Semiannual Report 1996
THE FLEX-FUNDS
Investment Adviser/R. Meeder & Associates
THE MUIRFIELD FUND
THE GROWTH FUND
THE TOTAL RETURN UTILITIES FUND
THE U.S. GOVERNMENT BOND FUND
THE MONEY MARKET FUND
<PAGE>
<TABLE>
Flex-funds Total Returns 1985 to 1996 (ytd)
<CAPTION>
FUND
(Inception) 1996(ytd) 1995 1994 1993
<S> <C> <C> <C> <C>
The Muirfield Fund 6.63 25.82 2.70 8.11
(8/10/88)
<CAPTION>
<S> <C> <C> <C> <C>
The Growth Fund 5.88 24.61 -0.69 7.21
(3/20/85)
<CAPTION>
<S> <C> <C> <C> <C>
The Total Return Utilities Fund 5.24 15.00(3) n/a n/a
(6/21/95)
<CAPTION>
<S> <C> <C> <C> <C>
The U.S. Government Bond Fund -1.13 18.32 -0.99 8.21
(5/9/85)
<CAPTION>
<S> <C> <C> <C> <C>
The Money Market Fund 2.59 5.85 4.10 2.98
(3/27/85)
<CAPTION>
FUND
(Inception) 1992 1991 1990 1989
<S> <C> <C> <C> <C>
The Muirfield Fund 6.91 29.83 2.33 13.95
(8/10/88)
<CAPTION>
<S> <C> <C> <C> <C>
The Growth Fund 6.35 21.46 4.31 10.17
(3/20/85)
<CAPTION>
<S> <C> <C> <C> <C>
The Total Return Utilities Fundn/a n/a n/a n/a n/a
(6/21/95)
<CAPTION>
<S> <C> <C> <C> <C>
The U.S. Government Bond Fund3.26 15.30 8.35 8.75 2.74
(5/9/85)
<CAPTION>
<S> <C> <C> <C> <C>
The Money Market Fund 3.70 6.12 8.21 9.32
(3/27/85)
<CAPTION>
FUND
(Inception) 1988 1987 1986 1985
<S> <C> <C> <C> <C>
The Muirfield Fund 6.20(1) n/a n/a n/a
(8/10/88)
<CAPTION>
<S> <C> <C> <C> <C>
The Growth Fund -5.79 7.61 11.81 6.90(2)
(3/20/85)
<CAPTION>
<S> <C> <C> <C> <C>
The Total Return Utilities Fund n/a n/a n/a n/a
(6/21/95)
<CAPTION>
<S> <C> <C> <C> <C>
The U.S. Government Bond Fund 2.74 -0.62 12.58 9.59(4)
(5/9/85)
<CAPTION>
<S> <C> <C> <C> <C>
The Money Market Fund 7.59 6.62 6.75 6.10(5)
(3/27/85)
<PAGE>
<CAPTION>
FUND AVERAGE ANNUAL TOTAL RETURNS (%)
(INCEPTION) 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C>
The Muirfield Fund 12.15 n/a 12.65
(8/10/88)
<CAPTION>
<S> <C> <C> <C>
The Growth Fund 9.51 6.56 8.56
(3/20/85)
<CAPTION>
<S> <C> <C> <C>
The Total Return Utilities Fund n/a n/a 20.41
(6/21/95)
<CAPTION>
<S> <C> <C> <C>
The U.S. Government Bond Fund 7.68 6.53 7.39
(5/9/85)
<CAPTION>
<S> <C> <C> <C>
The Money Market Fund 4.42 6.01 6.21
(3/27/85)
<FN>
All performance figures above represent total returns and average annual
total returns for the periods ended 6/30/96. Investment performance represents
total return and assumes reinvestment of all dividend and capital gain
distributions. The performance data shown above represents past performance
and does not necessarily indicate future performance. The investment return
and principal value of an investment will fluctuate so that an investors
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 Money Market, U.S.
Government Bond, and Total Return Utilities Fund during each of the periods
shown above. The Money Market Fund will seek to maintain a constant net asset
value of $1.00 per share, although there is no guarantee that it will be able
to do so. Investments in The Money Market Fund are neither insured nor
guaranteed by the U.S. Government. (1) Represents total return from 8/10/88 to
12/31/88. (2) Represents total return from 3/20/85 to 12/31/85. (3) Represents
total return from 6/21/95 to 12/31/95. (4) Represents total return from 5/9/85
to 12/31/85. (6) Represents total return from 3/27/85 to 12/31/85.
</FN>
</TABLE>
<PAGE>
clip here.
If you are a current Flex-funds shareholder, and you would like to add to any
of your existing Flex-funds accounts, simply complete the information below
and return this stub along with a check made payable to the Fund(s) for which
your investment is intended to:
Account #
Name
Address
City/State/Zip
Amount Enclosed
[Total of Check(s). $100 Minimum each Fund.]
This investment is for: The Muirfield Fund
The Growth Fund
The Total Return Utilities Fund
The U.S. Government Bond Fund
The Money Market Fund
The Flex-funds
P.O. Box 7177
Dublin, OH 43017
<PAGE>
June 30, 1996
Dear Investor:
We offer this 1996 Semiannual Report for your review in the hope that you will
find valuable information contained herein. To make your analysis of this
report easier, we have switched the page layout to a wider format. This allows
the financial information to be less compact and easier to read. We hope you
find this change helpful.
If you have questions regarding The Flex-funds 1996 Semiannual Report, please
do not hesitate to call our Investor Relations Department at 800-325-3539
(FLEX) between the hours of 8:30 a.m. and 5 p.m. EST, Monday through Friday.
We will be happy to answer any of your questions.
Cordially,
The Flex-funds
Photographic image of offices in Columbus, Ohio.
If you live in, or plan to visit, Columbus, Ohio please feel free to stop by
our offices. One of our investment professionals will be happy to personally
assist you in planning your Flex-funds investments. To set up an appointment,
call 800-325-3539 (FLEX).
<PAGE>
Contents
3 President's Letter
4 So Far in the 1990s
5 The First Half...
Portfolio Managers' Commentary
7 The Muirfield Fund
8 The Growth Fund
9 The Total Return Utilities Fund
10 The U.S. Government Bond Fund
11 The Money Market Fund
Portfolios
12 The Mutual Fund Portfolio
14 The Growth Stock Portfolio
17 The Utilities Stock Portfolio
20 The Bond Portfolio
21 The Money Market Portfolio
Financial Information
The Flex-funds
25 Statements of Assets & Liabilities
26 Statements of Operations
27 Statements of Changes in Net Assets
28 Financial Highlights
32 Notes to Financial Statements
The Portfolios
34 Statements of Assets & Liabilities
35 Statements of Operations
36 Statements of Changes in Net Assets
37 Financial Highlights
39 Notes to Financial Statements
Photographic image of ?
President's Letter
page 3
So far in the 1990s
page 4
Portfolio Commentary
pages 7-11
Portfolio Holdings
pages 12 - 21
<PAGE>
To Our Shareholders
Photographic image of Robert S. Meeder Sr.
president
Lest we forget...the ultimate force behind a rising (or falling) stock
market is supply and demand. Investor expectations of profit, or the fear of
loss, determine the imbalance of buy or sell orders in the marketplace. The
decision to buy or sell normally starts with the investment analysis process
and generally concludes with a rational decision based on predetermined
criteria. However, when the time comes to execute the decision, the psychology
of the market environment (greed or fear) becomes the predominant force in
determining when or how an investor's assets should be invested. The
interesting and challenging part of this dynamic process is that it is like a
pendulum. The greed and fear of investors can become extreme, resulting in
excess optimism or pessimism that manifests itself in unusual risk or
opportunity.
My last letter referred to the market's volatility and the potential of the
bull market coming to an end. The market volatility of the last two months has
produced evidence that the market may be reversing its direction from a rising
to a declining trend. A review of the stock market's dynamics is of interest
as a comparison with the past and in order to help identify the market's
"condition" as of June 30.
Net new money flowing into equity mutual funds in the first six months of
this year was more than all the net new money for 1995. Last year's money flow
set an all-time record. The historic infusion of assets so far this year (over
$10 billion a month) resulted in a modest gain for the stock market, which may
not be a good sign for the overall health of the market.
Over $18 billion in IPO's (Initial Public Offerings) were brought to market
during the second quarter. That's 50% greater than the previous record. This
fact may also be a bad sign for the health of the market as it is indicative
of excessive speculation (greed).
The July 1st issue of New Issue Digest reported current new issues were
priced at all-time high multiples. A few examples were: Aspect Development
with a P/E ratio of 461, Arbor Software's ratio was 397, Documentum's P/E was
289, and fifteen companies were valued at over 100 times earnings. All the
companies listed in this publication averaged a P/E of 63. Immediately
preceding the Bear Market of 1973-74, one of the worst bear markets of this
century, the New Issue Digest listed 114 companies with an average valuation
of 23 times earnings.
The recent price times dividend ratio of stocks listed on the New York
Stock Exchange established an all-time high. This means dividend yield was at
an all-time low. In the second quarter of this year more investment dollars
were required to purchase a dollar of dividends, on average, than at any other
time in the history of the Exchange.
There are other related statistics which suggest the recent levels of the
market are vulnerable. Among these are all time highs in margin debt, the
price of a "seat" on the NYSE, and the market value of companies compared to
their replacement cost. Historically, such extremes are associated with market
tops.
This partial review of the recent stock market environment is intended to
help identify the potential risk from a market that has had but one decline
greater than ten percent since 1987, an unusually long period from an
historical perspective. This information suggests an imbalance of demand in
the supply and demand forces developed over the last several months. We are
concerned about the possible market risk that could develop if market forces
shift to the supply side. It is our responsibility to manage this risk and
protect our shareholders.
Sincerely,
Robert S. Meeder Sr.
President
August 1, 1996
<PAGE>
Asset Allocation Fund*
Seeks both income and capital appreciation by determining the optimal
percentage of assets to place in stocks, bonds, and cash. A top priority of
managers of these funds is determining the correct allocation of assets to
these sectors, a decision often based on an analysis of business-cycle trends.
Sometimes separate managers will handle each class of security and an
allocator will oversee the process of determining the percentage of assets
each class receives.
Note: While The Muirfield Fund and The Growth Fund are considered Asset
Allocation funds by Morningstar, Inc., the manner in which these funds are
managed differs from the description above. For more information, see the
portfolio manager's commentary on pages 7-8. Or, review a current Flex-funds
prospectus.
General Government Bond Fund*
Seeks income by investing in a blend of mortgage-backed securities,
Treasuries, and agency securities.
Consumer Price Index
An index of the prices consumers pay for items like housing, food,
transportation, and electricity. The CPI, and the Producer Price Index are the
two primary tools used to measure inflation. This index may be used as a
benchmark for all of the Funds shown, but is used here for The Money Market
Fund.
*Average mutual fund definitions are from Morningstar, Inc.'s Mutual Fund
Performance Report.
So Far In the 1990s
The performance of The Flex-funds from January 1, 1990 to June 30, 1996
GRAPH:
Percent (%)
The Muirfield Fund 112.91%
Average Asset Allocation Fund*
90.93%
The Growth Fund
89.28%
U.S. Government Bond Fund
61.66%
Average General Gov't Bond Fund*
54.15%
The Money Market Fund
38.62%
CPI
24.19%
Shown above are the cumulative total returns for each of The Flex-funds mutual
funds from January 1, 1990 through June 30, 1996 as compared with an
applicable benchmark. For an explanation of the benchmarks used in this chart,
see the definitions at left. The Total Return Utilities Fund is not included
here because its inception date is 6/21/95. Source: Morningstar, Inc. Please
see the table on the inside front cover of this report for the one-, five-,
and ten-year average annual total returns of each of the Funds shown above.
