THE FLEX-PARTNERS FUNDS
1996 Annual Report
The TAA Fund
The BTB Fund
<PAGE>
Contents
2 President's Letter
3 The Fourth Quarter and Beyond
5 Market Mania
8 The TAA Fund
9 The BTB Fund
10 Financial Contents
<PAGE>
A Letter to our Shareholders
From the President of The Flex-Partners Funds
February 25, 1997
Dear Fellow Shareholders:
The challenges of the financial markets for the past year, as well as a few
compelling developments that may well lie ahead, are outlined in great detail
in the following pages. As always, we have included a letter from each of the
portfolio managers describing the overall investment posture of each fund
through the fourth quarter of the year.
A full set of portfolio holdings and other financial information (pp. 11-31)
is also enclosed for your review. If you have any questions with regard to the
information contained in this report, please do not hesitate to call our
Investor Relations Department.
The Flex-Partners Funds experienced growth and change last year. We added new
personnel to better serve your needs and made plans to broaden our selection
of mutual fund offerings for your consideration.
During 1996, we also began development of an international equity fund with a
leading financial institution from the United Kingdom tentatively slated to
serve as subadviser. We are currently preparing an initial filing for this
fund with the Securities and Exchange Commission and will notify you as soon
as more information is available.
When you call The Flex-Partners Funds to find out about these and other
issues, you may notice a few new voices on the line. We have added personnel
in our Investor Relations Department to more efficiently handle your requests
and to meet the demands of increased inquiries from new investors.
One of the first developments in our commitment to enhanced service will come
in the next few weeks. Beginning in March, we will offer shareholders the
opportunity to call The Flex-Partners Funds and hear recorded commentary
directly from portfolio managers. These contents will be updated regularly and
will be accessible at your convenience, 24-hours a day.
By midyear we plan to offer you the ability to access your current account
balance and other information about your Flex-Partners Funds account via
telephone, 24-hours a day.
If you have any questions about our plans or any suggestions for enhancements
to our services please call 800-494-FLEX (3539).
Cordially,
/s/ Robert S. Meeder Sr.
Robert S. Meeder Sr.
President
Photo of: Robert S. Meeder Sr., President
<PAGE>
The Financial Markets
For the fourth quarter and beyond
The ongoing bull market charged ahead during 1996 as nearly all domestic stock
market indexes climbed to new highs, defying the expectations of market
pundits and proponents alike.
As the nation's investors flocked to stocks in record numbers, many began to
worry that the enthusiasm over stocks had reached manic proportions. At a
speech in early December, Chairman of The Federal Reserve Board Alan Greenspan
referred to the "irrational exuberance" of Wall Street and prompted a swoon in
stocks the following day. The S&P tumbled from 756.56 to 720.98 over the next
14 days - a decline of nearly five percent. After this brief period of
soul-searching, the market rebounded and began toying anew with its highs of
late November.
After a difficult third quarter, The Flex-Partners Funds' TAA Fund rebounded
late in the year, while The BTB Fund kept pace with the thriving utilities
market. Interest rates during the quarter were flat to slightly lower as the
bond market rallied somewhat in October and November, only to succumb to
rising interest rates as the quarter closed.
(graphic description: 1996 Standard & Poors 500 Index)
STOCKS AND INTEREST RATES
The success or failure of the stock market throughout 1996 seemed inexorably
tied to the movement of interest rates. Concerns that The Federal Reserve
Board would raise the benchmark Federal Funds Rate caused tremors in the stock
market, and the bond market, throughout the first six months of the year. As
each Fed Open Market Committee meeting approached, the markets gyrated wildly.
Finally, when it became apparent that the economy was not overheating,
concerns that the Fed would raise interest rates began to subside. As a
result, the stock market underwent a significant advance from late July
through late November.
A period of rising interest rates stalled the market's advance late in the
fourth quarter and prompted a correction of about five percent from the
November highs to the mid-December lows on the S&P 500 Index. In fact, the S&P
500 Index declined nearly two percent for the month of December.
Also contributing to the stock market's fourth quarter hiccup were concerns
over the possibility of disappointing first quarter earnings reports on behalf
of some large-cap issues. Large-cap stocks led the way during the fourth
quarter as they did for much of 1996 and rumors of trouble in their ranks
contributed to the market's brief fourth quarter decline.
Utility stocks came to life during the quarter, turning in good performances
across a broad universe of stocks. The strong performance of the utility
sector can be attributed, at least in part, to seven factors: 1.) the
bond/utility yield spread was supportive of utility stocks, 2.) the flow of
deals in the utility sector began to impart a charisma to the group that even
fearful investors could not ignore, 3.) the form that electric utility
<PAGE>
deregulation will take was further delineated by the state regulators and the
Federal Energy Regulatory Commission (FERC), revealing a notable effort to
preserve the integrity of investor-owned utilities, 4.) the telephone yield
was attractive relative to the S&P 500 yield, making conditions ripe for the
kind of roaring rally the Bells experienced in the final two weeks of the
year, 5.) the economic slowness phase persisted, helping the underlying
interest rate environment, a favorable development for utility stocks, 6.) the
relative valuation attractions of utilities came to the fore, as the sector
was competitive with the S&P 500 Index, and 7.) institutions protecting large
profits flocked to conservative stocks like utilities and blue chips at the
end of the year.
Despite the similar returns produced by stocks in 1995 and 1996, it is clear
that the year just completed was fraught with much more difficulty and
volatility than its predecessor. Another notable difference between 1995 and
1996 was the interest rate environment, and the resulting difficulties
experienced by the bond market.
