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As filed with the Securities and Exchange Commission on April 22, 1996.
File No. 811- 9028
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
UTILITIES STOCK PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
P.O. Box 7177, 6000 Memorial Drive
Dublin, Ohio 43017
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 614-766-7000
Donald F. Meeder, P.O. Box 7177, 6000 Memorial Drive, Dublin, OH 43017
(Name and Address of Agent for Service)
Copy to:
James B. Craver
266 Summer Street
Boston, MA 02210
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EXPLANATORY NOTE
This Registration Statement of Utilities Stock Portfolio has been
filed by the Registrant pursuant to Section 8(b) of the Investment Company Act
of 1940, as amended (the "1940 Act"). However, beneficial interests in the
Registrant are not being registered under the Securities Act of 1933, as
amended (the "1933 Act"), since such interests will be offered solely in
private placement transactions which do not involve any "public offering"
within the meaning of Section 4(2) of the 1993 Act. Investments in the
Registrant may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or
entities which are "accredited investors" as defined in Regulation D under the
1993 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to sell, or the solicitation of an offer to buy,
any beneficial interest in the Registrant.
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PART A
Responses to Items 1 through 3 have been omitted pursuant to paragraph
4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
Utilities Stock Portfolio (the "Portfolio") is a diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on August 4, 1994.
Beneficial interests in the Portfolio are offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or
similar organizations or entities which are "accredited investors" as defined
in Regulation D under the 1933 Act. This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.
The Portfolio's investment adviser is R. Meeder & Associates, Inc.
(the "Investment Adviser" or the "Manager"). Miller/Howard Investments, Inc.
is the subadviser (the "Subadviser") for the Portfolio. The investment
objective of the Portfolio is to seek a high level of current income, relative
to that derived from investing primarily in equity securities of companies that
are not public utilities, and growth of income by investing primarily in equity
securities of domestic and foreign public utility companies; however, the
Portfolio will not invest in electric utilities whose generation of power is
derived from nuclear reactors. The Portfolio also seeks capital appreciation,
but only when consistent with its primary investment objective. There can be
no assurance that such objective will be achieved.
The Portfolio seeks to achieve its objective by investing, under
normal conditions, at least 65% of its total assets in a diversified portfolio
of common stocks, preferred stocks, warrants and rights, and securities
convertible into common or preferred stock of public utility companies. Public
utility companies include domestic or foreign companies that provide
electricity, natural gas, water, telecommunications or sanitary services to the
public. The Portfolio will not invest more than 5% of its assets in equity
securities of issuers whose debt securities are rated below investment grade,
that is, rated below one of the four highest rating categories by Standard &
Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") or
deemed to be of equivalent quality in the judgment of the Subadviser. Debt
securities rated below investment grade are rated below Baa or BBB.
The remaining 35% of the Portfolio's assets may be invested in debt
securities issued by public utility companies, and/or equity and debt
securities of issuers outside of the public utility industry which in the
opinion of the Subadviser stand to benefit from developments in the public
utilities industry. The Portfolio will not invest more than 40% of its assets
in the telephone industry. The Portfolio may invest up to 25% of its assets in
securities of foreign issuers. The
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Portfolio will not invest more than 10% of its net assets in securities that
are deemed to be illiquid.
Investments are selected on the basis of fundamental analysis to
identify those securities that, in the judgment of the Subadviser, provide a
high level of current income, relative to that derived from investing primarily
in equity securities of companies that are not public utilities, and growth of
income and secondarily, capital appreciation, but only when consistent with its
primary investment objective.
Fundamental analysis involves assessing a company and its business
environment, management, balance sheet, income statement, anticipated earnings
and dividends and other related measures of value. The Subadviser monitors and
evaluates the economic and political climate of the area in which each company
is located. The relative weightings among common stocks, debt securities and
preferred stocks will vary from time to time based upon the Subadviser's
judgment of the extent to which investments in each category will contribute to
meeting the Portfolio's investment objective.
The Subadviser emphasizes quality in selecting investments for the
Portfolio, and in addition to looking for high credit ratings, the Subadviser
ordinarily looks for several of the following characteristics: above average
earnings growth; above average growth of book value; an above average balance
sheet; high earnings to debt service coverage; low ratio of dividends to
earnings; high return on equity; low debt to equity ratio; an above-average
rating with respect to government regulation; growing rate base; lack of major
construction programs and strong management.
The Portfolio may invest up to 35% of its total assets in debt
securities of issuers in the public utility industries. Debt securities in
which the Portfolio invests are limited to those rated A or better by S&P or
Moody's or deemed to be of equivalent quality in the judgment of the
Subadviser.
A change in prevailing interest rates is likely to affect the
Portfolio's net asset value because prices of debt securities and equity
securities of utility companies tend to increase when interest rates decline
and decrease when interest rates rise.
During periods when the Subadviser deems it necessary for temporary
defensive purposes, the Portfolio may invest without limit in high quality
money market instruments. These instruments consist of commercial paper,
certificates of deposit, banker's acceptances and other bank obligations,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, high grade corporate obligations and repurchase agreements.
Except as otherwise expressly provided herein, all investment
objectives and policies stated throughout this Registration Statement are not
fundamental and may be changed without approval of the Portfolio's investors.
The Portfolio may not purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its agencies
or instrumentalities) if, as a result, more than 25% of the Portfolio's total
assets would be invested
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in the securities of companies whose principal business activities are in the
same industry, except that the Portfolio will invest more than 25% of its total
assets in securities of public utility companies. The Portfolio may not, with
respect to 75% of its total assets, purchase the securities of any issuer
(other than obligations issued or guaranteed by the government of the United
States, or any of its agencies or instrumentalities) if, as a result thereof,
(a) more than 5% of the Portfolio's total assets would be invested in the
securities of such issuer, or (b) the Portfolio would hold more than 10% of the
voting securities of such issuer. The foregoing investment policies regarding
concentration and diversification are fundamental and may not be changed
without investor approval.
RISK FACTORS
By itself, the Portfolio does not constitute a balanced investment
plan; the Portfolio seeks a high level of current income relative to that
derived from investing primarily in equity securities of companies that are not
public utilities, and growth of income with capital appreciation as a secondary
objective. The Portfolio invests primarily in common stock, preferred stock
and securities convertible into common or preferred stock. Changes in interest
rates may also affect the value of the Portfolio's investments, and rising
interest rates can be expected to reduce the Portfolio's net asset value.
Because the Portfolio concentrates its investments in public utility
companies, its performance will depend in large part on conditions in the
public utility industries. Utility stocks have traditionally been popular
among more conservative stock market investors because they have generally paid
above average dividends. However, utility stocks can still be affected by the
risks of the stock market, as well as factors specific to public utility
companies. Governmental regulation of public utility companies can limit their
ability to expand their business or to pass cost increases on to customers.
Companies providing power or energy-related services may also be affected by
fuel shortages or cost increases, environmental protection or energy
conservation regulations, as well as fluctuating demand for their services.
Some public utility companies are facing increased competition, which may
reduce their profits. All of these factors are subject to rapid change, which
may affect utility companies independently from the stock market as a whole.
In seeking its investment objectives, the Portfolio may invest in
securities of foreign issuers. Foreign securities may involve a higher degree
of risk and may be less liquid or more volatile than domestic investments.
Foreign securities usually are denominated in foreign currencies, which means
their value will be affected by changes in the strength of foreign currencies
relative to the U.S. dollar as well as the other factors that affect security
prices. Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there often is less
publicly available information about their operations. Generally, there is
less governmental regulation of foreign securities markets, and security
trading practices abroad may offer less protection to investors such as the
Portfolio.
The value of such investments may be adversely affected by changes in
political or social conditions, diplomatic relations, confiscatory taxation,
expropriation, nationalization, limitation
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on the removal of portfolios or assets, or imposition of (or change in)
exchange control or tax regulations in those foreign countries. Additional
risks of foreign securities include settlement delays and costs, difficulties
in obtaining and enforcing judgments, and taxation of dividends at the source
of payment.
In addition, the Portfolio may invest in private placement commercial
paper. Private placement commercial paper consists of unregistered securities
which are traded in public markets to qualified institutional investors, such
as the Portfolio. The Portfolio's risk is that the universe of potential
buyers for the securities, should the Portfolio desire to liquidate a position,
is limited to qualified dealers and institutions, and therefore such securities
could have the effect of being illiquid.
The Subadviser intends to manage the Portfolio actively in pursuit of
its investment objective. The Portfolio does not expect to trade in securities
for short-term profits but, when circumstances warrant, securities may be sold
without regard to the length of time held.
OTHER INVESTMENTS AND POLICIES
MONEY MARKET INSTRUMENTS. When investing in money market instruments,
the Portfolio will limit its purchases, denominated in U.S. dollars, to the
following securities:
- U.S. Government Securities and Securities of its Agencies and
Instrumentalities.
- Bank Obligations and Instruments Secured Thereby.
- High Quality Commercial Paper--The Portfolio may invest in commercial
paper rated no lower than "A-2" by S&P or "Prime-2" by Moody's, or, if
not rated, issued by a company having an outstanding debt issue rated
at least A by S&P or Moody's.
- Private Placement Commercial Paper--unregistered securities which are
traded in public markets to qualified institutional investors, such as
the Portfolio.
- High Grade Corporate Obligations--obligations rated at least A by S&P
or Moody's.
- Repurchase Agreements--see "Repurchase Agreements" below.
At the discretion of the Subadviser, the Portfolio may employ the
following strategies in pursuing its investment objective.
CURRENCY, OPTIONS AND FUTURES TRANSACTIONS. The Portfolio may use
forward currency contracts, futures contracts, options on securities or options
on futures contracts to implement strategies to attempt to hedge its portfolio,
i.e., reduce the overall level of investment risk normally associated with the
Portfolio. There can be no assurance that such efforts will succeed. These
techniques are described below and are further detailed in Part B.
To attempt to hedge against adverse movements in exchange rates
between currencies, the Portfolio may enter into forward currency contracts for
the purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar, or may involve two foreign currencies. The Portfolio may enter
into forward currency contracts either with respect to specific transactions or
with respect to the
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Portfolio's positions. For example, when the Portfolio anticipates making a
purchase or sale of a security, the Portfolio may enter into a forward currency
contract in order to set the rate at which a currency exchange transaction
related to the purchase or sale will be made. Further, when the Subadviser
believes that a particular currency may decline compared to the U.S. dollar or
another currency, the Portfolio may enter into a forward contract to sell the
currency the Subadviser expects to decline in an amount approximating the
value of some or all of the Portfolio's securities denominated in a foreign
currency. The Portfolio also may write covered call options and purchase put
and call options on currencies to hedge against movements in exchange rates.
In addition, the Portfolio may write covered call options and purchase
put and call options on equity and debt securities to hedge against the risk of
fluctuations in the prices of securities held by the Portfolio or which the
Subadviser intends to include in the Portfolio. The Portfolio also may write
covered call options and buy put and call options on stock indexes. Such stock
index options serve to hedge against overall fluctuations in the securities
markets generally or in the utilities market sector specifically, rather than
anticipated increases or decreases in the value of a particular security.
Further, the Portfolio may sell stock index futures contracts and may
purchase put options or write covered call options on such futures contracts to
protect against a general stock market decline or a decline in the utilities
market sector that could adversely affect the Portfolio. The Portfolio also
may buy stock index futures contracts and purchase call options on such
contracts to hedge against a general stock market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. The
Portfolio may use interest rate futures contracts and options thereon to hedge
the debt portion of the Portfolio against changes in the general level of
interest rates.
The Portfolio may write only "covered" call options. An option
written on a security or currency is "covered" when, so long as the Portfolio
is obligated under the option, it owns the underlying security or currency.
The Portfolio will "cover" stock index options and options on futures contracts
it writes by maintaining in a segregated account either marketable securities,
which in the Subadviser's judgment correlate to the underlying index or futures
contract or an amount of cash, U.S. government securities or other liquid, high
grade debt securities equal in value to the amount the Portfolio would be
required to pay were the option exercised.
Although the Portfolio might not employ any of the foregoing
strategies, its use of forward currency contracts, options and futures would
involve certain investment risks and transaction costs to which it might not
otherwise be subject. These risks include: dependence on the Subadviser's
ability to predict movements in the prices of individual securities,
fluctuations in the general securities markets or in the utilities market
sector and movements in interest rates and currency markets; imperfect
correlation between movements in the price of currency, options, futures
contracts or options thereon and movements in the price of the currency or
security hedged or used for cover; the fact that skills and techniques needed
to trade options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the securities in
which the Portfolio invests; lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
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particular time; and the possible need to defer closing out of certain options,
futures contracts and options thereon in order to continue to qualify for the
beneficial tax treatment afforded regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Accordingly, these financial futures contracts, related options and forward
currency contracts used by the Portfolio to implement its hedging strategies
are considered derivatives. The value of derivatives can be affected
significantly by even small market movements, sometimes in unpredictable ways.
They do not necessarily increase risk, and may in fact reduce risk.
SECURITIES LENDING
The Portfolio may lend its portfolio securities to brokers or dealers,
banks or other recognized institutional borrowers of securities, provided that
the borrower at all times maintains cash or equivalent collateral or secures a
letter of credit in favor of the Portfolio in an amount equal to at least 100%
of the market value of the securities loaned. During the time portfolio
securities are on loan, the borrower will pay the Portfolio an amount
equivalent to any dividend or interest paid on such securities and earn
additional income, or the Portfolio may receive an agreed-upon amount of
interest income from the borrower. In accordance with applicable regulatory
requirements, the Portfolio may lend up to 30% of the value of its total
assets. The risks in lending portfolio securities, as well as with other
extensions of secured credit, consist of possible delay in receiving additional
collateral or in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements whereby the seller
of a security agrees to repurchase that security from the Portfolio at a
mutually agreed-upon time and price. The repurchase date is usually within a
day or two of the original purchase, although it may not be for a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed- upon rate of return effective for the period of time the Portfolio's
money is invested in the security. The Portfolio's repurchase agreements will
at all times be fully collateralized in an amount at least equal to the
purchase price, including accrued interest earned on the underlying securities.
