expense ratio and to
pay lower dividends than the Class A shares. Each class will have exclusive
voting rights with respect to its distribution plan. Although the legal rights
of holders of Class A and Class C shares are identical, the different expenses
borne by each class will result in different net asset values and dividends. The
two classes also have different exchange privileges and Class C shares have a
conversion feature.
<TABLE>
<CAPTION>
TABLE OF CONTENTS. PAGE
<S> <C>
Investment Policies and Limitations 1
Portfolio Transactions 14
Valuation of Portfolio Securities 16
Performance 17
Additional Purchase and Redemption Information 20
Distributions and Taxes 23
Investment Adviser and Manager 25
Investment Subadviser 26
The Distributor 27
Trustees and Officers 28
Flex-Partners Retirement Plans 31
Contracts With Companies Affiliated With Manager 31
Description of the Trust 32
Principal Holders of Outstanding Shares 33
Financial Statements 34
</TABLE>
INVESTMENT ADVISER INVESTMENT SUBADVISER
- ------------------ ---------------------
R. Meeder & Associates, Inc. Miller/Howard Investments, Inc.
DISTRIBUTOR TRANSFER AGENT
- ----------- --------------
Roosevelt & Cross, Incorporated Mutual Funds Service Co.
<PAGE> 59
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or limitation
states a maximum percentage of the Portfolio's assets that may be invested in
any security or other asset, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the Portfolio's acquisition of such security or other asset.
Accordingly, any subsequent change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with the
Fund's investment policies and limitations.
The Fund's fundamental investment limitations cannot be changed without approval
by a "majority of the outstanding voting securities" (as defined in the
Investment Company Act of 1940) of the Fund. However, except for the fundamental
investment limitations set forth below, the investment policies and limitations
described in this Statement of Additional Information are not fundamental and
may be changed by the Trustees without shareholder approval. THE FOLLOWING ARE
THE PORTFOLIO'S FUNDAMENTAL INVESTMENT LIMITATIONS SET FORTH IN THEIR ENTIRETY;
PROVIDED THAT NOTHING IN THE FOLLOWING INVESTMENT RESTRICTIONS WILL PREVENT THE
FUND FROM INVESTING ALL OR PART OF THE FUND'S ASSETS IN AN OPEN-END MANAGEMENT
INVESTMENT COMPANY WITH THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND OR
THE PORTFOLIO MAY NOT
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than obligations issued or guaranteed by the
government of the United States, or any of its agencies or instrumentalities)
if, as a result thereof, (a) more than 5% of the Portfolio's total assets would
be invested in the securities of such issuer, or (b) the Fund would hold more
than 10% of the voting securities of such issuer;
(2) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(3) borrow money, except that the Portfolio may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed this
amount will be reduced within three days (not including Sundays and holidays) to
the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that the
Portfolio may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities)
if, as a result, more than 25% of the Portfolio's total assets would be invested
in the securities of companies whose principal business activities are in the
same industry, except that the Portfolio may invest more than 25% of its total
assets in securities of public utility companies;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
<PAGE> 60
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities); or
(8) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend to sell securities short,
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities short.
(ii) The Portfolio does not currently intend to purchase securities on
margin, except that the Fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
(iii) The Portfolio may borrow money only (a) from a bank or from a
registered investment company for which the Manager serves as investment adviser
or (b) by engaging in reverse repurchase agreements with any party (reverse
repurchase agreements are treated as borrowings for purposes of fundamental
investment limitation (3)). The Portfolio will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding. The
Portfolio will not borrow from other funds advised by the Manager if total
outstanding borrowings immediately after such borrowing would exceed 15% of the
Portfolio's total assets.
(iv) The Portfolio does not currently intend to purchase any security if, as
a result, more than 10% of its net assets would be invested in securities that
are deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued, including repurchase agreements with remaining maturities in excess of
seven days or securities without readily available market quotes.
(v) The Portfolio does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the New
York Stock Exchange or the American Stock Exchange or traded on the NASDAQ
National Market System.
(vi) The Portfolio does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
Portfolio's net assets) to a registered investment company for which the Manager
serves as investment adviser or (b) acquiring loans, loan participations, or
other forms of direct debt instruments and in connection therewith, assuming any
associated unfunded commitments of the sellers. (This limitation does not apply
to purchases or debt securities or to repurchase agreements.)
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(vii) The Portfolio does not currently intend to purchase securities of other
investment companies.
This limitation does not apply to securities received as dividends, through
offers of exchange, or as a result of reorganization, consolidation, or merger.
(viii) The Portfolio does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5% of
its total assets would be invested in the securities of business enterprises
that, including predecessors, have a record of less than three years of
continuous operation.
(ix) The Portfolio does not currently intend to purchase warrants, valued at
the lower of cost or market, in excess of 5% of the Portfolio's net assets.
Included in that amount, but not to exceed 2% of the Portfolio's net assets, may
be warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the Portfolio in units or attached to
securities are not subject to these restrictions.
(x) The Portfolio does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The Portfolio does not currently intend to purchase the securities of
any issuer if those officers and Trustees of the Trust and those officers and
directors of the Manager or the Subadviser who individually own more than 1/2 of
1% of the securities of such issuer, together own more than 5% of such issuer's
securities.
(xii) The Portfolio does not currently intend to invest in electric utilities
whose generation of power is derived from nuclear reactors.
For the Portfolio's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions"
beginning on page 11. For the Portfolio's limitations on short sales, see the
section entitled "Short Sales" on page 15.
MONEY MARKET INSTRUMENTS. When investing in money market instruments,
the Portfolio will limit its purchases, denominated in U.S. dollars, to the
following securities.
* U.S. Government Securities and Securities of its
Agencies and Instrumentalities - obligations issued or
guaranteed as to principal or interest by the United States or
its agencies (such as the Export Import Bank of the United
States, Federal Housing Administration, and Government
National Mortgage Association) or its instrumentalities (such
as the Federal Home Loan Bank, Federal Intermediate Credit
Banks and Federal Land Bank), including Treasury bills, notes
and bonds.
* Bank Obligations and Instruments Secured Thereby -
obligations including certificates of deposit, time deposits
and bankers' acceptances) of domestic banks having total
assets of $1,000,000,000 or more, instruments secured by such
obligations and obligations of foreign branches of such banks,
if the domestic parent bank is unconditionally liable to make
payment on the instrument if the foreign branch fails to
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make payment for any reason. The Portfolio may also invest in
obligations (including certificates of deposit and bankers'
acceptances) of domestic branches of foreign banks having
assets of $1,000,000,000 or more, if the domestic branch is
subject to the same regulation as United States banks. The
Portfolio will not invest at time of purchase more than 25% of
its assets in obligations of banks, nor will the Portfolio
invest more than 10% of its assets in time deposits.
* High Quality Commercial Paper - The Portfolio may
invest in commercial paper rated no lower than "A-2" by
Standard & Poor's Corporation or "Prime-2" by Moody's
Investors Services, Inc., or, if not rated, issued by a
company having an outstanding debt issue rated at least A by
Standard & Poor's or Moody's.
* Private Placement Commercial Paper - Private
placement commercial paper consists of unregistered securities
which are traded in public markets to qualified institutional
investors, such as the Portfolio. The Portfolio's risk is that
the universe of potential buyers for the securities, should
the Portfolio desire to liquidate a position, is limited to
qualified dealers and institutions, and therefore such
securities could have the effect of being illiquid.
* High Grade Corporate Obligations - obligations rated
at least A by Standard & Poor's or Moody's. See rating
information below.
* Repurchase Agreements -- See "Repurchase Agreements"
below.
The Subadviser exercises due care in the selection of money market
instruments. However, there is a risk that the issuers of the securities may not
be able to meet their obligations to pay interest or principal when due. There
is also a risk that some of the Portfolio's securities might have to be
liquidated prior to maturity at a price less than original amortized cost or
value, face amount or maturity value to meet larger than expected redemptions.
Any of these risks, if encountered, could cause a reduction in net income or in
the net asset value of the Portfolio.
Ratings
1. Moody's Investors Services, Inc.'s Corporate Bond Rating:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
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A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length or time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
2. Standard and Poor's Corporation's Corporate Bond Rating:
AAA - Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they move
with interest rates, and hence provide the maximum safety on all counts.
AA - Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
A - Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from the adverse
effect of changes in economic and trade conditions. Interest and principal are
regarded as safe. They predominantly reflect money rates in their market
behavior but, to some extent, also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
3. A-1 and P-1 Commercial Paper Ratings:
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has
the following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A-1, A-2, or
A-3.
The rating P-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Among the factors considered by
Moody's in assigning ratings are the following: (1) evaluation of the management
of the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the
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management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations.
4. Description of Permitted Money Market Investments:
Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short term credit needs.
U.S. Government Obligations - are bills, certificates of indebtedness,
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury, as for example, the Government National Mortgage Association; others
by the right of the issuer to borrow from the Treasury, as in the case of
Federal Farm Credit Banks and Federal National Mortgage Association; and others
only by the credit of the agency, authority or instrumentality; as for example,
Federal Home Loan Mortgage and Federal Home Loan Bank.
Repurchase Agreements - See "Repurchase Agreements" below.
Certificates of Deposit - are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified or
variable rate of return and are normally negotiable.
Banker's Acceptances - are short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
Corporate Obligations - include bonds and notes issued by corporations
in order to finance longer term credit needs.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of
in the ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Trustees, the Subadviser
determines the liquidity of the Portfolio's investments and, through reports
from the Subadviser, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Portfolio's investments, the Subadviser may
consider various factors, including (1) the frequency of trades and quotations,
(2) the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Portfolio's rights and
obligations relating to the investment). Investments currently considered by the
Portfolio to be illiquid include repurchase agreements not entitling the holder
to payment of principal and interest within seven days, over-the-counter
options, and non-government stripped fixed-rate mortgage-backed securities.
Also, the Subadviser may determine some restricted securities,
government-stripped fixed-rate mortgage-backed securities, loans and other
direct debt instruments, and swap agreements to be illiquid. However, with
respect to over-the-counter options the Portfolio writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the Portfolio
may have to close out the option before expiration. In the absence of market
quotations, illiquid investments are priced at fair value as determined in good
faith by the Board of Trustees. If through a change in values, net assets, or
other
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circumstances, the Portfolio were in a position where more than 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is required,
the Portfolio may be obligated to pay all or part of the registration expense
and a considerable period may elapse between the time it decides to seek
registration and the time the Portfolio may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Portfolio might obtain a less favorable
price than prevailed when it decided to seek registration of the security.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases a security and simultaneously commits to resell that security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is unrelated to the coupon rate or maturity
of the purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured by
the value (at least equal to the amount of the agreed upon resale price and
marked to market daily) of the underlying security. The Portfolio may engage in
repurchase agreements with respect to any security in which it is authorized to
invest.
While it does not presently appear possible to eliminate all risks from
these transactions (particularly the possibility of a decline in the market
value of the underlying securities, as well as delays and costs to the Portfolio
in connection with bankruptcy proceedings), it is the Portfolio's current policy
to limit repurchase agreement transactions to parties whose creditworthiness has
been reviewed and found satisfactory by the Subadviser.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
Portfolio sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument at a
particular price and time. While a reverse repurchase agreement is outstanding,
the Portfolio will maintain appropriate liquid assets in a segregated custodial
account to cover its obligation under the agreement. The Portfolio will enter
into reverse repurchase agreements only with parties whose creditworthiness has
been found satisfactory by the Subadviser. Such transactions may increase
fluctuations in the market value of the Portfolio's assets and may be viewed as
a form of leverage.
SECURITIES LENDING. The Portfolio may lend securities to parties such
as broker-dealers or institutional investors.
Securities lending allows the Portfolio to retain ownership of the
securities loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be made
only to parties deemed by the Subadviser to be of good standing. Furthermore,
they will only be made if, in the Subadviser's judgment, the consideration to be
earned from such loans would justify the risk.
The Subadviser understands that it is the current view of the SEC Staff
that the Portfolio may engage in loan transactions only under the following
conditions: (1) the Portfolio must receive 100% collateral in the form of cash
or cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower;
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(2) the borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, the Portfolio must be able to terminate the
loan at any time; (4) the Portfolio must receive reasonable interest on the loan
or a flat fee from the borrower, as well as amounts equivalent to any dividends,
interest, or other distributions on the securities loaned and to any increase in
market value; (5) the Portfolio may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able to vote
proxies on the securities loaned, either by terminating the loan or by entering
into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security
in which the Portfolio is authorized to invest. Investing this cash subjects
that investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
FOREIGN INVESTMENTS. Foreign investments can involve significant risks
in addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and interest
from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets, and
prices on some foreign markets can be highly volatile.
Many foreign countries lack uniform accounting and disclosure standards
comparable to those applicable to U.S. companies, and it may be more difficult
to obtain reliable information regarding an issuer's financial condition and
operations.
In addition, the costs of foreign investing, including withholding
taxes, brokerage commissions, and custodial costs, are generally higher than for
U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Subadviser will be able
to anticipate or counter these potential events.
The considerations noted above generally are intensified for
investments in developing countries. Developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
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The Portfolio may invest in foreign securities that impose restrictions
on transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable abroad, they may be less liquid than
foreign securities of the same class that are not subject to such restrictions.
American Depository Receipts and European Depository Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
corporation held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies in
the foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may be
exchanged on a spot (i.e., cash) basis, or by entering into forward contracts to
purchase or sell foreign currencies at a future date and price. Forward
contracts generally are traded in an interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated currency exchange.
The Portfolio may use currency forward contracts to manage currency
risks and to facilitate transactions in foreign securities. The following
discussion summarizes the principal currency management strategies involving
forward contracts that could be used by the Portfolio.
In connection with purchases and sales of securities denominated in
foreign currencies, the Portfolio may enter into currency forward contracts to
fix a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement hedge"
or "transaction hedge."
The Subadviser expects to enter into settlement hedges in the normal
course of managing the Portfolio's foreign investments. The Portfolio could also
enter into forward contracts to purchase or sell a foreign currency in
anticipation of future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected by the
Subadviser.
The Portfolio may also use forward contracts to hedge against a decline
in the value of existing investments denominated in foreign currency. For
example, if the Portfolio owned securities denominated in pounds sterling, it
could enter into a forward contract to sell pounds sterling in return for U.S.
dollars to hedge against possible declines in the pound's value. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both positive
and negative currency fluctuations, but would not offset changes in security
values caused by other factors. The Portfolio could also hedge the position by
selling another currency expected to perform similarly to the pound sterling -
for example, by entering into a forward contract to sell Deutschemarks or
European Currency Units in return for U.S. dollars. This type of hedge,
sometimes referred to as a "proxy hedge," could offer advantages in terms of
cost, yield, or efficiency, but generally would not hedge currency exposure as
effectively as a simple hedge into U.S. dollars. Proxy hedges may result in
losses if the currency used to hedge does not perform similarly to the currency
in which the hedged securities are denominated.
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Under certain conditions, SEC guidelines require mutual funds to set
aside cash and appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, the Portfolio
will segregate assets to cover currency forward contracts, if any, whose purpose
is essentially speculative. The Portfolio will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on the
Subadviser's skill in analyzing and predicting currency values. Forward
contracts may substantially change the Portfolio's investment exposure to
changes in currency exchange rates, and could result in losses to the Portfolio
if currencies do not perform as the Subadviser anticipates. For example, if a
currency's value rose at a time when the Subadviser had hedged the Portfolio by
selling that currency in exchange for dollars, the Portfolio would be unable to
participate in the currency's appreciation. If the Subadviser hedges currency
exposure through proxy hedges, the Portfolio could realize currency losses from
the hedge and the security position at the same time if the two currencies do
not move in tandem. Similarly, if the Subadviser increases the Portfolio's
exposure to a foreign currency, and that currency's value declines, the
Portfolio will realize a loss. There is no assurance that the Subadviser's use
of forward currency contracts will be advantageous to the Portfolio or that it
will hedge at an appropriate time. The policies described in this section are
non-fundamental policies of the Portfolio.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Portfolio will
not: (a) sell futures contracts, purchase put options, or write call options if,
as a result, more than 50% of the Portfolio's total assets would be hedged with
futures and options under normal conditions; (b) purchase futures contracts or
write put options if, as a result, the Portfolio's total obligations upon
settlement or exercise of purchased futures contracts and written put options
would exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options purchased by the
Portfolio would exceed 5% of the Portfolio's total assets. These limitations do
not apply to options attached to or acquired or traded together with their
underlying securities, and do not apply to securities that incorporate features
similar to options. The above limitations on the Portfolio's investments in
futures contracts and options, and the Portfolio's policies regarding futures
contracts and options discussed elsewhere in this Statement of Additional
Information, may be changed as regulatory agencies permit.
FUTURES CONTRACTS. When the Portfolio purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future date.
When the Portfolio sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and sale
will take place is fixed when the Portfolio enters into the contract.
Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on indices
of securities prices, such as the Standard & Poor's 500 Composite Stock Price
Index (S&P 500). Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore, purchasing
futures contracts will tend to increase the Portfolio's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the Portfolio sells a futures
contract, by contrast, the value of its futures position will tend to move in a
direction contrary to the market. Selling futures
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contracts, therefore, will tend to offset both positive and negative market
price changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and seller
are required to deposit "initial margin" with a futures broker, known as a
futures commission merchant (FCM), when the contract is entered into. Initial
margin deposits are typically equal to a percentage of the contract's value.
If the value of either party's position declines, that party will be
required to make additional "variation margin" payments to settle the change in
value on a daily basis. The party that has a gain may be entitled to receive all
or a portion of this amount. Initial and variation margin payments do not
constitute purchasing securities on margin for purposes of the Portfolio's
investment limitations. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option the
Portfolio obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Portfolio pays the current market price for the option (known as the option
premium). Options have various types of underlying instruments, including
specific securities, indices of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. If the option is allowed to
expire, the Fund will lose the entire premium it paid. If the Portfolio
exercises the option, it completes the sale of the underlying instrument at the
strike price. The Portfolio may also terminate a put option position by closing
it out in the secondary market at its current price, if a liquid secondary
market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying instrument's
price does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium paid,
plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price.
A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if security prices do not rise sufficiently to offset the cost of the
option.
WRITING PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures contract
the Portfolio will be required to make margin payments to an FCM as described
above for futures contracts. The Portfolio may seek to terminate its position in
a put option it writes before exercise by closing out the option in the
secondary market at its current price. If the secondary market is not liquid for
a put option the
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Portfolio has written, however, the Portfolio must continue to be prepared to
pay the strike price while the option is outstanding, regardless of price
changes, and must continue to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices fall, the put writer would expect to suffer a loss. This loss
should be less than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should mitigate the
effects of the decline.
Writing a call option obligates the Portfolio to sell or deliver the
option's underlying instrument, in return for the strike price, upon exercise of
the option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
COMBINED POSITIONS. The Portfolio may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Portfolio may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the Portfolio's current or
anticipated investments exactly. The Portfolio may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Portfolio's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Portfolio's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts.
The Fund may purchase or sell options and futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility between
the contract and the securities, although this may not be successful in all
cases. If
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<PAGE> 71
price changes in the Portfolio's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading volume
and liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily price
fluctuation limits for options and futures contracts, and may halt trading if a
contract's price moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached or a trading
halt is imposed, it may be impossible for the Portfolio to enter into new
positions or close out existing positions. If the secondary market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and potentially could
require the Portfolio to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, the Portfolio's
access to other assets held to cover its options or futures positions could also
be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other party to
the option contract. While this type of arrangement allows the Portfolio greater
flexibility to tailor an option to its needs, OTC options generally involve
greater credit risk than exchange-traded options, which are guaranteed by the
clearing organization of the exchanges where they are traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that they
are traded on exchanges (and have margin requirements) and are standardized as
to contract size and delivery date. Most currency futures contracts call for
payment or delivery in U.S. dollars. The underlying instrument of a currency
option may be a foreign currency, which generally is purchased or delivered in
exchange for U.S. dollars, or may be a futures contract. The purchaser of a
currency call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed above. The
Portfolio may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The Portfolio may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with exchange
rates, but may not reflect other factors that affect the value of the Fund's
investments. A currency hedge, for example, should protect a Yen-denominated
security from a decline in the Yen, but will not protect the Portfolio against a
price decline resulting from deterioration in the issuer's creditworthiness.
Because the value of the Portfolio's foreign-denominated investments changes in
response to many factors other than exchange rates, it may not be possible to
match the amount of currency options and futures to the value of the Portfolio's
investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Portfolio will
comply with guidelines established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and if the guidelines so
require, will set aside appropriate liquid assets in a segregated custodial
account in the
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<PAGE> 72
amount prescribed. Securities held in a segregated account cannot be sold while
the futures or option strategy is outstanding, unless they are replaced with
other suitable assets. As a result, there is a possibility that segregation of a
large percentage of the Portfolio's assets could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.
SHORT SALES. The Portfolio may enter into short sales with respect to
stocks underlying its convertible security holdings. For example, if the
Subadviser anticipates a decline in the price of the stock underlying a
convertible security the Portfolio holds, it may sell the stock short. If the
stock price subsequently declines, the proceeds of the short sale could be
expected to offset all or a portion of the effect of the stock's decline on the
value of the convertible security. The Fund currently intends to hedge no more
than 15% of its total assets with short sales on equity securities underlying
its convertible security holdings under normal circumstances.
When the Portfolio enters into a short sale, it will be required to set
aside securities equivalent in kind and amount to those sold short (or
securities convertible or exchangeable into such securities) and will be
required to continue to hold them while the short sale is outstanding. The
Portfolio will incur transaction costs, including interest expense, in
connection with opening, maintaining, and closing short sales.
PORTFOLIO TURNOVER. The portfolio turnover rate for the period June 21,
1995 to December 31, 1995 was 5%. The turnover rate was a result of readjusting
the portfolio in response to declining interest rates, to stocks offering
greater growth potential rather than current yield. The Portfolio has no fixed
policy with respect to portfolio turnover; however, as a result of the
Portfolio's investment policies, the Subadviser expects the annual portfolio
turnover rate will be 50% or less. The portfolio turnover rate is calculated by
dividing the lesser of sales or purchases of portfolio securities by the average
monthly value of the Portfolio's securities, excluding securities having a
maturity at the date of purchase of one year or less. High portfolio turnover
may involve correspondingly greater brokerage commissions and other transaction
costs which will be borne directly by the Portfolio.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed
on behalf of the Portfolio by the Subadviser pursuant to authority contained in
the investment advisory agreement and investment subadvisory agreement. The
Subadviser is also responsible for the placement of transaction orders for
accounts for which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal securities
laws, the Subadviser considers various relevant factors, including, but not
limited to, the size and type of the transaction; the nature and character of
the markets for the security to be purchased or sold; the execution efficiency,
settlement capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions, and arrangements for payment of Portfolio
expenses.
The Fund's brokerage transactions involving securities of companies
headquartered in countries other than the United States will be conducted
primarily on the markets and principal exchanges of such countries. Foreign
markets are generally not as developed as those located in the United States,
which may result in higher transaction costs, delayed settlement and less
liquidity for trades effected in foreign markets. Transactions on foreign
exchanges are usually subject to fixed commissions that generally are
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<PAGE> 73
higher than negotiated commissions on U.S. transactions. There is generally less
government supervision and regulation of exchanges and brokers in foreign
countries than in the United States.
The Portfolio may execute portfolio transactions with broker-dealers
who provide research and execution services to the Portfolio or other accounts
over which the Subadviser or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the advisability
of investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). The selection of such broker-dealers generally is made by the
Subadviser (to the extent possible consistent with execution considerations) in
accordance with a ranking of broker-dealers determined periodically by the
Subadviser's investment staff based upon the quality of research and execution
services provided.
The receipt of research from broker-dealers that execute transactions
on behalf of the Portfolio may be useful to the Subadviser in rendering
investment management services to the Portfolio or its other clients, and
conversely, such research provided by broker-dealers who have executed
transaction orders on behalf of other Subadviser clients may be useful to the
Subadviser in carrying out its obligations to the Portfolio. The receipt of such
research is not expected to reduce the Subadviser's normal independent research
activities; however, it enables the Subadviser to avoid the additional expenses
that could be incurred if the Subadviser tried to develop comparable information
through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
Portfolio to pay such higher commissions, the Subadviser must determine in good
faith that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or the Subadviser's overall
responsibilities to the Portfolio and its other clients. In reaching this
determination, the Subadviser will not attempt to place a specific dollar value
on the brokerage and research services provided or to determine what portion of
the compensation should be related to those services.
The Subadviser 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 Fund or shares of other
Flex-Partners' funds or Flex-funds' funds to the extent permitted by law.
The Subadviser may allocate brokerage transactions to broker-dealers
who have entered into arrangements with the Subadviser under which the
broker-dealer allocates a portion of the commissions paid by the Portfolio
toward payment of the Portfolio's or the Fund's 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. During
the period from June 21, 1995 to December 31, 1995 directed brokerage payments
of $1,212 were made to reduce expenses of the Portfolio.
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<PAGE> 74
The Trustees of the Portfolio periodically review the Subadviser'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.
From time to time, the Trustees of the Portfolio will review whether
the recapture for the benefit of the Portfolio of some portion of the brokerage
commissions or similar fees paid by the Portfolio on portfolio transactions is
legally permissible and advisable.
The Portfolio seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture arrangements
are in effect. The Trustees of the Portfolio intend to continue to review
whether recapture opportunities are available and are legally permissible and,
if so, to determine in the exercise of their business judgment, whether it would
be advisable for the Portfolio to seek such recapture.
Although the Trustees and officers of the Portfolio are substantially
the same as those of other portfolios managed by the Manager, investment
decisions for the Portfolio are made independently from those of other
portfolios managed by the Manager or accounts managed by affiliates of the
Manager. It sometimes happens that the same security is held in the portfolio of
more than one of these funds or accounts. Simultaneous transactions are
inevitable when several portfolios are managed by the same investment adviser,
particularly when the same security is suitable for the investment objective of
more than one portfolio.
When two or more portfolios are simultaneously engaged in the purchase
or sale of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the portfolios involved to be
equitable to each portfolio. In some cases this system could have a detrimental
effect on the price or value of the security as far as the Portfolio is
concerned. In other cases, however, the ability of the Portfolio to participate
in volume transactions will produce better executions and prices for the
Portfolio. It is the current opinion of the Trustees of the Portfolio that the
desirability of retaining the Manager as investment adviser to the Portfolio
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
The Portfolio effects transactions in its portfolio securities on
securities exchanges on a non-exclusive basis through Roosevelt & Cross,
Incorporated (the "Distributor") in its capacity as a broker-dealer. Because the
Distributor is an "affiliated person" of the Portfolio (as such term is defined
under the Investment Company Act of 1940) by serving as the distributor of the
Fund, the Board of Trustees of the Portfolio has adopted procedures pursuant to
Rule 17e-1 under the Investment Company Act of 1940 governing the payment of
commissions by the Portfolio to the Distributor in its capacity as a
broker-dealer. During the period from June 21, 1995 to December 31, 1995 the
Portfolio paid total commissions of $8,202 on the purchase and sale of portfolio
securities, of which $1,908 were paid to the Distributor.
VALUATION OF PORTFOLIO SECURITIES
Portfolio securities are valued by various methods depending on the
primary market or exchange on which they trade. Equity securities for which the
primary market is the U.S. are valued at last sale price or, if no sale has
occurred, at the closing bid price. Equity securities for which the primary
market
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<PAGE> 75
is outside the U.S. are valued using the official closing price or the last sale
price in the principal market where they are traded. If the last sale price (on
the local exchange) is unavailable, the last evaluated quote or last bid price
is normally used. Short-term securities are valued either at amortized cost or
at original cost plus accrued interest, both of which approximate current value.