<PAGE>
The Second Quarter and Beyond
What the events of the past month tell us about the stock and bond markets
of 1996
In quarter's past, we have made a conscious effort to limit the scope of
our comments in The Flex-funds quarterly reports to the quarter for which the
report was intended. We believe that a discussion of the financial markets and
the performance of our mutual funds relative to those markets is best
undertaken with a specific time period in mind. In other words, the best way
for us to discuss events occurring in the rapidly changing financial world is
to have a specific beginning and ending point in mind at the outset of our
discussion.
However, this quarter we feel that some discussion of the events that have
occurred subsequent to the end of the second quarter of 1996 is in order.
There have been several significant changes in the markets over the past
30-plus days. To wait until the third quarter report to discuss them with our
shareholders would be, in our opinion, to fall short of our goal to provide
you with timely, valuable investment information.
Amidst the clattering punditry that abounds in this year's financial
markets, investors anxious to understand what is occurring need to grasp three
key concepts: interest rates, interest rates, and interest rates.
Through the first 180-odd days of 1996 interest rates on the benchmark
30-year Treasury bond have risen from 5.95 percent on December 31, 1995 to
6.90 percent on June 30, 1996. This interest rate increase caused a
significant decline in bond prices through the first half of the year. The
U.S. Government Bond Fund has been defensively invested for roughly two-thirds
of that time.
The stock market also experienced a decline (also known as a correction) of
as much as ten percent from its high in mid-May through mid-July. The
Flex-funds Muirfield Fund and Growth Fund adopted fully defensive positions in
early July and remained defensive as of mid-August.
One factor at work in the bearish scenarios described above was interest
rates. While the effect of rising interest rates on the bond market is fairly
evident (when interest rates rise, bond prices fall and vice versa). What is
not so evident is the effect of rate increases on the stock market. Some Wall
Street analysts, and even historical precedent, indicate that the stock market
too is susceptible to rising interest rates. The Bond Market
Bond prices declined for much of the first half of 1996 on strong economic
news that had investors considering the likelihood of an increase in the
Federal Funds Rate by the Federal Reserve Board.
Since the end of the second quarter, and following the Fed's decision to
take no action regarding interest rates at its July meeting, the bond market
has stabilized somewhat and has experienced a modest rally. Economic
indicators that had been driving speculation about a rate increase have begun
to point toward more moderate growth in the economy. Moreover, speculation
that the Fed would raise rates at its August meeting has become less
pronounced.
Joseph Zarr, portfolio manager of The Flex-funds U.S. Government Bond Fund
and a member of The Flex-funds Investment Team, anticipates two distinct
scenarios arising based on what happens at this month's Fed meeting.
An increase in the Federal Funds rate of a quarter of a point could send
interest rates on the 30-year Treasury back up to their recent highs of 7.25
percent or so, said Zarr.
A decision by the Fed to take no action on short-term interest rates could
sustain a further rally in bonds and push long-term rates under 6.75 percent
for the first time since March of this year, according to Zarr.
<PAGE>
The Stock Market
From this year's mid-May highs through late July, the stock market
underwent a correction ranging from five to over sixteen percent, depending on
the index. For example, the S&P 500 declined from 665.61 on May 14, 1996 to
628.37 on July 16 - a decline of 5.6 percent. The NASDAQ Composite Index
declined from 1248.12 on May 20 to 1042.37 on July 24 - a decline of 16.5
percent.
Then, just as sharply, the stock market rebounded, sending the S&P 500
back up to 672.15 by August 8. A share of the responsibility for this rally
lies in investor perceptions regarding the current interest rate environment.
Prior to the rally, the fear associated with the potential for rising interest
rates and a continued decline in the bond market began to subside in the face
of moderate inflationary figures.
Further, the severity of the stock market's recent decline created a severe
"oversold" condition at the mid-July market low. The term "oversold" refers,
according to Barron's Dictionary of Finance and Investment Terms to a
description of a stock or market that has experienced an unusually sharp
decline and is therefore due, according to some proponents of technical
analysis, for an imminent price rise. In other words, if all those who wanted
to sell a stock have done so, there are no sellers left, and so the price will
rise.
"The rally taking place could relieve the oversold condition at a minimum,
and possibly take the Dow Jones Industrial Average to new all-time highs,"
said Zarr.
The key to how far this rally can go and even how long it lasts will be
found in the ongoing development of the rally in terms of the relative
performance of all the stock market indices.
"We want to see overall broad-based strength," said Zarr. "If the strength
isn't sufficient across the board, we do not expect to increase our exposure
to any appreciable degree."
To what does such broad-based strength refer? In terms of the investment
discipline employed by The Flex-funds Investment Team, it means that all or a
significant majority of the stock market indices (i.e., the NASDAQ, the S&P
500, the Dow Jones Industrial Average) will be rising in conjunction with one
another.
For example, if the Dow manages to eke out a new high, and none of the
other stock market indices confirm that high, then a negative overall
evaluation of stock market conditions could develop, depending on the readings
of various other measurements of internal market strength, like
advance/decline statistics and the number of individual stocks making new
highs and new lows.
Our Discipline
As this stock market "rally" develops and the bond market prepares for the
next Federal Reserve Board meeting, we remain vigilant for signs that our
position should change.
Thus far, our investment discipline has helped us to avoid much of the
volatility in the stock and bond markets. This is particularly evident when
one reviews the equity commentary (pages 7-8) that outlines our concerns
regarding the stock market as the second quarter closed -- and just prior to
July's significant declines.
However, shareholders should remember that we are not in the business of
calling market peaks and troughs. Instead, we manage risk. When we believe
that the risk present in the stock or bond markets is excessive, we strive to
protect our shareholders from that risk. We remain committed to that
philosophy and to our ability to implement it.
<PAGE>
The Muirfield Fund C The Mutual Fund Portfolio
Photograhpic image of Robert S. Meeder Jr.
portfolio manager
The Muirfield Fund provided a total return greater than the average Asset
Allocation mutual fund not only for the six months ended June 30, 1996, but
also for the past one-, three-, and five-year periods, as reported by
Morningstar, Inc.
During the first half of 1996, The Muirfield Fund provided a total return
of 6.63 percent, compared to a total return from the average Asset Allocation
mutual fund of 4.72 percent. For longer term performance comparisons between
The Muirfield Fund and the average Asset Allocation fund, see the chart at
right.
Since its inception (8/10/88), The Muirfield Fund has provided a
cumulative total return of 156.03 percent, which equates to an average annual
compound total return of 12.65 percent.
The Portfolio
Concerns raised by our discipline regarding the risk/reward relationship of
the stock market prompted us to adopt a partially defensive position for The
Muirfield Fund early in the quarter (see discussion that begins below).
The Muirfield Fund gained its exposure to the stock market during the
second quarter through investments in other growth mutual funds, with an
emphasis funds with significant exposure to small capitalization stocks.
PIE CHART:
THE MUTUAL FUND PORTFOLIO
portfolio exposure as of June 30, 1996
Mutual Funds/96%
Money Market Instruments/4%
GRAPH:
RECENT TOTAL RETURNS
for periods ended June 30, 1996
YEARS AVERAGE ASSET THE MUIRFIELD FUND
ALLOCATION FUND
5 YEARS 11.63% 12.15%
3 YEARS 10.42% 13.16%
1 YEAR 14.36% 17.77%
6 MONTHS 4.72% 6.63%
==============================================================================
The Stock Market
How The Muirfield Fund and
The Growth Fund were invested
Our investment discipline indicated that the risk/reward relationship of
the stock market was largely positive during the second quarter. There were,
however, a few exceptions to this evaluation. Among the items that caused us
concern: the continuation of a rising trend in interest rates, the
deterioration in a few technical aspects of our stock market evaluation, and
the continued overvaluation of the stock market.
Though we never adopted a fully defensive posture during the second
quarter, there were times, especially during the early part of the quarter,
when our evaluation raised questions regarding the level of risk present in
the stock market. As a consequence of this evaluation, we increased the
exposure of The Growth Fund and The Muirfield Fund (as much as 50 percent in
the former; and 30 percent in the latter) to money market instruments during
early April. Neither of these Funds were exposed to the bond market during the
second quarter due to our negative evaluation of the interest rate
environment.
During the second quarter, The Muirfield Fund emphasized mutual funds with
exposure to small capitalization stocks. Among the sizable mutual fund
positions held by The Muirfield Fund were: T. Rowe Price New Horizons,
Founders Growth, Fidelity Advisor Equity Growth, Value Line Fund, and the
Fidelity Contrafund (some but not all of these funds featured significant
exposure to small capitalization stocks). For a complete listing of the
holdings of The Mutual Fund Portfolio, see pages 12-13 of this report.
The Growth Fund achieved its stock market exposure during the second
quarter through investment in the thirty Dow Jones Industrials and exposure to
the S&P 500 Index.
After our concerns subsided in mid-April, the broad stock market averages
(the NASDAQ and the AMEX, for example) began to outperform the Dow Jones
Industrial Average. This factor and positive developments regarding internal
measurements of the stock market, which were also in place at the time, are
typically signs that the level of risk in the stock market is low and exposure
to the stock market is warranted.
<PAGE>
By the second week in June, however, these positive developments began to
change. Various internal stock market measurements began to deteriorate and
prices on the broad stock market began to reveal considerable weakness versus
the Dow. We perceived these factors, along with other negative developments,
such as a decline in the number of stocks making new highs, to be initial
signs that the risk reward relationship of the stock market was changing from
a positive/low risk environment to a negative/high risk environment.
As the second quarter closed, we were watching developments in the stock
market closely to determine if we should reduce our exposure to the market.
Despite the fact that some aspects of our investment discipline were
deteriorating, other aspects of our discipline, which had been negative for
some time, began to stabilize and improve. The ongoing advance of interest
rates slowed and the bond market stabilized somewhat. Measurements of investor
sentiment showed modest signs of improvement based on the fact that optimism
regarding stock market conditions was cooling. In general, excessive optimism
about the stock market is considered a negative for the market.
We remain watchful for a resolution, either positive or negative, of our
current concerns regarding the stock market. We are confident in our ability
to monitor and evaluate stock market conditions and to act appropriately in
defense of our shareholders.
<PAGE>
PIE CHART:
THE GROWTH STOCK PORTFOLIO
portfolio exposure as of June 30, 1996
Common Stocks/99%
Money Market Instruments/1%
GRAPH:
RECENT TOTAL RETURNS
for periods ended June 30, 1996
YEARS AVERAGE ASSET THE GROWTH FUND
ALLOCATION FUND
10 YEARS 8.79% 6.56%
5 YEARS 11.63% 9.51%
3 YEARS 10.42% 11.14%
1 YEAR 14.36% 16.84%
6 MONTHS 4.72% 5.88%
Photographic image of Robert S. Meeder Jr.
portfolio manager
During the first half of the year, The Growth Fund provided a total return
that exceeded the average Asset Allocation mutual fund, according to
Morningstar, Inc., an independent mutual fund monitor.
For the six months ended June 30, 1996, The Growth Fund provided a total
return of 5.88 percent, while the average Asset Allocation mutual fund
returned 4.72 percent. The Growth Fund also outperformed the average fund for
the one- and three-year periods ended June 30 (see chart at left for The
Growth Fund's one-, five-, and ten-year average annual total returns).
Since its inception (3/20/85), The Growth Fund has provided a cumulative
total return of 152.72 percent, which equates to an average annual compound
total return of 8.56 percent.
The Portfolio
In response to some concerns raised by our discipline regarding changes in
the risk/reward relationship of the stock market, The Growth Fund adopted a
partially defensive position during the early part of the second quarter (for
details see the discussion below).
However, the core position of the Fund changed little from the first
quarter in terms of the investments it used to gain exposure to the stock
market. A portion of the Portfolio was invested in the Dow Industrials and the
S&P 500 Index throughout the second quarter. The Fund was partially defensive
for a brief period during the quarter via investments in money market
instruments.
