Miles Funds NCSRS Certified semi-annual shareholder report (management investment company)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT

COMPANIES

REGISTRATION NO. 33-87498
811-08910

MILES FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1415 28^th STREET, SUITE 200
WEST DES MOINES, IOWA 50266
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

AMY M. MITCHELL, TREASURER
MILES FUNDS, INC.
1415 28^th STREET, SUITE 200
WEST DES MOINES, IOWA 50266
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPIES OF ALL COMMUNICATIONS TO:


VERA LICHTENBERGER, ESQ.	JOHN C. MILES, ESQ.
MILES FUNDS, INC.	CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
1415 28^th STREET, SUITE 200	1900 U.S. BANK BUILDING, 233 S. 13^TH STREET
WEST DES MOINES, IOWA 50266	LINCOLN, NEBRASKA 68508

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (515) 244-5426

DATE OF FISCAL YEAR END: 03/31/2013

DATE OF REPORTING PERIOD: 09/30/2013

ITEM 1. REPORTS TO STOCKHOLDERS.

SEMI-ANNUAL REPORT FOR THE PERIOD ENDING SEPTEMBER 30, 2013.

Institutional Money Market Fund

SEMI-ANNUAL FINANCIAL REPORT

SEPTEMBER 30, 2013

THE

EDUCATION

LIQUIDITY

FUND

Miles Funds, Inc.

Table of Contents

Message from the Investment Adviser

Page 2

Performance Report and Schedule of Portfolio Investments

Page 3

Statement of Assets and Liabilities

Page 6

Statement of Operations

Page 7

Statements of Changes in Net Assets

Page 8

Notes to Financial Statements

Page 9

Financial Highlights

Page 12

Additional Information

Page 13

Miles Funds, Inc.

Message from the Investment Adviser

Dear Valued Shareholder:

We begin the latter half of our year in the teeth of a U.S. government shutdown with a debt ceiling debate looming in the near future. The government is expected to run out of money in October and will require an increase in the debt ceiling to roll over maturing debt, which means significant political wrangling to come.

In the fall of 2011, the same situation produced a large equity market sell-off leading up to the deadline for action. This time around, the equity market’s reaction is much more benign – so far. Gridlock and a lack of cohesive, growth-oriented fiscal strategy continues to be a headwind to growth, but the domestic economy is still moving forward suggesting pent-up demand is driving activity.

Various economic numbers have demonstrated strength in the economy. The ISM Manufacturing index hit a two-year high in September, and the Service index reached an eight-year high during third quarter 2013. Auto sales also reached a five-year high. The housing market, which has been a bright spot all year, appeared to plateau in terms of both prices and activity, but remains in expansionary territory. And the unemployment rate ticked down to a nearly five-year low at 7.3%.

Despite these positive points, the Federal Reserve decided to not begin tapering asset purchases at their September meeting citing a need to see more improvement in underlying growth. The Fed’s decision surprised the markets and sent interest rates falling back to late July levels.

The outlook for global growth has improved somewhat with Europe exiting recession, Japan in stimulus mode, and China for now avoiding a hard landing. While emerging markets remain under pressure, the global picture is somewhat brighter. The timing of the taper will have implications for both domestic and global markets, but we expect it to begin in the relatively near future and view market opportunities in this light.

Thank you for your ongoing support of the Miles Funds, Inc.

[ncsr13001.jpg]

Laurie Mardis, CFA

Director, Fixed Income

Miles Capital, Inc.

The Miles Funds are distributed by Foreside Distribution Services, L.P.

Shares of the Miles Funds are NOT INSURED BY THE FDIC. Investment products involve investment risk, including the possible loss of principal. Past performance is not predictive of future results, and the composition of each Fund’s portfolio is subject to change.

Information not authorized for distribution unless accompanied or preceded by a current prospectus. An investor should consider the Fund investment objectives, risks, charges, and expenses carefully before investing or sending money. This and other important information can be found in the Funds’ prospectus. To obtain more information, please call 866-720-2995 or visit the website www.TELF-online.org. Please read the prospectus carefully before investing.

Miles Funds, Inc.

