THE FLEX-PARTNERS P.O. Box 7177, Dublin, OH 43017 (800)494-3539
[PHOTO] Sextant 1998 ANNUAL REPORT
Investment Adviser - R. Meeder & Associates
Distributor - Adviser Dealer Services, Inc.
<PAGE>
PERFORMANCE CAPSULE Period and Average Annual Total Returns as of 12/31/98
<TABLE>
<CAPTION>
before deduction of Tactical Asset Core Utility International
sales charges Allocation Fund Equity Fund Growth Fund Equity Fund
- ----------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C Class A Class C
Shares Shares Shares Shares Shares Shares
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year 28.38% 28.13% 22.78% 22.85% 8.34% 8.08% 19.78%
Three Year -- 16.59% -- -- 16.15% 15.95% --
Since Inception 21.13%(1) 18.11%(2) 17.24%(3) 17.18%3 18.50%(4) 18.31%(4) 12.34%(5)
</TABLE>
<TABLE>
<CAPTION>
Tactical Asset Core Utility International
net of sales charges Allocation Fund Equity Fund Growth Fund Equity Fund*
- -----------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C Class A Class C
Shares* Shares** Shares* Shares** Shares* Shares**
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year 23.26% 26.63% 17.85% 21.35% 4.03% 6.58% 14.97%
Three Year -- 16.59% -- -- 14.59% 15.95% --
Since Inception 19.10%(1) 18.11%(2) 13.91%(3) 16.19%(4) 17.12%(4) 18.31%4 8.95%(4)
</TABLE>
To obtain a prospectus containing more complete information about The
Flex-Partners Funds, including other fees and expenses that apply to a continued
investment in the Fund, you may call The Flex-Partners at (800)494-3539 or write
P.O. Box 7177, Dublin OH 43017. Please read the prospectus carefully before
investing.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. All performance figures
represent total returns and average annual total returns for the periods ended
12/31/98. Investment performance represents total return and assumes
reinvestment of all dividend and capital gain distributions. The investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. The
Investment Adviser waived a portion of its management fees and/or reimbursed
expenses in order to reduce the operating expenses of The Core Equity Fund,
Tactical Asset Allocation Fund, Utility Growth Fund, and International Equity
Fund during each of the periods shown above.
* Reflects the deduction of 4.00% maximum sales charges.
** Reflects the deduction of contingent deferred sales charges as follows:
1.50% if redeemed within 18 months from date of purchase; 0.75% if redeemed
after 18 but within 24 months from date of purchase; 0.00% thereafter.
(1) Inception Date for Class A Shares 8/1/96. (2) Inception Date for Class C
Shares 6/1/95. (3) Inception Date for Class A and C Shares 8/1/97. (4) Inception
Date for Class A and C Shares 7/11/95. (5) Inception Date 9/2/97.
The Flex-Partners 1998 Annual Report Page 2
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
A Look Back 4
A Look Ahead 6
The Flex-Partners family of no-load mutual funds 7
Tactical Asset Allocation Fund 8
Core Equity Fund 10
Utility Growth Fund 12
International Equity Fund 14
Portfolio Holdings & Financial Statements 16
ON THE COVER
The sextant was a valuable instrument for many ship captains, used to determine
location and direction based upon the position of the stars. The sextant
represents our commitment to providing sound investment instruments to help
shareholders navigate their way to financial security.
The Flex-Partners 1998 Annual Report Page 3
<PAGE>
R. MEEDER & ASSOCIATES Founded in
Columbus, OH on April 1, 1974 with
three employees and $100,000 in assets
under management.
A LOOK BACK . . .
1974 was not a particularly good year to start an investment management
firm. The stock market was stuck in a severe downturn, hitting its lowest level
in almost ten years. Inflation was rampant as energy prices skyrocketed in
response to the Arab oil embargo. The Watergate scandal had crippled the U.S.
Government, and the nation was stricken with apprehension and uncertainty about
the country's economy.
Despite all the doom and gloom that afflicted the financial markets during
this time, investing had become an integral part of many people's lives -- for
higher education, for retirement, and for overall security. However, the risks
associated with investing in the stock market, especially during bear markets
when nearly all stocks lose value, can outweigh the potential rewards. A need
developed in the financial marketplace for investment management services that
would help investors achieve positive returns during times of market strength,
and preserve these values during times of market weakness.
Robert S. Meeder Sr. saw this opportunity and set out to create an
investment management firm that would reach out to investors with a unique
investment discipline, offering the potential of shelter from the downside risk
of a declining stock market with the potential of achieving substantial gains
when the market is strong.
The investment discipline developed by Mr. Meeder -- Defensive Investing --
became the cornerstone of R. Meeder & Associates, which opened for business in
Columbus, Ohio in the thick of the `74 bear market. Defensive Investing seeks to
maximize shareholder returns when the risk/reward relationships in the market
are positive. When the risk/reward relationships in the market are negative,
Defensive Investing seeks to preserve values by moving out of the stock and bond
markets into more stable money market instruments.
Defensive Investing became the core investment philosophy of the first
accounts managed by R. Meeder & Associates in 1974, and the first Flex-Partners
fund launched in 1995. The Tactical Asset Allocation Fund brought the discipline
of "defensive investing" to the equity markets, offering investors the potential
for substantial returns during bull markets while seeking to preserve investment
gains during bear markets.
The Flex-Partners 1998 Annual Report Page 4
<PAGE>
Our Defensive Investing discipline has rewarded many investors over the
25-year history of R. Meeder & Associates. However, recognizing that the
financial needs and goals of every investor are different, The Flex-Partners
offer a wide range of investment options to investors, including the "sector
neutral, style neutral" investment discipline of the Core Equity Fund, the
socially conscious investment policies of the Utility Growth Fund, and most
recently the global investment expertise of the International Equity Fund.
Each mutual fund in The Flex-Partners family is managed by an investment
specialist who has financial expertise in a particular field of concentration.
By tapping the expertise of these managers, The Flex-Partners provide investors
with access to some of the best stock analysts and investment advisers in the
country. Whether you are an individual or an institutional investor, you can now
invest with the experts at The Flex-Partners to help meet your own financial
goals.
As the scope of our investment products and services has broadened, we
continue to remain focused on the individual needs and objectives of our
shareholders. While the future will undoubtedly bring change to R. Meeder &
Associates and The Flex-Partners, we will not change the commitment we made to
investors when our company was founded 25 years ago -- to provide sound
investment management services to our clients and shareholders so that they may
achieve financial prosperity and security.
[LINE GRAPH] The following information was depicted as a graph:
Value of $1,000 from 1974 to 1998 for the Dow Jones Industrial Average, the
10 Year Treasury Bill, and the S&P 500. Other events plotted on the graph
include:
Carter elected President
Gas prices skyrocket as energy crisis hits the U.S.
Inflation reaches 14%, Reagan elected President
The original Flex-fund is launched
Dow Jones Industrial Average crosses 1000
Crash of 1987 - Stocks fall more than 20% on Black Monday
Collapse of the Berlin Wall marks the end of communism in Europe
Clinton elected President
Dow Jones Industrial Average crosses 5000
The Flex-Partners Tactical Asset Allocation Fund is launched
The Utility Growth Fund is launched
The Core Equity Fund is launched
The International Equity Fund is launched
Today R. Meeder & Associates manages $1.4 billion in assets with a staff of 45
professionals from headquarters located in Dublin, OH.
The Flex-Partners 1998 Annual Report Page 5
<PAGE>
A LOOK AHEAD . . .
Today is a very exciting time -- and a scary time -- to be an investor.
With the tremendous advances in technology and communications over the last
25 years, the financial markets have entered what seems to be a brave new world.
The inventions and innovations of the pioneering companies in these industries
have contributed greatly to the prosperity of our economy. But just because it
is a brave new world for the financial markets does not mean it is a world free
from risk and adversity. The possibilities that the future may bring to the
marketplace are at the same time dynamic and daunting.
As an investor, there are two ways you can approach investing in this brave
new world: 1) you can spend much of your free time researching companies and
watching the markets, then making investment decisions based on your
observations; or 2) you can choose a team of investment advisers who will
monitor the markets for you and manage your investments with your financial
goals in mind.
Investment firms are successful not because of profits or returns or assets
under management, but because of the confidence they earn from clients.
Confidence comes from discipline and, like an investment, grows substantially
over time.
For 25 years, investors have placed their confidence in the investment
discipline of R. Meeder & Associates, seeking to take full advantage of the
opportunities the financial markets present while attempting to avoid the risks
of downside loss that will always be inherent in investing. Our success has been
driven by the commitment we have made to every client since we opened for
business in 1974. This commitment will continue to be the core value upon which
we build our business in the future.
The scope of our investment services is now broader than our founding
principle of "defensive investing." After 25 years of serving investors, we have
built a network of investment specialists who are experts in their chosen fields
and have successfully helped investors of all types meet their financial goals.
Now, through investments offered exclusively by The Flex-Partners, you can take
advantage of the skills and research usually available only to large
institutions. With this network of investment experts, we believe we can
continue to provide you with the means to achieve your financial objectives well
into the future.
It is our objective to continue developing new investment solutions that
utilize the abilities of the best and brightest in the financial world. We are
also committed to improving the services we offer to all Flex-Partners
shareholders, to make investing with the experts more convenient and more
successful for you.
The Flex-Partners 1998 Annual Report Page 6
<PAGE>
THE FLEX-PARTNERS FAMILY OF MUTUAL FUNDS
TACTICAL ASSET
ALLOCATION FUND CORE EQUITY FUND
invests in the shares utilizes a "sector neutral,
of other mutual funds style neutral" investment
under the "defensive strategy with a team of 10
investing" discipline sector specialists.
- --------------------------------------------------------------------------------
CONSERVATIVE AGGRESSIVE
- --------------------------------------------------------------------------------
UTILITY GROWTH FUND offers INTERNATIONAL EQUITY FUND
investors a socially- employs a team of
conscious approach to investment experts in 22
utilities industry different countries
investing, by not owning searching for prime
stock in companies that investment opportunities
generate nuclear power. in the global marketplace.
The Flex-Partners 1998 Annual Report Page 7
<PAGE>
The Flex-Partners 1998 Annual Report
TACTICAL ASSET ALLOCATION FUND
[PHOTO] Robert S. Meeder, Jr., Portfolio Manager
While many funds struggled throughout the volatile market environment of
1998, The Tactical Asset Allocation Fund was able to outperform its peer group
with a total return for 1998 of 28.38% for Class A Shares and 28.13% for Class C
Shares, prior to sales charges. This compares favorably with the 12.25% total
return of the average asset allocation fund for 1998, according to Morningstar.
The Fund's performance during the volatile market of 1998 was an excellent
demonstration of the effectiveness of our "defensive investing" philosophy,
which seeks to maximize shareholder return with investments in equity mutual
funds when the risk/reward relationships in the stock market are favorable, and
to protect shareholder gains with investments in cash equivalents when the
risk/reward relationships are negative.
Our evaluation of market conditions through the first half of the year
caused us to approach our equity mutual fund investments with caution, as we
periodically maintained defensive positions in cash equivalents. The stock
market had been overvalued for some time, according to many fundamental
measurements of market performance. Moreover, technical measurements also raised
doubts about the health of the market during 1998.
The third quarter confirmed our assessment of overvaluation, as the stock
market suffered its worst decline in many years. Timely decisions to adopt a
more defensive position as the market began to decline significantly helped the
Fund preserve year-to-date gains and avoid losses that affected most other
equity funds. For the third quarter, the average asset allocation fund declined
- -6.18% according to Morningstar, while The Tactical Asset Allocation Fund
declined only -3.25% for Class A and C Shares.
Our investment discipline prompted us to return to a fully invested
position by late October, once our evaluation of the risk/reward relationships
in the stock market turned positive again. The exceptional performance of the
Fund during the fourth quarter was due partly to our well-researched selection
of equity mutual funds for investment. By December 31, The Fund's portfolio was
split rather evenly between Nasdaq-oriented funds that favor the technology
sector, and growth funds that are pegged to the S&P 500 Index.
We expect volatility and narrowness to continue its hold on the financial
markets through 1999. The risks of stock market investing remain as high as
ever, although potential rewards do exist. We will continue to monitor the
equity markets for investment opportunities in mutual funds that are weighted
toward the growth sectors of the market, and plan to take advantage of them when
our evaluation of the risk/reward relationships are favorable.
The Flex-Partners 1998 Annual Report Page 8
<PAGE>
PERFORMANCE UPDATE as of 12/31/98
- -------------------------------------------------------------------------------
Period & Average Annual Total Returns before deduction of sales charges
Class A Shares Class C Shares
-------------- --------------
1 year 28.38% 28.13%
3 years -- 16.59%
Since Inception 21.13%(1) 18.11%(2)
Period & Average Annual Total Returns net of sales charges
Class A Shares* Class C Shares**
--------------- ----------------
1 year 23.26% 26.63%
3 years -- 16.59%
Since Inception 19.10%(1) 18.11%(2)
1 Inception Date 8/1/96
2 Inception Date 6/1/95
QUARTERLY PERFORMANCE
- -------------------------------------------------------------------------------
Quarterly Total Returns for 1998 before deduction of sales charges
Class A Shares Class C Shares
-------------- --------------
First Quarter 4.07% 3.92%
Second Quarter 1.83% 1.89%
Third Quarter -3.25% -3.25%
Fourth Quarter 25.22% 25.08%
Quarterly Total Returns for 1998 net of sales charges
Class A Shares* Class C Shares**
--------------- ----------------
First Quarter -0.08% 2.42%
Second Quarter -2.25% 0.39%
Third Quarter -7.15% -4.70%
Fourth Quarter 20.21% 23.58%
* Reflects the deduction of 4.00% maximum sales charges.
** Reflects the deduction of contingent deferred sales charges as follows:
1.50% if redeemed within 18 months from date of purchase; 0.75% if redeemed
after 18 but within 24 months from date of purchase; 0.00% thereafter.
PORTFOLIO HOLDINGS as of 12/31/98
- -----------------------------------------------------------------------
[CHART] The following information was presented as a pie chart:
Fidelity OTC 25.67%
Janus Twenty 20.02%
Gabelli Growth 17.52%
Federated Max-Cap 11.03%
Rydex OTC 10.66%
MFS Investors Growth A 7.55%
S&P Futures 4.28%
Cash Equivalents 3.27%
GROWTH OF $10,000
- -----------------------------------------------------------------------
[GRAPH] The following information was presented as a line graph:
Tactical Asset Allocation Tactical Asset Allocation Morningstar Average
Fund Class A Shares Fund Class A Shares Asset Allocation
(before sales charges) (net of sales charges) Fund
---------------------- ---------------------- -------------------
08/01/96 $10,000 $9,600 $10,000
09/30/96 $10,232 $9,823 $10,474
12/31/96 $10,551 $10,129 $11,001
03/31/97 $10,719 $10,290 $10,988
06/30/97 $12,055 $11,572 $12,037
09/30/97 $13,069 $12,546 $12,795
12/31/97 $12,375 $11,880 $12,853
03/31/98 $12,878 $12,363 $13,794
06/30/98 $13,114 $12,589 $13,947
09/30/98 $12,687 $12,179 $13,137
12/31/98 $15,887 $15,251 $14,326
[GRAPH] The following information was presented as a line graph:
Tactical Asset Allocation Tactical Asset Allocation Morningstar Average
Fund Class C Shares Fund Class C Shares Asset Allocation
(before sales charges) (net of sales charges) Fund
---------------------- ---------------------- -------------------
06/01/95 $10,000 $ 9,850 $10,000
06/30/95 $10,408 $10,258 $10,185
09/30/95 $11,496 $11,346 $10,699
12/31/95 $11,457 $11,307 $11,117
03/31/96 $11,716 $11,566 $11,379
06/30/96 $12,174 $12,024 $11,643
09/30/96 $11,681 $11,531 $11,900
12/31/96 $12,038 $11,963 $12,499
03/31/97 $12,225 $12,150 $12,483
06/30/97 $13,783 $13,783 $13,675
09/30/97 $14,875 $14,875 $14,537
12/31/97 $14,170 $14,170 $14,603
03/31/98 $14,725 $14,725 $15,671
06/30/98 $15,003 $15,003 $15,845
09/30/98 $14,515 $14,515 $14,925
12/31/98 $18,156 $18,156 $16,276
Please see additional fund performance information on page 2.