BONDS TAKE ON WATER
While the stock market was registering its second banner year in a row, bonds
were struggling thanks to an overheating economy that sparked fears about
inflation and the prospects for a Federal Reserve Board interest rate hike.
Speculation was ongoing throughout the first part of the year about the
possibility of a short-term interest rate hike by the Fed. Relatively strong
economic numbers during the first six months of 1996 indicated that the
economy might be gaining steam and that some Fed action would be necessary to
cool things down. As a result, interest rates on the benchmark 30-year
Treasury rose steadily from mid February 1996 through early July, prompting a
12 percent decline in the price of the benchmark 30-year Treasury bond.
By mid-August, however, it was apparent that the economy was not growing at an
excessive rate and the bond market grew less concerned over the likelihood of
a Federal Reserve Board rate hike. Interest rates on the 30-year Treasury
declined from approximately 7.15 percent in early September to 6.35 percent by
the first week in December. As the year drew to a close, it appeared that bond
investors would reap a modest gain.
However, interest rates began to rise anew late in the fourth quarter, thanks
to some stronger than expected economic numbers. As a result, the bond market
gave up most of the gains it had amassed during the quarter. For the year,
bond market indexes across the board managed only low single-digit returns.
(graphic description: 1996 10-Year Treasury Bond index)
The stock and bond markets of 1996 were challenging, indeed. However, the
first few months of 1997 have proven to be somewhat encouraging. The TAA Fund
and The BTB Fund are each off to strong starts.
<PAGE>
Stock Market Mania
It's been a good couple of years, but what lies ahead?
There's no doubt about it. In hindsight, the stock market of the past two
years has played host to an astounding display of bull market strength. Just
ask investors who are pouring assets into aggressive growth funds in hopes of
tapping some of the ultra-high returns they have heard so much about in recent
months.
The level of awareness and excitement that exists within the population
regarding stock market conditions has reached very unusual proportions. Just
ask your neighbors, your mailman, your barber or even members of your family
about what's going on in the stock market. They'll likely tout some high-tech
wonder stock they've heard about in the media or point to recent record highs
in the Dow Jones Industrial Average.
But in the face of all this unbridled optimism, it is wise to remember that
there have been 30 bear markets since 1900, that's one every three years, with
an average decline of 30 percent.
Historically, the stock market has often been the object of intense
fascination and significant cash flow from individual investors. One example
of such a period was during the late 1960s and early 1970s. As they are now,
inflation and interest rates were low; corporate earnings were temperate.
Investors were dumping assets into the "Nifty-Fifty" stocks despite staggering
price to earnings ratios. The United States was the world's preeminent
military and economic superpower and everyone from Wall Street to Main Street
was convinced that the party would last forever.
Then, in 1973 and 1974, the party ended. Inflation leapt into the
double-digits, interest rates climbed and money market funds became the
investment of choice. From January 1973 through December 1974, the S&P 500
Index declined 29 percent.
That's why some long-time market professionals have a feeling of deja vu
regarding the current market. It seems that, once again, everyone is convinced
that the party will last forever.
Maybe the stock market will continue its advance this year. Maybe the party
will soon be over. Maybe the Dow Jones Industrial Average will be at 10000 by
the end of the year. Maybe it will be at 3500. No matter what anyone in the
media says, no matter how many different points of view you read in annual
reports like this one, no one knows for sure what's going to happen tomorrow
in the stock market. There is only one item we believe is certain - history
has a way of repeating itself.
The point being: instead of blindly buying into the current stock market
mania, it might be prudent for you to step back, to consider where the market
has been, where it is going, and the overall goals you have for your
investments.
THE WORST CASE SCENARIO
o Is time on our side? The Dow Jones Industrial Average has not experienced a
10 percent or greater correction since October of 1990. Since that time,
the market has risen 191 percent over 751/4 months. The scope of this
advance is without precedent. Since 1907, the bull market closest in
magnitude to the current market ended in August of 1987, just prior to the
500 point Dow decline on October 19, 1987. The bull market that ended in
1987 had advanced just 150 percent over 37 months.
<PAGE>
o The first year of a presidential term is usually the weakest for the stock
market. Since 1904, the first year following a presidential election has
been a negative year for the stock market 48 percent of the time, and has
registered an average gain of just three percent. Incumbent presidents
create even bigger problems for the stock market. In the case of every
reelected president since 1904, each post-election year has been the
weakest of the four, declining as much as 36 percent following Franklin D.
Roosevelt's reelection in 1936.
o There have been only ten occasions when the S&P 500 Index has returned a
two-year gain comparable to 1995-96. In seven out of those ten cases, the
market's two-year gain was followed by a negative year. On two occasions,
the market was about even in year three. There has been only one occasion
(1935) when the market advanced in the year following a two-year gain like
we experienced in 1995-96.
o The average bear market since 1938 has erased 16 quarters, or four years, of
price appreciation in the stock market. Thus, if a bear market began
tomorrow, the stock market might not bottom until it hit 1992 levels . . .
a drop of approximately 50 percent.
o More new money rolled into equity mutual funds during 1996 than was held,
in total, in equity funds during 1990. Will that money be around for the
long haul, or will these new investors cut and run at the first sign of a
big market decline? The same vigorous momentum that has driven the stock
market so strongly to the upside could mean big trouble on the way down.
o The seventh year of each decade has typically been a difficult time for the
stock market. An analysis of the total return of every decade's seventh
year beginning with 1897 reveals that, taken together, the years have
amassed a total decline of over 55% in the price of stocks. Over the past
99 years, each decade's seventh year has seen a declining stock market 50
percent of the time.