Performance Report

Money Market Funds

The money market yield curve fell over the last six months as the Federal Reserve postponed tapering asset purchases and increasing bank regulatory requirements pressured the supply of short paper lower. Money market rates will be anchored at these historically low rates until domestic growth improves and the Fed normalizes monetary policy.

Institutional Money Market Fund

The Fund’s average days remain shorter than its index as overnight rates and savings deposits offered better yields than longer term investments. Longer paper will be added as the relationship between overnight rates and 1-year investments begins to normalize. We are also increasing the allocation to bank deposit accounts and CDs where additional yield can be gained.


Miles Funds, Inc.
Institutional Money Market Fund

Schedule of Portfolio Investments (unaudited)
September 30, 2013

					Amortized				Amortized
Par Value	Description				Cost	Par Value	Description		Cost
U.S. Government Agencies (26.99%)						Certificates of Deposit (continued)
Federal Farm Credit Bank						City State Bank, IA Certificate of Deposit
$ 300,000	0.220%	(a)	10/15/13		$ 299,988	$ 246,599	0.550%	01/27/14	$ 246,599
2,300,000	0.150%	(b)	03/11/14		2,300,097	Fifth Third Bank, OH Certificate of Deposit
6,000,000	0.150%	(b)	04/01/14		6,000,301	245,000	0.400%	02/06/14	245,000
500,000	0.260%	(a)	07/14/14		499,724	Freedom Financial Bank, IA Certificate of Deposit
2,000,000	0.190%	(c)	10/24/14		1,999,785	250,000	0.500%	02/07/14	250,000
						Bank of China, NY Certificate of Deposit
Federal Home Loan Bank						245,000	0.250%	03/05/14	245,000
1,500,000	3.625%		10/18/13		1,502,399	GE Capital Bank, UT Certificate of Deposit
4,000,000	0.375%		06/12/14		4,004,500	245,000	0.200%	03/07/14	245,000
						Great Western Bank, SD Certificate of Deposit
Federal National Mortgage Association						245,000	0.250%	03/12/14	245,000
3,400,000	0.360%	(b)	06/23/14		3,404,747	First National Bank, TX Certificate of Deposit
	(Cost $20,011,541)				20,011,541	250,000	0.700%	03/21/14	250,000
						Beal Bank, NV Certificate of Deposit
Certificates of Deposit (11.66%)						245,000	0.250%	04/02/14	245,000
Beal Bank, TX Certificate of Deposit						Mizuho Bank, NY Certificate of Deposit
245,000	0.400%		11/06/13		245,000	245,000	0.250%	05/01/14	245,000
Discover Bank, DE Certificate of Deposit						GE Capital Retail Bank, UT Certificate of Deposit
245,000	0.350%		11/07/13		245,000	245,000	0.360%	05/02/14	245,000
BMW Bank, UT Certificate of Deposit						Customers Bank, PA Certificate of Deposit
245,000	0.350%		11/14/13		245,000	245,000	0.260%	05/06/14	245,000
Synovus Bank, GA Certificate of Deposit						Bank of India, NY Certificate of Deposit
245,000	0.350%		11/15/13		245,000	245,000	0.400%	05/07/14	245,000
Bank of Baroda, NY Certificate of Deposit						Bankers Bank, OK Certificate of Deposit
245,000	0.650%		11/29/13		245,000	245,000	0.200%	05/30/14	245,000
Newburyport Bank, MA Certificate of Deposit						Medallion Bank, UT Certificate of Deposit
246,964	0.350%		11/29/13		246,964	245,000	0.300%	06/13/14	245,000
Mizrahi Tefahot Bank, CA Certificate of Deposit						Safra National Bank, NY Certificate of Deposit
245,000	0.200%		12/11/13		245,000	245,000	0.300%	06/13/14	245,000
Citibank NA, SD Certificate of Deposit						Transport Alliance Bank, UT Certificate of Deposit
245,000	0.250%		12/16/13		245,000	245,000	0.350%	06/13/14	245,000
Treynor State Bank, IA Certificate of Deposit						Firstbank, PR Certificate of Deposit
Account Registry Service (CDARS)				(d)		245,000	0.400%	08/29/14	245,000
500,000	0.350%		12/05/13		500,000		(Cost $8,648,585)		8,648,585
1,000,000	0.350%		12/12/13		1,000,000
1,010,022	0.350%		12/26/13		1,010,022

