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OMB Number: 3235-0570
Expires: November 30, 2005
Estimated average burden
hours per response. . . . . . . 5.0
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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
Investment Company Act file number 811-6720
---------------------------
Meeder Advisor Funds Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
6125 Memorial Drive Dublin, OH 43017
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(Address of principal executive offices) (Zip code)
Bruce McKibben
c/o Meeder Advisor Funds Trust
6125 Memorial Drive
Dublin, OH 43017
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(Name and address of agent for service)
Registrant's telephone number, including area code: 800-325-3539
----------------------------
Date of fiscal year end: December 31, 2003
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Date of reporting period: December 31, 2003
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Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. (S) 3507.
Item 1. Reports to Stockholders.
Include a copy of the report transmitted to stockholders pursuant to Rule
30e-1 under the Act (17 CFR 270.30e-1).
Meeder
Advisor Funds
The Institutional Fund
2003 Annual Report
December 31, 2003
[PICTURE]
Meeder
Advisor Funds
Managed by Meeder Asset Management, Inc.
6125 Memorial Drive, Dublin Ohio, 43017
Call Toll Free 800-325-3539 | 614-760-2159
Meeder
Advisor Funds
The Institutional Fund
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Performance Perspective
Average Annual Total Returns 1 3 5 Since
as of December 31, 2003 year years years Inception
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The Institutional Fund 1.06% 2.34% 3.69% 4.56%/1/
- -------------------------------------------------------------------------------------------------------
Average Institutional Money Market Fund/3/ 0.84% 2.08% 3.47% 4.28%/2/
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Current & Effective Yields* 7-day simple yield: 1.00% 7-day compound yield: 1.00%
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/1/ Inception Date: 6/15/94.
/2/ Average Annual total return from 6/30/94 to 12/31/03.
* As of December 31, 2003, yield quotations more closely reflect the earnings of
The Institutional Fund than total return quotations.
Source for average institutional money market fund data: iMoneyNet, Inc.
- --------------------------------------------------------------------------------
Annual Market Perspective
[PHOTO OF Joseph A. Zarr]
Joseph A. Zarr
Co-Portfolio Manager]
[PHOTO OF Christopher M. O'Daniel]
Christopher M. O'Daniel
Co-Portfolio Manager
The year began and ended on two entirely different themes. Most markets began
the year more concerned about foreign policy than Fed policy. Deflationary fears
outweighed inflationary expectations, and a number of money funds were on their
way toward annualized yields of 0.10% or less. Yields continued to erode through
the 2nd Quarter as the Federal Reserve lowered short-term rates in June and
talked rates lower at the long end. The Fed was quite concerned about a
Japanese-style deflationary recession enveloping the economy, and openly talked
of further stimulus should conditions continue to worsen.
By the 3rd Quarter, the Bush tax cuts were taking hold on the consumer side of
the ledger, and capital spending began to inch upward on the corporate side as
well. A perception began to emerge of an expanding economy with little standing
in its way (i.e., The Federal Reserve). Inflation remained low, job losses
subsided, and other economic numbers began to improve one by one. By the end of
the year, GDP growth had exploded and, on a seasonally adjusted basis, the job
growth began to accelerate. We had come full circle, from wondering at the start
of the year how low rates would go, to contemplating by the end of the year when
the Fed would begin to raise rates.
As always, we will be monitoring the situation closely and trying to take
advantage of any market anomalies. The key may well reside in the extent to
which the market anticipates inflation, and we will follow its lead accordingly.
Past performance does not guarantee future results. Except for the current and
effective yields, all performance figures represent average annual total returns
for the periods ended December 31, 2003, and assume reinvestment of all
dividend and capital gain distributions. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Expenses were
waived and/or reimbursed in order to reduce the operating expenses of The
Institutional Fund during the periods shown above. Investments in The
Institutional Fund are neither insured nor guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. Although the Fund seeks
to preserve the value of your invesment at $1.00 per share, it is possible to
lose money by investing in The Institutional Fund.
/3/ An index of funds such as iMoneyNet's Average Institutional Money Market
Fund index includes a number of mutual funds grouped by investment
objective.
To obtain a prospectus containing more complete information about The
Institutional Fund, including other fees and expenses that apply to a continued
investment in the Fund, you may call (800) 325-3539 or write P.O. Box 7177,
Dublin OH 43017. Please read the prospectus carefully before investing.