By themselves, this laundry list of handicaps facing the stock market in 1997
might not amount to much other than interesting dinner party chatter.
Considered in the face of more impactful and long-term obstacles (like the
extreme valuations in place at present), these items take on added weight.
THE BEST CASE SCENARIO
o Topping the list of reasons to be optimistic about the future of stocks is
the demographics of the baby boom generation. Since they were born, boomers
have had a powerful impact on society, sparking booms in everything from
baby food to luxury cars. Now, the first wave of the baby boomers are
turning 50 and thinking seriously about retirement. As a result, the stock
market could reap the rewards for several years to come. Why? Because baby
boomers have 401(k) plans and IRAs and because they are, as a group, a
little late in planning for retirement. Seeking to capture the level of
returns available from the stock market, the baby boomers are investing
their retirement assets in stocks and stock mutual funds as a way to play a
little catch-up. Additionally, the boomers' investments in 401(k) plans
mean a steady source of new money for the stock market as
<PAGE>
employer-sponsored retirement plans automatically invest assets each month
deducted from employee salaries.
o Interest rates continue to be stable and inflation is low. Steady interest
rates have been one of the major factors in the stock market's success thus
far and there is little indication that rates will begin rising sharply
anytime soon. Further, on a historical basis, inflation remains relatively
low.
o Corporate Earnings go hand in hand with interest rates. And, as rates have
remained steady, corporate profits have been increasing steadily. A
slowdown in corporate profits predicted by many for 1997 has yet to
materialize. In fact, earnings projections remained strong during the first
couple of months of 1997.
o A budget deal is in the offing. A good faith effort on the part of the
White House and Congress to effect a budget agreement could have a positive
impact on the stock and bond markets. A realistic, bipartisan budget
agreement could mean markedly lower interest rates - a positive development
for both the bond market and stocks.
There are compelling arguments for both bears and bulls. And in the final
analysis, regardless of what the pundits say, the ultimate barometer of the
market is your own. You have to decide whether you are truly a long-term
investor willing to ride through the pain of a prolonged bear market . . . or
whether you would like to temper your portfolio with some conservative
investments designed to ride through the tough times with less volatility.
Whether you are positive or negative on the future of the financial markets,
The Flex-Partners Funds can help you construct a portfolio well-suited for the
coming years.
Our established tactical asset allocation fund, The TAA Fund, strives to avoid
the ravages of a bear market and provide attractive returns during low-risk
market environments. The BTB Fund offers you the opportunity for upside growth
and income from utility stocks. We are also planning to launch, during 1997, a
buy and hold "enhanced" index fund and an international equity fund designed
to meet your need for overseas diversification.
No matter what you think the markets are going to do during 1997, and
especially if your are uncertain about the future, we'd like to help. If you
would like assistance considering your investment options, please feel free to
call your broker or our Investor Relations Department at 800-494-3539.
<PAGE>
The TAA Fund
As the stock market advanced during the fourth quarter, The TAA Fund continued
to emphasize mutual funds with significant exposure to large capitalization
stocks, as it had for much of 1996.
During the final three months of the year, The TAA Fund's underlying portfolio
was invested, at various times, in growth mutual funds, 10-year U.S. Treasury
bonds, and money market instruments based on our evaluation of the risk/reward
relationship of the stock market. Partially defensive as the quarter began,
the Fund regained a full exposure to the stock market by mid-November.
During the final three months of 1996, our most significant position was
exposure to the S&P 500 Index. This was achieved by owning S&P 500 futures
contracts which perform similarly to the index itself. Other major holdings
were: The Fidelity Blue Chip Fund, The Fidelity Fund, The Fidelity Growth and
Income Fund, and The Value Line Fund.
Thanks to its increased exposure during the fourth quarter, The TAA Fund's
performance rebounded nicely late in the year. The Fund maintained its
exposure to the stock market as the new year began and has participated nicely
with the recent strength in the stock market. We remain confident in our
ability to monitor and react to changing market conditions on behalf of our
shareholders and we eagerly anticipate the challenges that await us in 1997.
<TABLE>
<CAPTION>
RECENT TOTAL RETURNS for the periods ended December 31, 1996
3 months 1 year Inception (6-1-95)
<S> <C> <C> <C>
The TAA Fund (Class A Shares) 3.12% n/a* 5.51%*
The TAA Fund (Class C Shares) 3.05% 5.07% 13.79%
The Average Assett Allocation Fund 5.00% 12.43% 15.01%
The Average Balanced Fund 5.23% 13.20% 16.09%
Source: Morningstar, Inc. *The TAA Fund Class A Shares were not available until August 1, 1996.
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO EXPOSURE* as of December 31, 1996
pie chart:
<S> <C>
Mutual Funds 98%
Money Market Instruments 2%
* Portfolio Exposure reflects the effect of futures contracts on Portfolio investments.
</TABLE>
Photo of: Robert S. Meeder Jr., Portfolio Manager
<PAGE>
The BTB Fund
Utilities came to life last quarter, turning in good performances across a
broad universe of stocks. Increasingly, gas utilities led the way in our
Portfolio, as they have all year. Sharply higher product prices were a factor
as was the charismatic spark of a deal in which Duke Power offered to acquire
Panenergy - a significant position in our portfolio - at a premium.
Indeed, we have had several "deal" stocks in our portfolio of late, on both
the acquirer and acquiree side. The most classic takeover example is that of
Panergy by Duke Power, one of many electric/gas convergences to pepper the
market lately. And while we would be happy to continue to own Panenergy, the
stock will now leave our portfolio as Duke Power is a nuclear-based utility
and is therefore excluded from our universe of holdings. We believe we are
selling Panenergy at its high. Other notable additions to the portfolio during
the fourth quarter of 1996 were Public Service of Colorado and AirTouch, which
we believe to be the strongest value in wireless communication on a global
basis.