As the second quarter closed, we were monitoring conditions in the stock
market to determine if we should reduce our exposure to the market in response
to growing risk.
<PAGE>
The Total Return Utilities Fund The Utilities Stock Portfolio
Photographic image of Lowell G. Miller
portfolio manager
The Total Return Utilities Fund finished its first full year among the top
12 percent of 79 Utility Funds on the basis of 12-month total return through
June 30, according to independent mutual fund monitor, Morningstar, Inc.
For the 12 months ended June 30, The Total Return Utilities Fund provided a
total return of 22.50 percent, compared with a total return from the average
Utility fund of 18.52 percent, according to Morningstar, Inc.
The second quarter unfolded essentially as expected, with bonds and the
credit markets generally continuing to respond testily to signs of strength in
the economy. Last quarter we suggested that a "rather good" buying opportunity
was at hand, despite noise from the credit markets, and this time, at least,
our suspicions were well-founded.
From our perspective one of the most interesting features of the quarter
was that many of the "bad" utility investments turned in solid showings. One
would expect these, most of which are the highest yielding equities, to be
much more sensitive to interest rates than has been shown over the past few
quarters. This feature continues to prompt us to wonder if the popular fears
that have been raised in the press about utilities in recent years have been
perceived by substantial investors as material from which a floor for risk can
be constructed.
Deeming our portfolio well-positioned, we did not make many moves in the
second quarter. We added NYNEX on speculation regarding a NYNEX/Bell Atlantic
combination which we thought was a certainty. While we weren't especially
interested in NYNEX we felt that the solid dividend couldn't hurt, and we were
interested in defending our position in Bell Atlantic, to which we were
committed (As you know, often the acquiring company's stock may decline when a
deal is announced. Since we wanted to hold the combined company anyway, it
made sense to participate in both sides). As it turned out there was more
speculative froth in the NYNEX shares than we'd estimated and, to add insult
to injury, the Bell Atlantic shares rose on the news. So we are temporarily
behind on our maneuvers, but receiving a fine dividend while we await the
finalization of one of the most interesting deals in the new
telecommunications landscape.
We also added Questar, which older investors may remember as Mountain Fuel
Supply. This company has a solid base of gas distribution and pipelines in--as
you might guess--the mountain states (Utah, Wyoming, Colorado). And it has an
excellent record of success in unregulated ventures such as gas marketing,
gathering, exploration and production.
You may recall that last quarter we added the major gas distributor Pacific
Enterprises. This stock was a leader for our portfolio this past quarter,
rising over ten percent on the back of a share-repurchase announcement and a
dividend increase. In general, gas related stocks were a big help this past
quarter, and some laggard electrics such a Cinergy and Pacificorp finally
caught fire.
We benefited from a position in the initial public offering of Exel Corp.
We had contemplated maintaining a position in this long distance phone
reseller, but when the offering became scorchingly "hot," we decided to take
profits quickly.
In the near term, our outlook hasn't changed much. Despite all the fuss
about high employment coming from credit market pundits, we still have yet to
see any meaningful inflation numbers, or any real stress on capacity
utilization. There's something of the "little market who cried wolf" going on
here and we are reminded of the drubbing the markets took in 1994 over
prospects for higher inflation which never materialized.
We see no reason why this can't happen again, leaving bonds and high yield
stocks on a high and dry plateau of undervaluation relative to the inflation
background. We're always vigilant about our positioning when interest rates
are threatening, but there are simply too many signs that risk in the utility
market is limited for us to become overly concerned.
THE UTILITIES STOCK PORTFOLIO
portfolio exposure as of June 30, 1996
Telecommunication Services
Natural Gas Dist.
Electric Utility
Oil/Gas
Electric/Gas
Water/Diversified
Repurchase Agreements
Propane
Telecommunications Equip.
GRAPH:
RECENT TOTAL RETURNS
for periods ended June 30, 1996
YEARS AVERAGE UTILITY THE TOTAL RETURN
STOCK FUND UTILITIES FUND
1 YEAR 18.52% 22.50%
6 MONTHS 3.76% 5.24%
<PAGE>
THE BOND PORTFOLIO
portfolio exposure as of June 30, 1996
Money Market Instruments/100%
GRAPH:
RECENT TOTAL RETURNS
for periods ended June 30, 1996
YEARS AVERAGE GENERAL THE U.S. GOVERNMENT
GOVERNMENT BOND FUND BOND FUND
10 YEARS 7.11% 6.53%
5 YEARS 6.74% 7.68%
3 YEARS 3.70% 6.13%
1 YEAR 3.76% 4.89%
6 MONTHS -1.48% -1.13%
The U.S. Government Bond Fund oe The Bond Portfolio
Photographic image of Joseph A. Zarr
portfolio manager
The U.S. Government Bond Fund was the number one performing fund* of 228
General Government Bond Funds on the basis of its 3-year annualized total
return through June 30, according to independent mutual fund monitor,
Morningstar, Inc.
Further, The U.S. Government Bond Fund provided average annual total
returns that exceeded those available from other General Government Bond funds
for the one-, three-, and five-year periods ended March 31, 1996, according to
Morningstar, Inc., an independent mutual fund monitor (see chart at left).
The U.S. Government Bond Fund has provided a cumulative total return since
its inception (5-9-85) of 121.47 percent, which equates to an average annual
return of 7.39 percent. The Fund's 30-day SEC yield as of June 30 was 4.43
percent.
Rising Rates
Yields on the benchmark 30-year Treasury bond climbed steadily throughout
the second quarter, breaking above seven percent by the first week in May and
reaching 7.17 percent by mid-June. This rising interest rate trend meant
declining bond prices for much of the quarter. As a result, The U.S.
Government Bond Fund maintained the defensive position it first attained in
late February.
At least partially responsible for the quarter's rising interest rate
environment were several instances of stronger than expected economic
statistics. Strong nonfarm payroll numbers and low unemployment figures led to
speculation regarding the potential for an increase in the Federal Funds Rate
during the Federal Reserve Board meetings in early July. As the second quarter
ended, however, the bond market began to stabilize as it became clear that the
Fed was unlikely to increase short-term interest rates for the near term.
The Portfolio
Fully defensive as the quarter began, The U.S. Government Bond Fund
remained 100 percent invested in money market instruments until the first week
in June, when the Fund was approximately 17 percent exposed to ten-year U.S.
Treasuries. The U.S. Government Bond Fund held that small exposure to the bond
market until late June when the Fund again adopted a fully defensive position.
While interest rates remained in a negative trend throughout the quarter,
the other two elements that make up our bond model were positive as the
quarter ended. Real Rates of Return were positive throughout the quarter as
bond yields continued to outpace inflation. The Yield Ratio remained positive,
and in fact grew wider through the second quarter, based on the fact that
long-term bonds continued to offer an advantage in yield over Treasury Bill
rates.
Much of the volatility in the bond market during the second quarter of 1996
was prompted by anticipation of an increase in the Federal Funds Rate by The
Federal Reserve Board. In July, economic news began to indicate that growth in
the economy was slowing and that a rate hike by the Fed might not be a
foregone conclusion. Thus, the bond market began to stabilize somewhat early
in the third quarter.
We continue to watch interest rates closely in an effort to determine
whether or not renewed exposure to the bond market is in the best interest of
shareholders of The U.S. Government Bond Fund.
*The U.S. Government Bond Fund was ranked 46th of 375 funds, 20th of 122
funds, and 42nd of 53 funds, respectively, for the one-, five-, and ten-year
periods ended June 30.
<PAGE>
The Money Market Fund Q The Money Market Portfolio
Photographic image of Phillip A. Voelker
portfolio manager
Through the second quarter of 1996, The Money Market Fund remained the
number one general purpose money market fund in the nation with regard to its
cumulative total return since its inception in 1985, according to data from
Lipper Analytical Services, Inc.
Since March 31, 1985, The Money Market Fund has provided a cumulative total
return of 96.98 percent, while Lipper's average money market fund has returned
87.30 percent for the same period.
For the 12 months ended June 30, 1996, The Money Market Fund was ranked
12th of 276 general purpose money market funds on the basis of total return,
according to Lipper. This ranking places The Money Market Fund among the top
four percent of Lipper's general purpose funds and advances the Fund's
objective to finish in the top ten percent of all general purpose money market
funds - an objective the Fund has met for every 12 month period since its
inception. During the 12-months ended June 30, 1996, The Money Market Fund
provided a total return of 5.49 percent compared with the average money market
fund's return of 5.02 percent, according to Lipper.
The Money Market Fund's average annual total return from its inception
through June 30 was 6.21 percent. The Fund's 30-day annualized compound yield
as of June 30 was 5.08 percent.
Yields on the Rise
Yields on commercial paper with maturities in the three- to six-month range
increased during the second quarter in anticipation of an increase in the
Federal Funds Rate by The Federal Reserve Board at its meeting July 2.
As a result, the Portfolio of The Money Market Fund (as shown at right)
reflects an increase over the first quarter of the year in the amount of
commercial paper it owns. Approximately 53 percent of the Portfolio is
invested in securities with maturities of less than 90 days, which will enable
the Portfolio to reinvest assets at higher rates should an increase in The
Federal Funds rate materialize at the next Federal Reserve Board meeting on
August 20.
The average maturity of the securities owned by The Money Market Fund has
increased to the levels of late 1995, after declining slightly during the
first quarter of the year. By June 30, the average maturity of The Money
Market Portfolio was 70 days. This compares with an average maturity of 50
days at the end of the first quarter and 68 days as 1996 began.
Portfolio Quality
It is important to note that despite the changes outlined above in the
Portfolio of The Money Market Fund, the Fund remains committed to responsible
investments via a self-imposed objective that the Fund invest 100 percent of
its assets in securities ranked as "first tier" by the investment industry.
Money market funds are required by law to have at least 95 percent of their
assets invested in "first tier" securities.
As the competition among money market funds grows more intense, some
investment advisers may be tempted to reach for higher yielding investments
that may not be as creditworthy as "first tier" securities are.
Shareholders in The Money Market Fund may rest assured that we strive to
invest The Money Market Portfolio in high quality securities, regardless of
the pressures of the marketplace.
