THE FLEX-FUNDS
1996 Annual Report
The Muirfield Fund
The Growth Fund
The Total Return Utilities Fund
The U.S. Government Bond Fund
The Money Market Fund
<PAGE>
<TABLE>
<CAPTION>
Flex-funds Total Returns 1985 to 1996
Fund
(Inception) 1996 1995 1994 1993
<S> <C> <C> <C> <C>
The Muirfield Fund 5.99% 25.82 2.70 8.11
(8/10/88)
The Growth Fund 9.08% 24.61 -0.69 7.21
(3/20/85)
The Total Return Utilities Fund 13.33% 15.00(3) n/a n/a
(6/21/95)
The U.S. Government Bond Fund 0.15% 18.32 -0.99 8.21
(5/9/85)
The Money Market Fund 5.27% 5.85 4.10 2.98
(3/27/85)
<CAPTION>
Flex-funds Total Returns 1985 to 1996
Fund
(Inception) 1992 1991 1990 1989
<S> <C> <C> <C> <C>
The Muirfield Fund 6.91 29.83 2.33 13.95
(8/10/88)
The Growth Fund 6.35 21.46 4.31 10.17
(3/20/85)
The Total Return Utilities Fund n/a n/a n/a n/a
(6/21/95)
The U.S. Government Bond Fund 3.26 15.30 8.35 8.75
(5/9/85)
The Money Market Fund 3.70 6.12 8.21 9.32
(3/27/85)
<CAPTION>
Flex-funds Total Returns 1985 to 1996
Fund
(Inception) 1988 1987 1986 1985
<S> <C> <C> <C> <C>
The Muirfield Fund 6.20(1) n/a n/a n/a
(8/10/88)
The Growth Fund -5.79 7.61 11.81 6.90(2)
(3/20/85)
The Total Return Utilities Fund n/a n/a n/a n/a n/a
(6/21/95)
The U.S. Government Bond Fund 2.74 -0.62 12.58 9.59(4)
(5/9/85)
The Money Market Fund 7.59 6.62 6.75 6.10(5)
(3/27/85)
<CAPTION>
Flex-funds Total Returns 1985 to 1996
Fund Average Annual Total Returns (%)
(Inception) 5 years 10 years Since Inception
<S> <C> <C> <C>
The Muirfield Fund 9.61 n/a 11.77
(8/10/88)
The Growth Fund 9.01 8.10 8.45
(3/20/85)
The Total Return Utilities Fund n/a n/a 18.88
(6/21/95)
The U.S. Government Bond Fund 5.57 6.16 7.18
(5/9/85)
The Money Market Fund 4.38 5.96 6.17
(3/27/85)
<FN>
All performance figures above represent total returns and average annual total
returns for the periods ended 12/31/96. Investment performance represents
total return and assumes reinvestment of all dividend and capital gain
distributions. The performance data shown above represents past performance
and does not necessarily indicate future performance. The investment return
and principal value of an investment will fluctuate so that an investors
shares, when redeemed, may be worth more or less than their original cost. The
Investment Adviser waived a portion of its management fees and/or reimbursed
expenses in order to reduce the operating expenses of The Money Market, U.S.
Government Bond, and Total Return Utilities Fund during each of the periods
shown above. The Money Market Fund will seek to maintain a constant net asset
value of $1.00 per share, although there is no guarantee that it will be able
to do so. Investments in The Money Market Fund are neither insured nor
guaranteed by the U.S. Government. 1Represents total return from 8/10/88 to
12/31/88. 2Represents total return from 3/20/85 to 12/31/85. 3Represents total
return from 6/21/95 to 12/31/95. 4Represents total return from 5/9/85 to
12/31/85. 5Represents total return from 3/27/85 to 12/31/85.
</FN>
</TABLE>
<PAGE>
CONTENTS
2 President's Letter
4 The Fourth Quarter and Beyond
6 So Far in the 1990s
7 Market Mania
10 What's Ahead
11 The Muirfield Fund
12 The Growth Fund
13 The Total Return Utilities Fund
14 The U.S. Government Bond Fund
15 The Money Market Fund
16 Financial Contents
<PAGE>
A LETTER TO OUR SHAREHOLDERS
From the President of The Flex-funds
The Flex-funds experienced growth and change last year. We added new personnel
to better serve your needs and broadened our selection of mutual fund offerings
for your consideration.
Photographic image:
Commentary from portfolio managers
(l to r) Philip A. Voelker, Joseph A. Zarr, and Robert S. Meeder Jr. will
soon be available 24-hours a day via our new, toll-free Portfolio Manager
Telephone Commentary.
February 25, 1997
Dear Fellow Shareholders:
The challenges of the financial markets for the past year, as well as a few
compelling developments that may well lie ahead, are outlined in great detail
in the following pages. As always, we have included a letter from each of the
portfolio managers describing the overall investment posture of each fund
through the fourth quarter of the year.
A full set of portfolio holdings and other financial information (pp. 17-48)
is also enclosed for your review. If you have any questions with regard to the
information contained in this report, please do not hesitate to call our
Investor Relations Department.
The Flex-funds experienced growth and change last year. We added new personnel
to better serve your needs and broadened our selection of mutual fund
offerings for your consideration.
January 1, 1997, The Growth Fund, one of the oldest members of The Flex funds
family, became The Highlander Fund. This change, which created a new "buy and
hold" equity mutual fund, is the result of expressed interest by our
shareholders and a desire of your Board to offer another proven portfolio
style to our fund family. There are more details about The Highlander Fund
outlined later in this report.
<PAGE>
During 1996, we also began development of an international equity fund with a
leading financial institution from the United Kingdom tentatively slated to
serve as subadviser. We are currently preparing an initial filing for this
Fund with the Securities and Exchange Commission and will notify you as soon
as more information is available.
When you call The Flex-funds to find out about these and other issues, you may
notice a few new voices on the line. We have added personnel in our Investor
Relations Department to more efficiently handle your requests and to meet the
demands of increased inquiries from new investors.
One of the first developments in our commitment to enhanced service will come
in the next few weeks. Beginning in March, we will offer shareholders the
opportunity to call The Flex-funds and hear recorded commentary directly from
portfolio managers. These contents will be updated regularly and will be
accessible at your convenience, 24-hours a day.
Concurrent with the implementation of the Portfolio Manager commentary system,
a new call routing feature will be added to make sure your call gets to the
right person, the first time, with less waiting.
By mid-year we plan to offer you the ability to access your current account
balance and other information about your Flex-funds account via telephone,
24-hours a day.
If you are a shareholder living in Central Ohio who usually reaches us at our
local number, you should now dial (614) 760-2159 in order to take advantage of
the enhanced phone services outlined above. All other shareholders, including
those in Central Ohio for whom the number above is a long-distance call,
should continue to call us on our toll-free line at 800-325-FLEX (3539).
Whether you would rather communicate with us by telephone, fax or electronic
mail (info @flexfunds.com), we are ready to serve you. We would also be happy
to schedule a one-on-one meeting with an associate of The Flex-funds, either
by telephone or in person, to discuss in greater detail your investment
objectives and our ability to achieve them. We will keep you informed about
these and other developments as the year progresses. If you have any questions
about our plans or any suggestions for enhancements to our services please
call 800-325-FLEX (3539).
Cordially,
/s/ Robert S. Meeder Sr.
Robert S. Meeder Sr.
President
Photographic image:
Robert S. Meeder Sr.
President
<PAGE>
THE FINANCIAL MARKETS
For the fourth quarter and beyond
(graphic representation of: 1996 Standard & Poors 500 Index)
The ongoing bull market charged ahead during 1996 as nearly all domestic stock
market indexes climbed to new highs, defying the expectations of market
pundits and proponents alike.
As the nation's investors flocked to stocks in record numbers, many began to
worry that the enthusiasm over stocks had reached manic proportions. At a
speech in early December, Chairman of The Federal Reserve Board Alan Greenspan
referred to the "irrational exuberance" of Wall Street and prompted a swoon in
stocks the following day. The S&P tumbled from 756.56 to 720.98 over the next
14 days - a decline of nearly five percent. After this brief period of
soul-searching, the market rebounded and began toying anew with its highs of
late November.
After a difficult third quarter, The Flex-funds Muirfield Fund and Growth Fund
rebounded late in the year, while The Total Return Utilities Fund kept pace
with the thriving utilities market. Interest rates during the quarter were
flat to slightly lower as the bond market rallied somewhat in October and
November, only to succumb to rising interest rates as the quarter closed.
STOCKS
AND INTEREST RATES
The success or failure of the stock market throughout 1996 seemed inexorably
tied to the movement of interest rates. Concerns that The Federal Reserve
Board would raise the benchmark Federal Funds Rate caused tremors in the stock
market, and the bond market, throughout the first six months of the year. As
each Fed Open Market Committee meeting approached, the markets gyrated wildly.
Finally, when it became apparent that the economy was not overheating,
concerns that the Fed would raise interest rates began to subside. As a
result, the stock market underwent a significant advance from late July
through late November.
A period of rising interest rates stalled the market's advance late in the
fourth quarter and prompted a correction of about five percent from the
November highs to the mid-December lows on the S&P 500 Index. In fact, the S&P
500 Index declined nearly two percent for the month of December.
Also contributing to the stock market's fourth quarter hiccup were concerns
over the possibility of disappointing first quarter earnings reports on behalf
of some large-cap issues. Large-cap stocks led the way during the fourth
quarter as they did for much of 1996 and rumors of trouble in their ranks
contributed to the market's brief fourth quarter decline.
Utility stocks came to life during the quarter, turning in good performances
across a broad universe of stocks. The strong performance of the utility
sector can be attributed, at least in part, to seven factors: 1.) the
bond/utility yield spread was supportive of utility stocks, 2.) the flow of
deals in the utility sector began to impart a charisma to the group that even
fearful investors could not ignore, 3.) the form that electric utility
deregulation will take was further delineated by the state regulators and the
Federal Energy Regulatory Commission (FERC), revealing a notable effort to
preserve the integrity of investor-owned utilities, 4.) the telephone yield
was attractive relative to the S&P 500 yield, making conditions ripe for the
<PAGE>
kind of roaring rally the Bells experienced in the final two weeks of the
year, 5.) the economic slowness phase persisted, helping the underlying
interest rate environment, a favorable development for utility stocks, 6.) the
relative valuation attractions of utilities came to the fore, as the sector
was competitive with the S&P 500 Index, and 7.) institutions protecting large
profits flocked to conservative stocks like utilities and blue chips at the
end of the year.
Despite the similar returns produced by stocks in 1995 and 1996, it is clear
that the year just completed was fraught with much more difficulty and
volatility than its predecessor. Another notable difference between 1995 and
1996 was the interest rate environment, and the resulting difficulties
experienced by the bond market.
BONDS TAKE ON WATER
While the stock market was registering its second banner year in a row, bonds
were struggling thanks to an overheating economy that sparked fears about
inflation and the prospects for a Federal Reserve Board interest rate hike.
Speculation was ongoing throughout the first part of the year about the
possibility of a short-term interest rate hike by the Fed. Relatively strong
economic numbers during the first six months of 1996 indicated that the
economy might be gaining steam and that some Fed action would be necessary to
cool things down. As a result, interest rates on the benchmark 30-year
Treasury rose steadily from mid February 1996 through early July, prompting a
12.4 percent decline in the price of the benchmark 30-year Treasury bond.
By mid-August, however, it was apparent that the economy was not growing at an
excessive rate and the bond market grew less concerned over the likelihood of
a Federal Reserve Board rate hike. Interest rates on the 30-year Treasury
declined from approximately 7.15 percent in early September to 6.35 percent by
the first week in December. As the year drew to a close, it appeared that bond
investors would reap a modest gain.
However, interest rates began to rise anew late in the fourth quarter, thanks
to some stronger than expected economic numbers. As a result, the bond market
gave up most of the gains it had amassed during the quarter. For the year,
bond market indexes across the board managed only low single-digit returns.
The stock and bond markets of 1996 were challenging, indeed. However, the
first few months of 1997 have proven to be somewhat encouraging. The Muirfield
Fund, The Total Return Utilities Fund, and the new Highlander Fund (formerly
The Growth Fund) are each off to strong starts. The U.S. Government Bond Fund
has held a significant portion of its portfolio in a defensive position for
much of the new year and has recently begun to increase its exposure to
10-year Treasury notes.