2 2003 Annual Report | December 31, 2003
Meeder
Advisor Funds
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Portfolio Holdings as of December 31, 2003
[PIE CHART]
% of Total
Net Assets
1) Variable Rate Notes 36%
2) Corporate Notes 26%
3) Repurchase Agreements 14%
4) U.S. Gov't Agency Notes 14%
5) Time Deposits 4%
6) Commercial Paper 6%
Portfolio holdings are subject to change.
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Annual Returns
The Institutional Fund
Average Institutional Money Market Fund
[GRAPH]
Average
The Institutional
Annual Institutional Money Market
Returns Fund Fund
----------------------------------------
1995 6.01% 5.79%
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1996 5.43% 5.23%
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1997 5.53% 5.40%
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1998 5.49% 5.33%
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1999 5.13% 4.96%
----------------------------------------
2000 6.37% 6.19%
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2001 4.26% 3.87%
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2002 1.73% 1.50%
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2003 1.06% 0.84%
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Source for average money market fund performance: iMoneyNet, Inc.
2003 Annual Report | December 31, 2003 3
Schedule of Investments
December 31, 2003
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Money Market Portfolio
Principal
Coupon/ Amount ($)
Security Description Yield Maturity or Shares Value ($)
-------------------- ------- -------- ---------- -----------
Commercial Paper -- 6.2%
CIT Group, Inc. 1.12% 01/06/04 2,719,000 2,718,577
Duff & Phelps Utility &
Corporate Bond Trust,
Inc.** 1.14% 02/06/04 5,905,000 5,898,268
General Electric Capital
Services, Inc. 1.08% 02/09/04 1,500,000 1,498,245
Northern Illinois Gas 1.11% 03/02/04 2,000,000 1,996,239
-----------
Total Commercial Paper
(Cost $12,111,329) 12,111,329
-----------
Corporate Obligations -- 58.3%
Abbott Laboratories 5.13% 07/01/04 1,000,000 1,019,575
American Express Co. 6.75% 06/23/04 2,000,000 2,052,614
Aquarium Holdings, KY** 1.25%* 01/02/04 108,000 108,000
Associates Corp. 5.50% 02/15/04 700,000 703,738
Austin Printing Co., Inc.** 1.21%* 01/02/04 1,815,000 1,815,000
Bath Technologies, Inc.** 1.21%* 01/02/04 1,310,000 1,310,000
Bank Of America Corp. 7.75% 08/15/04 651,000 676,686
Bear Stearns Co., Inc. 6.63% 01/15/04 500,000 501,037
Bear Stearns Co., Inc. 6.15% 03/02/04 965,000 972,930
Bear Stearns Co., Inc.** 1.70%* 06/01/04 2,870,000 2,875,287
Bear Stearns Co., Inc. 6.63% 10/01/04 750,000 778,691
Beaver Creek Enterprise** 1.21%* 01/02/04 1,590,000 1,590,000
Cascade Plaza Project** 1.21%* 01/02/04 8,395,000 8,395,000
Citigroup, Inc. 5.50% 02/15/04 1,500,000 1,507,878
Citigroup, Inc. 5.63% 05/17/04 3,618,000 3,677,154
Clark Grave Vault Co.** 1.25%* 01/02/04 1,200,000 1,200,000
Commercial Credit Co. 7.88% 07/15/04 1,430,000 1,480,385
Coughlin Family Property,
Inc.** 1.25%* 01/02/04 1,605,000 1,605,000
CVS Corp.** 5.50% 02/15/04 5,000,000 5,026,642
DuPont, E.I., De Nemours
& Co. 8.13% 03/15/04 543,000 550,635
Espanola/Nambe** 1.21%* 01/02/04 915,000 915,000
FleetBoston Financial
Corp. 8.13% 07/01/04 3,000,000 3,101,820
FPL Group Capital, Inc. 6.88% 06/01/04 4,000,000 4,091,247
General Electric Capital
Corp. 5.38% 04/23/04 1,220,000 1,234,874
Gordon Flesch Co.