THE MONEY MARKET PORTFOLIO
portfolio exposure as of June 30, 1996
Commercial Paper/54.4%
Corporate Obligatons/29.1%
U.S. Gov't Obligations/4.8%
Repurchase Agreements/11.6%
GRAPH:
RECENT TOTAL RETURNS
for periods ended June 30, 1996
YEARS AVERAGE MONEY THE MONEY
MARKET FUND MARKET FUND
LIFE OF FUND 5.74% 6.21%
1 YEAR 5.02% 5.49%
<PAGE>
<TABLE>
Mutual Fund Portfolio
Portfolio of Investments as of June 30, 1996
=============================================================================================================================
<CAPTION>
SHARES OR
FACE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS - 88.8%
Aim Constellation Fund 83 $2,090
Aim Weingarten Fund 269,438 5,170,511
Acorn International Fund 395,887 6,199,585
Charles Schwab Money Market Fund 7,516,062 7,516,062
Columbia Growth Fund 95,208 3,178,991
Fidelity Contra Fund 255,196 10,039,412
Fidelity Core Money Market Fund 9,036,616 9,036,616
Fidelity Equity Portfolio Growth Fund 252,291 10,490,271
Fidelity Fund 217,682 5,365,850
Founders Blue Chip Fund 1,351,086 10,511,448
Founders Growth Fund 968,467 16,105,602
Neuberger & Berman Partners Fund 259,628 6,347,901
PBHG Growth Fund 197,718 5,441,198
T.Rowe Price New Era Fund 122 3,055
T.Rowe Price New Horizons Fund 617,458 14,287,978
Value Line Fund 522,360 10,535,999
Value Line Leveraged Growth Fund 195,156 6,176,701
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $116,595,318) 126,409,270
- -----------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 1.1%
*U.S. Treasury Bill, 5.00%, due 8/01/96 $1,650,000 1,642,896
U.S. Treasury Bill, 4.90%, due 1/09/97 30,100 29,252
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $1,672,210) 1,672,148
- -----------------------------------------------------------------------------------------------------------------------------
*Pledged $1,650,000 face amount as collateral on futures contracts
REPURCHASE AGREEMENTS - 10.1%
(Collateralized by U.S. Government obligations -
market value $14,353,773)
Paine Weber Incorporated, dated 6/28/96, 5.55%, due 7/01/96 14,343,000 14,343,000
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Mutual Fund Portfolio, continued
Portfolio of Investments as of June 30, 1996
=============================================================================================================================
<S> <C> <C>
TOTAL REPURCHASE AGREEMENTS
(Cost $14,343,000) 14,343,000
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $132,610,528) $142,424,418
=============================================================================================================================
FUTURES CONTRACTS
CONTRACTS
Long, S&P 500 futures contracts face amount $19,965,600 expiring in September, 1996. 59 $110,625
Long, Midcap futures contracts face amount $6,514,750 expiring in September, 1996. 55 2,250
- ------------------------------------------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $112,875
- ------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Growth Stock Portfolio
Portfolio of Investments as of June 30, 1996
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 57.4%
AEROSPACE/DEFENSE - (2.6%)
Boeing Company 7,850 $683,931
- ----------------------------------------------------------------------------------------------------------------------------
ALUMINUM - (1.7%)
Aluminum Company of America 7,850 450,394
- ----------------------------------------------------------------------------------------------------------------------------
AUTO AND TRUCK - (1.6%)
General Motors 7,850 411,144
- ----------------------------------------------------------------------------------------------------------------------------
BANKING - (2.5%)
J.P. Morgan & Company, Inc. 7,850 664,306
- ----------------------------------------------------------------------------------------------------------------------------
BEVERAGE - (1.5%)
Coca Cola 7,850 383,669
- ----------------------------------------------------------------------------------------------------------------------------
CHEMICAL (BASIC) - (3.6%)
Dupont 7,850 621,131
Union Carbide 7,850 312,038
- ----------------------------------------------------------------------------------------------------------------------------
933,169
- ----------------------------------------------------------------------------------------------------------------------------
CHEMICAL (DIVERSIFIED) - (2.1%)
Minnesota Mining & Manufacturing 7,850 541,650
- ----------------------------------------------------------------------------------------------------------------------------
COMPUTER AND PERIPHERALS - (3.0%)
International Business Machines 7,850 777,150
- ----------------------------------------------------------------------------------------------------------------------------
DRUG - (1.9%)
Merck & Company, Inc. 7,850 507,306
- ----------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - (3.2%)
General Electric Company 7,850 679,025
Westinghouse Electric Corporation 7,850 147,188
- ----------------------------------------------------------------------------------------------------------------------------
826,213
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Growth Stock Portfolio, continued
Portfolio of Investments as of June 30, 1996
============================================================================================================================
<S> <C> <C>
FINANCIAL SERVICES - (1.3%)
American Express 7,850 350,306
- ----------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - (2.7%)
Proctor & Gamble 7,850 711,406
- ----------------------------------------------------------------------------------------------------------------------------
MACHINERY (CONSTRUCTION & MINING) - (2.0%)
Caterpillar Inc. 7,850 531,838
- ----------------------------------------------------------------------------------------------------------------------------
MULTIFORM - (5.2%)
Allied-Signal Inc. 7,850 448,430
United Technologies 7,850 902,750
- ----------------------------------------------------------------------------------------------------------------------------
1,351,180
- ----------------------------------------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS - (1.1%)
International Paper 7,850 289,469
- ----------------------------------------------------------------------------------------------------------------------------
PETROLEUM (INTEGRATED) - (6.9%)
Chevron Corporation 7,850 463,150
Exxon 7,850 681,969
Texaco 7,850 658,419
- ----------------------------------------------------------------------------------------------------------------------------
1,803,538
- ----------------------------------------------------------------------------------------------------------------------------
PRECISION INSTRUMENT - (2.3%)
Eastman Kodak 7,850 610,338
- ----------------------------------------------------------------------------------------------------------------------------
RECREATION - (1.9%)
Walt Disney Company 7,850 493,569
- ----------------------------------------------------------------------------------------------------------------------------
RESTAURANT - (1.4%)
McDonalds Corporation 7,850 366,988
- ----------------------------------------------------------------------------------------------------------------------------
RETAIL STORE - (2.1%)
Sears 7,850 381,705
Woolworth Corporation 7,850 176,625
- ----------------------------------------------------------------------------------------------------------------------------
558,330
- ----------------------------------------------------------------------------------------------------------------------------
STEEL (INTEGRATED) - (.4%)
Bethlehem Steel 7,850 93,219
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Growth Stock Portfolio, continued
Portfolio of Investments as of June 30, 1996
============================================================================================================================
<S> <C> <C>
TELECOMMUNICATION SERVICES - (1.9%)
American Telephone & Telegraph 7,850 486,700
- ----------------------------------------------------------------------------------------------------------------------------
TIRE AND RUBBER - (1.4%)
Goodyear Tire & Rubber 7,850 378,762
- ----------------------------------------------------------------------------------------------------------------------------
TOBACCO - (3.1%)
Philip Morris Companies, Inc. 7,850 816,400
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $13,824,894) 15,020,975
- ----------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 3.1%
*U.S. Treasury Bill, 5.00%, due 8/01/96 $800,000 796,555
U.S. Treasury Bill, 4.90%, due 1/09/97 6,000 5,831
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $802,399) 802,386
- ----------------------------------------------------------------------------------------------------------------------------
*Pledged $700,000 face amount as collateral on futures contracts
REPURCHASE AGREEMENTS - 39.5%
(Collateralized by U.S. Government obligations - market value $10,569,794)
Paine Weber Incorporated, dated 6/28/96, 5.55%, due 7/01/96 5,337,000 5,337,000
Prudential Bache Securities, dated 6/28/96, 5.42%, due 7/01/96 5,000,000 5,000,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $10,337,000) 10,337,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS HELD LONG - 100%
(Cost $24,964,293) $26,160,361
============================================================================================================================
FUTURES CONTRACTS CONTRACTS
Long, S&P 500 futures contracts
face amount $10,490,400 expiring in September, 1996. 31 $55,775
Long, New York Stock Exchange Composite futures contracts
face amount $361,950 expiring in September, 1996. 2 1,850
- ----------------------------------------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $57,625
- ----------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Utilities Stock Portfolio
Portfolio of Investments as of June 30, 1996
============================================================================================================================
SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 95.8%
ELECTRIC/GAS UTILITY - (7.2%)
MDU Resources Group Incorporated 6,100 $131,150
Montana Power Company 1,300 28,925
Nipsco Industries Incorporated 4,700 189,175
Utilicorp United Incorporated 6,500 179,563
- ----------------------------------------------------------------------------------------------------------------------------
528,813
- ----------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - (19.7%)
AES Corporation 8,600 242,950
Cinergy Corporation 7,900 252,800
Ipalco Enterprises Incorporated 6,000 157,500
KU Energy Corporation 3,300 98,588
LG&E Energy Corporation 8,600 196,725
Pacificorp 10,000 222,500
Teco Energy Incorporated 11,000 277,750
- ----------------------------------------------------------------------------------------------------------------------------
1,448,813
- ----------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED UTILITY - (2.1%)
Citizens Utilities Company Class B 13,093 152,208
- ----------------------------------------------------------------------------------------------------------------------------
NATURAL GAS (DISTRIBUTOR) - (19.0%)
Bay State Gas Company 2,200 61,325
Brooklyn UN Gas Company 5,900 160,775
Consolidated Natural Gas Company 3,900 203,775
MCN Corporation 6,200 151,125
Nicor Incorporated 1,800 51,075
Pacific Enterprises 7,000 207,375
Panhandle Eastern Corporation 5,500 180,812
Transcanada Pipelines Ltd. 8,200 120,950
UGI Corporation 2,000 44,000
Wicor Incorporated 5,800 218,950
- ----------------------------------------------------------------------------------------------------------------------------
1,400,162
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Utilities Stock Portfolio, continued
Portfolio of Investments as of June 30, 1996
============================================================================================================================
<S> <C> <C>
OIL/GAS (DOMESTIC) - (8.2%)
Enron Corporation 3,000 122,625
Questar Corporation 5,300 180,200
Sante Fe Pacific Pipeline Partners 2,600 90,350
Williams Companies Incorporated 4,200 207,900
- ----------------------------------------------------------------------------------------------------------------------------
601,075
- ----------------------------------------------------------------------------------------------------------------------------
PROPANE (DISTRIBUTOR) - (2.8%)
National Propane Partners LP 10,000 210,000
- ----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT - (2.2%)
DSC Communications 2,000 60,250
