As filed with the Securities and Exchange Commission on April 29, 1997.
File No. 811- 9028
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
UTILITIES STOCK PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
P.O. Box 7177, 6000 Memorial Drive
Dublin, Ohio 43017
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 614-766-7000
Donald F. Meeder, P.O. Box 7177, 6000 Memorial Drive, Dublin, OH 43017
(Name and Address of Agent for Service)
Copy to:
James B. Craver
P. O. Box 811
Dover, MA 02030-0811
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EXPLANATORY NOTE
This Registration Statement of Utilities Stock Portfolio has been filed by
the Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended (the "1940 Act"). However, beneficial interests in the Registrant are
not being registered under the Securities Act of 1933, as amended (the "1933
Act"), since such interests will be offered solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the 1993 Act. Investments in the Registrant may only be made by
investment companies, insurance company separate accounts, common or commingled
trust funds or similar organizations or entities which are "accredited
investors" as defined in Regulation D under the 1993 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to sell, or the solicitation of an offer to buy, any beneficial interest in the
Registrant.
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PART A
Responses to Items 1 through 3 have been omitted pursuant to paragraph 4 of
Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
Utilities Stock Portfolio (the "Portfolio") is a diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on August 4, 1994.
Beneficial interests in the Portfolio are offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities which are "accredited investors" as defined in
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.
The Portfolio's investment adviser is R. Meeder & Associates, Inc. (the
"Investment Adviser" or the "Manager"). Miller/Howard Investments, Inc. is the
subadviser (the "Subadviser") for the Portfolio. The investment objective of the
Portfolio is to seek a high level of current income, and growth of income by
investing primarily in equity securities of domestic and foreign public utility
companies; however, the Portfolio will not invest in electric utilities whose
generation of power is derived from nuclear reactors. The Portfolio also seeks
capital appreciation, but only when consistent with its primary investment
objective. There can be no assurance that such objective will be achieved.
The Portfolio seeks to achieve its objective by investing, under normal
conditions, at least 65% of its total assets in a diversified portfolio of
common stocks, preferred stocks, warrants and rights, and securities convertible
into common or preferred stock of public utility companies. Public utility
companies include domestic or foreign companies that provide electricity,
natural gas, water, telecommunications or sanitary services to the public. The
Portfolio will not invest more than 5% of its total assets in equity securities
of issuers whose debt securities are rated below investment grade, that is,
rated below one of the four highest rating categories by Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") or deemed to
be of equivalent quality in the judgment of the Subadviser. Debt securities
rated below investment grade are rated below Baa or BBB.
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The remaining 35% of the Portfolio's total assets may be invested in debt
securities issued by public utility companies, and/or equity and debt securities
of issuers outside of the public utility industry which in the opinion of the
Subadviser stand to benefit from developments in the public utilities industry.
The Portfolio will not invest more than 40% of its total assets in the telephone
industry. The Portfolio may invest up to 25% of its total assets in securities
of foreign issuers. The Portfolio will not invest more than 10% of its net
assets in securities that are deemed to be illiquid.
Investments are selected on the basis of fundamental analysis to identify
those securities that, in the judgment of the Subadviser, provide a high level
of current income, and growth of income and secondarily, capital appreciation,
but only when consistent with its primary investment objective.
Fundamental analysis involves assessing a company and its business
environment, management, balance sheet, income statement, anticipated earnings
and dividends and other related measures of value. The Subadviser monitors and
evaluates the economic and political climate of the area in which each company
is located. The relative weightings among common stocks, debt securities and
preferred stocks will vary from time to time based upon the Subadviser's
judgment of the extent to which investments in each category will contribute to
meeting the Portfolio's investment objective.
The Subadviser emphasizes quality in selecting investments for the
Portfolio, and in addition to looking for high credit ratings, the Subadviser
ordinarily looks for several of the following characteristics: above average
earnings growth; above average growth of book value; an above average balance
sheet; high earnings to debt service coverage; low ratio of dividends to
earnings; high return on equity; low debt to equity ratio; an above-average
rating with respect to government regulation; growing rate base; lack of major
construction programs and strong management.
The Portfolio may invest up to 35% of its total assets in debt securities
of issuers in the public utility industries. Debt securities in which the
Portfolio invests are limited to those rated A or better by S&P or Moody's or
deemed to be of equivalent quality in the judgment of the Subadviser.
A change in prevailing interest rates is likely to affect the Portfolio's
net asset value because prices of debt securities and equity securities of
utility companies tend to increase when interest rates decline and decrease when
interest rates rise.
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During periods when the Subadviser deems it necessary for temporary
defensive purposes, the Portfolio may invest without limit in high quality money
market instruments. These instruments consist of commercial paper, certificates
of deposit, banker's acceptances and other bank obligations, obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, high
grade corporate obligations and repurchase agreements.
Except as otherwise expressly provided herein, all investment objectives
and policies stated throughout this Registration Statement are not fundamental
and may be changed without approval of the Portfolio's investors. The Portfolio
may not purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities)
if, as a result, 25% or more of the Portfolio's total assets would be invested
in the securities of companies whose principal business activities are in the
same industry, except that the Portfolio, under normal circumstances, will
invest 25% or more of its total assets in securities of public utility
companies. The Portfolio may not, with respect to 75% of its total assets,
purchase the securities of any issuer (other than obligations issued or
guaranteed by the government of the United States, or any of its agencies or
instrumentalities) if, as a result thereof, (a) more than 5% of the Portfolio's
total assets would be invested in the securities of such issuer, or (b) the
Portfolio would hold more than 10% of the voting securities of such issuer. The
foregoing investment policies regarding concentration and diversification are
fundamental and may not be changed without investor approval.
RISK FACTORS
By itself, the Portfolio does not constitute a balanced investment plan;
the Portfolio seeks a high level of current income and growth of income with
capital appreciation as a secondary objective. The Portfolio invests primarily
in common stock, preferred stock and securities convertible into common or
preferred stock. Changes in interest rates may also affect the value of the
Portfolio's investments, and rising interest rates can be expected to reduce the
Portfolio's net asset value.
Because the Portfolio concentrates its investments in public utility
companies, its performance will depend in large part on conditions in the public
utility industries. Utility stocks have traditionally been popular among more
conservative stock market investors because they have generally paid above
average dividends. However, utility stocks can still be affected by the risks of
the stock market, as well as factors specific to public utility companies.
Governmental regulation of public utility companies can limit their ability to
expand their business or to pass cost increases on to customers. Companies
providing power or energy-related services may also be affected by fuel
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shortages or cost increases, environmental protection or energy conservation
regulations, as well as fluctuating demand for their services. Some public
utility companies are facing increased competition, which may reduce their
profits. All of these factors are subject to rapid change, which may affect
utility companies independently from the stock market as a whole.
In seeking its investment objectives, the Portfolio may invest in
securities of foreign issuers. Foreign securities may involve a higher degree of
risk and may be less liquid or more volatile than domestic investments. Foreign
securities usually are denominated in foreign currencies, which means their
value will be affected by changes in the strength of foreign currencies relative
to the U.S. dollar as well as the other factors that affect security prices.
Foreign companies may not be subject to accounting standards or governmental
supervision comparable to U.S. companies, and there often is less publicly
available information about their operations. Generally, there is less
governmental regulation of foreign securities markets, and security trading
practices abroad may offer less protection to investors such as the Portfolio.
The value of such investments may be adversely affected by changes in
political or social conditions, diplomatic relations, confiscatory taxation,
expropriation, nationalization, limitation on the removal of portfolios or
assets, or imposition of (or change in) exchange control or tax regulations in
those foreign countries. Additional risks of foreign securities include
settlement delays and costs, difficulties in obtaining and enforcing judgments,
and taxation of dividends at the source of payment.
In addition, the Portfolio may invest in private placement commercial
paper. Private placement commercial paper consists of unregistered securities
which are traded in public markets to qualified institutional investors, such as
the Portfolio. The Portfolio's risk is that the universe of potential buyers for
the securities, should the Portfolio desire to liquidate a position, is limited
to qualified dealers and institutions, and therefore such securities could have
the effect of being illiquid.
The Subadviser intends to manage the Portfolio actively in pursuit of its
investment objective. The Portfolio does not expect to trade in securities for
short-term profits but, when circumstances warrant, securities may be sold
without regard to the length of time held.
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OTHER INVESTMENTS AND POLICIES
MONEY MARKET INSTRUMENTS. When investing in money market instruments, the
Portfolio will limit its purchases, denominated in U.S. dollars, to the
following securities:
o U.S. Government Securities and Securities of its Agencies and
Instrumentalities.
o Bank Obligations and Instruments Secured Thereby.
o High Quality Commercial Paper--The Portfolio may invest in commercial
paper rated no lower than "A-2" by S&P or "Prime-2" by Moody's, or, if
not rated, issued by a company having an outstanding debt issue rated
at least A by S&P or Moody's.
o Private Placement Commercial Paper--unregistered securities which are
traded in public markets to qualified institutional investors, such as
the Portfolio.
o High Grade Corporate Obligations--obligations rated at least A by S&P
or Moody's.
o Repurchase Agreements--see "Repurchase Agreements" below.
At the discretion of the Subadviser, the Portfolio may employ the following
strategies in pursuing its investment objective.
CURRENCY, OPTIONS AND FUTURES TRANSACTIONS. The Portfolio may use forward
currency contracts, futures contracts, options on securities or options on
futures contracts to implement strategies to attempt to hedge its portfolio,
i.e., reduce the overall level of investment risk normally associated with the
Portfolio. There can be no assurance that such efforts will succeed. These
techniques are described below and are further detailed in Part B.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Portfolio may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar, or may involve two foreign currencies. The Portfolio may enter into
forward currency contracts either with respect to specific transactions or with
respect to the Portfolio's positions. For example, when the Portfolio
anticipates making a purchase or sale of a security, the Portfolio may enter
into a forward currency contract in order to set the rate at which a currency
exchange transaction related to the purchase or sale will be made. Further, when
the Subadviser believes that a particular currency may decline compared to the
U.S. dollar or another currency, the Portfolio may enter into a forward contract
to sell the currency the Subadviser expects to decline in an amount
approximating the value of some or all of the Portfolio's securities denominated
in a foreign currency. The Portfolio also may write covered call options and
purchase put and call options on currencies to hedge against movements in
exchange rates.