Fixed-income securities are valued primarily by a pricing service that uses
direct exchange quotes and a vendor security valuation matrix which incorporates
both dealer-supplied valuations and electronic data processing techniques.
This twofold approach is believed to more accurately reflect fair value
because it takes into account appropriate factors such as institutional trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data, without exclusive
reliance upon quoted, exchange, or over-the-counter prices.
Securities and other assets for which there is no readily available
market are valued in good faith by the Board of Trustees. The procedures set
forth above need not be used to determine the value of the securities owned by
the Portfolio if, in the opinion of the Board of Trustees, some other method
(e.g., closing over-the-counter bid prices in the case of debt instruments
traded on an exchange) would more accurately reflect the fair market value of
such securities.
Generally, the valuation of foreign and domestic equity securities, as
well as corporate bonds, U.S. government securities, money market instruments,
and repurchase agreements, is substantially completed each day at the close of
the New York Stock Exchange (NYSE).
The values of any such securities held by the Portfolio are determined
as of such time for the purpose of computing the Portfolio's net asset value.
Foreign security prices are furnished by independent brokers or quotation
services which express the value of securities in their local currency. The
Manager gathers all exchange rates daily at the close of the NYSE using the last
quoted price on the local currency and then translates the value of foreign
securities from their local currency into U.S. dollars. Any changes in the value
of forward contracts due to exchange rate fluctuations and days to maturity are
included in the calculation of net asset value. If an extraordinary event that
is expected to materially affect the value of a portfolio security occurs after
the close of an exchange on which that security is traded, then the security
will be valued as determined in good faith by the Board of Trustees.
PERFORMANCE
The Fund may quote its performance in various ways. All performance
information supplied by the Fund in advertising is historical and is not
intended to indicate future returns. The Fund's share price and total returns
fluctuate in response to market conditions and other factors, and the value of
Fund shares when redeemed may be more or less than their original cost.
TOTAL RETURN CALCULATIONS. Total returns quoted in advertising reflect
all aspects of the Fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the Fund's net asset value
over the period. Average annual total return is determined separately for Class
A and Class C shares. Average annual returns will be calculated by determining
the growth or decline in value of a hypothetical historical investment in the
Fund over a stated period, and then calculating the annually compounded
percentage rate that would have produced the same result if the rate of growth
or decline in value had been constant over the period. While average annual
returns are a convenient means of comparing investment alternatives, investors
should realize that the Fund's performance is not
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<PAGE> 76
constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the Fund.
In addition to average annual returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, or series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. Total returns may be quoted on a before-tax or after-tax basis. Total
returns, yields, and other performance information may be quoted numerically, or
in a table, graph, or similar illustration.
Below is an example of the total return calculation for the BTB Fund
(Class A shares) assuming a hypothetical investment of $1,000 at the beginning
of each period.
Total return is computed by finding the average annual compounded rates
of return over the length of the base periods that would equate the initial
amount invested to the ending redeemable value, according to the following
formula:
P(1+T)(to the nth power) = ERV
P = initial investment of $1,000
T = average annual total return
n = Number of years
ERV = ending redeemable value at the
end of the base period
THE BTB FUND (Class A Shares):
<TABLE>
<CAPTION>
Total Return
-------------------------------------------------------
Since Inception
1 Year 5 Years (July 11, 1995)
Period Ended Period Ended Period Ended
December 31, 1995 December 31, 1995 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Value of Account
At end of Period $ 0 $ 0 $1,151.11
Value of Account
At beginning of Period 1,000.00 1,000.00 1,000.00
--------- --------- ---------
Base Period Return $ 0 $ 0 $ 151.11
Total Return 0 0 15.11%
</TABLE>
Total return quotations, when advertised for The BTB Fund (Class C
shares), are calculated in the same manner as described above.
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<PAGE> 77
NET ASSET VALUE. Charts and graphs using the Fund's net asset values,
adjusted net asset values, and benchmark indices may be used to exhibit
performance. An adjusted net asset value includes any distributions paid by the
Fund and reflects all elements of its return. Unless otherwise indicated, the
Fund's adjusted net asset values are not adjusted for sales charges, if any.
MOVING AVERAGES. The Fund may illustrate performance using moving
averages. A long-term moving average is the average of each week's adjusted
closing net asset value for a specified period. A short-term moving average is
the average of each day's adjusted closing net asset value for a specified
period. Moving Average Activity Indicators combine adjusted closing net asset
values from the last business day of each week with moving averages for a
specified period to produce indicators showing when a net asset value has
crossed, stayed above, or stayed below its moving average.
HISTORICAL FUND RESULTS. The Fund's performance may be compared to the
performance of other mutual funds in general, or to the performance of
particular types of mutual funds. These comparisons may be expressed as mutual
fund rankings prepared by Lipper Analytical Services, Inc. (Lipper), an
independent service located in Summit, New Jersey that monitors the performance
of mutual funds. Lipper generally ranks funds on the basis of total return,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and total return is prepared without regard
to tax consequences. In addition to the mutual fund rankings, the Fund's
performance may be compared to mutual fund performance indices prepared by
Lipper.
From time to time, the Fund's performance may also be compared to other
mutual funds tracked by financial or business publications and periodicals. For
example, the Fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. Rankings that compare the performance of
Flex-Partners or Flex-funds funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
In advertising materials, the Trust may reference or discuss its
products and services, which may include: other Flex-Partners or Flex-funds
funds; retirement investing; the effects of periodic investment plans and dollar
cost averaging; saving for college; and charitable giving. In addition, the Fund
may quote financial or business publications and periodicals, including model
portfolios or allocations, as they relate to Fund management, investment
philosophy, and investment techniques. The Fund may also reprint, and use as
advertising and sales literature, articles from Reflexions, a quarterly magazine
provided free of charge to Flex-Partners and Flex-funds shareholders.
VOLATILITY. The Fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Fund may compare these
measures to those of other funds. Measures of volatility seek to compare the
Fund's historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a comparative
benchmark may be. All measures of volatility and correlation are calculated
using averages of historical data.
MOMENTUM INDICATORS indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the Fund's
percentage change in price movements over that period.
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The Fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.
The Fund may be available for purchase through retirement plans or
other programs offering deferral of, or exemption from, income taxes, which may
produce superior after-tax returns over time. For example, a $1,000 investment
earning a taxable return of 10% annually would have an after-tax value of $1,949
after ten years, assuming tax was deducted from the return each year at a 31%
rate. An equivalent tax-deferred investment would have an after-tax value of
$2,100 after ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Fund is open for business and its net asset value per share (NAV)
is calculated each day the NYSE is open for trading. The NYSE has designated the
following holiday closings: New Year's Day, Washington's Birthday (observed),
Good Friday, Memorial Day (observed), Independence Day (observed), Labor Day,
Thanksgiving Day, and Christmas Day (observed). The NYSE may modify its holiday
schedule at any time.
The Fund's net asset value is determined as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the SEC. To the extent that
portfolio securities are traded in other markets on days when the NYSE is
closed, the Fund's NAV may be affected on days when investors do not have access
to the Fund to purchase or redeem shares.
If the Trustees determine that existing conditions make cash payment
undesirable, redemption payments may be made in whole or in part in securities
or other property, valued for this purpose as they are valued in computing the
Fund's NAV. Shareholders receiving securities or other property on redemption
may realize a gain or loss for tax purposes, and will incur any costs of sale,
as well as the associated inconveniences. All redemptions in kind will be of
readily marketable securities.
Shareholders of the Fund will be able to exchange their Class A shares
for Class A shares of any mutual fund that is a series of The Flex-Partners
(each a "Flex-Partners Fund"), and shares of The Flex-funds Money Market Fund.
No fee or sales load will be imposed upon the exchange. Shareholders of The
Flex-funds Money Market Fund who acquired such shares upon exchange of Class A
shares of the Fund may use the exchange privilege only to acquire Class A shares
of a Flex-Partners Fund.
Shareholders of the Fund may exchange their Class C shares for Class C
shares of other Flex-Partners Funds. If Class C shares of the Fund are exchanged
for Class C shares of other Flex-Partners Funds, no contingent deferred sales
charge will be payable upon such exchange of Class C shares, but a contingent
deferred sales charge will be payable upon the redemption of Class C shares
acquired as a result of the exchange. The applicable sales charge will be that
imposed by the Fund in which shares
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<PAGE> 79
were initially purchased and the purchase date will be deemed to be the date of
the initial purchase, rather than the date of the exchange.
At any time after acquiring shares of other funds participating in the
Class C exchange privilege, the shareholder may again exchange those shares (and
any reinvested dividends and distributions) for Class C shares of the Fund
without subjecting such shares to any contingent deferred sales charge. Shares
of any fund participating in the Class C exchange privilege that were acquired
through reinvestment of dividends or distributions may be exchanged for Class C
shares of other funds without being subject to any contingent deferred sales
charge.
Additional details about the exchange privilege and prospectuses for
each of the Flex-Partners Funds and The Flex-funds Money Market Fund are
available from the Fund's Transfer Agent. The exchange privilege may be
modified, terminated or suspended on 60 days' notice, and any fund, including
the Fund, or the Distributor, has the right to reject any exchange application
relating to such fund's shares. The 60 day notification requirement may be
waived if (i) the only effect of a modification would be to reduce or eliminate
an administrative fee, redemption fee, or deferred sales charge ordinarily
payable at the time of an exchange, or (ii) the Fund suspends the redemption of
the shares to be exchanged as permitted under the 1940 Act or the rules and
regulations thereunder, or the fund to be acquired suspends the sale of its
shares because it is unable to invest amounts effectively in accordance with its
investment objective and policies.
In the Prospectus, the Fund has notified shareholders that it reserves
the right at any time, without prior notice, to refuse exchange purchases by any
person or group if, in the Subadviser's judgment, the Fund would be unable to
invest effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.
COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other series of the Trust, the purchases may
be combined to take advantage of the reduced sales charges applicable to larger
purchases. See the table of breakpoints under "How to Buy Shares - Cumulative
Quantity Discount" in the Prospectus.
An eligible group of related Fund investors includes any combination of
the following:
(a) an individual;
(b) the individual's spouse, their children and their
parents;
(c) the individual's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity
or group that holds 25% or more of the outstanding voting securities of a
corporation will be deemed to control the corporation, and a partnership will be
deemed to be controlled by each of its general partners);
(e) a trust created by the individual, the beneficiaries
of which are the individual, his or her spouse, parents or children;
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<PAGE> 80
(f) a Uniform Gifts to Minors Act/Uniform Transfers to
Minors Act account created by the individual or the individual's spouse; and
(g) one or more employee benefit plans of a company
controlled by an individual.
The Combined Purchase and Cumulative Purchase Privilege does not apply
to individual participants in retirement and group plans described below under
"Flex-Partners Retirement Plans."
RIGHTS OF ACCUMULATION. Reduced sales charges are also available
through Rights of Accumulation, under which an investor or an eligible group of
related investors, as described above under "Combined Purchase and Cumulative
Purchase Privilege," may aggregate the value of their existing holdings of the
Class A shares of the Fund and Class A shares of other Flex-Partners Funds to
determine the reduced sales charge. The value of existing holdings for purposes
of determining the reduced sales charge is calculated using the maximum offering
price (net asset value plus maximum sales charge) as of the previous business
day. See "How Net Asset Value is Determined" in the Prospectus. The Transfer
Agent must be notified at the time of purchase that the investor is entitled to
a reduced sales charge. The reduced sales charges will be granted subject to
confirmation of the investor's holdings. Rights of accumulation are not
available to individual participants in the retirement and group plans described
below under "Flex-Partners Retirement Plans."
LETTERS OF INTENT. Reduced sales charges are also available to
investors (or an eligible group of related investors) who enter into a written
Letter of Intent providing for the purchase, within a thirteen-month period, of
Class A shares of the Fund and Class A shares of other Flex-Partners Funds. All
Class A shares of the Fund and Class A shares of other Flex-Partners Funds which
were previously purchased and are still owned are also included in determining
the applicable reduction. The Transfer Agent must be notified at the time of
purchase that the investor is entitled to a reduced sales charge. The reduced
sales charges will be granted subject to confirmation of the investor's
holdings. Letters of Intent are not available to individual participants in
retirement and group plans described below under "Flex-Partners Retirement
Plans."
A Letter of Intent permits a purchase to establish a total investment
goal to be achieved by any number of investments over a thirteen-month period.
Each investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Shares totaling 5% of the dollar amount of the Letter of Intent will
be held by the Transfer Agent in escrow in the name of the purchaser. The
effective date of a Letter of Intent may be back-dated up to 90 days, in order
that any investments made during this 90-day period, valued at the purchaser's
cost, can be applied to the fulfillment of the Letter of Intent goal.
The Letter of Intent does not obligate the investor to purchase, nor
the Fund to sell, the indicated amount. In the event the Letter of Intent goal
is not achieved within the thirteen-month period, the purchaser is required to
pay the difference between the sales charge otherwise applicable to the
purchases made during this period and sales charges actually paid. Such payment
may be made directly to the Transfer Agent or, if not paid, the Transfer Agent
will liquidate sufficient escrowed shares to obtain such difference. If the goal
is exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made by refunding to the purchaser the amount of excess sales
charge, if any, paid during the thirteen-month period. Investors electing to
purchase Class A shares of the Fund pursuant to a Letter of Intent should
carefully read such Letter of Intent.
22
<PAGE> 81
AUTOMATIC ACCOUNT BUILDER. An investor may arrange to have a fixed
amount of $100 or more automatically invested in shares of the Fund monthly by
authorizing his or her bank account to be debited to invest specified dollar
amounts in shares of the Fund. The investor's bank must be a member of the
Automatic Clearing House System.
Further information about these programs and an application form can be
obtained from the Fund's Transfer Agent.
SYSTEMATIC WITHDRAWAL PROGRAM. A systematic withdrawal plan is
available for shareholders having Class A and Class C shares of the Fund with a
minimum value of $10,000, based upon the offering price. The plan provides for
monthly, quarterly or annual checks in any amount, but not less than $100 (which
amount is not necessarily recommended). Except as otherwise provided in the
Prospectus, to the extent such withdrawals exceed the current net asset value of
reinvested dividends, they may be subject to the contingent deferred sales
charge. See "How to Buy Shares - Class C Shares" and "Other Shareholder
Services" in the Prospectus.
Dividends and/or distributions on shares held under this plan are
invested in additional full and fractional shares at net asset value. See
"Shareholder Investment Account - Automatic Reinvestment of Dividends and/or
Distributions" above. The Transfer Agent acts as agent for the shareholder in
redeeming sufficient full and fractional shares to provide the amount of the
periodic withdrawal payment. The plan may be terminated at any time.
Withdrawal payments should not be considered as dividends, yield or
income. If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and
any gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the applicable sales charges to (i) the purchase of Class
A shares and (ii) the withdrawal of Class C shares. Each shareholder should
consult his or her own tax adviser with regard to the tax consequences of the
plan, particularly if used in connection with a retirement plan.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and
the U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, the Subadviser may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested until you
provide the Subadviser with alternate instructions.
DIVIDENDS. A portion of the Fund's dividends derived from certain U.S.
government obligations may be exempt from state and local taxation. Gains
(losses) attributable to foreign currency fluctuations are generally taxable as
ordinary income and therefore will increase (decrease) dividend distributions.
The Fund will send each shareholder a notice in January describing the tax
status of dividends and capital gain distributions for the prior year.
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<PAGE> 82
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the Fund
on the sale of securities by the Portfolio and distributed to shareholders of
the Fund are federally taxable as long-term capital gains regardless of the
length of time shareholders have held their shares. If a shareholder receives a
long-term capital gain distribution on shares of the Fund and such shares are
held six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to
shareholders as dividends, not as capital gains. Distributions from short-term
capital gains do not qualify for the dividends-received deduction.
FOREIGN TAXES. Foreign governments may withhold taxes on dividends and
interest paid with respect to foreign securities. Because the Fund does not
currently anticipate that securities of foreign issuers will constitute more
than 25% of the Portfolio's total assets at the end of its fiscal year,
shareholders should not expect to claim a foreign tax credit or deduction on
their federal income tax returns with respect to foreign taxes withheld.
TAX STATUS OF THE FUND. The Fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be liable
for federal tax on income and capital gains distributed to shareholders. In
order to qualify as a regulated investment company and avoid being subject to
federal income or excise taxes at the Fund level, the Fund intends to distribute
substantially all of its net investment income (consisting of the income it
earns from its investment in the Portfolio, less expenses) and net realized
capital gains within each calendar year as well as on a fiscal year basis. The
Fund intends to comply with other tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities held less than three months constitute less than 30% of the Fund's
gross income for each fiscal year. Gains from some forward currency contracts,
futures contracts, and options are included in this 30% calculation, which may
limit the Fund's investments in such instruments.
If the Portfolio purchases shares in certain foreign investment
entities, defined as passive foreign investment companies (PFICs) in the
Internal Revenue Code, it may be subject to U.S. federal income tax on a portion
of any excess distribution or gain from the disposition of such shares. Interest
charges may also be imposed on the Portfolio with respect to deferred taxes
arising from such distributions or gains.
The Fund is treated as a separate entity from the other funds of The
Flex-Partners Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some
of the tax consequences generally affecting the Fund and its shareholders, and
no attempt has been made to discuss individual tax consequences. In addition to
federal income taxes, shareholders may be subject to state and local taxes on
Fund distributions. Investors should consult their tax advisers to determine
whether the Fund is suitable to their particular tax situation.
24
<PAGE> 83
INVESTMENT ADVISER AND MANAGER
R. Meeder & Associates, Inc. (the "Manager") is the investment adviser
and manager for, and has an Investment Advisory Contract with, the Portfolio.
Pursuant to the Investment Advisory Contract with the Portfolio, the
Manager, subject to the supervision of the Portfolio's Board of Trustees and in
conformity with the stated objective and policies of the Fund, manages both the
investment operations of the Fund and the composition of the Portfolio's
portfolio, including the purchase, retention, disposition and loan of
securities. In connection therewith, the Manager is obligated to keep certain
books and records of the Portfolio. The Manager also administers the Fund's
corporate affairs, and in connection therewith, furnishes the Fund with office
facilities, together with those ordinary clerical and bookkeeping services which
are not being furnished by Star Bank, N.A., the Portfolio's custodian and Mutual
Funds Service Co., the Fund's transfer and disbursing agent. The management
services of the Manager are not exclusive under the terms of the Investment
Advisory Agreement and the Manager is free to, and does, render management
services to others.
The Investment Advisory Contract for the Portfolio was separately
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 Investment Company
Act of 1940) of the Portfolio. The Investment Advisory Contract is to remain in
force so long as renewal thereof is specifically approved at least annually by a
majority of the Trustees or by vote of a majority of the interests in the
Portfolio, and in either case by vote of a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) at a
meeting called for the purpose of voting on such renewal.
The Investment Advisory Contract provides that the Manager will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Portfolio in connection with the matters to which the Investment Advisory
Contract relates except for a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Investment Advisory
Contract will terminate automatically if assigned and may be terminated without
penalty at any time upon 60 days' prior written notice by Majority Vote of the
Portfolio, by the Trustees of the Portfolio, or by the Manager.
Costs, expenses and liabilities of the Trust attributable to a
particular fund are allocated to that fund. Costs, expenses and liabilities
which are not readily attributable to a particular fund are allocated among all
of the Trust's funds. Thus, each fund pays its proportionate share of: the fees
of the Trust's independent auditors, legal counsel, custodian, transfer agent
and accountants; insurance premiums; the fees and expenses of Trustees who do
not receive compensation from R. Meeder & Associates or Miller/Howard
Investments, Inc.; association dues; the cost of printing and mailing
confirmations, prospectuses, proxies, proxy statements, notices and reports to
existing shareholders; state registration fees; distribution expenses within the
percentage limitations of each Class of Shares' distribution and service plan,
including the cost of printing and mailing of prospectuses and other materials
incident to soliciting new accounts; and other miscellaneous expenses.
The expenses of the Portfolio include the compensation of the Trustees
who are not affiliated with the Adviser or Subadviser; registration fees;
membership dues allocable to the Portfolio; fees and expenses of independent
accountants, of legal counsel and of any transfer agent or accountant of the
Portfolio; insurance premiums and other miscellaneous expenses.
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<PAGE> 84
Expenses of the Portfolio also include all fees under its Accounting
and Administrative Service Agreement; 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 offices and
commissions; expenses of meetings of investors and Trustees; the advisory fees
payable to the Manager under the Investment Advisory Contract and other
miscellaneous expenses.
The Board of Trustees of the Trust believe that the aggregate per share
expenses of the Fund and the Portfolio will be less than or approximately equal
to the expenses which the Fund would incur if it retained the services of an
investment adviser and the assets of the Fund were invested directly in the type
of securities being held by the Portfolio.
The Manager earns an annual fee, payable in monthly installments as
follows. The fee for the Portfolio is based upon the average net assets of the
Portfolio and is 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 average net assets.
For the year ended December 31, 1995, the Utilities Stock Portfolio
paid fees to the Manager totaling $14,297.
The Manager presently intends to reimburse the Fund through an expense
reimbursement fee to the extent necessary to keep total expenses at 1.75% of
average daily net assets for Class A Shares and 2.00% of average daily net
assets for Class C shares. The Manager may change this policy at any time
without notice to shareholders.
R. Meeder & Associates, Inc. was incorporated in Ohio on February 1,
1974 and maintains its principal offices at 6000 Memorial Drive, Dublin, Ohio
43017. The Manager is a wholly-owned subsidiary of Muirfield Investors, Inc.
("MII"), which is controlled by Robert S. Meeder, Sr. through the ownership of
voting common stock. The Manager's officers and directors, and the principal
offices are as set forth as follows: Robert S. Meeder, Sr., Chairman and Sole
Director; Robert S. Meeder, Jr., President; G. Robert Kincheloe, Senior Vice
President; Philip A. Voelker, Senior Vice President; Donald F. Meeder, Vice
President and Secretary; Sherrie L. Acock, Vice President; Robert D. Baker, Vice
President; Wesley F. Hoag, General Counsel and Chief Operating Officer; and
Steven T. McCabe, Vice President. Mr. Robert S. Meeder, Sr. is President and a
Trustee of the Trust and the Portfolio. Each of Mr. Robert S. Meeder, Jr.,
Donald F. Meeder, Wesley F. Hoag and Steven T. McCabe is an officer of the Trust
and the Portfolio. Mr. Philip A. Voelker is a Trustee and officer of the
Portfolio and an officer of the Trust.
INVESTMENT SUBADVISER
Miller/Howard Investments, Inc., 141 Upper Byrdcliffe, Woodstock, New
York 12498, serves as the Portfolio's Subadviser. Lowell G. Miller controls the
Subadviser through the ownership of voting common stock. Lowell G. Miller is a
Trustee of the Trust. The Investment Subadvisory Agreement provides that the
Subadviser shall furnish investment advisory services in connection with the
management of the Portfolio. In connection therewith, the Subadviser is
obligated to keep certain books and records of the Portfolio. The Manager
continues to have responsibility for all investment advisory
26
<PAGE> 85
services pursuant to the Investment Advisory Agreement and supervises the
Subadviser's performance of such services. Under the Investment Subadvisory
Agreement, the Manager, not the Portfolio, pays the Subadviser a fee, computed
daily and payable monthly, in an amount equal to 90% of the investment advisory
fees received by the Manager under its Investment Advisory Contract with the
Portfolio, provided that if a shareholder purchasing shares in the Fund is
solicited by the Manager, the Subadviser is compensated by the Manager in an
amount equal to 60% of such investment advisory fees received by the Manager.
The Investment Subadvisory Agreement provides that the Subadviser will
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the Portfolio, except a loss resulting from
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Investment Subadvisory Agreement provides that it will terminate automatically
if assigned, and that it may be terminated by the Manager without penalty to the
Fund or the Portfolio by the Manager, the Trustees of the Portfolio or by the
vote of a majority of the outstanding voting securities of the Portfolio upon
not less than 30 days' written notice. The Investment Subadvisory Agreement will
continue in effect for a period of more than two years from the date of
execution only so long as such continuance is specifically approved at least
annually in conformity with the 1940 Act. The Investment Subadvisory Agreement
was approved by the Board of Trustees of the Portfolio, including all of the
Trustees who are not parties to the contract or "interested persons" of any such
party, and by the shareholders of the Fund.
THE DISTRIBUTOR
Roosevelt & Cross, Incorporated (the "Distributor"), 20 Exchange Place,
New York, NY 10005, acts as the distributor of the Class A shares and the Class
C shares of the Fund.
Pursuant to separate plans of distribution (the Class A Plan and the
Class C Plan, collectively, the Plans) adopted by the Fund under Rule 12b-1
under the 1940 Act and an underwriting agreement (the Underwriting Agreement),
the Distributor incurs the expenses of distributing the Fund's Class A shares
and Class C shares. See "Distribution Plans" in the Prospectus.
On August 4, 1994, the Board of Trustees, including a majority of the
Trustees who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Class A or Class C Plan or
in any agreement related to the Plan (the Rule 12b-1 Trustees), at a meeting
called for the purpose of voting on the Class A Plan, adopted a plan of
distribution for the Class A shares of the Fund. On August 4, 1994, the Board of
Trustees, including the Rule 12b-1 Trustees, at a meeting called for the purpose
of voting on the Class C Plan, adopted a plan of distribution for the Class C
shares of the Fund. The Class A Plan was approved by Class A shareholders of the
Fund. The Class C Plan was approved by Class C shareholders of the Fund.
The Distributor also receives the proceeds of contingent deferred sales
charges paid by investors upon certain redemptions of Class C shares. See "How
to Buy Shares" in the Prospectus.
The Plans continue in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Trustees,
including a majority vote of the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on such continuance. The Plans may be
terminated at any time, without penalty, by the vote of a majority of the
Trustees who are not
27
<PAGE> 86
interested persons or by the vote of the holders of a majority of the
outstanding shares of the Fund. Neither Plan may be amended to increase
materially the amounts to be spent for the services described therein without
approval by the shareholders of Class A and Class C, as applicable, and all
material amendments are required to be approved by the Board of Trustees in the
manner described above. The Fund will not be contractually obligated to pay
expenses incurred under either the Class A or Class C Plan if it is terminated
or not continued.
Pursuant to each Plan, the Board of Trustees will review at least
quarterly a written report of the distribution expenses incurred on behalf of
the Class A and Class C shares of the Fund by the Distributor. The report
includes an itemization of the distribution expenses and the purposes of such
expenditures. In addition, as long as the Plans remain in effect, the selection
and nomination of Trustees who are not interested persons of the Fund shall be
committed to the Trustees who are not interested persons of the Fund.
Pursuant to the Underwriting Agreement, the Fund has agreed to
indemnify the Distributor to the extent permitted by applicable law against
certain liabilities under the Securities Act and the Investment Company Act of
1940. The Distribution Agreement was approved by the Board of Trustees,
including a majority of the Rule 12b-1 Trustees, on May 1, 1995. Total payments
made by the Fund to the Distributor for the year ended December 31, 1995
amounted to $924. The Distributor directed payments to parties with selling
agreements in the amount of $39.13. The balance of the payments made to the
Distributor were used to offset a portion of the initial commissions paid to
securities dealers for the sale of Fund shares.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Except as otherwise shown, all
persons named as Trustees also serve in similar capacities for other funds
advised by the Manager. Unless otherwise noted, the business address of each
Trustee and officer is 6000 Memorial Drive, Dublin, Ohio 43017, which is also
the address of the Manager. Those Trustees who are "interested persons" (as
defined in the Investment Company Act of 1940) by virtue of their affiliation
with either the Portfolio, the Trust, the Manager or the Subadviser are
indicated by an asterisk (*).