Vanguard Cellular 4,700 102,225
- ----------------------------------------------------------------------------------------------------------------------------
162,475
- ----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (31.8%)
360 Communications Company 1,466 35,184
Alltel Corporation 8,100 249,075
Bell Atlantic Corporation 2,400 153,000
Bellsouth Corporation 4,000 169,500
Century Telephone 9,500 302,813
Frontier Corporation 10,500 321,562
GTE Corporation 5,200 232,700
MCI Communications 5,000 128,125
Nynex Corporation 3,800 180,500
Sprint Corporation 4,400 184,800
Tele Denmark 7,000 177,625
U.S. West Incorporated 6,000 191,250
United Media Group 1,000 18,250
- ----------------------------------------------------------------------------------------------------------------------------
2,344,384
- ----------------------------------------------------------------------------------------------------------------------------
WATER UTILITIES - (2.8%)
American Water Works Incorporated 5,100 205,275
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $6,530,377) 7,053,205
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Utilities Stock Portfolio, continued
Portfolio of Investments as of June 30, 1996
============================================================================================================================
<S> <C> <C>
U.S. TREASURY BILLS - 0.0%
U.S. Treasury Bill, 4.90%, due 1/09/97 $1,000 972
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $974) 972
- ----------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 4.2% (Collateralized by U.S. Government obligations
market value $307,231) Paine Weber Incorporated, dated 6/28/96, 5.55%,
due 7/01/96 307,000 307,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $307,000) 307,000
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $6,838,352) $7,361,177
============================================================================================================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bond Portfolio
Portfolio of Investments as of June 30, 1996
============================================================================================================================
FACE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS - .7%
U.S. Treasury Bill, 5.00%, due 8/01/96 $100,000 $99,570
U.S. Treasury Bill, 4.90%, due 1/09/97 4,800 4,665
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $104,242) 104,235
- ----------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 47.1%
Federal National Mortgage Association Discount Note, 5,000,000 4,998,544
5.24%, due 7/03/96
Federal National Mortgage Association Discount Note, 1,000,000 997,958
5.25%, due 7/15/96
Federal Farm Credit Discount Note, 5.22%, due 7/08/96 1,000,000 998,985
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $6,995,488) 6,995,487
- ----------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 52.2%
(Collateralized by U.S. Government obligations -market value $7,925,837)
Paine Weber Incorporated, dated 6/28/96, 5.55%, due 7/01/96 3,740,000 3,740,000
Prudential Bache Securities, dated 6/28/96, 5.42%, due 7/01/96 4,000,000 4,000,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $7,740,000) 7,740,000
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $14,839,730) $14,839,722
============================================================================================================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Money Market Portfolio
Portfolio of Investments as of June 30, 1996
============================================================================================================================
FACE AMORTIZED
AMOUNT COST
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 54.5%
American Home Products, 5.41%, due 9/06/96 $10,000,000 $9,899,314
American Trading, 5.31%, due 7/25/96 2,700,000 2,690,442
Calcot, 5.36%, due 7/12/96 6,000,000 5,990,173
Calcot, 5.45%, due 7/26/96 8,000,000 7,969,722
Cargill Finance, 5.45%, due 12/27/96 15,000,000 14,593,521
Cooper Tire & Rubber, 5.29%, due 7/12/96 10,000,000 9,983,836
DuPont, 5.43%, due 12/18/96 20,000,000 19,487,167
Duff & Phelps, 5.35%, due 10/09/96 10,000,000 9,851,389
Duff & Phelps, 5.35%, due 10/03/96 7,500,000 7,395,229
GE Capital Corporation, 5.35%, due 7/1/96 15,850,000 15,850,000
GE Capital Corporation, 5.28%, due 10/23/96 10,000,000 9,832,800
LCI Funding, 5.42%, due 9/20/96 9,517,000 9,400,940
Merrill Lynch & Company, 5.32%, due 11/15/96 5,000,000 4,898,772
Nynex Corporation, 5.41%, due 8/09/96 6,402,000 6,364,479
Nynex Corporation, 5.32%, due 7/03/96 15,000,000 14,995,567
Parker Hannifin, 5.47%, due 7/23/96 3,500,000 3,488,300
Raytheon, 5.35%, due 7/08/96 16,000,000 15,983,356
Shady Point, 5.34%, due 7/11/96 12,500,000 12,481,458
Southern California Edison, 5.32%, due 9/27/96 9,500,000 9,376,458
Tambrands, 5.37%, due 8/13/96 3,000,000 2,980,758
Toronto Dominion, 5.30%, due 11/06/96 10,000,000 9,811,556
U.S. West Capital Funding, 5.58%, due 7/08/96 10,880,000 10,868,195
Walt Disney Company, 5.45%, due 12/26/96 15,000,000 14,595,791
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $228,789,223) 228,789,223
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 29.1%
American Telephone & Telegraph Capital Corporation, 6.99%, due 10/12/96 1,000,000 1,004,552
American Telephone & Telegraph Capital Corporation, 4.52%, due 8/30/96 250,000 249,441
American Telephone & Telegraph Capital Corporation, 7.40%, due 11/01/96 500,000 502,109
American Telephone & Telegraph Capital Corporation, 4.38%, due 10/01/96 232,000 231,447
American Brands Corporation, 8.32%, due 8/15/96 600,000 602,033
Associates Corporation, 4.75%, due 8/01/96 250,000 249,755
Associates Corporation, 7.50%, due 10/15/96 150,000 150,634
Associates Corporation, 4.63%, due 11/30/96 450,000 448,060
<PAGE>
<CAPTION>
Money Market Portfolio, continued
Portfolio of Investments as of June 30, 1996
==================================================================================================================================
<S> <C> <C>
Avery Dennison, 7.80%, due 10/01/96 5,000,000 5,025,100
* Bank One Capital Demand Note, 5.50%, next redemption date 7/05/96, due 4/01/2113 4,608,000 4,608,000
Bat Industries, 8.60%, due 8/30/96 550,000 551,997
Bell TriLSG, 8.05%, due 2/19/97 500,000 507,914
* Care Life Project Floating Rate Note, 5.60%, next redemption date 7/02/96, due 8/01/2111 1,375,000 1,375,000
Caterpillar Incorporated, 5.05%, due 1/15/97 . 500,000 499,057
Citicorp, 8.75%, due 11/01/96 100,000 101,118
DuPont, 8.45%, due 10/15/96 880,000 886,387
Eli Lilly Corporation, 6.58%, due 12/20/96 250,000 251,109
* Espanola/Nambe Variable Rate Demand Note, 5.60%, next redemption date 7/02/96, due 6/01/2006 2,500,000 2,500,000
* Exxon Shipping Floating Rate Note, 5.39%, next redemption date 7/02/96, due 10/01/2111 7,000,000 7,000,000
Ford Motor Credit Corporation, 8.80%, due 8/08/96 1,000,000 1,003,050
Ford Motor Credit Corporation, 4.85%, due 8/23/96 400,000 399,354
Ford Motor Credit Corporation, 9.07%, due 7/05/96 693,000 693,223
Ford Motor Credit Corporation, 8.25%, due 7/15/96 706,000 706,687
Ford Motor Credit Corporation, 9.10%, due 7/05/96 1,000,000 1,000,333
Ford Motor Credit Corpbration, 8.00%, due 10/01/96 3,000,000 3,015,091
Ford Motor Credit Corporation, 9.07%, due 7/05/96 200,000 200,067
General Motors Acceptance Corporation, 8.00%, due 10/01/96 275,000 276,506
General Motors Acceptance Corporation, 7.40%, due 1/14/97 170,000 171,971
* General Motors Acceptance Corporation Floating Rate Note, 5.42%,
next redemption date 10/13/96, due 4/13/98 10,000,000 10,000,000
General Telephone, California, 6.00%, due 10/01/96 1,000,000 1,000,000
* Hancor Incorporated Floating Rate Note, 5.60%, next redemption date 7/02/95, due 12/01/2004 900,000 900,000
Hertz Corporation, 9.125%, due 8/01/96 2,850,000 2,857,628
Hertz Corporation, 10.125%, due 3/01/97 2,000,000 2,061,639
IBM Credit Corporation, 5.06%, due 11/15/96 1,350,000 1,345,807
IBM Credit Corporation 4.85%, due 11/05/96 3,000,000 2,989,203
ITT Hartford, 7.25%, due 12/01/96 500,000 503,896
International Bank, 8.75%, due 9/06/96 100,000 100,530
MCI Communications, 7.625%, due 11/07/96 6,570,000 6,624,088
* Merrill Lynch & Company, Floating Rate Note, 5.46%, due 7/24/96 3,000,000 3,000,000
* Merrill Lynch & Company, Floating Rate Note, 5.55%, due 11/18/96 10,000,000 10,000,000
Mobil Corporation, 6.50%, due 12/17/96 500,000 500,000
Morgan Stanley Incorporated, 7.32%, due 1/15/97 500,000 504,137
Norwest Financial, 8.875%, due 7/01/96 494,000 494,000
* Olen Corporation, Floating Rate Note, 5.60%, next redemption date 7/02/96, due 12/01/2004 900,000 900,000
Pepsico Incorporated, 7.875%, due 8/15/96 2,350,000 2,355,109
<PAGE>
<CAPTION>
Money Market Portfolio, continued
Portfolio of Investments as of June 30, 1996
==================================================================================================================================
<S> <C> <C>
Pfizer Incorporated, 7.125%, due 10/01/96 1,200,000 1,203,984
Philip Morris Companies, 8.875%, due 7/01/96 1,500,000 1,500,000
Philip Morris Companies, 8.75%, due 12/01/96 10,125,000 10,261,300
Philip Morris Companies, 7.50%, due 3/15/97 370,000 375,506
Philip Morris Companies, 8.88%, due 7/01/96 550,000 550,000
* Presrite Corporation Floating Rate Note, 5.60%, next redemption date 7/02/96, due 1/01/2004 2,710,000 2,710,000
Private Export Funding, 7.125%, due 10/31/96 570,000 572,441
Sears Roebuck & Company, 9.00%, due 9/15/96 1,000,000 1,006,158
Sears Roebuck & Company, 7.75%, due 11/25/96 700,000 706,446
Sears Roebuck & Company, 8.55%, due 8/01/96 2,500,000 2,505,501
Southern California Edison, 5.90%, due 1/15/97 1,000,000 1,003,357
Southwestern Bell, 7.90%, due 8/23/96 1,5300,000 1,504,103
Texaco Capital Corporation, 9.00%, due 11/15/96 1,000,000 1,013,595
U.S. West Capital Funding Corporation, 8.00%, due 10/15/96 1,290,000 1,298,114
Virginia Electric & Power, 8.05%, due 12/11/96 1,000,000 1,011,850
Waste Management Corporation, 7.875%, due 8/15/96 5,000,000 5,013,175
* White Castle Corporation, Floating Rate Note, 5.60%, next redemption date 7/02/96, due 12/01/2010 9,000,000 9,000,000
World Book Finance Corporation, 8.125%, due 9/01/96 500,000 501,738
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $122,083,300) 122,083,300
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.0%
U.S. Treasury Bill, 4.906%, due 1/09/97 63,100 61,451
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $61,451) 61,451
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 4.8%
Federal Home Loan Mortgage Corporation, 5.10%, due 1/13/97 100,000 99,919
Federal Home Loan Mortgage Corporation, 7.69%, due 12/16/96 1,050,000 1,059,436
Federal Home Loan Mortgage Corporation, 7.88%, due 12/20/96 775,000 782,399
Federal Farm Credit Note, 5.60%, due 7/01/96 120,000 120,000
Federal Home Loan Bank, 7.70%, due 8/26/96 100,000 100,311
Federal Home Loan Bank, 5.69%, due 7/12/96 195,000 195,023
Federal Home Loan Bank, 4.84%, due 8/26/96 1,000,000 998,665
Federal Home Loan Bank, 5.81%, due 4/08/97 2,000,000 2,002,500
<PAGE>
<CAPTION>
Money Market Portfolio, continued
Portfolio of Investments as of June 30, 1996
==================================================================================================================================
<S> <C> <C>
Federal National Mortgage Association, 8.15%, due 8/12/96 150,000 150,480
Federal National Mortgage Association, 8.63%, due 9/10/96 300,000 301,577
Federal National Mortgage Association, 7.70%, due 12/10/96 600,000 605,110
* Student Loan Marketing Association Floating Rate Note, 5.48%,
due 8/03/99, next redemption date 7/02/96 4,350,000 4,354,520
* Student Loan Marketing Association Floating Rate Note, 5.43%,
due 11/10/98, next redemption date 7/02/96 5,000,000 5,000,000
* Student Loan Marketing Association Floating Rate Note, 5.41%,
due 11/24/97, next redemption date 7/02/96 2,000,000 1,999,712
Tennesee Valley Authority, 7.63%, due 9/15/96 2,200,000 2,207,898
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $19,977,550) 19,977,550
- ----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 11.6%
(Collateralized by U.S. Government obligations - market value $48,878,684)
Paine Weber Incorporated, dated 6/28/96, 5.55%, due 7/01/96 48,482,000 48,482,000
Star Bank N.A., dated 6/28/96, 5.00%, due 7/01/96 360,000 360,000
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $48,842,000) 48,842,000
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $419,753,524) $419,753,524
==================================================================================================================================
<FN>
* - Floating Rate as of 6/30/96.