(graphic representation of: 1996 10-Year Treasury Bond Index)
<PAGE>
SO FAR IN THE 1990S
The performance of The Flex-funds versus the competition*
ASSET ALLOCATION FUND
Seeks both income and capital appreciation by determining the optimal
percentage of assets to place in stocks, bonds and cash. A top priority among
managers of these types of funds is determining the correct allocation of
assets to these sectors, a decision often based on an analysis of business
cycle trends.
GENERAL GOVERNMENT BOND FUND
Seeks income by investing in a blend of mortgage-backed securities, Treasuries
and agency securities.
CONSUMER PRICE INDEX
An index of the prices consumers pay for items like housing, food,
transportation and electricity. The CPI, and the Producer Price Index are the
two primary tools used to measure inflation. This index may be used as a
benchmark for all the mutual funds shown, but is used here for The Money
Market Fund.
<TABLE>
<CAPTION>
bar chart:
<S> <C>
The Muirfield Fund 115.69%
The Growth Fund 95.01%
The Average Assett Allocation Fund 106.14%
The Average Balanced Fund 105.98%
The U.S. Government Bond Fund 69.63%
Average General Government Bond Fund 60.35%
The Money Market Fund 31.47%
CPI 25.77%
<FN>
Shown above are the cumulative total returns for each of The Flex-funds mutual
funds from January 1, 1990 through December 31, 1996 as compared with an
applicable benchmark (as outlined at left). The Total Return Utilities Fund is
not included here because its inception date is 6/21/95. Source: Morningstar,
Inc. Please see the table on the inside front cover of this report for the
one-, five-, and ten-year (where applicable) average annual total returns of
each of the Funds shown above.
</FN>
</TABLE>
<PAGE>
STOCK MARKET MANIA
It's been a good couple of years, but what lies ahead?
CONSIDER THIS . . .
Whether you've decided to take some profits from your equity fund accounts, or
if you're just looking for an attractive, liquid, cash equivalent investment,
consider an investment in THE MONEY MARKET FUND.
The highest yielding general purpose money market fund1 in the nation since
its inception in March of 1985 and among the top three percent of funds2 in
the nation for the 12 months ended December 31, 1996, The Money Market Fund is
a consistent performer.
The Fund features a high-quality portfolio, consistently low expenses, and a
solid investment track record. (see page 15 for more information).
To open an account in The Money Market Fund, call our Investor Relations
Department at 800-325-3539 (FLEX).
1 #1 of 288 funds.
2 #11 of 89 funds.
Both per Lipper Analytical Services.
There's no doubt about it. In hindsight, the stock market of the past two
years has played host to an astounding display of bull market strength. Just
ask investors who are pouring assets into aggressive growth funds in hopes of
tapping some of the ultra-high returns they have heard so much about in recent
months.
The level of awareness and excitement that exists within the population
regarding stock market conditions has reached very unusual proportions. Just
ask your neighbors, your mailman, your barber or even members of your family
about what's going on in the stock market. They'll likely tout some high-tech
wonder stock they've heard about in the media or point to recent record highs
in the Dow Jones Industrial Average.
But in the face of all this unbridled optimism, it is wise to remember that
there have been 30 bear markets since 1900, that's one every three years, with
an average decline of 30 percent.
Historically, the stock market has often been the object of intense
fascination and significant cash flow from individual investors. One example
of such a period was during the late 1960s and early 1970s. As they are now,
inflation and interest rates were low; corporate earnings were temperate.
Investors were dumping assets into the "Nifty-Fifty" stocks despite staggering
price to earnings ratios. The United States was the world's preeminent
military and economic superpower and everyone from Wall Street to Main Street
was convinced that the party would last forever.
Then, in 1973 and 1974, the party ended. Inflation leapt into the
double-digits, interest rates climbed and money market funds became the
investment of choice. From January 1973 through December 1974, the S&P 500
Index declined 29 percent.
That's why some long-time market professionals have a feeling of deja vu
regarding the current market. It seems that, once again, everyone is convinced
that the party will last forever.
Maybe the stock market will continue its advance this year. Maybe the party
will soon be over. Maybe the Dow Jones Industrial Average will be at 10000 by
the end of the year. Maybe it will be at 3500. No matter what anyone in the
media says, no matter how many different points of view you read in annual
reports like this one, no one knows for sure what's going to happen tomorrow
in the stock market. There is only one item we believe is certain - history
has a way of repeating itself.
The point being: instead of blindly buying into the current stock market
mania, it might be prudent for you to step back, to consider where the market
has been, where it is going, and the overall goals you have for your
investments.
THE WORST CASE SCENARIO
o Is time on our side? The Dow Jones Industrial Average has not experienced a
10 percent or greater correction since October of 1990. Since that time, the
market has risen 191 percent over 751/4 months. The scope of this advance is
without precedent. Since 1907, the bull market closest in magnitude to the
current market ended in August of 1987, just prior to the 500 point Dow
decline on October 19, 1987. The bull market that ended in 1987 had advanced
just 150 percent over 37 months.
o The first year of a presidential term is usually the weakest for the stock
market. Since 1904, the first year following a presidential election has been
<PAGE>
a negative year for the stock market 48 percent of the time, and has
registered an average gain of just three percent. Incumbent presidents create
even bigger problems for the stock market. In the case of every reelected
president since 1904, each post-election year has been the weakest of the
four, declining as much as 36 percent following Franklin D. Roosevelt's
reelection in 1936.
o There have been only ten occasions when the S&P 500 Index has returned a
two-year gain comparable to 1995-96. In seven out of those ten cases, the
market's two-year gain was followed by a negative year. On two occasions, the
market was about even in year three. There has been only one occasion (1935)
when the market advanced in the year following a two-year gain like we
experienced in 1995-96.
o The average bear market since 1938 has erased 16 quarters, or four years,
of price appreciation in the stock market. Thus, if a bear market began
tomorrow, the stock market might not bottom until it hit 1992 levels . . .
a drop of approximately 50 percent.
o More new money rolled into equity mutual funds during 1996 than was held, in
total, in equity funds during 1990. Will that money be around for the long
haul, or will these new investors cut and run at the first sign of a big
market decline? The same vigorous momentum that has driven the stock market so
strongly to the upside could mean big trouble on the way down.
o The seventh year of each decade has typically been a difficult time for the
stock market. An analysis of the total return of every decade's seventh year
beginning with 1897 reveals that, taken together, the years have amassed a
total decline of over 55% in the price of stocks. Over the past 99 years, each
decade's seventh year has seen a declining stock market 50 percent of the
time.
By themselves, this laundry list of handicaps facing the stock market in 1997
might not amount to much other than interesting dinner party chatter.
Considered in the face of more impactful and long-term obstacles (like the
extreme valuations in place at present), these items take on added weight.
THE BEST CASE SCENARIO
o Topping the list of reasons to be optimistic about the future of stocks is
the demographics of the baby boom generation. Since they were born, boomers
have had a powerful impact on society, sparking booms in everything from baby
food to luxury cars. Now, the first wave of the baby boomers are turning 50
and thinking seriously about retirement. As a result, the stock market could
reap the rewards for several years to come. Why? Because baby boomers have
401(k) plans and IRAs and because they are, as a group, a little late in
planning for retirement. Seeking to capture the level of returns available
from the stock market, the baby boomers are investing their retirement assets
in stocks and stock mutual funds as a way to play a little catch-up.
Additionally, the boomers' investments in 401(k) plans mean a steady source of
new money for the stock market as employer-sponsored retirement plans
automatically invest assets each month deducted from employee salaries.
<PAGE>
o Interest rates continue to be stable and inflation is low. Steady interest
rates have been one of the major factors in the stock market's success thus
far and there is little indication that rates will begin rising sharply
anytime soon. Further, on a historical basis, inflation remains relatively
low.
o Corporate Earnings go hand in hand with interest rates. And, as rates have
remained steady, corporate profits have been increasing steadily. A slowdown
in corporate profits predicted by many for 1997 has yet to materialize. In
fact, earnings projections remained strong during the first couple of months
of 1997.
o A budget deal is in the offing. A good faith effort on the part of the White
House and Congress to effect a budget agreement could have a positive impact
on the stock and bond markets. A realistic, bipartisan budget agreement could
mean markedly lower interest rates - a positive development for both the bond
market and stocks.
There are compelling arguments for both bears and bulls. And in the final
analysis, regardless of what the pundits say, the ultimate barometer of the
market is your own. You have to decide whether you are truly a long-term
investor willing to ride through the pain of a prolonged bear market . . . or
whether you would like to temper your portfolio with some conservative
investments designed to ride through the tough times with less volatility.
Whether you are positive or negative on the future of the financial markets,
The Flex-funds family of no-load mutual funds can help you construct a
portfolio well-suited for the coming years.
Our established tactical asset allocation fund, The Muirfield Fund, is
designed to help you avoid the ravages of a bear market and provide attractive
returns during low-risk market environments. The addition of The Total Return
Utilities Fund, and more recently, The Highlander Fund, to The Flex-funds
family of no-load mutual funds offer you the opportunity for upside growth in
a more traditional, buy and hold approach to the equity markets. We are also
planning to launch, during 1997, an international equity fund, designed to
meet your need for overseas diversification.
The U.S. Government Bond Fund and The Money Market Fund, used in combination
with our equity funds, mean that as a Flex-funds shareholder, you have the
ability to diversify your portfolio across different asset classes and
different investment styles.
No matter what you think the markets are going to do during 1997, and
especially if your are uncertain about the future, we'd like to help. If you
would like assistance considering your investment options, please feel free to
call one of our helpful Sales Associates at 800-325-3539.
<PAGE>
WHAT'S AHEAD FOR 1997?
Changes in investment offerings, investor services on tap for coming year
One of the members of our Investor Relations Team will be happy
to answer any questions you have about our plans for expanded
shareholder services.
Photo of: three members of the Investor Relations Team
The coming year at The Flex-funds will likely see some of the biggest
advancements in our history both in the array of investment options we offer
and in our service to shareholders.
THE HIGHLANDER FUND
First, for those investors who have long-sought a Flex-funds mutual fund with
a buy-and-hold investment strategy, we have launched The Highlander Fund.
Formerly known as The Growth Fund, The Highlander Fund is an equity fund for
growth-oriented investors. The Fund features a unique approach to investing in
the stock market, called Sector Plus, developed by the Fund's subadviser,
Sector Capital Management LLC.
The Sector Plus approach assigns the management of each of the 10 sectors that
comprise the S&P 500 Index to individual managers that specialize in those
sectors. The goals of Sector Plus, therefore, is for these managers to
outperform their S&P 500 benchmark, thus creating added value for investors.
INTERNATIONAL FUND
If, like many other investors, you are seeking an international equity
investment for purposes of diversification, we will soon offer you an
attractive alternative.
Sponsored jointly with a major financial institution from the United Kingdom,
the international equity fund will soon be filed with the Securities and
Exchange Commission. Our goal is to have the new fund up and running by the
second quarter of this year.
ENHANCED ACCESS TO INFORMATION
Beginning in March, we will offer Flex-funds shareholders access 24-hours a
day to recorded commentary from portfolio managers. So if you are interested
in our current strategy with regard to any of The Flex-funds, you'll have
access to the portfolio manager of your choice at your convenience.
We also plan to make our specialized investment research reports available to
investors who desire in-depth information about developments in the financial
markets. Call our Investor Relations department to ask for your free
subscription.
By mid-year, we will offer you access to account balance information via our
phone system so that you can monitor changes in the value of your investments
24 hours a day at times that are convenient to you.
Our presence on the World Wide Web will expand during 1997 with a new,
easier-to-navigate interface and new information-gathering capabilities at our
website, located at www.flexfunds.com.
We're also planning to take a more proactive approach to shareholder
communication during 1997. So, don't be surprised if one of our courteous
associates calls to make sure that you are satisfied with all aspects of our
service to you.
<PAGE>
THE MUIRFIELD FUND
Photographic image: Robert S. Meeder Jr., Portfolio Manager
As the stock market advanced during the fourth quarter, The Muirfield Fund
continued to emphasize mutual funds with significant exposure to large
capitalization stocks, as it had for much of 1996.
During the final three months of the year, The Muirfield Fund's underlying
portfolio was invested, at various times, in growth mutual funds, 10-year U.S.