Project** 1.21%* 01/02/04 900,000 900,000
Heller Financial, Inc. 6.00% 03/19/04 610,000 616,289
Isaac Tire, Inc.** 1.25%* 01/02/04 870,000 870,000
J.P. Morgan & Co., Inc. 5.69% 02/10/04 3,000,000 3,013,911
J.P. Morgan & Co., Inc. 7.63% 09/15/04 365,000 380,920
K.L. Morris, Inc.** 1.25%* 01/02/04 2,095,000 2,095,000
Kiser Street, Inc.** 1.21%* 01/02/04 1,785,000 1,785,000
Leggett & Platt, Inc.** 6.90% 06/29/04 2,000,000 2,055,281
Martin Wheel Co, Inc.** 1.44%* 01/02/04 2,420,000 2,420,000
Merrill Lynch & Co., Inc. 5.70% 02/06/04 1,500,000 1,506,251
Merrill Lynch & Co., Inc. 6.55% 08/01/04 5,336,000 5,495,757
MetLife Insurance Co.*** 1.25%* 01/02/04 12,000,000 12,000,000
Morgan Stanley Dean
Witter & Co. 5.63% 01/20/04 2,785,000 2,791,405
Mubea, Inc.** 1.21%* 01/02/04 5,825,000 5,825,000
Principal
Coupon/ Amount ($)
Security Description Yield Maturity or Shares Value ($)
-------------------- ------- -------- ---------- -----------
Corporate Obligations -- continued
Osco Industries, Inc.** 1.21%* 01/02/04 1,200,000 1,200,000
O.K.I. Supply Co.** 1.25%* 01/02/04 1,460,000 1,460,000
Paine Webber Group, Inc. 6.38% 05/15/04 200,000 203,671
Presrite Corp.** 1.21%* 01/02/04 170,000 170,000
Pro Tire, Inc.** 1.25%* 01/02/04 1,045,000 1,045,000
R.I. Lampus Co.** 1.21%* 01/02/04 625,000 625,000
Salomon, Inc. 7.20% 02/01/04 2,101,000 2,111,142
Seariver Maritime, Inc.** 1.13%* 01/02/04 4,400,000 4,400,000
SGS Tool Co.** 1.21%* 01/02/04 600,000 600,000
Wachovia Corp. 8.38% 04/15/04 4,185,000 4,270,779
Wachovia Corp. 7.20% 08/15/04 788,000 816,061
Wells Fargo & Co. 9.13% 02/01/04 1,000,000 1,006,402
White Castle Project** 1.21%* 01/02/04 6,500,000 6,500,000
-----------
Total Corporate Obligations
(Cost $113,352,062) 113,352,062
-----------
U.S. Government Agency Obligations -- 14.3%
Federal Home Loan Bank 5.17% 01/08/04 515,000 515,363
Federal Home Loan Bank 5.22% 01/12/04 500,000 500,587
Federal Home Loan Bank 3.25% 02/13/04 510,000 511,137
Federal Home Loan Bank 6.75% 04/05/04 300,000 304,217
Federal Home Loan Bank 3.40% 07/19/04 500,000 505,645
Federal Home Loan Bank 1.20% 08/20/04 3,000,000 3,000,000
Federal Home Loan Bank 1.40% 09/01/04 3,000,000 3,000,000
Federal Home Loan Bank 1.50% 12/24/04 1,000,000 1,000,000
Federal Home Loan
Mortgage Corp. 3.33% 01/30/04 500,000 500,842
Federal Home Loan
Mortgage Corp. 6.25% 07/15/04 5,017,000 5,150,277
Federal Home Loan
Mortgage Corp. 1.50% 11/16/04 2,000,000 2,000,000
Federal National Mortgage
Association 8.63% 06/30/04 200,000 207,151
Federal National Mortgage
Association 7.40% 07/01/04 500,000 514,749
Federal National Mortgage
Association 1.25% 08/27/04 3,000,000 3,000,000
Federal National Mortgage
Association 1.50% 12/03/04 2,000,000 2,000,000
Federal National Mortgage
Association 1.50% 12/21/04 3,000,000 3,000,000
Federal National Mortgage
Association 1.65% 12/30/04 2,000,000 2,000,000
-----------
Total U.S. Government Agency Obligations
(Cost $27,709,968) 27,709,968
-----------
Variable Rate Demand Notes -- 5.2%
Caterpillar Financial, Inc. 2.25%* 01/05/04 10,064,934 10,064,934
-----------
Total Variable Rate Demand Notes
(Cost $10,064,934) 10,064,934
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4
Schedule of Investments
December 31, 2003
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Money Market Portfolio
Principal
Coupon/ Amount ($)
Security Description Yield Maturity or Shares Value ($)
-------------------- ------- -------- ---------- -----------
Demand Deposits -- 3.6%
Bank One Corp. 1.24%* 01/02/04 4,021,783 4,021,783
National City Corp. 1.98%* 01/02/04 3,010,779 3,010,779
-----------
Total Demand Deposits
(Cost $7,032,562) 7,032,562
-----------
Repurchase Agreements -- 13.6%
Salomon Smith Barney,
Inc., 1.05%, 01/02/04,
(Collateralized by
$26,916,270 Eureka
Securities Commercial
Paper, at 1.06%, due
02/18/04, value --
$26,878,167) 26,351,000 26,351,000
-----------
Total Repurchase Agreements
(Cost $26,351,000) 26,351,000
-----------
Total Investments -- 101.2%
(Cost $196,621,855) (a) 196,621,855
-----------
Liabilities less Other Assets -- (1.2%) (2,275,888)
-----------
Total Net Assets -- 100.0% 194,345,967
-----------
Principal
Amount ($)
Security Description or Shares Value ($)
-------------------- ---------- -----------