The instruments held as collateral are valued daily, and as the value of
instruments declines, the Portfolio will require additional collateral. If the
seller defaults or becomes insolvent and the value of the collateral securing
the repurchase agreement declines, the Portfolio may incur a loss.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Portfolio may purchase or sell securities on a when-issued or
delayed delivery basis. When-issued or delayed delivery transactions arise
when securities are purchased or sold by the Portfolio with payment and
delivery taking place as much as a month or more in the future in
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order to secure what is considered to be an advantageous price and yield to the
Portfolio at the time of entering into the transaction. The Portfolio's
custodian will maintain, in a segregated account of the Portfolio, cash, U.S.
Government securities or other liquid high-grade debt obligations having a
value equal to or greater than the Portfolio's purchase commitments; the
custodian will likewise segregate securities sold on a delayed delivery basis.
The securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during the period between purchase and settlement. At
the time of delivery of the securities the value may be more or less than the
purchase price and an increase in the percentage of the Portfolio's assets
committed to the purchase of securities on a when-issued or delayed delivery
basis may increase the volatility of the Portfolio's net asset value.
BORROWING
The Portfolio may borrow an amount up to 33-1/3% of the value of its
total assets (calculated when the loan is made) from banks for temporary or
emergency purposes. The Portfolio may pledge up to 33-1/3% of its assets to
secure such borrowings. The Portfolio may borrow from banks or from other
funds or portfolios advised by the Manager, or through reverse repurchase
agreements. However, the Portfolio will not purchase portfolio securities if
borrowings exceed 5% of the Portfolio's total assets.
If the Portfolio borrows money, an investor's share price may be
subject to greater fluctuation until the borrowing is paid off.
ITEM 5. MANAGEMENT OF THE PORTFOLIO.
The Portfolio's Board of Trustees provides broad supervision over the
affairs of the Portfolio. A majority of the Portfolio's Trustees are not
affiliated with the Manager. Information concerning the Trustees and officers
of the Portfolio appears in Part B.
The Portfolio has not retained the services of a principal underwriter
or distributor, as interests in the Portfolio are offered solely in private
placement transaction. Signature Broker-Dealer Services, Inc. ("SBDS") has
been retained to serve without compensation as exclusive placement agent for
the Portfolio in connection with such transactions.
The Manager has been an investment adviser to individuals and
retirement plans since 1974 and to mutual funds since 1982. The Manager serves
the Portfolio pursuant to an Investment Advisory Contract under the terms of
which it has agreed to provide an investment program within the limitations of
the Portfolio's investment policies and restrictions, and to furnish all
executive, administrative, and clerical services required for the transaction
of Portfolio business, other than accounting services and services which are
provided by the Portfolio's custodian, transfer agent, independent accountants
and legal counsel, and investment advisory services provided by the Subadviser
to the Portfolio.
The Manager was incorporated in Ohio in 1974 and maintains its
principal offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a
wholly-owned subsidiary of Muirfield
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Investors, Inc. ("MII"). MII is controlled by Robert S. Meeder, Sr. through
ownership of voting common stock. MII conducts business only through its five
subsidiaries which are R. Meeder & Associates, Inc.; Mutual Funds Service Co.,
the Portfolio's transfer agent; Opportunities Management Co., a venture capital
investor; Meeder Advisory Services, Inc., a registered investment adviser and
OMCO, Inc., a registered commodity trading adviser and commodity pool operator.
Lowell G. Miller is the portfolio manager primarily responsible for
the day to day management of the Portfolio. Mr. Miller is the President of the
Subadviser. Mr. Miller has been associated the Subadviser since 1984 and
controls the Subadviser through ownership of voting common stock. Mr. Miller
has been managing the Portfolio since its inception in June of 1995.
The Manager earns an annual fee, payable in monthly installments, from
the Portfolio at the rate of 1.00% of the first $50 million, .75% of the next
$50 million and .60% in excess of $100 million, of average net assets. These
fees are higher than the fees charged to most other investment companies.
Accounting and transfer agency services are provided to the Portfolio
by Mutual Funds Service Co. ("MFSCo."), 6000 Memorial Drive, Dublin, Ohio
43017, a wholly-owned subsidiary of MII. The minimum annual fee, payable
monthly, for such services for the Portfolio is $7,500. Subject to the
applicable minimum fee, the Portfolio's annual fee is computed at the rate of
.15% of the first $10 million, .10% of the next $20 million, .02% of the next
$50 million and .01% in excess of $80 million of the Portfolio's average net
assets. These fees are reviewable annually by the Trustees of the Portfolio.
For the year ended December 31, 1995 total payments from the Portfolio to
MFSCo. amounted to $4,065.
SUBADVISER
Miller/Howard Investments, Inc., 141 Upper Byrdcliffe Road, P. O. Box
549, Woodstock, New York 12498, serves as the Portfolio's Subadviser under an
Investment Subadvisory Agreement between the Manager and the Subadviser. The
Subadviser furnishes investment advisory services in connection with the
management of the Portfolio. The Subadviser is compensated for its services by
the Manager in an amount equal to 90% of the investment advisory fees received
by the Manager under its investment advisory contract with the Portfolio,
provided that if a shareholder purchasing shares in The Flex-Partners BTB Fund
or The Flex-funds Total Return Utilities Fund, two separate registered
investment companies established to invest in the Portfolio, was solicited by
the Manager, the Subadviser is compensated by the Manager in an amount equal to
60% of the investment advisory fees received by the Manager with respect to
such shareholder. The Manager continues to have responsibility for all
investment advisory services in accordance with the investment advisory
contract and supervises the Subadviser's performance of such services.
The Subadviser, a Delaware corporation, is a registered investment
adviser which has been providing investment services to broker-dealers,
investment advisers, employee benefit plans, endowment portfolios, foundations
and other institutions and individuals since 1984. As
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of December 31, 1995, the Subadviser held discretionary investment authority
over approximately $195 million of assets. The Subadviser is controlled by
Lowell Miller through ownership of voting common stock.
PORTFOLIO MANAGER
Lowell Miller, a director and President of the Subadviser, is
primarily responsible for the day-to-day management of the Portfolio. Mr.
Miller has been associated with the Subadviser and its predecessor since 1984.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is organized as a trust under the laws of the State of
New York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in
the Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors in the
Portfolio (e.g., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations.
The net income of the Portfolio is determined each day on which the
New York Stock Exchange (the "NYSE") is open for trading (and on such other
days as are deemed necessary in order to comply with Rule 22c-1 under the
Investment Company Act of 1940, as amended (the "1940 Act")) ("Fund Business
Day"). This determination is made once during each such day. All the net
income of the Portfolio, as defined below, so determined is allocated pro rata
among the investors in the Portfolio at the time of such determination.
For this purpose the net income of the Portfolio (from the time of the
immediately preceding determination thereof) shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles. Interest income
includes discount earned (including both original issue and market discount) on
discount paper accrued ratably to the date of maturity and any net realized
gains or losses on the assets of the Portfolio.
Investments in the Portfolio have no preemptive or conversion rights
and are fully paid and non-assessable, except as set forth below. The
Portfolio is not required to hold annual meetings of investors but the
Portfolio will hold special meetings of investors when in the judgment of the
Trustees it is necessary or desirable to submit matters for an investor vote.
Investors have the right to communicate with other investors to the extent
provided in Section 16(c) of the 1940 Act in connection with requesting a
meeting of investors for the purpose of removing one or more Trustees, which
removal requires a two-thirds vote of the
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Portfolio's beneficial interests. Investors also have under certain
circumstances the right to remove one or more Trustees without a meeting. Upon
liquidation or dissolution of the Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution
to investors.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's taxable income,
gain, loss, deductions and credits in determining its income tax liability.
The determination of such share will be made in accordance with the Internal
Revenue Code and regulations promulgated thereunder.
The Portfolio's assets, income and distributions are managed in such a
way that an investor in the Portfolio will be able to satisfy the requirements
of Subchapter M of the Internal Revenue Code assuming that the investor
invested all of its investable assets in the Portfolio.
Investor inquiries may be directed to R. Meeder & Associates, Inc. at
6000 Memorial Drive, Dublin, Ohio 43017.
ITEM 7. PURCHASE OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
An investment in the Portfolio may be made without a sales load at the
net asset value next determined after an order is received in "good order" by
the Portfolio. Net asset value is determined as described in Item 19 of Part
B.
There is no minimum initial or subsequent investment in the Portfolio.
However, since the Portfolio intends to be as fully invested at all times as is
reasonably practicable in order to enhance the yield on its assets, investments
must be made in federal funds (i.e., monies credited to the account of the
Portfolio's custodian bank by a Federal Reserve Bank).
The Portfolio reserves the right to cease accepting investments at any
time or to reject any investment order.
The exclusive placement agent for the Portfolio is SBDS, whose
principal business address is 6 St. James Avenue, Boston, Massachusetts 02116.
SBDS receives no additional compensation for serving as such agent.
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Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Fund Business Day. As of 4:00 p.m., New York time, on
each such day, the value of each investor's beneficial interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, effective for that day, which represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or reductions, which are to be effected as of 4:00 p.m., New York
time, on such day, will then be effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of 4:00 p.m., New York time, on
such day plus or minus, as the case may be, the amount of net additions to or
reductions in the investor's investment in the Portfolio effected as of 4:00
p.m., New York time, on such day, and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of 4:00 p.m., New York time, on
such day, plus or minus, as the case may be, the amount of net additions to or
reductions in the aggregate investments in the Portfolio by all investors in
the Portfolio effected as of 4:00 p.m., New York time, on such day. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of 4:00 p.m., New York time, on the
following Fund Business Day.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may reduce any portion or all of its
investment at any time at the net asset value next determined after a request
in "good order" is furnished by the investor to the Portfolio. Any such
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution from the Portfolio). A distribution in kind may
result in a less diversified portfolio. The proceeds of a reduction will be
paid by the Portfolio in federal funds normally on the next business day after
the reduction is effected, but in any event within seven days. Investments in
the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
reduction may be suspended or the payment of the proceeds therefrom postponed
during any period in which the NYSE is closed (other than weekends or holidays)
or trading on such Exchange is restricted, or, to the extent otherwise
permitted by the 1940 Act, if an emergency exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
A-11
<PAGE> 14
PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS.
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History B-1
Investment Objective and Policies B-1
Management of the Portfolio B-17
Control Persons and Principal Holders of Securities B-19
Investment Advisory and Other Services B-20
Brokerage Allocation and Other Practices B-22
Capital Stock and Other Securities B-25
Purchase, Redemption and Pricing of Securities B-26
Tax Status B-27
Underwriters B-27
Calculation of Performance Data B-27
Financial Statements B-28
</TABLE>
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
Part A contains additional information about the investment objective
and policies of the Utilities Stock Portfolio (the "Portfolio"). This Part B
should only be read in conjunction with Part A. The investment policies and
limitations set forth below supplement those set forth in Part A.
INVESTMENT RESTRICTIONS
Under the Investment Company Act of 1940 (the "1940 Act"), a
"fundamental" policy may not be changed without the vote of a majority of the
outstanding voting securities of the Portfolio, which is defined in the 1940
Act with respect to the Portfolio as the lesser of (a) 67 percent or more of
the Portfolio's beneficial interests represented at a meeting of investors if
the holders of more than 50 percent of the outstanding beneficial interests are
present or represented by proxy, or (b) more than 50 percent of the outstanding
beneficial interests ("Majority Vote"). However, except for the fundamental
investment limitations set
B-1
<PAGE> 15
forth below, the investment policies and limitations described in this Part B
are not fundamental and may be changed by the Trustees without investor
approval. The percentage limitations contained in the restrictions listed
below apply at the time of the purchase of the securities.
The Portfolio may not:
(1) with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer (other than obligations issued or guaranteed by the
government of the United States, or any of its agencies or instrumentalities)
if, as a result thereof, (a) more than 5% of the Portfolio's total assets would
be invested in the securities of such issuer, or (b) the Fund would hold more
than 10% of the voting securities of such issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(3) borrow money, except that the Portfolio may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to exceed this
amount will be reduced within three days (not including Sundays and holidays)
to the extent necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that the
Portfolio may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities)
if, as a result, more than 25% of the Portfolio's total assets would be
invested in the securities of companies whose principal business activities are
in the same industry, except that the Portfolio may invest more than 25% of its
total assets in securities of public utility companies;
(6) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Portfolio
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities);
or
(8) lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or to repurchase agreements.
B-2
<PAGE> 16
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend to engage in short sales, but
may engage in short sales "against the box" to the extent that the Portfolio
contemporaneously owns or has the right to obtain at no added cost securities
identical to those sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities short.
(ii) The Portfolio does not currently intend to purchase securities on
margin, except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin payments
in connection with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
(iii) The Portfolio may borrow money only (a) from a bank or from a
registered investment company for which the Manager serves as investment
adviser or (b) by engaging in reverse repurchase agreements with any party
(reverse repurchase agreements are treated as borrowings for purposes of
fundamental investment limitation (3)). The Portfolio will not purchase any
security while borrowings representing more than 5% of its total assets are
outstanding. The Portfolio will not borrow from other funds advised by the
Manager if total outstanding borrowings immediately after such borrowing would
exceed 15% of the Portfolio's total assets.
(iv) The Portfolio does not currently intend to purchase any security if,
as a result, more than 10% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(v) The Portfolio does not currently intend to invest in securities of
real estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the New
York Stock Exchange or the American Stock Exchange or traded on the NASDAQ
National Market System.
(vi) The Portfolio does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
Portfolio's net assets) to a registered investment company for which the
Manager serves as investment adviser or (b) acquiring loans, loan
participations, or other forms of direct debt instruments and in connection
therewith, assuming any associated unfunded commitments of the sellers. (This
limitation does not apply to purchases or debt securities or to repurchase
agreements.)