(a) Interest rate fluctuates daily with Fed Fund rate
(b) Interest rate fluctuates daily with Prime rate
(c) Interest rate fluctuates monthly with Libor
(d) Fully FDIC insured through the CDARS program which places funds into certificates of deposit issued by banks in the
CDARS network in increments of less than the standard FDIC insurance maximum
(e) Deposit Account interest rates fluctuate as determined by individual bank
(f) Fully FDIC insured through the FICA program which places funds into individual banks in increments of less than the
standard FDIC insurance maximum
(g) Also approximates cost for tax purposes

					See accompanying notes to financial statements


Miles Funds, Inc.
Institutional Money Market Fund

Schedule of Portfolio Investments (unaudited) (continued)
September 30, 2013

			Amortized				Amortized
Par Value	Description		Cost	Par Value	Description		Cost
Deposit Accounts (45.48%)		(e)		Repurchase Agreements (15.83%)
Bank Iowa, West Des Moines, IA				South Street Securities, LLC
$ 245,000	0.200%		$ 245,000	11,736,387	0.080%	10/01/13	11,736,387
Bank of the West, Des Moines, IA					(Cost $11,736,387)		11,736,387
245,000	0.350%		245,000		(Purchased on 09/30/13; proceeds at
Boone Bank and Trust, Boone, IA					maturity $11,736,413; collateralized by
245,000	0.150%		245,000		$11,627,842 U.S. Government Agencies,
Central State Bank, State Center, IA					10/25/27~07/01/43, collateral worth
245,000	1.000%		245,000		$ 11,997,525)
Citizens State Bank, Pocahontas, IA
245,000	0.400%		245,000		Total Investments (99.96%)
Community Bank, Oelwein, IA					(Cost $74,115,118) (g)		$ 74,115,118
245,000	0.600%		245,000		Other Assets and Liabilities (0.04%)		30,899
Community Savings Bank, Manchester, IA
245,000	0.520%		245,000		Net Assets		$ 74,146,017
Fidelity Bank, Huxley, IA
245,000	0.300%		245,000
First Community Bank, Newell, IA
245,000	0.200%		245,000
First National Bank, Creston, IA
245,000	0.400%		245,000
First National Bank, Sioux Center, IA
245,000	0.400%		245,000
Iowa State Bank, Des Moines, IA
245,000	0.300%		245,000
Nationwide Bank, Columbus, OH
245,000	0.300%		245,000
Northwest Bank, Spencer, IA
245,000	0.400%		245,000
Treynor State Bank, Treynor, IA
245,000	0.500%		245,000
Federally Insured Cash Account		(f)
30,043,605	0.200%		30,043,605
	(Cost $33,718,605)		33,718,605




(a) Interest rate fluctuates daily with Fed Fund rate
(b) Interest rate fluctuates daily with Prime rate
(c) Interest rate fluctuates monthly with Libor
(d) Fully FDIC insured through the CDARS program which places funds into certificates of deposit issued by banks in the
CDARS network in increments of less than the standard FDIC insurance maximum
(e) Deposit Account interest rates fluctuate as determined by individual bank
(f) Fully FDIC insured through the FICA program which places funds into individual banks in increments of less than the
standard FDIC insurance maximum
(g) Also approximates cost for tax purposes See accompanying notes to financial statements


Miles Funds, Inc.
Statement of Assets and Liabilities (unaudited)
September 30, 2013

			Institutional
			Money Market
			Fund

ASSETS:
Investments, at value:
	Unaffiliated issuers		$ 62,378,731
	Repurchase agreements		11,736,387
		Total investments	74,115,118
Interest and dividends receivable			55,557
Prepaid expenses			2,000
		Total assets	74,172,675
LIABILITIES:
Dividends payable			613
Accrued expenses and other payables:
	Investment advisory fees		2,968
	Administration fees		4,365
	Other		18,712
		Total liabilities	26,658
		Net assets	$ 74,146,017
NET ASSETS:
Paid-in capital			$ 74,146,017
		Net assets	$ 74,146,017
Authorized shares			1,250,000,000
Capital shares outstanding			74,146,017
Net asset value--offering and redemption price per share			$ 1.00