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In addition, the Portfolio may write covered call options and purchase put
and call options on equity and debt securities to hedge against the risk of
fluctuations in the prices of securities held by the Portfolio or which the
Subadviser intends to include in the Portfolio. The Portfolio also may write
covered call options and buy put and call options on stock indexes. Such stock
index options serve to hedge against overall fluctuations in the securities
markets generally or in the utilities market sector specifically, rather than
anticipated increases or decreases in the value of a particular security.
Further, the Portfolio may sell stock index futures contracts and may
purchase put options or write covered call options on such futures contracts to
protect against a general stock market decline or a decline in the utilities
market sector that could adversely affect the Portfolio. The Portfolio also may
buy stock index futures contracts and purchase call options on such contracts to
hedge against a general stock market or market sector advance and thereby
attempt to lessen the cost of future securities acquisitions. The Portfolio may
use interest rate futures contracts and options thereon to hedge the debt
portion of the Portfolio against changes in the general level of interest rates.
The Portfolio may write only "covered" call options. An option written on a
security or currency is "covered" when, so long as the Portfolio is obligated
under the option, it owns the underlying security or currency. The Portfolio
will "cover" stock index options and options on futures contracts it writes by
maintaining in a segregated account either marketable securities, which in the
Subadviser's judgment correlate to the underlying index or futures contract or
an amount of cash, U.S. government securities or other liquid, high grade debt
securities equal in value to the amount the Portfolio would be required to pay
were the option exercised.
Although the Portfolio might not employ any of the foregoing strategies,
its use of forward currency contracts, options and futures would involve certain
investment risks and transaction costs to which it might not otherwise be
subject. These risks include: dependence on the Subadviser's ability to predict
movements in the prices of individual securities, fluctuations in the general
securities markets or in the utilities market sector and movements in interest
rates and currency markets; imperfect correlation between movements in the price
of currency, options, futures contracts or options thereon and movements in the
price of the currency or security hedged or used for cover; the fact that skills
and techniques needed to trade options, futures contracts and options thereon or
to use forward currency contracts are different from those needed to select the
securities in which the Portfolio invests; lack of assurance that a liquid
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secondary market will exist for any particular option, futures contract or
option thereon at any particular time; and the possible need to defer closing
out of certain options, futures contracts and options thereon in order to
continue to qualify for the beneficial tax treatment afforded regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code").
Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Accordingly, these financial futures contracts, related options and forward
currency contracts used by the Portfolio to implement its hedging strategies are
considered derivatives. The value of derivatives can be affected significantly
by even small market movements, sometimes in unpredictable ways. They do not
necessarily increase risk, and may in fact reduce risk.
SECURITIES LENDING
The Portfolio may lend its portfolio securities to brokers or dealers,
banks or other recognized institutional borrowers of securities, provided that
the borrower at all times maintains cash or equivalent collateral or secures a
letter of credit in favor of the Portfolio in an amount equal to at least 100%
of the market value of the securities loaned. During the time portfolio
securities are on loan, the borrower will pay the Portfolio an amount equivalent
to any dividend or interest paid on such securities and earn additional income,
or the Portfolio may receive an agreed-upon amount of interest income from the
borrower. In accordance with applicable regulatory requirements, the Portfolio
may lend up to 30% of the value of its total assets. The risks in lending
portfolio securities, as well as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in recovery of
the securities or possible loss of rights in the collateral should the borrower
fail financially.
REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements whereby the seller of a
security agrees to repurchase that security from the Portfolio at a mutually
agreed-upon time and price. The repurchase date is usually within a day or two
of the original purchase, although it may not be for a number of months. The
resale price is in excess of the purchase price, reflecting an agreed-upon rate
of return effective for the period of time the Portfolio's money is invested in
the security. The Portfolio's repurchase agreements will at all times be fully
collateralized in an amount at least equal to the purchase price, including
accrued interest earned on the underlying securities. The instruments held as
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collateral are valued daily, and as the value of instruments declines, the
Portfolio will require additional collateral. If the seller defaults or becomes
insolvent and the value of the collateral securing the repurchase agreement
declines, the Portfolio may incur a loss.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Portfolio may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Portfolio with payment and delivery
taking place as much as a month or more in the future in order to secure what is
considered to be an advantageous price and yield to the Portfolio at the time of
entering into the transaction. The Portfolio's custodian will maintain, in a
segregated account of the Portfolio, cash, U.S. Government securities or other
liquid high-grade debt obligations having a value equal to or greater than the
Portfolio's purchase commitments; the custodian will likewise segregate
securities sold on a delayed delivery basis. The securities so purchased are
subject to market fluctuation and no interest accrues to the purchaser during
the period between purchase and settlement. At the time of delivery of the
securities the value may be more or less than the purchase price and an increase
in the percentage of the Portfolio's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Portfolio's net asset value.
BORROWING
The Portfolio may borrow an amount up to 33-1/3% of the value of its total
assets (calculated when the loan is made) from banks for temporary or emergency
purposes. The Portfolio may pledge up to 33-1/3% of its assets to secure such
borrowings. The Portfolio may borrow from banks, or from other funds or
portfolios advised by the Manager if an applicable exemptive order has been
granted, or through reverse repurchase agreements. However, the Portfolio will
not purchase portfolio securities if borrowings exceed 5% of the Portfolio's
total assets.
If the Portfolio borrows money, an investor's share price may be subject to
greater fluctuation until the borrowing is paid off.
ITEM 5. MANAGEMENT OF THE PORTFOLIO.
The Portfolio's Board of Trustees provides broad supervision over the
affairs of the Portfolio. A majority of the Portfolio's Trustees are not
affiliated with the Manager or the Subadviser. Information concerning the
Trustees and officers of the Portfolio appears in Part B.
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The Portfolio has not retained the services of a principal underwriter or
distributor, as interests in the Portfolio are offered solely in private
placement transaction.
The Manager has been an investment adviser to individuals and retirement
plans since 1974 and to mutual funds since 1982. The Manager serves the
Portfolio pursuant to an Investment Advisory Contract under the terms of which
it has agreed to provide an investment program within the limitations of the
Portfolio's investment policies and restrictions, and to furnish all executive,
administrative, and clerical services required for the transaction of Portfolio
business, other than accounting services and services which are provided by the
Portfolio's custodian, transfer agent, independent accountants and legal
counsel, and investment advisory services provided by the Subadviser to the
Portfolio.
The Manager was incorporated in Ohio in 1974 and maintains its principal
offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a wholly-owned
subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled by Robert S.
Meeder, Sr. through ownership of voting common stock. MII conducts business only
through its six subsidiaries which are R. Meeder & Associates, Inc.; Mutual
Funds Service Co., the Portfolio's transfer agent; Adviser Dealer Services,
Inc., a registered broker-dealer; Opportunities Management Co., a venture
capital investor; Meeder Advisory Services, Inc., a registered investment
adviser and OMCO, Inc., a registered commodity trading adviser and commodity
pool operator.
The Manager earns an annual fee, payable in monthly installments, from the
Portfolio at the rate of 1.00% of the first $50 million, .75% of the next $50
million and .60% in excess of $100 million, of average net assets. These fees
are higher than the fees charged to most other investment companies.
Accounting and transfer agency services are provided to the Portfolio by
Mutual Funds Service Co. ("MFSCo."), 6000 Memorial Drive, Dublin, Ohio 43017, a
wholly-owned subsidiary of MII. The minimum annual fee, payable monthly, for
such services for the Portfolio is $7,500. Subject to the applicable minimum
fee, the Portfolio's annual fee is computed at the rate of .15% of the first $10
million, .10% of the next $20 million, .02% of the next $50 million and .01% in
excess of $80 million of the Portfolio's average net assets. These fees are
reviewable annually by the Trustees of the Portfolio. For the year ended
December 31, 1996 total payments from the Portfolio to MFSCo. amounted to
$9,541.
SUBADVISER
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Miller/Howard Investments, Inc., 141 Upper Byrdcliffe Road, P. O. Box 549,
Woodstock, New York 12498, serves as the Portfolio's Subadviser under an
Investment Subadvisory Agreement between the Manager and the Subadviser. The
Subadviser furnishes investment advisory services in connection with the
management of the Portfolio. The Manager pays the Subadviser a fee, based on the
value of the average daily net assets of the Portfolio, payable monthly, and
computed at the rate of 0.00% of the first $10 million, .40% of the next $50
million, .30% of the next $40 million, and .25% in excess of $100 million of the
Portfolio's average net assets. The Manager continues to have responsibility for
all investment advisory services in accordance with the investment advisory
contract and supervises the Subadviser's performance of such services.
The Subadviser, a Delaware corporation, is a registered investment adviser
which has been providing investment services to broker-dealers, investment
advisers, employee benefit plans, endowment portfolios, foundations and other
institutions and individuals since 1984. As of December 31, 1996, the Subadviser
held discretionary investment authority over approximately $183 million of
assets. The Subadviser is controlled by Lowell Miller through ownership of
voting common stock. Mr. Miller, a director and the President of the Subadviser,
is a Trustee of the Portfolio, and a Vice President and Trustee of The
Flex-funds and The Flex-Partners, mutual funds whose corresponding portfolios
are also advised by the manager.
PORTFOLIO MANAGER
Lowell Miller, a director and President of the Subadviser, is primarily
responsible for the day-to-day management of the Portfolio. Mr. Miller has been
associated with the Subadviser and its predecessor since 1984, and has managed
the Portfolio since its inception in 1995.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is organized as a trust under the laws of the State of New
York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors in the
Portfolio (e.g., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations.
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The net income of the Portfolio is determined each day on which the New
York Stock Exchange (the "NYSE") is open for trading (and on such other days as
are deemed necessary in order to comply with Rule 22c-1 under the Investment
Company Act of 1940, as amended (the "1940 Act")) ("Fund Business Day"). This
determination is made once during each such day. All the net income of the
Portfolio, as defined below, so determined is allocated pro rata among the
investors in the Portfolio at the time of such determination.
For this purpose the net income of the Portfolio (from the time of the
immediately preceding determination thereof) shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles. Interest income
includes discount earned (including both original issue and market discount) on
discount paper accrued ratably to the date of maturity and any net realized
gains or losses on the assets of the Portfolio.