Trustee Deferred Compensation****
The Flex-funds Dynamic Growth Fund 1,196 9,173
The Flex-funds Highlands Growth Fund 1,178 17,458
The Flex-funds Muirfield Fund 4,158 19,917
The Flex-funds Total Return Utilities Fund 967 13,818
-----------
Total Trustee Deferred Compensation
(Cost $60,366) 60,366
-----------
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate security. Interest rate is as of December 31, 2003. Maturity
date reflects the next rate change date.
** Represents a restricted security purchased under Rule 144A, which is exempt
from registration under the Securities Act of 1933, as amended. Security is
restricted as to resale to institutional investors, but has been deemed
liquid in accordance with guidelines approved by the Board of Trustees. As
of December 31, 2003, securities restricted as to resale to institutional
investors represented 31.9% of Total Investments.
*** Illiquid security. The sale or disposition of such security would not be
possible in the ordinary course of business within seven days at
approximately the value at which the Fund has valued the security. As of
December 31, 2003, illiquid securities represented 6.1% of Total
Investments.
**** Assets of affiliates to the Money Market Portfolio held for the benefit of
the Portfolio's Trustees in connection with the Trustee Deferred
Compensation Plan.
See accompanying notes to financial statements.
5
Statement of Assets & Liabilities
December 31, 2003
- --------------------------------------------------------------------------------
Institutional
Fund
-------------
Assets
Investment in corresponding portfolio, at value $28,695,086
Receivable from investment advisor 5,486
Other assets 3,558
------------------------------------------------------------------------
Total Assets 28,704,130
------------------------------------------------------------------------
Liabilities
Dividends payable 9,026
Accrued transfer agent and administrative fees 1,871
Accrued distribution plan (12b-1) fees 1,442
Other accrued liabilities 5,586
------------------------------------------------------------------------
Total Liabilities 17,925
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Net Assets $28,686,205
------------------------------------------------------------------------
Net Assets
Capital $28,686,205
------------------------------------------------------------------------
Total Net Assets $28,686,205
------------------------------------------------------------------------
Capital Stock Outstanding 28,686,205
(indefinite number of shares authorized, $0.10 par value)
Net Asset Value, Offering and Redemption Price Per Share $ 1.00
See accompanying notes to financial statements.
6
Statement of Operations
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
Institutional
Fund
-------------
Net Investment Income from Corresponding Portfolio
Interest $283,491
Expenses net of reductions (39,093)
----------------------------------------------------------------------
Total Net Investment Income from Corresponding Portfolio 244,398
----------------------------------------------------------------------
Fund Expenses
Administrative 10,417
Transfer agent 16,667
Registration and filing 7,429
Distribution plan (12b-1) 6,317
Printing 1,331
Legal 1,168
Audit 5,428
Insurance 1,222
Postage 730
Other 6,777
----------------------------------------------------------------------
Total Expenses Before Reductions 57,486
----------------------------------------------------------------------
Expenses reimbursed by investment advisor (26,679)
Distribution plan (12b-1) expenses waived (2,917)
Transfer agent expenses waived (5,701)
----------------------------------------------------------------------
Net Expenses 22,189
----------------------------------------------------------------------
----------------------------------------------------------------------
Net Investment Income 222,209
----------------------------------------------------------------------
----------------------------------------------------------------------
Net Change in Net Assets Resulting from Operations $222,209
----------------------------------------------------------------------
See accompanying notes to financial statements.