See notes to financial statements 6


Miles Funds, Inc.
Statement of Operations (unaudited)
For the Six Months Ended September 30, 2013

		Institutional
		Money Market
		Fund

INVESTMENT INCOME:
Interest income		$ 92,287
Total investment income		92,287

EXPENSES:
Investment advisory fees		96,452
Administration fees		48,226
Accounting fees		14,468
Custody fees		6,325
Legal fees		4,491
Audit and tax fees		9,442
Directors' fees		4,894
Affiliated transfer agent fees		3,000
Registration and filing fees		500
Insurance expense		3,446
Pricing Service		1,022
Other		1,591
Total expenses		193,857
Less: Expenses voluntarily reduced/waived		(105,929)
Net expenses		87,928
Net investment income		$ 4,359

See notes to financial statements 7


Miles Funds, Inc.
Statements of Changes in Net Assets (unaudited)
September 30, 2013
	Institutional Money Market Fund
	Six Months	Year
	Ended	Ended
	September 30, 2013	March 31, 2013
OPERATIONS:
Net investment income	$ 4,359	$ 16,758
Change in net assets resulting from operations	4,359	16,758

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Capital Shares	(4,359)	(16,758)
Change in net assets from shareholder distributions	(4,359)	(16,758)

CAPITAL SHARE TRANSACTIONS:
Issued:
Capital Shares	111,719,246	238,071,147
Reinvestments:
Capital Shares	4,428	18,229
Redemptions:
Capital Shares	(126,210,029)	(222,283,122)
Change in net assets from capital transactions	(14,486,355)	15,806,254
Change in net assets	(14,486,355)	15,806,254

NET ASSETS:
Beginning of period	88,632,372	72,826,118
End of period	$ 74,146,017	$ 88,632,372

SHARE TRANSACTIONS:
Issued:
Capital Shares	111,719,246	238,071,147
Reinvestments:
Capital Shares	4,428	18,229
Redemptions:
Capital Shares	(126,210,029)	(222,283,122)
Change in shares	(14,486,355)	15,806,254

See notes to financial statements 8

Miles Funds, Inc.

Notes to Financial Statements (unaudited)

September 30, 2013

1. Organization

The Miles Funds, Inc. (the “Miles Funds”) was registered on November 16, 1994 under the Investment Company Act of 1940 (the “1940 Act”), as amended, as a diversified open-end management investment company issuing its shares in one portfolio. Miles Capital, Inc. (“Miles Capital”) is the investment adviser. The Miles Funds currently consist of the following diversified portfolio: Institutional Money Market Fund (the “Fund”).

2. Significant Accounting Policies

The following is a summary of significant accounting policies followed by the Fund in the preparation of the financial statements. The policies are in conformity with U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements 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 increase and decrease in net assets from operations during the period. Actual results could differ from those estimates.

Securities Valuation

In accordance with Rule 2a-7 under the 1940 Act, the Fund’s investments are valued at amortized cost, which approximates market value, in order to maintain a constant net asset value of $1 per share. Under the amortized cost method of valuation, discount or premium is amortized on an effective yield basis to the maturity of the security.

Security Transactions and Investment Income

Security transactions are accounted for on the date the security is purchased or sold (“trade date”). Interest income is recognized on the accrual basis and includes, when applicable, the pro rata amortization of premium or accretion of discount. Dividends are recorded on the ex-dividend date. Gains or losses realized on sales of securities are determined on the identified cost basis.

Repurchase Agreements

The Fund may engage in repurchase agreements with financial institutions such as banks, brokers, or dealers that Miles Capital deems creditworthy under guidelines approved by the Fund’s Board of Directors (the “Board”), subject to the seller’s agreement to repurchase such securities at a mutually agreed-upon date and price. The seller under a repurchase agreement will be required to continually maintain the value of collateral held pursuant to the agreement at not less than the repurchase price (including accrued interest). If the seller were to default on its repurchase obligation or become insolvent, the Fund holding such obligation would suffer a loss to the extent that the proceeds from a sale of the underlying portfolio were less than the repurchase price under the agreement, or to the extent that the disposition of such securities by the Fund was delayed pending court action. The repurchase price generally equals the price paid plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying portfolio securities. Collateral for certain tri-party repurchase agreements is held at the counterparty’s custodian in a segregated account for the benefit of the Fund and the counterparty.

