Semiannual Report 1996
THE FLEX-PARTNERS FUNDS
Investment Adviser/R. Meeder & Associates
The TAA Fund
The BTB Fund
<PAGE>
To Our Shareholders
Lest we forget...the ultimate force behind a rising (or falling) stock market
is supply and demand. Investor expectations of profit, or the fear of loss,
determine the imbalance of buy or sell orders in the marketplace. The decision
to buy or sell normally starts with the investment analysis process and
generally concludes with a rational decision based on predetermined criteria.
However, when the time comes to execute the decision, the psychology of the
market environment (greed or fear) becomes the predominant force in determining
when or how an investor's assets should be invested. The interesting and
challenging part of this dynamic process is that it is like a pendulum. The
greed and fear of investors can become extreme, resulting in excess optimism or
pessimism that manifests itself in unusual risk or opportunity.
Photographic image of Robert S. Meeder Sr. president
<PAGE>
My last letter referred to the market's volatility and the potential of the
bull market coming to an end. The market volatility of the last two months has
produced evidence that the market may be reversing its direction from a rising
to a declining trend. A review of the stock market's dynamics is of interest
as a comparison with the past and in order to help identify the market's
"condition" as of June 30.
Net new money flowing into equity mutual funds in the first six months of
this year was more than all the net new money for 1995. Last year's money flow
set an all-time record. The historic infusion of assets so far this year (over
$10 billion a month) resulted in a modest gain for the stock market, which may
not be a good sign for the overall health of the market.
Over $18 billion in IPO's (Initial Public Offerings) were brought to market
during the second quarter. That's 50% greater than the previous record. This
fact may also be a bad sign for the health of the market as it is indicative
of excessive speculation (greed).
The July 1 issue of New Issue Digest reported current new issues were
priced at all-time high multiples. A few examples were: Aspect Development
with a P/E ratio of 461, Arbor Software's ratio was 397, Documentum's P/E was
289, and fifteen companies were valued at over 100 times earnings. All the
companies listed in this publication averaged a P/E of 63. Immediately
preceding the bear market of 1973-74, one of the worst bear markets of this
century, the New Issue Digest listed 114 companies with an average valuation
of 23 times earnings.
The recent price times dividend ratio of stocks listed on the New York
Stock Exchange established an all-time high. This means dividend yield was at
an all-time low. In the second quarter of this year more investment dollars
were required to purchase a dollar of dividends, on average, than at any other
time in the history of the Exchange.
There are other related statistics which suggest the recent levels of the
market are vulnerable. Among these are all time highs in margin debt, the
price of a "seat" on the NYSE, and the market value of companies compared to
their replacement cost. Historically, such extremes are associated with market
tops.
This partial review of the recent stock market environment is intended to
help identify the potential risk from a market that has had but one decline
greater than ten percent since 1987, an unusually long period from an
historical perspective. This information suggests an imbalance of demand in
the supply and demand forces developed over the last several months. We are
concerned about the possible market risk that could develop if market forces
shift to the supply side. It is our responsibility to manage this risk and
protect our shareholders.
Sincerely,
Robert S. Meeder Sr.
President
August 1, 1996
<PAGE>
The TAA Fund C The Mutual Fund Portfolio
The TAA Fund provided a total return greater than the average Asset
Allocation utual fund so far this year and for the 12 months ended June 30,
according to data from Morningstar, Inc., an independent mutual fund monitor.
During the first half of 1996, The TAA Fund provided a total return of
6.26 percent, compared to a total return from the average Asset Allocation
mutual fund of 4.72 percent. For the 12 months ended June 30, The TAA Fund
provided a total return of 16.97 percent, compared to a return of 14.36
percent from the average Asset Allocation fund.
Photographic image of Robert S. Meeder Jr. portfolio manager
The Portfolio
Concerns raised by our discipline regarding the risk/reward relationship of
the stock market prompted us to adopt a partially defensive position for The
TAA Fund early in the quarter (see discussion that begins at right).
The TAA Fund gained its exposure to the stock market during the second
quarter through investments in other growth mutual funds, with an emphasis on
funds with significant exposure to small capitalization stocks.
===============================================================================
The Stock Market
How The TAA Fund was invested
Our investment discipline indicated that the risk/reward relationship of
the stock market was largely positive during the second quarter. There were,
however, a few exceptions to this evaluation. Among the items that caused us
concern: the continuation of a rising trend in interest rates, the
deterioration in a few technical aspects of our stock market evaluation, and
the continued overvaluation of the stock market.