B-3
<PAGE> 17
(vii) The Portfolio does not currently intend to purchase securities of
other investment companies. This limitation does not apply to securities
received as dividends, through offers of exchange, or as a result of
reorganization, consolidation, or merger.
(viii) The Portfolio does not currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5% of
its total assets would be invested in the securities of business enterprises
that, including predecessors, have a record of less than three years of
continuous operation.
(ix) The Portfolio does not currently intend to purchase warrants, valued
at the lower of cost or market, in excess of 5% of the Portfolio's net assets.
Included in that amount, but not to exceed 2% of the Portfolio's net assets,
may be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange. Warrants acquired by the Portfolio in units or
attached to securities are not subject to these restrictions.
(x) The Portfolio does not currently intend to invest in oil, gas, or
other mineral exploration or development programs or leases.
(xi) The Portfolio does not currently intend to purchase the securities of
any issuer if those officers and Trustees of the Trust and those officers and
directors of the Manager or the Subadviser who individually own more than 1/2
of 1% of the securities of such issuer, together own more than 5% of such
issuer's securities.
(xii) The Portfolio does not currently intend to invest in electric
utilities whose generation of power is derived from nuclear reactors.
For the Portfolio's limitations on futures and options transactions,
see the section entitled "Limitations on Futures and Options Transactions" on
page B-9. For the Portfolio's limitations on short sales, see the section
entitled "Short Sales" on page B- 12.
MONEY MARKET INSTRUMENTS. When investing in money market instruments, the
Portfolio will limit its purchases, denominated in U.S. dollars, to the
following securities.
* U.S. Government Securities and Securities of its
Agencies and Instrumentalities - obligations issued or
guaranteed as to principal or interest by the United States or
its agencies (such as the Export Import Bank of the United
States, Federal Housing Administration, and Government
National Mortgage Association) or its instrumentalities (such
as the Federal Home Loan Bank, Federal Intermediate Credit
Banks and Federal Land Bank), including Treasury bills, notes
and bonds.
* Bank Obligations and Instruments Secured Thereby -
obligations including certificates of deposit, time deposits
and bankers' acceptances) of
B-4
<PAGE> 18
domestic banks having total assets of $1,000,000,000 or more,
instruments secured by such obligations and obligations of
foreign branches of such banks, if the domestic parent bank is
unconditionally liable to make payment on the instrument if
the foreign branch fails to make payment for any reason. The
Portfolio may also invest in obligations (including
certificates of deposit and bankers' acceptances) of domestic
branches of foreign banks having assets of $1,000,000,000 or
more, if the domestic branch is subject to the same regulation
as United States banks. The Portfolio will not invest at time
of purchase more than 25% of its assets in obligations of
banks, nor will the Portfolio invest more than 10% of its
assets in time deposits.
* High Quality Commercial Paper - The Portfolio may
invest in commercial paper rated no lower than "A-2" by
Standard & Poor's Corporation or "Prime-2" by Moody's
Investors Service, Inc., or, if not rated, issued by a company
having an outstanding debt issue rated at least A by Standard
& Poor's or Moody's.
* Private Placement Commercial Paper - Private
placement commercial paper consists of unregistered
securities which are traded in public markets to qualified
institutional investors, such as the Portfolio. The
Portfolio's risk is that the universe of potential buyers for
the securities, should the Portfolio desire to liquidate a
position, is limited to qualified dealers and institutions,
and therefore such securities could have the effect of being
illiquid.
* High Grade Corporate Obligations - obligations rated
at least A by Standard & Poor's or Moody's. See rating
information below.
* Repurchase Agreements -- See "Repurchase Agreements"
below.
The Subadviser exercises due care in the selection of money market
instruments. However, there is a risk that the issuers of the securities may
not be able to meet their obligations to pay interest or principal when due.
There is also a risk that some of the Portfolio's securities might have to be
liquidated prior to maturity at a price less than original amortized cost or
value, face amount or maturity value to meet larger than expected redemptions.
Any of these risks, if encountered, could cause a reduction in net income or in
the net asset value of the Portfolio.
Ratings
1. Moody's Investors Service, Inc.'s Corporate Bond Rating:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
B-5
<PAGE> 19
While the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds which are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
or protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length or time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
2. Standard and Poor's Corporation's Corporate Bond Rating:
AAA - Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they
move with interest rates, and hence provide the maximum safety on all counts.
AA - Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
A - Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from the adverse
effect of changes in economic and trade conditions. Interest and principal are
regarded as safe. They predominantly reflect money rates in their market
behavior but, to some extent, also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds
in this category than for bonds in the A category.
B-6
<PAGE> 20
3. A-1 and P-1 Commercial Paper Ratings:
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P")
has the following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and
cash flow have an upward trend. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determines whether the issuer's commercial paper
is A-1, A-2, or A-3.
The rating P-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Among the factors considered by
Moody's in assigning ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of the issuer's industry or
industries and an appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in relation to
competition and customer acceptance; (4) liquidity; (5) amount and quality of
long-term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet
such obligations.
4. Description of Permitted Money Market Investments:
Commercial Paper - refers to promissory notes issued by corporations
in order to finance their short term credit needs.
U.S. Government Obligations - are bills, certificates of
indebtedness, notes and bonds issued by the U.S. Treasury and agencies,
authorities and instrumentalities of the U.S. Government established under the
authority of an act of Congress. Some obligations of U.S. Government agencies,
authorities and instrumentalities are supported by the full faith and credit of
the U.S. Treasury, as for example, the Government National Mortgage
Association; others by the right of the issuer to borrow from the Treasury, as
in the case of Federal Farm Credit Banks and Federal National Mortgage
Association; and others only by the credit of the agency, authority or
instrumentality; as for example, Federal Home Loan Mortgage and Federal Home
Loan Bank.
Repurchase Agreements - See "Repurchase Agreements" below.
Certificates of Deposit - are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified or
variable rate of return and are normally negotiable.
B-7
<PAGE> 21
Banker's Acceptances - are short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
Corporate Obligations - include bonds and notes issued by corporations
in order to finance longer term credit needs.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, the Subadviser
determines the liquidity of the Portfolio's investments and, through reports
from the Subadviser, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Portfolio's investments, the Subadviser may
consider various factors, including (1) the frequency of trades and quotations,
(2) the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for
trades (including the ability to assign or offset the Portfolio's rights and
obligations relating to the investment). Investments currently considered by
the Portfolio to be illiquid include repurchase agreements not entitling the
holder to payment of principal and interest within seven days, over-the-counter
options, and non-government stripped fixed-rate mortgage-backed securities.
Also, the Subadviser may determine some restricted securities,
government-stripped fixed-rate mortgage-backed securities, loans and other
direct debt instruments, and swap agreements to be illiquid. However, with
respect to over-the-counter options the Portfolio writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the
Portfolio may have to close out the option before expiration. In the absence of
market quotations, illiquid investments are priced at fair value as determined
in good faith by the Board of Trustees. If through a change in values, net
assets, or other circumstances, the Portfolio were in a position where more
than 10% of its net assets were invested in illiquid securities, it would seek
to take appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is
required, the Portfolio may be obligated to pay all or part of the registration
expense and a considerable period may elapse between the time it decides to
seek registration and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases a security and simultaneously commits to resell that security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The resale price reflects the purchase price plus an
agreed upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
B-8
<PAGE> 22
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value (at least equal to the amount of the agreed upon
resale price and marked to market daily) of the underlying security. The
Portfolio may engage in repurchase agreements with respect to any security in
which it is authorized to invest.
While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility of a decline in the
market value of the underlying securities, as well as delays and costs to the
Portfolio in connection with bankruptcy proceedings), it is the Portfolio's
current policy to limit repurchase agreement transactions to parties whose
creditworthiness has been reviewed and found satisfactory by the Subadviser.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
Portfolio sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument at a
particular price and time. While a reverse repurchase agreement is outstanding,
the Portfolio will maintain appropriate liquid assets in a segregated custodial
account to cover its obligation under the agreement. The Portfolio will enter
into reverse repurchase agreements only with parties whose creditworthiness has
been found satisfactory by the Subadviser. Such transactions may increase
fluctuations in the market value of the Portfolio's assets and may be viewed as
a form of leverage.
SECURITIES LENDING. The Portfolio may lend securities to parties such
as broker-dealers or institutional investors.
Securities lending allows the Portfolio to retain ownership of the
securities loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be made
only to parties deemed by the Subadviser to be of good standing. Furthermore,
they will only be made if, in the Subadviser's judgment, the consideration to
be earned from such loans would justify the risk.
The Subadviser understands that it is the current view of the SEC
Staff that the Portfolio may engage in loan transactions only under the
following conditions: (1) the Portfolio must receive 100% collateral in the
form of cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the market
value of the securities loaned (determined on a daily basis) rises above the
value of the collateral; (3) after giving notice, the Portfolio must be able to
terminate the loan at any time; (4) the Portfolio must receive reasonable
interest on the loan or a flat fee from the borrower, as well as amounts
equivalent to any dividends, interest, or other distributions on the securities
loaned and to any increase in market value; (5) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (6) the Board of
Trustees must be able to vote proxies on the securities loaned, either by
terminating the loan or by entering into an alternative arrangement with the
borrower.
B-9
<PAGE> 23
Cash received through loan transactions may be invested in any
security in which the Portfolio is authorized to invest. Investing this cash
subjects that investment, as well as the security loaned, to market forces
(i.e., capital appreciation or depreciation).
FOREIGN INVESTMENTS. Foreign investments can involve significant risks
in addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and interest
from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets, and
prices on some foreign markets can be highly volatile.
Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be more
difficult to obtain reliable information regarding an issuer's financial
condition and operations.
In addition, the costs of foreign investing, including withholding
taxes, brokerage commissions, and custodial costs, are generally higher than
for U.S. investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to
less government supervision. Foreign security trading practices, including
those involving the release of assets in advance of payment, may involve
increased risks in the event of a failed trade or the insolvency of a
broker-dealer, and may involve substantial delays. It may also be difficult to
enforce legal rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse
to the interests of U.S. investors, including the possibility of expropriation
or nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility
of default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Subadviser will be able
to anticipate or counter these potential events.
The considerations noted above generally are intensified for
investments in developing countries. Developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
The Portfolio may invest in foreign securities that impose
restrictions on transfer within the U.S. or to U.S. persons. Although
securities subject to transfer restrictions may be marketable abroad, they may
be less liquid than foreign securities of the same class that are not subject
to such restrictions.
B-10
<PAGE> 24
American Depository Receipts and European Depository Receipts (ADRs
and EDRs) are certificates evidencing ownership of shares of a foreign-based
corporation held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and EDRs
are alternatives to the purchase of the underlying securities in their national
markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies in
the foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may be
exchanged on a spot (i.e., cash) basis, or by entering into forward contracts to
purchase or sell foreign currencies at a future date and price. Forward
contracts generally are traded in an interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated currency exchange.
The Portfolio may use currency forward contracts to manage currency
risks and to facilitate transactions in foreign securities. The following
discussion summarizes the principal currency management strategies involving
forward contracts that could be used by the Portfolio.
In connection with purchases and sales of securities denominated in
foreign currencies, the Portfolio may enter into currency forward contracts to
fix a definite price for the purchase or sale in advance of the trade's
settlement date. This technique is sometimes referred to as a "settlement
hedge" or "transaction hedge."
The Subadviser expects to enter into settlement hedges in the normal
course of managing the Portfolio's foreign investments. The Portfolio could
also enter into forward contracts to purchase or sell a foreign currency in
anticipation of future purchases or sales of securities denominated in foreign
currency, even if the specific investments have not yet been selected by the
Subadviser.
The Portfolio may also use forward contracts to hedge against a
decline in the value of existing investments denominated in foreign currency.
For example, if the Portfolio owned securities denominated in pounds sterling,
it could enter into a forward contract to sell pounds sterling in return for
U.S. dollars to hedge against possible declines in the pound's value. Such a
hedge, sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes in
security values caused by other factors. The Portfolio could also hedge the
position by selling another currency expected to perform similarly to the pound
sterling - for example, by entering into a forward contract to sell
Deutschemarks or European Currency Units in return for U.S. dollars. This type
of hedge, sometimes referred to as a "proxy hedge," could offer advantages in
terms of cost, yield, or efficiency, but generally would not hedge currency
exposure as effectively as a simple hedge into U.S. dollars. Proxy hedges may
result in losses if the currency used to
B-11
<PAGE> 25
hedge does not perform similarly to the currency in which the hedged securities
are denominated.
Under certain conditions, SEC guidelines require mutual funds to set
aside cash and appropriate liquid assets in a segregated custodial account to
cover currency forward contracts. As required by SEC guidelines, the Portfolio
will segregate assets to cover currency forward contracts, if any, whose
purpose is essentially speculative. The Portfolio will not segregate assets to
cover forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on the
Subadviser's skill in analyzing and predicting currency values. Forward
contracts may substantially change the Portfolio's investment exposure to
changes in currency exchange rates, and could result in losses to the Portfolio
if currencies do not perform as the Subadviser anticipates. For example, if a
currency's value rose at a time when the Subadviser had hedged the Portfolio by
selling that currency in exchange for dollars, the Portfolio would be unable to
participate in the currency's appreciation. If the Subadviser hedges currency
exposure through proxy hedges, the Portfolio could realize currency losses from
the hedge and the security position at the same time if the two currencies do
not move in tandem. Similarly, if the Subadviser increases the Portfolio's
exposure to a foreign currency, and that currency's value declines, the
Portfolio will realize a loss. There is no assurance that the Subadviser's use
of forward currency contracts will be advantageous to the Portfolio or that it
will hedge at an appropriate time. The policies described in this section are
non- fundamental policies of the Portfolio.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Portfolio will
not: (a) sell futures contracts, purchase put options, or write call options if,
as a result, more than 50% of the Portfolio's total assets would be hedged with
futures and options under normal conditions; (b) purchase futures contracts or
write put options if, as a result, the Portfolio's total obligations upon
settlement or exercise of purchased futures contracts and written put options
would exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options purchased by the
Portfolio would exceed 5% of the Portfolio's total assets. These limitations do
not apply to options attached to or acquired or traded together with their
underlying securities, and do not apply to securities that incorporate features
similar to options. The above limitations on the Portfolio's investments in
futures contracts and options, and the Portfolio's policies regarding futures
contracts and options discussed elsewhere herein, may be changed as regulatory
agencies permit.