The Flex-Partners 1998 Annual Report Page 9
<PAGE>
The Flex-Partners 1998 Annual Report
CORE EQUITY FUND
[PHOTO] William L. Gurner, Portfolio Manager
Two words can best describe the performance of the stock market during
1998: "volatile" and "narrow." While the first six months of the year were
relatively calm, with the market performing much to our expectations, the second
six months were anything but.
Investors received a cold shot of reality during the third quarter, as
equity markets plunged in response to financial crises in many emerging markets
and concerns about the effect of these crises on U.S. corporate earnings. By
early October, the Dow Jones Industrial Average had given back nearly all of its
year-to-date gains. However, the spectacular market comeback of the fourth
quarter helped the Dow and other large-cap market indexes finish the year in or
near record territory.
This may seem like good news to many casual market watchers. But looking
more closely at the composition of these indexes, it is apparent how narrow and
risky the stock market was in 1998. In the S&P 500, 11 stocks contributed more
than 50% of the index's gains for the year, and 55 stocks contributed more than
90% of the index's gains. Moreover, a total of 206 S&P 500 stocks (more than 40%
of the index's total) finished 1998 in negative territory.
These facts underscore the inherent risks of investing in the equity
markets, as well as the benefits of the Fund's "sector neutral, style neutral"
approach to managing these risks for investors. Through the whipsaw volatility
and extreme narrowness that characterized the performance of the stock market in
1998, the Core Equity Fund adhered to its investment strategy by remaining
nearly fully invested in equities throughout the year. While such exposure may
have left some investors feeling queasy at times, especially during the market
corrections of the third quarter, our position ultimately helped us achieve
strong returns in the fourth quarter and for all of 1998.
For the year, The Core Equity Fund gained 22.78% for Class A Shares and
22.85% for Class C Shares prior to sales charges, outperforming the 19.37%
annual return for the average growth fund according to Morningstar.
We expect to see continued narrowness and volatility in the stock market as
we begin 1999. The technology and health sectors should remain strong, while
lower commodity prices could hamper the performance of the energy and raw
materials sectors. Fears about Y2K may hurt the market later in the year, but we
should continue to see opportunities for stock selection both within and outside
the S&P 500 that could benefit shareholders in the long-term.
The Flex-Partners 1998 Annual Report Page 10
<PAGE>
PERFORMANCE UPDATE as of 12/31/98
- -------------------------------------------------------------------------------
Period & Average Annual Total Returns before deduction of sales charges
Class A Shares Class C Shares
-------------- --------------
1 year 22.78% 22.85%
Since Inception 17.24%(1) 17.18%(1)
Period & Average Annual Total Returns net of sales charges
Class A Shares* Class C Shares**
--------------- ----------------
1 year 17.85% 21.35%
Since Inception 13.91%(1) 16.19%(1)
1 Inception Date for Class A and C Shares 8/1/97
Quarterly Performance
- -------------------------------------------------------------------------------
Quarterly Total Returns for 1998 before deduction of sales charges
Class A Shares Class C Shares
-------------- --------------
First Quarter 12.71% 12.64%
Second Quarter 2.38% 2.17%
Third Quarter -11.29% -11.05%
Fourth Quarter 19.94% 20.01%
Quarterly Total Returns for 1998 net of sales charges
Class A Shares* Class C Shares**
--------------- ----------------
First Quarter 8.18% 11.14%
Second Quarter -1.75% 0.67%
Third Quarter -14.84% -12.38%
Fourth Quarter 15.15% 18.51%
* Reflects the deduction of 4.00% maximum sales charges.
** Reflects the deduction of contingent deferred sales charges as follows:
1.50% if redeemed within 18 months from date of purchase; 0.75% if redeemed
after 18 but within 24 months from date of purchase; 0.00% thereafter.
SECTOR WEIGHTINGS as of 12/31/98
- -----------------------------------------------------------------------
[CHART] The following information was presented as a pie chart:
Sector (Manager) % of Portfolio
------------------------------------------------
Technology (RCM) 19.20%
Finance (Delta Capital) 15.33%
Consumer Non-Durables 13.74%
(Barrow-Hanley)
Health (Alliance) 11.79%
Utilities (Miller/Howard) 10.61%
Consumer Durables 6.77%
(Barrow-Hanley)
Energy (Mitchell Group) 6.30%
Materials & Services 5.55%
(Ashland)
Consumer Goods (Hallmark) 4.39%
Transportation 0.92%
(Miller/Howard)
S&P 500 Futures 4.20%
Cash Equivalents 1.20%
GROWTH OF $10,000
- ----------------------------------------------------------
[GRAPH] The following information was presented as a line graph:
Core Equity Fund Core Equity Fund
Class A Shares Class A Shares Morningstar Average
(before sales charges) (net of sales charges) Growth Fund
---------------------- ---------------------- -------------------
08/01/97 $10,000 $ 9,600 $10,000
09/30/97 $10,024 $ 9,623 $10,300
12/31/97 $10,200 $ 9,792 $10,159
03/31/98 $11,497 $11,037 $11,448
06/30/98 $11,770 $11,299 $11,546
09/30/98 $10,442 $10,024 $ 9,882
12/31/98 $12,524 $12,023 $12,069
[GRAPH] The following information was presented as a line graph:
Core Equity Fund Core Equity Fund
Class C Shares Class C Shares Morningstar Average
(before sales charges) (net of sales charges) Growth Fund
---------------------- ---------------------- -------------------
08/01/97 $10,000 $ 9,850 $10,000
09/30/97 $10,024 $ 9,874 $10,300
12/31/97 $10,188 $10,038 $10,159
03/31/98 $11,475 $11,325 $11,448
06/30/98 $11,725 $11,575 $11,546
09/30/98 $10,429 $10,279 $ 9,882
12/31/98 $12,516 $12,366 $12,069
Please see additional fund performance information on page 2.
The Flex-Partners 1998 Annual Report Page 11
<PAGE>
The Flex-Partners 1998 Annual Report
UTILITY GROWTH FUND
[PHOTO] Lowell G. Miller, Portfolio Manager
1998 proved to be a challenging year for The Utility Growth Fund. Following
the Fund's strong first quarter performance, this summer's market downturn
adversely affected the Fund's returns for the year. Robust gains in the fourth
quarter helped the Fund finish 1998 on a positive note with a total return of
8.34% for Class A Shares and 8.08% for Class C Shares prior to sales charges,
below the 18.08% return of the average utility fund according to Morningstar.
The strong performance of the leading utility funds was mostly due to the
"flight to quality" of investors fleeing the turmoil of the world's equity
markets, as well as higher than normal gains by many electric utility companies
that generate nuclear power. The Fund's socially-conscious investment policy
prevents us from investing in these equities, for we consider the risks and
strict regulatory environment of the nuclear power industry to be a hindrance to
the long-term profitability of these companies.
Many investors who rushed into large-cap electric utilities during the
market turmoil of the spring and summer did so mostly in search of a safe place
for their capital while the broader market declined. This recent surge by
nuclear-based utilities may subside; if so, our portfolio should resume its
standing among its peer group through 1999.
There were some bright spots in the Fund's portfolio that aided our
performance for the year. Telecommunications stocks continued to ring up strong
gains, and this sector comprised nearly 40% of the Fund's portfolio by year-end.
Merger activity in the broad utilities industry also benefited the Fund: MCI
united with Worldcom (4.02% of portfolio) and Pacificorp (1.56% of portfolio)
accepted Scottish Power's invitation to join forces. We expect industry
consolidation to continue, especially in the gas and electric distribution
markets. Our focus for stock selection in the coming year will be on companies
in these sectors that are prime candidates for merger or acquisition.
We continue to believe the telecommunications stocks are at present fully
valued, even though several of these issues show no signs of exhaustion
following their rapid ascent into record territory. We have been concerned about
the high valuations of these companies for some time, and looking forward we may
reduce some of our exposure to this sector should they begin to falter.
The Fed's willingness to lower interest rates in response to contagious
global economic crises is a positive sign. As long as interest rates remain low,
we see many opportunities for stock selection in the various utility industries
that hold excellent potential for growth in the coming year.
Because the Utility Growth Fund concentrates its investments in public utility
companies, the value of the Fund's shares may fluctuate more than if invested in
a greater number of industries. Changes in interest rates may also affect the
value of utility stocks, and rising interest rates can be expected to reduce the
Utility Growth Fund's net asset value.
The Flex-Partners 1998 Annual Report Page 12
<PAGE>
PERFORMANCE UPDATE as of 12/31/98
- -------------------------------------------------------------------------------
Period & Average Annual Total Returns before deduction of sales charges
Class A Shares Class C Shares
-------------- --------------
1 year 8.34% 8.08%
3 years 16.15% 15.95%
Since Inception 18.50%(1) 18.31%(1)
Period & Average Annual Total Returns net of sales charges
Class A Shares* Class C Shares**
--------------- ----------------
1 year 4.03% 6.58%
3 years 14.59% 15.95%
Since Inception 17.12%(1) 18.31%(1)
1 Inception Date for Class A and C Shares 7/11/95
QUARTERLY PERFORMANCE
- -------------------------------------------------------------------------------
Quarterly Total Returns for 1998 before deduction of sales charges
Class A Shares Class C Shares
-------------- --------------
First Quarter 9.92% 9.87%
Second Quarter -3.17% -3.21%
Third Quarter -10.33% -10.40%
Fourth Quarter 13.52% 13.43%
Quarterly Total Returns for 1998 net of sales charges
Class A Shares* Class C Shares**
--------------- ----------------
First Quarter 5.55% 8.37%
Second Quarter -7.03% -4.66%
Third Quarter -13.94% -11.74%
Fourth Quarter 9.01% 11.93%
* Reflects the deduction of 4.00% maximum sales charges.
** Reflects the deduction of contingent deferred sales charges as follows: 1.50%
if redeemed within 18 months from date of purchase; 0.75% if redeemed after
18 but within 24 months from date of purchase; 0.00% thereafter.
SECTOR WEIGHTINGS as of 12/31/98
- -----------------------------------------------------------------------
[CHART] The following information was presented as a pie chart:
Telecomm. Services 40.00%
Natural Gas (Distributor) 21.10%
Oil/Gas (Domestic) 11.80%
Electric Utility 10.90%
Electric/Gas Utility 8.00%
Telecomm. Equipment 2.90%
Water Utility 2.80%
Cash Equivalents 2.50%
GROWTH OF $10,000
- ----------------------------------------------------------
[GRAPH] The following information was presented as a line graph:
[GRAPH] The following information was presented as a line graph:
Utility Growth Fund Utility Growth Fund
Class A Shares Class A Shares Morningstar Average
(before sales charges) (net of sales charges) Utility Fund
---------------------- ---------------------- -------------------
07/11/95 $10,000 $ 9,600 $10,000
09/30/95 $10,520 $10,099 $10,644
12/31/95 $11,511 $11,050 $11,369
03/31/96 $11,398 $10,942 $11,354
06/30/96 $12,072 $11,589 $11,805
09/30/96 $12,035 $11,553 $11,599
12/31/96 $12,963 $12,445 $12,558
03/31/97 $12,660 $12,153 $12,445
06/30/97 $13,650 $13,104 $13,536
09/30/97 $14,783 $14,192 $14,270
12/31/97 $16,646 $15,981 $15,736
03/31/98 $18,297 $17,565 $17,345
06/30/98 $17,718 $17,009 $17,060
09/30/98 $15,888 $15,252 $16,779
12/31/98 $18,035 $17,314 $18,580
12/31/98 $18,156 $18,156 $19,091
[GRAPH] The following information was presented as a line graph:
Utility Growth Fund Utility Growth Fund
Class C Shares Class C Shares Morningstar Average
(before sales charges) (net of sales charges) Utility Fund
---------------------- ---------------------- -------------------
07/11/95 $10,000 $ 9,850 $10,000
09/30/95 $10,513 $10,363 $10,644
12/31/95 $11,507 $11,357 $11,369
03/31/96 $11,391 $11,241 $11,354
06/30/96 $12,044 $11,894 $11,805
09/30/96 $12,019 $11,869 $11,599
12/31/96 $12,940 $12,790 $12,558
03/31/97 $12,627 $12,552 $12,445
06/30/97 $13,601 $13,526 $13,536
09/30/97 $14,741 $14,741 $14,270
12/31/97 $16,596 $16,596 $15,736
03/31/98 $18,234 $18,234 $17,345
06/30/98 $17,649 $17,649 $17,060
09/30/98 $15,813 $15,813 $16,779
12/31/98 $17,936 $17,936 $18,580
12/31/98 $18,156 $18,156 $19,091
Please see additional fund performance information on page 2.
The Flex-Partners 1998 Annual Report Page 13
<PAGE>
The Flex-Partners 1998 Annual Report
INTERNATIONAL EQUITY FUND
[PHOTO] Michael Sparkes, Portfolio Manager
1998 marked the first full year for The International Equity Fund as a
member of The Flex-Partners family of mutual funds. We are pleased that the Fund
was able to outperform its peer group average during its first full year, with a
annual total return of 19.78% before deduction of sales charges. According to
Morningstar, the average foreign stock fund gained 12.68% during 1998.
For international equity markets, this past year was as volatile and
tumultuous as any seen in recent years. The contagious Asian financial crisis at
last reached the shores of Japan, as the world's second-largest economy fell
into recession in May. Efforts by the Japanese government to jump-start the
economy seemed promising but their long-term success remains uncertain. Our
exposure to Japanese and Pacific Rim markets was lower in 1998 in response to
the turmoil. As these markets recovered late in the year, we gradually increased
our holdings in this part of our portfolio.
Emerging markets outside the Pacific Rim were also hit particularly hard
this year. When Russia devalued its currency this summer and defaulted on loans
from many Western banks, stock markets around the world plummeted. Our defensive
position in response to these events effectively helped the Fund preserve
year-to-date gains and compound returns when the markets recovered during the
fourth quarter. Persistent instability in other emerging markets, specifically
Brazil, leaves us cautious in regards to the long-term prospects for growth in
these countries.
The story in Europe and the United Kingdom was different altogether.
Heightened merger activity in select sectors of the market, namely the
pharmaceutical and energy stocks, helped boost returns for the year. Growth in
the utility and telecommunications industries also aided the Fund during 1998.
Regional growth in peripheral European markets continued to be strong,
especially in those countries where positive job growth and falling interest
rates have raised domestic confidence. Our exposure to these markets contributed
greatly to the performance of the Fund during 1998.
The introduction of the new European common currency, or euro, on January
1, 1999 came with great fanfare and heightened expectations. The common currency
should have a positive effect on the economies of the participating countries,
reducing trade barriers and lowering operational costs for companies. Lower
inflation rates will likely follow, as more efficient manufacturing centers draw
increased production and single market pricing becomes more common. We continue
to favor investment in markets with good domestic demand, and remain watchful
for signs of growth in several countries.