Though we never adopted a fully defensive posture during the second
quarter, there were times, especially during the early part of the quarter,
when our evaluation raised questions about the level of risk present in the
stock market. Because of this evaluation, we increased the exposure of The TAA
Fund to money market instruments during early April. The Fund was not exposed
to the bond market during the second quarter due to our negative evaluation of
interest rates.
During the second quarter, The TAA Fund emphasized mutual funds with
exposure to small capitalization stocks. Among the sizable mutual fund
positions held by The TAA Fund were: T. Rowe Price New Horizons, Founders
Growth, Fidelity Advisor Equity Growth, Value Line Fund, and the Fidelity
Contrafund (some but not all of these funds featured significant exposure to
small capitalization stocks). For a listing of the holdings of The Mutual Fund
Portfolio, see pages 3-4 of this report.
After our concerns subsided in mid-April, the broad stock market averages
(the NASDAQ and the AMEX, for example) began to outperform the Dow Jones
Industrial Average. This factor and positive developments regarding internal
measurements of the stock market, which were also in place at the time, are
typically signs that the level of risk in the stock market is low and exposure
to the stock market is warranted.
By the second week in June, however, these positive developments began to
change. Various internal stock market measurements began to deteriorate and
prices on the broad stock market began to reveal considerable weakness versus
the Dow. We perceived these factors, along with other negative developments,
such as a decline in the number of stocks making new highs, to be initial
signs that the risk reward relationship of the stock market was changing from
a positive/low risk environment to a negative/high risk environment.
As the second quarter closed, we were watching developments in the stock
market closely to determine if we should reduce our exposure to the market.
Despite the fact that some aspects of our investment discipline were
deteriorating, other aspects of our discipline, which had been negative for
some time, began to stabilize and improve. The ongoing advance of interest
rates slowed and the bond market stabilized somewhat. Measurements of investor
sentiment showed modest signs of improvement based on the fact that optimism
regarding stock market conditions was cooling. In general, excessive optimism
about the stock market is considered a negative for the market.
We remain watchful for a resolution, either positive or negative, of
our current concerns regarding the stock market. We are confident in our
ability to monitor and evaluate stock market conditions and to act
appropriately in defense of our shareholders.
Pie Charts
The Mutual Fund Portfolio
portfolio exposure as of June 30, 1996
Mutual Funds/96%
Money Market Instruments/4%
Recent Total Returns
for periods ended June 30, 1996
1 year
Average Asset Allocation Fund 14.36%
The TAA Fund C Shares 16.97%
6 months
Average Asset Allocation Fund 4.72%
The TAA Fund C Shares 6.26%
<PAGE>
The BTB Fund
A and C Shares
So far this year, The BTB Fund's A and C Shares have outperformed the total
return of the average Utility Fund, according to Morningstar, Inc., an
independent mutual fund monitor.
For the six months ended June 30, The BTB Fund A and C shares provided
total returns of 4.88 percent and 4.66 percent, respectively. These returns
compare favorably with the average Utility fund, which offered a total return
for the period of 3.76 percent.
Photographic image of Lowell G. Miller portfolio manager
For the 12 months ended June 30, The BTB Fund A shares provided a total
return of 20.72 percent and the C shares provided a total return of 20.44
percent. The average Utility fund provided a return of 18.52 percent, for the
same period, according to Morningstar, Inc.
The second quarter unfolded essentially as expected, with bonds and the
credit markets generally continuing to respond testily to signs of strength in
the economy. In the first quarter report, we suggested that a "rather good"
buying opportunity was at hand, despite noise from the credit markets, and
this time, at least, our suspicions were well-founded.
From our perspective one of the most interesting features of the second
quarter was that many of the "bad" utility investments turned in solid
showings. One would expect these, most of which are the highest yielding
equities, to be much more sensitive to interest rates than has been shown over
the past few quarters. This feature continues to prompt us to wonder if the
popular fears that have been raised in the press about utilities in recent
years have been perceived by substantial investors as material from which a
floor for risk can be constructed.
Deeming our portfolio well-positioned, we did not make many moves in the
second quarter. We added NYNEX on speculation regarding a NYNEX/Bell Atlantic
combination which we thought was a certainty. While we weren't especially
interested in NYNEX we felt that the solid dividend couldn't hurt, and we were
interested in defending our position in Bell Atlantic, to which we were
committed (As you know, often the acquiring company's stock may decline when a
deal is announced. Since we wanted to hold the combined company anyway, it
made sense to participate in both sides). As it turned out there was more
speculative froth in the NYNEX shares than we'd estimated and, to add insult
to injury, the Bell Atlantic shares rose on the news. So we are temporarily
behind on our maneuvers, but receiving a fine dividend while we await the
finalization of one of the most interesting deals in the new
telecommunications landscape.