FUTURES CONTRACTS. When the Portfolio purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future
date. When the Portfolio sells a futures contract, it agrees to sell the
underlying instrument at a specified future date. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract.
B-12
<PAGE> 26
Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on indices
of securities prices, such as the Standard & Poor's 500 Composite Stock Price
Index (S&P 500). Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore, purchasing
futures contracts will tend to increase the Portfolio's exposure to positive
and negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the Portfolio sells a
futures contract, by contrast, the value of its futures position will tend to
move in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price changes,
much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and seller
are required to deposit "initial margin" with a futures broker, known as a
futures commission merchant (FCM), when the contract is entered into. Initial
margin deposits are typically equal to a percentage of the contract's value.
If the value of either party's position declines, that party will be
required to make additional "variation margin" payments to settle the change in
value on a daily basis. The party that has a gain may be entitled to receive
all or a portion of this amount. Initial and variation margin payments do not
constitute purchasing securities on margin for purposes of the Portfolio's
investment limitations. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option the
Portfolio obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Portfolio pays the current market price for the option (known as the option
premium). Options have various types of underlying instruments, including
specific securities, indices of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. If the option is allowed to
expire, the Portfolio will lose the entire premium it paid. If the Portfolio
exercises the option, it completes the sale of the underlying instrument at the
strike price. The Portfolio may also terminate a put option position by closing
it out in the secondary market at its current price, if a liquid secondary
market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying instrument's
price does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium paid,
plus related transaction costs).
B-13
<PAGE> 27
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price.
A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to
suffer a loss if security prices do not rise sufficiently to offset the cost of
the option.
WRITING PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures contract
the Portfolio will be required to make margin payments to an FCM as described
above for futures contracts. The Portfolio may seek to terminate its position in
a put option it writes before exercise by closing out the option in the
secondary market at its current price. If the secondary market is not liquid for
a put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at a
lower price. If security prices fall, the put writer would expect to suffer a
loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.
Writing a call option obligates the Portfolio to sell or deliver the
option's underlying instrument, in return for the strike price, upon exercise
of the option. The characteristics of writing call options are similar to those
of writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security price
increases.
COMBINED POSITIONS. The Portfolio may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Portfolio may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call
option at one strike
B-14
<PAGE> 28
price and buying a call option at a lower price, in order to reduce the risk of
the written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the Portfolio's current or
anticipated investments exactly. The Portfolio may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Portfolio's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures prices are affected by such
factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until
expiration of the contract, which may not affect security prices the same way.
Imperfect correlation may also result from differing levels of demand in the
options and futures markets and the securities markets, from structural
differences in how options and futures and securities are traded, or from
imposition of daily price fluctuation limits or trading halts.
The Fund may purchase or sell options and futures contracts with a
greater or lesser value than the securities it wishes to hedge or intends to
purchase in order to attempt to compensate for differences in volatility
between the contract and the securities, although this may not be successful in
all cases. If price changes in the Portfolio's options or futures positions are
poorly correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading volume
and liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily price
fluctuation limits for options and futures contracts, and may halt trading if a
contract's price moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached or a trading
halt is imposed, it may be impossible for the Portfolio to enter into new
positions or close out existing positions. If the secondary market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and potentially could
require the Portfolio to continue to hold a position until delivery or
expiration regardless of changes in its value. As a result, the Portfolio's
access to other assets held to cover its options or futures positions could also
be impaired.
B-15
<PAGE> 29
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (options not traded on
exchanges) generally are established through negotiation with the other party to
the option contract. While this type of arrangement allows the Portfolio greater
flexibility to tailor an option to its needs, OTC options generally involve
greater credit risk than exchange-traded options, which are guaranteed by the
clearing organization of the exchanges where they are traded.
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that they
are traded on exchanges (and have margin requirements) and are standardized as
to contract size and delivery date. Most currency futures contracts call for
payment or delivery in U.S. dollars. The underlying instrument of a currency
option may be a foreign currency, which generally is purchased or delivered in
exchange for U.S. dollars, or may be a futures contract. The purchaser of a
currency call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to
options and futures relating to securities or indices, as discussed above. The
Portfolio may purchase and sell currency futures and may purchase and write
currency options to increase or decrease its exposure to different foreign
currencies. The Portfolio may also purchase and write currency options in
conjunction with each other or with currency futures or forward contracts.
Currency futures and options values can be expected to correlate with exchange
rates, but may not reflect other factors that affect the value of the Fund's
investments. A currency hedge, for example, should protect a Yen-denominated
security from a decline in the Yen, but will not protect the Portfolio against
a price decline resulting from deterioration in the issuer's creditworthiness.
Because the value of the Portfolio's foreign-denominated investments changes in
response to many factors other than exchange rates, it may not be possible to
match the amount of currency options and futures to the value of the
Portfolio's investments exactly over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Portfolio will
comply with guidelines established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and if the guidelines so
require, will set aside appropriate liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated account
cannot be sold while the futures or option strategy is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
SHORT SALES. The Portfolio may enter into short sales "against the box"
with respect to equity securities it holds. For example, if the Subadviser
anticipates a decline in the price of a stock the Portfolio holds, it may sell
the stock short "against the box." If the stock price subsequently declines, the
proceeds of the short sale could be expected to offset all or a
B-16
<PAGE> 30
portion of the stock's decline. The Portfolio currently intends to hedge no
more than 15% of its total assets with short sales "against the box" on equity
securities under normal circumstances.
When the Portfolio enters into a short sale "against the box", it will
be required to own or have the right to obtain at no added cost securities
identical to those sold short "against the box" and will be required to
continue to hold them while the short sale "against the box" is outstanding.
The Portfolio will incur transactions costs, including interest expense, in
connection with opening, maintaining, and closing short sales.
[/R]
PORTFOLIO TURNOVER
Because the Subadviser may employ flexible defensive investment
strategies when market trends are not considered favorable, the Subadviser may
occasionally change the entire portfolio of securities in the Portfolio. High
transaction costs could result when compared with other funds. This defensive
investment strategy can produce high portfolio turnover ratios when calculated
in accordance with SEC rules. The Portfolio's annual portfolio turnover rate
is not expected to exceed 50%. The portfolio turnover rate for the period June
21, 1995 to December 31, 1995 was 5%. The turnover rate was a result of
adjusting the portfolio, in response to declining interest rates, to stocks
offering a greater growth potential rather than current yield.
The Portfolio intends to comply with the short-term trading
restrictions of Subchapter M of the Internal Revenue Code although these
restrictions could inhibit a rapid change in the Portfolio's investments.
ITEM 14. MANAGEMENT OF THE PORTFOLIO.
The Trustees and officers of the Portfolio and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period. Asterisks indicate those Trustees who are
"interested persons" (as defined in the 1940 Act) of the Portfolio. Unless
otherwise indicated, the address of each Trustee and officer is P.O. Box 7177,
6000 Memorial Drive, Dublin, Ohio 43017.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Position
Name and Address Held Principal Occupation
---------------- ------- --------------------
<S> <C> <C>
ROBERT S. MEEDER, Trustee/President Chairman, R. Meeder &
SR.* Associates, Inc., an
Investment Adviser.
</TABLE>
B-17
<PAGE> 31
<TABLE>
<S> <C> <C>
MILTON S. Trustee Retired, formerly a
BARTHOLOMEW, ESQ. practicing attorney in
1424 Clubview Blvd. Columbus, Ohio. Member of
S. Worthington, OH the Portfolio's Audit
43235 Committee.
RUSSEL G. MEANS Trustee Chairman of Employee
4789 Rings Road Benefit Management
Dublin, OH 43017 Corporation, consultants
and administrators of
self-funded health and
retirement plans.
WALTER L. OGLE Trustee Executive Vice President
One Corporate Drive of Godwins, Booke &
Clearwater, FL 34622 Dickenson, Inc. employee
benefit, compensation and
human resource
consultants.
PHILIP A. VOELKER* Trustee and Vice Senior Vice President and
President Chief Operating Officer of
R. Meeder & Associates,
Inc.
ROBERT S. MEEDER, Vice President President, R. Meeder &
JR.* Associates, Inc.
WESLEY F. HOAG Vice President General Counsel of R.
Meeder & Associates, Inc.
(since July 1993);
Attorney, Porter, Wright,
Morris & Arthur, a law
firm (October 1984 to June
1993).
DONALD F. MEEDER Secretary/ Treasurer Vice President of
R. Meeder & Associates,
Inc., and President of
Mutual Funds Service Co.
</TABLE>
B-18
<PAGE> 32
<TABLE>
<S> <C> <C>
STEVEN T. McCABE Assistant Treasurer Vice President, R. Meeder
& Associates, Inc. and
Vice President of Mutual
Funds Service Co.
JAMES B. CRAVER Assistant Secretary Managing Director, Eagle
266 Summer Street Institutional Financial
Boston, MA 02210 Services, Inc. (since
September 1995); Senior
Vice President of
Signature Financial Group,
Inc. (January 1991 to
August 1995)
</TABLE>
Each Trustee and officer of the Portfolio holds the same positions
with other Portfolios, each a corresponding Portfolio of The Flex-funds or
Flex-Partners, each a Massachusetts business trust consisting of several
separate series. Robert S. Meeder, Sr. is Robert S. Meeder, Jr's. father and
Donald F. Meeder's uncle.
Each Trustee who is not an "interested person" is paid an annual fee
of $3,000, plus $750 for each meeting of the Board of Trustees attended
regardless of the number of Boards of Trustees on which each Trustee serves.
Mr. Bartholomew comprises the Audit Committee for each corresponding Portfolio
of The Flex-funds and the Flex-Partners Trusts. Mr. Bartholomew is paid $400
for each meeting of the Audit Committee attended regardless of the number of
Audit Committees on which he serves. Trustee fees for the Utilities Stock
Portfolio totaled $2,875 for the year ended December 31, 1995. Audit Committee
fees for the Portfolio totaled $66 for the year ended December 31, 1995. All
other officers and Trustees serve without compensation from the Portfolio.
The Declaration of Trust provides that the Portfolio will indemnify
its Trustees and officers as described below under Item 18.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
The Flex-funds The Total Return Utilities Fund and The Flex-Partners
The BTB Fund (the "Funds") have an investment in the Portfolio equaling
approximately 67% and 33%, respectively of the Portfolio's interests. No
Trustee or officer of the Portfolio or any other person, except the Funds, own
in the aggregate more than 1% interest in the Portfolio as of the date of this
registration statement.
B-19
<PAGE> 33
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER AND MANAGER
R. Meeder & Associates, Inc. (the "Manager") is the investment adviser
and manager for, and has an Investment Advisory Contract with, the Portfolio.
Pursuant to the Investment Advisory Contract with the Portfolio, the
Manager, subject to the supervision of the Portfolio's Board of Trustees and in
conformity with the stated objective and policies of the Portfolio, manages
both the investment operations of, and the composition of the Portfolio's
portfolio, including the purchase, retention, disposition and loan of
securities. In connection therewith, the Manager is obligated to keep certain
books and records of the Portfolio. The Manager also administers the
Portfolio's business affairs, and in connection therewith, furnishes the
Portfolio with office facilities, together with those ordinary clerical and
bookkeeping services which are not being furnished by Star Bank, N.A., the
Portfolio's custodian and Mutual Funds Service Co., the Portfolio's transfer
and disbursing agent. The management services of the Manager are not exclusive
under the terms of the Investment Advisory Agreement and the Manager is free
to, and does, render management services for others.
The Investment Advisory Contract for the Portfolio was separately
approved by a vote of a majority of the Trustees, including a majority of those
Trustees who are not "interested persons" (as defined in the Investment Company
Act of 1940) of the Portfolio. The Investment Advisory Contract is to remain
in force so long as renewal thereof is specifically approved at least annually
by a majority of the Trustees or by vote of a majority of the interests in the
Portfolio, and in either case by vote of a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) at a
meeting called for the purpose of voting on such renewal.
The Investment Advisory Contract provides that the Manager will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Portfolio in connection with the matters to which the Investment Advisory
Contract relates except for a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Investment Advisory
Contract will terminate automatically if assigned and may be terminated without
penalty at any time upon 60 days' prior written notice by Majority Vote of the
Portfolio, by the Trustees of the Portfolio, or by the Manager.
The expenses of the Portfolio include the compensation of the Trustees
who are not affiliated with the Manager or Subadviser; registration fees;
membership dues allocable to the Portfolio; fees and expenses of independent
accountants, of legal counsel and of any transfer agent or accountant of the
Portfolio; insurance premiums and other miscellaneous expenses.
Expenses of the Portfolio also include all fees under its Accounting
and Administrative Service Agreement; the expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Portfolio's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and
B-20
<PAGE> 34
accounts; expenses of preparing and mailing reports to investors and to
governmental offices and commissions; expenses of meetings of investors and
Trustees; the advisory fees payable to the Manager under the Investment
Advisory Contract and other miscellaneous expenses.
The Manager earns an annual fee, payable in monthly installments as
follows. The fee for the Portfolio is based upon the average net assets of the
Portfolio and is at the rate of 1% of the first $50 million, 0.75% of the next
$50 million and 0.60% in excess of $100 million of average net assets. The
Portfolio paid fees to the Manager totaling $14,297 for the period June 21,
1995 to December 31, 1995.
R. Meeder & Associates, Inc. was incorporated in Ohio on February 1,
1974 and maintains its principal offices at 6000 Memorial Drive, Dublin, Ohio
43017. The Manager is a wholly-owned subsidiary of Muirfield Investors, Inc.
("MII"), which is controlled by Robert S. Meeder, Sr. through the ownership of
voting common stock. The Manager's officers and directors, and the principal
offices are as set forth as follows: Robert S. Meeder, Sr., Chairman and Sole
Director; Robert S. Meeder, Jr., President and Treasurer; G. Robert Kincheloe,
Senior Vice President; Philip A. Voelker, Senior Vice President; Donald F.