In exchange for greater potential rewards, foreign investments involve greater
risk than U.S. investments. These risks include political and economic
uncertainties of foreign countries and currency fluctuations. These risks are
magnified in countries with emerging markets, which may have relatively unstable
governments and less established economies.
The Flex-Partners 1998 Annual Report Page 14
<PAGE>
PERFORMANCE UPDATE
- -------------------------------------------------------------------------------
Period & Average Annual Total Returns
before deduction of sales charges as of 12/31/98
1 year....................................19.78%
Since Inception (9/2/97)..................12.34%
Net of sales charges as of 12/31/98*
1 year....................................14.97%
Since Inception (9/2/97)...................8.95%
QUARTERLY PERFORMANCE
- -------------------------------------------------------------------------------
Quarterly Total Returns for 1998 before deduction of sales charges
First Quarter.............................12.89%
Second Quarter.............................2.11%
Third Quarter............................-13.03%
Fourth Quarter............................19.48%
Quarterly Total Returns for 1998 net of sales charges
First Quarter..............................8.35%
Second Quarter............................-1.95%
Third Quarter............................-16.54%
Fourth Quarter
* Reflects the deduction of 4.00% maximum sales charges.
REGIONAL HOLDINGS as of 12/31/98
- -------------------------------------------------------------------------------
[CHART] The following information was presented as a pie chart:
United Kingdom 21.4%
Europe (ex-U.K.) 52.5%
Japan 21.4%
Far East (ex-Japan) 4.7%
GROWTH OF $10,000
- -------------------------------------------------------------------------------
International Equity Fund
(before deduction International Equity Fund Morningstar Average
of sales charges) (net of sales charges) Foreign Stock Fund
------------------------- ------------------------- -------------------
09/02/97 $10,000 $ 9,600 $10,000
09/30/97 $10,528 $10,106 $10,614
12/31/97 $ 9,743 $ 9,354 $ 9,742
03/31/98 $10,999 $10,559 $11,091
06/30/98 $11,231 $10,782 $11,014
09/30/98 $ 9,767 $ 9,377 $ 9,151
12/31/98 $11,671 $11,204 $10,563
Past performance does not guarantee future results.
The Flex-Partners 1998 Annual Report Page 15
<PAGE>
THE FLEX-PARTNERS
1998 ANNUAL REPORT
PORTFOLIO HOLDINGS AND FINANCIAL STATEMENTS
The Flex-Partners 1998 Annual Report Page 16
<PAGE>
Growth Stock Portfolio
Portfolio of Investments as of December 31, 1998
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
COMMON STOCKS - 94.3%
ADVERTISING SALES - 0.4%
Outdoor Systems, Inc. # 7,600 $ 228,000
AEROSPACE/DEFENSE - 1.3%
B.F. Goodrich Co. 1,891 67,840
Boeing Co. 3,900 127,481
General Dynamics Corp. 440 25,960
Lockheed Martin Corp. 820 69,495
Northrup Grumman Corp. 250 18,281
Raytheon Co. - Class B # 2,000 106,500
Textron, Inc. 1,240 94,163
United Technologies Corp. 1,480 160,950
670,670
AIR TRANSPORTATION - 0.3%
AMR Corp. # 910 54,031
Delta Air Lines, Inc. 770 40,040
Southwest Airlines 1,685 38,228
USAir Group # 470 24,440
156,739
ALUMINUM - 0.2%
Aluminum Company of America 1,230 91,712
AUTO & TRUCK - 1.5%
Ford Motor Co. 6,500 381,469
General Motors Corp. 5,000 357,812
TRW, Inc. 620 34,759
774,040
BANKING - 0.2%
Washington Mutual Savings Bank 2,303 88,378
BEVERAGE--ALCOHOLIC - 0.6%
Anheuser-Busch Cos., Inc. 2,400 157,500
Canadaigua Wine Co. # 2,400 138,750
296,250
BEVERAGE--SOFT DRINK - 1.8%
Coca-Cola Co. 6,000 402,000
Pepsico, Inc. 7,300 298,388
Whitman Corp. 9,400 238,525
938,913
BUILDING MATERIALS - 0.2%
Crane Co. 495 14,943
Masco Corp. 1,860 53,475
Willbros Group # 1,500 8,344
76,762
CAPITAL GOODS - 0.1%
Ingersoll-Rand 611 28,870
CHEMICAL--DIVERSIFIED - 1.1%
Air Products & Chemicals, Inc. 1,550 62,000
E.I. du Pont de Nemours & Co. 4,780 255,730
Monsanto Corp. 2,950 140,125
Praxair, Inc. 1,140 40,185
Rohm & Haas Co. 1,685 50,761
548,801
CHEMICAL--SPECIALTY - 0.1%
Sigma Aldrich 910 26,731
COMMERCIAL SERVICES - 0.1%
Dun & Bradstreet 1,470 46,397
The Flex-Partners 1998 Annual Report Page 17
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
COMPUTERS & PERIPHERALS - 4.5%
Allied Waste Industries, Inc. # 1,260 29,768
Compaq Computer Corp. 8,850 371,700
Dell Computer Corp. # 6,100 446,444
EMC Corp./Mass # 2,825 240,125
Gateway 2000, Inc. # 600 30,712
IBM 4,890 901,594
Micron Technology, Inc. # 1,270 64,214
Seagate Technology, Inc. # 1,470 44,468
Sun Microsystems # 1,880 160,975
2,290,000
COMPUTER SOFTWARE & SERVICES - 4.6%
America Online, Inc. # 210 32,550
BMC Software, Inc. # 1,260 56,149
Ceridian Co. # 420 29,321
Computer Associates International, Inc. 2,895 123,399
Computer Sciences Corp. # 600 38,550
Electronic Data System Corp. 1,700 85,319
Microsoft Corp. # 12,110 1,679,506
National Data Corp. 770 37,489
Network Associates, Inc. # 400 26,500
Novell, Inc. # 1,800 32,625
Oracle Corp. # 4,940 213,038
Parametric Technology Co. # 1,400 22,750
2,377,196
CONSTRUCTION - 0.1%
Centex Corp. 830 37,402
CONSUMER NON-DURABLE - 2.7%
Fortune Brands, Inc. 7,800 246,675
Haggar Corp. 11,500 131,531
Procter & Gamble Co. 10,000 913,125
Tupperware Corp. 6,500 106,844
1,398,175
CONTAINERS - METAL/GLASS - 0.0%
Crown Cork & Seal Co., Inc. 670 20,644
COPPER - 0.0%
Phelps Dodge Corp. 380 19,332
COSMETICS - 1.3%
International Flavors & Fragrances, Inc. 6,700 296,056
Playtex Products, Inc. # 23,300 374,256
670,312
DATA PROCESSING - 0.6%
Automatic Data Processing, Inc. 1,800 144,337
Fiserv, Inc. # 920 47,323
First Data Corp. 2,820 89,888
281,548
DIVERSIFIED - 1.2%
Allied Signal, Inc. 2,190 97,044
Minnesota Mining & Manufacturing Co. 1,650 117,356
National Service Industries 500 19,000
Norfolk Southern Corp. 1,830 57,988
PPG Industries, Inc. 1,130 65,752
Tyco International 3,483 262,749
619,889
DRUG - 8.2%
Abbott Labs 6,700 328,300
Bristol Myers Squibb 5,940 794,846
Elan Corp. plc # 451 31,507
Eli Lilly & Co. 4,290 381,274
Merck & Co., Inc. 5,800 855,500
Pfizer, Inc. 7,780 972,500
Schering Plough Corp. 10,500 580,125
Warner Lambert Co. 3,730 280,449
4,224,501
The Flex-Partners 1998 Annual Report Page 18
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
DRUGSTORE - 0.1%
Longs Drug Stores 2,000 75,000
ELECTRIC--INTEGRATED - 0.4%
Edison International 1,830 51,011
FPL Group, Inc. 860 52,998
Texas Utilities Co. 1,930 90,107
194,116
ELECTRIC UTILITY - 0.6%
AES Corp. 3,850 182,394
American Electric Power, Inc. 740 34,826
Duke Power Co. 1,690 108,266
325,486
ELECTRICAL EQUIPMENT - 3.3%
General Electric Corp. 16,519 1,684,938
ELECTRONIC COMPONENT SEMICONDUCTORS - 3.3%
Applied Materials, Inc. # 1,880 80,252
Intel 9,880 1,171,398
KLA -Tencor Corp. # 700 30,362
Linear Tech Corp. 250 22,391
Motorola, Inc. 2,960 180,745
STMicroelectronic NV # 250 19,516
Texas Instruments, Inc. 2,300 196,938
1,701,602
ELECTRONIC COMPONENTS - 0.4%
AMP, Inc. 900 46,856
Emerson Electric 2,544 153,912
200,768
ELECTRONICS - 0.1%
Rockwell International Corp. 1,360 66,045
FINANCE - 9.4%
Banc One Corp. 8,926 455,784
Bank of Boston Corp. 3,300 128,494
Chase Manhattan Corp. 3,900 276,900
Citigroup, Inc, 7,997 397,351
Equifax, Inc. 1,250 42,734
Federal Home Loan Mortgage Corp. 5,700 367,294
Federal National Mortgage Corp. 6,600 488,400
First Union Corp. 7,968 484,554
Fleet Financial Group, Inc. 3,100 138,531
Lehman Brothers Holdings, Inc. 1,500 66,094
Mellon Bank Corp. 3,600 247,500
Merrill Lynch & Co. 800 53,400
Morgan Stanley Dean Witter & Co. 1,800 127,800
Metris Cos., Inc. 2,200 110,687
PNC Bank Corp. 3,100 167,400
Providian Financial Corp. 7,350 551,250
Ryder Systems, Inc. 360 9,360
SunTrust Banks, Inc. 900 68,850
Wells Fargo & Co. 15,900 635,006
4,817,389
FINANCIAL SERVICES - 3.9%
American Express Co. 1,700 174,250
Associates First Capital 10,400 440,700
Avery Dennison Corp. 620 27,939
BankAmerica Corp. 10,214 614,117
Capital One Financial Corp. 6,200 713,000
H&R Block, Inc. 1,370 61,650
2,031,656
FOOD - MISCELLANEOUS - 0.5%
International Home Foods, Inc. # 14,900 251,437
FOREST PRODUCTS - 0.2%
Georgia Pacific Corp. 430 25,182
Weyerhauser Co. 1,120 56,910
The Flex-Partners 1998 Annual Report Page 19
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
Willamette Industries, Inc. 640 21,440
103,532
HEALTH - 1.4%
American Home Products 5,670 319,646
Johnson & Johnson 5,040 422,730
742,376
INSTRUMENTS--CONTROLS - 0.2%
Honeywell, Inc. 500 37,656
Parker Hannifin Corp. 1,770 57,967
95,623
INSTRUMENTS--SCIENTIFIC - 0.0%
Perkin Elmer Corp. 190 18,537
INSURANCE--LIFE - 0.5%
AFLAC, Inc. 2,000 87,750
SunAmerica, Inc. 2,000 164,000
251,750
INSURANCE--MULTILINE - 1.6%
Allstate 4,400 169,400
American International Group 6,725 649,803
819,203
MACHINERY - 0.4%
Caterpillar, Inc. 1,499 68,954
Deere & Co. 2,484 81,662
Dover Corp. 840 30,765
Lancer Corp. # 3,700 40,700
222,081
MACHINERY--CONSTRUCTION & MINING - 0.2%
Case Corp. 3,192 69,626
Halliburton Co. 1,900 56,287
125,913
MANUFACTURING - 0.2%
Corning, Inc. 1,110 49,950
Mueller Industries, Inc. # 1,750 35,547
Owens Illinois # 780 23,888
109,385
MARKETING SERVICES - 0.1%
Omnicom Group, Inc. 1,135 65,830
MATERIALS & SERVICES - 0.7%
Champion International Corp. 425 17,213
Dana Corp. 970 39,649
Deluxe Corp. 910 33,272
Ecolab, Inc. 1,970 71,289
Hercules, Inc. 660 17,985
Illinois Tool Works, Inc. 1,730 100,340
Service Corp. International 1,570 59,758
Sherwin-Williams Co. 1,070 31,431
370,937
MEDICAL PRODUCTS - 1.0%
Algos Pharmaceutical Corp. # 2,240 58,240
Amgen, Inc. # 900 94,106
Centor, Inc. # 1,500 67,688
GelTex Pharmaceuticals, Inc. # 5,140 116,293
IDEC Pharmaceuticals Corp. # 1,020 47,940
MedImmune, Inc. # 1,550 154,128
538,395
MEDICAL SERVICES - 0.8%
Columbia/HCA Healthcare Corp. 2,620 64,845
Genzyme Corp. # 2,050 101,987
Genzyme Molecular Oncology # 1 2
HBO & Co. 3,940 113,029
IMS Health, Inc. 540 40,736
Shared Medical Systems 490 24,439
Tenet Healthcare Corp. # 1,820 47,775
392,813
The Flex-Partners 1998 Annual Report Page 20
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
MEDICAL SUPPLIES - 0.5%
Boston Scientific Co. # 1,000 26,813
IDEXX Laboratories, Inc. # 1,370 36,862
Medtronic, Inc. 2,860 212,444
276,119
MINING - 0.1%
Barrick Gold Corp. 2,090 40,755
Newmont Mining Corp. 1,510 27,558
68,313
MULTIMEDIA - 0.5%
CBS Corp. # 7,300 239,531
NATURAL GAS DISTRIBUTOR - 0.1%
Williams Companies, Inc. 1,300 40,544
NETWORKING PRODUCTS - 1.6%
3Com Corp. # 1,900 85,144
Cisco Systems, Inc. # 8,027 745,006
830,150
OFFICE AUTOMATION & EQUIPMENT - 1.1%
Hewlett Packard 5,770 394,163
Pitney Bowes, Inc. 1,325 87,533
Xerox Corp. 890 105,020
586,716
OIL/GAS--DOMESTIC - 1.7%
Amoco Corp. 4,000 238,000
Atlantic Richfield 1,100 71,912
Baker Hughes 1,640 28,905
Burlington Resources 1,500 53,719
Devon Energy 1,200 36,825
Enron Corp. 400 22,825
Mobil Corp. 4,000 348,500
Murphy Oil Corp. 400 16,500
Noble Drilling Co. # 1,300 16,819
USX Marathon Group 1,800 54,225
888,230
OIL/GAS--INTERNATIONAL - 2.1%
Chevron Corp. 3,500 290,281
Exxon Corp. 11,050 808,031
1,098,312
OILFIELD SERVICES/EQUIPMENT - 0.4%
Coastal Corp. 1,900 66,737
Kerr-McGee Corp. 1,000 38,250
Schlumberger LTD 2,200 101,888
Union Pacific Resources 1,500 13,594
220,469
OIL & NATURAL GAS - 0.4%
Amerada Hess 500 24,875
K N Energy, Inc. # 1,100 41,319
MCN Energy Group, Inc. 4,840 92,263
Ocean Energy, Inc. # 1,560 9,945
Seagull Energy Corp. # 2,900 18,306
186,708
PAPER & FOREST PRODUCTS - 0.3%
Bemis Co., Inc. 360 13,657
Fort James Corp. 1,060 42,400
International Paper 1,615 72,372
Mead Corp. 840 24,623
153,052
PETROLEUM--INTEGRATED - 1.6%
Occidental Petroleum Corp. 1,600 27,000
Phillips Petroleum 1,600 68,200
The Flex-Partners 1998 Annual Report Page 21
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
Royal Dutch Petroleum 11,400 545,775
Texaco 2,900 153,700
Unocal Corp. 1,000 29,188
823,863
PROTECTION--SAFETY EQUIPMENT - 0.6%
Lo-Jack Corp. # 25,500 302,812
PUBLISHING - 0.7%
The Reader's Digest Association, Inc. 14,000 352,625
RADIO - 0.8%
Chancellor Media Corp. # 4,900 234,587
Infinity Broadcasting Corp. # 6,200 169,725
404,312
RAILROAD TRANSPORTATION - 0.3%
Burlington Northern Santa Fe 2,370 81,172
Union Pacific Corp. 1,240 55,877
137,049
RENTAL--AUTO/EQUIPMENT - 0.6%
Budget Group Inc. # 9,400 149,225
The Hertz Corp. 3,600 164,250
313,475
RESTAURANT - 1.2%
Brinker International, Inc. # 8,300 239,662
Wendy's International, Inc. 17,100 372,994
612,656
RETAIL GROCERY - 0.6%
Albertsons, Inc. 5,000 318,438
RETAIL STORE - 3.4%
Kmart # 40,000 612,500
PETsMART, Inc. # 22,500 247,500
Sears, Roebuck & Co. 5,000 212,500
WalMart Stores, Inc. 8,000 651,500
1,724,000
SERVICES - 0.1%
Paychex, Inc. 1,397 71,858
TELECOMMUNICATION EQUIPMENT - 1.0%
General Instrument Corp. # 620 21,041
Loral Space & Communications Ltd. # 5,460 97,256
Newbridge Networks Corp. # 1,700 51,638
Nokia Corp. - ADR - A 380 45,766
Northern Telecom LTD 2,470 123,500
P-Com, Inc. # 8,760 34,903
QUALCOMM, Inc. # 2,550 132,122
506,226
TELECOMMUNICATION SERVICES - 10.5%
Airtouch Communications # 2,730 197,754
Ameritech Corp. 5,510 349,196
Ascend Communications, Inc. # 1,280 84,160
AT&T 9,000 681,750
BCE, Inc. 3,420 129,746
Bell Atlantic Corp. 7,730 417,420
BellSouth Corp. 9,600 478,800
Frontier Corp. 3,470 117,980
GTE Corp. 4,580 297,700
Leap Wireless International, Inc. # 550 3,987
Lucent Technologies, Inc. 6,205 682,162
MediaOne Group, Inc. # 3,130 147,110
MCI Communication 10,288 738,164
PT Indosat - ADR 7,370 90,282
Qwest Communications International, Inc. # 4,240 212,000
The Flex-Partners 1998 Annual Report Page 22
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
SBC Communications 7,550 404,869
Sprint Corp. 1,890 158,996
Sprint Corp. - PCS Group # 945 21,853
Tellabs, Inc. # 820 56,221
U.S. West, Inc. 1,825 117,941
5,388,091
TOBACCO - 3.2%
Gallaher Group, plc - ADR 7,200 195,750
Imperial Tobacco 5,000 105,625
Philip Morris Companies 16,900 904,150
UST, Inc. 12,000 418,500
1,624,025
TRANSPORTATION - 0.1%
FDX Corp. # 738 65,820
TRUCKING/TRANSPORTATION LEASING - 0.1%
CSX, Corp. 1,097 45,525
WASTE DISPOSAL--NON-HAZARDOUS - 0.3%
Waste Management, Inc. 3,048 142,113
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost 37,878,933 ) 48,537,106
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 0.8%
U.S. Treasury Bills
** 5.02%, 01/07/99 6,000 5,996
* 4.33%, 02/04/99 200,000 199,182
* 4.37%, 03/04/99 200,000 198,470
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost 403,673 ) 403,648
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 4.9%
Prudential Securities, 5.10%, 01/04/99,
(Collateralized by $2,468,000 FNMA Remic Series
Pool #93020J, 7.00%, 03/25/23,
market value - $2,557,465) 2,509,000 2,509,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost 2,509,000 ) 2,509,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost 40,791,606 ) 51,449,754
- --------------------------------------------------------------------------------
FUTURES CONTRACTS CONTRACTS VALUE
Long, S&P 500 Futures, face amount $2,055,875
expiring March 1999 7 2,179,625
- --------------------------------------------------------------------------------
TOTAL FUTURES CONTRACTS 2,179,625
- --------------------------------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION***
Flex-funds Highlands Growth Fund 230 4,888
Flex-funds Muirfield Fund 247 1,702
Flex-funds Total Return Utilities Fund 30 573
Flex-Partners International Equity Fund 154 2,234
- --------------------------------------------------------------------------------
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost 8,594) 9,397
- --------------------------------------------------------------------------------