Investments in the Portfolio have no preemptive or conversion rights and
are fully paid and non-assessable, except as set forth below. The Portfolio is
not required to hold annual meetings of investors but the Portfolio will hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Investors have
the right to communicate with other investors to the extent provided in Section
16(c) of the 1940 Act in connection with requesting a meeting of investors for
the purpose of removing one or more Trustees, which removal requires a
two-thirds vote of the Portfolio's beneficial interests. Investors also have
under certain circumstances the right to remove one or more Trustees without a
meeting. Upon liquidation or dissolution of the Portfolio, investors would be
entitled to share pro rata in the net assets of the Portfolio available for
distribution to investors.
Under the anticipated method of operation of the Portfolio, the Portfolio
will not be subject to any income tax. However, each investor in the Portfolio
will be taxable on its share (as determined in accordance with the governing
instruments of the Portfolio) of the Portfolio's taxable income, gain, loss,
deductions and credits in determining its income tax liability. The
determination of such share will be made in accordance with the Internal Revenue
Code and regulations promulgated thereunder.
The Portfolio's assets, income and distributions are managed in such a way
that an investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code assuming that the investor invested
all of its investable assets in the Portfolio.
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Investor inquiries may be directed to R. Meeder & Associates, Inc. at 6000
Memorial Drive, Dublin, Ohio 43017.
ITEM 7. PURCHASE OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.
An investment in the Portfolio may be made without a sales load at the net
asset value next determined after an order is received in "good order" by the
Portfolio. Net asset value is determined as described in Item 19 of Part B.
There is no minimum initial or subsequent investment in the Portfolio.
However, since the Portfolio intends to be as fully invested at all times as is
reasonably practicable in order to enhance the yield on its assets, investments
must be made in federal funds (i.e., monies credited to the account of the
Portfolio's custodian bank by a Federal Reserve Bank).
The Portfolio reserves the right to cease accepting investments at any time
or to reject any investment order.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Fund Business Day. As of 4:00 p.m., New York time, on each
such day, the value of each investor's beneficial interest in the Portfolio will
be determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions, which are to be effected as of 4:00 p.m., New York time, on such
day, will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the percentage
equal to the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of 4:00 p.m., New York time, on such day plus or
minus, as the case may be, the amount of net additions to or reductions in the
investor's investment in the Portfolio effected as of 4:00 p.m., New York time,
on such day, and (ii) the denominator of which is the aggregate net asset value
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of the Portfolio as of 4:00 p.m., New York time, on such day, plus or minus, as
the case may be, the amount of net additions to or reductions in the aggregate
investments in the Portfolio by all investors in the Portfolio effected as of
4:00 p.m., New York time, on such day. The percentage so determined will then be
applied to determine the value of the investor's interest in the Portfolio as of
4:00 p.m., New York time, on the following Fund Business Day.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may reduce any portion or all of its
investment at any time at the net asset value next determined after a request in
"good order" is furnished by the investor to the Portfolio. Any such withdrawal
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution from the Portfolio). A distribution in kind may result in a
less diversified portfolio. The proceeds of a reduction will be paid by the
Portfolio in federal funds normally on the next business day after the reduction
is effected, but in any event within seven days. Investments in the Portfolio
may not be transferred.
The right of any investor to receive payment with respect to any reduction
may be suspended or the payment of the proceeds therefrom postponed during any
period in which the NYSE is closed (other than weekends or holidays) or trading
on such Exchange is restricted, or, to the extent otherwise permitted by the
1940 Act, if an emergency exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
A-13
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PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS.
Page
General Information and History ............................. B-1
Investment Objective and Policies ........................... B-1
Management of the Portfolio ................................. B-17
Control Persons and Principal Holders of Securities ......... B-19
Investment Advisory and Other Services ...................... B-20
Brokerage Allocation and Other Practices .................... B-22
Capital Stock and Other Securities .......................... B-25
Purchase, Redemption and Pricing of Securities .............. B-26
Tax Status .................................................. B-27
Underwriters ................................................ B-27
Calculation of Performance Data ............................. B-27
Financial Statements ........................................ B-28
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
Part A contains additional information about the investment objective and
policies of the Utilities Stock Portfolio (the "Portfolio"). This Part B should
only be read in conjunction with Part A. The investment policies and limitations
set forth below supplement those set forth in Part A.
INVESTMENT RESTRICTIONS
Under the Investment Company Act of 1940 (the "1940 Act"), a "fundamental"
policy may not be changed without the vote of a majority of the outstanding
voting securities of the Portfolio, which is defined in the 1940 Act with
respect to the Portfolio as the lesser of (a) 67 percent or more of the
Portfolio's beneficial interests represented at a meeting of investors if the
holders of more than 50 percent of the outstanding beneficial interests are
present or represented by proxy, or (b) more than 50 percent of the outstanding
beneficial interests ("Majority Vote"). However, except for the fundamental
B-1
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investment limitations set forth below, the investment policies and limitations
described in this Part B are not fundamental and may be changed by the Trustees
without investor approval. The percentage limitations contained in the
restrictions listed below apply at the time of the purchase of the securities.
The Portfolio may not:
(1) with respect to 75% of the Portfolio's total assets, purchase the securities
of any issuer (other than obligations issued or guaranteed by the government of
the United States, or any of its agencies or instrumentalities) if, as a result
thereof, (a) more than 5% of the Portfolio's total assets would be invested in
the securities of such issuer, or (b) the Fund would hold more than 10% of the
voting securities of such issuer;
(2) issue senior securities, except as permitted under the 1940 Act;
(3) borrow money, except that the Portfolio may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not exceeding
33 1/3% of its total assets (including the amount borrowed) less liabilities
(other than borrowings). Any borrowings that come to exceed this amount will be
reduced within three days (not including Sundays and holidays) to the extent
necessary to comply with the 33 1/3% limitation;
(4) underwrite securities issued by others (except to the extent that the
Portfolio may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities);
(5) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities)
if, as a result, more than 25% of the Portfolio's total assets would be invested
in the securities of companies whose principal business activities are in the
same industry, except that the Portfolio may invest more than 25% of its total
assets in securities of public utility companies;
(6) purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Portfolio from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);
(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Portfolio from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities); or
B-2
<PAGE>
(8) lend any security or make any other loan if, as a result, more than 33 1/3%
of its total assets would be lent to other parties, but this limitation does not
apply to purchases of debt securities or to repurchase agreements.
THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL.
(i) The Portfolio does not currently intend to engage in short sales, but may
engage in short sales "against the box" to the extent that the Portfolio
contemporaneously owns or has the right to obtain at no added cost securities
identical to those sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities short.
(ii) The Portfolio does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
(iii) The Portfolio may borrow money only (a) from a bank, or from a registered
investment company for which the Manager serves as investment adviser if an
applicable exemptive order has been granted, or (b) by engaging in reverse
repurchase agreements with any party (reverse repurchase agreements are treated
as borrowings for purposes of fundamental investment limitation (3). The
Portfolio will not purchase any security while borrowings representing more than
5% of its total assets are outstanding. The Portfolio will not borrow from other
funds advised by the Manager if total outstanding borrowings immediately after
such borrowing would exceed 15% of the Portfolio's total assets.
(iv) The Portfolio does not currently intend to purchase any security if, as a
result, more than 10% of its net assets would be invested in securities that are
deemed to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(v) The Portfolio does not currently intend to invest in securities of real
estate investment trusts that are not readily marketable, or to invest in
securities of real estate limited partnerships that are not listed on the New
York Stock Exchange or the American Stock Exchange or traded on the NASDAQ
National Market System.
B-3
<PAGE>
(vi) The Portfolio does not currently intend to lend assets other than
securities to other parties, except by (a) lending money (up to 5% of the
Portfolio's net assets) to a registered investment company for which the Manager
serves as investment adviser or (b) acquiring loans, loan participations, or
other forms of direct debt instruments and in connection therewith, assuming any
associated unfunded commitments of the sellers. (This limitation does not apply
to purchases or debt securities or to repurchase agreements.)
(vii) The Portfolio does not currently intend to purchase securities of other
investment companies. This limitation does not apply to securities received as
dividends, through offers of exchange, or as a result of reorganization,
consolidation, or merger.
(viii) The Portfolio does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5% of
its total assets would be invested in the securities of business enterprises
that, including predecessors, have a record of less than three years of
continuous operation.
(ix) The Portfolio does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 5% of the Portfolio's net assets. Included
in that amount, but not to exceed 2% of the Portfolio's net assets, may be
warrants that are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the Portfolio in units or attached to
securities are not subject to these restrictions.
(x) The Portfolio does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(xi) The Portfolio does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers and
directors of the Manager or the Subadviser who individually own more than 1/2 of
1% of the securities of such issuer, together own more than 5% of such issuer's
securities.
(xii) The Portfolio does not currently intend to invest in electric utilities
whose generation of power is derived from nuclear reactors.
For the Portfolio's limitations on futures and options transactions, see
the section entitled "Limitations on Futures and Options Transactions" on page
B-12. For the Portfolio's limitations on short sales, see the section entitled
"Short Sales" on page B-16.
MONEY MARKET INSTRUMENTS. When investing in money market instruments, the
Portfolio will limit its purchases, denominated in U.S. dollars, to the
following securities.
B-4
<PAGE>
* U.S. Government Securities and Securities of its Agencies and
Instrumentalities obligations issued or guaranteed as to principal or
interest by the United States or its agencies (such as the Export
Import Bank of the United States, Federal Housing Administration, and
Government National Mortgage Association) or its instrumentalities
(such as the Federal Home Loan Bank, Federal Intermediate Credit Banks
and Federal Land Bank), including Treasury bills, notes and bonds.
* Bank Obligations and Instruments Secured Thereby - obligations
including certificates of deposit, time deposits and bankers'
acceptances) of domestic banks having total assets of $1,000,000,000
or more, instruments secured by such obligations and obligations of
foreign branches of such banks, if the domestic parent bank is
unconditionally liable to make payment on the instrument if the
foreign branch fails to make payment for any reason. The Portfolio may
also invest in obligations (including certificates of deposit and
bankers' acceptances) of domestic branches of foreign banks having
assets of $1,000,000,000 or more, if the domestic branch is subject to
the same regulation as United States banks. The Portfolio will not
invest at time of purchase more than 25% of its assets in obligations
of banks, nor will the Portfolio invest more than 10% of its assets in
time deposits.