Meeder, Vice President and Secretary; Sherrie L. Acock, Vice President; Robert
D. Baker, Vice President; Richard W. Arndt, Vice President; Wesley F. Hoag,
General Counsel and Chief Operating Officer; and Steven T. McCabe, Controller.
Mr. Robert S. Meeder, Sr. is President and a Trustee of the Portfolio. Each of
Mr. Robert S. Meeder, Jr., Donald F. Meeder, Wesley F. Hoag and Steven T.
McCabe is an officer of the Portfolio. Mr. Philip A. Voelker is a Trustee and
officer of the Portfolio.
The general counsel for the Manager was primarily responsible for
preparing and filing with the Securities and Exchange Commission the
registration statement for the Portfolio. A charge in the amount of $5,000 for
such legal services rendered by the Manager on behalf of the Portfolio will be
paid and amortized by the Portfolio as an organization expense over a period
not exceeding 60 months.
INVESTMENT SUBADVISER
Miller/Howard Investments, Inc., 141 Upper Byrdcliffe Road, P. O. Box
549, Woodstock, New York 12498, serves as the Portfolio's Subadviser. Lowell
G. Miller controls the Subadviser through the ownership of voting common stock.
The Investment Subadvisory Agreement provides that the Subadviser shall furnish
investment advisory services in connection with the management of the
Portfolio. In connection therewith, the Subadviser is obligated to keep
certain books and records of the Portfolio. The Manager continues to have
responsibility for all investment advisory services pursuant to the Investment
Advisory Agreement and supervises the Subadviser's performance of such
services. Under the Investment Subadvisory Agreement, the Manager, not the
Portfolio, pays the Subadviser a fee, computed daily and payable monthly, in an
amount equal to 90% of the investment advisory fees received by the Manager
under its Investment Advisory Contract with the Portfolio, provided that if a
shareholder purchasing shares in The Flex-Partners BTB Fund or The Flex-funds
Total Return Utilities Fund is solicited by the Manager, the Subadviser is
compensated
B-21
<PAGE> 35
by the Manager in an amount equal to 60% of such investment advisory fees
received by the Manager.
The Investment Subadvisory Agreement provides that the Subadviser will
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the Portfolio, except a loss resulting from
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Investment Subadvisory Agreement provides that it will terminate automatically
if assigned, and that it may be terminated by the Manager without penalty to
the Portfolio by the Manager, the Trustees of the Portfolio or by the vote of a
majority of the outstanding voting securities of the Portfolio upon not less
than 30 days' written notice. The Investment Subadvisory Agreement will
continue in effect for a period of more than two years from the date of
execution only so long as such continuance is specifically approved at least
annually in conformity with the 1940 Act. The Investment Subadvisory Agreement
was approved by the Board of Trustees of the Portfolio, including all of the
Trustees who are not parties to the contract or "interested persons" of any
such party.
TRANSFER AGENT
Mutual Funds Service Co. provides accounting, transfer agency,
dividend disbursing, and shareholder services to the Portfolio. The minimum
annual fee for accounting services for the Portfolio is $7,500. Subject to the
applicable minimum fee, the Portfolio's annual fee, payable monthly, is
computed at the rate of 0.15% of the first $10 million, 0.10% of the next $20
million, 0.02% of the next $50 million and 0.01% in excess of $80 million of
the Portfolio's average net assets. These fees are reviewable annually by the
Trustees of the Portfolio.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is custodian
of the assets of the Portfolio. The custodian is responsible for the
safekeeping of the Portfolio's assets and the appointment of subcustodian banks
and clearing agencies. The custodian takes no part in determining the
investment policies of the Portfolio or in deciding which securities are
purchased or sold by the Portfolio. The Portfolio may, however, invest in
obligations of the custodian and may purchase or sell securities from or to the
custodian.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio 43215,
serves as the Portfolio's independent accountant. The auditor examines
financial statements for the Portfolio and provides other audit, tax, and
related services.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
All orders for the purchase or sale of portfolio securities are placed
on behalf of the Portfolio by the Subadviser pursuant to authority contained in
the investment advisory
B-22
<PAGE> 36
agreement and investment subadvisory agreement. The Subadviser is also
responsible for the placement of transaction orders for accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, the
Subadviser considers various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the market
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis the
reasonableness of any commissions, and arrangements for payment of Portfolio
expenses.
The Portfolio's brokerage transactions involving securities of
companies headquartered in countries other than the United States will be
conducted primarily on the markets of principal exchanges of such countries.
Foreign markets are generally not as developed as those located in the United
States, which may result in higher transaction costs, delayed settlement and
less liquidity for trades effected in foreign markets. Transactions on foreign
exchanges are usually subject to fixed commissions that generally are higher
than negotiated commissions on U.S. transactions. There is generally less
government supervision and regulation of exchanges and brokers in foreign
countries than in the United States.
The Portfolio may execute portfolio transactions with broker-dealers
who provide research and execution services to the Portfolio or other accounts
over which the Subadviser or its affiliates exercise investment discretion.
Such services may include advice concerning the value of securities; the
advisability of investing in, purchasing or selling securities; the
availability of securities or the purchasers or sellers of securities;
furnishings analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). The selection of such
broker-dealers generally is made by the Subadviser (to the extent possible
consistent with execution considerations) in accordance with a ranking of
broker-dealers determined periodically by the Subadviser's investment staff
based upon the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions
on behalf of the Portfolio may be useful to the Subadviser in rendering
investment management services to the Portfolio or its other clients, and
conversely, such research provided by broker-dealers who have executed
transaction orders on behalf of other Subadviser clients may be useful to the
Subadviser in carrying out its obligations to the Portfolio. The receipt of
such research is not expected to reduce the Subadviser's normal independent
research activities; however, it enables the Subadviser to avoid the additional
expenses that could be incurred if the Subadviser tried to develop comparable
information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
Portfolio to pay such higher commissions, the Subadviser must determine in good
faith that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular
B-23
<PAGE> 37
transaction or the Subadviser's overall responsibilities to the Portfolio and
its other clients. In reaching this determination, the Subadviser will not
attempt to place a specific dollar value on the brokerage and research services
provided or to determine what portion of the compensation should be related to
those services.
The Subadviser is authorized to use research services provided by and
to place portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the investors to the extent
permitted by law.
The Subadviser may allocate brokerage transactions to broker-dealers
who have entered into arrangements with the Subadviser under which the
broker-dealer allocates a portion of the commissions paid by the Portfolio
toward payment of either the Portfolio's expenses, such as custodian fees, or a
proportionate share of each Fund's expenses, such as transfer agent fees of
Mutual Funds Service Co. The transaction quality must, however, be comparable
to those of other qualified broker-dealers. During the period from June 21,
1995 to December 31, 1995 directed brokerage payments of $1,212 were made to
reduce expenses of the Portfolio.
The Trustees of the Portfolio periodically review the Subadviser's
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Portfolio and review the commissions
paid by the Portfolio over representative periods of time to determine if they
are reasonable in relation to the benefits to the Portfolio.
From time to time, the Trustees of the Portfolio will review whether
the recapture for the benefit of the Portfolio of some portion of the brokerage
commissions or similar fees paid by the Portfolio on portfolio transactions is
legally permissible and advisable.
The Portfolio seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture arrangements
are in effect. The Trustees of the Portfolio intend to continue to review
whether recapture opportunities are available and are legally permissible and,
if so, to determine in the exercise of their business judgment, whether it
would be advisable for the Portfolio to seek such recapture.
Although the Trustees and officers of the Portfolio are substantially
the same as those of other portfolios managed by the Manager, investment
decisions for the Portfolio are made independently from those of other
portfolios managed by the Manager or accounts managed by affiliates of the
Manager. It sometimes happens that the same security is held in the portfolio
of more than one of these funds or accounts. Simultaneous transactions are
inevitable when several portfolios are managed by the same investment adviser,
particularly when the same security is suitable for the investment objective of
more than one portfolio.
When two or more portfolios are simultaneously engaged in the purchase
or sale of the same security, the prices and amounts are allocated in
accordance with a formula considered by the officers of the portfolios involved
to be equitable to each portfolio. In some cases this system could have a
detrimental effect on the price or value of the security as far as the
Portfolio is concerned. In other cases, however, the ability of the Portfolio
to participate in volume transactions will produce better executions and prices
for the Portfolio. It is the
B-24
<PAGE> 38
current opinion of the Trustees of the Portfolio that the desirability of
retaining the Manager as investment adviser to the Portfolio outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.
The Portfolio effects transactions in its portfolio securities on
securities exchanges on a non-exclusive basis through Roosevelt & Cross,
Incorporated, the distributor (the "Distributor") for the BTB Fund, all of
whose assets are invested in the Portfolio. Because the Distributor is an
"affiliated person" of the Portfolio (as such term is defined under the
Investment Company Act of 1940) by serving as the distributor of the BTB Fund,
the Board of Trustees of the Portfolio has adopted procedures pursuant to Rule
17e-1 under the Investment Company Act of 1940 governing the payment of
commissions by the Portfolio to the Distributor in its capacity as a
broker-dealer. During the period from June 21, 1995 to December 31, 1995 the
Portfolio paid total commissions of $8,202 on the purchase and sale of
portfolio securities, of which $1,908 were paid to the Distributor.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate
pro rata in distributions of taxable income, loss, gain and credit of the
Portfolio. Upon liquidation or dissolution of the Portfolio, investors are
entitled to share pro rata in the Portfolio's net assets available for
distribution to its investors. Investments in the Portfolio have no
preference, preemptive, conversion or similar rights and are fully paid and
non-assessable, except as set forth below. Investments in the Portfolio may
not be transferred. Certificates representing an investor's beneficial
interest in the Portfolio are issued only upon the written request of an
investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees of the Portfolio if
they choose to do so and in such event the other investors in the Portfolio
would not be able to elect any Trustee. The Portfolio is not required to hold
annual meetings of investors but the Portfolio will hold special meetings of
investors when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters for an investor vote. No material amendment may be
made to the Portfolio's Declaration of Trust without the affirmative majority
vote of investors (with the vote of each being in proportion to the amount of
their investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two-thirds of its
investors (with the vote of each being in proportion to the amount of their
investment), except that if the Trustees of the Portfolio recommend such sale
of assets, the approval by vote of a majority of the investors (with the vote
of each being in proportion to the amount of their investment) will be
sufficient. The Portfolio may also be terminated (i) upon liquidation and
distribution of its assets, if approved by the vote of two-thirds of its
investors (with the vote of each being in proportion to the amount of their
investment), or (ii) by the Trustees of the Portfolio by written notice to its
investors.
B-25
<PAGE> 39
The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the
Portfolio, its investors, Trustees, officers, employees and agents covering
possible tort and other liabilities. Thus, the risk of an investor incurring
financial loss on account of investor liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office. The Declaration of Trust
provides that the trustees and officers will be indemnified by the Portfolio
against liabilities and expenses incurred in connection with litigation in
which they may be involved because of their offices with the Portfolio, unless,
as to liability to the Portfolio or its investors, it is finally adjudicated
that they engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in their offices, or unless with
respect to any other matter it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Portfolio. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or
similar organizations or entities which are "accredited investors" as defined
in Regulation D under the 1933 Act. This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.
The Portfolio determines its net asset value as of 4:00 p.m., New York
time, each Fund Business Day by dividing the value of the Portfolio's net
assets by the value of the investment of the investors in the Portfolio at the
time the determination is made. (As of the date of this Registration
Statement, the New York Stock Exchange is open for trading every weekday except
for the following holidays (or days on which such holiday is observed): New
B-26
<PAGE> 40
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas.) Purchases and reductions will be
effected at the time of determination of net asset value next following the
receipt of any purchase or reduction order.
Securities owned by the Portfolio and listed or traded on any national
securities exchange are valued at each closing of the NYSE on the basis of the
last sale on such exchange each day that the exchange is open for business. If
there is no sale on that day, or if the security is not listed, it is valued at
its last bid quotation on the exchange or, in the case of unlisted securities,
as obtained from an established market maker. Futures contracts are valued on
the basis of the cost of closing out the liability; i.e., at the settlement
price of a closing contract or at the asked quotation for such a contract if
there is no sale. Money market instruments having maturities of 60 days or
less are valued at amortized cost if not materially different from market
value. Portfolio securities for which market quotations are not readily
available are to be valued in good faith by the Board of Trustees.
ITEM 20. TAX STATUS.
The Portfolio is organized as a trust under New York law. Under the
method of operation of the Portfolio, the Portfolio is not subject to any
income tax. However, each investor in the Portfolio is taxable on its share
(as determined in accordance with the governing instruments of the Portfolio)
of the Portfolio's ordinary income and capital gain in determining its income
tax liability. The determination of such share is made in accordance with the
Internal Revenue Code and regulations promulgated thereunder.
The Portfolio's taxable year-end is December 31. Although, as
described above, the Portfolio is not subject to federal income tax, it files
appropriate federal income tax returns.
The Portfolio's assets, income and distributions are managed in such a
way that an investor in the Portfolio will be able to satisfy the requirements
of Subchapter M of the Internal Revenue Code assuming that the investor
invested all of its investable assets in the Portfolio.
ITEM 21. UNDERWRITERS.
The exclusive placement agent for the Portfolio is SBDS, which
receives no additional compensation for serving in this capacity. Investment
companies, insurance company separate accounts, common and commingled trust
funds and similar organizations and entities may continuously invest in the
Portfolio.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
B-27
<PAGE> 41
ITEM 23. FINANCIAL STATEMENTS.
The following financial statements are intended to provide information
only with respect to the Utilities Stock Portfolio. Persons interest in
obtaining information about any of the other Portfolios should contact the
Investment Adviser to obtain a copy of such Portfolio's current Registration
Statement.