Treasury bonds, and money market instruments based on our evaluation of the
risk/reward relationship of the stock market. Partially defensive as the
quarter began, the Fund regained a full exposure to the stock market by
mid-November.
During the final three months of 1996, our most significant position was
exposure to the S&P 500 Index. This was achieved by owning S&P 500 futures
contracts which perform similarly to the index itself. Other major holdings
were: The Fidelity Blue Chip Fund, The Fidelity Fund, The Fidelity Growth and
Income Fund, and The Value Line Fund.
Thanks to its increased exposure during the fourth quarter, The Muirfield
Fund's performance rebounded nicely late in the year. The Fund maintained its
exposure to the stock market as the new year began and has participated nicely
with the recent strength in the stock market. We remain confident in our
ability to monitor and react to changing market conditions on behalf of our
shareholders and we eagerly anticipate the challenges that await us in 1997.
<TABLE>
<CAPTION>
RECENT TOTAL RETURNS for the periods ended December 31, 1996
3 months 1 year 3 years 5 years Inception
<S> <C> <C> <C> <C> <C>
The Murfield Fund 3.29% 5.99% 11.04% 9.61% 12.03%
The Average Asset Allocation Fund 5.00% 12.43% 11.67% 10.78% 11.56%
The Average Balanced Fund 5.23% 13.20% 11.24% 10.57% 11.91%
Source: Morningstar, Inc. See inside front cover for more performance information.
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO EXPOSURE* as of December 31, 1996
pie chart:
<S> <C>
Money Market Instruments 2%
Mutual Funds 98%
<FN>
*Portfolio Exposure reflects the effect of futures contracts on Portfolio investments.
</FN>
</TABLE>
<PAGE>
THE GROWTH FUND
Photographic image: Robert S. Meeder Jr., Portfolio Manager
The Growth Fund, now known as The Highlander Fund, has changed its investment
objective since the end of 1996. The Fund's new subadviser, Sector Capital
Management LLC, manages the fund according to its Sector Plus discipline, a
buy and hold approach to the stock market designed for growth-oriented
investors. The Sector Plus approach assigns the management of each of the 10
sectors that comprise the S&P 500 to individual managers that specialize in
those sectors. The goal of Sector Plus, therefore, is for these managers to
outperform their S&P 500 sector benchmark, thus creating added value for
investors.
So far in 1997, we are pleased with the Fund's performance.
The Growth Fund's underlying portfolio was fully exposed to the stock market
by mid-November and, as a result, performed well versus similar mutual funds
during the fourth quarter.
Prior to the Fund's return to a fully invested position, it had been fully or
partially defensive since mid-July. During the fourth quarter, the Fund was
invested, at various times, in "large cap" stocks, 10-year U.S. Treasury notes
and money market instruments.
The Growth Fund achieved its stock market exposure during the quarter through
investment in a mixture of large capitalization stocks from the Dow Jones
Industrial Average and exposure to the S&P 500 Index.
<TABLE>
<CAPTION>
RECENT TOTAL RETURNS for the periods ended December 31, 1996
3 months 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C> <C>
The Growth Fund 5.59% 9.08% 10.52% 9.01% 8.10%
The Average Asset Allocation Fund 5.00% 12.43% 11.67% 10.78% 10.02%
The Average Balanced Fund 5.23% 13.20% 11.24% 10.57% 11.05%
Source: Morningstar, Inc. See inside front cover for more performance information.
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO EXPOSURE* as of December 31, 1996
pie chart:
<S> <C>
Stocks 100%
<FN>
*Portfolio Exposure reflects the effect of futures contracts on Portfolio investments.
</FN>
</TABLE>
<PAGE>
THE TOTAL RETURN UTILITIES FUND
Photographic image: Lowell G. Miller, Portfolio Manager,
Miller/Howard Investments, Inc.
Utilities came to life last quarter, turning in good performances across a
broad universe of stocks. Increasingly, gas utilities led the way in our
portfolio, as they have all year. Sharply higher product prices were a factor
as was the charismatic spark of a deal in which Duke Power offered to acquire
Panenergy - a significant position in our portfolio - at a premium.
Indeed, we have had several "deal" stocks in our portfolio of late, on both
the acquirer and acquiree side. The most classic takeover example is that of
Panergy by Duke Power, one of many electric/gas convergences to pepper the
market lately. And while we would be happy to continue to own Panenergy, the
stock will now leave our portfolio as Duke Power is a nuclear-based utility
and is therefore excluded from our universe of holdings. At least we can be
sure we are selling Panenergy at its high. Other notable additions to the
portfolio during the fourth quarter of 1996 were Public Service of Colorado
and AirTouch, which we believe to be the strongest value in wireless
communication on a global basis.
More deals, phone companies, and newly created electric distribution companies
should bring some excitement to the portfolio this year, and general utility
pricing levels do not inspire the kinds of anxieties that many investors
justifiably feel regarding the broader equity markets. We don't think, at this
point, that interest rate problems will intervene and we look forward to a
solid 1997.
<TABLE>
<CAPTION>
RECENT TOTAL RETURNS for the periods ended December 31, 1996
3 months 1 year
<S> <C> <C>
The Total Return Utilities Fund 7.84% 13.33%
The Average Utility Fund 8.13% 10.01%
Source: Morningstar, Inc. See inside front cover for more performance information.
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS as of December 31, 1996
pie chart:
<S> <C>
Repurchase Agreement 11.5%
Electric/Gas Utility 4.1%
Electric Utility 18.1%
Diversified Utility 1.9%
Natural Gas Dist. 21.8%
Oil/Gas 7.9%
Telecommunications 30.8%
Water Utility 3.9%
<FN>
*Portfolio Exposure reflects the effect of futures contracts on Portfolio investments.
</FN>
</TABLE>
<PAGE>
THE U.S. GOVERNMENT BOND FUND
Photographic image: Portfolio Manager, Joseph A. Zarr
Interest rates declined for much of the second half of 1996, as it became
apparent that the economy was not growing as rapidly as had been expected
during the first six months of the year.
The U.S. Government Bond Fund regained a full exposure to 10-year U.S.
Treasuries during October and remained fully invested into late December. As
the year drew to a close, interest rates began rising anew, and the Fund again
adopted a partially defensive position through investments in money market
instruments.
At year's end, the three components of our bond model were positive with one
minor exception. The TREND OF INTEREST RATES was only partially positive based
on early indications of a rising interest rate environment (falling bond
prices). REAL RATES OF RETURN were positive based on continued low inflation
relative to bond yields. THE YIELD RATIO was positive as yields on
intermediate to long-term bonds outpaced yields available from Treasury Bills.
As long as inflation remains in check, we believe 1997 could be a strong year
for the bond market. Therefore, if you are an income investor looking for a
defensively managed portfolio, The U.S. Government Bond Fund could be a smart
choice for your portfolio.
<TABLE>
<CAPTION>
RECENT TOTAL RETURNS for the periods ended December 31, 1996
3 months 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C> <C>
The U.S. Government Bond Fund 1.66% 0.15% 5.47% 5.57% 6.16%
The Average General Government Bond Fund 2.48% 2.47% 4.35% 5.50% 6.91%
Source: Morningstar, Inc. See inside front cover for more performance information.
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS as of December 31, 1996
pie chart:
<S> <C>
Money Market Instruments 49%
10-Year Treasuries 51%
</TABLE>
<PAGE>
THE MONEY MARKET FUND
Photographic image: Portfolio Manager, Philip A. Voelker
The Money Market Fund remained the highest yielding general purpose money
market fund in the nation from its inception in 1985 through December 31,
1996, according to Lipper Analyitical Services, Inc. Further, the Fund
finished the year with a return that placed it among the top three percent of
the nation's general purpose funds, also according to Lipper.
After shortening the average maturity of the Fund early in 1996 based on the
market's anticipation of rising interest rates, the Fund began, late in the
year, to extend the maturity of its portfolio. As you will recall, we
generally shorten the Fund's average maturity when interest rates are rising,
so we have the ability to reinvest assets at higher rates as our investments
mature. However as the market anticipated an increase in rates by The Federal
Reserve Board in the fall, yields became available on maturities in the 180 to
360 day range that we found too attractive to miss. Between September 9 and
October 15, we increased the average maturity of the Fund from 48 to 90 days.
As higher rates failed to materialize and yields eventually declined, we
gained a significant advantage in yield from our decision to lengthen the
average maturity of the Fund when we did. In hindsight, we took the right
action and benefited accordingly.
We remain committed to actively managing the portfolio of The Money Market
Fund in an effort to earn the highest possible yields for our shareholders.
<TABLE>
<CAPTION>
RECENT TOTAL RETURNS for the periods ended December 31, 1996
1 year Since Inception
<S> <C> <C>
The Money Market Fund 5.27% 6.17%
The Average Money Market Fund 4.80% 5.71%
Source: Morningstar, Inc. See inside front cover for more performance information.