* High Quality Commercial Paper - The Portfolio may invest in commercial
paper rated no lower than "A-2" by Standard & Poor's Corporation or
"Prime-2" by Moody's Investors Service, Inc., or, if not rated, issued
by a company having an outstanding debt issue rated at least A by
Standard & Poor's or Moody's.
* Private Placement Commercial Paper - Private placement commercial
paper consists of unregistered securities which are traded in public
markets to qualified institutional investors, such as the Portfolio.
The Portfolio's risk is that the universe of potential buyers for the
securities, should the Portfolio desire to liquidate a position, is
limited to qualified dealers and institutions, and therefore such
securities could have the effect of being illiquid.
* High Grade Corporate Obligations - obligations rated at least A by
Standard & Poor's or Moody's. See rating information below.
* Repurchase Agreements -- See "Repurchase Agreements" below.
B-5
<PAGE>
The Subadviser exercises due care in the selection of money market
instruments. However, there is a risk that the issuers of the securities may not
be able to meet their obligations to pay interest or principal when due. There
is also a risk that some of the Portfolio's securities might have to be
liquidated prior to maturity at a price less than original amortized cost or
value, face amount or maturity value to meet larger than expected redemptions.
Any of these risks, if encountered, could cause a reduction in net income or in
the net asset value of the Portfolio.
RATINGS
1. Moody's Investors Service, Inc.'s Corporate Bond Rating:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length or time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
2. Standard and Poor's Corporation's Corporate Bond Rating:
AAA - Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they move
with interest rates, and hence provide the maximum safety on all counts.
B-6
<PAGE>
AA - Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
A - Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from the adverse
effect of changes in economic and trade conditions. Interest and principal are
regarded as safe. They predominantly reflect money rates in their market
behavior but, to some extent, also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
3. A-1 and P-1 Commercial Paper Ratings:
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A-1, A-2, or
A-3.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
4. Description of Permitted Money Market Investments:
B-7
<PAGE>
Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short term credit needs.
U.S. Government Obligations - are bills, certificates of indebtedness,
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury, as for example, the Government National Mortgage Association; others
by the right of the issuer to borrow from the Treasury, as in the case of
Federal Farm Credit Banks and Federal National Mortgage Association; and others
only by the credit of the agency, authority or instrumentality; as for example,
Federal Home Loan Mortgage and Federal Home Loan Bank.
Repurchase Agreements - See "Repurchase Agreements" below.
Certificates of Deposit - are certificates issued against funds deposited
in a bank, are for a definite period of time, earn a specified or variable rate
of return and are normally negotiable.
Banker's Acceptances - are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
Corporate Obligations - include bonds and notes issued by corporations in
order to finance longer term credit needs.
ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of in
the ordinary course of business at approximately the prices at which they are
valued. Under the supervision of the Board of Trustees, the Subadviser
determines the liquidity of the Portfolio's investments and, through reports
from the Subadviser, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Portfolio's investments, the Subadviser may
consider various factors, including (1) the frequency of trades and quotations,
(2) the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Portfolio's rights and
obligations relating to the investment). Investments currently considered by the
Portfolio to be illiquid include repurchase agreements not entitling the holder
to payment of principal and interest within seven days, over-the-counter
options, and non-government stripped fixed-rate mortgage-backed securities.
B-8
<PAGE>
Also, the Subadviser may determine some restricted securities,
government-stripped fixed-rate mortgage-backed securities, loans and other
direct debt instruments, and swap agreements to be illiquid. However, with
respect to over-the-counter options the Portfolio writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the Portfolio
may have to close out the option before expiration. In the absence of market
quotations, illiquid investments are priced at fair value as determined in good
faith by the Board of Trustees. If through a change in values, net assets, or
other circumstances, the Portfolio were in a position where more than 10% of its
net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is required,
the Portfolio may be obligated to pay all or part of the registration expense
and a considerable period may elapse between the time it decides to seek
registration and the time the Portfolio may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Portfolio might obtain a less favorable
price than prevailed when it decided to seek registration of the security.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio purchases a
security and simultaneously commits to resell that security to the seller at an
agreed upon price on an agreed upon date within a number of days from the date
of purchase. The resale price reflects the purchase price plus an agreed upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is in effect secured by the value
(at least equal to the amount of the agreed upon resale price and marked to
market daily) of the underlying security. The Portfolio may engage in repurchase
agreements with respect to any security in which it is authorized to invest.
While it does not presently appear possible to eliminate all risks from
these transactions (particularly the possibility of a decline in the market
value of the underlying securities, as well as delays and costs to the Portfolio
in connection with bankruptcy proceedings), it is the Portfolio's current policy
to limit repurchase agreement transactions to parties whose creditworthiness has
been reviewed and found satisfactory by the Subadviser.
B-9
<PAGE>
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
Portfolio sells a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash and agrees to repurchase the instrument at a
particular price and time. While a reverse repurchase agreement is outstanding,
the Portfolio will maintain appropriate liquid assets in a segregated custodial
account to cover its obligation under the agreement. The Portfolio will enter
into reverse repurchase agreements only with parties whose creditworthiness has
been found satisfactory by the Subadviser. Such transactions may increase
fluctuations in the market value of the Portfolio's assets and may be viewed as
a form of leverage.
SECURITIES LENDING. The Portfolio may lend securities to parties such as
broker-dealers or institutional investors.
Securities lending allows the Portfolio to retain ownership of the
securities loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be made
only to parties deemed by the Subadviser to be of good standing. Furthermore,
they will only be made if, in the Subadviser's judgment, the consideration to be
earned from such loans would justify the risk.
The Subadviser understands that it is the current view of the SEC Staff
that the Portfolio may engage in loan transactions only under the following
conditions: (1) the Portfolio must receive 100% collateral in the form of cash
or cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2)
the borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, the Portfolio must be able to terminate the
loan at any time; (4) the Portfolio must receive reasonable interest on the loan
or a flat fee from the borrower, as well as amounts equivalent to any dividends,
interest, or other distributions on the securities loaned and to any increase in
market value; (5) the Portfolio may pay only reasonable custodian fees in
connection with the loan; and (6) the Board of Trustees must be able to vote
proxies on the securities loaned, either by terminating the loan or by entering
into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which the Portfolio is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
FOREIGN INVESTMENTS. Foreign investments can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and interest
from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets, and
prices on some foreign markets can be highly volatile.
B-10
<PAGE>
Many foreign countries lack uniform accounting and disclosure standards
comparable to those applicable to U.S. companies, and it may be more difficult
to obtain reliable information regarding an issuer's financial condition and
operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, are generally higher than for U.S.
investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that the Subadviser will be able
to anticipate or counter these potential events.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.
The Portfolio may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable abroad, they may be less liquid than
foreign securities of the same class that are not subject to such restrictions.
B-11
<PAGE>
American Depositary Receipts and European Depositary Receipts (ADRs and
EDRs) are certificates evidencing ownership of shares of a foreign-based
corporation held in trust by a bank or similar financial institution. Designed
for use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
markets and currencies.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies in
the foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may be
exchanged on a spot (i.e., cash) basis, or by entering into forward contracts to
purchase or sell foreign currencies at a future date and price. Forward
contracts generally are traded in an interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated currency exchange.
The Portfolio may use currency forward contracts to manage currency risks
and to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the Portfolio.
In connection with purchases and sales of securities denominated in foreign
currencies, the Portfolio may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's settlement
date. This technique is sometimes referred to as a "settlement hedge" or
"transaction hedge."
The Subadviser expects to enter into settlement hedges in the normal course
of managing the Portfolio's foreign investments. The Portfolio could also enter
into forward contracts to purchase or sell a foreign currency in anticipation of
future purchases or sales of securities denominated in foreign currency, even if
the specific investments have not yet been selected by the Subadviser.
The Portfolio may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For example,
if the Portfolio owned securities denominated in pounds sterling, it could enter
into a forward contract to sell pounds sterling in return for U.S. dollars to
hedge against possible declines in the pound's value. Such a hedge, sometimes
referred to as a "position hedge," would tend to offset both positive and
negative currency fluctuations, but would not offset changes in security values
caused by other factors. The Portfolio could also hedge the position by selling
another currency expected to perform similarly to the pound sterling - for
example, by entering into a forward contract to sell Deutschemarks or European
B-12
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Currency Units in return for U.S. dollars. This type of hedge, sometimes
referred to as a "proxy hedge," could offer advantages in terms of cost, yield,
or efficiency, but generally would not hedge currency exposure as effectively as
a simple hedge into U.S. dollars. Proxy hedges may result in losses if the
currency used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.
Under certain conditions, SEC guidelines require mutual funds to set aside
cash and appropriate liquid assets in a segregated custodial account to cover
currency forward contracts. As required by SEC guidelines, the Portfolio will
segregate assets to cover currency forward contracts, if any, whose purpose is
essentially speculative. The Portfolio will not segregate assets to cover
forward contracts entered into for hedging purposes, including settlement
hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on the
Subadviser's skill in analyzing and predicting currency values. Forward
contracts may substantially change the Portfolio's investment exposure to
changes in currency exchange rates, and could result in losses to the Portfolio
if currencies do not perform as the Subadviser anticipates. For example, if a
currency's value rose at a time when the Subadviser had hedged the Portfolio by
selling that currency in exchange for dollars, the Portfolio would be unable to
participate in the currency's appreciation. If the Subadviser hedges currency
exposure through proxy hedges, the Portfolio could realize currency losses from
the hedge and the security position at the same time if the two currencies do
not move in tandem. Similarly, if the Subadviser increases the Portfolio's
exposure to a foreign currency, and that currency's value declines, the
Portfolio will realize a loss. There is no assurance that the Subadviser's use
of forward currency contracts will be advantageous to the Portfolio or that it
will hedge at an appropriate time. The policies described in this section are
non-fundamental policies of the Portfolio.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Portfolio will not:
(a) sell futures contracts, purchase put options, or write call options if, as a
result, more than 50% of the Portfolio's total assets would be hedged with
futures and options under normal conditions; (b) purchase futures contracts or
write put options if, as a result, the Portfolio's total obligations upon
settlement or exercise of purchased futures contracts and written put options
would exceed 25% of its total assets; or (c) purchase call options if, as a
result, the current value of option premiums for call options purchased by the
Portfolio would exceed 5% of the Portfolio's total assets. These limitations do
not apply to options attached to or acquired or traded together with their
underlying securities, and do not apply to securities that incorporate features
similar to options. The above limitations on the Portfolio's investments in
futures contracts and options, and the Portfolio's policies regarding futures
contracts and options discussed elsewhere herein, may be changed as regulatory
agencies permit.