More deals, phone companies, and newly created electric distribution companies
should bring some excitement to the portfolio this year, and general utility
pricing levels do not inspire the kinds of anxieties that many investors
justifiably feel regarding the broader equity markets. We don't think, at this
point, that interest rate problems will intervene and we look forward to a
solid 1997.
<TABLE>
<CAPTION>
RECENT TOTAL RETURNS for the periods ended December 31, 1996
3 months 1 year Inception
<S> <C> <C> <C>
The BTB Fund (Class A Shares) 7.71% 12.61% 19.36%
The BTB Fund (Class C Shares) 7.67% 12.45% 19.19%
The Average Utility Fund 8.13% 10.01% 16.38%
Source: Morningstar, Inc.
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS as of December 31, 1996
pie chart:
<S> <C>
Telecommunication 30.8%
Water Utility 3.9%
Repurchase Agreements 11.5%
Electric/Gas Utility 4.1%
Electric Utility 18.1%
Diversified Utility 1.9%
Natural Gas Dist. 21.8%
Oil/Gas 7.9%
</TABLE>
Photo of: Lowell G. Miller, Portfolio Manager, Miller/Howard Investments, Inc.
<PAGE>
(graphic)
FINANCIAL DATA
THE FLEX-PARTNERS FUNDS
11 The Mutual Fund Portfolio
13 The Utilities Stock Portfolio
16 Statements of Assets and Liabilities
18 Statements of Operations
19 Statements of Changes in Net Assets
20 Financial Highlights
22 Notes To Financial Statements
24 Independent Auditors' Report
THE PORTFOLIOS
25 Statements of Assets and Liabilities
26 Statements of Operations
27 Statements of Changes in Net Assets
28 Financial Highlights
29 Notes To Financial Statements
31 Independent Auditors' Report
<PAGE>
<TABLE>
<CAPTION>
MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1996
SHARES OR
FACE AMOUNT VALUE
<S> <C> <C>
MUTUAL FUNDS - 59.5%
Aim Constellation Fund 86 $2,185
Aim Weingarten Fund 99 1,832
Charles Schwab Money Market Fund 16,172,563 16,172,563
Fidelity Blue Chip Fund 235,580 7,701,108
Fidelity Core Money Market Fund 19,964,557 19,964,557
Fidelity Fund 236,798 5,848,911
Fidelity Growth & Income Fund 251,433 7,726,531
Mutual Series Fund 58 5,412
PBHG Growth Fund 624 16,398
Rydex U.S. Government Money Market Fund 5,927,310 5,927,310
Rydex Nova Fund 721,714 12,666,082
T. Rowe Price New Era Fund 132 3,443
T. Rowe Price New Horizons Fund 151 3,287
Value Line Fund 292,179 5,636,131
TOTAL MUTUAL FUNDS ==========
(Cost $81,126,588) 81,675,750
----------
U.S.TREASURY BILLS - 2.9%
*U.S. Treasury Bill, 5.34%, due 3/06/97 $1,650,000 1,635,222
*U.S. Treasury Bill, 5.00%, due 3/06/97 1,000,000 991,044
*U.S. Treasury Bill, 4.84%, due 3/06/97 900,000 891,940
*U.S. Treasury Bill, 4.90%, due 3/06/97 200,000 198,209
*U.S. Treasury Bill, 4.99%, due 3/06/97 150,000 148,657
U.S. Treasury Bill, 4.90%, due 1/09/97 30,100 30,068
TOTAL U.S. TREASURY BILLS ==========
(Cost $3,894,698) 3,895,140
----------
*Pledged $2,960,000 face amount as collateral on futures contracts
<PAGE>
<CAPTION>
MUTUAL FUND PORTFOLIO, continued
<S> <C> <C>
REPURCHASE AGREEMENTS - 37.6%
(Collateralized by U.S. government
obligations - market value $52,366,298) Paine
Webber Incorporated, dated 12/30/96,
6.35%, due 1/02/97 25,000,000 25,000,000
Prudential Bache Securities, dated 12/31/96,
6.75%, due 1/02/97 14,343,000 14,343,000
State Street Bank, dated 12/31/96,
6.00%, due 1/02/97 12,318,000 12,318,000
TOTAL REPURCHASE AGREEMENTS ==========
(Cost $51,661,000) 51,661,000
----------
TOTAL INVESTMENTS - 100% ============
(Cost $136,682,286) $137,231,890
------------
CONTRACTS
FUTURES CONTRACTS
Long, S&P 500 futures contracts face amount
$90,456,750 expiring in March, 1997. 243 (1,773,830)
Long, Midcap futures contracts face amount
$2,181,100 expiring in March, 1997. 17 (11,475)
===========
NET PAYABLE FOR FUTURES CONTRACTS SETTLEMENTS (1,785,305)
-----------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1996
SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE
<S> <C> <C>
COMMON STOCKS - 88.5%
ELECTRIC/GAS UTILITY - (4.1%)
MDU Resources Group Incorporated 6,100 $140,300
Nipsco Industries Incorporated 4,700 186,238
=========
326,538
---------
ELECTRIC UTILITY - (18.1%)
Cinergy Corporation 7,900 263,663
Ipalco Enterprises Incorporated 6,000 163,500
KU Energy Corporation 3,300 99,000
LG&E Energy Corporation 8,600 210,700
Pacificorp 10,000 205,000
Public Service Company of Colorado 5,900 229,362
Teco Energy Incorporated 11,000 265,375
=========
1,436,600
---------
DIVERSIFIED UTILITY - (1.9%)
Citizens Utilities Company Class B 13,514 150,341
---------
NATURAL GAS (DISTRIBUTOR) - (21.8%)
Bay State Gas Company 2,200 62,150
Brooklyn UN Gas Company 5,900 177,738
Consolidated Natural Gas Company 3,900 215,475
MCN Corporation 6,200 179,025
Nicor Incorporated 1,800 64,350
Pacific Enterprises 7,000 212,625
Panenergy Corporation 5,500 247,500
Transcanada Pipelines Ltd. 8,200 143,500
UGI Corporation 2,000 44,750
Wicor Incorporated 5,800 208,075