We also added Questar, which has a solid base of gas distribution and
pipelines in the mountain states (Utah, Wyoming, Colorado). Questar has an
excellent record of success in unregulated ventures such as gas marketing,
gathering, exploration and production.
You may recall that last quarter we added the major gas distributor Pacific
Enterprises. This stock was a leader for our portfolio this past quarter,
rising over ten percent on the back of a share-repurchase announcement and a
dividend increase. In general, gas related stocks were a big help this past
quarter, and some laggard electrics such a Cinergy and Pacificorp finally
caught fire.
We benefited from a position in the initial public offering of Exel Corp.
We had contemplated maintaining a position in this long distance phone
reseller, but decided to take profits quickly. For a complete list of the
holdings of The Utilities Stock Portfolio, see pages 4-6 of this report.
In the near term, our outlook hasn't changed much. Despite all the fuss
about high employment coming from credit market pundits, we still have yet to
see any meaningful inflation numbers, or any real stress on capacity
utilization. There's something of the "little market who cried wolf" going on
here and we are reminded of the drubbing the markets took in 1994 over
prospects for higher inflation which never materialized.
We see no reason why this can't happen again, leaving bonds and high yield
stocks on a high and dry plateau of undervaluation relative to the inflation
background. We're always vigilant about our positioning when interest rates
are threatening, but there are simply too many signs that risk in the utility
market is limited for us to become overly concerned.
Pie Charts
The Utilities Stock Portfolio
portfolio exposure as of June 30, 1996
Telecommunication Services/31.8%
Natural Gas Dist./19.0%
Electric Utility/19.7%
Oil-Gas/8.2%
Electric-Gas/7.2%
Water-Diversified/4.9%
Repurchase Agreements/4.2%
Propane/2.8%
Telecommunications Equip./2.2%
Recent Total Returns
for periods ended June 30, 1996
1 year
Average Utility Stock Fund 18.52%
The BTB Fund C Shares 20.44%
The BTB Fund A Shares 20.72%
6 months
Average Utility Stock Fund 3.76%
The BTB Fund C Shares 4.66%
The BTB Fund A Shares 4.88%
<PAGE>
<TABLE>
Mutual Fund Portfolio
Portfolio of Investments as of June 30, 1996
<CAPTION>
===================================================================================================================================
SHARES OR
FACE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS - 88.8%
Aim Constellation Fund 83 $2,090
Aim Weingarten Fund 269,438 5,170,511
Acorn International Fund 395,887 6,199,585
Charles Schwab Money Market Fund 7,516,062 7,516,062
Columbia Growth Fund 95,208 3,178,991
Fidelity Contra Fund 255,196 10,039,412
Fidelity Core Money Market Fund 9,036,616 9,036,616
Fidelity Equity Portfolio Growth Fund 252,291 10,490,271
Fidelity Fund 217,682 5,365,850
Founders Blue Chip Fund 1,351,086 10,511,448
Founders Growth Fund 968,467 16,105,602
Neuberger & Berman Partners Fund 259,628 6,347,901
PBHG Growth Fund 197,718 5,441,198
T.Rowe Price New Era Fund 122 3,055
T.Rowe Price New Horizons Fund 617,458 14,287,978
Value Line Fund 522,360 10,535,999
Value Line Leveraged Growth Fund 195,156 6,176,701
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $116,595,318) 126,409,270
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 1.1%
*U.S. Treasury Bill, 5.00%, due 8/01/96 $1,650,000 1,642,896
U.S. Treasury Bill, 4.90%, due 1/09/97 30,100 29,252
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $1,672,210) 1,672,148
- -----------------------------------------------------------------------------------------------------------------------------------
*Pledged $1,650,000 face amount as collateral on futures contracts
REPURCHASE AGREEMENTS - 10.1%
(Collateralized by U.S. Government obligations - market value $14,353,773)
Paine Weber Incorporated, dated 6/28/96, 5.55%, due 7/01/96 14,343,000 14,343,000
===================================================================================================================================
<PAGE>
<CAPTION>
<S> <C> <C>
TOTAL REPURCHASE AGREEMENTS
(Cost $14,343,000) 14,343,000
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $132,610,528) $142,424,418
===================================================================================================================================
FUTURES CONTRACTS
CONTRACTS
Long, S&P 500 futures contracts face amount $19,965,600 expiring in September, 1996. 59 $110,625
Long, Midcap futures contracts face amount $6,514,750 expiring in September, 1996. 55 2,250
- -----------------------------------------------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $112,875
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
Utilities Stock Portfolio
Portfolio of Investments as of June 30, 1996
<CAPTION>
===================================================================================================================================
SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.8%
ELECTRIC/GAS UTILITY - (7.2%)
MDU Resources Group Incorporated 6,100 $131,150
Montana Power Company 1,300 28,925
Nipsco Industries Incorporated 4,700 189,175
Utilicorp United Incorporated 6,500 179,563
- -----------------------------------------------------------------------------------------------------------------------------------
528,813
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - (19.7%)
AES Corporation 8,600 242,950
Cinergy Corporation 7,900 252,800
Ipalco Enterprises Incorporated 6,000 157,500
KU Energy Corporation 3,300 98,588
LG&E Energy Corporation 8,600 196,725
Pacificorp 10,000 222,500
Teco Energy Incorporated 11,000 277,750
- -----------------------------------------------------------------------------------------------------------------------------------
1,448,813
- -----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED UTILITY - (2.1%)
Citizens Utilities Company Class B 13,093 152,208
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
<S> <C> <C>
NATURAL GAS (DISTRIBUTOR) - (19.0%)
Bay State Gas Company 2,200 61,325
Brooklyn UN Gas Company 5,900 160,775
Consolidated Natural Gas Company 3,900 203,775
MCN Corporation 6,200 151,125
Nicor Incorporated 1,800 51,075
Pacific Enterprises 7,000 207,375