B-13
<PAGE>
FUTURES CONTRACTS. When the Portfolio purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future date.
When the Portfolio sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and sale
will take place is fixed when the Portfolio enters into the contract.
Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on indices
of securities prices, such as the Standard & Poor's 500 Composite Stock Price
Index (S&P 500). Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the Portfolio's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the Portfolio sells a futures
contract, by contrast, the value of its futures position will tend to move in a
direction contrary to the market. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the contract
is held until the delivery date. However, both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a futures
commission merchant (FCM), when the contract is entered into. Initial margin
deposits are typically equal to a percentage of the contract's value.
If the value of either party's position declines, that party will be
required to make additional "variation margin" payments to settle the change in
value on a daily basis. The party that has a gain may be entitled to receive all
or a portion of this amount. Initial and variation margin payments do not
constitute purchasing securities on margin for purposes of the Portfolio's
investment limitations. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
B-14
<PAGE>
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option the Portfolio
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. In return for this right, the Portfolio pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indices of securities prices, and futures contracts. The Portfolio may terminate
its position in a put option it has purchased by allowing it to expire or by
exercising the option. If the option is allowed to expire, the Portfolio will
lose the entire premium it paid. If the Portfolio exercises the option, it
completes the sale of the underlying instrument at the strike price. The
Portfolio may also terminate a put option position by closing it out in the
secondary market at its current price, if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price.
A call buyer typically attempts to participate in potential price increases
of the underlying instrument with risk limited to the cost of the option if
security prices fall. At the same time, the buyer can expect to suffer a loss if
security prices do not rise sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the Portfolio writes a put option, it
takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the option's underlying instrument if the other party to
the option chooses to exercise it. When writing an option on a futures contract
the Portfolio will be required to make margin payments to an FCM as described
above for futures contracts. The Portfolio may seek to terminate its position in
a put option it writes before exercise by closing out the option in the
secondary market at its current price. If the secondary market is not liquid for
a put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to set aside assets to cover its position.
B-15
<PAGE>
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices fall, the put writer would expect to suffer a loss. This loss
should be less than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should mitigate the
effects of the decline.
Writing a call option obligates the Portfolio to sell or deliver the
option's underlying instrument, in return for the strike price, upon exercise of
the option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
COMBINED POSITIONS. The Portfolio may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Portfolio may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the Portfolio's current or
anticipated investments exactly. The Portfolio may invest in options and futures
contracts based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Portfolio's other investments.
B-16
<PAGE>
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Portfolio's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts.
The Fund may purchase or sell options and futures contracts with a greater
or lesser value than the securities it wishes to hedge or intends to purchase in
order to attempt to compensate for differences in volatility between the
contract and the securities, although this may not be successful in all cases.
If price changes in the Portfolio's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract at
any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying instrument's
current price. In addition, exchanges may establish daily price fluctuation
limits for options and futures contracts, and may halt trading if a contract's
price moves upward or downward more than the limit in a given day. On volatile
trading days when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for the Portfolio to enter into new positions or
close out existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require the
Portfolio to continue to hold a position until delivery or expiration regardless
of changes in its value. As a result, the Portfolio's access to other assets
held to cover its options or futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and strike
price, the terms of over-the-counter options (options not traded on exchanges)
generally are established through negotiation with the other party to the option
contract. While this type of arrangement allows the Portfolio greater
flexibility to tailor an option to its needs, OTC options generally involve
greater credit risk than exchange-traded options, which are guaranteed by the
clearing organization of the exchanges where they are traded.
B-17
<PAGE>
OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES. Currency futures
contracts are similar to forward currency exchange contracts, except that they
are traded on exchanges (and have margin requirements) and are standardized as
to contract size and delivery date. Most currency futures contracts call for
payment or delivery in U.S. dollars. The underlying instrument of a currency
option may be a foreign currency, which generally is purchased or delivered in
exchange for U.S. dollars, or may be a futures contract. The purchaser of a
currency call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The Portfolio
may purchase and sell currency futures and may purchase and write currency
options to increase or decrease its exposure to different foreign currencies.
The Portfolio may also purchase and write currency options in conjunction with
each other or with currency futures or forward contracts. Currency futures and
options values can be expected to correlate with exchange rates, but may not
reflect other factors that affect the value of the Fund's investments. A
currency hedge, for example, should protect a Yen-denominated security from a
decline in the Yen, but will not protect the Portfolio against a price decline
resulting from deterioration in the issuer's creditworthiness. Because the value
of the Portfolio's foreign-denominated investments changes in response to many
factors other than exchange rates, it may not be possible to match the amount of
currency options and futures to the value of the Portfolio's investments exactly
over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Portfolio will comply
with guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require, will set
aside appropriate liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while the
futures or option strategy is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation of a large
percentage of the Portfolio's assets could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.
SHORT SALES. The Portfolio may enter into short sales "against the box"
with respect to equity securities it holds. For example, if the Subadviser
anticipates a decline in the price of a stock the Portfolio holds, it may sell
the stock short "against the box." If the stock price subsequently declines, the
proceeds of the short sale could be expected to offset all or a portion of the
stock's decline. The Portfolio currently intends to hedge no more than 15% of
its total assets with short sales "against the box" on equity securities under
normal circumstances.
B-18
<PAGE>
When the Portfolio enters into a short sale "against the box", it will be
required to own or have the right to obtain at no added cost securities
identical to those sold short "against the box" and will be required to continue
to hold them while the short sale "against the box" is outstanding. The
Portfolio will incur transactions costs, including interest expense, in
connection with opening, maintaining, and closing short sales.
PORTFOLIO TURNOVER
Because the Subadviser may employ flexible defensive investment strategies
when market trends are not considered favorable, the Subadviser may occasionally
change the entire portfolio of securities in the Portfolio. High transaction
costs could result when compared with other funds. This defensive investment
strategy can produce high portfolio turnover ratios when calculated in
accordance with SEC rules. The Portfolio's annual portfolio turnover rate is not
expected to exceed 60%. The portfolio turnover rate for the year ended December
31, 1996 was 51%. The turnover rate was a result of rebalancing the Portfolio to
take advantage of market opportunities as well as to realize gains in the
independent power and telecommunications areas.
The Portfolio intends to comply with the short-term trading restrictions of
Subchapter M of the Internal Revenue Code although these restrictions could
inhibit a rapid change in the Portfolio's investments.
ITEM 14. MANAGEMENT OF THE PORTFOLIO.
The Trustees and officers of the Portfolio and their principal occupations
during the past five years are set forth below. Their titles may have varied
during that period. Asterisks indicate those Trustees who are "interested
persons" (as defined in the 1940 Act) of the Portfolio. Unless otherwise
indicated, the address of each Trustee and officer is P.O. Box 7177, 6000
Memorial Drive, Dublin, Ohio 43017.
B-19
<PAGE>
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Name, Address and Age Position Held Principal Occupation
- --------------------- ------------- --------------------
<S> <C> <C>
ROBERT S. MEEDER, SR.*+, 68 Trustee/President Chairman, R. Meeder & Associates,
Inc., an investment adviser.
MILTON S. BARTHOLOMEW, 68 Trustee Retired; formerly a practicing
1424 Clubview Boulevard, S. attorney in Columbus, Ohio; member of
Worthington, OH 43235 the Portfolio's Audit Committee.
ROGER D. BLACKWELL, 56 Trustee Professor of Marketing and Consumer
Blackwell Associates, Inc. Behavior, The Ohio State University;
3380 Tremont Road President of Blackwell Associates,
Columbus, OH 43221 Inc., a strategic consulting firm.
JOHN M. EMERY, 76 Trustee Retired; formerly Vice President and
2390 McCoy Road Treasurer of Columbus & Southern Ohio
Columbus, OH 43220 Electric Co.; member of the
Portfolio's Audit Committee.
RICHARD A. FARR, 78 Trustee President of R&R Supply Co. and
3250 W. Henderson Road Farrair Concepts, Inc., two companies
Columbus, OH 43220 involved in engineering, consulting
and sales of heating and air
conditioning equipment.
WILLIAM L. GURNER*, 50 Trustee President, Sector Capital Management,
Sector Capital Management, Inc. an investment adviser (since January
5350 Poplar Avenue, Suite 490 1995); Manager of Trust Investments
Memphis, TN 38119 of Federal Express Corporation
(1987-1994).
B-20
<PAGE>
<S> <C> <C>
RUSSEL G. MEANS, 71 Trustee Retired; formerly Chairman of
5711 Barry Trace Employee Benefit Management
Dublin, OH 43017 Corporation, consultants and
administrators of self-funded health
and retirement plans.
ROBERT S. MEEDER, JR.*+, 36 Trustee and Vice President President of R. Meeder & Associates,
Inc.
LOWELL G. MILLER*, 48 Trustee President, Miller/Howard Investments,
Miller/Howard Investments, Inc. Inc., an investment adviser whose
141 Upper Byrdcliffe Road clients include the Portfolio and the
P. O. Box 549 Utilities Stock Portfolio.
Woodstock, NY 12498
WALTER L. OGLE, 58 Trustee Executive Vice President of Aon
400 Interstate North Parkway Consulting, an employee benefits
Suite 1630 consulting group.
Atlanta, GA 30339
PHILIP A. VOELKER*+, 43 Trustee and Vice President Senior Vice President and Chief
Operating Officer of R. Meeder &
Associates, Inc.
JAMES B. CRAVER*, 53 Assistant Secretary Practicing Attorney; Special Counsel
42 Miller Hill Road to Flex-Partners, Flex-funds and
Box 811 their Portfolios; Senior Vice
Dover, MA 02030 President of Signature Financial
Group, Inc. (January 1991 to August
1995).