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
June 30, 1996 (Unaudited)
=================================================================================================================================
THE THE THE THE U.S. THE
MUIRFIELD GROWTH TOTAL RETURN GOVERNMENT BOND MONEY MARKET
FUND FUND UTILITIES FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Assets:
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in corresponding portfolio $128,332,387 $28,219,749 $3,747,250 $17,891,583 $146,138,035
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable for capital stock issued 78,817 7,127 12,039 2,348 --
- ---------------------------------------------------------------------------------------------------------------------------------
Unamortized organizational costs -- -- 19,678 -- --
Other assets 1,374 16,039 9,766 2,741 15,764
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets 128,412,578 26,242,915 3,788,733 17,896,672 146,153,799
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities:
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for capital stock redeemed 11,057 11,369 -- 1,604 --
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends payable -- 1,418 458 5,668 11,982
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued transfer agent and
administrative fees 11,742 3,287 401 1,178 11,585
- ---------------------------------------------------------------------------------------------------------------------------------
Other accrued liabilities 45,938 18,276 6,207 8,858 30,032
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 68,737 34,350 7,066 17,308 53,599
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets:
=================================================================================================================================
Capital 114,847,907 24,889,327 3,309,494 17,769,805 146,100,200
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net
investment income 44,352 9,482 97 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net realized
gain on investments 3,690,761 113,432 79,122 109,567 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments 9,760,821 1,196,061 392,954 (8) -
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets $128,343,841 $26,208,302 $3,781,667 $17,879,364 $146,100,200
- ---------------------------------------------------------------------------------------------------------------------------------
Capital Stock Outstanding 20,994,095 1,627,528 257,380 856,966 146,100,200
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering and
Redemption price Per Share $6.11 $16.10 $14.69 $20.86 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
For the six months ended June 30, 1996 (Unaudited)
==================================================================================================================================
THE THE THE THE U.S. THE
MUIRFIELD GROWTH TOTAL RETURN GOVERNMENT BOND MONEY MARKET
FUND FUND UTILITIES FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income froM corresponding portfolio:
Interest $674,686 $317,635 $8,966 $458,739 $4,225,207
Dividends 97,857 136,752 52,458 - -
Expenses (519,608) (159,274) (25,607) (49,296) (142,938)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Net Investment Income From
Corresponding Portfolio 252,935 295,113 35,817 409,443 4,082,269
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Expenses:
- ----------------------------------------------------------------------------------------------------------------------------------
Legal fees 859 777 808 752 830
Audit fees 2,677 2,687 1,678 1,751 2,472
Printing 10,212 5,335 1,740 2,941 20,268
Postage 7,313 3,435 524 1,913 13,796
Transfer agent fees 58,049 13,104 2,002 4,802 53,050
Administrative fee 17,600 3,874 478 2,554 24,410
Trustees fees and expenses 1,632 1,687 1,820 1,632 1,713
Registration and filing fees 4,140 3,818 5,478 2,708 10,886
Insurance 856 182 10 125 1,254
Distribution plan 100,550 20,600 3,987 12,775 60,902
Amortization of organizational costs - - 2,504 - -
Other expenses 4,695 3,456 577 1,921 9,420
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 208,583 58,955 21,606 33,874 199,001
Expenses reimbursed by adviser - - (27,686) - (36,625)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Expenses - net 208,583 58,955 (6,080) 33,874 162,376
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME - NET 44,352 236,158 41,897 375,569 3,919,893
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS - NET:
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures (1,119,146) 14,745 - (88,438) -
Net realized gain on investments 4,809,907 98,687 79,801 198,004 -
Change in unrealized appreciation
(depreciation) of investments 3,877,678 1,087,657 59,662 (662,355) -
- ----------------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 7,568,439 1,201,089 139,463 (552,789) 0
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $7,612,791 $1,437,247 $181,360 ($177,220) $3,919,893
==================================================================================================================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
for the six months ended June 30, 1996 (Unaudited) and year ended December 31, 1995
==================================================================================================================================
THE THE THE
MUIRFIELD GROWTH TOTAL RETURN
FUND FUND UTILITIES FUND
- ----------------------------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended Six months Year ended
INCREASE (DECREASE) ended June 30, December 31, ended June 30, December 31, ended June 30, December 31,
IN NET ASSETS: 1996 1995 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $44,352 $938,690 $236,158 $807,065 $41,897 $39,143
Net realized gain (loss) on investments
and futures contracts 3,690,761 14,740,336 113,432 4,316,008 79,801 (679)
Net change in unrealized
appreciation (depreciation) of investments 3,877,678 5,883,601 1,087,657 111,505 59,662 333,292
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from operations 7,612,791 21,562,637 1,437,247 5,234,578 181,360 371,756
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Investment income - net - (938,690) (41,800) (807,065) (375,569) (36,143)
Net realized gain from investments
and futures contracts - (15,073,253) - (659,136) - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets
resulting from dividends and distributions 0 (16,011,943) (226,676) (1,466,201) (41,800) (36,143)
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 18,020,783 26,530,545 1,848,827 1,775,837 779,910 2,519,770
Reinvestment of dividends 0 15,844,992 224,156 1,436,634 34,046 33,121
Cost of redemptions (9,040,954) (19,294,010) (1,705,864) (4,525,935) (52,944) (4,409)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share transactions 8,979,829 23,081,527 367,119 (1,313,464) 761,012 2,548,482
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 16,592,620 28,632,221 1,577,690 2,454,913 900,572 2,881,095
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 111,751,221 83,119,000 24,630,875 22,175,962 2,881,095 -
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of period $128,343,841 $111,751,221 $26,208,565 $24,630,875 $3,781,667 $2,881,095
==================================================================================================================================
SHARE TRANSACTIONS:
Issued 3,027,443 4,353,780 116,451 120,106 54,929 201,499
Reinvested 0 2,767,237 14,017 96,212 2,397 2,549
Redeemed (1,535,419) (3,170,312) (108,433) (306,553) (3,674) (340)
- ----------------------------------------------------------------------------------------------------------------------------------
Change in shares 1,492,024 3,950,705 22,035 (90,235) 53,652 203,728
==================================================================================================================================
<PAGE>
<CAPTION>
THE THE
U.S. GOVERNMENT MONEY MARKET
BOND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended
INCREASE (DECREASE) ended June 30, December 31, ended June 30, December 31,
IN NET ASSETS: 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $375,569 $780,338 $3,919,893 $8,095,621
Net realized gain (loss) on investments
and futures contracts 109,566 988,478 - -
Net change in unrealized
appreciation (depreciation) of investments (662,355) 667,973 - -
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from operations (177,220) 2,436,789 3,919,893 8,095,621
- -----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Investment income - net (3,919,893) (780,352) - (8,095,621)
Net realized gain from investments
and futures contracts - - - -
- -----------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets
resulting from dividends and distributions (375,569) (780,352) (3,919,893) (8,095,621)
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 2,630,136 2,883,665 194,606,353 365,251,080
Reinvestment of dividends 336,761 686,353 3,778,678 7,649,188
Cost of redemptions (582,401) (2,161,626) (193,371,867) (396,651,391)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share transactions 2,384,496 1,408,392 5,013,164 (23,751,123)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 1,831,707 3,064,829 5,013,164 (23,751,123)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 16,047,657 12,982,828 141,087,036 164,838,159
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of period $17,879,364 $16,047,657 $146,100,200 $141,087,036
=============================================================================================================================
SHARE TRANSACTIONS:
Issued 124,725 142,467 194,606,353 365,251,080
Reinvested 16,070 33,492 3,778,678 7,649,188
Redeemed (27,589) (106,680) (193,371,867) (396,651,391)
- -----------------------------------------------------------------------------------------------------------------------------
Change in shares 113,206 69,279 5,013,164 (23,751,123)
=============================================================================================================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Selected per share data and ratios for an average share outstanding during
each period.
==================================================================================================================================
The Muirfield Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Six Months ended Year Ended December 31,
June 30, 1996 (unaudited) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $5.73 $5.34 $5.36 $6.25 $6.43 $5.22
- ----------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment income - 0.06 0.14 (0.01) 0.06 0.07
- ----------------------------------------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities (both realized
and unrealized) 0.38 1.31 0.00 0.45 0.34 1.41
- ----------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.38 1.37 0.14 0.44 0.40 1.48
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) - (0.06) (0.14) (0.02) (0.06) (0.27)
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions (from capital gains) - (0.92) (0.02) (1.31) (0.52) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions - (0.98) (0.16) (1.33) (0.58) (0.27)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of period $6.11 $5.73 $5.34 $5.36 $6.25 $6.43
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 6.63% 25.82% 2.70% 8.11% 6.91% 29.83%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period ($000) 128, 334 111, 751 83, 119 73, 063 55, 280 43, 276
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.23%1 1.26% 1.22% 1.26% 1.40% 1.50%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 0.07%1 0.97% 2.55% (0.13%) 1.05% 1.25%
Portfolio Turnover Rate N/A N/A N/A N/A 324.14% 107.05%
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1)Annualized
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The Growth Fund
- ----------------------------------------------------------------------------------------------------------------------------
Six Months ended Year Ended December 31,
June 30, 1996 (unaudited) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period 15.34 $13.08 $13.45 $12.70 $12.05 $10.21
- ----------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations
- ----------------------------------------------------------------------------------------------------------------------------
Net Investment income 0.14 0.50 0.27 0.09 0.18 0.34
- ----------------------------------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities (both realized
and unrealized)0.76 2.68 (0.37) 0.82 0.58 1.84
- ----------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.90 3.18 (0.10) 0.91 0.76 2.18
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
Financial Highlights, continued
Selected per share data and ratios for an average share outstanding during
each period based.
==============================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Less Distributions
- ------------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) (0.14) (0.50) (0.27) (0.16) (0.11) (0.34)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions (from capital gains) -- (0.42) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.92) (0.27) (0.16) (0.11) (0.34)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.10 $15.34 $13.08 $13.45 $12.70 $12.05
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 5.88% 24.61% (0.69%) 7.21% 6.35% 21.46%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period ($000) 26, 208 24, 631 22, 176 26, 171 25, 534 32, 654
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.71%1 1.64% 1.63% 1.51% 1.51% 1.42%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 1.85%1 3.38% 1.95% 0.69% 1.31% 2.98%
Portfolio Turnover Rate N/A N/A N/A N/A 39.03% 265.32%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The Total Return Utilities Fund
- ---------------------------------------------------------------------------------------------------------------
Six Months ended For The Period
June 30, 1996 June 21, 19952
(unaudited) to Dec. 31, 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of Period $14.14 $12.50
- --------------------------------------------------------------------------------------------------------
Income from Investment Operations
- --------------------------------------------------------------------------------------------------------
Net Investment Income 0.18 0.21
- --------------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities (both realized and unrealized) 0.55 1.64
- --------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.73 1.85
- --------------------------------------------------------------------------------------------------------
Less Distributions
- --------------------------------------------------------------------------------------------------------
Dividends (from net investment income) (0.18) (0.21)
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.18) (0.21)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.69 $14.14
Total Return 5.24% 15.00%
- --------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------
Net Assets, End of Period ($000) 3, 782 2, 881
- --------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.23%1 1.25% 1
- --------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.63%1 3.18% 1
Ratio of Expenses to Average Net Assets, before waiver of fees 2.97%1 4.35% 1
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 0.89%1 0.08% 1
Portfolio Turnover Rate N/A N/A
- --------------------------------------------------------------------------------------------------------
<FN>
1 Annualized
2 Date of commencement of operations
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights, continued
Selected per share data and ratios for an average share outstanding during
each period.
==================================================================================================================================
The U.S. Government Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Six Months ended Year Ended December 31,
June 30, 1996 (unaudited) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $21.58 $19.25 $20.18 $19.46 $19.84 $18.37
- ----------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment income 0.47 1.11 0.72 0.86 0.99 1.23
- ----------------------------------------------------------------------------------------------------------------------------------
Net Gains or Losses on Securities (both realized
and unrealized) (0.72) 2.33 (0.93) 0.71 (0.38) 1.47
- ----------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations (0.25) 3.44 (0.21) 1.57 0.61 2.70
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) (0.47) (1.11) (0.72) (0.85) (0.99) (1.23)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (1.11) (0.72) (0.85) (0.99) (1.23)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $20.86 $21.58 $19.25 $20.18 $19.46 $19.84
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return -1.13% 18.32% (0.99%) 8.21% 3.26% 15.30%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period ($000) 17, 879 16, 048 12, 983 13, 137 11, 100 9, 316
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.00%1 1.00% 1.00% 0.99% 1.00% 0.94%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 4.52%1 5.41% 3.71% 4.25% 5.13% 6.59%
Ratio of Expenses to Average Net Assets, before
waiver of fees * 1.10%1 1.14% 1.14% 1.09% 1.21% 1.23%
Ratio of Net Investment Income to Average Net Assets,
before waiver of fees * 4.42%1 5.27% 3.57% 4.15% 4.92% 6.30%
Portfolio Turnover Rate N/A N/A N/A N/A 100.53% 213.65%
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
1Annualized
*Includes fees waived in corresponding portfolio See accompanying notes to
financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights, continued
Selected per share data and ratios for an average share outstanding during
each period.