The Trust and the Portfolio are managed by its Trustees and officers.
Their names, positions and principal occupations during the past five years are
listed below:
<TABLE>
<CAPTION>
Position Principal
Name & Address Held Occupation
- -------------- ---- ----------
<S> <C> <C>
ROBERT S. MEEDER, SR. *+ Trustee/ Chairman, R. Meeder &
President (1)(2) & Associates, Inc. an
Investment Adviser
MILTON S. BARTHOLOMEW Trustee (2) Retired, formerly a practicing
1424 Clubview Boulevard, S. attorney in Columbus, Ohio
Worthington, OH 43235 Member of the Portfolio's Audit
Committee.
</TABLE>
28
<PAGE> 87
<TABLE>
<CAPTION>
Position Principal
Name & Address Held Occupation
- -------------- ---- ----------
<S> <C> <C>
JOHN M. EMERY Trustee (1) Retired, formerly Vice President
2390 McCoy Road & Treasurer of Columbus &
Columbus, OH 43220 Southern Ohio Electric Co.
Member of the Trust's Audit
Committee.
RICHARD A. FARR Trustee (1) President of R&R Supply Co.
3250 W. Henderson Rd. and General Manager of RAFCo.,
Columbus, OH 43220 Inc., two companies involved in
engineering, consulting & sales of
heating & air conditioning
equipment.
RUSSELL G. MEANS Trustee (2) Chairman of Employee Benefit
4789 Rings Road Management Corporation,
Dublin, OH 43017 consultants and administrators of
self-funded health and retirement
plans.
ROBERT S. MEEDER, JR.*+ Vice President (1)(2) President of R. Meeder &
Associates, Inc.
WALTER L. OGLE Trustee (2) Executive Vice President of
One Corporate Drive Godwins, Booke & Dickenson,
Suite 600 Inc. employee benefit, compensation
Clearwater, Fl 43622 and human resource consultants.
PHILIP A. VOELKER*+ Trustee (2)/ Senior Vice President of R. Meeder
Vice President (1)(2) & Associates, Inc.
JAMES B CRAVER* Assistant Managing Director, Eagle
266 Summer Street Secretary (1)(2) Institutional Financial Services, Inc.
Boston, MA 02210 (since September 1995); Senior Vice
President of Signature Financial
Group, Inc. (January 1991 to
August 1995)
STEVEN T. MCCABE*+ Assistant Vice President, R. Meeder &
Treasurer (1)(2) Associates, Inc., and Vice President,
Mutual Funds Service Company
DONALD F. MEEDER*+ Secretary/ Vice President of R. Meeder &
Treasurer(1)(2) Associates, Inc., and President of
Mutual Funds Service Company
</TABLE>
29
<PAGE> 88
<TABLE>
<CAPTION>
Position Principal
Name & Address Held Occupation
- -------------- ---- ----------
<S> <C> <C>
WESLEY F. HOAG*+ Vice President (1)(2) General Counsel and Chief
Operating Officer of R. Meeder &
Associates, Inc. (since July 1993);
Attorney, Porter, Wright, Morris &
Arthur, a law firm (October 1984 to
June 1993)
WILLIAM L. GURNER Trustee (1) President, Sector Capital
Sector Capital Management Management, an Investment Adviser
One Commerce Square, Suite 1900 (since January 1995); Manager of
Memphis, TN 38103 Trust Investments of Federal Express
Corporation (1987-1994)
LOWELL G. MILLER* Trustee (1) President, Miller/Howard
Miller/Howard Investments, Inc. Investments, Inc., an Investment
141 Upper Byrdcliffe Adviser
Woodstock, NY 12498
ROGER D. BLACKWELL Trustee (2) Professor of Marketing and
Blackwell Associates, Inc. Consumer Behavior, The Ohio State
3380 Tremont Road University, and President of
Columbus, OH 43221 Blackwell Associates, Inc., a
strategic consulting firm
</TABLE>
(1) Trustee and/or officer of The Flex-Partners
(2) Trustee and/or officer of the Portfolio
*"Interested Person" of the Trust (as defined in the Investment Company Act of
1940) and Portfolio.
+P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017.
Robert S. Meeder, Sr. is Robert S. Meeder, Jr.'s father and Donald F.
Meeder's uncle.
Several Trustees and each officer of the Trust hold the same positions
with The Flex-funds, a Massachusetts business trust consisting of six separate
series. Each Trustee and officer of the Portfolio hold the same positions with
each corresponding Portfolio of The Flex-funds. The Manager serves as the
investment adviser to each Portfolio of The Flex-funds.
The Trust pays each Trustee who is not an "interested person" an annual
fee of $3,000, plus $750 for each meeting of the Board of Trustees attended
regardless of the number of Boards of Trustees on which each Trustee serves. Mr.
Emery comprises the Audit Committee for each of The Flex-funds and The
Flex-Partners Trusts. Mr. Emery is paid $400 for each meeting of the Audit
Committees attended regardless of the number of Audit Committees on which he
serves. Trustees fees for The BTB Fund totaled $2,917 for the year ended
December 31, 1995. Audit Committee fees for the Fund totaled $45 for the year
ended December 31, 1995. All other officers and Trustees serve without
compensation from the Trust.
30
<PAGE> 89
Each Trustee who is not an "interested person" with each corresponding
Portfolio of The Flex-funds and Flex-Partners is paid an annual fee of $3,000,
plus $750 for each meeting of the Board of Trustees attended regardless of the
number of Boards of Trustees each Trustee serves. Mr. Bartholomew comprises the
Audit Committee for each corresponding Portfolio of The Flex-funds and the
Flex-Partners Trusts. Mr. Bartholomew is paid $400 for each meeting of the Audit
Committees attended regardless of the number of Audit Committees on which he
serves. Trustee fees for the Utilities Stock Portfolio totaled $2,875 for the
year ended December 31, 1995. Audit Committee fees for the Utilities Stock
Portfolio totaled $66 for the year ended December 31, 1995. All other officers
and Trustees serve without compensation from any Portfolio.
The Trustees and officers of the Fund and the Portfolio own, in the
aggregate, less than 1% of the Fund's total outstanding shares.
FLEX-PARTNERS RETIREMENT PLANS
The Trust offers retirement plans which are described in the
Prospectus. Minimum purchase requirements for retirement plan accounts are
subject to the same requirements as regular accounts, except for an IRA, which
has a $500 minimum purchase requirement. Information concerning contribution
limitations for IRA accounts are described below.
Individual Retirement Accounts (IRA):
Limitation on Deductible Contributions - Under prior law an individual
with earned income, not yet 70 1/2 years of age, was allowed a deductible IRA
contribution, limited to the lesser of earned income or $2,000. Effective for
years beginning after December 31, 1986, applicable law limits the deductibility
of IRA contributions where the taxpayer is a participant in an
employer-sponsored retirement plan and had adjusted gross income (AGI) in excess
of $40,000 (joint) and $25,000 (single). For every dollar that AGI exceeds these
limits, the maximum deduction is reduced by twenty cents. Thus, a joint filer
with AGI greater than $50,000 who is covered by an employer sponsored plan will
not be able to make a deductible IRA contribution. The deductible limits for
individuals not covered by an employer-sponsored plan were not changed.
Nondeductible Contributions- Individuals who may not make a deductible
contribution due to the limits noted above, may continue to make nondeductible
contributions subject to the prior $2,000 limitation. The earnings on such
contributions will still accumulate on a tax deferred basis. Individuals will be
required to report such contributions on their tax returns.
Rollover Contributions-Individuals who receive certain lump-sum
distributions from employer-sponsored retirement plans may make roll-over
contributions to an IRA and by doing so defer taxes on the distribution and
shelter any investment earnings.
A Spousal IRA is also available.
CONTRACTS WITH COMPANIES AFFILIATED WITH THE MANAGER
Mutual Funds Service Co. provides accounting, stock transfer, dividend
disbursing, and shareholder services to the Fund and the Portfolio. The minimum
annual fee for accounting services for
31
<PAGE> 90
the Portfolio is $7,500. Subject to the applicable 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. Subject to a
$4,000 annual minimum fee, each class of shares of the Fund will incur an annual
fee, payable monthly, which will be the greater of $15 per shareholder account
or 0.10% of the Fund's average net assets, payable monthly, for stock transfer
and dividend disbursing services. Mutual Funds Service Co. also serves as
Administrator to the Fund pursuant to an Administration Services Agreement which
was effective February 1, 1995. Services provided to the Fund include
coordinating and monitoring any third party services to the Fund; providing the
necessary personnel to perform administrative functions for the Fund; assisting
in the preparation, filing and distribution of proxy materials, periodic reports
to Trustees and shareholders, registration statements and other necessary
documents. The Fund incurs an annual fee, payable monthly, of .03% of the Fund's
average net assets. These fees are reviewable annually by the respective
Trustees of the Trust and the Portfolio.
For the year ended December 31, 1995, total payments to Mutual Funds
Service Co. by the Fund and the Portfolio amounted to $4,965.
The general counsel for the Manager was primarily responsible for
preparing and filing with the Securities and Exchange Commission (i) a
post-effective amendment to the registration statement for the Trust to add the
Fund as an additional series of the Trust and (ii) the registration statement
for the Portfolio. Charges in the amounts of $12,000 and $5,000 for such legal
services rendered by the Manager on behalf of the Fund and the Portfolio,
respectively, will be paid and amortized by the Portfolio and the Fund as
organization expenses over a period not exceeding 60 months.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. The assets of the Trust received for the issue or
sale of the shares of the Fund and all income, earnings, profits, and proceeds
thereof, subject only to the rights of creditors, are especially allocated to
the Fund and constitute the underlying assets of the Fund. The underlying assets
of the Fund are segregated on the books of account, and are to be charged with
the liabilities with respect to the Fund and with a share of the general
expenses of the Trust. Expenses with respect to the Trust are to be allocated in
proportion to the asset value of the respective funds except where allocations
of direct expense can otherwise be fairly made. The officers of the Trust,
subject to the general supervision of the Board of Trustees, have the power to
determine which expenses are allocable to a given fund, or which are general or
allocable to all of the funds. In the event of the dissolution or liquidation of
the Trust, shareholders of each fund are entitled to receive as a class the
underlying assets of such fund available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of Trust
provides that the Trust shall not have any claim against shareholders except for
the payment of the purchase price of shares and requires that each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees
include a provision limiting the obligations created thereby to the Trust and
its assets.
32
<PAGE> 91
The Declaration of Trust provides for indemnification out of each
fund's property of any shareholder held personally liable for the obligations of
the Fund. The Declaration of Trust also provides that each Fund shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Fund and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations. The Manager believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they
have exercised reasonable care, will not be liable for any neglect or
wrongdoing, but nothing in the Declaration of Trust protects Trustees against
any liability to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of their office.
VOTING RIGHTS. The Fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each share you own. The
shares have no preemptive or conversion rights; the voting and dividend rights,
the right of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth under
the heading "Shareholder and Trustee Liability" above. Shareholders representing
10% or more of the Trust or the Fund may, as set forth in the Declaration of
Trust, call meetings of the Trust or the Fund for any purpose related to the
Trust or Fund, as the case may be, including, in the case of a meeting of the
entire Trust, the purpose of voting on removal of one or more Trustees. The
Trust or any Fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the Trust or the
Fund, as determined by the current value of each shareholder's investment in the
Fund or Trust. If not so terminated, the Trust and the Fund will continue
indefinitely.
CUSTODIAN. Star Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is
custodian of the assets of the Portfolio. The custodian is responsible for the
safekeeping of the Portfolio's assets and the appointment of subcustodian banks
and clearing agencies. The custodian takes no part in determining the investment
policies of the Portfolio or in deciding which securities are purchased or sold
by the Portfolio. The Portfolio may, however, invest in obligations of the
custodian and may purchase or sell securities from or to the custodian.
AUDITOR. KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio
43215, serves as the trust's independent accountant. KPMG examines financial
statements for the Fund and provides other audit, tax, and related services.
PRINCIPAL HOLDERS OF OUTSTANDING SHARES
As of December 31, 1995, the following persons owned 5% or more of a
class of the Fund's outstanding shares of beneficial interest:
<TABLE>
<CAPTION>
Class Name and Address Amount of Record Percent
of Shares of Beneficial Owner and Beneficially of Class
- --------- ------------------- ---------------- --------
<S> <C> <C> <C>
BTB - Class C Field Family Trust 22,549.837 44.2%
c/o U.S. Trust Co.
</TABLE>
33
<PAGE> 92
<TABLE>
<S> <C> <C> <C>
114 W. 47th Street
New York, NY 10036
BTB - Class A Lanford Charitable Unitrust 7,248.963 16.1%
1295 Shaw Avenue
Clovis, CA 93612
BTB - Class A Roxanna R. Coop Trust 4,565.868 10.2%
P. O. Box 5126
Estes Park, CO 80517
</TABLE>
The shareholders above own shares for investment purposes and have no
known intention of exercising any control of the Fund.
FINANCIAL STATEMENTS
Financial Statements for the BTB Fund, TAA Fund, the Utilities Stock
Portfolio and the Mutual Fund Portfolio are presented on the following pages.
34
<PAGE> 93
THE FLEX-PARTNERS TAA FUND
CROSS REFERENCE SHEET TO FORM N-1A
Part B.
- -------
<TABLE>
<CAPTION>
Item No. Statement of Additional Information
- -------- -----------------------------------
<S> <C>
10 Cover Page
11 Table of Contents
12 Not applicable
13 Investment Policies and Related Matters
14(a)(b) Officers and Trustees
14(c) Not applicable
15(a)(b) Not applicable
15(c) Officers and Trustees
16(a)(b) Investment Adviser and Manager
16(c) Not applicable
16(d) Contracts with Companies Affiliated with the Manager
16(e) Not applicable
16(f) The Distributor
16(g) Not applicable
16(h) Description of the Trust
16(i) Contracts with Companies Affiliated With the Manager
17 Purchase and Sale of Portfolio Securities
18(a) Cover Page
Description of the Trust
18(b) Not applicable
19(a) Additional Purchase and Redemption Information
Flex-Partners Retirement Plans
19(b) Valuation of Portfolio Securities
Additional Purchase and Redemption Information
20 Distributions and Taxes
21(a) The Distributor
21(b) Not applicable
</TABLE>
<PAGE> 94
<TABLE>
<S> <C>
21(c) Not applicable
22(a) Not applicable
22(b) Calculation of Total Return
23 Financial Statements
</TABLE>
<PAGE> 95
TAA FUND
A Fund of The Flex-Partners Trust
Statement of Additional Information Dated April __, 1996
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus of The Flex-Partners dated April __, 1996. A
copy of the Prospectus may be obtained from The Flex-Partners, 6000 Memorial
Drive, Dublin, Ohio 43017, or by calling: 1-800-494-3539. Capitalized terms used
and not otherwise defined herein have the same meanings as defined in the
Prospectus.
The Fund offers two classes of shares which may be purchased at the next
determined net asset value per share plus a sales charge which, at the election
of the investor, may be imposed (i) at the time of purchase (Class A shares) or
(ii) on a deferred basis (Class C shares). These alternatives permit an investor
to choose the method of purchasing shares that is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other circumstances.
Each share of Class A and Class C represents an identical legal interest in the
investment portfolio of the Fund and has the same rights, except that the Class
C shares bear the higher expenses of a distribution plan for such class which
will cause the Class C shares to have a higher expense ratio and to pay lower
dividends than the Class A shares. Each class will have exclusive voting rights
with respect to its distribution plan. Although the legal rights of holders of
Class A and Class C shares are identical, the different expenses borne by each
class will result in different net asset values and dividends. The two classes
also have different exchange privileges and Class C shares have a conversion
feature.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Policies and Related Matters 2
General 2
The Mutual Fund Portfolio 3
Money Market Instruments and Bonds 3
Ratings 5
Hedging Strategies 7
Investment Restrictions 9
Portfolio Turnover 10
Purchase and Sale of Portfolio Securities 11
Valuation of Portfolio Securities 12
Calculation of Total Return 12
Additional Purchase and Redemption Information 13
Distribution and Taxes 16
Investment Adviser and Manager 17
Officers and Trustees 19
The Distributor 22
Flex-Partners Retirement Plans 23
Contracts with Companies Affiliated with the Manager 24
Description of the Trust 23
Financial Statements 25
</TABLE>
Investment Adviser Transfer Agent
- ------------------ --------------
R. Meeder & Associates, Inc. Mutual Funds Service Co.
Distributor
- -----------
Roosevelt & Cross, Incorporated
<PAGE> 96
INVESTMENT POLICIES AND RELATED MATTERS
GENERAL
As described in the Prospectus, the Trust seeks to achieve the investment
objective of the Fund by investing all of its investable assets in the Mutual
Fund Portfolio (the "Portfolio"), the Fund's corresponding portfolio having the
same investment objective, policies and restrictions as the Fund. Since the
investment characteristics of the Fund correspond directly to those of its
corresponding portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio.
The investment policies set forth below in this section represent the
Portfolio's policies as of the date of this Statement of Additional Information.
The investment policies are not fundamental and they may be changed by the
Trustees of the Portfolio without shareholder approval. (No such change would be
made, however, without 30 days written notice to shareholders.)
The Manager of the Portfolio 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. (See "Money Market Instruments and Bonds" below.)
Because the Manager intends to employ flexible defensive investment
strategies when market trends are not considered favorable, the Manager may
occasionally change the entire portfolio of the Portfolio. High transaction
costs could result when compared with other funds.
The Portfolio intends to comply with the short-term trading restrictions of
Subchapter M of the Internal Revenue Code of 1986, as amended, although these
restrictions could inhibit a rapid change in the Portfolio's investments. The
Portfolio will strive for a positive investment return each calendar year.
THE MUTUAL FUND PORTFOLIO
The Manager 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 Manager 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 "Additional
Investment Policies" in the Trust's Prospectus.)
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
interests. These restrictions are applicable to the
<PAGE> 97
Portfolio and are described elsewhere in this Statement of Additional
Information. Investment restrictions for the Portfolio differ from the
restrictions applicable to the portfolios in which other Flex-Partners' funds
are invested, in that the Portfolio is permitted to invest more than 5% of its
assets in the securities of any one issuer; is permitted to purchase the shares
of other investment companies (mutual funds); and may invest more than 25% 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 Trust and the Portfolio, as defined in the Investment Company
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 Manager
may then, in some instances, select alternative investments.
The Investment Company 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 Manager
determines that it is appropriate to dispose of such securities.
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
Mutual Fund Portfolio, without its having changed its investment position.
The Portfolio may invest in common stocks based upon the criteria
described in its investment objectives. 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. Generally, investments in common stocks will not exceed 25% of
the Portfolio's net assets.
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 the Trust's
Prospectus.
MONEY MARKET INSTRUMENTS AND BONDS
When investing in money market instruments or bonds, the Portfolio will
limit its purchases, denominated in U.S. dollars, to the following securities.
3
<PAGE> 98
* U.S. Government Securities and Securities of its Agencies and
Instrumentalities - obligations issued or guaranteed as to principal
or interest by the United States or its agencies (such as the Export
Import Bank of the United States, Federal Housing Administration, and
Government National Mortgage Association) or its instrumentalities
(such as the Federal Home Loan Bank, Federal Intermediate Credit Banks
and Federal Land Bank), including Treasury bills, notes and bonds.
* Bank Obligations and Instruments Secured Thereby - obligations
(including certificates of deposit, time deposits and bankers'
acceptances) of domestic banks having total assets of $1,000,000,000
or more, instruments secured by such obligations and obligations of
foreign branches of such banks, if the domestic parent bank is
unconditionally liable to make payment on the instrument if the
foreign branch fails to make payment for any reason. The Portfolio may
also invest in obligations (including certificates of deposit and
bankers' acceptances) of domestic branches of foreign banks having
assets of $1,000,000,000 or more, if the domestic branch is subject to
the same regulation as United States banks. The Portfolio will not
invest at time of purchase more than 25% of its assets in obligations
of banks, nor will the Portfolio invest more than 10% of its assets in
time deposits.
* High Quality Commercial Paper - The Portfolio may invest in commercial
paper rated no lower than "A-2" by Standard & Poor's Corporation or
"Prime-2" by Moody's Investors Services, Inc., or, if not rated,
issued by a company having an outstanding debt issue rated at least A
by Standard & Poor's or Moody's.
* Private Placement Commercial Paper - Private placement commercial
paper ("Rule 144A securities") consists of unregistered securities
which are traded in public markets to qualified institutional
investors, such as the Portfolio. The Portfolio's risk is that the
universe of potential buyers for the securities, should the Portfolio
desire to liquidate a position, is limited to qualified dealers and
institutions, and therefore such securities could have the effect of
being illiquid.
* High Grade Corporate Obligations - obligations rated at least A by
Standard & Poor's or Moody's. See rating information below.
* Repurchase Agreements Pertaining to the Above - The Portfolio may
invest without limit in any of the above securities subject to
repurchase agreements with any Federal Reserve reporting dealer or
member bank of the Federal Reserve System. A repurchase agreement is
an instrument under which the purchaser (i.e., the Portfolio) acquires
ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding
period. This results in a fixed rate of return insulated from market
fluctuations during such period. The underlying securities could be
any of those described above, some of which might bear maturities
exceeding one year. The Portfolio's risk is that the seller may fail
to repurchase the security on the delivery date. If the seller
defaults, the underlying security constitutes collateral for the
seller's obligation to pay. It is a policy of the Portfolio to make
settlement on repurchase agreements only upon proper delivery of the
underlying collateral. Repurchase agreements usually are for
4
<PAGE> 99
short periods, such as one week or less, but could be longer. The
Portfolio may enter into repurchase agreements with its custodian (Star
Bank, N.A., Cincinnati) when it is advantageous to do so. The Portfolio
will not invest more than 10% of its assets, at the time of purchase,
in repurchase agreements which mature in excess of seven days.
The Manager exercises due care in the selection of money market instruments
and bonds. However, there is a risk that the issuers of the securities may not
be able to meet their obligations to pay interest or principal when due. There
is also a risk that some of the Portfolio's securities might have to be
liquidated prior to maturity at a price less than original amortized cost or
value, face amount or maturity value to meet larger than expected redemptions.
Any of these risks, if encountered, could cause a reduction in net income or in
the net asset value of the Portfolio.
RATINGS
1. Moody's Investors Services, Inc.'s Corporate Bond Rating:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length or time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
2. Standard and Poor's Corporation's Corporate Bond Rating:
AAA - Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they move
with interest rates, and hence provide the maximum safety on all counts.
AA - Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
5
<PAGE> 100
A - Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse effect
of changes in economic and trade conditions. Interest and principal are regarded
as safe. They predominantly reflect money rates in their market behavior but, to
some extent, also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
3. A-1 and P-1 Commercial Paper Ratings:
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A-1, A-2, or
A-3.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
4. Description of Permitted Money Market Investments:
Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short term credit needs.
U.S. Government Obligations - are bills, certificates of indebtedness,
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury, as for example, the Government National Mortgage Association; others
by the right of the issuer to borrow from the Treasury, as in the case of
Federal Farm Credit Banks and Federal National Mortgage Association; and others
only by the credit of the agency, authority or instrumentality; as for example,
Federal Home Loan Mortgage and Federal Home Loan Bank.
Repurchase Agreements - A repurchase transaction occurs when an investor
buys a security and simultaneously agrees to resell it at a later date to the
person from whom it was bought, at a higher price.
6
<PAGE> 101
The price differential represents interest for the period the security is held.
Repurchase transactions will normally be entered into with banks and securities
brokers. The Portfolio could suffer a loss if the bank or securities broker with
which the Portfolio had a repurchase agreement were to default.
Certificates of Deposit - are certificates issued against funds deposited
in a bank, are for a definite period of time, earn a specified or variable rate
of return and are normally negotiable.
Banker's Acceptances - are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
Corporate Obligations - include bonds and notes issued by corporations in
order to finance longer term credit needs.
HEDGING STRATEGIES
The Manager may conduct a hedging program on behalf of the Portfolio for
any of the reasons described in the Prospectus. Such a program would involve
entering into options or futures contracts (hedge transactions).
The objective of an option or futures contract transaction could be to
protect a profit or offset a loss in the Portfolio from future price erosion.
Or, the objective could be to acquire the right to purchase a fixed amount of
securities at a future date for a definite price. In either case, it would not
be necessary for a Portfolio to actually buy or sell the securities currently.
Instead, the hedge transaction would give the Portfolio the right at a future
date to sell, or in other instances buy, the particular securities under
consideration or similar securities. The value of shares of common stock or the
face amount of government bonds or notes covered by the hedge transaction would
be the same, or approximately the same, as the quantity held by the Portfolio or
the quantity under consideration for purchase.
In lieu of the sale of a security, an option transaction could involve the
purchase of a put option contract, which would give the Portfolio the right to
sell a common stock, government bond or futures contract on an index (see
below), at a specified price until the expiration date of the option. The
Portfolio will only purchase a put option contract on a stock or bond when the
number of shares of the issuer's stock or the face amount of government bonds
involved in the option transaction are equal to those owned by the Portfolio.
Limitations on the use of put option contracts on an index are described below.
Also, in lieu of the sale of securities, a futures transaction could
involve the sale of a futures contract which would require the Portfolio either
(a) to deliver to the other party to the contract the securities specified and
receive payment at the price contracted for, prior to the expiration date of the
contract, or (b) to make or entitle it to receive payments representing
(respectively) the loss or gain on the security or securities involved in the
futures contract.
The securities involved in an option or futures contract may be stocks or
government bonds, or a group of stocks represented by a popular stock market
index, and they need not be exactly the same as those owned by the Portfolio.
The Manager will select the futures contract which involves a security, group of
securities, or index which it feels is closest to a mirror image of the
investments held by the
7
<PAGE> 102
Portfolio. However, the securities involved in the contract need not be exactly
the same as those owned by the Portfolio, and this may entail additional risk,
as described below.
To the extent that the Portfolio enters into futures contracts which sell
an index or group of securities short and which therefore could require the
Portfolio to pay the other party to the contract a sum of money measured by any
increase in a market index, the Portfolio will be exposing itself to an
indeterminate liability. On the other hand, the Portfolio should increase or
decrease in value to approximately the same extent as the market index or group
of securities, so any loss incurred on the contract should be approximately
offset by unrealized gains in the Portfolio's positions. Such an outcome is not
guaranteed, and it would be possible for the value of the index and the
Portfolio to move in opposite directions, in which case the Portfolio would
realize an unexpected gain or loss.
The Portfolio will only sell an index short when the Manager has decided to
reduce the Portfolio's risk for defensive purposes, and will close out the open
liability as soon as the Manager decides that a defensive posture is no longer
appropriate or the open liability represents an inappropriate risk in the
circumstances. In shorting an index, the Portfolio will segregate assets to the
full value of the contract and maintain and supplement such segregation to the
extent necessary until the short position is eliminated.
In lieu of the purchase of a security, an option transaction could involve
the purchase of a call option which would give the Portfolio the right to buy a
specified security (common stock or government bonds) or index aggregate at a
specified price until the expiration date of the option contract. Sufficient
cash or money market instruments will be segregated and maintained in reserve to
complete the purchase. The Portfolio will only purchase call options when the
shares of stock or face amount of bonds or value of the index aggregate included
in the option are equal to those planned to be purchased by the Portfolio.