Securities Purchased on a When-Issued or Delayed-Delivery Basis

The Fund may purchase securities on a when-issued or delayed-delivery basis. When-issued securities are securities purchased with delivery to occur at a later date at a stated price and/or yield, thereby involving the risk that the price and/or yield obtained may be more or less than those available in the market when delivery takes place. At the time the Fund makes a commitment to purchase a security on a when-issued basis, the Fund records

the transaction and reflects the value of the security in determining net asset value. A segregated account is established and the Fund maintains cash and marketable securities at least equal in value to commitments for when-issued securities.

Miles Funds, Inc.

Notes to Financial Statements (unaudited) (continued)

September 30, 2013

Dividends to Shareholders

Dividends from net investment income are declared daily and paid monthly.

The amount and timing of dividends from net investment income and distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from the character of distributions under GAAP. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal treatment; temporary differences do not require reclassification.

Taxes

The Fund’s policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute taxable income to shareholders in amounts that will avoid or minimize federal income or excise taxes of the Fund.

The Fund evaluates its tax position taken or expected to be taken in the course of preparing the Fund’s tax return to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as an expense in the current year. The Fund is no longer subject to examination by tax authorities for years prior to 2009. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would more-likely-than-not be sustained upon examination. Accordingly, no provision has been made for federal or state income taxes. Interest and penalties associated with any federal or state income tax obligations, if any, are recorded as interest expense.

3. Related Party Transactions

Under the terms of its Investment Advisory Agreement, Miles Capital is entitled to receive fees at an annual rate of 0.20 percent of the average daily net assets of the Fund. On May 23, 2012, the Board approved the amendment of the investment advisory fee from an annual rate of 0.35 percent to 0.20 percent. Miles Capital voluntarily limited advisory fees for the Fund to a range from 0.0 to 0.101 percent during the six months ended September 30, 2013.

The Fund has entered into a Management and Administration Agreement with Miles Capital pursuant to which the Fund pays administrative fees at an annual rate of 0.10 percent of the average daily net assets. On May 23, 2012, the Board approved the amendment of the management and administration fee from an annual rate of 0.21 percent to 0.10 percent. Miles Capital voluntarily limited administrative fees for the Fund to 0.065 to 0.07 percent during the six months ended September 30, 2013.

Miles Capital also provides fund accounting services for the Fund pursuant to a Fund Accounting Agreement and receives a fee of 0.03 percent of the average daily net assets of the Fund for such services. Miles Capital voluntarily waived all fund accounting fees for the Fund during the six months ended September 30, 2013.

Foreside Distribution Services, L.P. serves as distributor to the Fund pursuant to a Distribution Agreement. The Distributor receives no compensation under the Distribution Agreement with the Fund, but may receive compensation under a Distribution and Shareholder Service Plan (the “Plan”) adopted pursuant to Rule 12b-1

under the 1940 Act under which the Fund is authorized to pay the Distributor for payments it makes to Participating Organizations. As authorized by the Plan, the Distributor will enter into Shareholder Agreements with Participating Organizations pursuant to which the Participating Organization agrees to provide certain administrative and shareholder support services in connection with shares of a Fund purchased and held by Customers of the Participating Organization. The Distributor will be compensated by a Fund up to the amount of any payments it makes to Participating Organizations under the Rule 12b-1 Agreement. No fees have been

Miles Funds, Inc.

Notes to Financial Statements (unaudited) (continued)

September 30, 2013

approved for the Fund. However, Miles Capital as adviser and administrator of the Fund may in its sole discretion make payments to the Distributor to supplement shareholder fees paid by the Fund up to the maximum fee approved by the Plan without further notice to shareholders and at no cost to the Fund.

Miles Capital also serves as the Fund's transfer agent. Miles Capital is paid a fee for transfer agency services based on the number of shareholder accounts serviced or a minimum fee amount. During the six months ended September 30, 2013, Miles Capital received no transfer agent service fees.