<CAPTION>
=================================================================================================================================
The Money Market Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Six Months ended Year Ended December 31,
June 30, 1996 (unaudited) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net Investment income 0.03 0.06 0.04 0.03 0.04 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.03 0.06 0.04 0.03 0.04 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends (from net investment income) (0.03) (0.06) (0.04) (0.03) (0.04) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.03) (0.06) (0.04) (0.03) (0.04) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total Return 2.59% 5.85% 4.10% 2.98% 3.70% 6.12%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period ($000) 146, 100 141, 087 164, 838 200, 030 245, 259 316, 951
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 0.40%1 0.40% 0.37% 0.37% 0.35% 0.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 5.16%1 5.70% 4.02% 2.94% 3.68% 5.96%
Ratio of Expenses to Average Net Assets, before
waiver of fees *0.60%1 0.64% 0.57% 0.57% 0.56% 0.56%
Ratio of Net Investment Income to Average Net Assets,
before waiver of fees * 4.96%1 5.46% 3.82% 2.74% 3.47% 5.78%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
1Annualized
*Includes fees waived in corresponding portfolio
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
The Flex-funds
Notes to Financial Statements, June 30, 1996
==============================================================================
1. ORGANIZATION
The Flex-funds Trust was organized in 1982 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company which is presently comprised of five separate funds (each a
"Fund" and collectively the "Funds") offering five separate series. Effective
May 1, 1992, The Money Market, Growth, and Bond Funds began investing all of
their 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. The Muirfield Fund began on January 3, 1993
investing all of its investable assets in a corresponding open-end management
investment company having the same investment objectives as the Fund. The
Total Return Utilities Fund commenced operations on June 21, 1995 when it
began investing all of its investable assets in a corresponding open-end
management investment company having the same investment objectives as the
Fund. The Money Market, Muirfield, Growth, Bond and Total Return Utilities
Funds, the Portfolios into which they invest and the percentage of each
portfolio owned by the respective Fund at June 30, 1996 is shown below:
Approximate Percentage
<TABLE>
<CAPTION>
Portfolio Held by Fund
Fund Portfolio at June 30, 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund Money Market Portfolio 36%
Muirfield Fund Mutual Fund Portfolio 90%
Growth Fund Growth Stock Portfolio 100%
Bond Fund Bond Portfolio 100%
Total Return Utilities Fund Utilities Stock Portfolio 52%
</TABLE>
The financial statements of the Portfolios, including the Portfolios of
Investments, are included elsewhere in this report and should be read in
conjunction with the financial statements of each respective Fund.
2. SIGNIFICANT ACCOUNTING 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 - Valuation of securities by the Portfolios is
discussed at Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report (See page 39).
Income Taxes - It is the Funds' policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to their shareholders. Therefore, no
Federal income tax provision is required.
Distributions to Shareholders - Dividends to shareholders are recorded on the
ex-dividend date.
Organizational Costs - The costs related to the organization of each of
the five Funds have been deferred and are being amortized by each Fund on a
straight-line basis over a five-year period. Such costs for The Growth, Bond,
Muirfield and Money Market Funds have been fully amortized.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield
Investors, Inc. (MII), provides each Portfolio with investment management,
research, statistical and advisory services. Miller/Howard Investments, Inc.
(Subadviser) serves as the Utilities Stock Portfolio's Subadviser under an
Investment Subadvisory Agreement between RMA and the Subadviser.
<PAGE>
RMA has agreed to reimburse each Fund for the amount by which annual expenses
of the Fund and its respective Portfolio (excluding interest, taxes, brokerage
fees, and extraordinary expenses) exceed the most restrictive expense
limitation imposed by any State in which such Fund's shares are sold. Such
reimbursement is limited to the total fee charged by RMA. The investment
advisory fees reimbursed for the six months ended June 30, 1996 were at the
request of RMA and were not the result of the aforementioned expense
limitations.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
stock transfer, dividend disbursing and shareholder services for all of the
Trust's separate Funds. Subject to a $4,000 annual minimum fee The Growth,
Muirfield, and Total Return Utilities Funds each incur an annual fee equal to
the greater of $15 per shareholder account, or .10% of each Fund's average net
assets, payable monthly. In The Bond Fund, the annual fee is the greater of
$15 per shareholder account, or .06% of the Fund's average net assets, payable
monthly. In The Money Market Fund, the annual fee is the greater of $20 per
shareholder account, or .06% of the Fund's average net assets, payable
monthly.
MFS also provides the Trust with certain administrative services. Each
Fund incurs an annual fee, payable monthly, of .03% of each Fund's average net
assets.
The Funds have adopted distribution expense plans pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Plans"). Pursuant to the Plans, the
Funds may annually incur certain expenses associated with the distribution of
fund shares in amounts not to exceed 2/10 of 1% of each Fund's average net
assets, with the exception of The Total Return Utilities Fund whose amount
cannot exceed 25/100 of 1% of average net assets.
Certain officers and/or trustees of the Funds and each Portfolio are officers
and/or directors of MII, RMA and MFS.
4. COMMITMENTS AND CONTINGENCIES
Fidelity Bond and Errors and Omissions insurance coverage for the Trust and
its officers and Trustees has been obtained through ICI Mutual Insurance
Company (ICI Mutual), an industry-sponsored mutual insurance company. As of
June 30, 1996, the Trust has made payments of $29,620, in addition to the
annual premiums paid, for the capital reserves of ICI Mutual.
The Trust is also committed to provide $51,055 should ICI Mutual experience
the need for additional capital contributions.
Total assets of $105,000 invested in U.S. Treasury Bills are held in
segregated accounts which collateralizes a standby letter of credit in
connection with the Trust's participation in ICI Mutual.
5. CAPITAL SHARE TRANSACTIONS
At June 30, 1996, an indefinite number of shares of $0.10 par value stock were
authorized in each of the Funds, and paid-in capital amounted to $146,100,200
in The Money Market Fund, $114,847,907 in The Muirfield Fund, $24,889,327 in
The Growth Fund, $17,769,805 in The Bond Fund, and $3,309,494 in The Total
Return Utilities Fund. (See Statements of Changes in Net Assets which are
included elsewhere in this report for capital stock transactions.)
6. DISTRIBUTIONS
The Money Market and Bond Funds declare dividends daily and distribute monthly
all of their net investment income. The Total Return Utilities Fund declares
as dividends and distributes monthly substantially all of its net investment
income. The Muirfield and Growth Funds declare as dividends and distribute
quarterly substantially all of their net investment income. Net realized
capital gains for all Funds, if any, are distributed annually after deduction
of prior years' loss carryforwards. Dividends from net investment income and
any distributions of realized capital gains are distributed in cash or
reinvested in additional shares of the Funds at net asset value.
At June 30, 1996, The Bond and Total Return Utilities Funds had available
for Federal income tax purposes unused capital loss carryforwards. The amount
in The Bond Fund is $206,610 which will expire in 2002. The amount in The
Total Return Utilities Fund is $679 which will expire in 2003.
<PAGE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
June 30, 1996 (Unaudited)
=================================================================================================================================
MUTUAL GROWTH MONEY
FUND STOCK UTILITIES STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market value* $128,081,418 $15,823,361 $7,054,177 $7,099,722 $370,911,524
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements* 14,343,000 10,337,000 307,000 7,740,000 48,842,000
- ---------------------------------------------------------------------------------------------------------------------------------
Cash 975 364 431 336 239,446
Receivable for securities sold - - - 3,057,748 -
Receivable for futures contracts settlement 112,875 57,625 - - -
Interest receivable 110,925 4,727 142 3,536 2,307,728
Dividends receivable - 24,418 12,117 - -
Prepaid/Other assets 1,980 431 53 275 2,572
Unamortized organization costs 7,666 5,055 35,673 5,055 5,055
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets 142,658,819 26,252,981 7,409,593 17,906,672 422,308,325
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased - - 210,000 - 10,720,311
- ---------------------------------------------------------------------------------------------------------------------------------
Payable to investment adviser 85,959 20,090 5,246 4,502 43,693
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued fund accounting fees 3,971 2,291 522 1,771 4,853
Other accrued liabilities 16,194 10,864 45,703 8,698 14,172
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 106,124 33,045 261,471 14,971 10,783,029
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Capital 132,528,l05 25,023,868 6,625,297 17,891,709 411,525,296
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments 10,024,590 1,196,068 522,825 (8) 0
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets $142,552,695 $26,219,936 $7,148,122 $17,891,701 $411,525,296
=================================================================================================================================
*Securities at cost 132,610,528 24,964,293 6,838,352 14,839,730 419,753,524
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
For the six months ended June 30, 1996 (Unaudited)
==========================================================================================================================
MUTUAL GROWTH MONEY
FUND STOCK UTILITIES STOCK BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME - NET:
Interest $750,965 $317,637 $10,516 $458,742 $8,981,549
- --------------------------------------------------------------------------------------------------------------------------
Dividends 104,627 136,753 104,845 -- --
- --------------------------------------------------------------------------------------------------------------------------
Total Income 855,592 454,390 115,361 458,742 8,981,549
- --------------------------------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 531,305 127,833 29,586 33,253 480,675
Legal fees 1,028 972 799 1,028 872
Audit fees 6,925 5,047 3,865 4,550 8,118
Custodian fees 5,008 4,695 1,889 2,060 8,662
Accounting fees 24,775 15,069 4,208 10,791 33,958
Trustees fees and expenses 2,675 2,675 2,675 2,675 2,657
Insurance 1,067 245 15 154 2,185
Amortization of organization cost 2,712 2,482 4,474 2,482 2,482
Other expenses 201 257 361 201 182
- --------------------------------------------------------------------------------------------------------------------------
Total Expenses 575,696 159,275 47,870 57,194 539,791
Investment advisory fees waived -- -- -- (7,898) (236,343)
- --------------------------------------------------------------------------------------------------------------------------
Total Expenses - net 575,696 159,275 47,870 49,296 303,448
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME - NET 279,896 295,115 67,491 409,446 8,678,101
- --------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures contracts (1,264,062) 14,744 -- (88,436) --
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 5,302,348 98,688 152,239 197,995 --
- --------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments 4,344,245 1,087,664 100,406 (662,360) --
- --------------------------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 8,382,531 1,201,096 252,645 (552,801) 0
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $8,662,427 $1,496,211 $320,136 ($143,355) $8,678,101
==========================================================================================================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
for the six months ended June 30, 1996 (Unaudited) and year ended December 31, 1995
<CAPTION>
=================================================================================================================================
MUTUAL GROWTH
FUND STOCK UTILITIES STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended Six months Year ended
ended June 30, December 31, ended June 30, December 31, ended June 30, December 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income - net $279,896 $1,278,396 $295,115 $900,867 $67,491 $29,889
Net realized gain (loss)
on investments
and futures contracts 4,038,288 15,554,692 113,432 4,316,033 152,239 (1,067)
Net change in unrealized
appreciation (depreciation)
of investments 4,344,245 5,680,803 1,087,664 111,506 100,406 422,419
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 8,662,427 22,513,891 1,496,211 5,328,406 320,136 451,241
- ---------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 22,142,713 34,671,819 1,961,503 1,680,821 3,241,294 3,908,655
Withdrawals (10,361,574) (18,261,284) (1,774,808) (4,640,744) (704,178) (69,026)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
transactions of investors'
beneficial interests 11,781,139 16,410,535 186,695 (2,959,923) 2,537,116 3,839,629
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
IN NET ASSETS 20,443,566 38,924,426 1,682,906 2,368,483 2,857,252 4,290,870