ADR American Depositary Receipt
FNMA Federal National Mortgage Association
Remic Real Estate Mortgage Investment Conduit
# Represents non-income producing securities.
* Pledged as collateral on futures contracts.
** Pledged as collateral on Letter of Credit.
***Assets of affiliates to the Growth Stock Portfolio held for the benefit of
the Portfolio's Trustees in connection with the Trustee Deferred
Compensation Plan.
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 23
<PAGE>
Mutual Fund Portfolio
Portfolio of Investments as of December 31, 1998
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
-------------------------- --------------------- -----
MUTUAL FUNDS - 96.6%
Federated S&P 500 Maxcap Fund 632,669 $ 16,057,133
Fidelity OTC Portfolio Fund 856,653 37,375,785
Gabelli Growth 720,481 25,505,045
Janus Twenty Fund 546,887 29,149,088
MFS Investor Growth - Class A 690,955 10,993,091
Mutual Shares Fund 352 6,870
Rydex OTC Fund 375,152 15,516,274
- --------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $111,404,738) 134,603,286
- --------------------------------------------------------------------------------
MONEY MARKET MUTUAL FUNDS - 1.9%
Charles Schwab Money Market Fund 889,006 889,006
Fidelity Core Money Market Fund 1,771,471 1,771,471
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET MUTUAL FUNDS
(Cost $2,660,477 ) 2,660,477
- --------------------------------------------------------------------------------
U.S.TREASURY BILLS - 1.4%
** 5.02%, due 01/07/99 30,100 30,075
* 4.39%, due 02/04/99 $2,000,000 1,991,708
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $2,021,783 ) 2,021,783
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 0.1%
Prudential Securities, 5.10%, 01/04/99,
(Collateralized by $90,000 FNMA Remic
Series Pool #93020J, 7.00%, 03/25/23,
market value - $93,263) 91,000 91,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $91,000 ) 91,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost $116,177,998) $139,376,546
- --------------------------------------------------------------------------------
FUTURES CONTRACT CONTRACTS VALUE
Long, S&P 500 Futures, face amount $6,274,000
expiring March 1999 20 $6,227,500
- --------------------------------------------------------------------------------
TOTAL FUTURES CONTRACT $6,227,500
- --------------------------------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION***
Flex-funds Highlands Growth Fund 687 14,585
Flex-funds Muirfield Fund 778 5,355
Flex-funds Total Return Utilities Fund 76 1,437
Flex Partners International Equity Fund 442 6,390
- --------------------------------------------------------------------------------
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $25,368 ) $27,767
- --------------------------------------------------------------------------------
FNMA Federal National Mortgage Association
Remic Real Estate Mortgage Investment Conduit
* Pledged as collateral on futures contracts.
** Pledged as collateral on Letter of Credit.
***Assets of affiliates to the Mutual Fund Portfolio held for the benefit of the
Portfolio's Trustees in connection with the Trustee Deferred Compensation
Plan.
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 24
<PAGE>
Utilities Stock Portfolio
Portfolio of Investments as of December 31, 1998
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
COMMON STOCKS - 97.5%
ELECTRIC/GAS UTILITY - 8.0%
AGL Resources, Inc. 12,100 $ 279,056
MDU Resources Group, Inc. 5,000 131,562
NIPSCO Industries, Inc. 9,400 286,113
UtiliCorp United, Inc. 10,000 366,875
1,063,606
ELECTRIC UTILITY - 10.9%
Cinergy Corp. 7,800 268,125
LG&E Energy Corp. 13,944 394,789
New Century Energies, Inc. 5,600 273,000
PacifiCorp 9,800 206,413
TECO Energy, Inc. 10,400 293,150
1,435,477
NATURAL GAS (DISTRIBUTOR) - 21.1%
Bay State Gas Co.
Consolidated Natural Gas Co. 8,200 442,800
KeySpan Energy Corp. 22,100 685,100
MCN Corp. 22,270 424,522
Peoples Energy Corp. 6,990 278,726
TransCanada Pipelines Ltd. 8,100 119,475
WICOR, Inc. 11,200 244,300
Williams Cos., Inc. 19,140 596,929
2,791,852
OIL/GAS (DOMESTIC) - 11.8%
El Paso Natural Gas Co. 8,440 293,817
Enron Corp. 5,830 332,674
Kinder Morgan Energy Partners, L.P. 14,824 537,370
Questar Corp. 20,200 391,375
1,555,236
TELECOMMUNICATION EQUIPMENT - 2.9%
Loral Space & Communications Ltd. 14,890 265,228
P-Com, Inc. # 30,000 119,531
384,759
TELECOMMUNICATION SERVICES - 40.0%
AT&T Corp. 4,000 303,000
AirTouch Communications, Inc. # 5,400 391,162
Alltel Corp. 7,900 472,519
BCE, Inc. 12,040 456,768
Frontier Corp. 19,300 656,200
GTE Corp. 5,000 325,000
MCI WorldCom, Inc. # 7,420 532,385
Qwest Communications International, Inc.# 13,491 674,550
SBC Communications, Inc. 12,740 683,183
Sprint Corp. 4,300 361,737
Sprint Corp. - PCS Group # 2,150 49,719
U.S. West Communications Group 5,900 381,288
5,287,511
WATER UTILITY - 2.8%
American Water Works Co., Inc. 10,900 367,875
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $9,492,932 ) $12,886,316
- --------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.0%
* 5.02%, due 01/07/99 1,000 999
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $999 ) 999
- --------------------------------------------------------------------------------
The Flex-Partners 1998 Annual Report Page 25
<PAGE>
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE AMOUNT VALUE
- -------------------------- --------------------- -----
REPURCHASE AGREEMENT - 2.5%
Prudential Securities, 5.10%, 01/04/99,
(Collateralized by $320,00 FNMA Remic
Series Pool #93020J, 7.00%, 03/25/23,
market value - $331,600 325,000 325,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $325,000 ) 325,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(Cost $9,818,931 ) $13,212,315
- --------------------------------------------------------------------------------
TRUSTEE DEFERRED COMPENSATION**
Flex-funds Highlands Growth Fund 120 2,550
Flex-funds Muirfield Fund 120 826
Flex-funds Total Return Utilities 14 274
Flex Partners International Equit 85 1,231
- --------------------------------------------------------------------------------
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $4,465 ) $4,881
- --------------------------------------------------------------------------------
FNMA Federal National Mortgage Association
Remic Real Estate Mortgage Investment Conduit
# Represents non-income producing securities.
* Pledged as collateral on Letter of Credit.
** Assets of affiliates to the Utility Stock Portfolio held for the benefit
with the Trustees Deferred Compensation Plan.
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 26
<PAGE>
International Equity Fund
Portfolio of Investments as of December 31, 1998
INDUSTRIES/CLASSIFICATIONS SHARES OR FACE
AMOUNT VALUE
COMMON STOCKS - 96.5%
AEROSPACE/DEFENSE - 1.2%
British Aerospace plc 10,207 $ 86,700
Finmeccanica SpA # 97,100 99,697
Rolls-Royce plc 5,064 20,812
207,209
AGRICULTURE & FOOD - 0.0%
Kuala Lumpur Kepong Bhd 2,000 2,431
AIR TRANSPORT - 0.4%
BAA plc 2,577 29,929
British Airways plc 1,262 8,546
Japan Airlines Co. # 9,000 23,777
Singapore Airlines Ltd. 1,500 11,182
73,434
APPAREL - 0.7%
Alexon Group plc 3,181 10,136
Castellum AB 5,700 61,884
Espirit Holdings Ltd. 20,000 8,649
Onward Kashiyama Co., Ltd. 3,000 40,374
121,043
AUTO & TRUCK - 2.6%
Daimler Chrysler AG # 1,906 188,254
Honda Motor Co., Ltd. 3,000 98,673
Nissan Motor Co., Ltd. 4,000 12,270
Toyota Motor Corp. 6,000 163,303
462,500
AUTOPARTS - 0.5%
Denso Corp. 2,000 37,058
GKN plc 3,824 51,125
Torotrak plc # 2,831 4,027
92,210
BANKING - 13.2%
Abbey National plc 3,259 69,789
Argentaria, Caja Postal y Banco Hipotecar 4,000 103,747
Asahi Bank Ltd. 11,000 40,374
Australia & New Zealand Banking Group L 3,300 21,354
Banca Nazionale del Lavoro # 26,600 79,773
Bank of East Asia, Ltd. 3,000 5,247
Bank of Tokyo-Mitsubishi Ltd. 8,000 82,981
Banque Cantonale de Geneve 320 80,379
Banque Nationale de Paris 2,335 192,368
Barclays plc 3,741 80,484
Compahnie Financiere de Paribas 800 69,560
Credito Italiano 25,000 148,509
Credit Suisse Group 500 78,267
Dai-Ichi Kangyo Bank Ltd. 6,000 32,022
Den Danske Bank 400 53,737
Development Bank of Singapore Ltd. 1,200 10,982
HSBC Holdings plc 4,596 125,186
Halifax plc 2,574 36,511
Hang Seng Bank Ltd. 3,400 30,502
ING Groep NV 2,764 168,635
Industrial Bank of Japan Ltd. 7,000 32,333
Istituto Bancario San Paolo di Torino SpA 5,600 99,170
Julius Baer Holding AG 24 79,767
Malayan Banking Bhd 4,000 5,746
National Australia Bank Ltd. 2,760 41,305
National Bank of Greece SA 816 183,573
National Westminster Bank plc 1,732 33,372
Overseas-Chinese Banking Corp., Ltd. 2,000 13,455
Royal Bank of Scotland Group plc 2,334 37,554
Sanwa Bank Ltd. 4,000 30,887
The Flex-Partners 1998 Annual Report Page 27
<PAGE>
Schroders plc 975 17,618
Sumitomo Bank Ltd. 6,000 61,704
Tokai Bank Ltd. 6,000 28,405
Union Bank of Switzerland # 618 189,877
United Overseas Bank Ltd. 1,000 6,485
2,371,658
BEVERAGE -- ALCOHOLIC - 2.2%
Diageo plc 9,030 101,494
Foster's Brewing Group Ltd. 8,300 22,247
Fraser & Neave Ltd. 1,000 2,897
Heineken NV 1,800 108,382
Kirin Brewery Co., Ltd. 2,000 25,533
Pernod Ricard 1,600 103,974
Scottich & Newcastle plc 3,062 34,721
399,248
BROADCASTING -- CABLE TV - 0.4%
British Sky Broadcasting Group plc 4,966 38,071
Reuters Holdings plc 2,832 29,710
67,781
BROADCASTING & PUBLISHING - 0.5%
News Corporation Ltd. 6,600 43,395
Pearson plc 2,146 42,777
86,172
BUILDING & CONSTRUCTION - 2.6%
Blue Circle Industries plc 3,444 19,885
Grupo Acciona Sa 1,500 122,696
Obayashi Corp. 15,000 72,077
RMC Group plc 1,064 14,517
Sekisui House Ltd. 3,000 31,783
Suez Lyonnaise des Eaux 840 172,632
Taisei Corp. 10,000 19,238
Tostem Corp. 1,000 19,859
472,687
BUILDING MATERIALS - 0.6%
CRH plc 5,000 86,477
Wolseley plc 4,385 27,689
114,166
CHEMICALS - 0.6%
Laporte plc 2,490 19,307
Shin-Etsu Chemical Co., Ltd. 4,000 96,457
115,764
CHEMICALS -- DIVERSIFIED - 2.4%
Henkel KGaA 2,200 196,818
Hoechst AG 2,200 91,276
Montedison SpA 100,000 133,120
Sekisui Chemical Co., Ltd. 4,000 26,951
448,165
COMPUTERS & PERIPHERALS - 1.6%
Cap Gemini 1,122 180,171
Fujitsu Ltd. 5,000 66,713
SAP AG 75 35,809
282,693
CONSUMER DURABLES - 0.4%
Unilever plc 6,900 77,553
COSMETICS - 1.0%
Kao Corp. 4,000 90,428
L'OREAL 115 83,172
173,600
DATA PROCESSING - 0.1%
Industri-Matematik International
Corp. ADR # 2,000 10,000
DISTRIBUTION WHOLESALER - 0.4%
Marubeni Corp. 7,000 12,039
Mitsui & Co. 12,000 67,130
79,169
The Flex-Partners 1998 Annual Report Page 28
<PAGE>
DIVERSIFIED - 1.3%
Arriva plc 2,100 13,208
BTR plc 5,400 11,052
Brambles Industries Ltd. 1,050 25,438
Broken Hill Proprietary Co., Ltd. 2,350 17,008
Granada Group plc 3,639 64,576
Hutchison Whampoa Ltd. 7,500 52,762
Keppel Corp., Ltd. 2,000 5,430
Rio Tinto Ltd. 1,590 18,627