Panhandle Eastern Corporation 5,500 180,812
Transcanada Pipelines Ltd. 8,200 120,950
UGI Corporation 2,000 44,000
Wicor Incorporated 5,800 218,950
- -----------------------------------------------------------------------------------------------------------------------------------
1,400,162
- -----------------------------------------------------------------------------------------------------------------------------------
OIL/GAS (DOMESTIC) - (8.2%)
Enron Corporation 3,000 122,625
Questar Corporation 5,300 180,200
Sante Fe Pacific Pipeline Partners 2,600 90,350
Williams Companies Incorporated 4,200 207,900
- -----------------------------------------------------------------------------------------------------------------------------------
601,075
- -----------------------------------------------------------------------------------------------------------------------------------
PROPANE (DISTRIBUTOR) - (2.8%)
National Propane Partners LP 10,000 210,000
- -----------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT - (2.2%)
DSC Communications 2,000 60,250
Vanguard Cellular 4,700 102,225
- -----------------------------------------------------------------------------------------------------------------------------------
162,475
- -----------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (31.8%)
360 Communications Company 1,466 35,184
ALLTEL Corporation 8,100 249,075
Bell Atlantic Corporation 2,400 153,000
Bellsouth Corporation 4,000 169,500
Century Telephone 9,500 302,813
Frontier Corporation 10,500 321,562
GTE Corporation 5,200 232,700
MCI Communications 5,000 128,125
Nynex Corporation 3,800 180,500
<PAGE>
<CAPTION>
<S> <C> <C>
===================================================================================================================================
Sprint Corporation 4,400 184,800
Tele Denmark 7,000 177,625
U.S. West Incorporated 6,000 191,250
United Media Group 1,000 18,250
- -----------------------------------------------------------------------------------------------------------------------------------
2,344,384
- -----------------------------------------------------------------------------------------------------------------------------------
WATER UTILITIES - (2.8%)
American Water Works Incorporated 5,100 205,275
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $6,530,377) 7,053,205
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.0%
U.S. Treasury Bill, 4.90%, due 1/09/97 $1,000 972
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $974)
- -----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 4.2% (Collateralized by U.S. Government obligations
market value $307,231) Paine Weber Incorporated, dated 6/28/96, 5.55%,
due 7/01/96 307,000 307,000
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $307,000) 307,000
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $6,838,352) $7,361,l77
===================================================================================================================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
Statements of Assets and Liabilities
June 30, 1996 (unaudited)
<CAPTION>
===================================================================================================================================
TAA FUND BTB FUND
Assets:
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment in corresponding portfolio $14,220,178 $3,400,752
Receivable for capital stock issued 15,417 25,820
- -----------------------------------------------------------------------------------------------------------------------------------
Unamortized organizational costs 32,468 22,918
Prepaid expenses and other assets 8,072 12,743
Total Assets 14,276,135 3,462,233
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
- -----------------------------------------------------------------------------------------------------------------------------------
Payable for capital stock redeemed - 14,656
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends payable - 1,763
Accrued transfer agent and administrative fees 1,291 902
Accrued liabilities 48,250 25,094
Total Liabilities 49,591 42,415
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets,
- -----------------------------------------------------------------------------------------------------------------------------------
Capital 13,691,821 3,217,951
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net investment loss (43,589) (38)
Accumulated undistributed net realized gain on investments 356,638 72,048
Net unrealized gain on investments 221,724 129,856
Net Assets $14,226,594 $3,419,817
===================================================================================================================================
Net Assets,
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Shares N/A $1,290,854
- -----------------------------------------------------------------------------------------------------------------------------------
Class C Shares 14,226,594 2,128,963
- -----------------------------------------------------------------------------------------------------------------------------------
Total $14,226,594 $3,419,817
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares) :
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Shares N/A 87,188
- -----------------------------------------------------------------------------------------------------------------------------------
Class C Shares 1,009,992 143,737
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,009,992 230,925
===================================================================================================================================
Net asset value - redemption price per share:
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Shares $ N/A $14.81
- -----------------------------------------------------------------------------------------------------------------------------------
Class C Shares * 14.09 14.81
- -----------------------------------------------------------------------------------------------------------------------------------
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 $15.43
===================================================================================================================================
<FN>
* Redemption price varies based upon holding period See accompanying notes to
financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For the six months ended June 30, 1996 (unaudited)
<CAPTION>
===================================================================================================================================
TAA FUND BTB FUND
<S> <C> <C>
Net investment income from corresponding portfolio:
- -----------------------------------------------------------------------------------------------------------------------------------
Interest $72,320 $ 8,332
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends 10,726 45,601
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses (56,086) (22,263)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Net Investment Income From Corresponding Portfolio 26,960 31,670
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Expenses:
- -----------------------------------------------------------------------------------------------------------------------------------
Legal fees 839 537
Audit fees 1,734 2,797
Printing 1,407 2,184
Transfer agent fees 6,213 3,704
Administrative fee 1,926 424
Trustees fees and expenses 3,152 2,597
Distribution plan - Class A - 1,268
Distribution plan - Class C 48,156 6,785
Shareholder servicing fee - Class A - 1,267
Shareholder servicing fee - Class C 16,052 2,262
Amortization of organizational costs 2,828 2,917
Registration 9,965 12,211
Postage 959 506
Other expenses 2,133 2,315
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses 95,364 41,774
Expenses reimbursed by adviser (24,815) (37,490)
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Total expenses - net 70,549 4,284
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INVESTMENT INCOME (LOSS) - NET (43,589) 27,386
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - NET:
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized loss on futures (121,831) -
Net realized gain on investments 511,375 72,436
Change in unrealized appreciation of investments 423,269 40,742
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NET GAIN ON INVESTMENTS 812,813 113,178
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $769,224 $140,564
===================================================================================================================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For the six months ended June 30, 1996 (unaudited) and the period ended December 31, 1995
<CAPTION>
===================================================================================================================================
TAA Fund BTB Fund
CLASS C CLASS A
For the six For the For the six For the
months ended period ended months ended period ended
June 30, 1996 Dec. 31, 1995* June 30, 1996 Dec. 31, 1995*
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income (loss) - net ($43,589) ($13,080) $27,386 $4,414
Net realized gain on investments and futures contracts 389,544 814,327 72,436 (388)
Net change in unrealized appreciation of investments 423,269 (202,813) 40,742 89,114
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 769,224 598,434 140,564 93,140
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net - - (27,424) (4,414)
Net Realized gain (loss) from investment transactions - (847,234) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from dividends
and distributions - (847,234) (27,424) (4,414)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 2,556,968 11,115,307 2,448,243 1,335,133
Reinvestment of dividends - 847,234 24,190 3,831
Cost of redemptions (623,278) (190,061) (588,420) (5,026)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from capital share
transactions 1,933,690 11,772,480 1,884,013 1,333,938
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 2,702,914 11,523,680 1,997,153 1,422,664
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - Beginning of period 11,523,680 - 1,422,664 -
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of period $14,226,594 $11,523,680 $3,419,817 $1,422,664
===================================================================================================================================
SHARE TRANSACTIONS:
Issued 185,717 808,680 171,274 99,792
Reinvested - 63,894 1,837 277
Redeemed (44,973) (13,326) (41,891) (364)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in shares 140,744 869,248 131,220 99,705
===================================================================================================================================
<PAGE>
<CAPTION>
Statements of Changes in Net Assets
For the six months ended June 30, 1996 (unaudited) and the period ended December 31, 1995
===================================================================================================================================
BTB Fund
CLASS A SHARES CLASS C SHARES
For the six For the For the six For the
months ended period ended months ended period ended
June 30, 1996 Dec. 31, 1995** June 30, 1996 Dec. 31, 1995**
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income (loss) - net $10,444 $2,947 $16,942 $1,467
Net realized gain on investments and futures contracts 26,564 (195) 45,872 (193)
Net change in unrealized appreciation of investments 18,339 50,091 22,403 39,023
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 55,347 52,843 85,217 40,297
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (10,444) (2,947) (16,980) (1,467)
Net Realized gain (loss) from investment transactions - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from dividends
and distribution s(10,444) (2,947) (16,980) (1,467)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 789,715 593,527 1,658,528 741,606
Reinvestment of dividends 9,024 2,365 15,166 1,466
Cost of redemptions (193,550) (5,026) (394,870) -
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from capital
share transactions 605,189 590,866 1,278,824 743,072
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 6 50,092 640,762 1,347,061 781,902
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - Beginning of period 640,762 - 781,902 -
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of period $1,290,854 $640,762 $2,128,963 $781,902
===================================================================================================================================
SHARE TRANSACTIONS:
Issued 55,260 45,114 116,014 54,678