7
Statements of Changes in Net Assets
For the Year Ended December 31,
- --------------------------------------------------------------------------------
Institutional Fund
--------------------------
2003 2002
------------ ------------
Operations
Net investment income $ 222,209 $ 536,961
- --------------------------------------------------------------------------------------------------------
Net change in net assets resulting from operations 222,209 536,961
- --------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From net investment income (222,209) (536,961)
- --------------------------------------------------------------------------------------------------------
Net change in net assets resulting from distributions (222,209) (536,961)
- --------------------------------------------------------------------------------------------------------
Capital Transactions
Issued 44,806,516 52,568,110
Reinvested 174,384 453,560
Redeemed (40,923,296) (77,088,976)
- --------------------------------------------------------------------------------------------------------
Net change in net assets resulting from capital transactions 4,057,604 (24,067,306)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Total Change in Net Assets 4,057,604 (24,067,306)
- --------------------------------------------------------------------------------------------------------
Net Assets -- Beginning of Period 24,628,601 48,695,907
- --------------------------------------------------------------------------------------------------------
Net Assets -- End of Period $ 28,686,205 $ 24,628,601
- --------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions in excess of) net investment income $ -- $ --
- --------------------------------------------------------------------------------------------------------
Share Transactions
Issued 44,806,516 52,568,110
Reinvested 174,384 453,560
Redeemed (40,923,296) (77,088,976)
- --------------------------------------------------------------------------------------------------------
Net change in shares 4,057,604 (24,067,306)
- --------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
8
Institutional Fund
2003 2002 2001 2000 1999
------- ------- ------- ------- --------
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------
Income from Investment Operations
Net investment income 0.011 0.017 0.042 0.062 0.050
- -----------------------------------------------------------------------------------------------------
Total from Investment Operations 0.011 0.017 0.042 0.062 0.050
- -----------------------------------------------------------------------------------------------------
Less Distributions
From net investment income (0.011) (0.017) (0.042) (0.062) (0.050)
- -----------------------------------------------------------------------------------------------------
Total Distributions (0.011) (0.017) (0.042) (0.062) (0.050)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------
Total Return (assumes reinvestment of distributions) 1.06% 1.73% 4.26% 6.37% 5.13%
Ratios/Supplemental Data
Net assets, end of period ($000) $28,686 $24,629 $48,696 $63,971 $868,169
Ratio of net expenses to average net assets(1) 0.29% 0.30% 0.29% 0.24% 0.25%
Ratio of net investment income to average net assets(1) 1.07% 1.75% 4.23% 6.02% 5.01%
Ratio of expenses to average net assets before
reductions(1) 0.64% 0.53% 0.49% 0.46% 0.45%
(1) Ratio reflects reduction in corresponding portfolio.
See accompanying notes to financial statements.
9
Financial Highlights
For a Share Outstanding Through Each Fiscal Year Ended December 31,
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2003
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Meeder Advisor Funds Trust (the "Trust") was organized in 1992 and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a diversified, open-end management investment company. The
Institutional Fund (the "Fund") is the lone series of the Trust as of December
31, 2003. The Fund invests all of its investable assets in a corresponding
open-end management investment company (the "Portfolio"). The Fund, the
Portfolio into which the Fund invests and the percentage of the Portfolio owned
by the Fund is as follows:
Percentage of
Portfolio Owned by
Fund as of
Fund Portfolio December 31, 2003*
---- --------- ------------------
Institutional Fund Money Market Portfolio 15%
* There is a partner of the Portfolio that owns a de minimis position.
The financial statements of the Portfolio, including the Schedule of
Investments, are included elsewhere in this report and should be read in
conjunction with the financial statements of the Fund.
Use of estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Valuation of investments. The Fund records its investment in the corresponding
Portfolio at value. Valuation of securities held by the Portfolio is discussed
in the Portfolio's notes to financial statements included elsewhere in this
report.
Federal income taxes. It is the Fund's policy to continue to comply with the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income and net capital gains to its shareholders. Therefore, no federal
income tax provision is required.
Distributions to shareholders. Distributions to shareholders are recorded on
the ex-dividend date. The Fund declares dividends from net investment income on
a daily basis and pays such dividends on a monthly basis. The Fund distributes
net capital gains, if any, on an annual basis.