Swire Pacific Ltd. 3,000 13,631
Williams plc 1,100 6,177
227,909
DRUG - 3.0%
Rhone-Poulenc SA 2,800 144,160
Sankyo Co., Ltd. 2,000 43,796
Sanofi SA 945 155,639
Smithkline Beecham plc 13,860 194,524
538,119
ELECTRIC PRODUCTION -- MISCELLANEOUS - 2.2%
CLP Holdings Ltd. 5,000 25,042
Chubu Electric Power Co., Inc. 4,000 80,853
Endesa SA 3,400 90,224
Hitachi Ltd. 6,000 37,235
National Grid Group plc 7,307 58,115
Scottish Power plc 3,683 37,719
Sharp Corp. 2,000 18,068
Tenaga Nasional Bhd 3,000 3,812
Tokyo Electric Power Co. 1,400 34,629
385,697
ELECTRONIC COMPONENT -- MISCELLANEOUS - 2.4%
Fanuc Ltd. 1,000 34,310
Hirose Electric Co., Ltd. 600 42,076
Johnson Electric Holdings Ltd. 2,000 5,137
Mabuchi Motor Co., Ltd. 900 69,018
Matsushita Electric Industrial Co., Ltd. 4,000 70,889
Omron Corp. 3,000 41,171
Sony Corp. 1,000 72,963
Toshiba Corp. 11,000 65,631
Yokogawa Electric Corp. 4,000 19,859
421,054
ENGINEERING RESEARCH & DEVELOPMENT - 0.1%
Sembcorp Industries Ltd. # 3,000 3,454
Singapore Technologies Engineering Ltd. 6,000 5,636
9,090
FINANCE - 1.8%
Credit Saison Co., Ltd. 2,900 71,602
Garban plc # 67 258
Lend Lease Corp., Ltd. 2,200 29,483
Lloyds TSB Group plc 13,412 190,357
Nomura Securities Co., Ltd. 3,000 26,198
317,898
FINANCIAL SERVICES - 0.9%
Acom Co., Ltd. 500 32,182
Legal & General Group plc 1,831 23,840
Northern Rock plc 1,636 15,625
Unidanmark A/S 1,000 90,348
161,995
FOOD -- DIVERSIFIED - 3.1%
Associated British Foods plc 2,100 19,602
Cadbury Schweppes plc 2,060 35,099
Danone 300 85,929
J Sainsbury plc 1,200 9,339
Nestle SA 60 130,615
Royal Canin SA 3,300 206,767
Tesco plc 21,367 61,328
548,679
The Flex-Partners 1998 Annual Report Page 29
<PAGE>
FOOD -- RETAIL - 1.3%
Koninklijke Ahold NV 2,500 92,450
Laurus NV 1,279 32,304
Nissin Food Products 3,000 75,667
Somerfield plc 1,500 9,996
Whitbread plc 1,293 16,480
226,897
HOTEL/GAMING - 0.7%
Accor SA 560 121,303
Genting Bhd 1,400 2,166
Ladbroke Group plc 2,173 8,678
132,147
HOUSEHOLD PRODUCTS - 1.3%
Asahi Glass Co., Ltd. 11,000 68,362
Benckiser NV 1,900 124,527
Nippon Sheet Glass Co., Ltd. 13,000 36,650
229,539
HUMAN RESOURCES - 0.4%
Vedior 4,000 78,862
INSURANCE -- MULTILINE - 1.6%
Allied Zurich AG # 5,597 83,761
CNP Assurances # 3,080 93,624
ERGO Versicherungs Gruppe AG 570 94,116
Royal & Sun Alliance Insurance Group plc 2,162 17,501
289,002
INSURANCE -- PROPERTY/CASUALTY - 0.0%
Allianz AG 12 4,402
INSURANCE - 3.5%
AMP Ltd. # 1,800 22,522
Assicurazioni Generali 4,356 182,282
Fortis AG # 500 181,208
Guardian Royal Exchange plc 3,459 19,338
Prudential Corp., plc 3,625 54,797
Skandia Forsakrings AB 9,100 139,214
Tokio Marine & Fire Insurance Co. 3,000 35,905
635,266
INVESTMENT COMPANIES - 0.6%
Corp. Financiera Reunida SA # 7,000 102,018
Sime Darby Bhd 4,000 3,300
105,318
MACHINERY - 2.1%
Kubota Corp. 20,000 59,754
Mannesmann AG 2,300 263,765
Toshiba Machine Co., Ltd. 23,000 47,102
370,621
MANUFACTURING - 2.7%
FKI plc 12,045 26,956
General Electric Co. plc 7,728 69,436
Mitsubishi Heavy Industries Ltd. 18,000 70,215
Morgan Crucible Co., plc 1,923 8,879
RWE AG 2,400 131,492
Siemens AG 2,600 167,817
TI Group plc 1,200 6,474
481,269
MEDICAL PRODUCTS - 6.2%
Glaxo Wellcome plc 9,153 313,882
Hoya Corp. 1,000 48,760
Novartis AG 250 491,445
Takeda Chemical Industries 2,000 77,130
Yamanouchi Pharmaceutical Co., Ltd. 3,000 96,811
Zeneca Group plc 2,049 89,495
1,117,523
The Flex-Partners 1998 Annual Report Page 30
<PAGE>
MINING - 0.2%
Rio Tinto plc 1,800 20,785
Sumitomo Metal Mining Co. 7,000 22,776
43,561
OIL & NATURAL GAS - 4.9%
Australia Gas & Light 1,300 9,337
BG plc 11,180 70,642
British Petroleum Co., plc 21,612 322,562
Centrica plc # 17,585 35,331
Elf Aquitain SA 1,300 150,340
Hong Kong & China Gas Co., Ltd. 8,000 10,068
Nippon Oil Co. 6,000 20,958
Royal Dutch Petroleum Co. 2,450 122,063
Tokyo Gas Co. 26,000 68,460
Total SA 700 70,927
880,688
PAPER & FOREST PRODUCTS - 0.8%
Nippon Paper Industries Co. 6,000 27,341
Stora Kopparbergs Bergslags Aktiebolag 10,250 113,812
141,153
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 0.4%
Fuji Photo Film 2,000 74,470
PRINTING -- COMMERCIAL - 0.2%
Dai Nippon Printing Co., Ltd. 2,000 31,951
PROTECTION -- SAFETY EQUIPMENT - 0.5%
Secom Co., Ltd. 1,000 82,981
PUBLISHING - 1.1%
Johnston Press plc 5,266 18,882
Reed International plc 2,541 20,231
Singapore Press Holdings Ltd. 946 10,263
South China Morning Post Holdings Ltd. 9,000 4,647
United News & Media plc 673 5,829
Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit 3,700 139,585
199,437
REAL ESTATE MANAGEMENT & INVESTMENT - 1.2%
British Land Co., plc 1,233 9,119
Cheung Kong Holdings Ltd. 4,000 29,302
City Developments Ltd. 4,000 17,454
HKR International Ltd. 12,080 7,446
Henderson Land Development Co., Ltd. 1,000 5,215
Hysan Development Co., Ltd. 3,000 4,511
Land Securities plc 1,094 13,106
Mitsubishi Estate Co., Ltd. 8,000 71,846
New World Development Co., Ltd. 4,000 10,146
Sun Hung Kai Properties Ltd. 5,000 36,950
Westfield Holdings Ltd. 2,700 13,579
218,674
RECREATION - 0.2%
TAB Ltd. # 9,590 18,705
TABCORP Holdings Ltd. 2,800 17,174
35,879
RETAIL - 0.3%
Great Universal Stores plc 2,832 29,663
JUSCO Co., Ltd. 1,000 20,258
49,921
RETAIL GROCERY - 2.0%
Ito-Yokado Co., Ltd. 1,000 70,038
Superdiplo SA # 9,500 267,853
Woolworths Ltd. 5,000 16,775
354,666
RETAIL STORE - 1.7%
ASDA Group plc 3,900 10,399
The Flex-Partners 1998 Annual Report Page 31
<PAGE>
Debenhams plc 1,627 9,719
Family Mart Co., Ltd. 1,000 50,002
Kingfisher plc 3,347 36,199
Marks & Spencer 4,608 31,474
Marui Co. 3,000 57,847
Metro AG 1,300 103,813
299,453
STEEL -- INTEGRATED - 0.4%
Nippon Steel Corp. 30,000 54,523
Sumitomo Metal Industries Ltd. 18,000 20,586
75,109
TELECOMMUNICATIONS - 3.7%
Cable & Wireless plc 3,591 44,185
Nippon Telegraph & Telephone Corp. 25 193,268
Singapore Telecommunications Ltd. 12,000 18,764
Societe Europeenne des Satellites # 500 81,944
Swisscom AG # 300 125,591
Telecom Corporation of New Zealand Ltd. 6,900 30,910
Telecom Italia SpA 18,850 161,190
Telefonica SA bonus rights 2,000 14
655,866
TELECOMMUNICATION EQUIPMENT - 4.2%
Alcatel Alsthom 340 41,633
Nokia Oyj 1,000 122,450
Olivetti SpA # 60,000 209,231
Storebrand ASA # 13,250 99,999
Telefonaktiebolaget LM Ericsson 1,400 33,335
Telefonica de Espana 2,000 89,067
Vodafone Group plc 9,388 152,145
747,860
TELECOMMUNICATION SERVICES - 4.7%
Barry Callebaut AG # 450 102,221
British Telecommunications plc 15,268 229,782
China Telecom Ltd. # 4,000 6,945
Hong Kong Telecommunications Ltd. 22,000 38,479
Panafon Hellenic Telecom SA # 6,730 178,439
Sonera Group Oyj # 8,600 152,865
Telecel-Comunicacaoes Pessoais SA 500 102,210
Telekom Malaysia Bhd 2,000 3,297
Telestra Corp., Ltd. # 5,900 27,322
841,560
TIRE & RUBBER - 0.3%
Bridgestone Corp. 2,000 45,480
TOBACCO - 1.5%
BAT Industries plc 1,221 10,834
Gallaher Group plc 3,147 21,325
Japan Tobacco, Inc. 4 40,072
Rothmans of Pall Mall Bhd 400 1,606
Tabacalera SA 8,000 202,130
275,967
TRANSPORTATION - 1.5%
East Japan Railway Co. 13 72,724
FirstGroup plc 2,601 17,246
Malaysia International Shipping Bhd 1,000 913
National Express Group plc 989 18,365
Nippon Yusen Kabushiki Kaisha 5,000 15,825
Peninsular and Oriental Steam
Navigation Co. 3,449 40,745
Railtrack Group plc 1,049 27,438
Tokyu Corp. 7,000 18,431
Yamato Transport Co., Ltd. 4,000 56,030
267,717
WATER UTILITY - 0.1%
Anglian Water plc 950 13,183
Pennon Group plc 543 10,499
23,682
TOTAL COMMON STOCKS
(Cost $15,062,948 ) 17,284,845
The Flex-Partners 1998 Annual Report Page 32
<PAGE>
REPURCHASE AGREEMENTS - 3.5%
State Street Bank, 4.35%, 01/04/99,
(Collateralized by $455,000 U.S. Treasury
Notes, 8.75%, 05/15/17, market value - $633,232) 622,000 622,000
TOTAL REPURCHASE AGREEMENTS
(Cost $622,000 ) 622,000
TOTAL INVESTMENTS - 100.0%
(Cost $15,684,948 ) 17,906,845
TRUSTEE DEFERRED COMPENSATION*
Flex-funds Highlands Growth Fund 105 2222
Flex-funds Muirfield Fund 103 705
Flex-funds Total Return Utilities Fund 16 297
Flex Partners International Equity Fund 68 986
TOTAL TRUSTEE DEFERRED COMPENSATION
(Cost $3,860 ) $4,210
# Represents non-income producing securities.
ADR American Depositary Receipt
* Assets of affiliates to the International Equity Fund held for the benefit
of the Portfolio's Trustees in connection with the Trustee Deferred
Compensation Plan.
Portfolio Composition by Country of Domicile as of 12/31/98.
United Kingdom - 21.5% Hong Kong - 1.7%
Japan - 21.4% Finland - 1.6%
France - 10.8% Belgium - 1.5%
Switzerland - 7.4% Denmark - 0.8%
Germany - 7.4% Portugal - 0.6%
Italy - 6.4% Norway - 0.6%
Spain - 5.7% Singapore - 0.6%
Netherlands - 5.0% Ireland - 0.5%
Sweden - 2.1% New Zealand - 0.2%
Greece - 2.1% Malaysia - 0.1%
Australia - 2.0%
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 33
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
CORE TACTICAL ASSET UTILITY
EQUITY ALLOCATION GROWTH
FUND FUND FUND
Assets:
Investment in corresponding
portfolio, at value $7,995,706 $15,089,067 $2,847,030
Receivable for capital stock issued 12,144 --- 1,130
Receivable from investment adviser 3,232 666 10,834
Unamortized organization costs 7,167 11,938 8,508
Other assets 5,080 4,445 6,655
Total Assets 8,023,329 15,106,116 2,874,157
Liabilites:
Payable for capital stock redeemed 115,672 7,665 1,000
Dividends payable 618 --- 199
Accrued transfer agent and
administrative fees 994 2,399 527
Accrued 12b-1 and shareholder
service fees -- Class A 4,483 7 2,038
Accrued 12b-1 and shareholder
service fees -- Class C 5,754 43,103 2,363
Organizational costs due to adviser 2,108 --- ---
Other accrued liabilities 53,201 12,661 18,578
Total Liabilities 182,830 65,835 24,705
Net Assets 7,840,499 15,040,281 2,849,452
Components of Net Assets:
Capital 7,158,137 12,949,926 1,975,562
Accumulated undistributed (distributions
in excess of) net investment income (1,235) --- 576
Accumulated undistributed net realized
gains (losses) from investment
transactions 175,738 277,971 (5,391)
Net unrealized appreciation of investments
(depreciation) of investments 507,859 1,812,384 878,705
Total Net Assets $7,840,499 $15,040,281 $2,849,452
Net Assets:
Class A Shares $5,374,630 $58,746 $1,550,272
Class C Shares 2,465,869 14,981,535 1,299,180
7,840,499 15,040,281 2,849,452
Outstanding units of beneficial interest (shares):
(indefinite number of shares authorized, $0.10 par value)
Class A Shares 350,901 4,235 83,391
Class C Shares 160,913 977,102 70,701
511,814 981,337 154,092
Net asset value -- redemption price per share:
Class A Shares $15.32 $13.87 $18.59
Class C Shares * $15.32 $15.33 $18.38
Sales charge -- Class A Shares 4.00% 4.00% 4.00%
Maximum offering price per share -- Class A Shares
(100%/(100% - sales charge) of net asset value
adjusted to nearest cent) $15.96 $14.45 $19.36
* Redemption price varies based upon holding period.