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO EXPOSURE as of December 31, 1996
pie chart:
<S> <C>
U.S. Government Obligations 8.1%
Repurchase Agreements 9.3%
Corporate Obligations 33.1%
Commercial Paper 49.5%
</TABLE>
<PAGE>
(graphic)
FINANCIAL DATA
The Flex-funds
17 The Mutual Fund Portfolio
19 The Growth Stock Portfolio
23 The Utilities Stock Portfolio
26 The Bond Portfolio
27 The Money Market Portfolio
30 Statements of Assets and Liabilities
31 Statements of Operations
32 Statements of Changes in Net Assets
33 Financial Highlights
38 Notes To Financial Statements
40 Independent Auditors' Report
THE PORTFOLIOS
41 Statements of Assets and Liabilities
42 Statements of Operations
43 Statements of Changes in Net Assets
44 Financial Highlights
46 Notes To Financial Statements
48 Independent Auditors' Report
<PAGE>
<TABLE>
<CAPTION>
MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1996
SHARES OR
FACE AMOUNT VALUE
<S> <C> <C>
MUTUAL FUNDS - 59.5%
Aim Constellation Fund 86 $2,185
Aim Weingarten Fund 99 1,832
Charles Schwab Money Market Fund 16,172,563 16,172,563
Fidelity Blue Chip Fund 235,580 7,701,108
Fidelity Core Money Market Fund 19,964,557 19,964,557
Fidelity Fund 236,798 5,848,911
Fidelity Growth & Income Fund 251,433 7,726,531
Mutual Series Fund 58 5,412
PBHG Growth Fund 624 16,398
Rydex U.S. Government Money Market Fund 5,927,310 5,927,310
Rydex Nova Fund 721,714 12,666,082
T. Rowe Price New Era Fund 132 3,443
T. Rowe Price New Horizons Fund 151 3,287
Value Line Fund 292,179 5,636,131
TOTAL MUTUAL FUNDS ==========
(Cost $81,126,588) 81,675,750
----------
U.S.TREASURY BILLS - 2.9%
*U.S. Treasury Bill, 5.34%, due 3/06/97 $1,650,000 1,635,222
*U.S. Treasury Bill, 5.00%, due 3/06/97 1,000,000 991,044
*U.S. Treasury Bill, 4.84%, due 3/06/97 900,000 891,940
*U.S. Treasury Bill, 4.90%, due 3/06/97 200,000 198,209
*U.S. Treasury Bill, 4.99%, due 3/06/97 150,000 148,657
U.S. Treasury Bill, 4.90%, due 1/09/97 30,100 30,068
TOTAL U.S. TREASURY BILLS =========
(Cost $3,894,698) 3,895,140
---------
<FN>
*Pledged $2,960,000 face amount as collateral on futures contracts
</FN>
<PAGE>
<CAPTION>
MUTUAL FUND PORTFOLIO, continued
<S> <C> <C>
REPURCHASE AGREEMENTS - 37.6%
(Collateralized by U.S. government
obligations - market value $52,366,298)
Paine Webber Incorporated, dated 12/30/96,
6.35%, due 1/02/97 25,000,000 25,000,000
Prudential Bache Securities, dated 12/31/96,
6.75%, due 1/02/97 14,343,000 14,343,000
State Street Bank, dated 12/31/96,
6.00%, due 1/02/97 12,318,000 12,318,000
TOTAL REPURCHASE AGREEMENTS ==========
(Cost $51,661,000) 51,661,000
----------
TOTAL INVESTMENTS - 100% ============
(Cost $136,682,286) $137,231,890
------------
CONTRACTS
FUTURES CONTRACTS
Long, S&P 500 futures contracts,
face amount $90,456,750 expiring in March, 1997. 243 (1,773,830)
Long, Midcap futures contracts,
face amount $2,181,100 expiring in March, 1997. 17 (11,475)
-----------
NET PAYABLE FOR FUTURES CONTRACTS SETTLEMENTS (1,785,305)
-----------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1996
SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE
<S> <C> <C>
COMMON STOCKS - 67.6%
AEROSPACE/DEFENSE - (3.4%)
Boeing Company 7,850 $835,044
--------
ALUMINUM - (2.0%)
Aluminum Company of America 7,850 500,438
--------
AUTO AND TRUCK - (1.8%)
General Motors 7,850 437,637
--------
BANKING - (3.1%)
J.P. Morgan & Company, Inc. 7,850 766,356
--------
BEVERAGE - (1.7%)
Coca Cola 7,850 413,106
--------
CHEMICAL (BASIC) - (4.3%)
Dupont 7,850 740,844
Union Carbide 7,850 320,869
========
1,061,713
--------
CHEMICAL (DIVERSIFIED) - (2.7%)
Minnesota Mining & Manufacturing 7,850 650,569
--------
COMPUTER AND PERIPHERALS - (4.8%)
International Business Machines 7,850 1,185,350
--------
DRUG - (2.5%)
Merck & Company, Inc. 7,850 622,112
--------
<PAGE>
<CAPTION>
GROWTH STOCK PORTFOLIO, continued
<S> <C> <C>
ELECTRICAL EQUIPMENT - (3.8%)
General Electric Company 7,850 776,169
Westinghouse Electric Corporation 7,850 156,018
========
932,187
--------
FINANCIAL SERVICES - (1.8%)
American Express 7,850 443,525
--------
HOUSEHOLD PRODUCTS - (3.4%)
Procter & Gamble 7,850 843,875
--------
MACHINERY (CONSTRUCTION & MINING) - (2.4%)
Caterpillar Inc. 7,850 590,713
--------
MULTIFORM - (4.3%)
Allied-Signal Inc. 7,850 525,950
United Technologies 7,850 518,100
========
1,044,050
--------
PAPER AND FOREST PRODUCTS - (1.3%)
International Paper 7,850 316,943
--------
PETROLEUM (INTEGRATED) - (8.3%)
Chevron Corporation 7,850 510,250
Exxon 7,850 769,300
Texaco 7,850 770,281
========
2,049,831
--------
<PAGE>
<CAPTION>
Growth Stock Portfolio, continued
<S> <C> <C>
PRECISION INSTRUMENT - (2.7%)
Eastman Kodak 7,850 629,963
Imation Corporation 785 22,078
========
652,041
--------
RECREATION - (2.2%)
Walt Disney Company 7,850 546,556
--------
RESTAURANT - (1.5%)
McDonalds Corporation 7,850 355,213
--------
RETAIL STORE - (2.2%)
Sears 7,850 362,081
Woolworth Corporation 7,850 171,719
========
533,800
--------
STEEL (INTEGRATED) - (.3%)
Bethlehem Steel 7,850 70,650
--------
TELECOMMUNICATION EQUIPMENT & SERVICES - (1.9%)
American Telephone & Telegraph 7,850 341,475
Lucent Technologies Incorporated 2,544 117,660
========
459,135
--------
TIRE AND RUBBER - (1.6%)
Goodyear Tire & Rubber 7,850 403,294
--------
TOBACCO - (3.6%)
Philip Morris Companies, Inc. 7,850 884,106
TOTAL COMMON STOCKS ==========
(Cost $13,435,117) 16,598,244
----------
<PAGE>
<CAPTION>
GROWTH STOCK PORTFOLIO, continued
<S> <C> <C>
U.S. TREASURY BILLS - 4.0%
*U.S. Treasury Bill, 5.34%, due 3/06/97 $800,000 792,836
U.S. Treasury Bill, 5.01%, due 3/06/97 100,000 99,105
U.S. Treasury Bill, 4.84%, due 3/06/97 100,000 99,104
U.S. Treasury Bill, 4.90%, due 1/09/97 6,000 5,994
TOTAL U.S. TREASURY BILLS ========
(Cost $996,649) 997,039
--------
<FN>
*Pledged $390,000 face amount as collateral on futures
</FN>
REPURCHASE AGREEMENTS - 28.4%
(Collateralized by U.S. government obligations
- market value $7,047,064)
Paine Webber Incorporated, dated 12/30/96,
6.35%, due 1/02/97 4,000,000 4,000,000
Prudential Bache Securities, dated 12/31/96,
6.75%, due 1/02/97 2,968,000 2,968,000
TOTAL REPURCHASE AGREEMENTS =========
(Cost $6,968,000) 6,968,000
---------
TOTAL INVESTMENTS - 100% ===========
(Cost $21,399,766) $24,563,283
-----------
CONTRACTS
FUTURES CONTRACTS
Long, S&P 500 futures contracts,
face amount $7,817,250 expiring in March, 1997. 21 (153,300)
=========
NET PAYABLE FOR FUTURES CONTRACTS SETTLEMENTS (153,300)
---------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1996
SHARES OR
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT VALUE
<S> <C> <C>
COMMON STOCKS - 88.5%
ELECTRIC/GAS UTILITY - (4.1%)
MDU Resources Group Incorporated 6,100 $ 140,300
Nipsco Industries Incorporated 4,700 186,238
========
326,538
--------
ELECTRIC UTILITY - (18.1%)
Cinergy Corporation 7,900 263,663
Ipalco Enterprises Incorporated 6,000 163,500
KU Energy Corporation 3,300 99,000
LG&E Energy Corporation 8,600 210,700
Pacificorp 10,000 205,000
Public Service Company of Colorado 5,900 229,362
Teco Energy Incorporated 11,000 265,375
========
1,436,600
--------
DIVERSIFIED UTILITY - (1.9%)
Citizens Utilities Company Class B 13,514 150,341
--------
NATURAL GAS (DISTRIBUTOR) - (21.8%)
Bay State Gas Company 2,200 62,150
Brooklyn UN Gas Company 5,900 177,738
Consolidated Natural Gas Company 3,900 215,475
MCN Corporation 6,200 179,025
Nicor Incorporated 1,800 64,350
Pacific Enterprises 7,000 212,625
Panenergy Corporation 5,500 247,500
Transcanada Pipelines Ltd. 8,200 143,500
UGI Corporation 2,000 44,750
Wicor Incorporated 5,800 208,075
Williams Companies Incorporated 4,800 180,000
========
1,735,188
--------
<PAGE>
<CAPTION>
Utilities Stock Portfolio, continued
<S> <C> <C>
OIL/GAS (DOMESTIC) - (7.9%)
El Paso Natural Gas Company 4,800 242,400
Enron Corporation 3,000 129,375
Questar Corporation 5,300 194,775
Sante Fe Pacific Pipeline Partners 1,600 60,800
========
627,350
--------
TELECOMMUNICATION EQUIPMENT - (2.1%)
LCC International A 5,000 92,500
Vanguard Cellular 4,700 74,025
========
166,525
--------
TELECOMMUNICATION SERVICES - (28.7%)
Airtouch Communications 5,600 141,400
Alltel Corporation 8,100 254,138
Bell Atlantic Corporation 2,400 155,400
Bellsouth Corporation 3,000 121,125
Century Telephone 8,500 262,437
Frontier Corporation 9,500 214,937
GTE Corporation 5,200 236,600
Intellicell Corporation 30,000 221,250
MCI Communications 5,000 163,437
Sprint Corporation 4,400 175,450
Tele Denmark 5,000 136,250
U.S. West Incorporated 6,000 193,500
=========
2,275,924
---------
WATER UTILITY - (3.9%)
American Water Works Incorporated 15,200 313,500
--------
TOTAL COMMON STOCKS
(Cost $6,252,239) 7,031,966
---------
<PAGE>
<CAPTION>
UTILITIES STOCK PORTFOLIO, continued
<S> <C> <C>
U.S. TREASURY BILLS - 0.0%
U.S. Treasury Bill, 4.90%, due 1/09/97 $ 1,000 1,000
-------
TOTAL U.S. TREASURY BILLS
(Cost $1,000) 1,000
-------
REPURCHASE AGREEMENTS - 11.5%
(Collateralized by U.S. government
obligations - market value $922,418)
Prudential Bache Securities, dated 12/31/96,
6.75%, due 1/02/97 914,000 914,000
-------
TOTAL REPURCHASE AGREEMENTS
(Cost $914,000) 914,000
-------
TOTAL INVESTMENTS - 100% ==========
(Cost $7,167,239) $7,946,966
----------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOND PORTFOLIO
Portfolio of Investments as of December 31, 1996
FACE AMOUNT VALUE
<S> <C> <C>
U.S.TREASURY NOTES - 66.6%
U.S. Treasury Note, 6.50%, due 10/15/2006 $ 9,000,000 $ 9,054,844
TOTAL U.S.TREASURY NOTES =========
(Cost $9,169,393) 9,054,844
---------
U.S. GOVERNMENT AGENCY - 29.9%
Federal National Mortgage Association Discount Note, 5.48%, due 1/06/97 2,000,000 1,998,478
Federal National Mortgage Association Discount Note, 5.48%, due 1/14/97 2,000,000 1,996,042
Federal National Mortgage Association Note, 4.80%, due 6/25/97 79,359 78,937
TOTAL U.S. GOVERNMENT AGENCY =========
(Cost $4,073,521) 4,073,457
---------
U.S.TREASURY BILLS - 1.9%
U.S. Treasury Bill, 4.97%, due 2/20/97 100,000 99,310
U.S. Treasury Bill, 5.34%, due 3/06/97 100,000 99,105
U.S. Treasury Bill, 4.99%, due 3/06/97 50,000 49,552
U.S. Treasury Bill, 4.90%, due 1/09/97 4,800 4,794
TOTAL U.S.TREASURY BILLS =========
(Cost $252,711) 252,761
---------
REPURCHASE AGREEMENTS - 1.6%
(Collateralized by U.S. government obligations - market value $227,072)
Prudential Bache Securities, dated 12/31/96, 6.75%, due 1/02/97 225,000 225,000
---------
TOTAL REPURCHASE AGREEMENTS
(Cost $225,000) 225,000
---------
TOTAL INVESTMENTS - 100% ===========
(Cost $13,720,625) $13,606,062
-----------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Money Market Portfolio
Portfolio of Investments as of December 31, 1996
AMORTIZED
FACE AMOUNT COST
<S> <C> <C>
COMMERCIAL PAPER - 49.5%
American Trading & Production, 5.35%, due 1/14/97 $ 4,000,000 $ 3,992,272
Bell South, 5.42%, due 1/21/97 5,030,000 5,014,854
Calcot, 5.75%, due 2/21/97 3,000,000 2,975,562
Calcot, 5.40%, due 1/24/97 5,000,000 4,982,750
Calcot, 5.36%, due 1/22/97 5,000,000 4,984,367
Cargill Financial, 5.58%, due 6/16/97 5,000,000 4,871,350
Coca-Cola Company, 5.80%, due 1/17/97 15,000,000 14,961,333
Equitable of Iowa, 5.61%, due 1/17/97 12,000,000 11,970,080
Fingerhut Owners Trust, 5.50%, due 1/09/97 10,000,000 9,987,778
Fleet Funding, 5.48%, due 1/24/97 2,200,000 2,192,298
Hertz Corporation, 5.90%, due 1/03/97 10,000,000 9,996,722
Hitachi America Ltd., 5.35%, due 3/25/97 8,160,000 8,059,349
JC Penney Funding, 5.39%, due 3/27/97 15,000,000 14,809,104
Merrill Lynch & Company, 5.55%, due 6/13/97 5,000,000 4,874,354
Michigan Consolidated Gas, 5.33%, due 2/07/97 8,000,000 7,956,175
National Rural Utilities, 5.31%, due 2/14/97 4,200,000 4,172,742
PHH Corporation, 5.50%, due 1/17/9710,000,000 9,975,556
Portland General Electric, 5.33%, due 1/21/97 10,000,000 9,970,389
Receivables Capital Corporation, 5.75%, due 1/15/97 10,000,000 9,977,639
Toyota Motor Company, 5.31%, due 2/06/97 8,000,000 7,957,520