STEVEN T. MCCABE*+, 32 Assistant Treasurer Vice President, R. Meeder &
Associates, Inc., and Vice President
of Mutual Funds Service Co.
B-21
<PAGE>
<S> <C> <C>
DONALD F. MEEDER*+, 58 Secretary/Treasurer Vice President of R. Meeder &
Associates, Inc., and President of
Mutual Funds Service Company.
WESLEY F. HOAG*+, 40 Vice President Vice President and General Counsel of
R. Meeder & Associates, Inc. (since
July 1993); Attorney, Porter, Wright,
Morris & Arthur, a law firm (October
1984 to June 1993).
</TABLE>
Each Trustee and officer of the Portfolio holds the same positions with
other Portfolios, each a corresponding Portfolio of The Flex-funds or
Flex-Partners, each a Massachusetts business trust consisting of several
separate series. Robert S. Meeder, Sr. is Robert S. Meeder, Jr's. father and
Donald F. Meeder's uncle.
The following table shows the compensation paid by the Portfolio and all
other mutual funds advised by the Adviser, including The Flex-funds, The
Flex-Partners and the corresponding portfolios of The Flex-Partners and The
Flex-funds (collectively, the "Fund Complex") as a whole to the Trustees of the
Portfolio during the fiscal year ended December 31, 1996.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from
Aggregate Benefits Registrant
Compensation Accrued as Part Estimated Annual and Fund
from the of Portfolio or Benefits Upon Complex Paid
Trustee Portfolio Fund Expense Retirement to Trustee
- ------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Robert S. Meeder, Sr. None None None None
Milton S. Bartholomew $1,485 None None $7,550
John M. Emery None None None $7,550
Richard A. Farr None None None $6,750
William F. Gurner None None None $5,250
B-22
<PAGE>
<S> <C> <C> <C> <C>
Russel G. Means $1,325 None None $6,750
Lowell G. Miller None None None None
Robert S. Meeder, Jr. None None None None
Walter L. Ogle $1,200 None None $6,000
Philip A. Voelker None None None None
Roger A. Blackwell None None None $5,250
</TABLE>
Each Trustee who is not an "interested person" is paid a meeting fee of
$250 per meeting for each of the five Portfolios. In addition, each such Trustee
earns an annual fee, payable quarterly, based on the average net assets in each
Portfolio based on the following schedule: Money Market Portfolio, 0.0005% of
the amount of average net assets between $500 million and $1 billion; 0.0025% of
the amount of average net assets exceeding $1 billion. For the other four
Portfolios, including the Portfolio, each Trustee is paid a fee of 0.00375% of
the amount of each Portfolio's average net assets exceeding $15 million. Mr.
Bartholomew comprises the Audit Committee for each corresponding Portfolio of
The Flex-funds and the Flex-Partners Trusts. Mr. Bartholomew is paid $500 for
each meeting of the Audit Committee attended regardless of the number of Audit
Committees on which he serves. Trustee fees for the Utilities Stock Portfolio
totaled $4,010 for the year ended December 31, 1996. Audit Committee fees for
the Portfolio totaled $160 for the year ended December 31, 1996. All other
officers and Trustees serve without compensation from the Portfolio.
The Declaration of Trust provides that the Portfolio will indemnify its
Trustees and officers as described below under Item 18.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
The Flex-funds The Total Return Utilities Fund and The Flex-Partners
Utility Growth Fund (the "Funds") have an investment in the Portfolio equaling
approximately 64% and 36%, respectively of the Portfolio's interests. No Trustee
or officer of the Portfolio or any other person, except the Funds, own in the
aggregate more than 1% interest in the Portfolio as of the date of this
registration statement.
B-23
<PAGE>
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER AND MANAGER
R. Meeder & Associates, Inc. (the "Manager") is the investment adviser and
manager for, and has an Investment Advisory Contract with, the Portfolio.
Pursuant to the Investment Advisory Contract with the Portfolio, the
Manager, subject to the supervision of the Portfolio's Board of Trustees and in
conformity with the stated objective and policies of the Portfolio, manages both
the investment operations of, and the composition of the Portfolio's portfolio,
including the purchase, retention, disposition and loan of securities. In
connection therewith, the Manager is obligated to keep certain books and records
of the Portfolio. The Manager also administers the Portfolio's business affairs,
and in connection therewith, furnishes the Portfolio with office facilities,
together with those ordinary clerical and bookkeeping services which are not
being furnished by Star Bank, N.A., the Portfolio's custodian and Mutual Funds
Service Co., the Portfolio's transfer and disbursing agent. The management
services of the Manager are not exclusive under the terms of the Investment
Advisory Agreement and the Manager is free to, and does, render management
services for others.
The Investment Advisory Contract for the Portfolio was separately approved
by a vote of a majority of the Trustees, including a majority of those Trustees
who are not "interested persons" (as defined in the Investment Company Act of
1940) of the Portfolio. The Investment Advisory Contract is to remain in force
so long as renewal thereof is specifically approved at least annually by a
majority of the Trustees or by vote of a majority of the interests in the
Portfolio, and in either case by vote of a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) at a
meeting called for the purpose of voting on such renewal.
The Investment Advisory Contract provides that the Manager will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Portfolio in connection with the matters to which the Investment Advisory
Contract relates except for a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Investment Advisory
Contract will terminate automatically if assigned and may be terminated without
penalty at any time upon 60 days' prior written notice by Majority Vote of the
Portfolio, by the Trustees of the Portfolio, or by the Manager.
The expenses of the Portfolio include the compensation of the Trustees who
are not affiliated with the Manager or Subadviser; registration fees; membership
dues allocable to the Portfolio; fees and expenses of independent accountants,
of legal counsel and of any transfer agent or accountant of the Portfolio;
insurance premiums and other miscellaneous expenses.
B-24
<PAGE>
Expenses of the Portfolio also include all fees under its Accounting and
Administrative Service Agreement; the expenses connected with the execution,
recording and settlement of security transactions; fees and expenses of the
Portfolio's custodian for all services to the Portfolio, including safekeeping
of funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to governmental offices and
commissions; expenses of meetings of investors and Trustees; the advisory fees
payable to the Manager under the Investment Advisory Contract and other
miscellaneous expenses.
The Manager earns an annual fee, payable in monthly installments as
follows. The fee for the Portfolio is based upon the average net assets of the
Portfolio and is at the rate of 1% of the first $50 million, 0.75% of the next
$50 million and 0.60% in excess of $100 million of average net assets. The
Portfolio paid fees to the Manager totaling $65,190 for the year ended December
31, 1996.
R. Meeder & Associates, Inc. was incorporated in Ohio on February 1, 1974
and maintains its principal offices at 6000 Memorial Drive, Dublin, Ohio 43017.
The Manager is a wholly-owned subsidiary of Muirfield Investors, Inc. ("MII"),
which is controlled by Robert S. Meeder, Sr. through the ownership of voting
common stock. The Manager's officers and directors, and the principal offices
are as set forth as follows: Robert S. Meeder, Sr., Chairman and Sole Director;
Robert S. Meeder, Jr., President and Treasurer; Philip A. Voelker, Senior Vice
President and Chief Operating Officer; Donald F. Meeder, Vice President and
Secretary; Sherrie L. Acock, Vice President; Robert D. Baker, Vice President;
Wesley F. Hoag, Vice President and General Counsel; Steven T. McCabe, Vice
President; and Roy E. Rogers, Vice President. Mr. Robert S. Meeder, Sr. is
President and a Trustee of the Portfolio. Each of Mr. Donald F. Meeder, Wesley
F. Hoag and Steven T. McCabe is an officer of the Portfolio. Each of Mr. Robert
S. Meeder, Jr. and Philip A. Voelker is a Trustee and officer of the Portfolio.
The general counsel for the Manager was primarily responsible for preparing
and filing with the Securities and Exchange Commission the registration
statement for the Portfolio. A charge in the amount of $5,000 for such legal
services rendered by the Manager on behalf of the Portfolio will be paid and
amortized by the Portfolio as an organization expense over a period not
exceeding 60 months.
INVESTMENT SUBADVISER
Miller/Howard Investments, Inc., 141 Upper Byrdcliffe Road, P. O. Box
549, Woodstock, New York 12498, serves as the Portfolio's Subadviser. Lowell G.
Miller controls the Subadviser through the ownership of voting common stock. The
B-25
<PAGE>
Investment Subadvisory Agreement provides that the Subadviser shall furnish
investment advisory services in connection with the management of the Portfolio.
In connection therewith, the Subadviser is obligated to keep certain books and
records of the Portfolio. The Manager continues to have responsibility for all
investment advisory services pursuant to the Investment Advisory Agreement and
supervises the Subadviser's performance of such services. Under the Investment
Subadvisory Agreement, the Manager, not the Portfolio, pays the Subadviser a
fee, based upon the average daily net assets of the Portfolio, payable monthly,
and computed at the rate of 0.00% of the first $10 million, .40% of the next $50
million, .30% of the next $40 million, and .25% in excess of $100 million of the
Portfolio's average net assets.
The Investment Subadvisory Agreement provides that the Subadviser will not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution of portfolio
transactions for the Portfolio, except a loss resulting from misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Investment
Subadvisory Agreement provides that it will terminate automatically if assigned,
and that it may be terminated by the Manager without penalty to the Portfolio by
the Manager, the Trustees of the Portfolio or by the vote of a majority of the
outstanding voting securities of the Portfolio upon not less than 30 days'
written notice. The Investment Subadvisory Agreement will continue in effect for
a period of more than two years from the date of execution only so long as such
continuance is specifically approved at least annually in conformity with the
1940 Act. The Investment Subadvisory Agreement was approved by the Board of
Trustees of the Portfolio, including all of the Trustees who are not parties to
the contract or "interested persons" of any such party.