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 34
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
CORE TACTICAL ASSET UTILITY
EQUITY ALLOCATION GROWTH
FUND FUND FUND
Net Investment Income from Corresponding Portfolio:
Interest $12,886 $303,199 $5,356
Dividends 26,342 40,988 81,912
Expenses (25,581) (126,061) (39,182)
Total Net Investment Income from
Corresponding Portfolio 13,647 218,126 48,086
Fund Expenses:
Administrative fee 1,045 6,846 1,318
Transfer agent fees 8,019 17,922 7,676
Shareholder service -- Class A Shares 2,787 119 3,466
Shareholder service -- Class C Shares 2,440 34,112 3,122
Audit fees 2,710 3,744 2,465
Legal fees 1,685 739 912
Printing 2,455 5,206 806
Amortization of organizational costs 2,017 8,308 5,611
Postage 1,118 4,637 1,994
12b-1 fees -- Class A Shares 2,787 119 3,546
12b-1 fees -- Class C Shares 7,319 102,337 9,443
Registration and filing fees 10,052 22,179 25,156
Insurance 1 1,087 739
Other expenses 2,353 13,716 5,305
Total Expenses 46,788 221,071 71,559
Expenses reimbursed
by investment adviser (33,064) (56,876) (52,712)
Net Expenses 13,724 164,195 18,847
NET INVESTMENT INCOME (77) 53,931 29,239
NET REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
Net realized gains (losses) from
futures contracts 112,828 433,446 ---
Net realized gains (losses) from
investment transactions 178,827 468,724 (5,391)
Net change in unrealized appreciation
(depreciation) of investments 502,895 2,504,806 288,302
NET GAIN (LOSS) FROM INVESTMENTS 794,550 3,406,976 282,911
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $794,473 $3,460,907 $312,150
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 35
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
INTERNATIONAL
EQUITY
FUND
Assets:
Investments, at value (cost $15,062,948) $17,284,845
Repurchase agreements, at cost 622,000
Cash and foreign currency, at value (cost 304,795
Receivable for capital stock issued 10,183
Receivable for investments sold 628,867
Dividends, interest and tax reclaims
receivable, at value 48,651
Receivable from investment adviser 9,883
Unamortized organization costs 21,378
Trustee Deferred Compensation Plan asset, 4,210
Other assets 4,467
Total Assets 18,939,279
Liabilites:
Payable for investments purchased 622,000
|| Payable for capital stock redeemed ---
Dividends payable 30
Accrued management fees 15,014
Accrued fund accounting fees 2,362
Accrued transfer agent fees 1,427
Accrued administrative fees 1,179
Accrued 12b-1 distribution and shareholder 9,591
Trustee Deferred Compensation Plan, at val 4,210
Other accrued liabilities 10,098
Total Liabilities 665,911
Net Assets $18,273,368
Components of Net Assets:
Capital $16,013,374
Accumulated undistributed (distributions in excess
of) net investment income (80,139)
Accumulated undistributed net realized gains (losses)
from investment and foreign currency tr 120,522
Net unrealized appreciation (depreciation) of
investments and foreign currency 2,219,611
Total Net Assets $18,273,368
Net Assets: $18,273,368
Outstanding units of beneficial interest (s 1,263,154
Net asset value -- redemption price per sha $14.47
Maximum sales charge 4.00%
Maximum offering price per share
(100%/(100% - sales charge) of net asset value
adjusted to nearest cent) $15.07
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INTERNATIONAL
EQUITY
FUND
Investment Income:
Interest $36,933
Dividends 280,472
Foreign taxes withheld (25,981)
Total Investment Income 291,424
Expenses:
Investment management fees 160,304
Administration fees 8,429
Distribution (12b-1) fees 20,998
Fund accounting fees 29,999
Transfer agent fees 16,030
Audit fees 6,476
Legal fees 569
Custody fees 72,672
Trustees fees and expenses 8,091
Postage expense 640
Registration expense 12,650
Printing expense 1,329
Amortization of organizational costs 5,825
Other expenses 4,516
Total Expenses 348,528
Expenses reimbursed by investment adviser (27,903)
Net Expenses 320,625
NET INVESTMENT INCOME (LOSS) (29,201)
NET REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
Net realized gains (losses) from investments
and foreign currency transactions 381,420
Net change in unrealized appreciation
(depreciation) of investments 2,333,615
NET GAIN (LOSS) FROM INVESTMENTS 2,715,035
NET INCREASE (INCREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $2,685,834
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 36
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
CORE EQUITY FUND TACTICAL ASSET ALLOCATION FUND
TOTAL CLASS A CLASS C TOTAL CLASS A CLASS C
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ($77) $983 ($1,060) $53,931 $216 $53,715
Net realized gains (losses) from investment
and futures contract transactions 291,655 189,663 101,992 902,170 3,583 898,587
Net change in unrealized appreciation
(depreciation) of investments 502,895 390,385 112,510 2,504,806 9,221 2,495,585
Net increase in net assets
resulting from operations 794,473 581,031 213,442 3,460,907 13,020 3,447,887
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (983) (983) --- (53,931) (216) (53,715)
In excess of net investment income (175) (175) --- --- --- ---
From net realized gains (115,378) (76,889) (38,489) (288,528) (1,127) (287,401)
Net decrease in net assets resulting
from dividends and distributions (116,536) (78,047) (38,489) (342,459) (1,343) (341,116)
CAPITAL TRANSACTIONS:
Issued 9,795,113 4,836,253 4,958,860 1,537,614 9,651 1,527,963
Reinvested 113,551 76,538 37,013 343,504 1,343 342,161
Redeemed (3,071,047) (286,572) (2,784,475) (4,496,048) (5) (4,496,043)
Net increase (decrease) in net assets
resulting from capital share
transactions 6,837,617 4,626,219 2,211,398 (2,614,930) 10,989 (2,625,919)
TOTAL INCREASE (DECREASE)
IN NET ASSETS 7,515,554 5,129,203 2,386,351 503,518 22,666 480,852
NET ASSETS - Beginning of period 324,945 245,427 79,518 14,536,763 36,080 14,500,683
NET ASSETS - End of period $7,840,499 $5,374,630 $2,465,869 $15,040,281 $58,746 $14,981,535
SHARE TRANSACTIONS:
Issued 702,814 347,932 354,882 124,826 875 123,951
Reinvested 7,470 5,036 2,434 23,573 101 23,472
Redeemed (224,121) (21,437) (202,684) (354,387) --- (354,387)
Change in shares 486,163 331,531 154,632 (205,988) 976 (206,964)
</TABLE>
<TABLE>
<CAPTION>
UTILITY GROWTH FUND INTERNATIONAL
TOTAL CLASS A CLASS C EQUITY FUND
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) $29,239 $17,208 $12,031 ($29,201)
Net realized gains (losses) from
investment and futures contract
transactions (5,391) (22,770) 17,379 381,420
Net change in unrealized appreciation
(depreciation) of investments 288,302 206,323 81,979 2,333,615
Net increase in net assets
resulting from operations 312,150 200,761 111,389 2,685,834
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (28,275) (16,244) (12,031) ---
In excess of net investment income (388) --- (388) (50,938)
From net realized gains --- --- --- (98,118)
Net decrease in net assets resulting
from dividends and distributions (28,663) (16,244) (12,419) (149,056)
CAPITAL TRANSACTIONS:
Issued 1,234,768 899,057 335,711 5,048,139
Reinvested 27,166 15,269 11,897 149,026
Redeemed (1,264,535) (833,891) (430,644) (1,650,643)
Net increase (decrease) in net assets
resulting from capital share
transactions (2,601) 80,435 (83,036) 3,546,522
TOTAL INCREASE (DECREASE)
IN NET ASSETS 280,886 264,952 15,934 6,083,300
NET ASSETS - Beginning of period 2,568,566 1,285,320 1,283,246 12,190,068
NET ASSETS - End of period $2,849,452 $1,550,272 $1,299,180 18,273,368
SHARE TRANSACTIONS:
Issued 76,704 57,353 19,351 376,007
Reinvested 1,567 876 691 10,299
Redeemed (72,921) (48,837) (24,084) (123,624)
Change in shares 5,350 9,392 (4,042) 262,682
</TABLE>
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 37
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
CORE EQUITY FUND * TACTICAL ASSET ALLOCATION FUND
TOTAL CLASS A CLASS C TOTAL CLASS A CLASS C
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income 71 $112 ($41) $128,691 $991 $127,700
Net realized gains (losses) from investment
transactions, futures contracts
and foreign currency 1,363 1,001 362 2,929,816 7,934 2,921,882
Net change in unrealized appreciation (depreciation)
of investments and foreign currency 4,964 3,709 1,255 (664,958) 15,665 (680,623)
Net increase (decrease) in net assets
resulting from operations 6,398 4,822 1,576 2,393,549 24,590 2,368,959
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (112) (112) --- (128,691) (991) (127,700)
From net realized gains (1,363) (1,001) (362) (2,929,816) (7,934) (2,921,882)
In excess of net realized gains (539) (436) (103) (335,671) (926) (334,745)
Net decrease in net assets resulting
from dividends and distributions (2,014) (1,549) (465) (3,394,178) (9,851) (3,384,327)
CAPITAL TRANSACTIONS:
Issued 641,428 563,486 77,942 983,507 11,333 972,174
Reinvested 2,014 1,549 465 3,352,428 9,851 3,342,577
Redeemed (322,881) (322,881) --- (2,877,993) (136,573) (2,741,420)
Net increase (decrease) in net assets resulting from
capital share transactions 320,561 242,154 78,407 1,457,942 (115,389) 1,573,331
TOTAL INCREASE (DECREASE)
IN NET ASSETS 324,945 245,427 79,518 457,313 (100,650) 557,963
NET ASSETS - Beginning of period --- --- --- 14,079,450 136,730 13,942,720
NET ASSETS - End of period $324,945 $245,427 $79,518 $14,536,763 $36,080 $14,500,683
SHARE TRANSACTIONS:
Issued 50,902 44,658 6,244 64,263 786 63,477
Reinvested 159 122 37 271,118 864 270,254
Redeemed (25,410) (25,410) --- (190,148) (9,279) (180,869)
Change in shares 25,651 19,370 6,281 145,233 (7,629) 152,862
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
UTILITY GROWTH FUND INTERNATIONAL
TOTAL CLASS A CLASS C EQUITY FUND*
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $33,999 $16,465 $17,534 ($15,575)
Net realized gains (losses) from investment
transactions, futures contracts
and foreign currency 234,211 116,754 117,457 (163,883)
Net change in unrealized appreciation (depreciation)
of investments and foreign currency 363,380 167,064 196,316 (114,004)
Net increase (decrease) in net assets
resulting from operations 631,590 300,283 331,307 (293,462)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (33,999) (16,465) (17,534) ---
From net realized gains (234,211) (116,754) (117,457) ---
In excess of net realized gains --- --- --- ---
Net decrease in net assets resulting
from dividends and distributions (268,210) (133,219) (134,991) ---
CAPITAL TRANSACTIONS:
Issued 376,081 155,854 220,227 12,536,720
Reinvested 260,528 128,843 131,685 ---
Redeemed (1,323,208) (543,220) (779,988) (53,190)
Net increase (decrease) in net assets resulting from
capital share transactions (686,599) (258,523) (428,076) 12,483,530
TOTAL INCREASE (DECREASE)
IN NET ASSETS (323,219) (91,459) (231,760) 12,190,068
NET ASSETS - Beginning of period 2,891,785 1,376,779 1,515,006 ---
NET ASSETS - End of period $2,568,566 $1,285,320 $1,283,246 $12,190,068
SHARE TRANSACTIONS:
Issued 24,093 9,531 14,562 1,004,830
Reinvested 15,263 7,494 7,769 ---
Redeemed (83,469) (34,239) (49,230) (4,358)
Change in shares (44,113) (17,214) (26,899) 1,000,472
<FN>
* For the period from commencement of operations, August 1, 1997, and
September 2, 1997 for the Core Equity Fund and International Equity Fund,
respectively, through December 31, 1997.
</FN>
</TABLE>
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 38
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
CORE EQUITY FUND
<CAPTION>
Year ended August 1, 1997* to
December 31, 1998 December 31, 1997
CLASS A CLASS C CLASS A CLASS C
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.67 $12.66 $12.50 $12.50
Income from Investment Operations:
Net investment income --- (0.01) 0.01 (0.01)
Net gains (losses) from investments 2.88 2.90 0.24 0.24
Total from investment operations 2.88 2.89 0.25 0.23
Less Dividends and Distributions:
From net investment income --- --- (0.01) ---
From net realized gains (0.23) (0.23) (0.05) (0.05)
In excess of net realized gains --- --- (0.02) (0.02)
Total distributions (0.23) (0.23) (0.08) (0.07)
Net Asset Value, End of Period $15.32 $15.32 $12.67 $12.66
Total Return 22.78% 22.85% 2.00%(2) 1.88%(2)
Ratios/Supplementary Data
Net assets, end of period ($000) $5,375 $2,466 $245 $80
Ratio of expenses to
average net assets 1.80% 1.97% 2.00%(3) 2.25%(3)
Ratio of net investment income to
average net assets 0.09% -0.11% 0.10%(3) (0.13%)(3)
Ratio of expenses to average net assets
before waiver of fees 3.13% 3.85% 9.50%(3) 16.67%(3)
Ratio of net investment income to average
net assets before waiver of fees -1.24% -1.99% (7.40%)(3) (14.55%)(3)
Portfolio turnover(1) 79.98% 79.98% 129.79% 129.79%
<FN>
* Date of commencement of operations
(1) Represents turnover rate of corresponding portfolio
(2) Not Annualized
(3) Annualized
</FN>
</TABLE>
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 39
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
TACTICAL ASSET ALLOCATION FUND
<CAPTION>
Year ended Year ended Year ended June 1, 1995*
December 31, 1998 December 31, 1997 December 31, 1996 to Dec. 31, 1995
CLASS A CLASS C CLASS A CLASS C CLASS A** CLASS C CLASS C
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.07 $12.25 $12.56 $13.52 $12.50 $13.26 $12.50
Income from Investment Operations:
Net investment income 0.05 0.05 0.40 0.14 0.14 0.10 (0.02)
Net gains (losses) from investments 3.07 3.38 1.78 2.26 0.55 0.57 1.84
Total from investment operations 3.12 3.43 2.18 2.40 0.69 0.67 1.82
Less Dividends and Distributions:
From net investment income (0.05) (0.05) (0.40) (0.14) (0.14) (0.10) ---
From net realized gains (0.27) (0.30) (2.93) (3.17) (0.49) (0.31) (1.06)
In excess of net realized gains --- --- (0.34) (0.36) --- --- ---
Total distributions (0.32) (0.35) (3.67) (3.67) (0.63) (0.41) (1.06)
Net Asset Value, End of Period $13.87 $15.33 $11.07 $12.25 $12.56 $13.52 $13.26
Total Return 28.38% 28.13% 17.29% 17.71% 5.51%(2) 5.07% 14.57%(2)
Ratios/Supplementary Data
Net assets, end of period ($000) $59 $14,982 $36 $14,501 $137 $13,943 $11,524
Ratio of expenses to
average net assets 2.00% 2.10% 2.00% 2.10% 1.73%(3) 2.00% 1.97%(3)
Ratio of net investment income to
average net assets 0.45% 0.39% 0.99% 0.86% 2.60%(3) 0.75% (0.29%)(3)
Ratio of expenses to average net assets
before waiver of fees 10.38% 2.48% 6.16% 2.50% 5.23%(3) 2.40% 2.80%(3)
Ratio of net investment income to average
net assets before waiver of fees -7.93% 0.01% (3.17%) 0.46% (0.90%)(3) 0.35% (1.12%)(3)
Portfolio turnover(1) 128.31% 128.31% 395.42% 395.42% 297.41% 297.41% 186.13%
<FN>
* Date of commencement of operations
** August 1, 1996 (date of commencement of operations) to December 31, 1996
(1) Represents turnover rate of corresponding portfolio.