WMX Technologies, 5.60%, due 5/13/97 20,000,000 19,589,333
TOTAL COMMERCIAL PAPER ===========
(Cost $173,271,527) 173,271,527
-----------
CORPORATE OBLIGATIONS - 33.1%
American Home Products Corporation, 6.875%, due 4/15/97 1,005,000 1,008,499
American General Finance, 7.75%, due 1/15/97 450,000 450,335
Associates Corporation, 6.875%, due 1/15/97 425,000 425,179
*Bank One Capital Demand Note, 5.95%, next redemption
date 1/02/97, due 4/01/2113 3,536,000 3,536,000
Bell Atlantic Corporation, 7.22%, due 6/16/97 4,000,000 4,029,304
Bell Tri LSG, 8.05%, due 2/19/97 500,000 501,663
*Care Life Project Floating Rate Note, 5.80%, next
redemption date 1/02/97, due 8/01/2111 1,350,000 1,350,000
*Caterpillar Financial Incorporated Floating Rate
Note, 5.654%, due 6/20/97 1,000,000 1,000,473
Caterpillar Incorporated, 5.05%, due 1/15/97 500,000 499,933
Central Illinois Public Service, 6.125%, due 7/01/97 2,000,000 2,003,840
Chase Manhattan Bank, 7.875%, due 1/15/97 750,000 750,574
<PAGE>
<CAPTION>
MONEY MARKET PORTFOLIO, continued
<S> <C> <C>
Consolidated Rail, 6.00%, due 7/01/97 142,000 141,977
Cooper Industries, 7.77%, due 10/21/97 5,000,000 5,063,808
Cooper Industries, 7.81%, due 10/15/97 3,000,000 3,038,398
*Espanola/Nambe Variable Rate Demand Note, 5.84%, next
redemption date 1/02/97, due 6/01/2006 2,500,000 2,500,000
Ford Capital, 9.75%, due 6/05/97 3,700,000 3,755,316
Ford Holdings, 9.25%, due 7/15/97 3,168,000 3,220,923
Ford Motor Credit Corporation, 6.75%, put date 7/15/97 350,000 351,922
GE Capital Corporation, 7.00%, due 4/03/97 1,518,000 1,522,190
GE Capital Corporation, 4.55%, due 10/27/97 2,500,000 2,471,888
*General Motors Acceptance Corporation Floating Rate Note,
5.68%, next redemption date 4/13/97, due 4/13/98 10,000,000 10,000,000
General Motors Acceptance Corporation, 7.40%, due 1/14/97 170,000 170,130
General Motors Acceptance Corporation, 7.80%, due 5/05/97 9,200,000 9,264,405
General Motors Acceptance Corporation, 7.90%, due 5/01/97 1,500,000 1,509,712
General Telephone, California, 6.75%, due 12/01/97 2,500,000 2,500,000
General Nutrition Corporation, 11.375%, redemption date 3/03/97 5,000,000 5,183,933
Golden West Financial, 10.25%, due 5/15/97 475,000 482,422
*Hancor Incorporated Floating Rate Note, 5.84%, next redemption
date 1/02/97, due 12/01/2004 800,000 800,000
Hertz Corporation, 10.125%, due 3/01/97 2,000,000 2,014,965
Marshall & Isley, 7.375%, due 10/31/97 10,000,000 10,125,300
Michigan Consolidated Gas, 6.25%, due 5/01/97 1,500,000 1,502,857
Minnesota Mining & Manufacturing, 6.375%, due 6/16/97 1,000,000 1,001,186
Morgan Stanley Incorporated, 7.32%, due 1/15/97 500,000 500,292
*Mubea, Incorporated Floating Rate Note, 5.84%, next redemption
date 1/02/97, due 12/01/2004 5,000,000 5,000,000
NBD Bank N.A., 7.875%, due 1/21/97 250,000 250,266
Philip Morris Companies, 9.25%, due 12/01/97 1,568,000 1,615,090
Philip Morris Companies, 9.75%, due 5/01/97 814,000 824,532
Philip Morris Companies, 8.75%, due 6/15/97 500,000 506,712
Philip Morris Companies, 7.50%, due 3/15/97 870,000 873,155
*Presrite Corporation Floating Rate Note, 5.84%, next redemption
date 1/02/97, due 1/01/2004 2,540,000 2,540,000
*Seariver Maritime Financial Holdings Floating Rate Note, 5.405%,
next redemption date 1/02/97, due 10/01/2111 7,000,000 7,000,000
Sears Roebuck & Company, 6.66%, due 5/20/97 1,000,000 1,003,456
Sears Roebuck & Company, 7.41%, due 6/11/97 100,000 100,629
Southern California Edison, 5.90%, due 1/15/97 1,000,000 1,000,237
Virginia Electric & Power, 7.25%, due 3/01/97 3,250,000 3,258,635
*White Castle Corporation, Floating Rate Note, 5.84%, next
redemption date 1/02/97, due 12/01/2010 9,000,000 9,000,000
TOTAL CORPORATE OBLIGATIONS ===========
(Cost $115,650,136) 115,650,136
-----------
U.S. TREASURY NOTES - 4.0%
U.S. Treasury Note, 6.00%, due 8/31/97 4,000,000 4,005,201
U.S. Treasury Note, 6.00%, due 11/30/97 10,000,000 10,043,606
<PAGE>
<CAPTION>
Money Market Portfolio, continued
<S> <C> <C>
TOTAL U.S. TREASURY NOTES ==========
(Cost $14,048,807) 14,048,807
----------
U.S. TREASURY BILLS - 0.0% ==========
U.S. Treasury Bill, 4.906%, due 1/09/97 63,100 63,031
----------
TOTAL U.S. TREASURY BILLS
(Cost $63,031) 63,031
U.S. GOVERNMENT OBLIGATIONS - 4.1%
Federal Home Loan Mortgage Corporation, 5.10%, due 1/13/97 100,000 99,995
Federal Home Loan Mortgage Corporation, 6.47%, due 7/07/97 500,000 501,978
Federal Home Loan Bank Note, 5.50%, due 3/21/97 235,000 235,000
Federal Farm Credit, 5.32%, due 2/03/97 200,000 199,895
*Federal Home Loan Bank Floating Rate Note, 5.803%,
due 4/08/97, next redemption date 1/02/97 2,000,000 2,000,863
*Student Loan Marketing Association Floating Rate
Note, 5.48%, due 8/03/99, next redemption date
7/02/96 4,350,000 4,353,782
*Student Loan Marketing Association Floating Rate Note,
5.43%, due 11/10/98, next redemption date 7/02/96 5,000,000 5,000,000
*Student Loan Marketing Association Floating Rate Note,
5.41%, due 11/24/97, next redemption date 7/02/96 2,000,000 1,999,816
Tennesee Valley Authority, 6.00%, due 1/15/97 100,000 100,009
TOTAL U.S. GOVERNMENT OBLIGATIONS ==========
(Cost $14,491,338) 14,491,338
----------
REPURCHASE AGREEMENTS - 9.3%
(Collateralized by U.S. government obligations - market value $32,927,954)
Paine Webber Incorporated, dated 12/31/96, 6.35%, due 1/02/97 21,000,000 21,000,000
Prudential Bache Securities, dated 12/31/96, 6.75%, due 1/02/97 11,550,000 11,550,000
TOTAL REPURCHASE AGREEMENTS ==========
(Cost $32,550,000) 32,550,000
----------
TOTAL INVESTMENTS - 100% ============
(Cost $350,074,839) $350,074,839
------------
<FN>
* - Floating Rate as of 12/31/96.
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
The The The Total The U.S. The
Muirfield Growth Return Utilities Government Money Market
Fund Fund Fund Bond Fund Fund
<S> <C> <C> <C> <C> <C>
Assets:
Investment in corresponding portfolio $ 121,425,042 $ 24,413,491 $ 5,089,213 $ 17,791,465 $ 119,987,807
Receivable for capital stock issued 3,616,683 2,717 39 383 -
Unamortized organizational costs - - - 17,146 - -
Other assets 452 15,835 8,822 2,610 7,666
============= ============= ============= ============= =============
Total Assets 125,042,177 24,432,043 5,115,220 17,794,458 119,995,473
------------- ------------- ------------- ------------- -------------
Liabilities:
Payable for capital stock redeemed 3,570,240 217,039 119 2,674 -
Dividends payable 93,203 2,942 27,385 2,532 11,207
Accrued transfer agent and
administrative fees 12,153 2,611 368 1,219 9,469
Other accrued liabilities 31,974 5,595 13,230 5,428 27,300
============= ============= ============= ============= =============
Total Liabilities 3,707,570 228,187 41,102 11,853 47,976
------------- ------------- ------------- ------------- -------------
Net Assets:
Capital 120,745,044 22,379,843 4,521,433 18,790,118 119,947,497
Accumulated undistributed net
investment income (loss) (1) 9 - (3) -
Accumulated undistributed net realized
gain (loss) on investments 12,496 (1,339,494) - (892,948) -
Net unrealized gain (loss) on
investments 577,068 3,163,498 552,685 (114,562) -
============= ============= ============= ============= =============
Net Assets $ 121,334,607 $ 24,203,856 $ 5,074,118 $ 17,782,605 $ 119,947,497
------------- ------------- ------------- ------------- -------------
Capital Stock Outstanding 22,198,952 1,475,239 338,624 861,611 119,947,497
------------- ------------- ------------- ------------- -------------
Net Asset Value, Offering and
Redemption Price Per Share $ 5.47 $ 16.41 $ 14.98 $ 20.64 $ 1.00
------------- ------------- ------------- ------------- -------------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
The The The Total The U.S. The
Muirfield Growth Return Utilities Government Money Market
Fund Fund Fund Bond Fund Fund
<S> <C> <C> <C> <C> <C>
Net Investment Income From
Corresponding Portfolio:
Interest $ 2,995,152 $599,913 $15,424 $983,780 $8,775,604
Dividends 311,660 321,265 126,220 - -
Expenses (1,052,259) (320,098) (61,617) (107,760) (294,611)
============= ============= ============= ============= =============
Total Net Investment Income From
Corresponding Portfolio 2,254,553 601,080 80,027 876,020 8,480,993
------------- ------------- ------------- ------------- -------------
Fund Expenses:
Legal fees 2,007 2,225 1,642 2,034 3,998
Audit fees 3,936 6,480 2,881 2,876 4,234
Printing 22,332 8,599 3,642 4,056 35,582
Postage 17,803 4,575 1,100 2,857 25,544
Transfer agent fees 120,161 25,406 4,026 10,228 111,421
Administrative fee 36,230 7,712 1,121 5,362 42,785
Trustees fees and expenses 2,931 2,949 3,832 2,495 2,914
Registration and filing fees 13,530 7,470 12,054 6,880 23,314
Insurance 1,778 387 36 256 2,501
Distribution plan 157,536 36,280 9,338 28,045 115,428
Amortization of organizational costs - - 5,036 - -
Other expenses 10,991 3,837 1,917 2,310 27,281
============= ============= ============= ============= =============
Total expenses 389,235 105,920 46,625 67,399 395,002
Expenses reimbursed by adviser - - (61,549) - (52,840)
============= ============= ============= ============= =============
Total Expenses - net 389,235 105,920 (14,924) 67,399 342,162
INVESTMENT INCOME - NET 1,865,318 495,160 94,951 808,621 8,138,831
------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS - NET:
Net realized gain (loss) on futures (385,498) (1,614,914) - 41,147 -
Net realized gain (loss) on investments 10,610,566 301,293 209,382 (7,020) -
Net change in unrealized appreciation
(depreciation) of investments (5,306,075) 3,055,094 219,393 (776,909) -
============= ============= ============= ============= =============
NET GAIN (LOSS) ON INVESTMENTS 4,918,993 1,741,473 428,775 (742,782) -
------------- ------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 6,784,311 $ 2,236,633 $523,726 $65,839 $8,138,831
------------- ------------- ------------- ------------- -------------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31,
The The
Muirfield Growth
Fund Fund
INCREASE (DECREASE) IN NET ASSETS: 1996 1995 1996 1995
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 1,865,318 $ 938,690 $ 495,160 $ 807,065
Net realized gain (loss) on investments and
futures contracts 10,225,068 14,740,346 (1,313,621) 4,316,008
Net change in unrealized appreciation
(depreciation) of investments (5,306,075) 5,883,601 3,055,094 111,505
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations 6,784,311 21,562,637 2,236,633 5,234,578
------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (1,865,319) (938,690) (495,151) (807,065)
Net realized gain from investments and futures
contracts (9,879,664) (15,073,253) - (659,136)
------------- ------------- ------------- -------------
Net decrease in net assets resulting
from dividends and distributions (11,744,983) (16,011,943) (495,151) (1,466,201)
------------- ------------- ------------- -------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 31,306,972 26,530,545 3,904,506 1,775,837
Reinvestment of dividends 11,652,407 15,844,992 488,159 1,436,634
Cost of redemptions (28,415,321) (19,294,010) (6,561,166) (4,525,935)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from capital share transactions 14,544,058 23,081,527 (2,168,501) (1,313,464)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 9,583,386 28,632,221 (427,019) 2,454,913
NET ASSETS - Beginning of period 111,751,221 83,119,000 24,630,875 22,175,962
============= ============= ============= =============
NET ASSETS - End of period $ 121,334,607 $ 111,751,221 $ 24,203,856 $ 24,630,875
============= ============= ============= =============
SHARE TRANSACTIONS:
Issued 5,310,158 4,353,780 246,129 120,106
Reinvested 2,132,111 2,767,237 30,498 96,212
Redeemed (4,745,388) (3,170,312) (406,881) (306,553)
------------- ------------- ------------- -------------
Change in shares 2,696,881 3,950,705 (130,254) (90,235)
============= ============= ============= =============
<PAGE>
<CAPTION>
The The U.S.