In lieu of the purchase of securities, a futures transaction could involve
the purchase of a futures contract which would either (a) require the Portfolio
to receive and pay for the securities specified in the futures contract at the
price contracted for prior to the expiration date of the contract or (b) require
the Portfolio to make payment or receive payment representing (respectively) the
loss or gain on the security or securities involved in the contract. The
securities may be government bonds, stocks, or a group of stocks such as a
popular stock market index, and need not be exactly the same as those intended
to be purchased by the Portfolio. The Manager will select the contract
(therefore the group of securities) which it believes is most similar to those
desired to be purchased by the Portfolio.
The Portfolio may sell any put or call option contracts it enters into.
Such a transaction would normally be used to eliminate or close out a hedged
position. The Portfolio may also buy or sell futures contracts to eliminate or
close out a hedged position.
Option contracts will be purchased through organized exchanges and will be
limited to those contracts which are cleared through the Options Clearing
Corporation. Organized exchanges which presently trade option contracts are the
Chicago Board Options Exchange, the American Stock Exchange, the Philadelphia
Stock Exchange, the Pacific Stock Exchange, and the New York Stock Exchange.
8
<PAGE> 103
Futures contracts will only be entered into through an organized exchange.
The exchanges which presently trade financial futures contracts are the New York
Futures Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade,
the Kansas City Board of Trade, and the International Monetary Market (at the
Chicago Mercantile Exchange).
Put and call options and financial futures contracts are valued on the
basis of the daily settlement price or last sale on the exchanges where they
trade. If an exchange is not open, or if there is no sale, the contract is
valued at its last bid quotation unless the Trustees determine that such is not
a fair value. In the case of a futures contract which entails a potential
liability for a gain in a market index, the liability is valued at the last sale
of an offsetting contract or if there was no sale, at the last asked quotation
unless the Trustees determine that such does not fully reflect the liability.
In conducting a hedging program for the Portfolio, the Manager may
occasionally buy a call on an index or futures contract and simultaneously sell
a put on the same index or futures contract. Or, in other circumstances, it may
sell a call and simultaneously buy a put on the same index or futures contract.
When conducting a hedging program on behalf of the Portfolio, the Portfolio
will establish and maintain with the Custodian segregated accounts for the
deposit and maintenance of margin requirements. Such deposits will be in the
form of cash or U.S. Government securities in amounts as shall be required from
time to time by the broker or the exchange on which the transactions are
effected for the Portfolio.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Trust with
respect to the Fund and by the Portfolio as fundamental policies. Under the
Investment Company Act of 1940 (the "Act"), a "fundamental" policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund or the Portfolio, respectively, to which it relates, which is defined
in the Act as the lesser of (a) 67 percent or more of the shares present at a
shareholder meeting if the holders of more than 50 percent of the outstanding
shares are present or represented by proxy, or (b) more than 50 percent of the
outstanding shares ("Majority Vote"). The percentage limitations contained in
the restrictions listed below apply at the time of the purchase of the
securities. Whenever the Fund is requested to vote on a change in the investment
restrictions of the Portfolio, the Trust will hold a meeting of the Fund
shareholders and will cast its votes as instructed by the shareholders.
Provided that nothing in the following investment restrictions shall
prevent the Trust from investing all or part of the Fund's assets in the
Portfolio, the Fund nor the Portfolio may: (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
9
<PAGE> 104
excess of 7 days do not exceed 10% of its total assets; (g) Purchase any
security if, as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or disposed of
in the ordinary course of business at approximately the prices at which they are
valued, including repurchase agreements with remaining maturities in excess of
seven days or securities without readily available market quotes; (h) Purchase
any securities on margin, or participate in any joint or joint and several
trading account, provided, however, that it may open a margin account to the
extent necessary to engage in hedging transactions which are not precluded by
other particular restrictions; (i) Make any so-called "short" sales of
securities, except against an identical portfolio position (i.e., a "short sale
against the box"), but this restriction shall not preclude a futures contract
which sells short an index or group of securities; (j) Purchase or retain any
securities of an issuer, any of whose officers, directors or security holders is
an officer or director of the Trust or 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; (k) 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; (l) Purchase participations or other direct
interests in oil, gas or other mineral exploration or development programs; and
(m) Invest in warrants.
In order to comply with certain state investment restrictions, each of the
Trust's and 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.
PORTFOLIO TURNOVER
The portfolio turnover rate for the fiscal year ended December 31, 1995 in
the Mutual Fund Portfolio was 186% (1994 - 168%). Resultant turnover rates are
primarily a function of the Manager's response to market conditions. In the
Manager's opinion, it was in the best interest of the Portfolio to change its
portfolio from a fully invested position to a partially defensive position at
various times during the year. This defensive investment strategy can produce
high portfolio turnover ratios when calculated in accordance with SEC rules.
However, viewed in terms of "round trips", the Portfolio completed one and
one-half "round trips" in the stock market during the year.
The Mutual Fund Portfolio began the year being 100% invested in money
market instruments and became fully exposed to the stock market in late January.
By mid-March the Portfolio, in response to internal weaknesses which were not
confirming the price movement in the Dow, adopted a partially defensive position
by scaling back exposure to the stock market to approximately 50%. In early May
as negative divergences no longer existed between the major stock market indexes
the Portfolio was returned to a fully defensive where it remained until the
fourth quarter. In October, certain technical and fundamental questions about
the market's continued advance began to indicate that the most prudent posture
was to again adopt a partially defensive position. The Portfolio remained
partially defensive until the first week in December when a fully invested
position was implemented and maintained through the end of the year.
The portfolio turnover rate for the Portfolio is not expected to exceed
300% in the current year.
10
<PAGE> 105
PURCHASE AND SALE OF PORTFOLIO SECURITIES
The Portfolio seeks to obtain the best available prices on, and firm
execution of, all purchases and sales of portfolio securities. In order to do
so, it may buy securities from or sell securities to broker/dealers acting as
principals and may use primary markets in the purchase or sale of
over-the-counter securities, unless best price and execution can be obtained in
some other way.
Satisfied that it is obtaining the best available price and favorable
execution, the Portfolio may, from time to time, place orders for the purchase
or sale of portfolio securities with broker/dealers who provide research,
statistical or other financial information or services ("research") to it or to
R. Meeder & Associates, Inc. ("RMA"), or to any other client for which RMA 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 RMA 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.
RMA 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 RMA, 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
RMA in providing management services to the Portfolio is not determinable. In
addition, it is understood by the Trustees that other clients of RMA might also
benefit from the information obtained for the Portfolio, in the same manner that
the Portfolio might also benefit from information obtained by RMA in performing
services to others.
RMA utilizes brokers who have demonstrated an ability to execute orders on
a favorable basis, or who are able to provide research or other services. RMA
does not knowingly authorize a higher rate of commission to one broker than to
any other. In order to assure itself that the Portfolio is paying reasonable
commissions, RMA will periodically attempt to determine the rates being paid by
other institutional investors of similar size.
Currently, RMA negotiates for commissions equal to no more than 20 basis
points (1/5 of 1%) and is generally able to hold commissions at or below that
level. Debt securities are purchased on a net basis.
RMA and the Trust have previously purchased various research and other
services with brokerage commissions paid to or for the benefit of certain
entities.
It is the opinion of the Trust, the Portfolio and RMA that the receipt of
research from brokers will not materially reduce RMA's own research activities
or the overall cost of fulfilling its contracts with the Trust or the Portfolio.
Neither the Trust nor the Portfolio has any broker/dealer affiliate.
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<PAGE> 106
The Portfolio paid no commissions in 1995, 1994 or 1993 on the purchase and
sale of common stock securities. Brokerage commissions paid on the purchase and
sale of futures contracts amounted to $30,008 for the year ended December 31,
1995.
VALUATION OF PORTFOLIO SECURITIES
Securities owned by a 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 is no sale. Money market instruments (certificates
of deposit, commercial paper, etc.) in the Portfolios, 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 Manager in good faith at its own expense under
the direction of the Trustees.
Other assets, which include cash, prepaid and accrued items and amounts
receivable as income on investments and from the sale of portfolio securities,
are carried at book value, as are all liabilities. Liabilities include accrued
expenses, sums owed for securities purchased, and dividends payable.
CALCULATION OF TOTAL RETURN
From time to time, the Fund may advertise its average annual total returns
for various periods of time. When applicable, depending on the Fund, the periods
of time shown will be for a one-year period; a five-year period (or relevant
portion thereof) and since inception. Period and average annualized total return
are calculated separately for Class A and Class C shares. The calculation
assumes the reinvestment of all dividends and distributions. Examples of the
total return calculation for the Fund will assume a hypothetical investment of
$1,000 at the beginning of each period.
It is computed by finding the average annual compounded rates of return
over the length of the base periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P (1+T)(to the nth power) = ERV
P = initial investment of $1,000
T = average annual total return
n = Number of years
ERV = ending redeemable value at the
end of the base period
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<PAGE> 107
THE TAA FUND (Class C Shares):
<TABLE>
<CAPTION>
Total Return
--------------------------------------------------------------
Since Inception
1 Year 5 Years (June 1, 1995)
Period Ended Period Ended Period Ended
December 31, 1995 December 31, 1995 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Value of Account
At end of Period $ 0 $ 0 $1,145.70
Value of Account
At beginning of Period 1,000.00 1,000.00 1,000.00
Base Period Return $ 0 $ 0 $ 145.70
Total Return 0 0 14.57%
</TABLE>
Total return quotations, when advertised for The TAA Fund (Class A Shares),
are calculated in the same manner as described above.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Fund is open for business and its net asset value per share (NAV) is
calculated each day the NYSE is open for trading. The NYSE has designated the
following holiday closings: New Year's Day, Washington's Birthday (observed),
Good Friday, Memorial Day (observed), Independence Day (observed), Labor Day,
Thanksgiving Day, and Christmas Day (observed). The NYSE may modify its holiday
schedule at any time.
The Fund's net asset value is determined as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the SEC. To the extent that
portfolio securities are traded in other markets on days when the NYSE is
closed, the Fund's NAV may be affected on days when investors do not have access
to the Fund to purchase or redeem shares.
Shareholders of the Fund will be able to exchange their Class A shares for
Class A shares of any mutual fund that is a series of The Flex-Partners (each a
"Flex-Partners Fund"), and shares of The Flex-funds Money Market Fund. No fee or
sales load will be imposed upon the exchange. Shareholders of The Flex-funds
Money Market Fund who acquired such shares upon exchange of Class A shares of
the Fund may use the exchange privilege only to acquire Class A shares of a
Flex-Partners Fund.
Shareholders of the Fund may exchange their Class C shares for Class C
shares of other Flex-Partners Funds. If Class C shares of the Fund are exchanged
for Class C shares of other Flex-Partners Funds, no contingent deferred sales
charge will be payable upon such exchange of Class C shares, but a contingent
deferred sales charge will be payable upon the redemption of Class C shares
acquired as a result of the exchange. The applicable sales charge will be that
imposed by the Fund in which shares were initially purchased and the purchase
date will be deemed to be the date of the initial purchase, rather than the date
of the exchange.
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<PAGE> 108
At any time after acquiring shares of other funds participating in the
Class C exchange privilege, the shareholder may again exchange those shares (and
any reinvested dividends and distributions) for Class C shares of the Fund
without subjecting such shares to any contingent deferred sales charge. Shares
of any fund participating in the Class C exchange privilege that were acquired
through reinvestment of dividends or distributions may be exchanged for Class C
shares of other funds without being subject to any contingent deferred sales
charge.
Additional details about the exchange privilege and prospectuses for each
of the Flex-Partners Funds and The Flex-funds Money Market Fund are available
from the Fund's Transfer Agent. The exchange privilege may be modified,
terminated or suspended on 60 days' notice, and any fund, including the Fund, or
the Distributor, has the right to reject any exchange application relating to
such fund's shares. The 60 day notification requirement may be waived if (i) the
only effect of a modification would be to reduce or eliminate an administrative
fee, redemption fee, or deferred sales charge ordinarily payable at the time of
an exchange, or (ii) the Fund suspends the redemption of the shares to be
exchanged as permitted under the 1940 Act or the rules and regulations
thereunder, or the fund to be acquired suspends the sale of its shares because
it is unable to invest amounts effectively in accordance with its investment
objective and policies.
In the Prospectus, the Fund has notified shareholders that it reserves the
right at any time, without prior notice, to refuse exchange purchases by any
person or group if, in the Manager's judgment, the Fund would be unable to
invest effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.
All redemptions in kind shall be of readily marketable securities.
COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other series of the Trust, the purchases may
be combined to take advantage of the reduced sales charges applicable to larger
purchases. See the table of breakpoints under "How to Buy Shares - Cumulative
Quantity Discount" in the Prospectus.
An eligible group of related Fund investors includes any combination of the
following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
(c) the individual's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or
group that holds 25% or more of the outstanding voting securities of a
corporation will be deemed to control the corporation, and a partnership will be
deemed to be controlled by each of its general partners);
(e) a trust created by the individual, the beneficiaries of which
are the individual, his or her spouse, parents or children;
14
<PAGE> 109
(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act
account created by the individual or the individual's spouse; and
(g) one or more employee benefit plans of a company controlled by
an individual.
The Combined Purchase and Cumulative Purchase Privilege does not apply to
individual participants in retirement and group plans described below under
"Flex-Partners Retirement Plans."
RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
Privilege," may aggregate the value of their existing holdings of the Class A
shares of the Fund and Class A shares of other Flex-Partners Funds to determine
the reduced sales charge. The value of existing holdings for purposes of
determining the reduced sales charge is calculated using the maximum offering
price (net asset value plus maximum sales charge) as of the previous business
day. See "How Net Asset Value is Determined" in the Prospectus. The Transfer
Agent must be notified at the time of purchase that the investor is entitled to
a reduced sales charge. The reduced sales charges will be granted subject to
confirmation of the investor's holdings. Rights of accumulation are not
available to individual participants in the retirement and group plans described
below under "Flex-Partners Retirement Plans."
LETTERS OF INTENT. Reduced sales charges are also available to investors
(or an eligible group of related investors) who enter into a written Letter of
Intent providing for the purchase, within a thirteen-month period, of Class A
shares of the Fund and Class A shares of other Flex-Partners Funds. All Class A
shares of the Fund and Class A shares of other Flex-Partners Funds which were
previously purchased and are still owned are also included in determining the
applicable reduction. The Transfer Agent must be notified at the time of
purchase that the investor is entitled to a reduced sales charge. The reduced
sales charges will be granted subject to confirmation of the investor's
holdings. Letters of Intent are not available to individual participants in
retirement and group plans described below under "Flex-Partners Retirement
Plans."
A Letter of Intent permits a purchase to establish a total investment goal
to be achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Shares totaling 5% of the dollar amount of the Letter of Intent will
be held by the Transfer Agent in escrow in the name of the purchaser. The
effective date of a Letter of Intent may be back-dated up to 90 days, in order
that any investments made during this 90-day period, valued at the purchaser's
cost, can be applied to the fulfillment of the Letter of Intent goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the purchaser is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Transfer Agent or, if not paid, the Transfer Agent will
liquidate sufficient escrowed shares to obtain such difference. If the goal is
exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made by refunding to the purchaser the amount of excess sales
charge, if any, paid during the thirteen-month period. Investors electing to
purchase Class A shares of the Fund pursuant to a Letter of Intent should
carefully read such Letter of Intent.
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<PAGE> 110
AUTOMATIC ACCOUNT BUILDER. An investor may arrange to have a fixed amount
of $100 or more automatically invested in shares of the Fund monthly by
authorizing his or her bank account to be debited to invest specified dollar
amounts in shares of the Fund. The investor's bank must be a member of the
Automatic Clearing House System.
Further information about these programs and an application form can be
obtained from the Distributor.
SYSTEMATIC WITHDRAWAL PROGRAM. A systematic withdrawal plan is available
for shareholders having Class A and Class C shares of the Fund with a minimum
value of $10,000, based upon the offering price. The plan provides for monthly,
quarterly or annual checks in any amount, but not less than $100 (which amount
is not necessarily recommended). Except as otherwise provided in the Prospectus,
to the extent such withdrawals exceed the current net asset value of reinvested
dividends, they may be subject to the contingent deferred sales charge. See "How
to Buy Shares - Class C Shares" and "Other Shareholder Services" in the
Prospectus.
Dividends and/or distributions on shares held under this plan are invested
in additional full and fractional shares at net asset value. The Transfer Agent
acts as agent for the shareholder in redeeming sufficient full and fractional
shares to provide the amount of the periodic withdrawal payment. The plan may
be terminated at any time.
Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the applicable sales charges to (i) the purchase of Class
A shares and (ii) the withdrawal of Class C shares. Each shareholder should
consult his or her own tax adviser with regard to the tax consequences of the
plan, particularly if used in connection with a retirement plan.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, the Manager may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested until you
provide the Manager with alternate instructions.
DIVIDENDS. A portion of the Fund's dividends derived from certain U.S.
government obligations may be exempt from state and local taxation. The Fund
will send each shareholder a notice in January describing the tax status of
dividends and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by the Fund on
the sale of securities by the Portfolio and distributed to shareholders of the
Fund are federally taxable as long-term capital gains regardless of the length
of time shareholders have held their shares. If a shareholder receives a
16
<PAGE> 111
long-term capital gain distribution on shares of the Fund and such shares are
held six months or less and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to
shareholders as dividends, not as capital gains. Distributions from short-term
capital gains do not qualify for the dividends-received deduction.
TAX STATUS OF THE FUND. The Fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be liable
for federal tax on income and capital gains distributed to shareholders. In
order to qualify as a regulated investment company and avoid being subject to
federal income or excise taxes at the Fund level, the Fund intends to distribute
substantially all of its net investment income (consisting of the income it
earns from its investment in the Portfolio, less expenses) and net realized
capital gains within each calendar year as well as on a fiscal year basis. The
Fund intends to comply with other tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities held less than three months constitute less than 30% of the Fund's
gross income for each fiscal year. Gains from futures contracts and options are
included in this 30% calculation, which may limit the Fund's investments in such
instruments.
The Fund is treated as a separate entity from the other funds of The
Flex-Partners Trust for tax purposes.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting the Fund and its shareholders, and no
attempt has been made to discuss individual tax consequences. In addition to
federal income taxes, shareholders may be subject to state and local taxes on
Fund distributions. Investors should consult their tax advisers to determine
whether the Fund is suitable to their particular tax situation.
INVESTMENT ADVISER AND MANAGER
R. Meeder & Associates, Inc. (the "Manager") is the investment adviser and
manager for, and has an Investment Advisory Contract with, the Portfolio.
Pursuant to the Investment Advisory Contract with the Portfolio, the
Manager, subject to the supervision of the Portfolio's Board of Trustees and in
conformity with the stated objective and policies of the Fund, manages both the
investment operations of the Fund and the composition of the Portfolio's
portfolio, including the purchase, retention, disposition and loan of
securities. In connection therewith, the Manager is obligated to keep certain
books and records of the Portfolio. The Manager also administers the Fund's
corporate affairs, and in connection therewith, furnishes the Fund with office
facilities, together with those ordinary clerical and bookkeeping services which
are not being furnished by Star Bank, N.A., the Portfolio's custodian and Mutual
Funds Service Co., the Fund's transfer and disbursing agent. The management
services of the Manager are not exclusive under the terms of the Investment
Advisory Agreement and the Manager is free to, and does, render management
services to others.
The Investment Advisory Contract for the Portfolio was separately approved
by a vote of a majority of the Trustees, including a majority of those Trustees
who are not "interested persons" (as
17
<PAGE> 112
defined in the Investment Company Act of 1940) of the Portfolio. The Investment
Advisory Contract is to remain in force so long as renewal thereof is
specifically approved at least annually by a majority of the Trustees or by vote
of a majority of the interests in the Portfolio, and in either case by vote of a
majority of the Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) at a meeting called for the purpose of voting on
such renewal.
The Investment Advisory Contract provides that the Manager will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Portfolio in connection with the matters to which the Investment Advisory
Contract relates except for a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Investment Advisory
Contract will terminate automatically if assigned and may be terminated without
penalty at any time upon 60 days' prior written notice by Majority Vote of the
Portfolio, by the Trustees of the Portfolio, or by the Manager.
Costs, expenses and liabilities of the Trust attributable to a particular
fund are allocated to that fund. Costs, expenses and liabilities which are not
readily attributable to a particular fund are allocated among all of the Trust's
funds. Thus, each fund pays its proportionate share of: the fees of the Trust's
independent auditors, legal counsel, custodian, transfer agent and accountants;
insurance premiums; the fees and expenses of Trustees who do not receive
compensation from R. Meeder & Associates; association dues; the cost of printing
and mailing confirmations, prospectuses, proxies, proxy statements, notices and
reports to existing shareholders; state registration fees; distribution expenses
within the percentage limitations of each Class of Shares' distribution and
service plan, including the cost of printing and mailing of prospectuses and
other materials incident to soliciting new accounts; and other miscellaneous
expenses.
The expenses of the Portfolio include the compensation of the Trustees who
are not affiliated with the Manager; registration fees; membership dues
allocable to the Portfolio; fees and expenses of independent accountants, of
legal counsel and of any transfer agent or accountant of the Portfolio;
insurance premiums and other miscellaneous expenses.
Expenses of the Portfolio also include all fees under its Accounting and
Administrative Service Agreement; 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 offices and
commissions; expenses of meetings of investors and Trustees; the advisory fees
payable to the Manager under the Investment Advisory Contract and other
miscellaneous expenses.
The Board of Trustees of the Trust believe that the aggregate per share
expenses of the Fund and the Portfolio will be less than or approximately equal
to the expenses which the Fund would incur if it retained the services of an
investment adviser and the assets of the Fund were invested directly in the type
of securities being held by the Portfolio.
The Manager earns an annual fee, payable in monthly installments as
follows. The fee for the Portfolio is based upon the average net assets of the
Portfolio and is 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 average net assets.
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<PAGE> 113
For the year ended December 31, 1995, the Mutual Fund Portfolio paid fees
to the Manager totaling $874,473 ($743,058 in 1994).
The Manager presently intends to reimburse the Fund through an expense
reimbursement fee to the extent necessary to keep total expenses at 1.75% of
average daily net assets for Class A Shares and 2.00% of average daily net
assets for Class C shares. The Manager may change this policy at any time
without notice to shareholders.
R. Meeder & Associates, Inc. was incorporated in Ohio on February 1, 1974
and maintains its principal offices at 6000 Memorial Drive, Dublin, Ohio 43017.
The Manager is a wholly-owned subsidiary of Muirfield Investors, Inc. ("MII"),
which is controlled by Robert S. Meeder, Sr. through the ownership of voting
common stock. The Manager's officers and directors, and the principal offices
are as set forth as follows: Robert S. Meeder, Sr., Chairman and Sole Director;
Robert S. Meeder, Jr., President; G. Robert Kincheloe, Senior Vice President;
Philip A. Voelker, Senior Vice President; Donald F. Meeder, Vice President and
Secretary; Sherrie L. Acock, Vice President; Robert D. Baker, Vice President;
Wesley F. Hoag, General Counsel and Chief Operating Officer; and Steven T.
McCabe, Vice President. Mr. Robert S. Meeder, Sr. is President and a Trustee of
the Trust and the Portfolio. Each of Mr. Robert S. Meeder, Jr., Donald F.
Meeder, Wesley F. Hoag and Steven T. McCabe is an officer of the Trust and the
Portfolio. Mr. Philip A. Voelker is a Trustee and officer of the Portfolio and
an officer of the Trust.
OFFICERS AND TRUSTEES
The Trustees and executive officers of the Trust are listed below. Except
as indicated, each individual has held the office shown or other offices in the
same company for the last five years. Except as otherwise shown, all persons
named as Trustees also serve in similar capacities for other funds advised by
the Manager. Unless otherwise noted, the business address of each Trustee and
officer is 6000 Memorial Drive, Dublin, Ohio 43017, which is also the address of
the Manager. Those Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) by virtue of their affiliation with either the
Portfolio, the Trust or the Manager are indicated by an asterisk (*).
The Trust and the Portfolio are managed by its Trustees and officers. Their
names, positions and principal occupations during the past five years are listed
below:
<TABLE>
<CAPTION>
Position Principal
Name & Address Held Occupation
- -------------- ---- ----------
<S> <C> <C>
ROBERT S. MEEDER, SR. *+ Trustee/ Chairman, R. Meeder &
President (1)(2) & Associates, Inc. an
Investment Adviser
MILTON S. BARTHOLOMEW Trustee (2) Retired, formerly a practicing
1424 Clubview Boulevard, S. attorney in Columbus, Ohio
Worthington, OH 43235 Member of the Portfolio's Audit
Committee.
</TABLE>
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<PAGE> 114
<TABLE>
<S> <C> <C>
JOHN M. EMERY Trustee (1) Retired, formerly Vice President
2390 McCoy Road & Treasurer of Columbus &
Columbus, OH 43220 Southern Ohio Electric Co.
Member of the Trust's Audit
Committee.
RICHARD A. FARR Trustee (1) President of R&R Supply Co.
3250 W. Henderson Rd. and General Manager of RAFCo.,
Columbus, OH 43220 Inc., two companies involved in
engineering, consulting & sales
of heating & air conditioning
equipment.
RUSSELL G. MEANS Trustee (2) Chairman of Employee Benefit
4789 Rings Road Management Corporation,
Dublin, OH 43017 consultants and administrators
of self-funded health and
retirement plans.
ROBERT S. MEEDER, JR.*+ Vice President (1)(2) President of R. Meeder &
Associates, Inc.
WALTER L. OGLE Trustee (2) Executive Vice President of
One Corporate Drive Godwins, Booke & Dickenson,
Suite 600 Inc. employee benefit, compensation
Clearwater, Fl 43622 and human resource consultants.
PHILIP A. VOELKER*+ Trustee (2)/ Senior Vice President of R. Meeder
Vice President (1)(2) & Associates, Inc.
JAMES B CRAVER* Assistant Managing Director, Eagle
266 Summer Street Secretary (1)(2) Institutional Financial Services, Inc.,
Boston, MA 02210 (since September 1995); Senior Vice
President of Signature Financial
Group, Inc. (January 1991 to
August 1995)
STEVEN T. MCCABE*+ Assistant Vice President, R. Meeder &
Treasurer (1)(2) Associates, Inc., and Vice President,
Mutual Funds Service Co.
DONALD F. MEEDER*+ Secretary/ Vice President of R. Meeder &
Treasurer(1)(2) Associates, Inc., and President of
Mutual Funds Service Co.
</TABLE>
20
<PAGE> 115
<TABLE>
<S> <C> <C>
WESLEY F. HOAG*+ Vice President (1)(2) General Counsel and Chief
Operating Officer of R. Meeder &
Associates, Inc. (since July 1993);
Attorney, Porter, Wright, Morris &
Arthur, a law firm (October 1984 to
June 1993)
WILLIAM L. GURNER Trustee (1) President, Sector Capital
Sector Capital Management Management, an Investment Advisor
One Commerce Square, Suite 1900 (since January 1995); Manager of
Trust Investments of Federal
Express Corporation (1987-1994)
Memphis, TN 38103
LOWELL G. MILLER* Trustee (1) President, Miller/Howard Miller/Howard
Investments, Inc. Investments, Inc., an Investment
141 Upper Byrdcliffe Adviser
Woodstock, NY 12498
ROGER D. BLACKWELL Trustee (1) Professor of Marketing and
Blackwell Associates, Inc. Consumer Behavior, The Ohio State
3380 Tremont Road University, and President of
Columbus, OH 43221 Blackwell Associates, Inc., a
strategic consulting firm
</TABLE>
(1) Trustee and/or officer of The Flex-Partners
(2) Trustee and/or officer of the Portfolio
*"Interested Person" of the Trust (as defined in the Investment Company Act of
1940) and Portfolio.