(2) Not Annualized
(3) Annualized
</FN>
</TABLE>
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 40
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
UTILITY GROWTH FUND
<CAPTION>
Year ended Year ended Year ended July 11, 1995*
December 31, 1998 December 31, 1997 December 31, 1996 to Dec. 31, 1995
CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.37 $17.17 $15.09 $14.91 $14.26 $14.27 $12.50 $12.50
Income from Investment Operations:
Net investment income 0.23 0.16 0.22 0.19 0.29 0.26 0.12 0.10
Net gains (losses) from investments 1.20 1.21 4.03 3.99 1.48 1.49 1.76 1.77
Total from investment operations 1.43 1.37 4.25 4.18 1.77 1.75 1.88 1.87
Less Dividends and Distributions:
From net investment income (0.21) (0.16) (0.22) (0.19) (0.29) (0.26) (0.12) (0.10)
From net realized gains --- --- (1.75) (1.73) (0.65) (0.85) --- ---
Total distributions (0.21) (0.16) (1.97) (1.92) (0.94) (1.11) (0.12) (0.10)
Net Asset Value, End of Period $18.59 $18.38 $17.37 $17.17 $15.09 $14.91 $14.26 $14.27
Total Return 8.34% 8.08% 28.41% 28.25% 12.61% 12.45% 15.11%(2) 15.07%(2)
Ratios/Supplementary Data
Net assets, end of period ($000) $1,550 $1,299 $1,285 $1,283 $1,377 $1,515 $641 $782
Ratio of expenses to
average net assets 2.00% 2.25% 2.00% 2.25% 1.75% 2.00% 1.75%(3) 2.00%(3)
Ratio of net investment income to
average net assets 1.20% 0.93% 1.36% 1.21% 2.03% 1.85% 2.17%(3) 1.72%(3)
Ratio of expenses to average net assets
before waiver of fees 3.80% 4.31% 4.03% 4.51% 4.37% 4.65% 22.70%(3) 13.37%(3)
Ratio of net investment income to average
net assets before waiver of fees -0.60% -1.13% (0.67%) (1.05%) (0.59%) (0.80%) (18.78%)(3) (9.55%)(3)
Portfolio turnover(1) 51.36% 51.36% 41.22% 41.22% 50.79% 50.79% 5.06% 5.06%
<FN>
* Date of commencement of operations
(1) Represents turnover rate of corresponding portfolio
(2) Not Annualized
(3) Annualized
</FN>
</TABLE>
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 41
<PAGE>
FINANCIAL HIGHLIGHTS
INTERNATIONAL EQUITY FUND
Year ended Sept. 2, 1997* to
Dec. 31, 1998 Dec. 31, 1997
Net Asset Value, Beginning of Period $12.18 $12.50
Income from Investment Operations:
Net investment income (0.02) (0.02)
Net gains (losses) from investments 2.43 (0.30)
Total from investment operations 2.41 (0.32)
Less Dividends and Distributions:
In excess of net investment income (0.04) ---
From net realized gains (0.08) ---
Total distributions (0.12) ---
Net Asset Value, End of Period $14.47 $12.18
Total Return 19.78% (2.56%)(1)
Ratios/Supplementary Data
Net assets, end of period ($000) $18,273 $12,190
Ratio of expenses to
average net assets 2.00% 2.00%(2)
Ratio of net investment income to
average net assets -0.18% (0.43%)(2)
Ratio of expenses to average net assets
before waiver of fees 2.17% 2.68%(2)
Ratio of net investment income to average
net assets before waiver of fees -0.35% (1.11%)(2)
Portfolio turnover 86.13% 12.71%
* Date of commencement of operations
(1) Not Annualized
(2) Annualized
See accompanying notes to financial statements.
The Flex-Partners 1998 Annual Report Page 42
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION
The Flex-Partners Trust (the "Trust") was organized in 1992 and is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Trust offers five
series, and it is presently comprised of five separate funds as follows: Core
Equity Fund, Tactical Asset Allocation Fund (formerly TAA Fund), Utility Growth
Fund (formerly BTB Fund), International Equity Fund (each a "Fund" and
collectively the "Funds") and Institutional Fund. Each Fund, except
International Equity Fund, invests all of its investable assets in a
corresponding open-end management investment company (each a "Portfolio" and
collectively the "Portfolios") having the same investment objective as the Fund.
Each Fund, each Portfolio into which the Fund invests and the percentage of each
Portfolio owned by the respective Fund is as follows:
Percentage of Portfolio
Owned by Fund as of
Fund Portfolio December 31, 1998
- ---- --------- -----------------
Core Equity Fund Growth Stock Portfolio 16%
Tactical Asset Allocation Fund Mutual Fund Portfolio 11%
Utility Growth Fund Utilities Stock Portfolio 21%
The investment objective of the International Equity Fund is to seek long-term
growth from investing primarily in equity securities of foreign issuers.
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. The financial
statements of the Institutional Fund are are separately reported.
2. SIGNIFICANT ACCOUNTING POLICES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Valuation of Investments
Each Fund, except International Equity Fund, values its investment in the
corresponding Portfolio at fair value. Valuation of securities held by each
Portfolio is further described at Note 2 of the Portfolios' Notes to Financial
Statements.
Securities owned by the International Equity Fund are valued at 3:00 pm Eastern
Time based on the last sales price, or, lacking any sales, at the closing bid
prices.
Deferred Trustee Compensation
Under a Deferred Compensation Plan (the "Plan") non-interested Trustees may
elect to defer receipt of a portion of their annual compensation. Under the
Plan, deferred amount are invested in the shares of the Flex-funds and
Flex-Partners Funds. Deferred amounts remain in the Funds until distributed in
accordance with the Plan.
Foreign Currency Translation
Accounting records of the Funds are maintained in U.S. dollars. The value of
securities, other assets and liabilities of the International Equity Fund
denominated in foreign currency are translated into U.S. dollars at the current
exchange rate. Purchases and sales of securities, income receipts and expense
payments are translated into U.S. dollars at the exchange rate on the dates of
such transactions. The Funds do not isolate that portion of the results of
operations resulting from changes in foreign exchange rates from those resulting
from changes in market prices of securities held.
Forward Currency Contracts
The International Equity Fund may enter into forward foreign currency exchange
contracts ("forwards") for purposes of hedging against either specific
transactions or portfolio positions. Forwards are agreements between two parties
to exchange currencies at a set price on a future date. The market value of
The Flex-Partners 1998 Annual Report Page 43
<PAGE>
forwards fluctuates with changes in currency exchange rates. The forward is
marked-to-market daily, and the change in market value is recorded by the Fund
as unrealized appreciation or depreciation. When the forward is offset by entry
into a closing transaction or extinguished by delivery of the currency, the Fund
records a realized gain or loss equal to the fluctuation in value during the
period the forward was open. Risks may arise upon entering forwards from the
potential inability of counterparties to meet the terms of the forwards or from
unanticipated fluctuations in the value of the foreign currency relative to the
U.S. dollar.
Income Taxes
It is each Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income and net capital gains
to its shareholders. Therefore, no Federal income tax provision is required.
Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date. Core Equity Fund
and Tactical Asset Allocation Fund declare dividends from net investment income
on a quarterly basis. Utility Growth Fund declares dividends from net investment
income on a monthly basis. International Equity Fund declares dividends from net
investment income on an annual basis. Each Fund distributes net capital gains,
if any, on an annual basis.
Distributions from net investment income and from net capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
deferrals of certain losses, expiring capital loss carryforwards, differing
treatment of unrealized gains and losses of futures contracts held by the Fund's
corresponding Portfolio, and differing treatment of gains and losses realized in
transactions denominated in foreign currency. Permanent book and tax basis
differences have been reclassified among the components of net assets.
Organizational Costs
The costs related to the organization of each of the four Funds have been
deferred and are being amortized by each Fund on a straight-line basis over a
five-year period.
Investment Income & Expenses
The funds record daily their proportionate share of the Portfolios' income,
expenses, and realized and unrealized gains and losses. In addition, the Funds
accrue their own expenses. Expenses incurred by the Trust that do not
specifically relate to an individual Fund of the Trust are allocated to the
Funds based on each Fund's relative net assets or other appropriate basis.
Expenses of each Fund, other than expenses incurred pursuant to the Class A and
Class C distribution and shareholder services plans, are allocated to the
separate classes based on their relative net assets or other appropriate basis.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield Investors,
Inc. (MII), provides each Portfolio with investment management, research,
statistical and advisory services. Under separate Investment Subadvisory
Agreements with RMA, Sector Capital Management, Inc., Miller/Howard Investments,
Inc., and Commercial Union Investment Management, LTD serve as subadvisor of the
Growth Stock Portfolio, the Utilities Stock Portfolio, and the International
Equity Fund, respectively. Sub-subadvisers, selected by Sector Capital
Management, Inc., subject to the review and approval of the Trustees of the
Growth Stock Portfolio, are responsible for the selection of individual
portfolio securities for the assets of the Portfolio assigned to them by Sector
Capital Management, Inc. For such services, the International Equity Fund pays
RMA monthly fees at the annual rate of 1.00% of the average daily net asset
value of the Fund.
Mutual Funds Service Co. ("MFSCo"), a wholly-owned subsidiary of MII, serves as
stock transfer, dividend disbursing and shareholder services agent for each
Fund. In compensation for such services, each Fund pays MFSCo an annual fee
equal to the greater of $15 per active shareholder account or 0.10% of the
Fund's average daily net assets. MFSCo is entitled to receive an annual minimum
fee of $4,000 for each Fund.
MFSCo provides the Trust with certain administrative services. In compensation
for such services, each Fund pays MFSCo an annual fee equal to 0.05% of each
Fund's average daily net assets.
The Flex-Partners 1998 Annual Report Page 44
<PAGE>
RMA has voluntarily agreed to reimburse the Funds for the amount by which annual
expenses of each Fund including expenses allocated from its respective Portfolio
(excluding interest, taxes, brokerage fees, and extraordinary expenses) exceed
certain limitations. Such reimbursement is limited to the total of fees charged
the Fund by RMA and MFSCo. The limitations currently in place are as follows:
Annual expense limitation as a
Fund percentage of average daily net assets
Core Equity Fund -- Class A 1.80%*
Core Equity Fund -- Class C 1.95%*
Tactical Asset Allocation Fund -- Class A 2.00%
Tactical Asset Allocation Fund -- Class C 2.10%
Utility Growth Fund -- Class A 2.00%
Utility Growth Fund -- Class C 2.25%
International Equity Fund -- Class A 2.00%
* Prior to March 31, 1998, the annual expense limitation had been 2.00% and
2.25% of average daily net assets of the Core Equity Fund Class A shares and
Class C shares, respectively.
Certain officers of the Funds and trustees of the Trust and the Portfolios are
also officers or directors of MII, RMA and MFSCo.
Pursuant to Rule 12b-1 of the Act, each Fund has adopted two Distribution Plans
(the "Plans") with Advisor Dealer Services (the "Distributor"). Under the
provisions of the Plans, each Fund pays the Distributor an annual fee, at a
maximum rate of 0.25% and 0.75% of average daily net assets of Class A shares
and Class C shares, respectively, to aid in the distribution of Fund shares.
Additionally, each Fund has adopted two Service Plans with the Distributor.
Under the provisions of the Service Plans, each Fund pays the Distributor an
annual fee, at a maximum rate of 0.25% of average daily net assets of Class A
shares and Class C shares, to reimburse securities dealers for personal services
or maintenance of shareholder accounts.
4. SECURITIES TRANSACTIONS
For the year ended December 31, 1998, the cost of purchases and proceeds from
sales or maturities of long-term investments for the International Equity Fund
were $16,273,751 and $12,981,439, respectively. The cost of investments for
federal income tax purposes and for financial reporting purposes is
substantially the same.
5. FEDERAL INCOME TAX INFORMATION (unaudited)
At December 31, 1998, the Utility Growth Fund had unused capital loss
carryforwards of $7,287 available to offset future gains, if any, for Federal
income tax purposes. The capital loss carryforward expires 2006.