Reinvested 670 173 1,167 104
Redeemed (13,665) (364) (28,226) -
- -----------------------------------------------------------------------------------------------------------------------------------
Change in shares 42,265 44,923 88,955 54,782
===================================================================================================================================
<FN>
*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
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
Selected per share data and ratios for an average share outstanding during each period
<CAPTION>
===================================================================================================================================
BTB Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1996 (Unaudited) For the Period July 11, 1995* to December 31, 1995
Class A Class C Class A Class C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $14.26 $14.27 $l2.50 $12.50
- -----------------------------------------------------------------------------------------------------------------------------------
Increase from Investment Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment income 0.14 0.12 0.12 0.10
- -----------------------------------------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) 0.55 0.54 1.76 1.77
- -----------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.69 0.66 1.88 1.87
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) (0.14) (0.12) (0.12) (0.10)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.12) (0.12) (0.10)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of period $14.81 $14.81 $14.26 $14.27
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 4.88 % 4.66% 15.11 % 15.07 %
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of period ($000) 1.291 2,129 641 782
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.75 % 1 2.00 % 1 1.75 % 1 2.00 %
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets 2.06 % 1 1.87% 1 2.17 % 1 1.72 % 1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets,
before waiver of fees 4.40 % 1 4.65% 1 22.70 % 1 13.27 % 1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets,
before waiver of fees -0.59 % 1 -0.78% 1 -18.78 % 1 -9.55 % 1
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Date of inception
1 Annualized
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAA Fund - Class C
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1996 (Unaudited) For the Period June 1, 1995* to December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of period $13.26 $12.50
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment income (0.05) (0.02)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) 0.88 1.84
- -----------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.83 1.82
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions (from capital gains) -- (1.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.00 (1.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of period $14.09 $13.26
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 6.26 % 14.57 %
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of period ($000) 14,227 11,524
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.98 % 1 1.97 % 1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets -0.68 % 1 -0.29 % 1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets,
before waiver of fees 2.36 % 1 2.80 % 1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets,
before waiver of fees -1.06 % 1 -1.12 % 1
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Date of inception
1 Annualized
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
The Flex-Partners Trust
The TAA Fund and The BTB Fund
Notes to Financial Statements June 30, 1996
===============================================================================
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 June 30,
1996 The TAA Fund held approximately 10% of the total assets of the Mutual
Fund Portfolio and The BTB Fund held approximately 48% of the total assets of
the Utilities Stock Portfolio.
The financial statements of the Portfolios, including the Portfolios of
Investments, are included elsewhere in this report and should be read in
conjunction with the financial statements of each respective Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Valuation of Investments -- 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 15).
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.
Distributions 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 service 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 June 30, 1996, an indefinite number of shares of $0.10 par value stock
were authorized in each of the Funds and paid in capital amounted to
$13,691,821 in The TAA Fund and $3,217,951 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 June 30, 1996, 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.
<PAGE>
<TABLE>
Statements of Assets & Liabilities
June 30, 1996 (unaudited)
===============================================================================
<CAPTION>
MUTUAL FUND UTILITIES STOCK
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments at market value* $128,081,418 $7,054,177
- -------------------------------------------------------------------------------
Repurchase Agreements* 14,343,000 307,000
- -------------------------------------------------------------------------------
Cash 975 431
Receivable for securities sold - -
Receivable for futures contracts settlement 112,875 -
Interest receivable 110,925 142
Dividends receivable - 24,418
Prepaid/Other assets 1,980 431
Unamortized organization costs 7,666 35,673
- -------------------------------------------------------------------------------
Total Assets 142,658,819 7,409,593
- -------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased - 210,000
- -------------------------------------------------------------------------------
Payable to investment adviser 85,959 5,246
- -------------------------------------------------------------------------------
Accrued fund accounting fees 3,971 522
Other accrued liabilities 16,194 45,703
- -------------------------------------------------------------------------------
Total Liabilities 106,124 261,471
- -------------------------------------------------------------------------------
Net Assets.