+P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017.
Robert S. Meeder, Sr. is Robert S. Meeder, Jr.'s father and Donald F.
Meeder's uncle.
Several Trustees and each officer of the Trust hold the same positions with
The Flex- funds, a Massachusetts business trust consisting of six separate
series. Each Trustee and officer of the Portfolio hold the same positions with
each corresponding Portfolio of The Flex-funds. The Manager serves as the
investment adviser to each portfolio of The Flex- funds.
The Trust pays each Trustee who is not an "interested person" an annual fee
of $3,000, plus $750 for each meeting of the Board of Trustees attended
regardless of the number of Boards of Trustees on which each Trustee serves. Mr.
Emery comprises the Audit Committee for each of The Flex-funds and The
Flex-Partners Trusts. Mr. Emery is paid $400 for each meeting of the Audit
Committees attended regardless of the number of Audit Committees on which he
serves. Trustees fees for The TAA Fund totaled $2,917 for the year ended
December 31, 1995. Audit Committee fees for the Fund totaled $45 for the year
ended December 31, 1995.
21
<PAGE> 116
Each Trustee who is not an "interested person" with each corresponding
Portfolio of The Flex-funds and Flex-Partners is paid an annual fee of $3,000,
plus $750 for each meeting of the Board of Trustees attended regardless of the
number of Boards of Trustees each Trustee serves. Mr. Bartholomew comprises the
Audit Committee for each corresponding Portfolio of The Flex-funds and the
Flex-Partners Trusts. Mr. Bartholomew is paid $400 for each meeting of the Audit
Committees attended regardless of the number of Audit Committees on which he
serves. Trustee fees for the Mutual Fund Portfolio totaled $3,925 for the year
ended December 31, 1995 ($3,750 in 1994). Audit Committee fees for the Mutual
Fund Portfolio totaled $146 for the year ended December 31, 1995 ($160 in 1994).
All other officers and Trustees serve without compensation from any Portfolio.
All other officers and Trustees serve without compensation from the Trust.
The Trustees and officers of the Fund and the Portfolio own, in the
aggregate, less than 1% of the Fund's total outstanding shares.
THE DISTRIBUTOR
Roosevelt & Cross, Incorporated (the "Distributor"), 20 Exchange Place, New
York, New York 10005, acts as the distributor of the Class A shares and the
Class C shares of the Fund.
Pursuant to separate plans of distribution (the Class A Plan and the Class
C Plan, collectively, the Plans) adopted by the Fund under Rule 12b-1 under the
1940 Act and an underwriting agreement (the Underwriting Agreement), the
Distributor incurs the expenses of distributing the Fund's Class A shares and
Class C shares. See "Distribution Plans" in the Prospectus.
On August 4, 1994, the Board of Trustees, including a majority of the
Trustees who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Class A or Class C Plan or
in any agreement related to the Plan (the Rule 12b-1 Trustees), at a meeting
called for the purpose of voting on the Class A Plan, adopted a plan of
distribution for the Class A shares of the Fund. On August 4, 1994, the Board of
Trustees, including the Rule 12b-1 Trustees, at a meeting called for the purpose
of voting on the Class C Plan, adopted a plan of distribution for the Class C
shares of the Fund. The Class A Plan was approved by Class A shareholders of the
Fund. The Class C Plan was approved by Class C shareholders of the Fund.
The Distributor also receives the proceeds of contingent deferred sales
charges paid by investors upon certain redemptions of Class C shares. See "How
to Buy Shares" in the Prospectus.
The Plans continue in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Trustees,
including a majority vote of the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on such continuance. The Plans may be
terminated at any time, without penalty, by the vote of a majority of the
Trustees who are not interested persons or by the vote of the holders of a
majority of the outstanding shares of the Fund. Neither Plan may be amended to
increase materially the amounts to be spent for the services described therein
without approval by the shareholders of Class A and Class C, as applicable, and
all material amendments are required to be approved by the Board of Trustees in
the manner described above. The Fund will not be contractually obligated to pay
expenses incurred under either the Class A or Class C Plan if it is terminated
or not continued.
22
<PAGE> 117
Pursuant to each Plan, the Board of Trustees will review at least quarterly
a written report of the distribution expenses incurred on behalf of the Class A
and Class C shares of the Fund by the Distributor. The report includes an
itemization of the distribution expenses and the purposes of such expenditures.
In addition, as long as the Plans remain in effect, the selection and nomination
of Trustees who are not interested persons of the Fund shall be committed to the
Trustees who are not interested persons of the Fund.
Pursuant to the Underwriting Agreement, the Fund has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the Securities Act and the Investment Company Act of 1940. The
Underwriting Agreement was approved by the Board of Trustees, including a
majority of the Rule 12b-1 Trustees, on May 1, 1995. Total payments made by the
Fund to the Distributor for the year ended December 31, 1995 amounted to
$33,524. The payments made were used to offset a portion of initial commissions
paid to securities dealers for the sale of Fund shares.
FLEX-PARTNERS RETIREMENT PLANS
The Trust offers retirement plans which are described in the Prospectus.
Minimum purchase requirements for retirement plan accounts are subject to the
same requirements as regular accounts, except for an IRA, which has a $500
minimum purchase requirement. Information concerning contribution limitations
for IRA accounts are described below.
Individual Retirement Accounts (IRA):
Limitation on Deductible Contributions - Under prior law an individual with
earned income, not yet 70 1/2 years of age, was allowed a deductible IRA
contribution, limited to the lesser of earned income or $2,000. Effective for
years beginning after December 31, 1986, applicable law limits the deductibility
of IRA contributions where the taxpayer is a participant in an
employer-sponsored retirement plan and had adjusted gross income (AGI) in excess
of $40,000 (joint) and $25,000 (single). For every dollar that AGI exceeds these
limits, the maximum deduction is reduced by twenty cents. Thus, a joint filer
with AGI greater than $50,000 who is covered by an employer sponsored plan will
not be able to make a deductible IRA contribution. The deductible limits for
individuals not covered by an employer-sponsored plan were not changed.
Nondeductible Contributions- Individuals who may not make a deductible
contribution due to the limits noted above, may continue to make nondeductible
contributions subject to the prior $2,000 limitation. The earnings on such
contributions will still accumulate on a tax deferred basis. Individuals will be
required to report such contributions on their tax returns.
Rollover Contributions-Individuals who receive certain lump-sum
distributions from employer-sponsored retirement plans may make roll-over
contributions to an IRA and by doing so defer taxes on the distribution and
shelter any investment earnings.
A Spousal IRA is also available.
23
<PAGE> 118
CONTRACTS WITH COMPANIES AFFILIATED WITH THE MANAGER
Mutual Funds Service Co. provides accounting, stock transfer and dividend
disbursing services to the Fund and the Portfolio. The minimum annual fee for
accounting services for the Portfolio is $7,500. Subject to the applicable
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. Subject to a $4,000 annual minimum fee, each class of shares
of the Fund will incur an annual fee, payable monthly, which will be the greater
of $15 per shareholder account or 0.10% of the Fund's average net assets, for
stock transfer and dividend disbursing services. These fees are reviewable
annually by the respective Trustees of the Trust and the Portfolio.
Mutual Funds Service Co. also serves as Administrator to the Fund pursuant
to an Administration Services Agreement which was effective February 1, 1995.
Services provided to the Fund include coordinating and monitoring any third
party services to the Fund; providing the necessary personnel to perform
administrative functions for the Fund; assisting in the preparation, filing and
distribution of proxy materials, periodic reports to Trustees and shareholders,
registration statements and other necessary documents. The Fund incurs an annual
fee, payable monthly, of 0.03% of the Fund's average net assets. For the year
ended December 31, 1995, total payments to Mutual Funds Service Co. by the Fund
and the Portfolio amounted to $51,137.
The general counsel for the Manager was primarily responsible for preparing
and filing with the Securities and Exchange Commission a post-effective
amendment to the registration statement for the Trust to add the Fund as an
additional series of the Trust. A charge in the amount of $12,000 for such legal
services rendered by the Manager on behalf of the Fund will be paid and
amortized by the Fund as an organization expense over a period not exceeding 60
months.
DESCRIPTION OF THE TRUST
Trust Organization. The assets of the Trust received for the issue or sale
of the shares of the Fund and all income, earnings, profits, and proceeds
thereof, subject only to the rights of creditors, are especially allocated to
the Fund and constitute the underlying assets of the Fund. The underlying assets
of the Fund are segregated on the books of account, and are to be charged with
the liabilities with respect to the Fund and with a share of the general
expenses of the Trust. Expenses with respect to the Trust are to be allocated in
proportion to the asset value of the respective funds except where allocations
of direct expense can otherwise be fairly made. The officers of the Trust,
subject to the general supervision of the Board of Trustees, have the power to
determine which expenses are allocable to a given fund, or which are general or
allocable to all of the funds. In the event of the dissolution or liquidation of
the Trust, shareholders of each fund are entitled to receive as a class the
underlying assets of such fund available for distribution.
Shareholder and Trustee Liability. The Trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of Trust
provides that the Trust shall not have any claim against shareholders except for
the payment of the purchase price of shares and requires that each agreement,
obligation, or instrument entered into or
24
<PAGE> 119
executed by the Trust or the Trustees include a provision limiting the
obligations created thereby to the Trust and its assets.
The Declaration of Trust provides for indemnification out of each fund's
property of any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides that each Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Fund and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations. The Manager believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or wrongdoing, but
nothing in the Declaration of Trust protects Trustees against any liability to
which they would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
Voting Rights. The Fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each share you own. The
shares have no preemptive or conversion rights; the voting and dividend rights,
the right of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth under
the heading "Shareholder and Trustee Liability" above. Shareholders representing
10% or more of the Trust or the Fund may, as set forth in the Declaration of
Trust, call meetings of the Trust or the Fund for any purpose related to the
Trust or Fund, as the case may be, including, in the case of a meeting of the
entire Trust, the purpose of voting on removal of one or more Trustees. The
Trust or any Fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and distribution of
its assets, if approved by vote of the holders of a majority of the Trust or the
Fund, as determined by the current value of each shareholder's investment in the
Fund or Trust. If not so terminated, the Trust and the Fund will continue
indefinitely.
Custodian. Star Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is
custodian of the assets of the Portfolio. The custodian is responsible for the
safekeeping of the Portfolio's assets and the appointment of subcustodian banks
and clearing agencies. The custodian takes no part in determining the investment
policies of the Portfolio or in deciding which securities are purchased or sold
by the Portfolio. The Portfolio may, however, invest in obligations of the
custodian and may purchase or sell securities from or to the custodian.
Auditor. KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio 43215,
serves as the Trust's independent accountant. The auditor examines financial
statements for the Fund and provides other audit, tax, and related services.
FINANCIAL STATEMENTS
Financial statements for the TAA Fund, BTB Fund, Mutual Fund Portfolio and
Utilities Stock Portfolio are presented on the following pages.
25
<PAGE> 120
<TABLE>
<CAPTION>
FLEX-PARTNERS 1995 Annual Report
MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
SHARES OR VALUE
FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Acorn International Fund 60 $1,000
Charles Schwab Money Market Fund 8,376,894 8,376,894
Constellation Fund 83 1,879
Fidelity Core Money Market Fund 5,549,983 5,549,983
Fidelity Equity Portfolio Growth Fund 333,197 12,628,156
Fidelity Growth & Income Fund 267,791 7,243,753
Founders Growth Fund 897,745 13,259,700
Neuberger & Berman Focus Fund 387,385 10,819,650
Neuberger & Berman Guardian Fund 457,705 10,540,947
Neuberger & Berman Manhattan Fund 173,284 2,103,666
PBNG Growth Fund 50,605 1,210,472
Pin Oak Aggressive Stock Fund (1) 23,041 384,793
T.Rowe Price New Era Fund 122 2,771
T.Rowe Price New Horizons Fund 724,089 14,843,822
Twentieth Century Ultra Fund 52,948 1,382,468
Twentieth Century Vista Fund 114,172 1,666,912
Weingarten Equity Fund 477,272 8,462,030
White Oak Growth Stock Fund 14,307 256,096
- --------------------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $93,054,647) 98,734,992
- --------------------------------------------------------------------------------------------
U.S.TREASURY BILLS - 1.2%
*U.S..Treasury Bill, 5.29%, due 1/04/96 $150,000 149,912
*U.S. Treasury Bill, 5.22%, due 1/04/96 250,000 249,891
*U.S. Treasury Bill, 5.26%, due 1/04/96 1,000,000 999,486
U.S. Treasury Bill, 6.66%, due 1/11/96 25,200 25,149
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $1,424,438) 1,424,438
- --------------------------------------------------------------------------------------------
*Pledged $1,400,000 face amount as collateral on futures contracts
REPURCHASE AGREEMENTS - 17.2%
(Collateralized by U.S. government obligations -
market value $21,328,465)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 2,550,000 2,550,000
Smith Barney, dated 12/28/95, 5.90%, due 1/02/96 18,250,000 18,250,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $20,800,000) 20,800,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $115,279,085) $120,959,430
============================================================================================
FUTURES CONTRACTS
CONTRACTS
- --------------------------------------------------------------------------------------------
Long, S&P 500 futures contracts
face amount $32,468,625 expiring in March, 1996. 105 36,750
Long, Midcap futures contracts
face amount $1,962,450 expiring in March, 1996. 18 9,000
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS 45,750
- --------------------------------------------------------------------------------------------
</TABLE>
(1) No dividend paid on security in 1995.
See accompanying notes to financial statements
Flex-Partners 1995 Annual Report 1
<PAGE> 121
<TABLE>
<CAPTION>
FLEX-PARTNERS 1995 Annual Report
UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.6%
ELECTRIC/GAS UTILITY - (6.9%)
MDU Resources Group Incorporated 2,100 $41,738
Montana Power Company 1,300 29,412
Nipsco Industries Incorporated 1,700 65,025
Utilicorp United Incorporated 5,500 161,563
- --------------------------------------------------------------------------------------------
297,738
- --------------------------------------------------------------------------------------------
ELECTRIC UTILITY - (15.0%)
AES Corporation(1) 2,600 62,075
Cinergy Corporation 3,900 119,437
Ipalco Enterprises Incorporated 2,000 76,250
KU Energy Corporation 1,300 39,000
LG&E Energy Corporation 2,300 97,175
Pacificorp 8,000 170,000
Teco Energy Incorporated 3,000 76,875
- --------------------------------------------------------------------------------------------
640,812
- --------------------------------------------------------------------------------------------
DIVERSIFIED UTILITY - (3.8%)
Citizens Utilities Company Class B 12,686 160,158
- --------------------------------------------------------------------------------------------
NATURAL GAS (DISTRIBUTOR) - (19.8%)
Bay State Gas Company 1,700 47,175
Brooklyn UN Gas Company 3,900 114,075
Consolidated Natural Gas Company 2,900 131,587
MCN Corporation 6,200 144,150
Nicor Incorporated 1,800 49,500
Panhandle Eastern Corporation 5,500 153,313
Transcanada Pipelines Ltd. 3,200 44,000
UGI Corporation 2,000 41,500
Wicor Incorporated 3,800 122,550
- --------------------------------------------------------------------------------------------
847,850
- --------------------------------------------------------------------------------------------
OIL/GAS (DOMESTIC) - (7.3%)
Enron Corporation 3,000 114,375
Sante Fe Pacific Pipeline Partners 1,600 58,600
Williams Companies Incorporated 3,200 140,400
- --------------------------------------------------------------------------------------------
313,375
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT - (1.7%)
DSC Communications(1) 2,000 73,750
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (33.4%)
Alltel Corporation 5,100 150,450
American Telephone & Telegraph Corporation 1,500 97,125
Ameritech Corporation 2,500 147,500
Bell Atlantic Corporation 1,400 93,625
Century Telephone Enterprise 5,500 174,625
Cincinnati Bell Incorporated 2,000 69,500
Frontier Corporation 6,500 195,000
GTE Corporation 3,200 140,800
Nynex Corporation 300 16,200
Sprint Corporation 2,400 95,700
U.S. West Incorporated 6,000 214,500
United Media Group 2,000 38,000
- --------------------------------------------------------------------------------------------
1,433,025
- --------------------------------------------------------------------------------------------
</TABLE>
Continued
2 FLEX-PARTNERS Annual Report
<PAGE> 122
FLEX-PARTNERS 1995 Annual Report
UTILITIES STOCK PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
WATER UTILITY - (3.7%)
American Water Works Incorporated 4,100 159,387
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,503,676) 3,926,095
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.4%
(Collateralized by U.S. government obligations -
market value $360,995)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 $360,000 360,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $360,000) 360,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $3,863,676) $4,286,095
============================================================================================
</TABLE>
(1)No dividend paid in 1995.
See accompanying notes to financial statements.
FLEX-PARTNERS 1995 Annual Report 3
<PAGE> 123
FLEX-PARTNERS 1995 Annual Report
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
TAA FUND BTB FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
- -----------------------------------------------------------------------------------------------------------------------
Investment in corresponding portfolio $11,466,987 $1,410,061
- -----------------------------------------------------------------------------------------------------------------------
Receivable for capital stock issued 93,122 21,588
- -----------------------------------------------------------------------------------------------------------------------
Unamortized organizational costs 25,061 25,836
- -----------------------------------------------------------------------------------------------------------------------
Prepaid expenses and other assets 13
- -----------------------------------------------------------------------------------------------------------------------
Total Assets 11,585,183 1,457,485
- -----------------------------------------------------------------------------------------------------------------------
Liabilities:
- -----------------------------------------------------------------------------------------------------------------------
Dividends payable 102
- -----------------------------------------------------------------------------------------------------------------------
Accrued transfer agent and administrative fees 844
- -----------------------------------------------------------------------------------------------------------------------
Accrued liabilities 60,659 34,719
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 61,503 34,821
- -----------------------------------------------------------------------------------------------------------------------
Net Assets:
- -----------------------------------------------------------------------------------------------------------------------
Capital 11,772,480 1,333,938
- -----------------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments (32,907) --
- -----------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net realized
loss on investments -- (388)
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments (202,813) 89,114
- -----------------------------------------------------------------------------------------------------------------------
Net Assets $11,523,680 $1,422,664
- -----------------------------------------------------------------------------------------------------------------------
Net Assets:
- -----------------------------------------------------------------------------------------------------------------------
Class A Shares N/A $ 640,762
- -----------------------------------------------------------------------------------------------------------------------
Class C Shares 11,523,680 781,902
- -----------------------------------------------------------------------------------------------------------------------
Total $11,523,680 $1,422,664
- -----------------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares):
- -----------------------------------------------------------------------------------------------------------------------
Class A Shares N/A 44,923
- -----------------------------------------------------------------------------------------------------------------------
Class C Shares 869,248 54,782
- -----------------------------------------------------------------------------------------------------------------------
Total 869,248 99,705
- -----------------------------------------------------------------------------------------------------------------------
Net asset value - redemption price per share:
- -----------------------------------------------------------------------------------------------------------------------
Class A Shares $ N/A $ 14.26
- -----------------------------------------------------------------------------------------------------------------------
Class C Shares* 13.26 14.27
- -----------------------------------------------------------------------------------------------------------------------
Sales Charge (Class A) N/A 4.00%
- -----------------------------------------------------------------------------------------------------------------------
Offering price (100%/(100%-Sales Charge) of net asset
value adjusted to nearest cent) per share - Class A $ N/A $ 14.85
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Redemption price varies based upon holding period
See accompanying notes to financial statements
4 Flex-Partners 1995 Annual Report
<PAGE> 124
Flex-Partners 1995 Annual Report
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
TAA FUND* BTB FUND**
Net investment income from corresponding
portfolio:
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest $ 49,468 $ 833
- -------------------------------------------------------------------------------------------------------
Dividends 25,287 7,673
- -------------------------------------------------------------------------------------------------------
Expenses (40,822) (4,384)
- -------------------------------------------------------------------------------------------------------
Total Net Investment Income From
Corresponding Portfolio 33,933 (4,122)
- -------------------------------------------------------------------------------------------------------
Fund Expenses:
- -------------------------------------------------------------------------------------------------------
Legal fees 1,476 1,305
Audit fees 4,981 540
Printing 5,196 3,356
Transfer agent fees 2,581 4,000
Administrative fee 1,129 67
Trustees fees and expenses 5,396 4,627
Distribution plan - Class A -- 338
Distribution plan - Class C 33,005 639
Shareholder servicing fee - Class A -- 338
Shareholder servicing fee - Class C 11,002 213
Amortization of organizational costs 3,032 1,843
Registration 12,626 18,065
Postage 1,057 250
Other expenses 2,401 2,253
- -------------------------------------------------------------------------------------------------------
Total expenses 83,882 37,834
Transfer Agent and Administrative fees reimbursed -- (3,167)
Expenses reimbursed by adviser (36,869) (34,959)
- -------------------------------------------------------------------------------------------------------
Total expenses - net 47,013 (292)
- -------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (LOSS) - NET (13,080) 4,414
- -------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS - NET:
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures 24,514 --
Net realized gain (loss) on investments 789,813 (388)
Change in unrealized appreciation (depreciation) of investments (202,813) 89,114
- -------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 611,514 88,726
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $598,434 $93,140
- -------------------------------------------------------------------------------------------------------
</TABLE>
*For the period June 1, 1995 (commencement of operations) to December 31, 1995
**For the period July 11, 1995 (commencement of operations) to December 31, 1995
See accompanying notes to financial statements
Flex-Partners 1995 Annual Report 5
<PAGE> 125
FLEX-PARTNERS 1995 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended December 31, 1995
<TABLE>
<CAPTION>
TAA FUND* BTB FUND**
Class C Total Class A Class C
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investments income (loss) - net ($13,080) $ 4,414 $ 2,947 $ 1,467
Net realized gain (loss) on investments
and futures contracts 814,327 (388) (195) (193)
Net change in unrealized appreciation
(depreciation of investments (202,813) 89,114 50,091 39,023
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 598,434 93,140 52,843 40,297
- -----------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Investment income - net -- (4,414) (2,947) (1,467)
Net realized gain from investment transactions (847,234) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting
from dividends and distributions (847,234) (4,414) (2,947) (1,467)
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 11,115,307 1,335,133 593,527 741,606
Reinvestment of dividends 847,234 3,831 2,365 1,466
Cost of redemptions (190,061) (5,026) (5,026) --
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from capital share transactions 11,772,480 1,333,938 590,866 743,072
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 11,523,680 1,422,664 640,762 781,902
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS - Beginning of period 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of period $11,523,680 $1,422,664 $640,762 $781,902
- -----------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 818,680 99,792 45,114 54,678
Reinvested 63,894 277 173 104
Redeemed (13,326) (364) (364) 0
- -----------------------------------------------------------------------------------------------------------------------
Change in shares 869,248 99,705 44,923 54,782
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the period June 1, 1995 (commencement of operations) to December 31, 1995
**For the period July 11, 1995 (commencement of operations) to December 31, 1995
See accompanying notes to financial statements
6 Flex-Partners 1995 Annual Report
<PAGE> 126
Flex-Partners 1995 Annual Report
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during each
period
<TABLE>
<CAPTION>
TAA FUND - CLASS C
For the Period
June 1, 1995 (2)
to December 31, 1995
<S> <C>
Net Asset Value, Beginning of Period $12.50
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Loss (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities (both realized and unrealized) 1.84
- ------------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.82
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions (from capital gains) (1.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.26
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 14.57%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period ($000) 11,524
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.97% (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net Assets (0.29%)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets, before reimbursement of fees 2.80% (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average
Net Assets, before reimbursement of fees (1.12%)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
(2) Date of commencement of operations
<TABLE>
<CAPTION>
BTB FUND
For the Period July 11, 1995(2)
to December 31, 1995
Class A Class C
<S> <C> <C>
Net Asset Value, Beginning of Period $12.50 $12.50
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment loss 0.12 0.10
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities (both realized and unrealized) 1.76 1.77
- ------------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.88 1.87
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) (0.12) (0.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.26 $14.27
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 15.11% 15.07%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period ($000) 641 782
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.75% (1) 2.00% (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.17% (1) 1.72% (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets, before reimbursement of fees 22.70% (1) 13.27% (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average
Net Assets, before reimbursement of fees (18.78%) (1) (9.55%) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
(2) Date of commencement of operations
See accompanying notes to financial statements
Flex-Partners 1995 Annual Report 7
<PAGE> 127
Flex-Partners 1995 Annual Report
THE FLEX-PARTNERS TRUST
THE TAA FUND AND THE BTB FUND
NOTES TO FINANCIAL STATEMENTS, DECEMBER 31, 1995
1. ORGANIZATION
The Flex-Partners Trust was organized in 1992 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The TAA Fund and The BTB Fund (the "Funds") commenced operations on
June 1, 1995 and July 11, 1995, respectively, when each Fund began investing
all of its investable assets in a corresponding open-end management investment
company (each a "Portfolio" and collectively the "Portfolios") having the same
investment objectives as the Fund. On December 31, 1995 The TAA Fund held
approximately 9% of the total assets of the Mutual Fund Portfolio and The BTB
Fund held approximately 33% of the total assets of the Utilities Stock
Portfolio. The BTB Fund has issued two classes of shares: A Class shares and C
Class shares. A Class shares are sold with a front-end sales charge (maximum
4.00%), and C Class shares may be subject to a contingent deferred sales
charge.
The financial statements of the Portfolios, including the Portfolios of
Investments, are included elsewhere in this report and should be read in
conjunction with the financial statements of each respective Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary
of significant accounting policies followed by the Funds.
Valuation of Investments -- Valuation of securities by the Portfolios is
discussed at Note 1 of the Portfolios Notes to Financial Statements which are
included elsewhere in this report (See page 16).
Income Taxes -- It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
Federal income tax provision is required.
Distribution to Shareholders -- Dividends to shareholders are recorded on the
ex-dividend date.
Organizational Costs -- The cost related to the organization of each Fund has
been deferred and is being amortized on a straight-line basis over a five-year
period.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS 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. Miller/Howard Investments, Inc.
(Subadviser) serves as the Utilities Stock Portfolio's Subadviser under an
Investment Subadvisory Agreement between RMA and the Subadviser.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
stock transfer, dividend disbursing and shareholder servicing agent for all of
the Trust's separate Funds. Subject to a $4,000 annual minimum fee each class
of shares of each Fund incurs an annual fee equal to the greater of $15 per
shareholder account or 0.10% of each Fund's average net assets, payable
monthly. MFS also provides the Trust with certain administrative services.
Each Fund incurs an annual fee, payable monthly, of 0.03% of the Fund's average
net assets.
The Funds have adopted distribution expense plans pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Plans"). Pursuant to the Plans, the
Funds may use as much as 25/100 of 1% and 75/100 of 1% of net assets annually
to aid in the distribution of Class A shares and Class C shares, respectively.
Each Fund has adopted a shareholder servicing plan for using as much as 25/100
of 1% of net assets annually to aid in the distribution of each Class A shares
and Class C shares.
Certain officers and/or trustees of the Fund and the Portfolio are officers
and/or directors of MII, RMA and MFS.
4. CAPITAL SHARE TRANSACTIONS
At December 30, 1995, an indefinite number of shares of $0.10 par value stock
were authorized in each of the Funds and paid in capital amounted to
$11,772,480 in The TAA Fund and $1,333,938 in The BTB Fund. Capital stock
transactions for each class of shares appear elsewhere in this report.