Williams Companies Incorporated 4,800 180,000
=========
1,735,188
---------
<PAGE>
<CAPTION>
UTILITIES STOCK PORTFOLIO, continued
<S> <C> <C>
OIL/GAS (DOMESTIC) - (7.9%)
El Paso Natural Gas Company 4,800 242,400
Enron Corporation 3,000 129,375
Questar Corporation 5,300 194,775
Sante Fe Pacific Pipeline Partners 1,600 60,800
=========
627,350
---------
TELECOMMUNICATION EQUIPMENT - (2.1%)
LCC International A 5,000 92,500
Vanguard Cellular 4,700 74,025
=========
166,525
---------
TELECOMMUNICATION SERVICES - (28.7%)
Airtouch Communications 5,600 141,400
Alltel Corporation 8,100 254,138
Bell Atlantic Corporation 2,400 155,400
Bellsouth Corporation 3,000 121,125
Century Telephone 8,500 262,437
Frontier Corporation 9,500 214,937
GTE Corporation 5,200 236,600
Intellicell Corporation 30,000 221,250
MCI Communications 5,000 163,437
Sprint Corporation 4,400 175,450
Tele Denmark 5,000 136,250
U.S. West Incorporated 6,000 193,500
=========
2,275,924
---------
WATER UTILITY - (3.9%)
American Water Works Incorporated 15,200 313,500
---------
TOTAL COMMON STOCKS
(Cost $6,252,239) 7,031,966
---------
<PAGE>
<CAPTION>
UTILITIES STOCK PORTFOLIO, continued
<S> <C> <C>
U.S. TREASURY BILLS - 0.0%
U.S. Treasury Bill, 4.90%, due 1/09/97 $1,000 1,000
---------
TOTAL U.S. TREASURY BILLS
(Cost $1,000) 1,000
---------
REPURCHASE AGREEMENTS - 11.5%
(Collateralized by U.S. government
obligations - market value $922,418)
Prudential Bache Securities, dated
12/31/96, 6.75%, due 1/02/97 914,000 914,000
---------
TOTAL REPURCHASE AGREEMENTS
(Cost $914,000) 914,000
---------
TOTAL INVESTMENTS - 100% ==========
(Cost $7,167,239) $7,946,966
----------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
The TAA Fund The BTB Fund
<S> <C> <C>
Assets:
Investment in corresponding portfolio $14,114,400 $2,875,011
Receivable for capital stock issued - 10,602
Unamortized organizational costs 28,623 19,969
Prepaid expenses and other assets 64 18,514
=========== ==========
Total Assets 14,143,087 2,924,096
----------- ----------
Liabilities:
Payable for capital stock redeemed 713 7,125
Dividends payable 18,230 5,986
Accrued transfer agent and administrative fees 1,899 712
Accrued liabilities 42,795 18,488
=========== ==========
Total Liabilities 63,637 32,311
----------- ----------
Net Assets:
Capital 14,106,914 2,664,762
Accumulated undistributed net investment income (loss) - -
Accumulated undistributed net realized gain
on investments
Net unrealized gain (loss) on investments (27,464) 227,023
=========== ==========
Net Assets $14,079,450 $2,891,785
----------- ----------
<PAGE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1996
The TAA Fund The BTB Fund
<S> <C> <C>
Net Assets:
Class A Shares 136,730 $1,376,779
Class C Shares 13,942,720 1,515,006
=========== ==========
Total $14,079,450 $2,891,785
----------- ----------
Outstanding units of beneficial interest (shares):
Class A Shares $10,888 $91,213
Class C Shares 1,031,204 101,642
=========== ==========
Total $1,042,092 $192,855
----------- ----------
Net asset value - redemption price per share:
Class A Shares $12.56 $15.09
Class C Shares* 13.52 14.91
=========== ==========
Sales Charge (Class A) 4.00% 4.00%
----------- ----------
Offering price (100%/(100%-Sales Charge) of net asset
value adjusted to nearest cent) per share - Class A $13.08 $15.72
=========== ==========
<FN>
*Redemption price varies based upon holding period
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
The TAA Fund The BTB Fund
<S> <C> <C>
Net Investment Income From Corresponding Portfolio:
Interest $335,860 $12,474
Dividends 36,453 97,025
Expenses (116,514) (46,530)
=========== ==========
Total Net Investment Income From Corresponding Portfolio 255,799 62,969
----------- ----------
Fund Expenses:
Legal fees 1,415 1,409
Audit fees 5,323 5,145
Printing 5,595 3,618
Transfer agent fees 15,067 7,520
Administrative fee 4,042 859
Trustees fees and expenses 6,512 6,499
Distribution plan - Class A 137 2,961
Distribution plan - Class C 100,640 12,587
Shareholder servicing fee - Class A 137 2,961
Shareholder servicing fee - Class C 33,547 4,196
Amortization of organizational costs 6,674 5,867
Registration 18,675 22,331
Postage 2,013 1,003
Other expenses 8,567 4,868
=========== ==========
Total expenses 208,344 81,824
Expenses reimbursed by adviser (55,382) (73,959)
=========== ==========
Total Expenses - net 152,962 7,865
----------- ----------
INVESTMENT INCOME - NET 102,837 55,104
----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - NET:
Net realized gain (loss) on futures (40,196)
Net realized gain (loss) on investments 390,221 139,002
Net change in unrealized appreciation
(depreciation) of investments 175,349 137,909
=========== ==========
NET GAIN (LOSS) ON INVESTMENTS 525,374 276,911
----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $628,211 $332,015