Total Return Government
Utilities Fund Bond Fund
INCREASE (DECREASE) IN NET ASSETS: 1996 1995* 1996 1995
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 94,951 $ 39,143 $ 808,621 $ 780,338
Net realized gain (loss) on investments and
futures contracts 209,382 (679) 34,127 988,478
Net change in unrealized appreciation
(depreciation) of investments 219,393 333,292 (776,909) 667,973
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations 523,726 371,756 65,839 2,436,789
------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (94,951) (39,143) (808,624) (780,352)
Net realized gain from investments and futures
contracts (208,703) - - -
------------- ------------- ------------- -------------
Net decrease in net assets resulting
from dividends and distributions (303,654) (39,143) (808,624) (780,352)
------------- ------------- ------------- -------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 2,105,006 2,519,770 4,221,575 2,883,665
Reinvestment of dividends 261,364 33,121 731,408 686,353
Cost of redemptions (393,419) (4,409) (2,475,250) (2,161,626)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from capital share transactions 1,972,951 2,548,482 2,477,733 1,408,392
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,193,023 2,881,095 1,734,948 3,064,829
NET ASSETS - Beginning of period 2,881,095 - 16,047,657 12,982,828
============= ============= ============= =============
NET ASSETS - End of period $ 5,074,118 $ 2,881,095 $ 17,782,605 $ 16,047,657
============= ============= ============= =============
SHARE TRANSACTIONS:
Issued 143,939 201,499 201,655 142,467
Reinvested 17,645 2,569 35,083 33,492
Redeemed (26,688) (340) (118,887) (106,680)
------------- ------------- ------------- -------------
Change in shares 134,896 203,728 117,851 69,279
============= ============= ============= =============
<PAGE>
<CAPTION>
The
Money Market
Fund
INCREASE (DECREASE) IN NET ASSETS: 1996 1995
<S> <C> <C>
OPERATIONS:
Investment income - net $ 8,138,831 $ 8,095,621
Net realized gain (loss) on investments and futures contracts - -
Net change in unrealized appreciation
(depreciation) of investments - -
------------ ------------
Net increase in net assets resulting from operations 8,138,831 8,095,621
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (8,138,831) (8,095,621)
Net realized gain from investments and futures contracts - -
------------ ------------
Net decrease in net assets resulting
from dividends and distributions (8,138,831) (8,095,621)
------------ ------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 389,806,633 365,251,080
Reinvestment of dividends 7,883,875 7,649,188
Cost of redemptions (418,830,047) (396,651,391)
------------ ------------
Net increase (decrease) in net assets
resulting from capital share transactions (21,139,539) (23,751,123)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (21,139,539) (23,751,123)
NET ASSETS - Beginning of period 141,087,036 164,838,159
============ ============
NET ASSETS - End of period $ 119,947,497 $ 141,087,036
============ ============
SHARE TRANSACTIONS:
Issued 389,806,633 365,251,080
Reinvested 7,883,875 7,649,188
Redeemed (418,830,047) (396,651,391)
------------ ------------
Change in shares (21,139,539) (23,751,123)
============ ============
<FN>
*For period from June 21, 1995 through December 31, 1995
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during
each period based upon audited financial statements
THE MUIRFIELD FUND
Years Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $5.73 $5.34 $5.36 $6.25 $6.43
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10 0.06 0.14 (0.01) 0.06
Net Gains or Losses on Securities
(both realized and unrealized) 0.25 1.31 - 0.45 0.34
===== ===== ===== ===== =====
Total From Investment Operations 0.35 1.37 0.14 0.44 0.40
===== ===== ===== ===== =====
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.10) (0.06) (0.14) (0.02) (0.06)
Distributions (from capital gains) (0.51) (0.92) (0.02) (1.31) (0.52)
===== ===== ===== ===== =====
Total Distributions (0.61) (0.98) (0.16) (1.33) (0.58)
===== ===== ===== ===== =====
NET ASSET VALUE, END OF PERIOD $5.47 $5.73 $5.34 $5.36 $6.25
===== ===== ===== ===== =====
TOTAL RETURN 5.99% 25.82% 2.70% 8.11% 6.91%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 121,335 111,751 83,119 73,063 55,280
Ratio of Expenses to Average Net Assets 1.19% 1.26% 1.22% 1.26% 1.40%
Ratio of Net Investment Income to Average Net Assets 1.54% 0.97% 2.55% -0.13% 1.05%
Portfolio Turnover Rate* 297.41% 186.13% 168.17% 279.56% 324.14
<FN>
*Turnover rate of corresponding portfolio
</FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during
each period based upon audited financial statements
THE GROWTH FUND
Years Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.34 $13.08 $13.45 $12.70 $12.05
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.31 0.50 0.27 0.09 0.18
Net Gains or Losses on Securities
(both realized and unrealized) 1.07 2.68 (0.37) 0.82 0.58
====== ====== ======= ====== ======
Total From Investment Operations 1.38 3.18 (0.10) 0.91 0.76
====== ====== ======= ====== ======
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.31) (0.50) (0.27) (0.16) (0.11)
Distributions (from capital gains) -- (0.42) -- -- --
====== ====== ======= ====== ======
Total Distributions (0.31) (0.92) (0.27) (0.16) (0.11)
====== ====== ======= ====== ======
NET ASSET VALUE, END OF PERIOD $16.41 $15.34 $13.08 $13.45 $12.70
====== ====== ======= ====== ======
TOTAL RETURN 9.08% 24.61% -0.69% 7.21% 6.35%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 24,204 24,631 22,176 26,171 25,534
Ratio of Expenses to Average Net Assets 1.65% 1.64% 1.63% 1.51% 1.51%
Ratio of Net Investment Income to Average Net Assets 1.92% 3.38% 1.95% 0.69% 1.31%
Portfolio Turnover Rate* 81.66% 337.57% 102.76% 99.54% 39.03%
<FN>
*Turnover rate of corresponding portfolio
</FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during
each period based upon audited and unaudited financial statements
THE TOTAL RETURN UTILITIES FUND
For The Period
For The Year Ended June 21, 1995 2
December 31, 1996 to Dec. 31, 1995
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.14 $12.50
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.37 0.21
Net Gains or Losses on Securities (both realized and unrealized) 1.48 1.64
===== =====
Total From Investment Operations 1.85 1.85
===== =====
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.37) (0.21)
Distributions (from capital gains) (0.64) --
===== =====
Total Distributions (1.01) (0.21)
NET ASSET VALUE, END OF PERIOD $14.98 $14.14
===== =====
TOTAL RETURN 13.33% 15.00%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 5,074 2,881
Ratio of Expenses to Average Net Assets 1.25% 1.25% 1
Ratio of Net Investment Income to Average Net Assets 2.55% 3.18% 1
Ratio of Expenses to Average Net Assets, before waiver of fees 2.95% 4.35% 1
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 0.85% 0.08% 1
Portfolio Turnover Rate* 50.79% 5.06%
<FN>
1 Annualized
2 Date of commencement of operations
*Turnover rate of corresponding portfolio
</FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during
each period based upon audited financial statements.
THE U.S. GOVERNMENT BOND FUND
Years Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.58 $19.25 $20.18 $19.46 $19.84
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.96 1.11 0.72 0.86 0.99
Net Gains or Losses on Securities
(both realized and unrealized) (0.94) 2.33 (0.93) 0.71 (0.38)
====== ===== ===== ===== ======
Total From Investment Operations 0.02 3.44 (0.21) 1.57 0.61
====== ===== ===== ===== ======
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.96) (1.11) (0.72) (0.85) (0.99)
====== ===== ===== ===== ======
Total Distributions (0.96) (1.11) (0.72) (0.85) (0.99)
====== ===== ===== ===== ======
Net Asset Value, End of Period $20.64 $21.58 $19.25 $20.18 $19.46
====== ===== ===== ===== ======
TOTAL RETURN 0.15% 18.32% -0.99% 8.21% 3.26%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 17,783 16,048 12,983 13,137 11,100
Ratio of Expenses to Average Net Assets 1.00% 1.00% 1.00% 0.99% 1.00%
Ratio of Net Investment Income to Average Net Assets 4.61% 5.41% 3.71% 4.25% 5.13%
Ratio of Expenses to Average Net Assets, before
waiver of fees * 1.06% 1.14% 1.14% 1.09% 1.21%
Ratio of Net Investment Income to Average Net Assets,
before waiver of fees * 4.55% 5.27% 3.57% 4.15% 4.92%
Portfolio Turnover Rate1 778.59% 232.34% 707.57% 235.74% 100.53%
<FN>
* Includes fees waived in corresponding portfolio
1 Turnover rate of corresponding portfolio
</FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during
each period based upon audited financial statements
THE MONEY MARKET FUND
Years Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.06 0.04 0.03 0.04
====== ===== ===== ===== ======
Total From Investment Operations 0.05 0.06 0.04 0.03 0.04
====== ===== ===== ===== ======
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.05) (0.06) (0.04) (0.03) (0.04)
====== ===== ===== ===== ======
Total Distributions (0.05) (0.06) (0.04) (0.03) (0.04)
====== ===== ===== ===== ======
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
====== ===== ===== ===== ======
TOTAL RETURN 5.27% 5.85% 4.10% 2.98% 3.70%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 119,947 141,087 164,838 200,030 245,259
Ratio of Expenses to Average Net Assets 0.40% 0.40% 0.37% 0.37% 0.35%
Ratio of Net Investment Income to Average
Net Assets 5.15% 5.70% 4.02% 2.94% 3.68%
Ratio of Expenses to Average Net Assets, before
waiver of fees * 0.58% 0.64% 0.57% 0.57% 0.56%
Ratio of Net Investment Income to Average Net
Assets, before waiver of fees * 4.97% 5.46% 3.82% 2.74% 3.47%
<FN>
* Includes fees waived in corresponding portfolio
</FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. ORGANIZATION
The Flex-funds Trust (the Trust) was organized in 1982 and is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company which is presently comprised of five separate funds (each a
"Fund" and collectively the "Funds") offering six separate series. Effective
May 1, 1992, The Money Market, Growth, and Bond Funds began investing all of
their investable assets in a corresponding open-end management investment
company (each a "Portfolio" and collectively the "Portfolios") having the same
investment objective as the Fund. The Muirfield Fund began on January 3, 1993
investing all of its investable assets in a corresponding open-end management
investment company having the same investment objectives as the Fund. The
Total Return Utilities Fund commenced operations on June 21, 1995 when it
began investing all of its investable assets in a corresponding open-end
management investment company having the same investment objectives as the
Fund. The Money Market, Muirfield, Growth, Bond and Total Return Utilities
Funds, the Portfolios into which they invest and the percentage of each
portfolio owned by the respective Fund at December 31, 1996 is shown below:
<TABLE>
<CAPTION>
Approximate Percentage
of Portfolio Held by Fund
Fund Portfolio at December 31, 1996
<S> <C> <C>
The Muirfield Fund Mutual Fund Portfolio 90%
The Growth Fund Growth Stock Portfolio 100%
The Total Return Utilities Fund Utilities Stock Portfolio 64%
The U.S. Government Bond Fund Bond Portfolio 100%
The Money Market Fund Money Market Portfolio 34%
</TABLE>
The financial statements of the Portfolios, including the Portfolios of
Investments, are included elsewhere in this report and should be read in
conjunction with the financial statements of each respective Fund.