5. DISTRIBUTIONS
The BTB Fund declares as dividends and distributes monthly substantially all of
its net investment income. The TAA Fund declares as dividends and distributes
quarterly substantially all of its net investment income. Net realized capital
gains for all Funds, if any, are distributed annually after deduction of prior
years' loss, carryforwards. Dividends from net investment income and any
distributions of realized capital gains are distributed in cash or reinvested
in additional shares of each class of shares of each Fund at net asset value.
At December 31, 1995, The BTB Fund had available for federal income tax
purposes unused capital loss carryforwards. The amount of the carryforward is
$388 and will expire in 2003.
8 Flex-Partners 1995 Annual Report
<PAGE> 128
Flex-Partners 1995 Annual Report
INDEPENDENT AUDITOR'S REPORT
The Shareholders and Board of Trustees
The Flex-Partners' Trust
The TAA and BTB Funds
We have audited the accompanying statements of assets and liabilities of The
Flex-Partners' Trust, The TAA and BTB Funds (Funds) as of December 31, 1995,
and the related statements of operations, statements of changes in net assets
and the financial highlights for the periods indicated herein. These financial
statements and the financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of December 31, 1995, by correspondence with the custodian and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
TAA and BTB Funds of The Flex-Partners' Trust at December 31, 1995, the results
of their operations, the changes in their net assets and the financial
highlights for each of the periods indicated herein, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Columbus, Ohio
February 2, 1996
Flex-Partners 1995 Annual Report 9
<PAGE> 129
Flex-Partners 1995 Annual Report
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
MUTUAL UTILITIES
FUND STOCK
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------------------------------
Investments at market value* $100,159,430 $3,926,095
- -----------------------------------------------------------------------------------------------------------------------
Repurchase Agreements* 20,800,000 360,000
- -----------------------------------------------------------------------------------------------------------------------
Cash -- 121
- -----------------------------------------------------------------------------------------------------------------------
Receivable for futures contracts settlement 45,750 --
- -----------------------------------------------------------------------------------------------------------------------
Interest receivable 61,492 177
- -----------------------------------------------------------------------------------------------------------------------
Dividends receivable 1,139,291 11,374
- -----------------------------------------------------------------------------------------------------------------------
Prepaid/Other assets 454 --
- -----------------------------------------------------------------------------------------------------------------------
Unamortized organization costs 10,377 40,146
- -----------------------------------------------------------------------------------------------------------------------
Total Assets 122,216,794 4,337,913
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------------------------------------------
Payable to investment adviser 85,828 3,325
- -----------------------------------------------------------------------------------------------------------------------
Accrued fund accounting fees 4,159 628
- -----------------------------------------------------------------------------------------------------------------------
Other accrued liabilities 17,678 43,090
- -----------------------------------------------------------------------------------------------------------------------
Total Liabilities 107,665 47,043
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 116,428,784 3,868,451
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized gain on investments 5,680,345 422,419
- -----------------------------------------------------------------------------------------------------------------------
Net Assets $122,109,129 $4,290,870
- -----------------------------------------------------------------------------------------------------------------------
*Securities at cost 115,279,085 3,863,676
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
MUTUAL UTILITIES
FUND STOCK
PORTFOLIO PORTFOLIO*
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME - NET:
Interest $1,911,196 $8,057
- -----------------------------------------------------------------------------------------------------------------------
Dividends 329,219 54,996
- -----------------------------------------------------------------------------------------------------------------------
Total Income 2,240,415 63,053
- -----------------------------------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------------------------------
Investment advisory fees 874,473 14,297
Legal fees 1,853 1,100
Audit fees 13,482 3,028
Custodian fees 11,483 1,755
Accounting fees 47,427 4,065
Trustees fees and expenses 5,223 3,776
Insurance 2,241 --
Amortization or organization cost 5,438 4,744
Other expenses 399 1,611
- -----------------------------------------------------------------------------------------------------------------------
Total Expenses 962,019 34,376
Directed brokerage payments received -- (1,212)
- -----------------------------------------------------------------------------------------------------------------------
Total Expenses - net 962,019 33,164
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME - NET 1,278,396 29,880
- -----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain on futures contracts 2,494,274 --
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 13,060,418 (1,067)
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
of investments 5,680,803 422,419
- -----------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 21,235,495 421,352
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $22,513,891 $451,241
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31,
1995.
See accompanying notes to financial statements
10 Flex-Partners 1995 Annual Report
<PAGE> 130
Flex-Partners 1995 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1994 and December 31, 1995
<TABLE>
<CAPTION>
Mutual Fund Utilities Stock
Portfolio Portfolio*
Year ended December 31, Year ended December 31,
1995 1994 1995
INCREASE (DECREASE)
IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C>
Investment income - net $ 1,278,396 $ 2,272,777 $ 29,889
Net realized gain (loss)
on investments
and futures contracts 15,554,692 302,941 (1,067)
appreciation (depreciation)
of investments 5,680,803 (252,062) 422,419
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 22,513,891 2,323,656 451,241
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 34,671,819 26,769,231 3,908,655
Withdrawals (18,261,284) (27,513,563) (69,026)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
transactions of investors'
beneficial interests 16,410,535 (744,332) 3,839,629
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE) IN NET ASSETS 38,924,426 1,579,324 4,290,870
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - Beginning of period 83,184,703 81,605,379 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of Period $122,109,129 $83,184,703 $4,290,870
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31, 1995.
See accompanying notes to financial statements
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Mutual Fund Portfolio
Year Ended Dec. 31,
Ratios/Supplemental Data 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Assets, End of Period ($000) 122,109 83,185 81,605
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets** 0.95% 1.01% 1.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.26% 2.76% 0.09%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 186.13% 168.17% 279.56%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities Stock Portfolio
<CAPTION>
For The Period
June 21, 1995*
Ratios/Supplemental Data to Dec. 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Assets, End of Period ($000) 4,291
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets** 2.32%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.09%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
before directed brokerage payments 2.40%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investments Income to Average Net Assets
before directed brokerage payments 2.01%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 5.06%
- ------------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission per share $0.0600
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
*Date of commencement of operations
**Please refer to page 11 for total expense ratios relating to each
corresponding fund.
See accompanying notes to financial statements
Flex-Partners 1995 Annual Report 11
<PAGE> 131
Flex-Partners 1995 Annual Report
MUTUAL FUND PORTFOLIO
UTILITIES STOCK PORTFOLIO
December 31, 1995
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Each separate Portfolio (the "Portfolios") is registered under the Investment
Company Act of 1940, as amended, as a no-load, open-end management investment
company which was organized as a trust under the laws of the State of New York.
Each Declaration of Trust permits the Trustees, who are the same for each
Portfolio, to issue beneficial interests in each Portfolio.
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. The following is a summary
of significant accounting policies followed by the Portfolios.
Investments -- Money market securities held in the Portfolios maturing more
than sixty days after the valuation date are valued at the last sales price as
of the close of business on the day of valuation, or, lacking any sales, at the
most recent bid price or yield equivalent as obtained from dealers that make
markets in such securities. When such securities are valued within sixty days
or less to maturity, the difference between the valuation existing on the
sixty-first day before maturity and maturity value is amortized on a
straight-line basis to maturity. Securities maturing within sixty days from
their date of acquisition are valued at amortized cost.
Securities which are traded on stock exchanges are valued at the last sales
price as of the close of business of the New York Stock Exchange on the day of
valuation, or, lacking any sales, at the closing bid prices. Securities traded
on the over-the-counter market are valued at the most recent bid price or yield
equivalent as obtained from one or more dealers that make markets in such
securities. Mutual funds are valued at the daily redemption value determined
by the underlying fund.
Repurchase Agreements -- It is the Portfolio's policy to take possession of the
collateral for repurchase agreements before payment is made to the seller.
Market value of the collateral must be at least 100% of the amount of the
repurchase agreement.
Options & Futures -- Each Portfolio may engage in transactions in financial
futures contracts and options as a hedge against the change in market value of
the securities held in the portfolio, or which it intends to purchase. The
expectation is that any gain or loss on such transactions will be substantially
offset by any gain or loss on the securities in the underlying portfolio or on
those which are being considered for purchase.
During the period ended December 31, 1995 the Mutual Fund Portfolio wrote the
following option contracts:
Number of
Contracts Premiums
- -----------------------------------------------------------------------
Outstanding at Beginning of Period 0 $0
- -----------------------------------------------------------------------
Options Written 173 186,057
- -----------------------------------------------------------------------
Options Terminated (173) (186,057)
- -----------------------------------------------------------------------
Outstanding at End of Period 0 $0
- -----------------------------------------------------------------------
To the extent that the Portfolio enters into future contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change in
the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit either cash or securities in an amount
("initial margin") equal to a certain percentage of the contract value.
Subsequent payments ("variation margin") equal to changes in the daily
settlement price or last sale on the exchanges were they trade are paid or
received each day and are recorded as a gain or loss on 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 segrated to complete the
purchase. Options are valued on the basis of the daily settlement price or
last sale on the exchanges where they trade and the changes in value are
recorded as an unrealized gain or loss until sold, exercised or expired. In
the case of a written option, premiums received by each portfolio upon writing
the option are recorded in the liability section of the Statement of Assets and
Liabilities and are subsequently adjusted to
12 Flex-Partners 1995 Annual Report
<PAGE> 132
Flex-Partners 1995 Annual Report
current market value. When the written option is closed, exercised or expired,
the portfolio realizes a gain or loss and the liability is eliminated.
Income Taxes - It is the Portfolio's policy to comply with the requirements of
the Internal Revenue Code applicable to it. Therefore, no Federal income tax
provisions 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.
Other - The Portfolio follows industry practice and records security
transactions on the trade date. Gains and losses on security transactions are
determined on the specific identification basis. Dividend income is recognized
on the ex-dividend date, and interest income (including amortization of premium
and discount) is recognized as earned.
2. INVESTMENT ADVISORY, AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield Investors,
Inc. (MII), provides the Portfolios with investment management research,
statistical and advisory services, and pays certain other expenses of the
Portfolios. Miller/Howard Investments, Inc. (Subadviser) serves as the
Utilities Stock Portfolio's Subadviser under an Investment Subadvisory
Agreement between RMA and the Subadviser. For such services the Portfolios pay
monthly fees based upon the average daily value of each Portfolio's net assets
at the following annual rate: 1% of average net assets up to $50 million, 0.75%
of average net assets exceeding $50 million up to $100 million and 0.60% of
average net assets exceeding $100 million.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
accounting services agent for each of the Portfolios. The minimum annual fee
for all such services for each Portfolio is $7,500. Subject to the applicable
minimum fee, each Portfolio's annaul fee, payable monthly, is computed at the
rate of 0.15% of the first $10 million, 0.10% of the next $20 million, 0.02% of
the next $50 million, and 0.01% in excess of $80 million of the Portfolio's
average net assets.
Certain officers and/or trustees of the Portfolio are officers and/or directors
of MII, RMA and MFS.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the year ended December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Purchases Sales
- ---------------------------------------------------------------------
<S> <C> <C>
Mutual Fund Portfolio $153,526,438 $77,373,285
- --------------------------------------------------------------------
Utilities Stock Portfolio $ 3,636,056 $ 131,312
- --------------------------------------------------------------------
</TABLE>
As of December 31, 1995, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised of
the following:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Investment Appreciation Depreciation (Depreciation)
Cost of Investments of Investments of Investments
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mutual Fund Portfolio $115,644,899 $ 6,814,624 $(1,500,093) $5,314,531
- -----------------------------------------------------------------------------------------------------------------------
Utilities Stock Portfolio $ 3,863,676 $ 428,434 $ (6,015) $ 422,419
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Flex-Partners 1995 Annual Report 13
<PAGE> 133
Flex-Partners 1995 Annual Report
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees
The Flex-Partners' Trust
Mutual Fund Portfolio and Utilities Stock Portfolio
We have audited the accompanying statements of assets and liabilities of
the Mutual Fund Portfolio and Utilities Stock Portfolio (Portfolios), including
the schedules of portfolio investments, as of December 31, 1995, and the
related statements of operations, statements of changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and the financial highlights are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of December 31, 1995, by correspondence with the custodian and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial hightlights
referred to above present fairly, in all material respects, the financial
position of the Mutual Fund Portfolio and Utilities Stock Portfolio at December
31, 1995, the results of their operations, the changes in their net assets and
the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Columbus, Ohio
February 2, 1996
14 Flex-Partners 1995 Annual Report
<PAGE> 134
THE FLEX-PARTNERS
CROSS REFERENCE SHEET TO FORM N-1A
FOR THE INSTITUTIONAL FUND
Part B.
Item No. Statement of Additional Information
10 Cover Page
11 Table of Contents
12 Not applicable
13(a)(b)(c) Investment Policies and Related Matters
13(d) Not applicable
14(a)(b) Officers and Trustees
14(c) Not applicable
15(a)(b) Not applicable
15(c) Officers and Trustees
16(a)(b) Investment Adviser and Manager
16(c) Not applicable
16(d) Other Services
16(e) Not applicable
16(f) Distribution Plans
16(g) Not applicable
16(h) Other Services
16(i) Other Services
17 Purchase and Sale of Portfolio Securities
18 Not applicable
19(a) Not applicable
19(b) Valuation of Portfolio Securities
20 Not applicable
21 Not applicable
22(a) Calculation of Yield
22(b) Not applicable
23 Financial Statements
<PAGE> 135
THE INSTITUTIONAL FUND
6000 Memorial Drive
Dublin, Ohio 43017
Statement of Additional Information Dated April , 1996
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus of The Institutional Fund dated April __,
1996. A copy of the Prospectus may be obtained from The Institutional Fund, c/o
R. Meeder and Associates, Inc., at the above address, or by calling:
1-800-325-FLEX, or (614) 766-7000. Capitalized terms used and not otherwise
defined herein have the same meanings as defined in the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Policies and Related Matters 2
General 2
The Portfolio 2
Money Market Instruments 2
Ratings 4
Investment Restrictions 6
Purchase and Sale of Portfolio Securities 8
Valuation of Portfolio Securities 8
Calculation of Yield 8
Investment Adviser and Manager 9
Officers and Trustees 10
Distribution Plan 14
Other Services 15
Additional Information 16
Financial Statements 16
</TABLE>
<PAGE> 136
INVESTMENT POLICIES AND RELATED MATTERS
GENERAL
As described in the Prospectus, the Fund seeks to achieve its investment
objective by investing all of its investable assets in the Money Market
Portfolio (the "Portfolio") a corresponding open-end management investment
company having the same investment objective, policies and restrictions as the
Fund. Since the investment characteristics of the Fund correspond directly to
those of the Portfolio, the following is a discussion of the various investments
of and techniques employed by the Portfolio.
The investment policies set forth below in this section represent the
Portfolio's policies as of the date of this Statement of Additional Information.
The investment policies are not fundamental and they may be changed by the
Trustees of the Portfolio without shareholder approval. (No such change would be
made, however, without 30 days' written notice to shareholders.)
THE PORTFOLIO
The Portfolio seeks to maintain a constant net asset value of $1.00 per
share, although there is no assurance it will be able to do so. To do so, the
Portfolio utilizes the amortized cost method of valuing its portfolio securities
pursuant to a rule adopted by the Securities and Exchange Commission. The rule
also prescribes portfolio quality and maturity standards. The Portfolio will be
managed in accordance with the requirements of this rule.
MONEY MARKET INSTRUMENTS
The Portfolio will limit its purchases, denominated in U.S. dollars, to the
following securities:
* U.S. Government Securities and Securities of its Agencies and
Instrumentalities - obligations issued or guaranteed as to principal
or interest by the United States or its agencies (such as the Export
Import Bank of the United States, Federal Housing Administration, and
Government National Mortgage Association) or its instrumentalities
(such as the Federal Home Loan Bank, Federal Intermediate Credit Banks
and Federal Land Bank), including Treasury bills, notes and bonds.
* Bank Obligations and Instruments Secured Thereby - obligations
(including certificates of deposit, time deposits and bankers'
acceptances) of domestic banks having total assets of $1,000,000,000
or more, instruments secured by such obligations and obligations of
foreign branches of such banks, if the domestic parent bank is
unconditionally liable to make payment on the instrument if the
foreign branch fails to make payment for any reason. The
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<PAGE> 137
Portfolio may also invest in obligations (including certificates of
deposit and bankers' acceptances) of domestic branches of foreign
banks having assets of $1,000,000,000 or more, if the domestic branch
is subject to the same regulation as United States banks. The
Portfolio will not invest at time of purchase more than 25% of its
assets in obligations of banks, nor will the Portfolio invest more
than 10% of its assets in time deposits.
* High Quality Commercial Paper - The Portfolio, which is subject to
specific quality criteria and diversification requirements, may invest
in commercial paper rated in either one of the two highest categories
by at least two nationally recognized rating services, or, if not
rated, guaranteed by a company having commercial paper rated in either
one of the two highest categories by at least two nationally
recognized rating services.
* Private Placement Commercial Paper - Private placement commercial
paper ("Rule 144A securities") consist of unregistered securities
which are traded in public markets to qualified institutional
investors, such as the Portfolio. The Portfolio's risk is that the
universe of potential buyers for the securities, should the Portfolio
desire to liquidate a position, is limited to qualified dealers and
institutions, and therefore such securities could have the effect of
being illiquid.
* High Grade Corporate Obligations - obligations rated at least A by
Standard & Poor's or Moody's. See rating information below.
* Repurchase Agreements Pertaining to the Above - The Portfolio may
invest without limit in any of the above securities subject to
repurchase agreements with any Federal Reserve reporting dealer or
member bank of the Federal Reserve System. A repurchase agreement is
an instrument under which the purchaser (i.e., the Portfolio) acquires
ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding
period. This results in a fixed rate of return insulated from market
fluctuations during such period. The underlying securities might bear
maturities exceeding one year. The Portfolio's risk is that the seller
may fail to repurchase the security on the delivery date. If the
seller defaults, the underlying security constitutes collateral for
the seller's obligation to pay. It is a policy of the Portfolio to
make settlement on repurchase agreements only upon proper delivery of
the underlying collateral. Repurchase agreements usually are for short
periods, such as one week or less, but could be longer. The Portfolio
may enter into repurchase agreements with its custodian (Star Bank,
N.A., Cincinnati) when it is advantageous to do so. The Portfolio will
not invest more than 10% of its assets, at time of purchase, in
repurchase agreements which mature in excess of seven days.
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<PAGE> 138
R. Meeder & Associates, Inc. (the "Manager") exercises due care in the
selection of money market instruments. However, there is a risk that the issuers
of the securities may not be able to meet their obligations to pay interest or
principal when due. There is also a risk that some of the Portfolio's securities
might have to be liquidated prior to maturity at a price less than original
amortized cost or value, face amount or maturity value to meet larger than
expected redemptions. Any of these risks, if encountered, could cause a
reduction in net income or in the net asset value of the Portfolio.
RATINGS
1. Moody's Investors Services, Inc.'s Corporate Bond Rating:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length or time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
2. Standard and Poor's Corporation's Corporate Bond Rating:
AAA - Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they move
with interest rates, and hence provide the maximum safety on all counts.
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AA - Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
A - Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse effect
of changes in economic and trade conditions. Interest and principal are regarded
as safe. They predominantly reflect money rates in their market behavior but, to
some extent, also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
3. A-1 and P-1 Commercial Paper Ratings:
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A- 1, A-2, or
A-3.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
4. Description of Permitted Money Market Investments:
Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short term credit needs.
U.S. Government Obligations - are bills, certificates of indebtedness,
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury, as for example, the Government National Mortgage
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<PAGE> 140
Association; others by the right of the issuer to borrow from the Treasury, as
in the case of Federal Farm Credit Banks and Federal National Mortgage
Association; and others only by the credit of the agency, authority or
instrumentality; as for example, Federal Home Loan Mortgage and Federal Home
Loan Bank.
Repurchase Agreements - A repurchase transaction occurs when an investor
buys a security and simultaneously agrees to resell it at a later date to the
person from whom it was bought, at a higher price. The price differential
represents interest for the period the security is held. Repurchase transactions
will normally be entered into with banks and securities brokers. The Portfolio
could suffer a loss if the bank or securities broker with which the Portfolio
had a repurchase agreement were to default.
Certificates of Deposit - are certificates issued against funds deposited
in a bank, are for a definite period of time, earn a specified or variable rate
of return and are normally negotiable.
Banker's Acceptances - are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
Corporate Obligations - include bonds and notes issued by corporations in
order to finance longer term credit needs.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Fund and by the
Portfolio as fundamental policies. Under the Investment Company Act of 1940 (the
"Act"), a "fundamental" policy may not be changed without the vote of a majority
of the outstanding voting securities of the Fund or Portfolio, respectively, to
which it relates, which is defined in the Act as the lesser of (a) 67 percent or
more of the shares present at a shareholder meeting if the holders of more than
50 percent of the outstanding shares are present or represented by proxy, or (b)
more than 50 percent of the outstanding shares ("Majority Vote"). The percentage
limitations contained in the restrictions listed below apply at the time of the
purchase of the securities. Whenever the Fund is requested to vote on a change
in the investment restrictions of the Portfolio, the Fund will hold a meeting of
its shareholders and will cast its votes as instructed by the shareholders.
Provided that nothing in the following investment restrictions shall
prevent the Fund from investing all or part of its assets in an open-end
management investment company with the same investment objective as the Fund,
neither the Fund, the Portfolio nor any additional series which may be created
under the Declaration of Trust may: (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
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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 7 days do not exceed 10% of its total assets; (g)
Purchase more than 10% of any class of securities, including voting securities
of any issuer, except that the purchase of U.S. Treasury debt instruments shall
not be subject to this limitation; (h) Invest more than 5% of its total assets
(taken at value) in the securities of any one issuer, other than obligations of
the U.S. Treasury; provided, however, that this restriction shall not be
applicable to any separate investment series of the Trust or a Portfolio which
is created specifically to invest in the shares of other investment companies;
(i) Purchase any securities on margin, or participate in any joint or joint and
several trading account, provided, however, that it may open a margin account to
the extent necessary to engage in hedging transactions which are not precluded
by other particular restrictions; (j) Make any so-called "short" sales of
securities, except against an identical portfolio position i.e., a "short sale
against the box"), but this restriction shall not preclude a futures contract
which sells short an index or group of securities; (k) Invest more than 25% of
its net assets at time of purchase (taken at value) in the securities of
companies in any one industry; provided, however, that this restriction shall
not be applicable to any separate investment series of the Trust or a Portfolio
which is created specifically to invest in the shares of other investment
companies; (l) Purchase the securities of another investment company except
where such purchase is part of a plan of merger or consolidation; provided,
however, that this restriction shall not be applicable to any separate
investment series of the Trust or a Portfolio which is created specifically to
invest in the shares of other investment companies; (m) Purchase or retain any
securities of an issuer, any of whose officers, directors or security holders is
an officer or director of the Trust or a Portfolio, if such officer or director
owns beneficially more than 1/2 of 1% of the issuer's securities or together
they own beneficially more than 5% of such securities; (n) Invest in securities
of companies which have a record of less than three years' continuous operation
if, at the time of such purchase, more than 5% of its assets (taken at value)
would be so invested; (o) Purchase participations or other direct interests in
oil, gas or other mineral exploration or development programs; (p) Invest in
warrants; and (q) Invest more than 10% of its assets in 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, each of the
Fund's and 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.
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PURCHASE AND SALE OF PORTFOLIO SECURITIES
The Portfolio's purchases and sales of securities usually are principal
transactions. Securities are normally purchased directly from the issuer or from
an underwriter or market maker for the securities. There usually are no
brokerage commissions paid for such purchases. The Portfolio does not anticipate
paying brokerage commissions. Any transaction for which the Portfolio pays a
brokerage commission will be effected at the best price and execution available.
Purchases from underwriters of securities include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers are purchased at the offered price.
Allocation of transactions, including their frequency, to various dealers
is determined by the Adviser in its best judgment and in a manner deemed to be
in the best interest of the investors in the Portfolio rather than by any
formula. The primary consideration is prompt execution of orders in an effective
manner at the most favorable price.
Investment decisions for the Portfolio will be made independently from
those for any other account or investment company that is or may in the future
become managed by the Adviser or its affiliates. If, however, the Portfolio and
other investment companies or accounts managed by the Adviser are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. When purchases or sales of the same security for the Portfolio and for
investment companies managed by the Adviser occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large denomination purchases or sales.
VALUATION OF PORTFOLIO SECURITIES
The Money Market Portfolio will value its securities by the amortized cost
method as it maintains a dollar weighted average portfolio maturity of 90 days
or less. Portfolio securities for which market quotations are not readily
available are to be valued by the Manager in good faith at its own expense under
the direction of the Trustees.
Other assets, which include cash, prepaid and accrued items and amounts
receivable as income on investments and from the sale of portfolio securities,
are carried at book value, as are all liabilities. Liabilities include accrued
expenses, sums owed for securities purchased, and dividends payable.
CALCULATION OF YIELD
The Fund will calculate its yield quotations based on the net change,
exclusive of realized and unrealized gains or losses, in the value of a
hypothetical account over a seven calendar day base period. The following is an
example of the yield calculations for the seven days ended December 31, 1995.
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<TABLE>
<S> <C>
Simple yield:
Value of hypothetical account at end of period $1.00107359
Value of hypothetical account at beginning of period 1.00000000
Base period return $ .00107359
===========
Current seven day yield (.00107359 x (365/7) 5.60%
Effective yield:
Effective yield [(.00107359 + 1)365/7 ] - 1 5.75%
</TABLE>
These yields reflect the Manager's decision to voluntarily waive a portion
of its management fee and to reimburse certain operating expenses of the Fund.
Therefore, the Fund realized a higher yield as a result of reduced expenses.
Investors should recognize that yields are not necessarily representative of
future results, but will vary as a function of market conditions and expenses
incurred.
The Manager presently intends to reimburse the Fund through an expense
reimbursement fee and/or waive a portion of the Manager's management fee to the
extent necessary to keep the expenses at 0.25% of average daily net assets. The
Manager may change this policy at any time without notice to shareholders. This
would, in some circumstances, have an adverse effect on the net income of the
Fund, and the yields earned by shareholders. For planning purposes prospective
investors and shareholders should assume that expenses will not be reimbursed.
(See "Synopsis of Financial Information" in the Fund's Prospectus.)
INVESTMENT ADVISER AND MANAGER
R. Meeder & Associates, Inc. (the "Manager") is the investment adviser and
manager for the Money Market Portfolio. The Investment Advisory Contract for the
Portfolio was 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
Investment Company Act of 1940) of the Portfolio. The contract is to remain in
force so long as renewal thereof is specifically approved at least annually by a
majority of the Trustees or by vote of a majority of outstanding shares of the
Portfolio, and in either case by vote of a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) at a
meeting called for the purpose of voting on such renewal.
The Investment Advisory Contract will terminate automatically if assigned
and may be terminated without penalty at any time upon 60 days' prior written
notice by Majority Vote of the Portfolio, by the Trustees of the Portfolio, or
by the Manager.
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Costs, expenses and liabilities of the Trust attributable to a particular
Fund are allocated to that Fund. Costs, expenses and liabilities which are not
readily attributable to a particular Fund are allocated among all of the Trust's
Funds. Thus, each Fund pays its proportionate share of: the fees of the Trust's
independent auditors, legal counsel, custodian, transfer agent and accountants;
insurance premiums; the fees and expenses of Trustees who do not receive
compensation from R. Meeder & Associates; association dues; the cost of printing
and mailing confirmations, prospectuses, proxies, proxy statements, notices and
reports to existing shareholders; state registration fees; distribution expenses
within the limitation of each Fund's Distribution Plan, including the cost of
printing and mailing of prospectuses and other materials incident to soliciting
new accounts; and other miscellaneous expenses.