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 122,109,129 83,184,703 24,537,030 22,168,547 4,290,870 --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $142,552,695 $122,109,129 $26,219,936 $24,537,030 $7,148,122 $4,290,870
=================================================================================================================================
<PAGE>
<CAPTION>
MONEY
BOND MARKET
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
Six months Year ended Six months Year ended
ended June 30, December 31, ended June 30, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Investment income - net $409,446 $841,854 $8,678,101 $11,720,462
Net realized gain (loss)
on investments
and futures contracts 109,559 988,487 0 0
Net change in unrealized
appreciation (depreciation)
of investments (662,360) 667,977 0 0
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations (143,355) 2,498,318 8,678,101 11,720,462
- --------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 2,626,606 2,890,694 624,120,515 753,617,719
Withdrawals (657,572) (2,330,962) (475,921,694) (735,213,083)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
transactions of investors'
beneficial interests 1,969,034 559,732 148,198,821 18,404,636
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
IN NET ASSETS 1,825,679 3,058,050 156,876,922 30,125,098
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 16,066,022 13,007,972 254,648,374 224,523,276
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $17,891,701 $16,066,022 $411,525,296 $254,648,374
====================================================================================================================
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
Ratios/Supplemental Data
=================================================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Mutual Fund Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
June 30, 1996 (unaudited) 1995 1994 1993
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000) 142,553 122,109 83,185 81,605
- ---------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 0.87%1 0.95% 1.01% 1.03%
- ---------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets 0.43%1 1.26% 2.76% 0.09%
Portfolio Turnover Rate 92.04% 186.13% 168.17% 279.56%
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Utilities Stock Portfolio
- ---------------------------------------------------------------------------------------------------------------
Six Months Ended For The Period June 21, l995* to
June 30, 1996 (unaudited) December 31, 1995
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period 7,148 4,291
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.61%1 2.32%1
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets 2.27%1 2.09%1
Ratio of Expenses to Average Net Assets before directed brokerage payments N/A 2.40%1
Ratio of Net Income to Average Net Assets before directed brokerage payments N/A 2.01%1
Portfolio Turnover Rate 20.28% 5.06%
Average brokerage commission per share $0.0600 $0.0600
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Stock Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended December 31, For The Period
June 30, 1996 (unaudited) 1995 1994 1993 May 1,1992*
to Dec. 31, 1992
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000) 26,220 24,537 22,169 26,172 25,556
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.25%1 1.25% 1.23% 1.23% 1.22%1
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets 2.31%1 3.781 2.35% 0.99% 2.04%1
Portfolio Turnover Rate 89.37% 337.57% 102.76% 99.54% 129.44%
Average brokerage commission per share $0.0820 $0.0600 N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Annualized
* Date of Inception
</FN>
</TABLE>
<PAGE>
<TABLE>
Financial Highlights, continued
Ratios/Supplemental Data
=============================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Bond Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended December 31, For The Period
June 30, 1996 (unaudited) 1995 1994 1993 May 1 1992*
to Dec. 31, 1992
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000) 17,892 16,086 13,008 13,178 11,126
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 0.59%1 0.57% 0.56% 0.60% 0.58%1
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of Net Income to Average Net Assets 4.92%1 5.82% 4.15% 4.62% 5.40%1
Ratio of Expenses to Average Net Assets, before
waiver of fees 0.69%1 0.71% 0.70% 0.71% 0.80%1
Ratio of Net Income to Average Net Assets, before
waiver of fees 4.82%1 5.68% 4.01% 4.51% 5.18%1
Portfolio Turnover Rate 154.95% 232.34% 707.57% 235.74% 132.53%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Money Market Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended December 31, For The Period
June 30, 1996 (unaudited) 1995 1994 1993 May 1, 1992*
to Dec. 31, 1992
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000) 411,525 254,648 224,523 200,148 244,272
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 0.19%1 0.21% 0.19% 0.19% 0.18%1
Ratio of Net Income to Average Net Assets 5.33%1 5.87% 4.28% 3.09% 3.60%1
Ratio of Expenses to Average Net Assets, before
waiver of fees 0.34%1 0.38% 0.39% 0.40% 0.40%1
Ratio of Net Income to Average Net Assets, before
waiver of fees 5.18%1 5.70% 4.08% 2.88% 3.38%1
Portfolio Turnover Rate N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Annualized
* Date of Inception
</FN>
</TABLE>
<PAGE>
MUTUAL FUND PORTFOLIO
GROWTH STOCK PORTFOLIO
UTILITIES STOCK PORTFOLIO
BOND PORTFOLIO
MONEY MARKET PORTFOLIO
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Each separate Portfolio (the "Portfolios") is registered under the Investment
Company Act of 1940, as amended, as a no-load, open-end management investment
company which was organized as a trust under the laws of the State of New
York. Each Declaration of Trust permits the Trustees, who are the same for all
the Portfolios, to issue beneficial interests in each Portfolio. The following
is a summary of significant accounting policies followed by the Portfolios.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments - Money market securities held in the Money Market Portfolio are
valued at amortized cost, which approximates market value in accordance with
Rule 2a-7 of the Investment Company Act of 1940. Money market securities held
in the five remaining Portfolios maturing more than sixty days after the
valuation date are valued at the last sales price as of the close of business
on the day of valuation, or, lacking any sales, at the most recent bid price
or yield equivalent as obtained from dealers that make markets in such
securities. When such securities are valued within sixty days or less to
maturity, the difference between the valuation existing on the sixty-first day
before maturity and maturity value is amortized on a straight-line basis to
maturity.
Securities maturing within sixty days from their date of acquisition are
valued at amortized cost.
Securities which are traded on stock exchanges are valued at the last sales
price as of the close of business of the New York Stock Exchange on the day of
valuation, or, lacking any sales, at the closing bid prices. Securities traded
on the over-the-counter market are valued at the most recent bid price or
yield equivalent as obtained from one or more dealers that make markets in
such securities. Mutual funds are valued at the daily redemption value
determined by the underlying fund. Valuations in The Bond Portfolio are
determined as of 3:00 p.m. Eastern time.
Repurchase Agreements - It is the Portfolios' policy to take possession
of the collateral for repurchase agreements before payment is made to the
seller. Market value of the collateral must be at least 100% of the amount of
the repurchase agreement.
Options & Futures - Each Portfolio except the Money Market Portfolio may
engage in transactions in financial futures contracts and options as a hedge
against the change in market value of the securities held in the portfolio, or
which it intends to purchase. The expectation is that any gain or loss on such
transactions will be substantially offset by any gain or loss on the
securities in the underlying portfolio or on those which are being considered
for purchase.
To the extent that the Portfolio enters into futures contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change
in the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit either cash or securities in an amount
("initial margin") equal to a certain percentage of the contract value.
Subsequent payments ("variation margin") equal to changes in the daily
settlement price or last sale on the exchanges where they trade are paid or
received each day and are recorded as a gain or loss on futures contracts.
Call and put option contracts involve the payment of a premium for the right
to purchase or sell an individual security or index aggregate at a specified
price until the expiration of the contract. Such transactions expose the
Portfolio to the loss of the premium paid if the Portfolio does not sell or
exercise the contract prior to the expiration date. In the case of a call
option, sufficient cash or money market instruments will be segregated to
complete the purchase. Options are valued on the basis of the daily settlement
price or last sale on the exchanges where they trade and the changes in value
are recorded as an unrealized gain or loss until sold, exercised or expired.
In the case of a written option, premiums received by each portfolio upon
writing the option are recorded in the liability section of the Statement of
Assets and Liabilities and are subsequently adjusted to current market value.
When the written option is closed, exercised or expired, the portfolio
realizes a gain or loss and the liability is eliminated.
<PAGE>
Income Taxes - It is the Portfolios' policy to comply with the
requirements of the Internal Revenue Code applicable to it. Therefore, no
Federal income tax provision is required.
Organizational Costs - The costs related to the organization of each of the
five Portfolios have been deferred and are being amortized by each Portfolio
on a straight-line basis over a five-year period.
Other - The Portfolios follow industry practice and record security
transactions on the trade date. Gains and losses on security transactions are
determined on the specific identification basis. Dividend income is recognized
on the ex-dividend date, and interest income (including amortization of
premium and discount) is recognized as earned.
2. INVESTMENT ADVISORY, AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield
Investors, Inc. (MII), provides the Portfolios with investment management,
research, statistical and advisory services, and pays certain other expenses
of the Portfolios. Miller/Howard Investments, Inc. (Subadviser) serves as the
Utilities Stock Portfolio's Subadviser under an Investment Subadvisory
Agreement between RMA and the Subadviser. For such services the Portfolios pay
monthly a fee based upon the average daily value of each Portfolios' net
assets at the following annual rates: Mutual Fund, Growth Stock, and Utilities
Stock Portfolio, 1% of average net assets up to $50 million, 0.75% of average
net assets exceeding $50 million up to $100 million and 0.60% of average net
assets exceeding $100 million; Bond Portfolio, 0.40% of average net assets up
to $100 million and 0.20% of average net assets exceeding $100 million; Money
Market Portfolio, 0.40% of average net assets up to $100 million and 0.25% of
average net assets exceeding $100 million. During the six months ended June
30, 1996, RMA voluntarily waived a portion of its investment advisory fees in
the Money Market and Bond Portfolios.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
accounting services agent for all of the Portfolios. The minimum annual fee
for all such services for the Mutual Fund, Growth Stock, Bond, and Utilities
Stock Portfolios is $7,500. Subject to the applicable minimum fee, each
Portfolio's annual fee, payable monthly, is computed at the rate of 0.15% of
the first $10 million, 0.10% of the next $20 million, 0.02% of the next $50
million, and 0.01% in excess of $80 million of the respective Portfolio's
average net assets. In the Money Market Portfolio the minimum annual fee for
accounting services is $30,000. Subject to the applicable minimum fee, the
Money Market Portfolio's annual fee, payable monthly, is computed at the rate
of 0.15% of the first $10 million, 0.10% of the next $20 million, 0.02% of the
next $50 million and 0.01% in excess of $80 million of the Portfolio's average
net assets.
Certain officers and/or trustees of the Funds and each Portfolio are officers
and/or directors of MII, RMA and MFS.
<PAGE>
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the six months ended June 30, 1996 were
as follows:
- ------------------------------------------------------------------------------
Portfolio Purchases Sales
- ------------------------------------------------------------------------------
Mutual Fund Portfolio $ 81,311,667 $68,651,439
Growth Stock Portfolio $ 2,990,564 $ 283,648
Utilities Stock Portfolio $ 4,002,145 $ 1,027,839
As of June 30, 1996, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised
of the following:
<TABLE>
<CAPTION>
Net Unrealized
Unrealized Unrealized Appreciation
Investment Appreciation Depreciation (Depreciation)
Portfolio Cost of Investments of Investments of Investments
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mutual Fund Portfolio $132,610,528 $10,024,651 $ (61) $10,024,590
Growth Stock Portfolio $ 24,964,293 $ 1,281,794 $(85,726) $ 1,196,068
Bond Portfolio $ 14,839,730 $ 0 $ (8) $ (8)
Utilities Stock Portfolio $ 6,838,352 $ 605,065 $(82,240) $ 522,825
</TABLE>
<PAGE>
Manager and Investment Adviser
R. Meeder & Associates
6000 Memorial Drive
P.O. Box 7177
Dublin, Ohio 43017
Subadviser/The Utilities Stock Portfolio
Miller/Howard Investments, Inc.
141 Upper Byrdcliff Road, P.O. Box 549
Woodstock, New York 12498
Board of Trustees
Milton S. Bartholomew
Dr. Roger D. Blackwell
John M. Emery
Richard A. Farr
William L. Gurner
Robert S. Meeder, Sr.
Robert S. Meeder, Jr.
Russel G. Means
Lowell G. Miller
Walter L. Ogle
Philip A. Voelker
Custodian
Star Bank, N.A., Cincinnati
Cincinnati, Ohio 45201
Transfer Agent and Dividend Disbursing Agent
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, Ohio 43017
Auditors
KPMG Peat Marwick LLP
Columbus, Ohio 43215
<PAGE>
THE FLEX-FUNDS
P.O. Box 7177
Dublin, Ohio 43017
Bulk Rate
U.S. Postage
PAID
Permit No. 150
Berwyn, IL