Miles Capital reimburses the Fund for various other fees in order to maintain a targeted yield. Expenses voluntarily reduced/waived by Miles Capital for the six months ended September 30, 2013 are as follows:


	Expenses Voluntarily Reduced/Waived:
	Investment advisory fees	$ 73,970
	Administration fees	14,491
	Accounting fees	14,468
	Transfer agent fees	3,000
	Total expenses voluntarily reduced/waived	$ 105,929

4. Federal Income Taxes

5. Fair Value Measurement

ASC 820, Fair Value Measurement and Disclosure, defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. Under ASC 820, various inputs are used in determining the value of the Fund’s investments. These inputs are summarized into three broad levels as described below:

Level 1 –

quoted prices in active markets for identical securities;

Level 2 –

other significant observable inputs (including quoted prices for similar securities, interest rates, and evaluated quotations obtained from pricing services); or

Level 3 –

significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments.)

Securities in the Fund’s investments are valued at amortized cost, which approximates fair value, pursuant to Rule 2a-7 under the Investment Company Act of 1940. These approximate fair values are all considered Level 2 valuations with the exception of the demand accounts which are considered Level 1 valuations.

6. Securities Transactions

Purchases and proceeds from the maturity and sale of portfolio securities in the Institutional Money Market Fund aggregated $3,331,354,222 and $3,345,694,173 for the six months ended September 30, 2013.


Miles Funds, Inc.
Financial Highlights (unaudited)

		Institutional Money Market Fund
		Six Months Ended September 30, 2013			Year Ended March 31,
			(unaudited)		2013	2012	2011	2010	2009

Net Asset Value, Beginning of Period			$1.00000		$1.000	$1.000	$1.000	$1.000	$1.000

Net Investment Income			$0.00005		$0.000	$0.001	$0.002	$0.003	$0.017

Dividends and Distributions			($0.00005)		($0.000)	($0.001)	($0.002)	($0.003)	($0.017)

Net Asset Value, End of Period			$1.00000		$1.000	$1.000	$1.000	$1.000	$1.000





Total Return			0.01%	(a)	0.02%	0.05%	0.16%	0.26%	1.64%

Ratio of Expenses to Average
	Net Assets, After Waivers		0.18%	(b)	0.23%	0.17%	0.19%	0.32%	0.25%

Ratio of Net Investment Income to
	Average Net Assets, After Waivers		0.01%	(b)	0.02%	0.05%	0.16%	0.26%	1.66%

Ratio of Expenses to Average
	Net Assets, Before Waivers (c)		0.40%	(b)	0.51%	0.70%	0.73%	0.73%	0.74%

Ratio of Net Investment Income to
	Average Net Assets, Before Waivers (c)		(0.21%)	(b)	(0.26%)	(0.48%)	(0.37%)	(0.14%)	1.17%

Net Assets, End of Period (000 Omitted)			$74,146		$88,632	$72,826	$55,797	$57,769	$61,107



(a) Total return is for the period and has not been annualized.

(b) Ratios are annualized.

(c) During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.

Miles Funds, Inc.

Additional Information

September 30, 2013

1. About Your Fund Expenses

It is important for you to understand the impact of costs on your investment. All mutual funds have operating expenses. As a shareholder of the fund, you incur ongoing costs, including management fees, distribution and service fees, and other fund expenses. Expenses, which are deducted from a fund’s investment income, directly reduce the investment return of the fund.

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire period from April 1, 2013 to September 30, 2013. The table illustrates your fund’s costs in two ways:

Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

Based on hypothetical 5 percent return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a return of 5 percent before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the fund’s actual return, the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5 percent return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

Your fund does not carry a “sales load” or transaction fee. The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

You can find more information about the fund’s expenses, including annual expense ratios for the past five years, in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate fund prospectus.


	Beginning	Ending	Expenses Paid	Annualized
	Account Value	Account Value	During Period*	Expense
	4/1/2013	9/30/2013	4/1/13-9/30/13	Ratio*
*Based on Actual Fund Return*
Institutional Money Market Fund	$1,000.00	$1,000.05	$0.90	0.18%

*Based on Hypothetical 5% Return*
Institutional Money Market Fund	$1,000.00	$1,024.17	$0.91	0.18%


*Expenses are equal to the fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by number of days in the most recent fiscal half-year, then divided by 365.