Expenses of the Portfolio also include all fees under its Administrative
Services Agreement; 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; the advisory fees payable to the
Adviser under the Advisory Contract and other miscellaneous expense.
The Board of Trustees of the Trust believes that the aggregate per share
expenses of the Fund and the Portfolio will be less than or approximately equal
to the expenses which the Fund would incur if it retained the services of an
investment adviser and the assets of the Fund were invested directly in the type
of securities being held by the Portfolio.
The Manager earns an annual fee, payable in monthly installments, at the
rate of 0.40% of the first $100 million and 0.25% in excess of $100 million, of
average net assets. For the year ended December 31, 1995, the Money Market
Portfolio paid fees to the Manager totaling $299,240 ($243,359 in 1994; $232,839
in 1993).
R. Meeder & Associates, Inc. was incorporated in Ohio on February 1, 1974
and maintains its principal offices at 6000 Memorial Drive, Dublin, Ohio 43017.
The Manager is a wholly-owned subsidiary of Muirfield Investors, Inc. ("MII"),
which is controlled by Robert S. Meeder, Sr. through the ownership of voting
common stock. The Manager's officers and directors, and the principal offices
held by each in MII are as set forth in the Prospectus under the caption "The
Fund and its Management." Mr. Robert S. Meeder is President and Trustee of the
Trust and President and Trustee of the Portfolio. Messrs. James B. Craver, Esq.,
Wesley F. Hoag, Esq., Steven T. McCabe, Donald F. Meeder, Robert S. Meeder, Jr.
and Philip A. Voelker are officers of the Trust and the Portfolio.
OFFICERS AND TRUSTEES
The Trust and the Portfolio is managed by its Board of Trustees and
officers. Their names, positions and principal occupations during the past five
years are listed below:
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<TABLE>
<CAPTION>
Position Principal
Name & Address Held Occupation
- -------------- ---- ----------
<S> <C> <C>
ROBERT S. MEEDER, SR.*+ Trustee/ Chairman of R.
President (1)(2) Meeder & Associates,
Inc., an Investment
Adviser.
MILTON S. BARTHOLOMEW, ESQ. Trustee (2) Retired, formerly a
1424 Clubview Boulevard, S. practicing attorney in
Worthington, OH 43235 Columbus, Ohio.
Member of the
Portfolio's Audit
Committee.
ROGER D. BLACKWELL Trustee(1) Professor of Marketing
Blackwell Associates, Inc. and Consumer Behavior,
3380 Tremont Road The Ohio State
Columbus, OH 43221 University, and President
of Blackwell Associates,
Inc., a strategic
consulting firm.
JOHN M. EMERY Trustee (1) Retired, formerly Vice
2390 McCoy Road President & Treasurer
Columbus, OH 43220 of Columbus &
Southern Ohio
Electric Co.
Member of the Trust's
Audit Committee.
RICHARD A. FARR Trustee (1) President of R&R
3250 W. Henderson Road Supply Co. and
Columbus, OH 43220 General Manager
of RAFCo., Inc., two
companies involved
in engineering, consulting
& sales of
heating & air conditioning
equipment.
</TABLE>
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<TABLE>
<S> <C> <C>
WILLIAM L. GURNER Trustee (1) President, Sector Capital
Sector Capital Management, L.L.C. Management, L.L.C.
One Commerce Square, Suite 1900 (since January 1995);
Memphis, TN 38103 Manager of Trust
Investments of Federal
Express Corporation
(September 1987 to
December 1995)
RUSSEL G. MEANS Trustee (2) Chairman of
4789 Rings Road Employee Benefit
Dublin, OH 43017 Management Corporation,
consultants and
administrators of self-funded
health and
retirement plans.
LOWELL G. MILLER* Trustee (1) President, Miller/Howard
Miller/Howard Investments, Inc. Investments, Inc., an
69 Glasco Turnpike Investment Advisor.
Woodstock, NY 12498
WALTER L. OGLE Trustee (2) Executive Vice
One Corporate Drive President of Godwins
Clearwater, FL 34622 Booke & Dickenson
employee benefit,
compensation and
human resource
consultants.
PHILIP A. VOELKER *+ Trustee (2)/ Vice President of
Vice President (1)(2) R. Meeder &
Associates, Inc.
JAMES B. CRAVER, ESQ.* Assistant Managing Director, Eagle
266 Summer Street Secretary (1)(2) Institutional Financial
Boston, MA 02210 Services, Inc. (since
September 1995); Senior
Vice President of
Signature Financial
Group, Inc. (January 1991
to August 1995).
</TABLE>
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<TABLE>
<S> <C> <C>
WESLEY F. HOAG*+ Vice President (1)(2) General Counsel and
Chief Operating Officer
of R. Meeder &
Associates, Inc. (since
July 1993); Attorney,
Porter, Wright, Morris &
Arthur, a law firm
(October 1984 to June
1993).
STEVEN T. MCCABE*+ Assistant Vice President, R.
Treasurer (1)(2) Meeder & Associates,
Inc., and Vice President
of Mutual Funds Service
Co.
DONALD F. MEEDER *+ Secretary/ Vice President of R.
Treasurer (1)(2) Meeder & Associates,
Inc., and President of
Mutual Funds Service
Company.
ROBERT S. MEEDER, JR. *+ Vice President (1)(2) President of R. Meeder &
Associates, Inc.
</TABLE>
(1) Trustee and/or officer of the Trust
(2) Trustee and/or officer of the Portfolio
*"Interested Person" of the Trust (as defined in the Investment Company Act of
1940).
+ P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017.
Several Trustees and each officer of the Trust holds the same position with
The Flex- funds, a Massachusetts business trust consisting of five separate
series, one of which, The Money Market Fund, also invests all of its investable
assets in the Portfolio. Each trustee and officer of the Portfolio holds the
same position with each corresponding Portfolio of The Flex-funds. Trustees and
officers of the Trust and the Portfolio own in aggregate less than 1% of the
Fund's outstanding shares. Robert S. Meeder, Sr. is Robert S. Meeder, Jr.'s
father and Donald F. Meeder's uncle.
The Trust pays each Trustee who is not an "interested person" of The
Flex-funds and Flex-Partners Trusts an annual fee of $3,000, plus $750 for each
meeting of the Board of Trustees attended regardless of the number of Boards of
Trustees on which each Trustee serves. Mr. Emery comprises the Audit Committee
for each of The Flex-funds and The Flex-
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<PAGE> 148
Partners Trusts. Mr. Emery is paid $400 for each meeting of the Audit Committees
attended regardless of the number of Audit Committees on which he serves. All
other officers and Trustees serve without compensation from any Trust. Trustees
fees for The Institutional Fund totaled $5,166 for the year ended December 31,
1995 ($5,875 in 1994). Audit Committee fees for the Fund totaled $45 for the
year ended December 31, 1995 ($80 in 1994).
Each Trustee who is not an "interested person" with each corresponding
Portfolio of The Flex-funds and Flex-Partners is paid an annual fee of $3,000,
plus $750 for each meeting of the Board of Trustees attended regardless of the
number of Boards of Trustees each Trustee serves. Mr. Bartholomew comprises the
Audit Committee for each corresponding Portfolio of The Flex-funds and the
Flex-Partners Trusts. Mr. Bartholomew is paid $400 for each meeting of the Audit
Committees attended regardless of the number of Audit Committees on which he
serves. Trustee fees for the Money Market Portfolio totaled $3,925 for the year
ended December 31, 1995 ($3,750 in 1994). Audit Committee fees for the Money
Market Portfolio totaled $147 for the year ended December 31, 1995 ($160 in
1994). All other officers and Trustees serve without compensation from any
Portfolio.
The Trustees and officers of the Fund and the Portfolio own, in the
aggregate, less than 1% of the Fund's total oustanding shares.
DISTRIBUTION PLAN
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the
"Act") describes the circumstances under which an investment company such as the
Fund may, directly or indirectly, bear the expenses of distributing its shares.
The Rule defines such distribution expenses to include the cost of any activity
which is primarily intended to result in the sale of Fund shares.
The Fund has adopted a Distribution Plan (the "Plan") which authorizes,
among other things, payment of incentives in the form of commissions and fees,
advertising, the services of public relations consultants, and direct
solicitation. Possible recipients include securities brokers, attorneys,
accountants, investment advisers, investment performance consultants, pension
actuaries, and service organizations. Another class of recipients is banks.
Currently, The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. Since the only function of banks who may be engaged as
participating organizations, is to perform administrative and shareholder
servicing functions, the Fund believes that such laws should not preclude banks
from acting as participating organizations; however, future changes in either
federal or state statutes or regulations relating to the permissible activities
of banks and their subsidiaries or affiliates, as well as judicial or
administrative decisions or interpretations of statutes or regulations, could
prevent a bank from continuing to perform all or a part of its shareholder
service activities. If a bank were prohibited from so acting, its shareholder
customers would be permitted to remain shareholders of the Fund and alternative
means for continuing the servicing of such shareholders would be sought. In such
event, changes in the operation of the Fund might occur and a shareholder being
serviced by such bank might no longer be able to avail himself, or itself, of
any automatic investment or other services then being provided by the bank. It
is not expected that shareholders would suffer any adverse
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<PAGE> 149
financial consequences as a result of any of these occurrences. In addition,
state securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law.
The Fund may expend in each Fund as much as, but not more than, 3/100 of
1% of the Fund's average net assets annually pursuant to the Plan. A report of
the amounts so expended in each Fund and the purpose of the expenditures must be
made to and reviewed by the Board of Trustees at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the costs
which the Fund may bear for distribution pursuant to the Plan without
shareholder approval of the Plan, and that other material amendments of the Plan
must be approved by the Board of Trustees, and by the Trustees who are not
"interested persons" of the Fund (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan, by vote cast in
person at a meeting called for the purpose of voting on the Plan.
The Plan is terminable at any time by vote of a majority of the Trustees
who are not "interested persons" and who have no direct or indirect financial
interest in the operation of the Plan or by vote of a majority of the Fund's
shares. Any service agreement terminates upon assignment and is terminable
without penalty at any time by a vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the operation of any of the Plans, upon not more than 60 days' written notice to
the service organization, or by the vote of the holders of a majority of the
Fund's shares, or, upon 15 days' notice, by a party to a service agreement.
The Plan was approved by the Fund's Board of Trustees, who made a
determination that there is a reasonable likelihood that the Plan will benefit
the Fund. The Plan has been approved by shareholders and will continue in effect
only if approved at least annually by the Board of Trustees.
Total payments made by the Fund to parties with service agreements for the
year ended December 31, 1995 amounted to $3,784 ($132 in 1994). In addition,
expenditures were approved by the Board of Trustees in the amount of $2,651 for
printing and mailing of prospectuses, periodic reports and other sales materials
to prospective investors; and $1,450 for the services of public relations and
marketing consultants to encourage the sale of Fund shares. These expenditures
amounted to $4,101 for the year ended December 31, 1995 ($474 in 1994).
OTHER SERVICES
Custodian - Star Bank, N.A., Star Bank Center, 425 Walnut Street,
Cincinnati, Ohio 45202, is custodian of all of the Fund's assets.
Auditors - KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio,
43215, has been retained as independent auditors for the Fund.
15
<PAGE> 150
Stock Transfer Agent - Mutual Funds Service Co., 6000 Memorial Drive,
Dublin, Ohio 43017, a wholly owned subsidiary of Muirfield Investors, Inc., is
the Fund's stock transfer and dividend disbursing agent.
Subadministrator - Signature Broker-Dealer Services, Inc., 6 St. James
Avenue, Suite 900, Boston, Massachusetts 02116, has been retained as
Subadministrator to provide certain day-to-day administrative services to the
Fund.
Reports to Shareholders - The Fund provides shareholders with quarterly
reports of investments and other information, semi-annual financial statements,
and annual reports.
ADDITIONAL INFORMATION
Registration Statement: This Statement of Additional Information omits
certain of the information contained in the Registration Statement filed with
the Securities and Exchange Commission by the Fund. Items of information which
are thus omitted may be obtained from the Commission upon payment of the fee
prescribed by its Rules and Regulations, or may be examined at the offices of
the Commission without charge.
FINANCIAL STATEMENTS
Financial statements for The Institutional Fund and the Money Market
Portfolio are presented on the following pages. Persons interested in obtaining
information about any of the other Funds and/or Portfolios should contact the
Investment Adviser to obtain a copy of the Fund or Portfolio's current
Registration Statement.
16
<PAGE> 151
The Institutional Fund 1995 Annual Report
MONEY MARKET PORTFOLIO
Portfolio of Investments as of December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FACE VALUE
AMOUNT (NOTES 1 AND 2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 39.1%
American Honda Finance, 5.73%, due 2/23/96 $10,000,000 $ 9,915,642
American Honda Finance, 5.62%, due 4/02/96 3,000,000 2,956,913
BOT Financial, 6.20%, due 1/05/96 11,000,000 10,992,422
Dupont Corporation, 6.25%, due 1/03/96 275,000 274,905
Duff & Phelps, 5.47%, due 5/09/96 6,000,000 5,882,395
GTE Corporation, 5.83%, due 2/16/96 10,000,000 9,925,506
Idaho Power, 6.25%, due 1/11/96 140,000 139,757
Jefferson Smurfit, 5.70%, due 3/01/96 1,200,000 1,188,600
Jefferson Smurfit, 5.70%, due 3/19/96 4,000,000 3,950,600
Laclede Gas, 6.25%, due 1/22/96 432,000 430,425
Marsh MacClellan, 5.58%, due 3/14/96 3,120,000 3,084,697
Mitsubishi Motor Credit Corporation, 6.25%, due 1/18/96 518,000 516,471
National Utilities, 5.58%, due 3/12/96 2,000,000 1,977,990
Nynex Corporation, 5.74%, due 2/06/96 3,000,000 2,982,780
Nynex Corporation, 5.77%, due 1/12/96 10,000,000 9,982,369
Pacific Bell, 6.25%, due 1/22/96 390,000 388,578
Public Services Electric & Gas, 5.93%, due 1/11/96 8,142,000 8,128,588
Public Services Electric & Gas, 5.90%, due 1/17/96 3,061,000 3,052,973
Tambrands, 5.50%, due 6/04/96 3,500,000 3,417,118
Torchmark, 5.75%, due 2/14/96 10,600,000 10,525,506
Whirlpool Corporation, 5.77%, due 1/31/96 10,700,000 10,648,551
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $100,362,786) 100,362,786
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 47.9%
American Telephone & Telegraph Capital Corporation, 4.52%,
due 8/30/96 250,000 247,743
American Telephone & Telegraph Capital Corporation, 7.40%,
due 11/01/96 500,000 505,230
Associates Corporation, 7.50%, due 10/15/96 150,000 151,722
Associates Corporation, 4.75%, due 8/01/96 250,000 248,321
BP America, Incorporated, 10.00%, due 3/08/96 5,000,000 5,034,208
BP, Incorporated, 10.15%, due 3/15/96 190,000 191,649
Bank One, Dayton, 5.95%, due 10/02/96 5,000,000 5,000,000
*Bank One, Capital Demand Note, 5.83%,
next redemption date 7/11/96, due 4/01/2113 3,510,000 3,510,000
Barnett Bank, 10.00%, due 1/08/96 3,500,000 3,502,308
Bat Industries, 8.60%, due 8/30/96 550,000 558,052
*Bear Stearns Floating Rate Note, 5.76%, due 3/01/96 10,000,000 10,000,000
*Best Sands Corporation Floating Rate Note,
5.95%, next redemption date 1/04/96, due 7/01/2002 850,000 850,000
*Care Life Project Floating Rate Note, 5.95%,
next redemption date 1/04/96, due 8/01/2111 1,375,000 1,375,000
Conrail, 5.20%, due 2/12/96 1,000,000 999,051
Continental Bankcorp, 9.875%, due 6/15/96 1,250,000 1,272,500
Dean Witter, 8.92%, due 3/15/96 1,000,000 1,005,634
Dow Capital Corporation, 8.25%, due 2/15/96 65,000 65,146
Dupont Corporation, 8.45%, due 10/15/96 860,000 897,347
Eastman Kodak, 10.00%, due 6/15/96 125,000 126,948
Eli Lilly Corporation, 6.58%, due 12/20/96 250,000 252,275
*Espanola/Nambe Variable Rate Demand Note, 5.95%,
next redemption date 1/04/96, due 6/01/2006 2,500,000 2,500,000
*Exxon Shipping Floating Rate Note, 5.78%,
next redemption date 1/04/96, due 10/01/2111 7,000,000 7,000,000
</TABLE>
Continued
The Institutional Fund 1995 Annual Report 1
<PAGE> 152
The Institutional Fund 1995 Annual Report
MONEY MARKET PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (Notes 1 and 2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ford Motor Credit Corporation, 4.85%, due 8/23/96 400,000 397,132
Ford Motor Credit Corporation, 8.25%, due 7/15/96 171,000 172,927
Ford Motor Credit Corporation, 9.10%, due 7/05/96 1,000,000 1,015,476
Ford Motor Credit Corporation, 8.25%, due 5/15/96 1,200,000 1,209,494
General Electric Capital Corporation,
4.615%, next redemption date 5/30/96 1,000,000 994,514
General Motors Acceptance Corporation, 9.00%, due 2/06/96 400,000 401,185
General Motors Acceptance Corporation, 8.00%, due 10/01/96 275,000 279,485
*General Motors Acceptance Corporation Floating Rate Note,
5.805%, next redemption date 4/13/96, due 4/13/98 10,000,000 10,000,000
*Hancor Incorporated Floating Rate Note, 5.95%,
next redemption date 1/04/95, due 12/01/2004 900,000 900,000
Hertz Corporation, 9.125%, due 8/01/96 2,850,000 2,902,407
Honeywell Corporation, 7.875%, due 5/14/96 1,445,000 1,453,511
Household Financial Corporation, 9.375%, due 2/15/96 2,000,000 2,007,835
IBM Corporation, 5.00%, due 2/26/96 250,000 249,698
IBM Credit Corporation, 5.06%, due 11/15/96 1,350,000 1,340,236
IBM Credit Corporation, 4.85%, due 11/05/96 3,000,000 2,973,731
International Bank, 8.75%, due 9/06/96 100,000 101,972
John Deere Corporation, 8.50%, due 4/10/96 200,000 201,383
Lockheed Corporation, 4.875%, due 2/15/96 85,000 84,848
Merrill Lynch & Company, Floating Rate Note, 5.925%,
due 11/18/96 10,000,000 10,000,000
Morgan Stanley Incorporated, 8.875%, due 4/01/96 400,000 402,793
Morgan Stanley Incorporated, 7.32%, due 1/15/97 500,000 507,941
Pacific Gas & Electric, 5.03%, due 3/22/96 800,000 798,800
Pepsico Incorporated, 7.875%, due 8/15/96 2,350,000 2,375,767
Philip Morris Companies, 8.875%, due 7/01/96 1,150,000 1,165,600
*Presrite Corporation Floating Rate Note, 5.95%,
next redemption date 1/04/96, due 1/01/2004 2,880,000 2,880,000
Regions Bank, Louisiana, 6.71%, due 4/11/96 5,000,000 5,011,262
Sears Roebuck & Company, 9.00%, due 9/15/96 1,000,000 1,020,902
Sears Roebuck & Company, 8.55%, due 8/01/96 2,000,000 2,028,466
Smith Barney Holding Company, 5.375%, due 6/01/96 5,380,000 5,365,423
Southwestern Bell, 7.90%, due 8/23/96 1,500,000 1,518,192
Southwestern Bell, 8.30%, due 6/01/96 100,000 101,028
Suntrust Banks, 8.375%, due 3/01/96 1,130,000 1,134,467
U.S. West Capital Funding Corporation, 8.00%, due 10/15/96 290,000 294,634
Unilever, 8.00%, due 5/28/96 450,000 453,838
Union Electric, 5.50% due 5/01/96 100,000 99,868
Virginia Electric & Power, 6.35%, due 5/30/96 3,000,000 3,005,191
Virginia Electric & Power, 8.35%, due 6/15/96 1,000,000 1,010,524
WMX Technologies, 4.875%, due 6/15/96 215,000 213,945
Waste Management Corporation, 7.875%, due 8/15/96 1,000,000 1,011,214
Waste Management Corporation, 4.875%, due 6/15/96 100,000 99,547
Weyerhaeuser Corporation, 8.41%, due 5/17/96 100,000 100,863
White Castle Corporation, Floating Rate Note, 5.95%,
next redemption date 1/04/96 7,000,000 7,000,000
World Book Finance Corporation, 8.125%, due 9/01/96 500,000 506,839
- ----------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $122,818,621) 122,818,621
- ----------------------------------------------------------------------------------------------------------------------
Continued
</TABLE>
2 The Institutional Fund 1995 Annual Report
<PAGE> 153
The Institutional Fund 1995 Annual Report
<TABLE>
<S> <C> <C>
U.S. TREASURY BILLS - 0.1%
U.S. Treasury Bill, 6.66%, due 1/11/96 66,000 $ 67,874
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $67,874) 67,874
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 4.6%
Federal Farm Credit Note, 5.91%, due 6/24/96 500,000 500,614
*Student Loan Marketing Association Floating Rate Note,
5.70%, due 11/10/98, next redemption 1/02/96 5,000,000 5,000,000
*Student Loan Marketing Association Floating Rate Note,
5.75%, due 8/03/99, next redemption date 1/02/96 4,350,000 4,355,249
*Student Loan Marketing Association Floating Rate Note,
5.68%, due 11/24/97, next redemption date 1/02/96 2,000,000 1,999,610
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $11,855,473) 11,855,473
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.3%
(Collateralized by U.S. government obligations -
market value $21,644,319)
Everen Securities, dated 12/29/95, 5.90%,
due 1/02/96 20,556,000 20,556,000
Star Bank N.A., dated 12/29/95, 5.30%,
due 1/02/96 950,000 950,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $21,506,000) 21,506,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $256,610,754) $256,610,754
====================================================================================================================================
</TABLE>
*Floating Rate as of 12/31/95.
See accompanying notes to financial statements
The Institutional Fund 1995 Annual Report 3
<PAGE> 154
The Institutional Fund 1995 Annual Report
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
THE
INSTITUTIONAL
FUND
<S> <C>
Assets:
- ----------------------------------------------------------------------
Investment in corresponding portfolio $113,504,219
- ----------------------------------------------------------------------
Unamortized organizational costs 11,126
- ----------------------------------------------------------------------
Prepaid expenses and other assets 423
- ----------------------------------------------------------------------
Total Assets 113,515,768
======================================================================
Liabilities:
- ----------------------------------------------------------------------
Dividends payable 297,726
- ----------------------------------------------------------------------
Accrued transfer agent and administrative fees 6,736
- ----------------------------------------------------------------------
Other accrued liabilities 6,101
- ----------------------------------------------------------------------
Total Liabilities 310,563
======================================================================
Net Assets:
- ----------------------------------------------------------------------
Capital 113,205,205
- ----------------------------------------------------------------------
Net Assets $113,205,205
- ----------------------------------------------------------------------
Capital Stock Outstanding 113,205,205
- ----------------------------------------------------------------------
Net Asset Value, Offering and
Redemption Price Per Share $ 1.00
======================================================================
</TABLE>
See accompanying notes to financial statements
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
THE
INSTITUTIONAL
FUND
<S> <C>
Net investment income from corresponding portfolio:
- ----------------------------------------------------------------------
Interest $ 3,467,318
- ----------------------------------------------------------------------
Expenses (116,231)
- ----------------------------------------------------------------------
Total Net Investment Income From
Corresponding Portfolio 3,351,087
- ----------------------------------------------------------------------
Fund Expenses:
- ----------------------------------------------------------------------
Legal Fees 1,227
Audit Fees 6,022
Printing and postage 1,315
Administrative fee 14,567
Transfer agent fees 30,268
Trustees fees and expenses 9,535
Insurance 1,479
Distribution plan 5,022
Amortization of organizational costs 3,194
24f-2 filing fee 20,532
Other expenses 845
- ----------------------------------------------------------------------
Total expenses 94,006
Expenses waived by adviser (70,391)
- ----------------------------------------------------------------------
Total expenses - net 23,615
- ----------------------------------------------------------------------
INVESTMENT INCOME - NET 3,327,472
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 3,327,472
- ----------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
4 The Institutional Fund 1995 Annual Report
<PAGE> 155
The Institutional Fund 1995 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
THE INSTITUTIONAL FUND
<TABLE>
<CAPTION>
INCREASE IN NET ASSETS:
For the year ended For the period
December 31, 1995 June 15, 1994* to
December 31, 1995
<S> <C> <C>
OPERATIONS:
Investment income - net $3,327,472 $1,159,548
Net increase in net assets resulting from operations 3,327,472 1,159,548
- ------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Investment income - net (3,327,472) (1,159,548)
Net decrease in net assets resulting from dividends and
distributions (3,327,472) (1,159,548)
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 389,173,505 282,402,574
Reinvestment of dividends 1,987,756 339,945
Cost of redemptions (337,450,306) (223,248,269)
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from capital share transactions 53,710,955 59,494,250
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 53,710,955 59,494,250
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS - Beginning of period 59,494,250 0
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of period $113,205,205 $59,494,250
- ------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 389,173,505 282,402,574
Reinvested 1,987,756 339,945
Redeemed (337,450,306) 223,248,269
- ------------------------------------------------------------------------------------------------------------------------
Change in shares 53,710,955 59,494,250
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during each
period.
THE INSTITUTIONAL FUND
<TABLE>
<CAPTION>
For the period
Year Ended June 15, 1 994(2) to
December 31, 1995 December 31, 1994
<S> <C> <C>
Net Asset Value, Beginning of period $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net Investment income 0.06 0.03
- -------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.06 0.03
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) (0.06) (0.03)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.03)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 6.01% 4.80%(1)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net Assets, End of period ($000) 113,205 50,494
- -------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 0.25% 0.20%(1)
- -------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 5.87% 4.01%(1)
- -------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets, before waiver of fees* 0.55% 0.46%(1)
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees* 5.57% 4.25%(1)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
(2) Date of commencement of operations
*Includes fees waived in corresponding portfolio
See accompanying notes to financial statements
The Institutional Fund 1995 Annual Report 5
<PAGE> 156
The Institutional Fund 1995 Annual Report
THE INSTITUTIONAL FUND
NOTES TO FINANCIAL STATEMENTS, DECEMBER 31, 1995
1. ORGANIZATION
The Flex-Partners Trust was organized in 1992 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Institutional Fund (the "Fund") commenced operations on June 15,
1994 when the Fund began investing all of its investable assets in a
corresponding open-end management investment company (the "Portfolio") having
the same investment objectives as the Fund. On December 31, 1995 The
Institutional Fund held approximately 45% of the total assets of The Money
Market Portfolio.
The financial statements of the Portfolio, including the Portfolio of
Investments, are included elsewhere in this report and should be read in
conjunction with the financial statements of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary
of significant accounting policies followed by the Fund.
Valuation of Investments - Valuation of securities by the Portfolio is
discussed at Note 1 of the Notes to Financial Statements of the Money Market
Portfolio which are included elsewhere in this report.
Income Taxes - It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
Federal income tax provision is required.
Organizational Costs - The cost related to the organization of the Fund has
been deferred and is being amortized on a straight-line basis over a five year
period.
3. INVESTMENT ADVISORY, ACCOUNTING AND TRANSFER AGREEMENTS
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield Investors,
Inc. (MII), provides the Portfolio with investment managment research,
statistical and advisory services.