2. SIGNIFICANT ACCOUNTING POLICES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Valuation of Investments - Valuation of securities by the Portfolios is
discussed at Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report (See page 46).
Income Taxes - It is the Funds' policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to their shareholders. Therefore, no
Federal income tax provision is required.
Distributions to Shareholders - Dividends to shareholders are recorded on the
ex-dividend date.
Organizational Costs - The costs related to the organization of each of the
five Funds have been deferred and are being amortized by each Fund on a
straight-line basis over a five-year period. Such costs for The Growth, Bond,
Muirfield and Money Market Funds have been fully amortized.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield
Investors, Inc. (MII), provides each Portfolio with investment management,
research, statistical and advisory services. Miller/Howard Investments, Inc.
(Subadviser) serves as the Utilities Stock Portfolio's Subadviser under an
Investment Subadvisory Agreement between RMA and the Subadviser.
RMA has agreed to reimburse each Fund for the amount by which annual expenses
of the Fund and its respective Portfolio (excluding interest, taxes, brokerage
fees, and extraordinary expenses) exceed the most restrictive expense
limitation imposed by any State in which such Fund's shares are sold. Such
reimbursement is limited to the total fee charged by RMA. The investment
advisory fees reimbursed for the year ended December 31, 1996 were at the
request of RMA and were not the result of the aforementioned expense
limitations.
<PAGE>
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of
MII, serves as stock transfer, dividend disbursing and shareholder services
for all of the Trust's separate Funds. Subject to a $4,000 annual minimum fee
The Growth, Muirfield, and Total Return Utilities Funds each incur an annual
fee equal to the greater of $15 per shareholder account, or .10% of each
Fund's average net assets, payable monthly. In The Bond Fund, the annual fee
is the greater of $15 per shareholder account, or .06% of the Fund's average
net assets, payable monthly. In The Money Market Fund, the annual fee is the
greater of $20 per shareholder account, or .06% of the Fund's average net
assets, payable monthly.
MFS also provides the Trust with certain administrative services. Each Fund
incurs an annual fee, payable monthly, of .03% of each Fund's average
net assets.
The Funds have adopted distribution expense plans pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Plans"). Pursuant to the Plans, the
Funds may annually incur certain expenses associated with the distribution of
fund shares in amounts not to exceed 2/10 of 1% of each Fund's average net
assets, with the exception of The Total Return Utilities Fund whose amount
cannot exceed 25/100 of 1% of average net assets.
Certain officers and/or trustees of the Funds and each Portfolio are officers
and/or directors of MII, RMA and MFS.
4. COMMITMENTS AND CONTINGENCIES
Fidelity Bond and Errors and Omissions insurance coverage for the Trust and
its officers and Trustees has been obtained through ICI Mutual Insurance
Company (ICI Mutual), an industry-sponsored mutual insurance company. As of
December 31, 1996, the Trust has made payments of $29,620, in addition to the
annual premiums paid, for the capital reserves of ICI Mutual.
The Trust is also committed to provide $51,055 should ICI Mutual experience
the need for additional capital contributions.
Total assets of $105,000 invested in U.S. Treasury Bills are held in
segregated accounts which collateralize a standby letter of credit in
connection with the Trust's participation in ICI Mutual.
5. CAPITAL SHARE TRANSACTIONS
At December 31, 1996, an indefinite number of shares of $0.10 par value stock
were authorized in each of the Funds, and paid-in capital amounted to
$119,947,497 in The Money Market Fund, $120,745,044 in The Muirfield Fund,
$22,378,542 in The Growth Fund, $18,790,130 in The Bond Fund, and $4,521,433
in The Total Return Utilities Fund. (See Statements of Changes in Net Assets
which are included elsewhere in this report for capital stock transactions.)
6. DISTRIBUTIONS
The Money Market and Bond Funds declare dividends daily and distribute monthly
all of their net investment income. The Total Return Utilities Fund declares
as dividends and distributes monthly substantially all of its net investment
income. The Muirfield and Growth Funds declare as dividends and distribute
quarterly substantially all of their net investment income. Net realized
capital gains for all Funds, if any, are distributed annually after deduction
of prior years' loss carryforwards. Dividends from net investment income and
any distributions of realized capital gains are distributed in cash or
reinvested in additional shares of the Funds at net asset value.
At December 31, 1996, The Growth and Bond Funds had available for Federal
income tax purposes unused capital loss carryforwards. The amount in the
Growth Fund is $1,339,495 which will expire in 2004, and the amount in the
Bond Fund is $700,493 which will expire in the years 1997 through 2002.
7. SUBSEQUENT EVENTS
On January 1, 1997 The Growth Fund changed its name to The Highlander Fund. In
addition, The Growth Stock Portfolio (the "Portfolio") in which the Growth
Fund invests all of its investable assets, changed its investment objective to
seek capital growth by investing primarily in a diversified portfolio of
domestic common stocks with greater than average growth characteristics
selected primarily from the Standard & Poor's Composite Stock Price Index (the
"S&P 500"). The new investment discipline calls for establishing separate
investment portfolio components of the Portfolio's existing portfolio of
assets, each such component representing one of the industry sectors
comprising the S&P 500. The industry sectors are then managed by one or more
subadvisers.
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Trustees of The Flex-funds:
We have audited the accompanying statements of assets and liabilities of The
Flex-funds (comprising, respectively, The Muirfield, Growth, Total Return
Utilities, U.S. Government Bond and Money Market Funds), as of December 31,
1996, and the related statements of operations, statements of changes in net
assets and the financial highlights for each of the periods indicated herein.
These financial statements and the financial highlights are the responsibility
of The Flex-funds' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of December 31, 1996, by correspondence with the custodian and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The Flex-funds at December 31, 1996,
the results of their operations, the changes in their net assets and the
financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
Mutual Growth Utilities Money
Fund Stock Stock Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market value* $85,570,890 $17,595,283 $7,032,966 $13,381,062 $317,524,839
Repurchase agreements* 51,661,000 6,968,000 914,000 225,000 32,550,000
Cash 520 689 583 581 248,915
Receivable for securities sold - - - 4,084,554 -
Interest receivable 193,699 1,968 171 125,001 3,167,087
Dividends receivable - 32,852 18,560 - -
Prepaid/Other assets 644 140 16 89 844
Unamortized organization costs 4,924 2,545 31,150 2,545 2,545
=========== =========== =========== =========== ============
Total Assets 137,431,677 24,601,477 7,997,446 17,818,832 353,494,230
----------- ----------- ----------- ----------- ------------
Liabilites:
Payable for futures contract settlement 1,785,305 153,300 - 8,625 -
Payable to corresponding Fund - - - - 505,357
Payable to investment adviser 91,065 21,868 6,264 6,077 46,355
Accrued fund accounting fees 4,248 2,648 644 1,910 6,313
Other accrued liabilities 11,491 9,979 26,184 10,626 5,980
=========== =========== =========== =========== ============
Total Liabilities 1,892,109 187,795 33,092 27,238 564,005
----------- ----------- ----------- ----------- ------------
Net Assets:
Capital 134,989,964 21,250,165 7,184,627 17,906,157 352,930,225
Net unrealized gain (loss) on investments 549,604 3,163,517 779,727 (114,563) -
=========== =========== =========== =========== ============
Net Assets $135,539,568 $24,413,682 $7,964,354 $17,791,594 $352,930,225
----------- ----------- ----------- ----------- ------------
*Securities at cost 136,682,286 21,399,766 7,167,239 13,720,625 350,074,839
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
Mutual Growth Utilities Money
Fund Stock Stock Bond Market
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME - NET:
Interest $3,331,013 $599,916 $20,631 $983,788 $20,131,315
Dividends 348,105 321,268 230,516 - -
========== ========= ======== ======== ===========
Total Investment Income 3,679,118 921,184 251,147 983,788 20,131,315
---------- --------- -------- -------- -----------
Expenses:
Investment advisory fees 1,083,553 258,239 65,190 70,236 1,060,982
Legal fees 1,543 2,040 1,535 1,543 1,522
Audit fees 10,880 8,471 10,211 8,184 13,848
Custodian fees 15,407 6,451 3,066 4,980 21,008
Accounting fees 50,435 30,867 9,541 22,555 74,002
Trustees fees and expenses 4,870 7,192 5,558 4,956 4,938
Insurance 2,382 536 51 340 3,913
Amortization of organization cost 5,453 4,992 8,996 4,992 4,992
Other expenses 4,649 1,313 4,000 865 3,720
========== ========= ======== ======== ===========
Total Expenses 1,179,172 320,101 108,148 118,651 1,188,925
Investment advisory fees waived - - - (10,890) (512,876)
Directed brokerage payments received - - (3,377) - -
Other directed payments received (10,397) - - - -
========== ========= ======== ======== ===========
Total Expenses - net 1,168,775 320,101 104,771 107,761 676,049
---------- --------- -------- -------- -----------
INVESTMENT INCOME - NET 2,510,343 601,083 146,376 876,027 19,455,266
---------- --------- -------- -------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on futures contracts (425,664) (1,614,924) - 41,147 -
Net realized gain (loss) on investments 11,000,788 301,314 348,392 (7,021) -
Net change in unrealized appreciation
(depreciation) of investments (5,130,740) 3,055,094 357,308 (776,915) -
========== ========= ======== ======== ===========
NET GAIN (LOSS) ON INVESTMENTS 5,444,384 1,741,484 705,700 (742,789) -
========== ========= ======== ======== ===========
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $7,954,727 $2,342,567 $852,076 $133,238 $19,455,266
========== ========= ======== ======== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31,
Mutual Growth
Fund Stock
Portfolio Portfolio
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income - net $2,510,343 $1,278,396 $601,083 $900,867
Net realized gain (loss) on investments and futures contracts 10,575,124 15,554,692 (1,313,610) 4,316,033
Net change in unrealized appreciation
(depreciation) of investments (5,130,740) 5,680,803 3,055,094 111,506
----------- ---------- ----------- ---------
Net increase in net assets resulting from operations 7,954,727 22,513,891 2,342,567 5,328,406
----------- ---------- ----------- ---------
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 32,575,692 34,671,819 4,020,512 1,680,821
Withdrawals (27,099,980) (18,261,284) (6,486,427) (4,640,744)
----------- ---------- ----------- ---------
Net increase (decrease) in net assets resulting from
transactions of investors' beneficial interests 5,475,712 16,410,535 (2,465,915) (2,959,923)
----------- ---------- ----------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS 13,430,439 38,924,426 (123,348) 2,368,483
=========== ========== =========== =========
NET ASSETS - Beginning of period 122,109,129 83,184,703 24,537,030 22,168,547
=========== ========== =========== =========
NET ASSETS - End of period $135,539,568 $122,109,129 $24,413,682 $24,537,030
=========== ========== =========== =========
<PAGE>
<CAPTION>
Utilities
Stock Bond
Portfolio Portfolio
1996 1995* 1996 1995
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income - net $146,376 $29,889 $876,027 $841,854
Net realized gain (loss) on investments and futures contracts 348,392 (1,067) 34,126 988,487
Net change in unrealized appreciation
(depreciation) of investments 357,308 422,419 (776,915) 667,977
----------- ---------- ----------- ---------
Net increase in net assets resulting from operations 852,076 451,241 133,238 2,498,318
----------- ---------- ----------- ---------
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 5,138,546 3,908,655 4,220,008 2,890,694
Withdrawals (2,317,138) (69,026) (2,627,674) (2,330,962)
----------- ---------- ----------- ---------
Net increase (decrease) in net assets resulting from
transactions of investors' beneficial interests 2,821,408 3,839,629 1,592,334 559,732
----------- ---------- ----------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,673,484 4,290,870 1,725,572 3,058,050
=========== ========== =========== =========
NET ASSETS - Beginning of period 4,290,870 - 16,066,022 13,007,972
=========== ========== =========== =========
NET ASSETS - End of period $7,964,354 $4,290,870 $17,791,594 $16,066,022
=========== ========== =========== =========
<PAGE>
<CAPTION>
Money
Market
Portfolio
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income - net $19,455,266 $11,720,462
Net realized gain (loss) on investments and futures contracts - -
Net change in unrealized appreciation
(depreciation) of investments - -
------------- ------------
Net increase in net assets resulting from operations 19,455,266 11,720,462
------------- ------------
TRANSACTIONS OF INVESTORS' BENEFICIAL INTERESTS:
Contributions 1,414,075,891 753,617,719
Withdrawals (1,335,249,306) (735,213,083)
------------- ------------
Net increase (decrease) in net assets resulting from
transactions of investors' beneficial interests 78,826,585 18,404,636
------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 98,281,851 30,125,098
============= ============
NET ASSETS - Beginning of period 254,648,374 224,523,276
============= ============
NET ASSETS - End of period $352,930,225 $254,648,374
============= ============
<FN>
*For the period June 21, 1995 through December 31, 1996
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Ratios/Supplemental Data
MUTUAL FUND PORTFOLIO
Year Ended December 31,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 135,540 122,109 83,185 81,605
Ratio of Expenses to Average Net Assets* 0.87% 0.95% 1.01% 1.03%
Ratio of Net Investment Income to Average Net Assets 1.86% 1.26% 2.76% 0.09%
Portfolio Turnover Rate 297.41% 186.13% 168.17% 279.56%
<FN>
*Ratio of expenses both with and without effect of directed payments
</FN>
</TABLE>
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
For The Period May 1, 1992
Year Ended December 31, to December 31, 1992
1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) 24,414 24,537 22,169 26,172 25,556
Ratio of Expenses to Average Net Assets 1.24% 1.25% 1.23% 1.23% 1.22% 1
Ratio of Net Investment Income to Average Net Assets 2.33% 3.78% 2.35% 0.99% 2.04% 1
Portfolio Turnover Rate 81.66% 337.57% 102.76% 99.54% 129.44%
Average brokerage commission per share 2 $0.091 $0.0806 N/A N/A N/A
<FN>
1 Annualized
2 Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of shares purchased and sold by the
Portfolio for which commissions were charged.