B-28
<PAGE> 42
GROWTH STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1995
================================================================================
<TABLE>
<CAPTION>
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 36.7%
AEROSPACE/DEFENSE - (1.6%)
Boeing Company 6,300 $493,763
- --------------------------------------------------------------------------------------------
ALUMINUM - (1.1%)
Aluminum Company of America 6,300 333,113
- --------------------------------------------------------------------------------------------
AUTO AND TRUCK - (1.1%)
General Motors Corporation 6,300 333,113
- --------------------------------------------------------------------------------------------
BANKING - (1.7%)
J.P. Morgan & Company 6,300 505,575
- --------------------------------------------------------------------------------------------
BEVERAGE - (1.5%)
Coca Cola Company 6,300 467,775
- --------------------------------------------------------------------------------------------
CHEMICAL (BASIC) - (2.2%)
Dupont E.I. Nemours 6,300 440,212
Union Carbide Corporation 6,300 236,250
- --------------------------------------------------------------------------------------------
676,462
- --------------------------------------------------------------------------------------------
CHEMICAL (DIVERSIFIED) - (1.4%)
Minnesota Mining & Manufacturing 6,300 417,375
- --------------------------------------------------------------------------------------------
COMPUTER AND PERIPHERALS - (1.9%)
International Business Machines 6,300 578,025
- --------------------------------------------------------------------------------------------
DRUG - (1.4%)
Merck & Co., Incorporated 6,300 414,225
- --------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - (1.8%)
General Electric Company 6,300 453,600
Westinghouse Electric Corporation 6,300 103,950
- --------------------------------------------------------------------------------------------
557,550
- --------------------------------------------------------------------------------------------
FINANCIAL SERVICES - (.9%)
American Express Company 6,300 260,663
- --------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - (1.7%)
Proctor & Gamble Company 6,300 522,900
- --------------------------------------------------------------------------------------------
MACHINERY (CONSTRUCTION & MINING) - (1.2%)
Caterpillar Incorporated 6,300 370,125
- --------------------------------------------------------------------------------------------
MULTIFORM - (3.0%)
Allied-Signal Incorporated 6,300 299,250
United Technologies Corporation 6,300 597,712
- --------------------------------------------------------------------------------------------
896,962
- --------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS - (.8%)
International Paper Company 6,300 238,612
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C>
PETROLEUM (INTEGRATED) - (4.4%)
Chevron Corporation 6,300 330,750
Exxon Corporation 6,300 504,788
Texaco 6,300 494,550
- --------------------------------------------------------------------------------------------
1,330,088
- --------------------------------------------------------------------------------------------
PRECISION INSTRUMENT - (1.4%)
Eastman Kodak Company 6,300 422,100
- --------------------------------------------------------------------------------------------
RECREATION - (1.2%)
Walt Disney Company 6,300 371,700
- --------------------------------------------------------------------------------------------
RESTAURANT - (.9%)
McDonalds Corporation 6,300 284,287
- --------------------------------------------------------------------------------------------
RETAIL STORE - (1.1%)
Sears Roebuck & Company 6,300 245,700
Woolworth Corporation 6,300 81,900
- --------------------------------------------------------------------------------------------
327,600
- --------------------------------------------------------------------------------------------
STEEL (INTEGRATED) - (.3%)
Bethlehem Steel Corporation (1) 6,300 88,200
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (1.3%)
American Telephone & Telegraph Corporation 6,300 407,925
- --------------------------------------------------------------------------------------------
TIRE AND RUBBER - (.9%)
Goodyear Tire & Rubber Company 6,300 285,862
- --------------------------------------------------------------------------------------------
TOBACCO - (1.9%)
Philip Morris Companies Incorporated 6,300 570,150
- --------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $11,071,620) 11,154,150
- --------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 2.5%
*U.S. Treasury Bill, 5.19%, due 1/04/96 $600,000 599,741
*U.S. Treasury Bill, 5.26%, due 1/04/96 100,000 99,956
*U.S. Treasury Bill, 5.29%, due 1/04/96 50,000 49,978
U.S. Treasury Bill, 6.66%, due 1/11/96 6,700 6,687
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $756,362) 756,362
- --------------------------------------------------------------------------------------------
*Pledged $703,000 face amount as collateral
on futures and options contracts
REPURCHASE AGREEMENTS - 30.8%
(Collateralized by U.S. government obligations -
market value $9,527,687)
Everen Securities, dated 12/29/95, 5.90%,
due 1/02/96 3,344,000 3,344,000
Smith Barney, dated 12/28/95, 5.90%,
due 1/02/96 6,000,000 6,000,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $9,344,000) 9,344,000
- --------------------------------------------------------------------------------------------
<CAPTION
CONTRACTS
<S> <C> <C>
OPTIONS PURCHASED - 30.0%
CALL OPTIONS
S&P 500 futures contract expiring March, 1996 at 570 1,650 8,332,500
- --------------------------------------------------------------------------------------------
</TABLE>
Continued on next page
<PAGE> 44
GROWTH STOCK PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
PUT OPTIONS
S&P 500 futures contract expiring March, 1996 at 590 1,650 792,000
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost $8,122,488) 9,124,500
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS HELD LONG - 100%
(Cost $29,294,470) $30,379,012
============================================================================================
FUTURES CONTRACTS
Long, S&P 500 futures contracts
face amount $13,527,000 expiring in March, 1996. 43 $17,650
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $17,650
- --------------------------------------------------------------------------------------------
</TABLE>
WRITTEN OPTIONS OUTSTANDING AS OF DECEMBER 31, 1995.
<TABLE>
<CAPTION>
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CALL OPTIONS
S&F 500 futures contract expiring March, 1996 at 590 1,650 $(5,436,750)
- --------------------------------------------------------------------------------------------
PUT OPTIONS
S&P 500 futures contract expiring March, 1996 at 570 1,650 (420,750)
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Proceeds $4,881,362) $(5,857,500)
- --------------------------------------------------------------------------------------------
</TABLE>
(1)No dividend paid in 1995.
See accompanying notes to financial statements
<PAGE> 45
MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1995
===============================================================================
<TABLE>
<CAPTION>
SHARES OR VALUE
FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS - 81.6%
Acorn International Fund 60 $1,000
Charles Schwab Money Market Fund 8,376,894 8,376,894
Constellation Fund 83 1,879
Fidelity Core Money Market Fund 5,549,983 5,549,983
Fidelity Equity Portfolio Growth Fund 333,197 12,628,156
Fidelity Growth & Income Fund 267,791 7,243,753
Founders Growth Fund 897,745 13,259,700
Neuberger & Berman Focus Fund 387,385 10,819,650
Neuberger & Berman Guardian Fund 457,705 10,540,947
Neuberger & Berman Manhattan Fund 173,284 2,103,666
PBNG Growth Fund 50,605 1,210,472
Pin Oak Aggressive Stock Fund (1) 23,041 384,793
T.Rowe Price New Era Fund 122 2,771
T.Rowe Price New Horizons Fund 724,089 14,843,822
Twentieth Century Ultra Fund 52,948 1,382,468
Twentieth Century Vista Fund 114,172 1,666,912
Weingarten Equity Fund 477,272 8,462,030
White Oak Growth Stock Fund 14,307 256,096
- --------------------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $93,054,647) 98,734,992
- --------------------------------------------------------------------------------------------
U.S.TREASURY BILLS - 1.2%
*U.S..Treasury Bill, 5.29%, due 1/04/96 $150,000 149,912
*U.S. Treasury Bill, 5.22%, due 1/04/96 250,000 249,891
*U.S. Treasury Bill, 5.26%, due 1/04/96 1,000,000 999,486
U.S. Treasury Bill, 6.66%, due 1/11/96 25,200 25,149
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $1,424,438) 1,424,438
- --------------------------------------------------------------------------------------------
*Pledged $1,400,000 face amount as collateral on futures contracts
REPURCHASE AGREEMENTS - 17.2%
(Collateralized by U.S. government obligations -
market value $21,328,465)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 2,550,000 2,550,000
Smith Barney, dated 12/28/95, 5.90%, due 1/02/96 18,250,000 18,250,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $20,800,000) 20,800,000
============================================================================================
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $115,279,085) $120,959,430
============================================================================================
FUTURES CONTRACTS
<CAPTION>
CONTRACTS
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Long, S&P 500 futures contracts
face amount $32,468,625 expiring in March, 1996. 105 36,750
Long, Midcap futures contracts
face amount $1,962,450 expiring in March, 1996. 18 9,000
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS 45,750
- --------------------------------------------------------------------------------------------
</TABLE>
(1) No dividend paid on security in 1995.
See accompanying notes to financial statements
<PAGE> 46
UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1995
===============================================================================
<TABLE>
<CAPTION>
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.6%
ELECTRIC/GAS UTILITY - (6.9%)
MDU Resources Group Incorporated 2,100 $41,738
Montana Power Company 1,300 29,412
Nipsco Industries Incorporated 1,700 65,025
Utilicorp United Incorporated 5,500 161,563
- --------------------------------------------------------------------------------------------
297,738
- --------------------------------------------------------------------------------------------
ELECTRIC UTILITY - (15.0%)
AES Corporation(1) 2,600 62,075
Cinergy Corporation 3,900 119,437
Ipalco Enterprises Incorporated 2,000 76,250
KU Energy Corporation 1,300 39,000
LG&E Energy Corporation 2,300 97,175
Pacificorp 8,000 170,000
Teco Energy Incorporated 3,000 76,875
- --------------------------------------------------------------------------------------------
640,812
- --------------------------------------------------------------------------------------------
DIVERSIFIED UTILITY - (3.8%)
Citizens Utilities Company Class B 12,686 160,158
- --------------------------------------------------------------------------------------------
NATURAL GAS (DISTRIBUTOR) - (19.8%)
Bay State Gas Company 1,700 47,175
Brooklyn UN Gas Company 3,900 114,075
Consolidated Natural Gas Company 2,900 131,587
MCN Corporation 6,200 144,150
Nicor Incorporated 1,800 49,500
Panhandle Eastern Corporation 5,500 153,313
Transcanada Pipelines Ltd. 3,200 44,000
UGI Corporation 2,000 41,500
Wicor Incorporated 3,800 122,550
- --------------------------------------------------------------------------------------------
847,850
- --------------------------------------------------------------------------------------------
OIL/GAS (DOMESTIC) - (7.3%)
Enron Corporation 3,000 114,375
Sante Fe Pacific Pipeline Partners 1,600 58,600
Williams Companies Incorporated 3,200 140,400
- --------------------------------------------------------------------------------------------
313,375
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT - (1.7%)
DSC Communications(1) 2,000 73,750
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (33.4%)
Alltel Corporation 5,100 150,450
American Telephone & Telegraph Corporation 1,500 97,125
Ameritech Corporation 2,500 147,500
Bell Atlantic Corporation 1,400 93,625
Century Telephone Enterprise 5,500 174,625
Cincinnati Bell Incorporated 2,000 69,500
Frontier Corporation 6,500 195,000
GTE Corporation 3,200 140,800
Nynex Corporation 300 16,200
Sprint Corporation 2,400 95,700
U.S. West Incorporated 6,000 214,500
United Media Group 2,000 38,000
- --------------------------------------------------------------------------------------------
1,433,025
- --------------------------------------------------------------------------------------------
</TABLE>
Continued on next page
<PAGE> 47
UTILITIES STOCK PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
WATER UTILITY - (3.7%)
American Water Works Incorporated 4,100 159,387
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,503,676) 3,926,095
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.4%
(Collateralized by U.S. government obligations -
market value $360,995)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 $360,000 360,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $360,000) 360,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $3,863,676) $4,286,095
============================================================================================
</TABLE>
(1)No dividend paid in 1995.
See accompanying notes to financial statements.