Mutual Funds Service Co.,(MFS), a wholly-owned subsidiary of MII, serves as
stock transfer, dividend disbursing and shareholder servicing agent for the
Fund. Subject to a $4,000 annual minimum fee the Fund incurs an annual fee
equal to or the greater of $20 per shareholder account or 0.06% of the Fund's
average net assets, payable monthly.
MFS also provides the Trust with certain administrative services. The Fund
incurs an annual fee, payable monthly, of .03% of the Fund's average net
assets.
The Fund has adopted a distribution expense plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Plans"). Pursuant to the Plans, the
Fund may annually incur certain expenses associated with the distribution of
fund shares in amounts not to exceed 3/100 of 1% of the Fund's average net
assets.
Certain officers and/or trustees of the Fund and the Portfolio are officers
and/or directors of MII, RMA and MFS.
4. CAPITAL SHARE TRANSACTIONS
At December 31, 1995, an indefinite number of shares of $0.10 par value stock
were authorized in the Fund and capital amounted to $113,205,205 in The
Institutional Fund. Transactions in capital stock are included elsewhere in
this report.
6 The Institutional Fund 1995 Annual Report
<PAGE> 157
The Institutional Fund 1995 Annual Report
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
The Flex-Partners' Trust
The Institutional Fund:
We have audited the accompanying statement of assets and liabilities of The
Flex-Partners' Trust, The Institutional Fund (Fund) as of December 31, 1995,
and the related statement of operations, statements of changes in net assets
and the financial highlights for the periods indicated herein. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of December 31, 1995, by correspondence with the custodian and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Flex-Partners' Trust, The Institutional Fund at December 31, 1995, the results
of its operations, the changes in its net assets and the financial highlights
for the periods indicated herein, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Columbus, Ohio
February 2, 1996
The Institutional Fund 1995 Annual Report 7
<PAGE> 158
The Institutional Fund 1995 Annual Report
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
MONEY
MARKET
PORTFOLIO
- -------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at market value* $235,104,754
- -------------------------------------------------------------------------------------------
Repurchase Agreements* 21,506,000
- -------------------------------------------------------------------------------------------
Cash 206
- -------------------------------------------------------------------------------------------
Interest receivable 2,245,756
- -------------------------------------------------------------------------------------------
Prepaid/Other assets 1,251
- -------------------------------------------------------------------------------------------
Unamortized organizations costs 7,538
- -------------------------------------------------------------------------------------------
Total Assets 258,865,505
===========================================================================================
LIABILITIES:
Payable for securities purchased 2,680,949
- -------------------------------------------------------------------------------------------
Payable to corresponding Fund 1,477,153
- -------------------------------------------------------------------------------------------
Payable to investment adviser 33,706
- -------------------------------------------------------------------------------------------
Accrued fund accounting fees 4,818
- -------------------------------------------------------------------------------------------
Other accrued liabilities 20,505
- -------------------------------------------------------------------------------------------
Total Liabilities 4,217,131
===========================================================================================
NET ASSETS:
CAPITAL 254,648,374
- -------------------------------------------------------------------------------------------
NET ASSETS $254,648,374
- -------------------------------------------------------------------------------------------
*Securities at cost 256,610,754
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
MONEY
MARKET
PORTFOLIO
- -------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME - NET:
Interest $12,128,882
- -------------------------------------------------------------------------------------------
Total Income 12,128,882
- -------------------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------------------
Investment advisory fees 648,665
Legal fees 1,555
Audit fees 15,695
Custodian fees 17,104
Accounting fees 58,111
Trustees fees and expenses 5,385
Insurance 5,920
Amortization of organization cost 4,978
Other expenses 432
- -------------------------------------------------------------------------------------------
Total Expenses 757,845
Investment advisory fees waived (349,425)
Total Expenses - net 408,420
- -------------------------------------------------------------------------------------------
INVESTMENT INCOME - NET 11,720,462
- -------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $11,720,462
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8 The Institutional Fund 1995 Annual Report
<PAGE> 159
The Institutional Fund 1995 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1994 and
December 31, 1995
<TABLE>
<CAPTION>
Money Market
Portfolio
Year ended December 31,
1995 1994
INCREASE (DECREASE)
IN NET ASSETS:
<S> <C> <C>
OPERATIONS:
Investment income - net $ 11,720,462 $ 8,115,651
Net realized gain (loss)
on investments -- --
Net change in unrealized
appreciation (depreciation)
of investments -- --
- --------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 11,720,462 8,115,651
- --------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 753,617,719 733,486,217
Withdrawals (735,213,083) (717,226,708)
- --------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
transactions of investors'
beneficial interests 18,404,636 16,259,509
- --------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 30,125,098 24,375,160
- --------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 224,523,276 200,148,116
- --------------------------------------------------------------------------------------
NET ASSETS
End of period $254,648,374 $224,523,276
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Portfolio
For the Period
Year Ended Dec. 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec. 31, 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 254,648 224,523 200,148 244,272
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets* 0.21% 0.19% 0.19% 0.18%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 5.87% 4.28% 3.09% 3.60%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets, before waiver of fees 0.38% 0.39% 0.40% 0.40%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 5.70% 4.08% 2.88% 3.38%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized
*Please refer to page 6 for total expense ratios relating to the corresponding
Fund.
See accompanying notes to financial statements
The Institutional Fund 1995 Annual Report 9
<PAGE> 160
The Institutional Fund 1995 Annual Report
THE INSTITUTIONAL FUND ANNUAL REPORT 1995
MONEY MARKET PORTFOLIO, DECEMBER 31, 1995 NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940, as amended, as a no-load, open-end management investment
company which was organized as a trust under the laws of the State of New York.
The Declaration of Trust permits the Trustees to issue beneficial interests in
the Portfolio.
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. The following is a summary
of significant accounting policies followed by the Portfolio.
Investments - Money market securities held in the Money Market Portfolio are
valued at amortized cost, which approximates market value in accordance with
Rule 2a-7 of the Investment Company Act of 1940. Amortized costs also
represents cost for federal income tax purposes.
Repurchase Agreements - It is the Portfolio's policy to take possession of the
collateral for repurchase agreements before payment is made to seller. Market
value of the collateral must be at least 100% of the amount of the repurchase
agreement.
Income Taxes - It is the Portfolio's policy to comply with the requirements of
the Internal Revenue Code applicable to partnerships. Therefore, no Federal
income tax provision is required.
Organizational Costs - The costs related to the organization the Portfolio has
been deferred and is being amortized on a straight-line basis over a five-year
period.
Other - The Portfolio follows industry practice and records security
transactions on the trade date. Gains and losses on security transactions are
determined on the first-in, first-out ("FIFO") basis. Interest income is
recognized as earned.
2. INVESTMENT ADVISORY, ACCOUNTING AND TRANSFER AGREEMENTS R. Meeder &
Associates (RMA), a wholly-owned subsidiary of Muirfield Investors, Inc. (MII),
provides the Portfolio with investment management, research, statistical and
advisory services, and pays certain other expenses of the Portfolio. For such
services the Portfolio pays monthly a fee based upon the average daily value of
the Portfolio's net assets at the following annual rate: 0.40% of average net
assets up to $100 million and 0.25% of average net exceeding $100 million.
During the year ended December 31, 1995, RMA voluntarily waived investment
advisory fees in the Portfolio.
Mutual Funds Service Co. (MFS), a wholly-owned subsidiary of MII, serves as
accounting services agent for the Portfolio. The minimum annual fee for all
such services is $30,000. Subject to the applicable 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.
Certain officers and/or trustees of each Portfolio are officers and/or
directors of MII, RMA and MFS.
10 The Institutional Fund 1995 Annual Report
<PAGE> 161
The Institutional Fund 1995 Annual Report
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
Money Market Portfolio:
We have audited the accompanying statement of assets and liabilities of
the Money Market Portfolio (Portfolio), including the schedule of portfolio
investments, as of December 31, 1995, and the related statement 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 Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of December 31, 1995, by correspondence with the custodian and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the Money Market Portfolio at December 31, 1995, the results of its operations,
the changes in its net assets and the financial highlights for each of the
periods indicated herein, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Columbus, Ohio
February 2, 1996
The Institutional Fund 1995 Annual Report 11
<PAGE> 162
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this Amendment to
its Registration Statement meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dublin, and the State of Ohio on the 29th day of
April, 1996.
THE FLEX-PARTNERS
BY: Donald F. Meeder
_________________________
Donald F. Meeder
Secretary/Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
4/29/96 Donald F. Meeder
________________ __________________________________
Date Signed Donald F. Meeder, Secretary/Treasurer
Pursuant to Powers of Attorney
copies of which are being filed herewith
as Exhibits, for Robert S. Meeder, Sr., Richard A. Farr,
John M. Emery, Roger D. Blackwell,
Lowell Miller and William Gurner
Trustees of The Flex-Partners
4/29/96 Donald F. Meeder
________________ __________________________________
Date Signed Donald F. Meeder
Executed by Donald F. Meeder
Pursuant to Powers of Attorney
<PAGE> 163
SIGNATURES
Mutual Fund Portfolio (the "Portfolio") has duly caused this Post-Effective
Amendment to the Registration on Form N-1A of The Flex-Partners (File No.
33-48922) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 29th day of April,
1996.
MUTUAL FUND PORTFOLIO
By: Donald F. Meeder
_____________________________
Donald F. Meeder
This Post-Effective Amendment to the Registration Statement on Form N-1A of
The Flex-Partners (File No. 33-48922) has been signed below by the following
persons in the capacities with respect to the Portfolio indicated on April 29th,
1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- -----------------------------
Robert S. Meeder, Sr.
Milton S. Bartholomew* Trustee
- -----------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- -----------------------------
Russel G. Means
Donald F. Meeder Secretary/Treasurer, Principal Financial
- -----------------------------
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- -----------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- -----------------------------
Philip A. Voelker
*By: Donald F. Meeder
------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 164
SIGNATURES
Utilities Stock Portfolio (the "Portfolio") has duly caused this
Post-Effective Amendment to the Registration Statement on Form N-1A of The
Flex-Partners to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 29th day of April,
1996.
UTILITIES STOCK PORTFOLIO
By: Donald F. Meeder
__________________________
Donald F. Meeder
This Registration Statement on Form N-1A of The Flex-Partners has been
signed below by the following persons in the capacities with respect to the
Portfolio indicated on April 29, 1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- -----------------------------
Robert S. Meeder, Sr.
Milton S. Bartholomew* Trustee
- -----------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- -----------------------------
Russel G. Means
Donald F. Meeder Secretary/Treasurer, Principal Financial
- -----------------------------
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- -----------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- -----------------------------
Philip A. Voelker
*By: Donald F. Meeder
-------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 165
SIGNATURES
Money Market Portfolio (the "Portfolio") has duly caused this
Post-Effective Amendment to the Registration Statement on Form N-1A of The
Flex-Partners to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 29th day of April,
1996.
MONEY MARKET PORTFOLIO
By: Donald F. Meeder
-----------------------------
Donald F. Meeder
This Registration Statement on Form N-1A of The Flex-Partners has been
signed below by the following persons in the capacities with respect to the
Portfolio indicated on April 29, 1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- -----------------------------
Robert S. Meeder, Sr.
Milton S. Bartholomew* Trustee
- -----------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- -----------------------------
Russel G. Means
Donald F. Meeder Secretary/Treasurer, Principal Financial
- -----------------------------
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- -----------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- -----------------------------
Philip A. Voelker
*By: Donald F. Meeder
------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 166
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Financial Statements included in Part A
Financial Highlights
Financial Statements included in Part B
REGISTRANT - THE FLEX-PARTNERS' TAA FUND AND BTB
FUND
Statements of Assets and Liabilities - December 31, 1995
Statements of Operations - For the periods ended December 31,
1995 Statements of Changes in Net Assets - for the period June
1, 1995 to December 31, 1995 for the TAA Fund and for the period
July 11, 1995 to December 31, 1995 for the BTB Fund
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report dated February 2, 1996.
REGISTRANT - THE FLEX-PARTNERS' INSTITUTIONAL FUND
Statements of Assets and Liabilities - December 31, 1995
Statements of Operations - For the period ended December 31,
1995 Statements of Changes in Net Assets for the year ended
December 31, 1995 and for the period June 15, 1994 to December
31, 1994 Financial Highlights Notes to Financial Statements
Independent Auditors' Report dated February 2, 1996.
PORTFOLIOS - UTILITIES STOCK AND MUTUAL FUND
PORTFOLIOS
Portfolio of Investments - December 31, 1995 Statements of
Assets and Liabilities - December 31, 1995 Statements of
Operations - For the period ended December 31, 1995 Statements
of Changes in Net Assets for the year ended December 31,
1995 and December 31, 1994 for the Mutual Fund Portfolio
and for the period July 11, 1995 to December 31, 1995 for
the Utilities Stock Portfolio
Financial Highlights
<PAGE> 167
Notes to Financial Statements
Independent Auditors' Report dated February 2, 1996.
PORTFOLIO - MONEY MARKET PORTFOLIO
Statements of Assets and Liabilities - December 31, 1995
Statements of Operations - For the period ended December 31,
1995 Statements of Changes in Net Assets for the years ended
December 31, 1995 and December 31, 1994
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report dated February 2, 1996.
Statements and schedules other than those listed above are omitted because they
are not required, or because the information required is included in the
financial statements or notes thereto.
(b) Exhibits - The TAA Fund and The BTB Fund:
1. Declaration of Trust (effective June 22, 1992) --
filed as an exhibit to Registrant's initial
Registration Statement on Form N-1A filed with the
Commission on June 25, 1992, which exhibit is
incorporated herein by reference.
2. By-laws of the Trust -- filed as an exhibit to
Registrant's initial Registration Statement on Form
N-1A filed with the Commission on June 25, 1992,
which exhibit is incorporated herein by reference.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Underwriting Agreement between the Trust and
Roosevelt & Cross, Incorporated filed as an exhibit
to Registrant's Ninth Post- Effective Amendment to
the Registration Statement Form N-1A filed with the
Commission on or about April 28, 1995, which exhibit
is incorporated herein by reference.
7. Not Applicable.
8. Custodian Agreement -- Between the Registrant and
Star Bank, N.A. filed as an exhibit to Registrant's
First Post-Effective Amendment to the Registration
Statement on Form N-1A filed
<PAGE> 168
with the Commission on April 12, 1993, which exhibit
is incorporated by reference herein.
9. Administration Services Agreement between the Fund
and Mutual Funds Service Co. filed as an exhibit to
Registrant's Seventh Post-Effective Amendment to the
Registration Statement on Form N-1A filed with the
Commission on or before February 18, 1995, which
exhibit is incorporated by reference herein
10. Opinion and Consent of Counsel -- filed as an exhibit
to Registrant's initial Registration Statement on
Form N-1A filed with the Commission on June 25, 1992,
which exhibit is incorporated herein by reference.
11. Consent of KPMG Peat Marwick LLP, Independent
Certified Public Accountants is filed herewith.
12. Not Applicable.
13. Investment Representation Letter of Initial
Shareholder filed as an exhibit to Registrant's
Eighth Post-Effective Amendment to the Registration
Statement on Form N-1A filed with the Commission on
April 29, 1995, which exhibit is incorporated by
reference herein.
14. Model Plans and related documents to be used in the
establishment of retirement plans in conjunction with
shares of the Registrant will be filed by amendment.
15. 12b-1 and Service Plans for the Class A Shares and
Class C Shares of The BTB Fund -- reference is made
to the exhibits referred to in Part C, Item 24(b)(15)
of Registrant's Fourth Post-Effective Amendment to
the Registration Statement on Form N-1A filed
with the Commission on or about October 3, 1994, and
is incorporated herein by reference. 12b-1 and
Service Plans for the Class A Shares and Class C
Shares of The TAA Fund -- reference is made to the
exhibits referred to in Part C, Item 24(b)(15) of the
Registrant's Seventh Post-Effective Amendment to the
Registration Statement on Form N-1A filed with the
Commission on or about February 18, 1995, and is
incorporated herein by reference.
16. Schedules for Computation of Performance Quotation
for The BTB Fund and The TAA Fund are filed herewith.
17. Financial Data Schedules for The BTB Fund and The TAA
Fund are filed as an exhibit to Registrant's Ninth
Post-Effective Amendment to the Registration
Statement on Form N-1A filed
<PAGE> 169
with the Commission on or about April 28, 1995, which
exhibit is incorporated herewith by reference.
18. Multiple Class Plans for The BTB Fund and The TAA
Fund are filed herewith filed as an exhibit to
Registrant's Ninth Post-Effective Amendment to the
Registration Statement on Form N-1A filed with the
Commission on or about April 28, 1995, which exhibit
is incorporated herewith by reference.
19. Powers of Attorney of Trustees of Registrant and each
Portfolio -- previously filed and incorporated herein
by reference.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities at December 31, 1995.
<TABLE>
<CAPTION>
Title of Number of
Class Fund Record Holders
-------- ---- --------------
<S> <C> <C>
Class A The TAA Fund 0
Shares of
Beneficial
Interest
Class C The TAA Fund 386
Shares of
Beneficial
Interest
Class A The BTB Fund 53
Shares of
Beneficial
Interest
Class C The BTB Fund 10
Shares of
Beneficial
Interest
</TABLE>
Item 27. Indemnification
Reference is made to Section 5.3 of the Declaration of Trust
filed as an exhibit to the Registrant's initial Registration
Statement on Form N-1A filed with the Commission on June 25,
1992. As provided therein, the Fund is required to indemnify
its officers and trustees against claims and
<PAGE> 170
liability arising in connection with the affairs of the Fund,
except liability arising from breach of trust, bad faith,
willful misfeasance, gross negligence or reckless disregard of
duties. The Fund is obligated to undertake the defense of any
action brought against any officer, trustee or shareholder,
and to pay the expenses thereof if he acted in good faith and
in a manner he reasonably believed to in or not opposed to the
best interest of the Fund, and with respect to any criminal
action had no reasonable cause to believe his conduct was
unlawful. Other conditions are applicable to the right of
indemnification as set forth in the Declaration of Trust. In
applying these provisions, the Fund will comply with the
provisions of Investment Company Act.
Item 28. Business and Other Connections of Investment Adviser.
Not applicable.
Item 29. Principal Underwriters.
(a) Not applicable.
(b)
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
---------------- ----------- ----------
<S> <C> <C>
Dominick F. Antonelli* Chairman, Director None
Richard D. Griffiths* President, Director None
G. Roy Burton* Executive Vice
President, Director None
Gary T. Eggers* Executive Vice
President, Director None
John M. Farawell* Executive Vice
President, Director None
Thomas G. Houston* Executive Vice
President, Secretary
and Treasurer None
Robert P. Luckey* Executive Vice
President, Director None
Eugene F. McCue* Executive Vice
President, Director None
</TABLE>
<PAGE> 171
<TABLE>
<S> <C> <C>
Raymond J. O'Sullivan* Executive Vice
President, Director None
F. Gregory Finn* Executive Vice
President, Director None
</TABLE>
*20 Exchange Place, New York, NY 10005
(c) Not applicable.
Item 30. Location of Accounts and Records.
Registrant's Declaration of Trust, By-laws, and Minutes of
Trustees' and Shareholders' Meetings, and contracts and like
documents are in the physical possession of Mutual Funds
Service Co., or R. Meeder & Associates, Inc., at 6000 Memorial
Drive, Dublin, Ohio 43017. Certain custodial records are in
the custody of Star Bank, N.A., the Fund's custodian, at 425
Walnut Street, Cincinnati, Ohio 45202. All other records are
kept in the custody of R. Meeder & Associates, Inc. and Mutual
Funds Service Co., 6000 Memorial Drive, Dublin, OH 43017.
Item 31. Management Services.
None.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) If the information called for by Item 5A of this
Registration Statement is contained in the latest
annual report to shareholders, Registrant undertakes
to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and
without charge.
(d) The Registrant undertakes to call a meeting of
shareholders for the purpose of voting upon the
question of removal of one or more directors, if
requested to do so by the holders of at least 10% of
the Registrant's outstanding shares, and will assist
communications among shareholders as set forth within
Section 16(c) of the 1940 Act.
<PAGE> 172
(b) Exhibits - The Institutional Fund:
1. Declaration of Trust (effective June 22, 1992) --
filed as an exhibit to Registrant's initial
Registration Statement on Form N-1A filed with the
Commission on June 25, 1992, which exhibit is
incorporated herein by reference.
2. By-laws of the Trust -- filed as an exhibit to
Registrant's initial Registration Statement on Form
N-1A filed with the Commission on June 25, 1992,
which exhibit is incorporated herein by reference.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Not Applicable.
7. Not Applicable.
8. Custodian Agreement -- Between the Registrant and
Star Bank, N.A. filed as an exhibit to Registrant's
First Post-Effective Amendment to the Registration
Statement on Form N-1A filed with the Commission on
April 12, 1993, which exhibit is incorporated by
reference herein.
9. Administration Services Agreement between the Fund
and Mutual Funds Service Co. filed as an exhibit to
Registrant's Seventh Post- Effective Amendment to the
Registration Statement on Form N-1A filed with the
Commission on or before February 18, 1995, which
exhibit is incorporated by reference herein
10. Opinion and Consent of Counsel -- filed as an exhibit
to Registrant's initial Registration Statement on
Form N-1A filed with the Commission on June 25, 1992,
which exhibit is incorporated herein by reference.
11. Consent of KPMG Peat Marwick LLP, Independent
Certified Public Accountants -- filed herewith.
12. Not Applicable.
13. Investment Representation Letter of Initial
Shareholder filed as an exhibit to Registrant's
Eighth Post-Effective Amendment to the Registration
Statement on Form N-1A filed with the Commission
<PAGE> 173
on April 29, 1995, which exhibit is incorporated by
reference herein.
14. Not Applicable.
15. 12b-1 Plan for The Institutional Fund -- reference is
made to the exhibits referred to in Part C, Item
24(b)(15) of Registrant's Second Post-Effective
Amendment to the Registration Statement on Form N-1A
filed with the Commission on or about April 18, 1994,
and is incorporated herein by reference.
16. Schedule for Computation of Performance Quotation for
The Institutional Fund is filed herewith.
17. Financial Data Schedules for The BTB Fund and The TAA
Fund are filed as an exhibit to Registrant's Ninth
Post-Effective Amendment to the Registration
Statement on Form N-1A filed with the Commission on
or about April 28, 1995, which exhibit is
incorporated herewith by reference.
18. Not Applicable.
19. Powers of Attorney of Trustees of Registrant and each
Portfolio -- previously filed and incorporated herein
by reference.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities at December 31, 1995.
<TABLE>
<CAPTION>
Title of Number of
Class Fund Record Holders
-------- ---- --------------
<S> <C> <C>
Shares of The Institutional Fund 16
Beneficial
Interest
</TABLE>
Item 27. Indemnification
Reference is made to Section 5.3 of the Declaration of Trust
filed as an exhibit to the Registrant's initial Registration
Statement on Form N-1A filed with the Commission on June 25,
1992. As provided therein, the Fund is required to indemnify
its officers and trustees against claims and liability arising
in connection with the affairs of the Fund, except liability
arising from breach of trust, bad faith, willful misfeasance,
gross negligence or reckless disregard of duties. The Fund is
obligated to
<PAGE> 174
undertake the defense of any action brought against any
officer, trustee or shareholder, and to pay the expenses
thereof if he acted in good faith and in a manner he
reasonably believed to in or not opposed to the best interest
of the Fund, and with respect to any criminal action had no
reasonable cause to believe his conduct was unlawful. Other
conditions are applicable to the right of indemnification as
set forth in the Declaration of Trust. In applying these
provisions, the Fund will comply with the provisions of
Investment Company 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.
Registrant's Declaration of Trust, By-laws, and Minutes of
Trustees' and Shareholders' Meetings, and contracts and like
documents are in the physical possession of Mutual Funds
Service Co., or R. Meeder & Associates, Inc., at 6000 Memorial
Drive, Dublin, Ohio 43017. Certain custodial records are in
the custody of Star Bank, N.A., the Fund's custodian, at 425
Walnut Street, Cincinnati, Ohio 45202. All other records are
kept in the custody of R. Meeder & Associates, Inc. and Mutual
Funds Service Co., 6000 Memorial Drive, Dublin, OH 43017.
Item 31. Management Services.
None.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) If the information called for by Item 5A of this
Registration Statement is contained in the latest
annual report to shareholders, Registrant undertakes
to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and
without charge.
(d) The Registrant undertakes to call a meeting of
shareholders for the purpose of voting upon the
question of removal of one or more directors, if
requested to do so by the holders of at least 10% of
the
<PAGE> 175
Registrant's outstanding shares, and will assist
communications among shareholders as set forth within
Section 16(c) of the 1940 Act.
<PAGE> 1
EXHIBIT 11
AUDITORS' CONSENT
The Board of Trustees of
The Flex-Partners:
We consent to the use of our reports included herein dated February 2, 1996 on
the financial statements of The TAA and BTB Funds and the Mutual Fund Portfolio
and Utilities Stock Portfolio as of December 31, 1995 and for the periods
indicated therein and to the references to our firm under the headings
"Financial Highlights" in the prospectus and "Auditor" in the Statements of
Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 29, 1996
<PAGE> 1
EXHIBIT 16
THE FLEX-PARTNERS
THE BTB AND TAA FUNDS
COMPUTATION SCHEDULE
Method by which total return (ending redeemable value) is computed:
P (1 + T)n = ERV
P = a hypothetical initial payment of $1,000 T = average annual total
return N = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of one or five periods (or fractional portion thereof)
<TABLE>
<CAPTION>
BTB FUND - CLASS A 0.47 YEAR
- ------------------ ---------
<S> <C>
Beginning Account Balances $1,000.00
Total Return 15.11%
Ending Redeemable Value $1,151.11
</TABLE>
Formula Computation:
0.47 year: $1,000 (1 + .1511) = $1,151.11
<TABLE>
<CAPTION>
BTB FUND - CLASS C 0.47 YEAR
- ------------------ ---------
<S> <C>
Beginning Account Balances $1,000.00
Total Return 15.07%
Ending Redeemable Value $1,150.70
</TABLE>
Formula Computation:
0.47 year: $1,000 (1 + .1507) = $1,150.70
<TABLE>
<CAPTION>
TAA FUND - CLASS C 0.59 YEAR
- ------------------ ---------
<S> <C>
Beginning Account Balances $1,000.00
Total Return 14.57%
Ending Redeemable Value $1,145.70
</TABLE>
Formula Computation:
0.59 year: $1,000 (1 + .1457) = $1,145.70
<PAGE> 2
EXHIBIT 16
THE FLEX-PARTNERS
THE INSTITUTIONAL FUND
YIELD COMPUTATION SCHEDULE
Method by which yield is computed:
YIELD = Base Period Return X (365/7)
EFFECTIVE YIELD = [(Base Period Return + 1)365/7 ] - 1
Beginning Account Balance 1.00
Dividend Declaration
December 25 0.00015329
December 26 0.00015274
December 27 0.00015192
December 28 0.00015247
December 29 0.00015439
December 30 0.00015439
December 31 0.00015439
----------
<TABLE>
<S> <C>
0.00107359
Less: Deductions from Shareholders Accounts 0.00
----------
Ending Account Balance 1.00107359
Less: Beginning Account Balance -1.00
----------
Difference 0.00107359
Base Period Return
(Difference/Beginning Account Balance) 0.00107359
Yield Quotation
(Base Period Return * 365/7) 5.60%
Effective Yield Quotation
[(Base Period Return + 1 )*365/7 ] - 1 5.75%
</TABLE>
The yield quotations were computed based on the seven days ending December 31,
1995 for the period ended December 31, 1995.