TRANSFER AGENT
Mutual Funds Service Co. provides accounting, transfer agency, dividend
disbursing, and shareholder services to the Portfolio. The minimum annual fee
for accounting services for the Portfolio is $7,500. Subject to the applicable
minimum fee, the Portfolio's annual fee, payable monthly, is computed at the
rate of 0.15% of the first $10 million, 0.10% of the next $20 million, 0.02% of
the next $50 million and 0.01% in excess of $80 million of the Portfolio's
average net assets. These fees are reviewable annually by the Trustees of the
Portfolio.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is custodian of
the assets of the Portfolio. The custodian is responsible for the safekeeping of
the Portfolio's assets and the appointment of subcustodian banks and clearing
B-26
<PAGE>
agencies. The custodian takes no part in determining the investment policies of
the Portfolio or in deciding which securities are purchased or sold by the
Portfolio. The Portfolio may, however, invest in obligations of the custodian
and may purchase or sell securities from or to the custodian.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio 43215, serves
as the Portfolio's independent accountant. The auditor examines financial
statements for the Portfolio and provides other audit, tax, and related
services.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
All orders for the purchase or sale of portfolio securities are placed on
behalf of the Portfolio by the Subadviser pursuant to authority contained in the
investment advisory agreement and investment subadvisory agreement. The
Subadviser is also responsible for the placement of transaction orders for
accounts for which it or its affiliates act as investment adviser. In selecting
broker-dealers, subject to applicable limitations of the federal securities
laws, the Subadviser considers various relevant factors, including, but not
limited to, the size and type of the transaction; the nature and character of
the market for the security to be purchased or sold; the execution efficiency,
settlement capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis the
reasonableness of any commissions, and arrangements for payment of Portfolio
expenses.
The Portfolio's brokerage transactions involving securities of companies
headquartered in countries other than the United States will be conducted
primarily on the markets of principal exchanges of such countries. Foreign
markets are generally not as developed as those located in the United States,
which may result in higher transaction costs, delayed settlement and less
liquidity for trades effected in foreign markets. Transactions on foreign
exchanges are usually subject to fixed commissions that generally are higher
than negotiated commissions on U.S. transactions. There is generally less
government supervision and regulation of exchanges and brokers in foreign
countries than in the United States.
The Portfolio may execute portfolio transactions with broker-dealers who
provide research and execution services to the Portfolio or other accounts over
which the Subadviser or its affiliates exercise investment discretion. Such
services may include advice concerning the value of securities; the advisability
of investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishings analyses and
reports concerning issuers, industries, securities, economic factors and trends,
B-27
<PAGE>
portfolio strategy, and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). The selection of such broker-dealers generally is made by the
Subadviser (to the extent possible consistent with execution considerations) in
accordance with a ranking of broker-dealers determined periodically by the
Subadviser's investment staff based upon the quality of research and execution
services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the Portfolio may be useful to the Subadviser in rendering investment
management services to the Portfolio or its other clients, and conversely, such
research provided by broker-dealers who have executed transaction orders on
behalf of other Subadviser clients may be useful to the Subadviser in carrying
out its obligations to the Portfolio. The receipt of such research is not
expected to reduce the Subadviser's normal independent research activities;
however, it enables the Subadviser to avoid the additional expenses that could
be incurred if the Subadviser tried to develop comparable information through
its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
Portfolio to pay such higher commissions, the Subadviser must determine in good
faith that such commissions are reasonable in relation to the value of the
brokerage and research services provided by such executing broker-dealers,
viewed in terms of a particular transaction or the Subadviser's overall
responsibilities to the Portfolio and its other clients. In reaching this
determination, the Subadviser will not attempt to place a specific dollar value
on the brokerage and research services provided or to determine what portion of
the compensation should be related to those services.
The Subadviser is authorized to use research services provided by and to
place portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the investors to the extent permitted by law.
The Subadviser may allocate brokerage transactions to broker-dealers who
have entered into arrangements with the Subadviser under which the broker-dealer
allocates a portion of the commissions paid by the Portfolio toward payment of
either the Portfolio's expenses, such as custodian fees, or a proportionate
share of each Fund's expenses, such as transfer agent fees of Mutual Funds
Service Co. The transaction quality must, however, be comparable to those of
other qualified broker-dealers. For the year ended December 31, 1996 directed
brokerage payments of $3,377 were made to reduce expenses of the Portfolio.
B-28
<PAGE>
The Trustees of the Portfolio periodically review the Subadviser's
performance of its responsibilities in connection with the placement of
portfolio transactions on behalf of the Portfolio and review the commissions
paid by the Portfolio over representative periods of time to determine if they
are reasonable in relation to the benefits to the Portfolio.
From time to time, the Trustees of the Portfolio will review whether the
recapture for the benefit of the Portfolio of some portion of the brokerage
commissions or similar fees paid by the Portfolio on portfolio transactions is
legally permissible and advisable.
The Portfolio seeks to recapture soliciting broker-dealer fees on the
tender of portfolio securities, but at present no other recapture arrangements
are in effect. The Trustees of the Portfolio intend to continue to review
whether recapture opportunities are available and are legally permissible and,
if so, to determine in the exercise of their business judgment, whether it would
be advisable for the Portfolio to seek such recapture.
Although the Trustees and officers of the Portfolio are substantially the
same as those of other portfolios managed by the Manager, investment decisions
for the Portfolio are made independently from those of other portfolios managed
by the Manager or accounts managed by affiliates of the Manager. It sometimes
happens that the same security is held in the portfolio of more than one of
these funds or accounts. Simultaneous transactions are inevitable when several
portfolios are managed by the same investment adviser, particularly when the
same security is suitable for the investment objective of more than one
portfolio.
When two or more portfolios are simultaneously engaged in the purchase or
sale of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the portfolios involved to be
equitable to each portfolio. In some cases this system could have a detrimental
effect on the price or value of the security as far as the Portfolio is
concerned. In other cases, however, the ability of the Portfolio to participate
in volume transactions will produce better executions and prices for the
Portfolio. It is the current opinion of the Trustees of the Portfolio that the
desirability of retaining the Manager as investment adviser to the Portfolio
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
B-29
<PAGE>
The Portfolio effects transactions in its portfolio securities on
securities exchanges on a non-exclusive basis through Adviser Dealer Services,
Inc., the distributor (the "Distributor") for the BTB Fund, all of whose assets
are invested in the Portfolio. Because the Distributor is an "affiliated person"
of the Portfolio (as such term is defined under the Investment Company Act of
1940) by serving as the distributor of the BTB Fund, the Board of Trustees of
the Portfolio has adopted procedures pursuant to Rule 17e-1 under the Investment
Company Act of 1940 governing the payment of commissions by the Portfolio to the
Distributor in its capacity as a broker-dealer. During the year ended December
31, 1996 the Portfolio paid total commissions of $13,594 on the purchase and
sale of portfolio securities, of which $0 was paid to the Distributor or former
distributors.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and non-assessable, except as
set forth below. Investments in the Portfolio may not be transferred.
Certificates representing an investor's beneficial interest in the Portfolio are
issued only upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees of the Portfolio if they
choose to do so and in such event the other investors in the Portfolio would not
be able to elect any Trustee. The Portfolio is not required to hold annual
meetings of investors but the Portfolio will hold special meetings of investors
when in the judgment of the Portfolio's Trustees it is necessary or desirable to
submit matters for an investor vote. No material amendment may be made to the
Portfolio's Declaration of Trust without the affirmative majority vote of
investors (with the vote of each being in proportion to the amount of their
investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two-thirds of its
investors (with the vote of each being in proportion to the amount of their
investment), except that if the Trustees of the Portfolio recommend such sale of
assets, the approval by vote of a majority of the investors (with the vote of
each being in proportion to the amount of their investment) will be sufficient.
The Portfolio may also be terminated (i) upon liquidation and distribution of
its assets, if approved by the vote of two-thirds of its investors (with the
vote of each being in proportion to the amount of their investment), or (ii) by
the Trustees of the Portfolio by written notice to its investors.
B-30
<PAGE>
The Portfolio is organized as a trust under the laws of the State of New
York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Portfolio,
its investors, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the Portfolio
are not binding upon the Trustees individually but only upon the property of the
Portfolio and that the Trustees will not be liable for any action or failure to
act, but nothing in the Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The Declaration of Trust provides that
the trustees and officers will be indemnified by the Portfolio against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their offices with the Portfolio, unless, as to
liability to the Portfolio or its investors, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect to any
other matter it is finally adjudicated that they did not act in good faith in
the reasonable belief that their actions were in the best interests of the
Portfolio. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination, based upon a review of
readily available facts, by vote of a majority of disinterested Trustees or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may only be made by investment companies,
B-31
<PAGE>
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities which are "accredited investors" as defined in
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.
The Portfolio determines its net asset value as of 4:00 p.m., New York
time, each Fund Business Day by dividing the value of the Portfolio's net assets
by the value of the investment of the investors in the Portfolio at the time the
determination is made. (As of the date of this Registration Statement, the New
York Stock Exchange is open for trading every weekday except for the following
holidays (or days on which such holiday is observed): New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.) Purchases and reductions will be effected at
the time of determination of net asset value next following the receipt of any
purchase or reduction order.
Securities owned by the Portfolio and listed or traded on any national
securities exchange are valued at each closing of the NYSE on the basis of the
last sale on such exchange each day that the exchange is open for business. If
there is no sale on that day, or if the security is not listed, it is valued at
its last bid quotation on the exchange or, in the case of unlisted securities,
as obtained from an established market maker. Futures contracts are valued on
the basis of the cost of closing out the liability; i.e., at the settlement
price of a closing contract or at the asked quotation for such a contract if
there is no sale. Money market instruments having maturities of 60 days or less
are valued at amortized cost if not materially different from market value.
Portfolio securities for which market quotations are not readily available are
to be valued in good faith by the Board of Trustees.
ITEM 20. TAX STATUS.
The Portfolio is organized as a trust under New York law. Under the method
of operation of the Portfolio, the Portfolio is not subject to any income tax.
However, each investor in the Portfolio is taxable on its share (as determined
in accordance with the governing instruments of the Portfolio) of the
Portfolio's ordinary income and capital gain in determining its income tax
liability. The determination of such share is made in accordance with the
Internal Revenue Code and regulations promulgated thereunder.
The Portfolio's taxable year-end is December 31. Although, as described
above, the Portfolio is not subject to federal income tax, it files appropriate
federal income tax returns.
B-32
<PAGE>
The Portfolio's assets, income and distributions are managed in such a way
that an investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code assuming that the investor invested
all of its investable assets in the Portfolio.
ITEM 21. UNDERWRITERS.