Capital 132,528,108 6,625,297
- -------------------------------------------------------------------------------
Net unrealized gain (loss) on investments 10,024,590 522,825
- -------------------------------------------------------------------------------
Net Assets $142,552,695 $7,145,122
===============================================================================
*Securities at cost 132,610,528 6,838,352
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
For the six months ended June 30, 1996 (unaudited)
===============================================================================
<CAPTION>
MUTUAL FUND UTILITIES STOCK
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME - NET:
Interest $750,965 $10,516
- -------------------------------------------------------------------------------
Dividends 104,627 104,845
- -------------------------------------------------------------------------------
Total Income 855,592 115,361
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Investment advisory fees 531,305 29,586
Legal fees 1,028 799
Audit fees 6,925 3,865
Custodian fees 5,008 1,889
Accounting fees 24,775 4,208
Trustees fees and expenses 2,675 2,675
Insurance 1,067 15
Amortization of organization cost 2,712 4,474
Other expenses 201 361
- -------------------------------------------------------------------------------
Total Expenses 575,696 47,870
Investment advisory fees waived - -
- -------------------------------------------------------------------------------
Total Expenses - net 575,696 159,275
- -------------------------------------------------------------------------------
INVESTMENT INCOME - NET 279,896 67,491
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- -------------------------------------------------------------------------------
Net realized gain (loss) on futures
contracts (1,264,062)
- -------------------------------------------------------------------------------
Net realized gain on investments 5,302,348 152,239
- -------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments 4,344,245 100,406
- -------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 8,382,531 252,645
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $8,662,427 $320,136
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
For the six months ended June 30, 1996 (unaudited)
and year ended December 31, 1995
===================================================================================================================================
<CAPTION>
MUTUAL FUND PORTFOLIO UTILITIES STOCK PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Year Ended Six Months Year Ended
Ended June 30, December 31, June 30, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income - net $279,896 $1,278,396 $67,491 $29,889
Net realized gain
on investments
and futures contracts 4,038,288 15,554,692 113,432 (1,067)
Net change in unrealized
appreciation (depreciation)
of investments 4,344,245 5,680,803 100,406 422,419
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from operations 8,662,427 22,513,891 320,136 451,241
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 22,142,713 34,671,819 3,241,294 3,908,655
Withdrawals (10,361,574) (18,261,284) (704,178) (69,026)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
transactions of investors'
beneficial interests 11,781,139 16,410,535 2,537,116 3,839,629
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 20,443,566 38,924,426 2,857,252 4,290,870
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 122,109,129 83,184,703 4,290,870 -
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $142,552,695 $122,109,129 $7,148,12 $4,290,870
===================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
Ratios/Supplemental Data
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Fund Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1996 (unaudited) 1995 1994 1993
<S> <C> <C> <C> <C>
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000) 142,553 122,109 83,185 81,605
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 0.87 %1 0.95 % 1.01 % 1.03 %
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets 0.43 %1 1.26 % 2.76 % 0.09 %
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 92.04 % 186.13 % 168.17 % 279.56 %
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities Stock Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended For The Period June 21, l995* to
June 30, 1996 (unaudited) December 31, 1995
<S> <C> <C>
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period 7,148 4,291
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.61 %1 2.32 %1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets 2.27 %1 2.09 %1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets
before directed brokerage payments N/A 2.40 %1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets
before directed brokerage payments N/A 2.01 %1
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20.28 % 5.06 %
- -----------------------------------------------------------------------------------------------------------------------------------
Average brokerage commission per share $0.0600 $0.0600
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Annualized
* Date of Inception
</FN>
</TABLE>
<PAGE>
Mutual Fund Portfolio
Utilities Stock Portfolio
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Each separate Portfolio (the "Portfolios") is registered under the Investment
Company Act of 1940, as amended, as a no-load, open-end management investment
company which was organized as a trust under the laws of the State of New
York. Each Declaration of Trust permits the Trustees, who are the same for all
the Portfolios, to issue beneficial interests in each Portfolio. The following
is a summary of significant accounting policies followed by the Portfolios.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments - Money market securities held in the 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 Portfolios' policy to take possession of
the collateral for repurchase agreements before payment is made to the seller.
Market value of the collateral must be at least 100% of the amount of the
repurchase agreement.
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.
To the extent that the Portfolio enters into futures contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change
in the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit either cash or securities in an amount
("initial margin") equal to a certain percentage of the contract value.