</FN>
</TABLE>
<TABLE>
<CAPTION>
UTILITY STOCK PORTFOLIO
For The Period
For The Year Ended June 21, 1995 *
December 31, 1996 to December 31, 1995
<S> <C> <C>
Net Assets, End of Period ($000) 7,964 4,291
Ratio of Expenses to Average Net Assets 1.61% 2.32% 1
Ratio of Net Investment Income to Average Net Assets 2.24% 2.09% 1
Ratio of Expenses to Average Net Assets before directed brokerage payments 1.66% 2.40% 1
Ratio of Net Investment Income to Average Net Assets before
directed brokerage payments 2.19% 2.01% 1
Portfolio Turnover Rate 50.79% 5.06%
Average brokerage commission per share 2 $0.060 $0.0600
<FN>
1 Annualized
2 Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of shares purchased and sold by the
Portfolio for which commissions were charged.
* Date of commencement of operations
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Ratios/Supplemental Data
BOND PORTFOLIO
For The Period May 1, 1992
Year Ended December 31, to December 31, 1992
1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) 17,792 16,066 13,008 13,178 11,126
Ratio of Expenses to Average Net Assets 0.61% 0.57% 0.56% 0.60% 0.58% 1
Ratio of Net Investment Income to Average Net
Assets 4.99% 5.82% 4.15% 4.62% 5.40% 1
Ratio of Expenses to Average Net Assets, before
waiver of fees 0.68% 0.71% 0.70% 0.71% 0.80% 1
Ratio of Net Investment Income to Average Net
Assets, before waiver of fees 4.92% 5.68% 4.01% 4.51% 5.18% 1
Portfolio Turnover Rate 778.59% 232.34% 707.57% 235.74% 132.53%
<FN>
1 Annualized
</FN>
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
For The Period
May 1, 1992
Year Ended December 31, to Dec. 31, 1992
1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Assets, End of Period ($000) 352,930 256,126 224,523 200,148 244,272
Ratio of Expenses to Average Net Assets 0.19% 0.21% 0.19% 0.19% 0.18% 1
Ratio of Net Investment Income to Average
Net Assets 5.34% 5.87% 4.28% 3.09% 3.60% 1
Ratio of Expenses to Average Net Assets,
before waiver of fees 0.33% 0.37% 0.39% 0.40% 0.40% 1
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 5.20% 5.70% 4.08% 2.88% 3.38% 1
Portfolio Turnover Rate N/A N/A N/A N/A N/A
<FN>
1 Annualized
</FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Each separate Portfolio (the "Portfolios") is registered under the Investment
Company Act of 1940, as amended, as a no-load, open-end management investment
company which was organized as a trust under the laws of the State of New
York. Each Declaration of Trust permits the Trustees, who are the same for 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 four remaining Portfolios maturing more than sixty days after the
valuation date are valued at the last sales price as of the close of business
on the day of valuation, or, lacking any sales, at the most recent bid price
or yield equivalent as obtained from dealers that make markets in such
securities. When such securities are valued within sixty days or less to
maturity, the difference between the valuation existing on the sixty-first day
before maturity and maturity value is amortized on a straight-line basis to
maturity. Securities maturing within sixty days from their date of acquisition
are valued at amortized cost.
Securities which are traded on stock exchanges are valued at the last sales
price as of the close of business of the New York Stock Exchange on the day of
valuation, or, lacking any sales, at the closing bid prices. Securities traded
on the over-the-counter market are valued at the most recent bid price or
yield equivalent as obtained from one or more dealers that make markets in
such securities. Mutual funds are valued at the daily redemption value
determined by the underlying fund. Valuations in The Bond Portfolio are
determined as of 3:00 p.m. Eastern time.
Repurchase Agreements - It is the Portfolios' policy to take possession of the
collateral for repurchase agreements before payment is made to the seller.
Market value of the collateral must be at least 100% of the amount of the
repurchase agreement.
Options & Futures - Each Portfolio except the Money Market Portfolio may
engage in transactions in financial futures contracts and options as a hedge
against the change in market value of the securities held in the portfolio, or
which it intends to purchase. The expectation is that any gain or loss on such
transactions will be substantially offset by any gain or loss on the
securities in the underlying portfolio or on those which are being considered
for purchase.
To the extent that the Portfolio enters into futures contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change
in the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit either cash or securities in an amount
("initial margin") equal to a certain percentage of the contract value.
Subsequent payments ("variation margin") equal to changes in the daily
settlement price or last sale on the exchanges where they trade are paid or
received each day and are recorded as a gain or loss on futures contracts.
Call and put option contracts involve the payment of a premium for the right
to purchase or sell an individual security or index aggregate at a specified
price until the expiration of the contract. Such transactions expose the
Portfolio to the loss of the premium paid if the Portfolio does not sell or
exercise the contract prior to the expiration date. In the case of a call
option, sufficient cash or money market instruments will be segregated to
complete the purchase. Options are valued on the basis of the daily settlement
price or last sale on the exchanges where they trade and the changes in value
are recorded as an unrealized gain or loss until sold, exercised or expired.
In the case of a written option, premiums received by each portfolio upon
writing the option are recorded in the liability section of the Statement of
Assets and Liabilities and are subsequently adjusted to current market value.
When the written option is closed, exercised or expired, the portfolio
realizes a gain or loss and the liability is eliminated. During the period
ended December 31, 1996 the Portfolios wrote the following option contracts:
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO BOND PORTFOLIO
Number of Contracts Number of Premiums Number of Contracts Number of Premiums
<S> <C> <C> <C> <C>
Outstanding at Beginning of Period 3,300 $4,881,362 20 $10,850
Options Written - - - -
Options Terminated (3,300) (4,881,362) (20) (10,850)
====== ========== ===== ========
Outstanding at End of Period 0 $0 0 $0
</TABLE>
<PAGE>
Income Taxes - It is the Portfolios' policy to comply with the requirements of
the Internal Revenue Code applicable to it. Therefore, no Federal income tax
provision is required.
Organizational Costs - The costs related to the organization of each of the
five Portfolios have been deferred and are being amortized by each Portfolio
on a straight-line basis over a five-year period.
Other - The Portfolios follow industry practice and record security
transactions on the trade date. Gains and losses on security transactions are
determined on the specific identification basis. Dividend income is recognized
on the ex-dividend date, and interest income (including amortization of premium
and discount) is recognized as earned.
2. INVESTMENT ADVISORY, AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield
Investors, Inc. (MII), provides the Portfolios with investment management,
research, statistical and advisory services, and pays certain other expenses
of the Portfolios. Miller/Howard Investments, Inc. (Subadviser) serves as the
Utilities Stock Portfolio's Subadviser under an Investment Subadvisory
Agreement between RMA and the Subadviser. For such services the Portfolios pay
monthly a fee based upon the average daily value of each Portfolios' net
assets at the following annual rates: Mutual Fund, Growth Stock, and Utilities
Stock Portfolio, 1% of average net assets up to $50 million, 0.75% of average
net assets exceeding $50 million up to $100 million and 0.60% of average net
assets exceeding $100 million; Bond Portfolio, 0.40% of average net assets up
to $100 million and 0.20% of average net assets exceeding $100 million; Money
Market Portfolio, 0.40% of average net assets up to $100 million and 0.25% of
average net assets exceeding $100 million. During the year ended December 31,
1996, RMA voluntarily waived a portion of its investment advisory fees in the
Money Market and Bond Portfolios.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
accounting services agent for all of the Portfolios. The minimum annual fee
for all such services for the Mutual Fund, Growth Stock, Bond, and Utilities
Stock Portfolios is $7,500. Subject to the applicable minimum fee, each
Portfolio's annual fee, payable monthly, is computed at the rate of 0.15% of
the first $10 million, 0.10% of the next $20 million, 0.02% of the next $50
million, and 0.01% in excess of $80 million of the respective Portfolio's
average net assets. In the Money Market Portfolio the minimum annual fee for
accounting services is $30,000. Subject to the applicable minimum fee, the
Money Market Portfolio's annual fee, payable monthly, is computed at the rate
of 0.15% of the first $10 million, 0.10% of the next $20 million, 0.02% of the
next $50 million and 0.01% in excess of $80 million of the Portfolio's average
net assets.
Certain officers and/or trustees of the Funds and each Portfolio are officers
and/or directors of MII, RMA and MFS.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the year ended December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Mutual Fund Portfolio $127,926,031 $179,435,771
Growth Stock Portfolio $ 2,990,564 $ 792,118
Utilities Stock Portfolio $ 5,484,900 $ 3,084,727
</TABLE>
As of December 31, 1996, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised of
the following:
<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 $136,682,286 $1,034,293 $(484,688) $549,605
Growth Stock Portfolio $21,399,766 $3,267,845 $(104,329) $3,163,516
Bond Portfolio $13,720,625 $54 $(114,617) $(114,563)
Utilities Stock Portfolio $7,167,239 $902,962 $(123,235) $779,727
</TABLE>
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Trustees of the Mutual Fund Portfolio, Growth
Stock Portfolio, Utilities Stock Portfolio, Bond 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 and Money Market Portfolio, including the portfolios of investments,
as of December 31, 1996, and the related statements of operations, statements
of changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and the financial highlights are
the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of December 31, 1996, by correspondence with the custodian and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio, Bond
Portfolio and Money Market Portfolio at December 31, 1996, the results of
their operations, the changes in their net assets and the financial highlights
for each of the periods indicated herein, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE>
MANAGER AND INVESTMENT ADVISER
R. Meeder & Associates
6000 Memorial Drive
P.O. Box 7177
Dublin, Ohio 43017
SUBADVISER/THE UTILITIES STOCK PORTFOLIO
Miller/Howard Investments, Inc.
141 Upper Byrdcliffe Road, P.O. Box 549
Woodstock, New York 12498
BOARD OF TRUSTEES
Milton S. Bartholomew
Dr. Roger D. Blackwell
John M. Emery
Richard A. Farr
William L. Gurner
Robert S. Meeder, Sr.
Robert S. Meeder, Jr.
Russel G. Means
Lowell G. Miller
Walter L. Ogle
Philip A. Voelker
CUSTODIAN
Star Bank, N.A., Cincinnati
Cincinnati, Ohio 45201
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, Ohio 43017
AUDITORS
KPMG Peat Marwick LLP
Columbus, Ohio 43215