Distributions from net investment income and from net capital gains are
determined in accordance with income tax regulations that may differ from GAAP.
These differences are primarily due to deferrals of certain losses and expiring
capital loss carryforwards held by the Fund's corresponding Portfolio.
Accordingly, timing differences relating to shareholder distributions are
reflected in the components of net assets and permanent book and tax
differences relating to shareholder distributions have been reclassified within
the components of net assets.
Investment income & expenses. The Fund records daily its proportionate share
of the corresponding Portfolio's income, expenses, and realized and unrealized
gains and losses. In addition, the Fund accrues its own expenses. Expenses
incurred by the Trust that do not specifically relate to an individual Fund of
the Trust are allocated to the Fund based on the Fund's relative net assets or
other appropriate basis.
2. Agreements and Other Transactions with Affiliates
Meeder Asset Management, Inc. ("MAM"), a wholly-owned subsidiary of Meeder
Financial, Inc. ("Meeder"), provides the Portfolio with investment management,
research, statistical and advisory services.
Mutual Funds Service Co. ("MFSCo"), a wholly-owned subsidiary of Meeder, serves
as stock transfer, dividend disbursing and shareholder services agent for the
Fund. In compensation for such services, the Fund pays MFSCo an annual fee
equal to the greater of $20 per active shareholder account or 0.08% of the
Fund's average daily net assets. MFSCo is entitled to receive an annual minimum
fee of $4,000 from the Fund. The Fund is currently subject to an expense cap,
thus the basis point fee has been reduced by 0.02%.
10
MFSCo provides the Trust with certain administrative services. In compensation
for such services, the Fund pays MFSCo an annual fee equal to 0.05% of the
Fund's average daily net assets.
MAM has voluntarily agreed to reduce its fees and/or reimburse expenses,
including expenses allocated from its respective Portfolio (excluding brokerage
fees and commissions, taxes, interest, and extraordinary or non-recurring
expenses), to limit the Fund's total annual operating expenses. During the year
MAM limited the Fund's total annual operating expenses to a range of 0.27% to
0.30% of average daily net assets. As of December 31, 2003, the Fund's total
annual operating expense limit is 0.30%. Such reimbursement is limited to the
total of fees charged to the Fund by MAM and MFSCo. For the year ended December
31, 2003, MAM and MFSCo, collectively, reimbursed $26,679 to the Fund.
Pursuant to Rule 12b-1 of the 1940 Act, a mutual fund can adopt a written plan
to pay certain expenses out of fund assets relating to the sale and
distribution of its shares. The Fund has adopted a distribution plan that
limits the Fund, on an annual basis, to pay 0.03% of average daily net assets
for such expenses.
3. Federal Tax Information
The Fund paid dividends, characterized for tax purposes as ordinary income, of
$216,268 and $541,986 during the years ended December 31, 2003 and December 31,
2002, respectively./1/
As of December 31, 2003 and December 31, 2002, the components of accumulated
earnings/(deficit) on a tax basis for the Fund were as follows:
Accumulated Total
Undistributed Capital and Unrealized Accumulated
Ordinary Dividends Other Gains Appreciation/ Earnings/
Year Income Payable and (Losses) (Depreciation) (Deficit)
---- ------------- --------- ------------ -------------- -----------
2003 $9,026 $(9,026) $-- $-- $--
/1/ Total dividends paid may differ from the amount reported in the Statements
of Changes in Net Assets because for tax purposes dividends are recognized
when actually paid.
4. Subsequent Event
The Institutional Fund and The Money Market Fund of The Flex-funds Trust, which
are managed by Meeder Asset Management, Inc., are organized in the
master-feeder structure. Under this structure both funds, having the same
investment objective, invest in the same master portfolio, the Money Market
Portfolio. The Board of Trustees has approved the liquidation, on or about
April 30, 2004, of the Institutional Fund. In conjunction with this
liquidation, the Board of Trustees has also approved the termination, on or
about April 30, 2004, of the Money Market Portfolio. The shareholders of the
Institutional Fund will have the opportunity to invest their liquidation
proceeds in a new class of shares of The Money Market Fund, which will have a
virtually identical investment objective as the Institutional Fund.
Consequently, on or about April 30, 2004, The Flex-funds Money Market Fund will
be a stand-alone fund offering two classes of shares and will continue to be
managed by Meeder Asset Management, Inc.