Subsequent payments ("variation margin") equal to changes in the daily
settlement price or last sale on the exchanges where they trade are paid or
received each day and are recorded as a gain or loss on futures contracts.
<PAGE>
Call and put option contracts involve the payment of a premium for the right
to purchase or sell an individual security or index aggregate at a specified
price until the expiration of the contract. Such transactions expose the
Portfolio to the loss of the premium paid if the Portfolio does not sell or
exercise the contract prior to the expiration date. In the case of a call
option, sufficient cash or money market instruments will be segregated to
complete the purchase. Options are valued on the basis of the daily settlement
price or last sale on the exchanges where they trade and the changes in value
are recorded as an unrealized gain or loss until sold, exercised or expired.
In the case of a written option, premiums received by each portfolio upon
writing the option are recorded in the liability section of the Statement of
Assets and Liabilities and are subsequently adjusted to current market value.
When the written option is closed, exercised or expired, the portfolio
realizes a gain or loss and the liability is eliminated.
Income Taxes - It is the Portfolios' policy to comply with the requirements
of the Internal Revenue Code applicable to it. Therefore, no Federal income tax
provision is required.
Organizational Costs - The costs related to the organization of each of the
Portfolios have been deferred and are being amortized by each Portfolio on a
straight-line basis over a five-year period.
Other - The Portfolios follow industry practice and record security
transactions on the trade date. Gains and losses on security transactions are
determined on the specific identification basis. Dividend income is recognized
in the ex-dividend date, and nterest income (including amortization of premium
and discount) is recognized as earned.
2. INVESTMENT ADVISORY, AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield
Investors, Inc. (MII), provides the Portfolios with investment management,
research, statistical and advisory services, and pays certain other expenses
of the Portfolios. Miller/Howard Investments, Inc. (Subadviser) serves as the
Utilities Stock Portfolio's Subadviser under an Investment Subadvisory
Agreement between RMA and the Subadviser. For such services the Portfolios pay
monthly a fee based upon the average daily value of each Portfolios' net
assets at the following annual rates: Mutual Fund and Utilities Stock
Portfolio, 1% of average net assets up to $50 million, 0.75% of average net
assets exceeding $50 million up to $100 million and 0.60% of average net
assets exceeding $100 million.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
accounting services agent for all of the Portfolios. The minimum annual fee
for all such services for the Mutual Fund and Utilities Stock Portfolios is
$7,500. Subject to the applicable minimum fee, each Portfolio's annual fee,
payable monthly, is computed at the rate of 0.15% of the first $10 million,
0.10% of the next $20 million, 0.02% of the next $50 million, and 0.01% in
excess of $80 million of the respective Portfolio's average net assets.
Certain officers and/or trustees of the Funds and each Portfolio are officers
and/or directors of MII, RMA and MFS.
<PAGE>
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the six months ended June 30, 1996 were
as follows:
Portfolio Purchases Sales
- -------------------------------------------------------------------------------
Mutual Fund Portfolio $81,311,667 $68,651,439
Utilities Stock Portfolio $ 4,002,145 $ 1,027,839
<TABLE>
As of June 30, 1996, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised of
the following:
<CAPTION>
Net Unrealized
Unrealized Unrealized Appreciation
Investment Appreciation Depreciation (Depreciation)
Portfolio Cost of Investments of Investments of Investments
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mutual Fund Portfolio $132,610,528 $10,024,651 $ (61) $10,024,590
Utilities Stock Portfolio $ 6,838,352 $ 605,065 $(82,240) $ 522,825
</TABLE>
<PAGE>
Manager and Investment Adviser
R. Meeder & Associates
6000 Memorial Drive
P.O. Box 7177
Dublin, Ohio 43017
Distributor
Midwest Group Financial Services, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
(800) 613-3848
Subadviser/The Utilities Stock Portfolio
Miller/Howard Investments, Inc.
141 Upper Byrdcliffe Road, P.O. Box 549
Woodstock, New York 12498
Board of Trustees
Milton S. Bartholomew
Dr. Roger D. Blackwell
John M. Emery
Richard A. Farr
William L. Gurner
Robert S. Meeder, Sr.
Russel G. Means
Lowell G. Miller
Walter L. Ogle
Philip A. Voelker
Custodian
Star Bank, N.A., Cincinnati
Cincinnati, Ohio 45201
Transfer Agent and Dividend Disbursing Agent
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, Ohio 43017
Auditors
KPMG Peat Marwick LLP
Columbus, Ohio 43215
<PAGE>
THE FLEX-PARTNERS FUNDS
P.O. Box 7177
Dublin, Ohio 43017