The Portfolio has not retained the services of a principal underwriter or
distributor, as interests in the Portfolio are offered solely in private
placement transactions. Investment companies, insurance company separate
accounts, common and commingled trust funds and similar organizations and
entities may continuously invest in the Portfolio.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
The following financial statements are intended to provide information only
with respect to the Utilities Stock Portfolio. Persons interest in obtaining
information about any of the other Portfolios should contact the Investment
Adviser to obtain a copy of such Portfolio's current Registration Statement.
B-33
<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
--------
B-34
<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
---------
B-35
<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>
B-36
<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
--------
B-37
<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
--------
B-38
<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
----------
B-39
<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>
B-40
<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>
B-41
<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>
B-42
<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>
B-43
<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
B-44
<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
B-45
<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>
B-46
<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>
B-47
<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>
B-48
<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
=========== ========== =========== =========
B-49
<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
=========== ========== =========== =========
B-50
<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>
B-51
<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>
B-52
<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>
B-53
<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.
B-54
<PAGE>
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>
B-55
<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.
B-56
<PAGE>
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the 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>
B-57
<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
B-58
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
The following report and financial statement are included in Part B:
Portfolio of Investments - December 31, 1996; Statements of Assets and
Liabilities - December 31, 1996; Statements of Operations - for the
year ended December 31, 1996; Statements of Changes in Net Assets for
the periods ended December 31, 1996 and 1995; Financial Highlights for
the periods indicated therein; Notes to Financial Statements;
Independent Auditors' Report dated January 31, 1997.
(B) EXHIBITS
*1. Declaration of Trust of the Registrant.
*2. By-Laws of the Registrant.
*5. (a) Form of Investment Advisory Agreement between the Registrant
and R. Meeder & Associates, Inc.
(b) Form of Subadvisory Agreement between R. Meeder &
Associates, Inc. and Miller/Howard Investments, Inc.
*6. Form of Exclusive Placement Agent Agreement between the
Registrant and Signature Broker-Dealer Services, Inc.
*8. Form of Custody Agreement between the Registrant and Star Bank,
N.A., Cincinnati.
*9. (a) Form of Administration Agreement between the Registrant and
Mutual Funds Service Co. (MFSCo)
(b) Form of Accounting Services Agreement between the Registrant
and MFSCo.
11. Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants, filed herewith.
*13. Investment representation letters of initial investors.
19. Powers of Attorney of Trustees of Registrant -- previously filed
and incorporated herein by reference; however, Powers of Attorney
of new Trustees of Registrant are filed herewith.
-------------
*Filed April 20, 1995 and incorporated herein by reference.
C-1
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Beneficial Interests 3 (as of December 31, 1996)
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as an Exhibit to Registrant's initial Registration Statement on
April 20, 1995.
The Trustees and officers of the Registrant are insured under an errors and
omissions liability insurance policy and under the fidelity bond required by
Rule 17g-1 under the Investment Company Act of 1940 (the "1940 Act").
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are located, in whole or in
part, at the principal executive offices of the Registrant and the following
locations:
NAME ADDRESS
R. Meeder & Associates, Inc. 6000 Memorial Drive
(investment adviser) Dublin, Ohio 43017
Mutual Funds Service Co. 6000 Memorial Drive
(transfer and accounting Dublin, OH 43017
service agent)
Star Bank, N.A., Cincinnati Star Bank Center
(custodian) 425 Walnut Street
Cincinnati, Ohio 45202
C-2
<PAGE>
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement on Form N-1A to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dublin and State of Ohio on the 29th day of April, 1997.
UTILITIES STOCK PORTFOLIO
By /s/ Donald F. Meeder
-------------------------------
Donald F. Meeder
Secretary/Treasurer
EXHIBIT 11
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Trustees of
Utilities Stock Portfolio:
We consent to the use of our report included herein dated January 31, 1997 on
the financial statements of the Mutual Fund Portfolio, Growth Stock Portfolio,
Utilities Stock Portfolio, Bond Portfolio, and Money Market Portfolio as of
December 31, 1996 and for the periods indicated therein and to the reference to
our firm under the heading "Independent Accountants" in Part B of the
Registration Statement.
KPMG Peat Marwick LLP
Columbus, Ohio
April 28, 1997
EXHIBIT 19
POWERS OF ATTORNEY
THE PORTFOLIOS
The undersigned hereby constitutes and appoints Donald F. Meeder, Philip A.
Voelker and James B. Craver, and each of them, with full powers of substitution
as his true and lawful attorneys and agents to execute in his name and on his
behalf in any and all capacities the Registration Statements on Form N-1A, and
any and all amendments thereto, filed by the Money Market, Mutual Fund, Growth
Stock, Bond and Utilities Stock Portfolios (the "Portfolios") The Flex-Partners
or The Flex-funds (each a "Trust") with the Securities and Exchange Commission
under the Investment Company Act of 1940 and the Securities Act of 1933 and any
and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Portfolios or the Trusts to comply with
such Acts, the rules, regulations and requirements of the Securities and
Exchange Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 22nd day
of April, 1997.
/s/ John M. Emery
---------------------------------
John M. Emery
<PAGE>
THE PORTFOLIOS
The undersigned hereby constitutes and appoints Donald F. Meeder, Philip A.
Voelker and James B. Craver, and each of them, with full powers of substitution
as his true and lawful attorneys and agents to execute in his name and on his
behalf in any and all capacities the Registration Statements on Form N-1A, and
any and all amendments thereto, filed by the Money Market, Mutual Fund, Growth
Stock, Bond and Utilities Stock Portfolios (the "Portfolios") The Flex-Partners
or The Flex-funds (each a "Trust") with the Securities and Exchange Commission
under the Investment Company Act of 1940 and the Securities Act of 1933 and any
and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Portfolios or the Trusts to comply with
such Acts, the rules, regulations and requirements of the Securities and
Exchange Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 22nd day
of April, 1997.
/s/ Richard A. Farr
---------------------------------
Richard A. Farr
<PAGE>
THE PORTFOLIOS
The undersigned hereby constitutes and appoints Donald F. Meeder, Wesley F.
Hoag and James B. Craver, and each of them, with full powers of substitution as
his true and lawful attorneys and agents to execute in his name and on his
behalf in any and all capacities the Registration Statements on Form N-1A, and
any and all amendments thereto, filed by the Money Market, Mutual Fund, Growth
Stock, Bond and Utilities Stock Portfolios (the "Portfolios") The Flex-Partners
or The Flex-funds (each a "Trust") with the Securities and Exchange Commission
under the Investment Company Act of 1940 and the Securities Act of 1933 and any
and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Portfolios or the Trusts to comply with
such Acts, the rules, regulations and requirements of the Securities and
Exchange Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 22nd day
of April, 1997.
/s/ William L. Gurner
---------------------------------
William L. Gurner
<PAGE>
THE PORTFOLIOS
The undersigned hereby constitutes and appoints Donald F. Meeder, Wesley F.
Hoag and James B. Craver, and each of them, with full powers of substitution as
his true and lawful attorneys and agents to execute in his name and on his
behalf in any and all capacities the Registration Statements on Form N-1A, and
any and all amendments thereto, filed by the Money Market, Mutual Fund, Growth
Stock, Bond and Utilities Stock Portfolios (the "Portfolios") The Flex-Partners
or The Flex-funds (each a "Trust") with the Securities and Exchange Commission
under the Investment Company Act of 1940 and the Securities Act of 1933 and any
and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Portfolios or the Trusts to comply with
such Acts, the rules, regulations and requirements of the Securities and
Exchange Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 22nd day
of April, 1997.
/s/ Lowell G. Miller
---------------------------------
Lowell G. Miller
<PAGE>
THE PORTFOLIOS
The undersigned hereby constitutes and appoints Donald F. Meeder, Wesley F.
Hoag and James B. Craver, and each of them, with full powers of substitution as
his true and lawful attorneys and agents to execute in his name and on his
behalf in any and all capacities the Registration Statements on Form N-1A, and
any and all amendments thereto, filed by the Money Market, Mutual Fund, Growth
Stock, Bond and Utilities Stock Portfolios (the "Portfolios") The Flex-Partners
or The Flex-funds (each a "Trust") with the Securities and Exchange Commission
under the Investment Company Act of 1940 and the Securities Act of 1933 and any
and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Portfolios or the Trusts to comply with
such Acts, the rules, regulations and requirements of the Securities and
Exchange Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 22nd day
of April, 1997.
/s/ Robert S. Meeder, Jr.
---------------------------------
Robert S. Meeder, Jr.
<PAGE>
THE PORTFOLIOS
The undersigned hereby constitutes and appoints Donald F. Meeder, Wesley F.
Hoag and James B. Craver, and each of them, with full powers of substitution as
his true and lawful attorneys and agents to execute in his name and on his
behalf in any and all capacities the Registration Statements on Form N-1A, and
any and all amendments thereto, filed by the Money Market, Mutual Fund, Growth
Stock, Bond and Utilities Stock Portfolios (the "Portfolios") The Flex-Partners
or The Flex-funds (each a "Trust") with the Securities and Exchange Commission
under the Investment Company Act of 1940 and the Securities Act of 1933 and any
and all instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable the Portfolios or the Trusts to comply with
such Acts, the rules, regulations and requirements of the Securities and
Exchange Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 22nd day
of April, 1997.
/s/ Roger D. Blackwell
---------------------------------
Roger D. Blackwell
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000944414
<NAME> UTILITY STOC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7167239
<INVESTMENTS-AT-VALUE> 7946966
<RECEIVABLES> 18731
<ASSETS-OTHER> 599
<OTHER-ITEMS-ASSETS> 31150
<TOTAL-ASSETS> 7997446
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33092
<TOTAL-LIABILITIES> 33092
<SENIOR-EQUITY> 7964354
<PAID-IN-CAPITAL-COMMON> 7184627
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 779727
<NET-ASSETS> 7964354
<DIVIDEND-INCOME> 230516
<INTEREST-INCOME> 20631
<OTHER-INCOME> 0
<EXPENSES-NET> 104771
<NET-INVESTMENT-INCOME> 146376
<REALIZED-GAINS-CURRENT> 348392
<APPREC-INCREASE-CURRENT> 357308
<NET-CHANGE-FROM-OPS> 852076
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3673484
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 65190
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 108148
<AVERAGE-NET-ASSETS> 6507516
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