----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996
The TAA Fund
1996
INCREASE (DECREASE) IN NET ASSETS: Total Class A Class C
<S> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 102,837 $ 1,449 $ 101,388
Net realized gain (loss) on investments and futures contracts 350,025 5,070 344,955
Net change in unrealized appreciation
(depreciation) of investments 175,349 566 174,783
--------- -------- ---------
Net increase in net assets resulting from operations 628,211 7,085 621,126
--------- -------- ---------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (101,477) (1,449) (100,028)
Net realized gain from investments and futures contracts (318,479) (5,070) (313,409)
--------- -------- ---------
Net decrease in net assets resulting
from dividends and distributions (419,956) (6,519) (413,437)
--------- -------- ---------
CAPITAL TRANSACTIONS:
Net proceeds from sales 3,210,419 129,635 3,080,784
Reinvestment of dividends 401,724 6,534 395,190
Cost of redemptions (1,264,628) (5) (1,264,623)
--------- -------- ---------
Net increase (decrease) in net assets
resulting from capital share transactions 2,347,515 136,164 2,211,351
--------- -------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,555,770 136,730 2,419,040
NET ASSETS - Beginning of period 11,523,680 - 11,523,680
========= ======== =========
NET ASSETS - End of period $ 14,079,450 $ 136,730 $ 13,942,720
========= ======== =========
SHARE TRANSACTIONS:
Issued 234,121 10,368 223,753
Reinvested 29,750 520 29,230
Redeemed (91,027) - (91,027)
--------- -------- ---------
Change in shares 172,844 10,888 161,956
========= ======== =========
<CAPTION>
The TAA Fund
1995
INCREASE (DECREASE) IN NET ASSETS: Total Class A Class C*
<S> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net (13,080) - (13,080)
Net realized gain (loss) on investments and futures contracts 814,327 - 814,327
Net change in unrealized appreciation
(depreciation) of investments (202,813) - (202,813)
-------- -------- ---------
Net increase in net assets resulting from operations 598,434 - 598,434
-------- -------- ---------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net
Net realized gain from investments and futures contracts (847,234) - (847,234)
-------- -------- ---------
Net decrease in net assets resulting
from dividends and distributions (847,234) - (847,234)
CAPITAL TRANSACTIONS:
Net proceeds from sales 11,115,307 - 11,115,307
Reinvestment of dividends 847,234 847,234
Cost of redemptions (190,061) - (190,061)
----------- -------- ----------
Net increase (decrease) in net assets
resulting from capital share transactions 11,772,480 - 11,772,480
----------- -------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 11,523,680 - 11,523,680
NET ASSETS - Beginning of period - - -
=========== ======== ==========
NET ASSETS - End of period $ 11,523,680 - $ 11,523,680
=========== ======== ==========
SHARE TRANSACTIONS:
Issued 818,680 - 818,680
Reinvested 63,894 - 63,894
Redeemed (13,326) - (13,326)
----------- -------- ----------
Change in shares 869,248 - 869,248
=========== ======== ==========
<PAGE>
<CAPTION>
The BTB Fund
1996
INCREASE (DECREASE) IN NET ASSETS: Total Class A Class C
<S> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $$55,104 $ 24,065 $ 31,039
Net realized gain (loss) on investments and futures contracts 3139,002 57,262 81,740
Net change in unrealized appreciation
(depreciation) of investments 1137,909 73,100 64,809
----------- -------- ----------
Net increase in net assets resulting from operations 6332,015 154,427 177,588
----------- -------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net ((55,104) (24,065) (31,039)
Net realized gain from investments and futures contracts ((138,614) (57,068) (81,546)
----------- -------- ----------
Net decrease in net assets resulting
from dividends and distributions ((193,718) (81,133) (112,585)
----------- -------- ----------
CAPITAL TRANSACTIONS:
Net proceeds from sales 32,936,429 982,609 1,953,820
Reinvestment of dividends 4184,771 73,097 111,674
Cost of redemptions ((1,790,376) (392,983) (1,397,393)
----------- -------- ----------
Net increase (decrease) in net assets
resulting from capital share transactions 21,330,824 662,723 668,101
----------- -------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 21,469,121 736,017 733,104
NET ASSETS - Beginning of period 11,422,664 640,762 781,902
=========== ======== ==========
NET ASSETS - End of period $$2,891,785 $ 1,376,779 $ 1,515,006
=========== ======== ==========
SHARE TRANSACTIONS:
Issued 2203,707 68,268 135,439
Reinvested 212,452 4,899 7,553
Redeemed ((123,009) (26,877) (96,132)
----------- -------- ----------
Change in shares 193,150 46,290 46,860
=========== ======== ==========
<CAPTION>
The BTB Fund
1995**
INCREASE (DECREASE) IN NET ASSETS: Total Class A** Class C**
<S> <C> <C> <C>
OPERATIONS:
Investment income (loss) - net $ 4,414 $ 2,947 $ 1,467
Net realized gain (loss) on investments and futures contracts (388) (195) (193)
Net change in unrealized appreciation
(depreciation) of investments 89,114 50,091 39,023
----------- -------- ----------
Net increase in net assets resulting from operations 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 investments and futures contracts - - -
----------- -------- ----------
Net decrease in net assets resulting
from dividends and distributions (4,414) (2,947) (1,467)
----------- -------- ----------
CAPITAL TRANSACTIONS:
Net proceeds from sales 1,335,133 593,527 741,606
Reinvestment of dividends 3,831 2,365 1,466
Cost of redemptions (5,026) (5,026) -
----------- -------- ----------
Net increase (decrease) in net assets
resulting from capital share transactions 1,333,938 590,866 743,072
----------- -------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,422,664 640,762 781,902
NET ASSETS - Beginning of period - - -
=========== ======== ==========
NET ASSETS - End of period $ 1,422,664 $ 640,762 $ 781,902
=========== ======== ==========
SHARE TRANSACTIONS:
Issued 99,792 45,114 54,678
Reinvested 277 173 104
Redeemed (364) (364) -
----------- -------- ----------
Change in shares 99,705 44,923 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
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during each period
The TAA Fund
For the Period June 1, 1995 (2)
Year Ended December 31, 1996 to December 31, 1995
Class A (3) Class C Class C
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.50 $13.26 $12.50
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (loss) 0.14 0.10 (0.02)
Net Gains or Losses on Securities
(both realized and unrealized) 0.55 0.57 1.84
====== ====== ======
Total From Investment Operations 0.69 0.67 1.82
====== ====== ======
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.14) (0.10) -
Distributions (from capital gains) (0.49) (0.31) (1.06)
====== ====== ======
Total Distributions (0.63) (0.41) (1.06)
====== ====== ======
NET ASSET VALUE, END OF PERIOD $12.56 $13.52 $13.26
====== ====== ======
TOTAL RETURN 5.51% 5.07% 14.57%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 137 13,943 11,524
Ratio of Expenses to Average Net Assets 1.73% (1) 2.00% 1.97% (1)
Ratio of Net Investment Income to
Average Net Assets 2.60% (1) 0.75% -0.29% (1)
Ratio of Expenses to Net Average
Net Assets, before waiver of fees 5.23% (1) 2.40% 2.80% (1)
Ratio of Net Investment Income to
Average Net Assets, before waiver
of fees -0.90% (1) 0.35% -1.12% (2)
<FN>
(1) Annualized
(2) Date of commencement of operations (3) For the period August 1, 1996 to
December 31, 1996 See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during each period
The BTB Fund
For the Period July 11, 1995 (2)
Year Ended December 31, 1996 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 $12.50 $12.50
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (loss) 0.29 0.26 0.12 0.10
Net Gains or Losses on Securities
(both realized and unrealized) 1.48 1.49 1.76 1.77
Total From Investment Operations 1.77 1.75 1.88 1.87
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.29) (0.26) (0.12) (0.10)
Distributions (from capital gains) (0.65) (0.85) - -
Total Distributions (0.94) (1.11) (0.12) (0.10)
NET ASSET VALUE, END OF PERIOD $15.09 $14.91 $14.26 $14.27
TOTAL RETURN 12.61% 12.45% 15.11% 15.07%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 1,377 1,515 641 782
Ratio of Expenses to Average Net Assets 1.75% 2.00% 1.75% (1) 2.00% (1)
Ratio of Net Investment Income to
Average Net Assets 2.03% 1.85% 2.17% (1) 1.72% (1)
Ratio of Expenses to Average Net Assets,
before waiver of fees 4.37% 4.65% 22.70% (1) 13.37% (1)
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees -0.59% -0.80% -18.78% (1) -9.55% (1)
<FN>
(1) Annualized
(2) Date of commencement of operations
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 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 December
31, 1996 The TAA Fund held approximately 10% of the total assets of the Mutual
Fund Portfolio and The BTB Fund held approximately 36% 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 ).
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.
<PAGE>
4. CAPITAL SHARE TRANSACTIONS
At December 31, 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
$14,106,914 in The TAA Fund and $2,664,762 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.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
The Flex-Partners' Trust
The TAA and BTB Funds
We have audited the accompanying statement of assets and liabilities of The
Flex-Partners' Trust, The TAA and BTB Funds (Funds) as of December 31, 1996,
and the related statement of operations, statement of changes in net assets
and the financial highlights for the period 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 audit.