Capital gain distributions from long-term capital gains for the year ended
December 31, 1998 were as follows:
Core Equity Fund $115,378
Tactical Asset Allocation Fund 281,319
International Equity Fund 19,961
The Flex-Partners 1998 Annual Report Page 45
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
The Flex-Partners Trust
We have audited the accompanying statements of assets and liabilities of The
Flex-Partners Trust (including, respectively, the Core Equity Fund, Tactical
Asset Allocation Fund, Utility Growth Fund and International Equity Fund),
including the portfolio of investments for the International Equity Fund, as of
December 31, 1998, and the related statements of operations, statements of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and the financial highlights are
the responsibility of the Flex-Partners Trust 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. With respect to the International Equity Fund, our procedures
included verification of securities owned as of December 31, 1998, by
confirmation 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 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 each
of the aforementioned funds comprising The Flex-Partners Trust at December 31,
1998, and the results of their operations, the changes in their net assets and
the financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 19, 1999
The Flex-Partners 1998 Annual Report Page 46
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES
FUND STOCK STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
Assets:
<S> <C> <C> <C>
Investments, at market value* $139,285,546 $48,940,754 $12,887,315
Repurchase agreements, at cost* 91,000 2,509,000 325,000
Trustee deferred compensation investments, at 27,767 9,397 4,881
market value
Cash 3,600 3,954 3,499
Receivable for securities sold 12,500,000 --- ---
Receivable for net variation margin on futures 16,350 5,300 ---
Interest receivable 8,018 356 46
Dividends receivable --- 45,431 22,698
Prepaid/Other assets 13,925 1,819 3,437
Total Assets 151,946,206 51,516,011 13,246,876
Liabilites:
Payable for securities purchased 11,000,000 262,923 ---
Payable for Trustee Deferred Compensation Plan 27,767 9,397 4,881
Payable to investment adviser 92,531 43,454 10,658
Accrued audit fees 6,136 5,775 6,356
Accrued legal fees 919 458 915
Accrued custodian fees 3,293 5,131 799
Accrued trustee fees 2,108 --- ---
Accrued fund accounting fees 4,447 3,470 1,547
Other accrued liabilities 1,318 17,660 2,175
Total Liabilities 11,138,519 348,268 27,331
Net Assets $140,807,687 $51,167,743 $13,219,545
Net Assets:
Capital 117,592,789 40,504,295 9,826,161
Net unrealized appreciation (depreciation) 23,214,898 10,663,448 3,393,384
from investments
Net Assets $140,807,687 $51,167,743 $13,219,545
*Securities at cost $116,177,998 $40,791,606 $9,818,931
</TABLE>
See accompanying notes to financial statements
The Flex-Partners 1998 Annual Report Page 47
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES
FUND STOCK STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
NET INVESTMENT INCOME
<S> <C> <C> <C>
Interest $2,842,845 $351,842 $24,854
Dividends 385,119 526,542 375,953
Total Investment Income 3,227,964 878,384 400,807
Expenses:
Investment advisory fees 1,058,035 435,886 126,301
Audit fees 9,823 9,599 10,135
Custodian fees 13,496 27,603 3,257
Trustees fees and expenses 44,320 15,022 7,382
Legal fees 1,576 10,572 1,066
Amortization of organization cost 224 --- 8,357
Accounting fees 50,050 38,204 18,154
Insurance 1,918 373 88
Other expenses 7,553 10,278 9,568
Total Expenses 1,186,995 547,537 184,308
Investment advisory fees waived --- (4,431) ---
Directed brokerage payments received --- --- (2,246)
Total Net Expenses 1,186,995 543,106 182,062
NET INVESTMENT INCOME 2,040,969 335,278 218,745
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
Net realized gain from futures contracts 3,842,750 1,087,862 ---
Net realized gain (loss) from investments 4,379,433 3,495,938 (364,390)
Net change in unrealized appreciation
(depreciation) of investments 23,909,375 4,790,713 1,126,399
NET GAIN ON INVESTMENTS 32,131,558 9,374,513 762,009
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $34,172,527 $9,709,791 $980,754
</TABLE>
See accompanying notes to financial statements
The Flex-Partners 1998 Annual Report Page 48
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES
FUND STOCK STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C>
Net investment income $2,040,969 $335,278 $218,745
Net realized gain (loss) from investments
and futures contracts 8,222,183 4,583,800 (364,390)
Net change in unrealized appreciation
(depreciation) of investments 23,909,375 4,790,713 1,126,399
Net increase in net assets
resulting from operations 34,172,527 9,709,791 980,754
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 21,876,913 74,136,798 6,977,776
Withdrawals (59,774,446) (66,072,809) (5,408,703)
Net increase (decrease) in net assets resulting
from transactions of investors' beneficial
interests (37,897,533) 8,063,989 1,569,073
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,725,006) 17,773,780 2,549,827
NET ASSETS - Beginning of period 144,532,693 33,393,963 10,669,718
NET ASSETS - End of period $140,807,687 $51,167,743 $13,219,545
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES
FUND STOCK STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C>
Net investment income $2,965,765 $264,643 $158,538
Net realized gain (loss) from investments
and futures contracts 22,734,137 5,302,202 769,055
Net change in unrealized appreciation
(depreciation) of investments (1,244,081) 2,709,218 1,487,258
Net increase in net assets
resulting from operations 24,455,821 8,276,063 2,414,851
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 27,375,051 40,513,401 2,517,724
Withdrawals (42,837,747) (39,809,183) (2,227,211)
Net increase (decrease) in net assets resulting
from transactions of investors' beneficial
interests (15,462,696) 704,218 290,513
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,993,125 8,980,281 2,705,364
NET ASSETS - Beginning of period 135,539,568 24,413,682 7,964,354
NET ASSETS - End of period $144,532,693 $33,393,963 $10,669,718
</TABLE>
See accompanying notes to financial statements
The Flex-Partners 1998 Annual Report Page 49
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
MUTUAL FUND PORTFOLIO
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $140,808 $144,533 $135,540 $122,109 $83,185
Ratio of Expenses to Average Net Assets 0.91% 0.89% 0.87% 0.95% 1.01%
Ratio of Net Investment Income to
Average Net Assets 1.56% 2.08% 1.86% 1.26% 2.76%
Portfolio Turnover Rate 128.31% 395.42% 297.41% 186.13% 168.17%
</TABLE>
<TABLE>
GROWTH STOCK PORTFOLIO
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) $51,168 $33,394 $24,414 $24,537 $22,169
Ratio of Expenses to Average Net Assets 1.25% 1.34% 1.24% 1.25% 1.23%
Ratio of Net Investment Income to
Average Net Assets 0.77% 0.83% 2.33% 3.78% 2.35%
Ratio of Expenses to Average Net Assets
before waiver of fees 1.26% 1.34% 1.24% 1.25% 1.23%
Ratio of Net Investment Income to Average
Net Assets before waiver of fees 0.76% 0.83% 2.33% 3.78% 2.35%
Portfolio Turnover Rate 79.98% 129.79% 81.66% 337.57% 102.76%
</TABLE>
<TABLE>
UTILITIES STOCK PORTFOLIO
<CAPTION>
Period
Year Ended December 31, June 21, 1995* to
1998 1997 1996 December 31, 1995
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) $13,220 $10,670 $7,964 $4,291
Ratio of Expenses to Average Net Assets 1.44% 1.60% 1.61% 2.32%(1)
Ratio of Net Investment Income to
Average Net Assets 1.73% 1.79% 2.24% 2.09%(1)
Ratio of Expenses to Average Net Assets
before directed brokerage payments 1.46% 1.65% 1.66% 2.40%(1)
Ratio of Net Investment Income to Average Net
Assets before directed brokerage payments 1.71% 1.74% 2.19% 2.01%(1)
Portfolio Turnover Rate 51.36% 41.22% 50.79% 5.06%
<FN>
(1) Annualized
* Date of commencement of operations
</FN>
</TABLE>
See accompanying notes to financial statements
The Flex-Partners 1998 Annual Report Page 50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION
Each Fund of The Flex-Partners Trust (the "Trust") invests all of its investable
assets in a corresponding open-end management investment company (each a
"Portfolio" and collectively the "Portfolios") having the same investment
objective as the Fund. Each Portfolio is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a no-load, open-end management
investment company which was organized as a trust under the laws of the State of
New York. Each Declaration of Trust permits the Trustees, who are the same for
each Portfolio, to issue beneficial interests in each Portfolio.
The investment objective of each Portfolio is as follows:
The Mutual Fund Portfolio seeks growth of capital through investment in the
shares of other mutual funds.
The Growth Stock Portfolio seeks capital growth by investing in a diversified
portfolio of domestic common stocks with greater than average growth
characteristics selected primarily from the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500").
The Utilities Stock Portfolio seeks a high level of current income and growth of
income by investing primarily in equity securities of domestic and foreign
public utility companies; however, it will not invest in electric utilities
whose generation of power is derived from nuclear reactors. The Portfolio also
seeks capital appreciation, but only when consistent with its primary investment
objective.
The financial statements of the Funds are included elsewhere in this report.
2. SIGNIFICANT ACCOUNTING POLICES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
Securities which are traded on stock exchanges are valued at the last sales
price as of the close of business of the New York Stock Exchange on the day of
valuation or, lacking any sales, at the closing bid prices. Securities traded
over-the-counter are valued at the most recent bid price or yield equivalent as
obtained from one or more dealers that make markets in such securities. Mutual
funds are valued at the daily redemption value as reported by the underlying
fund. The Portfolios obtain prices from independent pricing services which use
valuation techniques approved by the Board of Trustees.
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 to maturity, the
difference between the valuation existing on the sixty-first day before maturity
and maturity value is amortized on a straight-line basis to maturity. Securities
maturing within sixty days from their date of acquisition are valued at
amortized cost.
Repurchase Agreements
Each Portfolio may engage in repurchase agreement transactions whereby the
Portfolio takes possession of an underlying debt instrument subject to an
obligation of the seller to repurchase the instrument from the Portfolio and an
obligation of the Portfolio to resell the instrument at an agreed upon price and
term. At all times, the Portfolio maintains the value of collateral, including
accrued interest, at least 100% of the amount of the repurchase agreement, plus
accrued interest. If the seller defaults or the fair value of the collateral
declines, realization of the collateral by the Portfolios may be delayed or
limited.
Deferred Trustee Compensation
Under a Deferred Compensation Plan (the "Plan") non-interested Trustees may
elect to defer receipt of a portion of their annual compensation. Under the
Plan, deferred amounts are invested in the shares of the Flex-funds and
Flex-Partners Funds. Deferred amounts remain in the Portfolios until distributed
in accordance with the Plan.
The Flex-Partners 1998 Annual Report Page 51
<PAGE>
Futures & Options
Each Portfolio may engage in transactions in financial futures contracts and
options contracts in order to manage the risk of unanticipated changes in market
values of securities held in the portfolio, or which it intends to purchase. The
expectation is that any gain or loss on such transactions will be substantially
offset by any gain or loss on the securities in the underlying portfolio or on
those which are being considered for purchase.
To the extent that the Portfolio enters into futures contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change in
the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit an initial margin, which is either cash or
securities in an amount equal to a certain percentage of the contract value.
Subsequently, the variation margin, which is equal to changes in the daily
settlement price or last sale price on the exchanges where they trade, is
received or paid. The Portfolios record realized gains or losses for the daily
variation margin when they are recorded as a gains or losses from futures
contracts.
Call and put option contracts involve the payment of a premium for the right to
purchase or sell an individual security or index aggregate at a specified price
until the expiration of the contract. Such transactions expose the Portfolio to
the loss of the premium paid if the Portfolio does not sell or exercise the
contract prior to the expiration date. In the case of a call option, sufficient
cash or money market instruments will be segregated to complete the purchase.
Options are valued on the basis of the daily settlement price or last sale on
the exchanges where they trade and the changes in value are recorded as an
unrealized appreciation or depreciation until closed, exercised or expired.
The Portfolios may write covered call or put options for which premiums received
are recorded in as liabilities and are subsequently adjusted to current market
value of the options written. When written options are closed or exercised,
premiums received are offset against the proceeds paid, and the Portfolio
records realized gains or losses for the difference. When written options
expire, the liability is eliminated, and the Portfolio records realized gains
for the entire amount of premiums received.
During the year ended December 31, 1998, the Portfolios had the following
activity in futures contracts and written option contracts:
LONG CONTRACTS
NUMBER OF CONTRACTS NOTIONAL AMOUNT
- --------------------------------------------------------------------------------
MUTUAL FUND PORTFOLIO:
Outstanding, beginning of year 110 $25,064,900
Contracts opened 1,282 132,898,050
Contracts closed (1,372) (151,688,950)
Outstanding, end of year 20 6,274,000
Growth Stock Portfolio:
Outstanding, beginning of year 7 $1,711,037
Contracts opened 321 82,010,900
Contracts closed (321) (81,666,062)
Outstanding, end of year 7 2,055,875
Letter of Credit
Each Portfolio has pledged as collateral a U.S. Government security, cash or
other high-grade debt security solely for the benefit of ICI Mutual Insurance
Co. for the Portfolios' fidelity bond coverage.
Income Taxes
The Portfolios will be treated as a partnership for Federal income tax purposes.
As such, each investor in the Portfolios will be subject to taxation on its
share of the Portfolios' ordinary income and capital gains. It is each
Portfolio's policy to comply with the requirements of the Internal Revenue Code
applicable to it. Therefore, no Federal income tax provision is required.
Organizational Costs
The costs related to the organization of each Portfolio have been deferred and
are being amortized by the Portfolio on a straight-line basis over a five-year
period. Such costs for Mutual Fund Portfolio and Growth Stock Portfolio have
been fully amortized.
The Flex-Partners 1998 Annual Report Page 52
<PAGE>
Securities Transactions
The Portfolios record security transactions on the trade date. Gains and losses
realized from the sale of securities are determined on the specific
identification basis. Dividend income is recognized on the ex-dividend date, and
interest income (including amortization of premium and accretion of discount) is
recognized as earned.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield Investors,
Inc. (MII), provides each Portfolio with investment management, research,
statistical and advisory services. Under separate Investment Subadvisory
Agreements with RMA, Sector Capital Management, Inc. and Miller/Howard
Investments, Inc. serve as subadvisor of the Growth Stock Portfolio and the
Utilities Stock Portfolio, respectively. Sub-subadvisers, selected by Sector
Capital Management, Inc., subject to the review and approval of the Trustees of
the Growth Stock Portfolio, are responsible for the selection of individual
portfolio securities for the assets of the Portfolio assigned to them by Sector
Capital Management, Inc.
For such services the Portfolios pay monthly fees based upon the average daily
value of each Portfolio's net assets at the following annual rate: 1.00% of
average daily net assets up to $50 million, 0.75% of average daily net assets
exceeding $50 million up to $100 million and 0.60% of average daily net assets
exceeding $100 million..
Mutual Funds Service Co. ("MFSCo"), a wholly-owned subsidiary of MII, serves as
accounting services agent for each Portfolio. In compensation for such services,
each Portfolio pays MFSCo an annual fee equal to the greater of: a. 0.15% of the
first $10 million of average daily net assets, 0.10% of the next $20 million of
average daily net assets, 0.02% of the next $50 million of average daily net
assets, and 0.01% in excess of $80 million of average daily net assets, or b.
$7,500.
Certain officers and trustees of the Portfolios are also officers or directors
of MII, RMA and MFSCo.
4. SECURITIES TRANSACTIONS
For the year ended December 31, 1998, the cost of purchases and proceeds from
sales or maturities of long-term investments for the Portfolios were as follows:
Portfolio Purchases Sales
- --------- --------- -----
Mutual Fund Portfolio $199,485,528 $145,269,691
Growth Stock Portfolio 37,169,893 29,958,979
Utilities Stock Portfolio 7,985,042 6,219,080
As of December 31, 1998, the aggregate cost basis of investments and unrealized
appreciation (depreciation) for Federal income tax was as follows:
Net unrealized
Cost basis of Unrealized Unrealized appreciation
Portfolio investments appreciation depreciation (depreciation)
- --------- ----------- ------------ ------------ --------------
Mutual Fund Portfolio $116,197,093 $23,275,127 ($79,324) $23,195,803
Growth Stock Portfolio 40,817,038 11,886,639 (1,248,623) 10,638,016
Utilities Stock Portfolio 9,818,931 3,663,864 (270,480) 3,393,384
The Flex-Partners 1998 Annual Report Page 53
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of the
Growth Stock Portfolio, Mutual Fund Portfolio and Utilities Stock Portfolio
We have audited the accompanying statements of assets and liabilities of the
Growth Stock Portfolio, Mutual Fund Portfolio and Utilities Stock Portfolio
(Portfolios), including the portfolios of investments, as of December 31, 1998,
and the related statements of operations, statements of changes in net assets
and the financial highlights for each of the periods indicated herein. These
financial statements and the financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1998, by confirmation with the custodian and brokers and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Growth Stock Portfolio, Mutual Fund Portfolio and Utilities Stock Portfolios at
December 31, 1998, and the results of their operations, the changes in their net
assets and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 19, 1999
The Flex-Partners 1998 Annual Report Page 54
<PAGE>
MANAGER AND INVESTMENT ADVISER
R. Meeder & Associates
6000 Memorial Drive
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
SUBADVISER/THE GROWTH STOCK PORTFOLIO
Sector Capital Management L.L.C.
5350 Poplar Avenue, Suite 490
Memphis, Tennesse 38119
BOARD OF TRUSTEES
Milton S. Bartholomew
Dr. Roger D. Blackwell
James Didion
Charles Donabedian
William L. Gurner
Robert S. Meeder, Sr.
Robert S. Meeder, Jr.
Lowell G. Miller
Jack Nicklaus II
Walter L. Ogle
Philip A. Voelker
CUSTODIAN
Star Bank, N.A. Cincinnati
Cincinnati, Ohio 45201
TRANSFER AGENT DIVIDEND DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, Ohio 43017
AUDITORS
KPMG LLP
Columbus, Ohio 43215
The Flex-Partners 1998 Annual Report Page 55
<PAGE>
THE FLEX-PARTNERS
P.O. Box 7177
Dublin, Ohio 43017