11
Independent Auditors' Report
To the Shareholders and Board of Trustees of
The Institutional Fund:
We have audited the accompanying statement of assets and liabilities of The
Institutional Fund (the Fund) as of December 31, 2003, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the periods presented in the two year period then ended,
and the financial highlights for each of the periods presented in the five year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's 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 auditing standards generally
accepted in the United States of America. 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. 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
Fund as of December 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the periods presented in the
two year period then ended, and the financial highlights for each of the
periods presented in the five year period then ended, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Columbus, Ohio
March 15, 2004
12
Statement of Assets & Liabilities
December 31, 2003
- --------------------------------------------------------------------------------
Money
Market
Portfolio
------------
Assets
Investments, at value* $170,270,855
Repurchase agreements, at value* 26,351,000
Trustee deferred compensation investments, at value 60,366
Cash 748
Interest and dividend receivable 1,467,815
Prepaid expenses/other assets 778
----------------------------------------------------------------
Total Assets 198,151,562
----------------------------------------------------------------
Liabilities
Payable for securities purchased 3,704,289
Payable for Trustee Deferred Compensation Plan 60,366
Payable to investment advisor 24,754
Accrued fund accounting fees 5,261
Other accrued liabilities 10,925
----------------------------------------------------------------
Total Liabilities 3,805,595
----------------------------------------------------------------
----------------------------------------------------------------
Total Net Assets $194,345,967
----------------------------------------------------------------
----------------------------------------------------------------
* Investments, at cost $196,621,855
----------------------------------------------------------------
See accompanying notes to financial statements.
13
Statement of Operations
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
Money
Market
Portfolio
----------
Investment Income
Interest $2,800,152
--------------------------------------------------------------
Total Investment Income 2,800,152
--------------------------------------------------------------
Expenses
Investment advisor 668,771
Fund accounting 57,751
Trustee 8,583
Audit 6,168
Custodian 8,322
Legal 4,081
Insurance 1,824
Other 1,482
--------------------------------------------------------------
Total Expenses Before Reductions 756,982
--------------------------------------------------------------
Investment advisor fees waived (374,508)
--------------------------------------------------------------
Total Net Expenses 382,474
--------------------------------------------------------------
--------------------------------------------------------------
Net Investment Income 2,417,678
--------------------------------------------------------------
--------------------------------------------------------------
Net Change in Net Assets Resulting from Operations $2,417,678
--------------------------------------------------------------
See accompanying notes to financial statements.
14
Statements of Changes in Net Assets
For the Years Ended December 31,
- --------------------------------------------------------------------------------
Money Market Portfolio
----------------------------
2003 2002
------------- -------------
Operations
Net investment income $ 2,417,678 $ 4,658,599
- ---------------------------------------------------------------------------------------------------------------------
Net change in net assets resulting from operations 2,417,678 4,658,599
- ---------------------------------------------------------------------------------------------------------------------
Transactions of Investors' Beneficial Interests
Contributions 245,964,298 325,392,543
Withdrawals (264,913,444) (389,503,659)
- ---------------------------------------------------------------------------------------------------------------------
Net change in net assets resulting from transactions of investors' beneficial interests (18,949,146) (64,111,116)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Total Change in Net Assets (16,531,468) (59,452,517)
- ---------------------------------------------------------------------------------------------------------------------
Net Assets -- Beginning of Period 210,877,435 270,329,952
- ---------------------------------------------------------------------------------------------------------------------
Net Assets -- End of Period $ 194,345,967 $ 210,877,435
- ---------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
Financial Highlights
Ratios/Supplementary Data For Each Fiscal Year Ended December 31,
- --------------------------------------------------------------------------------
Money Market Portfolio
2003 2002 2001 2000 1999
-------- -------- -------- -------- ----------
Total Return 1.17% 1.83% 4.54% 6.61% 5.37%
Net assets, end of period ($000) $194,346 $210,877 $270,330 $297,206 $1,104,197
Ratio of net expenses to average net assets 0.18% 0.20% 0.21% 0.19% 0.18%
Ratio of net investment income to average net assets 1.16% 1.83% 4.26% 6.05% 5.07%
Ratio of expenses to average net assets before reductions 0.36% 0.36% 0.35% 0.30% 0.30%
See accompanying notes to financial statements.