<PAGE> 48
BOND PORTFOLIO
Portfolio of Investments as of December 31, 1995
===============================================================================
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S.TREASURY OBLIGATIONS - 85.7%
U.S. Treasury Note, 6.50%, due 8/15/2005 $7,700,000 8,214,938
U.S. Treasury Note, 6.50%, due 5/15/2005 5,000,000 5,327,344
*U.S. Treasury Bill, 5.17%, due 6/06/96 50,000 48,893
U.S. Treasury Bill, 6.66%, due 1/11/96 3,900 3,892
- --------------------------------------------------------------------------------------------
TOTAL U.S.TREASURY OBLIGATIONS
(Cost $12,924,502) 13,595,067
- --------------------------------------------------------------------------------------------
*Pledged $50,000 face amount as collateral on futures and options contracts
REPURCHASE AGREEMENTS - 14.3%
(Collateralized by U.S. Government obligations -
market value $2,271,669)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 2,262,000 2,262,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $2,262,000) 2,262,000
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS HELD LONG - 100%
(Cost $15,186,502) $15,857,067
- --------------------------------------------------------------------------------------------
FUTURES CONTRACTS
CONTRACTS
Long, 10 Year Bond futures contracts
face amount $2,291,875 expiring in March, 1996. 20 $5,625
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $5,625
- --------------------------------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING AS OF DECEMBER 31, 1995:
<CAPTION>
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CALL OPTIONS
U.S. Treasury Note Contract Expiring
February, 1996 at 114 20 $19,063
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Proceeds $10,850) $19,063
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
<PAGE> 49
SHORT-TERM GLOBAL PORTFOLIO
Portfolio of Investments as of December 31, 1995
===============================================================================
<TABLE>
<CAPTION>
FACE AMOUNT VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S.TREASURY - 42.4%
U.S. Treasury Note, 5.875%, due 8/15/98 $1,300,000 $1,321,531
*U.S. Treasury Bill, 5.34%, due 2/15/96 50,000 49,651
U.S. Treasury Bill, 6.66%, due 1/11/96 1,200 1,198
- --------------------------------------------------------------------------------------------
TOTAL U.S.TREASURY BILLS
(Cost $1,355,357) 1,372,380
- --------------------------------------------------------------------------------------------
*Pledged $10,000 face amount as collateral on futures contracts
U.S. GOVERNMENT OBLIGATIONS - 15.5%
Federal National Mortgage Association Discount Note,
5.60%, due 1/04/96 500,000 499,767
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $499,767) 499,767
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 42.1%
(Collateralized by U.S. government obligations -
market value $1,386,192)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 612,000 612,000
Smith Barney, dated 12/28/95, 5.90%, due 1/02/96 750,000 750,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $1,362,000) 1,362,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $3,217,124) $3,234,147
============================================================================================
FUTURES CONTRACTS - 0.0%
<CAPTION>
CONTRACTS
<S> <C> <C>
Long, Canadian Dollar futures contracts
face amount $366,550 expiring in March, 1996. 5 $(1,150)
- --------------------------------------------------------------------------------------------
NET PAYABLE FOR FUTURES CONTRACTS SETTLEMENTS $(1,150)
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
<PAGE> 50
MONEY MARKET PORTFOLIO
Portfolio of Investments as of December 31, 1995
===============================================================================
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 39.1%
American Honda Finance, 5.73%, due 2/23/96 $10,000,000 $9,915,642
American Honda Finance, 5.62%, due 4/02/96 3,000,000 2,956,913
BOT Financial, 6.20%, due 1/05/96 11,000,000 10,992,422
Dupont Corporation, 6.25%, due 1/03/96 275,000 274,905
Duff & Phelps, 5.47%, due 5/09/96 6,000,000 5,882,395
GTE Corporation, 5.83%, due 2/16/96 10,000,000 9,925,506
Idaho Power, 6.25%, due 1/11/96 140,000 139,757
Jefferson Smurfit, 5.70%, due 3/01/96 1,200,000 1,188,600
Jefferson Smurfit, 5.70%, due 3/19/96 4,000,000 3,950,600
Laclede Gas, 6.25%, due 1/22/96 432,000 430,425
Marsh MacClellan, 5.58%, due 3/14/96 3,120,000 3,084,697
Mitsubishi Motor Credit Corporation, 6.25%, due 1/18/96 518,000 516,471
National Utilities, 5.58%, due 3/12/96 2,000,000 1,977,990
Nynex Corporation, 5.74%, due 2/06/96 3,000,000 2,982,780
Nynex Corporation, 5.77%, due 1/12/96 10,000,000 9,982,369
Pacific Bell, 6.25%, due 1/22/96 390,000 388,578
Public Services Electric & Gas, 5.93%, due 1/11/96 8,142,000 8,128,588
Public Services Electric 6 Gas, 5.90%, due 1/17/96 3,061,000 3,052,973
Tambrands, 5.50%, due 6/04/96 3,500,000 3,417,118
Torchmark, 5.75%, due 2/14/96 10,600,000 10,525,506
Whirlpool Corporation, 5.77%, due 1/31/96 10,700,000 10,648,551
- --------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $100,362,786) 100,362,786
- --------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 47.9%
American Telephone & Telegraph Capital Corporation, 4.52%,
due 8/30/96 250,000 247,743
American Telephone & Telegraph Capital Corporation, 7.40%,
due 11/01/96 500,000 505,230
Associates Corporation, 7.50%, due 10/15/96 150,000 151,722
Associates Corporation, 4.75%, due 8/01/96 250,000 248,321
BP America, Incorporated, 10.00%, due 3/08/96 5,000,000 5,034,208
BP, Incorporated, 10.15%, due 3/15/96 190,000 191,649
Bank One, Dayton, 5.95%, due 10/02/96 5,000,000 5,000,000
* Bank One Capital Demand Note, 5.83%,
next redemption date 7/11/96, due 4/01/2113 3,510,000 3,510,000
Barnett Bank, 10.00%, due 1/08/96 3,500,000 3,502,308
Bat Industries, 8.60%, due 8/30/96 550,000 558,052
* Bear Stearns Floating Rate Note, 5.76%, due 3/01/96 10,000,000 10,000,000
* Best Sands Corporation Floating Rate Note,
5.95%, next redemption date 1/04/96, due 7/01/2002 850,000 850,000
* Care Life Project Floating Rate Note, 5.95%,
next redemption date 1/04/96, due 8/01/2111 1,375,000 1,375,000
Conrail, 5.20%, due 2/12/96 1,000,000 999,051
Continental Bankcorp, 9.875%, due 6/15/96 1,250,000 1,272,500
Dean Witter, 8.92%, due 3/15/96 1,000,000 1,005,634
Dow Capital Corporation, 8.25%, due 2/15/96 65,000 65,146
Dupont Corporation, 8.45%, due 10/15/96 860,000 897,347
Eastman Kodak, 10.00%, due 6/15/96 125,000 126,948
Eli Lilly Corporation, 6.58%, due 12/20/96 250,000 252,275
*Espanola/Nambe Variable Rate Demand Note, 5.95%,
next redemption date 1/04/96, due 6/01/2006 2,500,000 2,500,000
*Exxon Shipping Floating Rate Note, 5.78%,
next redemption date 1/04/96, due 10/01/2111 7,000,000 7,000,000
Ford Motor Credit Corporation, 8.00%, due 10/01/96 1,800,000 1,825,930
Ford Motor Credit Corporation, 9.07%, due 7/05/96 893,000 906,417
</TABLE>
<PAGE> 51
MONEY MARKET PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Ford Motor Credit Corporation, 4.85%, due 8/23/96 400,000 397,132
Ford Motor Credit Corporation, 8.25%, due 7/15/96 171,000 172,927
Ford Motor Credit Corporation, 9.10%, due 7/05/96 1,000,000 1,015,476
Ford Motor Credit Corporation, 8.25%, due 5/15/96 1,200,000 1,209,494
General Electric Capital Corporation,
4.615%, next redemption date 5/30/96 1,000,000 994,514
General Motors Acceptance Corporation, 9.00%, due 2/06/96 400,000 401,185
General Motors Acceptance Corporation, 8.00%, due 10/01/96 275,000 279,485
*General Motors Acceptance Corporation Floating Rate Note,
5.805%, next redemption date 4/13/96, due 4/13/98 10,000,000 10,000,000
*Hancor Incorporated Floating Rate Note, 5.95%,
next redemption date 1/04/95, due 12/01/2004 900,000 900,000
Hertz Corporation, 9.125%, due 8/01/96 2,850,000 2,902,407
Honeywell Corporation, 7.875%, due 5/14/96 1,445,000 1,453,511
Household Financial Corporation, 9.375%, due 2/15/96 2,000,000 2,007,835
IBM Corporation, 5.00%, due 2/26/96 250,000 249,698
IBM Credit Corporation, 5.06%, due 11/15/96 1,350,000 1,340,236
IBM Credit Corporation, 4.85%, due 11/05/96 3,000,000 2,973,731
International Bank, 8.75%, due 9/06/96 100,000 101,972
John Deere Corporation, 8.50%, due 4/10/96 200,000 201,383
Lockheed Corporation, 4.875%, due 2/15/96 85,000 84,848
Merrill Lynch & Company, Floating Rate Note, 5.925%,
due 11/18/96 10,000,000 10,000,000
Morgan Stanley Incorporated, 8.875%, due 4/01/96 400,000 402,793
Morgan Stanley Incorporated, 7.32%, due 1/15/97 500,000 507,941
Pacific Gas & Electric, 5.03%, due 3/22/96 800,000 798,800
Pepsico Incorporated, 7.875%, due 8/15/96 2,350,000 2,375,767
Philip Morris Companies, 8.875%, due 7/01/96 1,150,000 1,165,600
*Presrite Corporation Floating Rate Note, 5.95%,
next redemption date 1/04/96, due 1/01/2004 2,880,000 2,880,000
Regions Bank, Louisiana, 6.71%, due 4/11/96 5,000,000 5,011,262
Sears Roebuck & Company, 9.00%, due 9/15/96 1,000,000 1,020,902
Sears Roebuck & Company, 8.55%, due 8/01/96 2,000,000 2,028,466
Smith Barney Holding Company, 5.375%, due 6/01/96 5,380,000 5,365,423
Southwestern Bell, 7.90%, due 8/23/96 1,500,000 1,518,192
Southwestern Bell, 8.30%, due 6/01/96 100,000 101,028
Suntrust Banks, 8.375%, due 3/01/96 1,130,000 1,134,467
U.S. West Capital Funding Corporation, 8.00%, due 10/15/96 290,000 294,634
Unilever, 8.00%, due 5/28/96 450,000 453,838
Union Electric, 5.50% due 5/01/96 100,000 99,868
Virginia Electric & Power, 6.35%, due 5/30/96 3,000,000 3,005,191
Virginia Electric & Power, 8.35%, due 6/15/96 1,000,000 1,010,524
WMX Technologies, 4.875%, due 6/15/96 215,000 213,945
Waste Management Corporation, 7.875%, due 8/15/96 1,000,000 1,011,214
Waste Management Corporation, 4.875%, due 6/15/96 100,000 99,547
Weyerhaeuser Corporation, 8.41%, due 5/17/96 100,000 100,863
White Castle Corporation, Floating Rate Note, 5.95%,
next redemption date 1/04/96 7,000,000 7,000,000
World Book Finance Corporation, 8.125%, due 9/01/96 500,000 506,839
- --------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $122,818,621) 122,818,621
- --------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.1%
U.S. Treasury Bill, 6.66%, due 1/11/96 66,000 67,874
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $67,874) 67,874
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS - 4.6%
Federal Farm Credit Note, 5.91%, due 6/24/96 500,000 500,614
*Student Loan Marketing Association Floating Rate Note,
5.70%, due 11/10/98, next redemption date 1/02/96 5,000,000 5,000,000
*Student Loan Marketing Association Floating Rate Note,
5.75%, due 8/03/99, next redemption date 1/02/96 4,350,000 4,355,249
*Student Loan Marketing Association Floating Rate Note,
5.68%, due 11/24/97, next redemption date 1/02/96 2,000,000 1,999,610
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $11,855,473) 11,855,473
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.3%
(Collateralized by U.S. government obligations -
market value $21,644,319)
Everen Securities, dated 12/29/95, 5.90%,
due 1/02/96 20,556,000 20,556,000
Star Bank N.A., dated 12/29/95, 5.30%,
due 1/02/96 950,000 950,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $21,506,000) 21,506,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $256,610,754) $256,610,754
============================================================================================
</TABLE>
*Floating Rate as of 12/31/95.
See accompanying notes to financial statements
<PAGE> 53
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES SHORT-TERM MONEY
FUND STOCK STOCK BOND GLOBAL MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS :
Investments at market value* $100,159,430 $21,035,012 $3,926,095 $13,595,067 $1,872,147 $235,104,754
Repurchase Agreements* 20,800,000 9,344,000 360,000 2,262,000 1,362,000 21,506,000
Cash -- -- 121 124 85 206
Receivable for futures contracts settlement 45,750 17,650 -- 5,625 -- --
Interest receivable 61,492 5,577 177 232,124 29,641 2,245,756
Dividends receivable 1,139,291 21,609 11,374 -- -- --
Prepaid/Other assets 454 109 -- 68 19 1,251
Unamortized organization costs 10,377 7,538 40,146 7,537 7,181 7,538
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets 122,216,794 30,431,495 4,337,913 16,102,545 3,271,073 258,865,505
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased -- -- -- -- -- 2,680,949
Payable to corresponding Fund -- -- -- -- -- 1,477,153
Payable for futures contracts settlement -- -- -- -- 1,150 --
Written options at market value* -- 5,857,500 -- 19,063 -- --
Payable to investment adviser 85,828 21,414 3,325 4,275 -- 33,706
Accrued fund accounting fees 4,159 2,496 628 1,699 636 4,818
Other accrued liabilities 17,678 13,055 43,090 11,486 7,042 20,505
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 107,665 5,894,465 47,043 36,523 8,828 4,217,131
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 116,428,784 24,428,626 3,868,451 15,403,670 3,245,222 254,648,374
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized gain on investments 5,680,345 108,404 422,419 662,352 17,023 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets $122,109,129 $24,537,030 $4,290,870 $16,066,022 $3,262,245 $254,648,374
- -----------------------------------------------------------------------------------------------------------------------------------
*Securities at cost 115,279,085 24,413,108 3,863,676 15,175,652 3,217,124 256,610,754
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
<PAGE> 54
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES SHORT-TERM MONEY
FUND STOCK STOCK BOND GLOBAL MARKET
PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME - NET:
Interest $ 1,911,196 $1,070,422 $ 8,057 $ 924,478 $236,424 $12,128,882
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends 329,219 127,830 54,996 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income 2,240,415 1,198,252 63,053 924,478 236,424 12,128,882
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 874,473 238,640 14,297 57,855 15,829 648,665
Legal fees 1,853 1,679 1,100 1,679 1,609 1,555
Audit fees 13,482 10,234 3,028 9,125 5,544 15,695
Custodian fees 11,483 7,236 1,755 3,624 3,649 17,104
Accounting fees 47,427 28,335 4,065 18,951 7,457 58,111
Trustees fees and expenses 5,223 5,223 3,776 5,223 5,130 5,385
Insurance 2,241 661 -- 369 161 5,920
Amortization of organization cost 5,438 4,978 4,744 4,979 4,745 4,978
Other expenses 399 399 1,611 399 432 432
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 962,019 297,385 34,376 102,204 44,556 757,845
Investment advisory fees waived -- -- -- (19,580) (15,829) (349,425)
Directed brokerage payments received -- -- (1,212) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses - net 962,019 297,385 33,164 82,624 28,727 408,420
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME - NET 1,278,396 900,867 29,889 841,854 207,697 11,720,462
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures contracts 2,494,274 3,480,775 -- (47,455) (13,514) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 13,060,418 835,258 (1,067) 1,035,942 43,853 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
of investments 5,680,803 111,506 422,419 667,977 17,441 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 21,235,495 4,427,539 421,352 1,656,464 47,780 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $22,513,891 $5,328,406 $451,241 $2,498,318 $255,477 $11,720,462
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31, 1995.