We conducted our audit 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, 1996, 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
audit provides 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, 1996, the
results of their operations, the changes in their net assets and the financial
highlights for each of the periods indicated herein, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
Mutual Utilities
Fund Stock
Portfolio Portfolio
<S> <C> <C>
Assets:
Investments at market value* $85,570,890 $7,032,966
Repurchase agreements* 51,661,000 914,000
Cash 520 583
Interest receivable 193,699 171
Dividends receivable - 18,560
Prepaid/Other assets 644 16
Unamortized organization costs 4,924 31,150
=========== ===========
Total Assets 137,431,677 7,997,446
----------- -----------
Liabilities:
Payable for futures contract settlement 1,785,305 -
Payable to investment adviser 91,065 6,264
Accrued fund accounting fees 4,248 644
Other accrued liabilities 11,491 26,184
=========== ===========
Total Liabilities 1,892,109 33,092
----------- -----------
Net Assets:
Capital 134,989,964 7,184,627
Net unrealized gain (loss) on investments 549,604 779,727
=========== ===========
Net Assets $135,539,568 $7,964,354
----------- -----------
*Securities at cost 136,682,286 7,167,239
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
Mutual Utilities
Fund Stock
Portfolio Portfolio
<S> <C> <C>
INVESTMENT INCOME - NET:
Interest $3,331,013 $20,631
Dividends 348,105 230,516
========== =========
Total Investment Income 3,679,118 251,147
---------- ---------
Expenses:
Investment advisory fees 1,083,553 65,190
Legal fees 1,543 1,535
Audit fees 10,880 10,211
Custodian fees 15,407 3,066
Accounting fees 50,435 9,541
Trustees fees and expenses 4,870 5,558
Insurance 2,382 51
Amortization of organization cost 5,453 8,996
Other expenses 4,649 4,000
========== =========
Total Expenses 1,179,172 108,148
Other directed payments received (10,397) -
Directed brokerage payments received - (3,377)
========== =========
Total Expenses - net 1,168,775 104,771
---------- ---------
INVESTMENT INCOME - NET 2,510,343 146,376
---------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on futures contracts (425,664) -
Net realized gain (loss) on investments 11,000,788 348,392
Net change in unrealized appreciation
(depreciation) of investments (5,130,740) 357,308
========== =========
NET GAIN (LOSS) ON INVESTMENTS 5,444,384 705,700
========== =========
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,954,727 $852,076
========== =========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1996
Mutual Utilities
Fund Stock
Portfolio Portfolio
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income - net $2,510,343 $1,278,396 $146,376 $29,889
Net realized gain (loss) on investments
and futures contracts 10,575,124 15,554,692 348,392 (1,067)
Net change in unrealized appreciation
(depreciation) of investments (5,130,740) 5,680,803 357,308 422,419
----------- ----------- ---------- ---------
Net increase in net assets resulting
from operations 7,954,727 22,513,891 852,076 451,241
----------- ----------- ---------- ---------
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 32,575,692 34,671,819 5,138,546 3,908,655
Withdrawals (27,099,980) (18,261,284) (2,317,138) (69,026)
----------- ----------- ---------- ---------
Net increase (decrease) in net assets
resulting from transactions of investors'
beneficial interests 5,475,712 16,410,535 2,821,408 3,839,629
----------- ----------- ---------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS 13,430,439 38,924,426 3,673,484 4,290,870
=========== =========== ========== =========
NET ASSETS - Beginning of period 122,109,129 83,184,703 4,290,870 -
=========== =========== ========== =========
NET ASSETS - End of period $135,539,568 $122,109,129 $7,964,354 $4,290,870
=========== =========== ========== =========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Ratios/Supplemental Data
Mutual Fund Portfolio
For The Year Ended
Year Ended December 31, December 31, 1993
1996 1995 1994
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 135,540 122,109 83,185 81,605
Ratio of Expenses to Average Net Assets 0.87% 0.95% 1.01% 1.03%
Ratio of Net Investment Income to Average Net Assets 1.86% 1.26% 2.76% 0.09%
Portfolio Turnover Rate 297.41% 186.13% 168.17% 279.56%
UTILITY STOCK PORTFOLIO
<CAPTION>
For The Year Ended For The Period June 21, 1995 *
December 31, 1996 to December 31, 1995
<S> <C> <C>
Net Assets, End of Period ($000) 7,964 4,291
Ratio of Expenses to Average Net Assets 1.61% 2.32% 1
Ratio of Net Investment Income to Average Net Assets 2.24% 2.09% 1
Ratio of Expenses to Average Net Assets before
directed brokerage payments 1.66% 2.40% 1
Ratio of Net Investment Income to Average Net Assets
before directed brokerage payments 2.19% 2.01% 1
Portfolio Turnover Rate 50.79% 5.06%
Average brokerage commission per share 2 $0.0600 $0.0600
<FN>
1 Annualized
2 Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of shares purchased and sold by the
Portfolio for which commissions were charged. * Date of commencement of
operations
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 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 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.
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 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 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 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.
<PAGE>
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 annual fee, payable monthly, is computed at the
rate of 0.15% of the first $10 million, 0.10% of the next $20 million, 0.02%
of the next $50 million, and 0.01% in excess of $80 million of the Portfolio's
average net assets.
Certain officers and/or trustees of the 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, 1996 are as
follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Mutual Fund Portfolio $127,926,031 $179,435,771
Utilities Stock Portfolio $ 5,484,900 $ 3,084,727
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1996, the aggregate cost of investments and net
unrealized appreciation (depreciation) for Federal income tax purposes
was comprised of the following:
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 $136,682,286 $1,034,293 $(484,688) $549,605
Utilities Stock Portfolio $ 7,167,239 $ 902,962 $(123,235) $779,727
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees
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 portfolios of investments, as of December 31, 1996, and the related
statements of operations, statements of changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and the financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of December 31, 1996, by correspondence with the custodian and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Mutual Fund Portfolio and Utilities Stock Portfolio at December 31, 1996, the
results of their operations, the changes in their net assets and the financial
highlights for each of the periods indicated herein, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE>
MAMAGER AND INVESTMENT ADVISER
R. Meeder & Associates
6000 Memorial Drive
P.O.Box 7177
Dublin, Ohio 43017
DISTRIBUTER
Adviser Dealer Services, Inc.
P.O. Box 7177
Dublin, Ohio 43017
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.
Russell G. Means
Lowell G. Miller
Walter L. Ogle
Phillip 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 43107
AUDITORS
KPMG Peat Marwick LLP
Columbus, Ohio 43215