See accompanying notes to financial statements
<PAGE> 55
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1994 and December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Mutual Fund Growth Stock Utilities Stock
Portfolio Portfolio Portfolio*
Year ended December 31, Year ended December 31, Year ended December 31,
1995 1994 1995 1994 1995
INCREASE (DECREASE)
IN NET ASSETS:
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 1,278,396 $ 2,272,777 $ 900,867 $ 565,496 $ 29,889
Net realized gain (loss)
on investments
and futures contracts 15,554,692 302,941 4,316,003 705,537 (1,067)
Net change in unrealized
appreciation (depreciation)
of investments 5,680,803 (252,062) 111,506 (1,392,790) 422,419
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 22,513,891 2,323,656 5,328,406 (121,757) 451,241
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 34,671,819 26,769,231 1,680,821 1,440,673 3,908,655
Withdrawals (18,261,284) (27,513,563) (4,640,744) (5,322,563) (69,026)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
transactions of investors'
beneficial interests 16,410,535 (744,332) (2,959,923) (3,881,890) 3,839,629
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 38,924,426 1,579,324 2,368,483 (4,003,647) 4,290,870
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 83,184,703 81,605,379 22,168,547 26,172,194 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $ 122,109,129 $ 83,184,703 $ 24,537,030 $ 22,168,547 $ 4,290,870
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Short-Term Global Money Market
Portfolio Portfolio Portfolio
Year ended December 31, Year ended December 31, Year ended December 31,
1995 1994 1995 1994 1995 1994
INCREASE (DECREASE)
IN NET ASSETS:
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income- net $ 841,854 $ 526,976 $ 207,697 $ 279,212 $ 11,720,462 $ 8,115,651
Net realized gain (loss)
on investments
and futures contracts 988,487 (614,421) 30,339 (147,601) -- --
Net change in unrealized
appreciation (depreciation)
of investments 667,977 (5,626) 17,441 (5,068) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 2,498,318 (93,071) 255,477 126,543 11,720,462 8,115,651
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 2,890,694 2,140,676 1,159,854 1,025,710 753,617,719 733,486,217
Withdrawals (2,330,962) (2,217,176) (2,087,949) (11,962,648) (735,213,083) (717,226,708)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
transactions of investors'
beneficial interests 559,732 (76,500) (928,095) (10,936,938) 18,404,636 16,259,509
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 3,058,050 (169,571) (672,618) (10,810,395) 30,125,098 24,375,160
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 13,007,972 13,177,543 3,934,863 14,745,258 224,523,276 200,148,116
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $ 16,066,022 $ 13,007,972 $ 3,262,245 $ 3,934,863 $ 254,648,374 $ 224,523,276
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31, 1995.
See accompanying notes to financial statements
<PAGE> 56
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Mutual Fund Portfolio
Year Ended Dec 31,
Ratios/Supplemental Data 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Assets, End of Period ($000) 122,109 83,185 81,605
Ratio of Expenses to Average Net Assets* 0.95% 1.01% 1.03%
Ratio of Net Investment Income to Average Net Assets 1.26% 2.76% 0.09%
Portfolio Turnover Rate 186.13% 168.17% 279.56%
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Stock Portfolio
For The Period
Year Ended Dec 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec 31, 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 24,537 22,169 26,172 25,556
Ratio of Expenses to Average Net Assets* 1.25% 1.23% 1.23% 1.22% (1)
Ratio of Net Investment Income to Average Net Assets 3.78% 2.35% 0.99% 2.04% (1)
Portfolio Turnover Rate 337.57% 102.76% 99.54% 129.44%
Average brokerage commission per share $0.0806 N/A N/A N/A
</TABLE>
(1)Annualized
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Utilities Stock Portfolio
For The Period
June 21, 1995*
Ratios/Supplemental Data to Dec 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Assets, End of Period ($000) 4,291
Ratio of Expenses to Average Net Assets* 2.32%(1)
Ratio of Net Investment Income to Average Net Assets 2.09%(1)
Ratio of Expenses to Average Net Assets
before directed brokerage payments 2.40%(1)
Ratio of Net Investment Income to Average Net Assets
before directed brokerage payments 2.01%(1)
Portfolio Turnover Rate 5.06%
Average brokerage commission per share $0.0600
</TABLE>
(1)Annualized
*Date of commencement of operations
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Bond Portfolio
For The Period
Year Ended December 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec 31, 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 16,066 13,008 13,178 11,126
Ratio of Expenses to Average Net Assets* 0.57% 0.56% 0.60% 0.58%(1)
Ratio of Net Investment Income to Average Net Assets 5.82% 4.15% 4.62% 5.40%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 0.71% 0.70% 0.71% 0.80%(1)
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 5.68% 4.01% 4.51% 5.18%(1)
Portfolio Turnover Rate 232.34% 707.57% 235.74% 132.53%
</TABLE>
(1) Annualized
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Short-Term Global Portfolio
For The Period
Year Ended December 31, May 27, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec 31, 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 3,262 3,935 14,745 34,809
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets* 0.73% 0.62% 0 64% 0 66%(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 5.24% 3.62% 4.58% 3.88%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 1.13% 0.86% 0.64% 0.72%(1)
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 4.84% 3.38% 4.58% 3.82%(1)
Portfolio Turnover Rate 369.36% 0.00% 780.99% 380.28%(1)
</TABLE>
(1) Annualized
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Money Market Portfolio
For the Period
Year Ended Dec 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec 31, 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 254,648 224,523 200,148 244,272
Ratio of Expenses to Average Net Assets* 0.21% 0.19% 0.19% 0.18%(1)
Ratio of Net Investment Income to Average Net Assets 5.87% 4.28% 3.09% 3.60%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 0.38% 0.39% 0.40% 0.40%(1)
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 5.70% 4.08% 2.88% 3.38%(1)
Portfolio Turnover Rate N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Annualized
*Please refer to pages 27-29 for total expense ratios relating to each
corresponding Fund.
See accompanying notes to financial statements
<PAGE> 57
MUTUAL FUND PORTFOLIO
GROWTH STOCK PORTFOLIO
UTILITIES STOCK PORTFOLIO
BOND PORTFOLIO
SHORT-TERM GLOBAL 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 and Short-Term Global Portfolios 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. During the period ended December 31, 1995 the Portfolios
wrote the following option contracts:
<TABLE>
<CAPTION>
Growth Stock Portfolio Bond Portfolio Mutual Fund Portfolio Short-Term Global Portfolio
No. of No. of No. of No. of
Contracts Premiums Contracts Premiums Contracts Premiums Contracts Premiums
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Period 0 $ 0 0 $ 0 0 $ 0 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Options Written 3,342 4,927,214 185 67,650 173 186,057 24 7,470
- ------------------------------------------------------------------------------------------------------------------------------------
Options Terminated (42) (45,852) (165) (56,800) (173) (186,057) (24) (7,470)
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at End of Period 3,300 $ 4,881,362 20 $ 10,850 0 $ 0 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
In the case of the Short-Term Global Portfolio, futures and options contracts
entered into will typically be futures and options on futures of a foreign
currency. The Portfolio is presently engaging only in the buying and selling of
futures contracts on foreign currencies. The expectation is that the Portfolio
will be able to participate in interest rate differentials between the U.S.
dollar and foreign currencies by investing in futures on the foreign currencies
in lieu of investing in short-term foreign debt instruments. At the same time,
the Portfolio will take advantage of the favorable transaction cost associated
with the purchase of a futures contract in lieu of a cash instrument. To the
extent that the Portfolio enters into futures contracts on foreign currencies,
the Portfolio exposes itself to a liability, which at a maximum cannot exceed
the value given for the contracts, and will be required to pay or receive a sum
of money measured by the change in the market value of that currency's index.
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
<PAGE> 58
instruments will be segregated to complete the purchase. Options are valued on
the basis of the daily settlement price or last sale on the exchanges where they
trade and the changes in value are recorded as an unrealized gain or loss until
sold, exercised or expired. In the case of a written option, premiums received
by each portfolio upon writing the option are recorded in the liability section
of the Statement of Assets and Liabilities and are subsequently adjusted to
current market value. When the written option is closed, exercised or expired,
the portfolio realizes a gain or loss and the liability is eliminated.
Income Taxes - It is the Portfolios' policy to comply with the requirements of
the Internal Revenue Code applicable to it. Therefore, no Federal income tax
provision is required.
Organizational Costs - The costs related to the organization of each of the six
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 and Short-Term Global Income Portfolios, 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 year ended
December 31, 1995, RMA voluntarily waived a portion of its investment advisory
fees in the Money Market and Bond Portfolios, and all of its investment advisory
fees in the Short-Term Global Income Portfolio.
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, Short-Term Global,
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.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the year ended December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
- --------------------------------------------------------------------------------
<S> <C> <C>
Mutual Fund Portfolio $153,526,438 $77,373,285
- --------------------------------------------------------------------------------
Growth Stock Portfolio $ 20,462,275 $10,183,074
- --------------------------------------------------------------------------------
Utilities Stock Portfolio $ 3,636,056 $ 131,312
- --------------------------------------------------------------------------------
</TABLE>
As of December 31, 1995, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised of the
following:
<TABLE>
<CAPTION>
Net Unrealized
Unrealized Unrealized Appreciation
Investment Appreciation Depreciation (Depreciation)
Cost of Investments of Investments of Investments
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mutual Fund Portfolio $115,644,899 $6,814,624 $(1,500,093) $5,314,531
- -------------------------------------------------------------------------------------------------------------------------------
Growth Stock Portfolio $ 24,438,982 $4,474,745 $(4,392,215) $ 82,530
- -------------------------------------------------------------------------------------------------------------------------------
Utilities Stock Portfolio $ 3,863,676 $ 428,434 $ (6,015) $ 422,419
- -------------------------------------------------------------------------------------------------------------------------------
Bond Portfolio $ 15,173,624 $ 664,380 $ 0 $ 664,380
- -------------------------------------------------------------------------------------------------------------------------------
Short-Term Global
Portfolio $ 3,217,124 $ 17,023 $ 0 $ 17,023
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 59
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of the Mutual Fund Portfolio, Growth
Stock Portfolio, Utilities Stock Portfolio, Bond Portfolio, Short-Term Global
Portfolio, and Money Market Portfolio:
We have audited the accompanying statements of assets and liabilities of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio, Short-Term Global Portfolio, and Money Market Portfolio, including
the schedules of portfolio investments, as of December 31, 1995, and the related
statements of operations, statements of changes in net assets and the financial
highlights for each of the periods indicated herein. These financial statements
and the financial highlights are the responsibility of the Portfolios'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio, Short-Term Global Portfolio, and Money Market Portfolio at December
31, 1995, the results of their operations, the changes in their net assets and
the financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Columbus, Ohio
February 2,1996
<PAGE> 60
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
The following report and financial statement are included in
Part B: Portfolio of Investments - December 31, 1995;
Statements of Assets and Liabilities - December 31, 1995;
Staetments of Operations - for the period June 21, 1995 to
December 31, 1995; Statements of Changes in Net Assets for the
period June 21, 1995 to December 31, 1995; Financial
Highlights for the period June 21, 1995 to December 31, 1995;
Notes to Financial Statements; Independent Auditor's Report
dated February 2, 1996.
(b) EXHIBITS
*1. Declaration of Trust of the Registrant.
*2. By-Laws of the Registrant.
*5. (a) Form of Investment Advisory Agreement between
the Registrant and R. Meeder & Associates,
Inc.
(b) Form of Subadvisory Agreement between R.
Meeder & Associates, Inc. and Miller/Howard
Investments, Inc.
*6. Form of Exclusive Placement Agent Agreement between
the Registrant and Signature Broker-Dealer Services,
Inc.
*8. Form of Custody Agreement between the Registrant and
Star Bank, N.A., Cincinnati.
*9. (a) Form of Administration Agreement between the
Registrant and Mutual Funds Service Co.
(MFSCo)
(b) Form of Accounting Services Agreement between
the Registrant and MFSCo.
11. Consent of KPMG Peat Marwick LLP, Independent
Certified Public Accountants, filed herewith.
*13. Investment representation letters of initial
investors.
- ---------------
*Filed April 20, 1995 and incorporated herein by reference.
C-1
<PAGE> 61
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Beneficial Interests 3 (as of December 31, 1995)
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an Exhibit to Registrant's initial Registration Statement on
April 20, 1995.
The Trustees and officers of the Registrant are insured under an
errors and omissions liability insurance policy and under the fidelity bond
required by Rule 17g-1 under the Investment Company Act of 1940 (the "1940
Act").
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are located, in whole or in
part, at the principal executive offices of the Registrant and the following
locations:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Signature Broker-Dealer Services, Inc. 6 St. James Avenue, Suite 900
(exclusive placement agent) Boston, Massachusetts 02116
R. Meeder & Associates, Inc. 6000 Memorial Drive
(investment adviser) Dublin, Ohio 43017
Mutual Funds Service Co. 6000 Memorial Drive
(transfer and accounting Dublin, OH 43017
service agent)
</TABLE>
C-2
<PAGE> 62
<TABLE>
<S> <C>
Star Bank, N.A., Cincinnati Star Bank Center
(custodian) 425 Walnut Street
Cincinnati, Ohio 45202
</TABLE>
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-3
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Dublin and State of Ohio on the 19th day of April, 1996.
UTILITIES STOCK PORTFOLIO
By /s/ Donald F. Meeder
--------------------
Donald F. Meeder
Secretary/Treasurer
<PAGE> 1
[KPMG Peat Marwick LLP Letterhead]
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Trustees of
Utilities Stock Portfolio:
We consent to the use of our report included herein dated February 2, 1996 on
the financial statements of the Mutual Fund Portfolio, Growth Stock Portfolio,
Utilities Stock Portfolio, Bond Portfolio, Short-Term Global Portfolio, and
Money Market Portfolio as of December 31, 1995 and for the periods indicated
therein and to the reference to our firm under the heading "Independent
Accountants" in Part B of the Registration Statement.
KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Columbus, Ohio
April 18, 1996