16
Notes to Financial Statements
December 31, 2003
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Institutional Fund (the "Fund") invests all of its investable assets in a
corresponding open-end management investment company (a "Portfolio") having the
same investment objective as the Fund. The Portfolio is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a no-load,
open-ended management investment company, which was organized as a trust under
the laws of the State of New York. For federal income tax purposes the
Portfolio qualifies as a partnership, and each investor in the Portfolio is
treated as the owner of its proportionate share of the net assets, income,
expenses, and realized and unrealized gains and losses of the Portfolio.
Accordingly, as a "pass-through" entity, the Portfolio pays no income dividend
or capital gain distribution.
Use of estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") 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.
Security valuation. Money market securities held in the Portfolio are valued
at amortized cost, which approximates value. In compliance with Rule 2a-7 of
the 1940 Act, the amortized values are compared to prices obtained from
independent pricing services that use valuation techniques approved by the
Board of Trustees ("Trustees").
Repurchase agreements. The Portfolio may engage in repurchase agreement
transactions whereby the Portfolio takes possession of an underlying debt
instrument subject to an obligation of the seller to repurchase the instrument
from the Portfolio and an obligation of the Portfolio to resell the instrument
at an agreed upon price and term. At all times, the Portfolio maintains the
value of collateral, including accrued interest, at least 100% of the amount of
the repurchase agreement, plus accrued interest. If the seller defaults or the
fair value of the collateral declines, realization of the collateral by the
Portfolio may be delayed or limited.
Federal income taxes. The Portfolio will be treated as a partnership for
federal income tax purposes. As such, each investor in the Portfolio will be
subject to taxation on its share of the Portfolio's ordinary income and capital
gains. It is the Portfolio's policy to continue to comply with the requirements
of Subchapter M of the Internal Revenue Code applicable to it. Therefore, no
federal income tax provision is required.
Other. The Portfolio records security transactions on the trade date. Gains
and losses realized from the sale of securities are determined on the specific
identification basis. Interest income (including amortization of premium and
accretion of discount) is recognized as earned.
Under a Deferred Compensation Plan (the "Plan"), non-interested Trustees may
elect to defer receipt of a portion of their annual compensation. Under the
Plan, deferred amounts are invested in shares of The Flex-funds. Deferred
amounts remain in the Portfolio until distributed in accordance with the Plan.
2. Investment Transactions
As of December 31, 2003, the aggregate cost basis of investments for federal
income tax purposes was $196,621,855.
3. Investment Advisory Fees and Other Transactions with Affiliates
Meeder Asset Management, Inc. ("MAM"), a wholly-owned subsidiary of Meeder
Financial, Inc. ("Meeder"), provides the Portfolio with investment management,
research, statistical and advisory services. For such services the Portfolio
pays a fee at the following annual rates: 0.40% of average daily net assets up
to $100 million and 0.25% of average daily net assets exceeding $100 million.
During the year ended December 31, 2003, MAM agreed to reduce $374,508 of
investment advisory fees in the Portfolio.
17
Mutual Funds Service Co. ("MFSCo"), a wholly-owned subsidiary of Meeder, serves
as accounting services agent for the Portfolio. In compensation for such
services, the Portfolio pays MFSCo an annual fee equal to the greater of:
a. 0.15% of the first $10 million of average daily net assets, 0.10% of the
next $20 million of average daily net assets, 0.02% of the next $50
million of average daily net assets, and 0.01% in excess of $80 million
of average daily net assets, or
b. $30,000.
18
Independent Auditors' Report
To the Shareholders and The Board of Trustees
of the Money Market Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Money Market Portfolio (the Portfolio), including the schedule of investments,
as of December 31, 2003, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the periods
presented in the two year period then ended, and the financial highlights for
each of the periods presented in the five year period then ended. These
financial statements and financial highlights are the responsibility of the
Portfolio's 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 auditing standards generally
accepted in the United States of America. 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 confirmation of securities owned as of December 31, 2003, by
correspondence with the custodian, brokers, 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
Portfolio as of December 31, 2003, the results of its operations for the year
then ended, the changes in its net assets for each of the periods presented in
the two year period then ended, and the financial highlights for each of the
periods presented in the five year period then ended, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Columbus, Ohio
March 15, 2004
19
Trustees and Officers
- --------------------------------------------------------------------------------
Certain trustees and officers of the Portfolio are also officers or directors
of Meeder, MAM and MFSCo. The Trustees oversee the management of the Trust, the
Fund, and the Portfolio and elect their officers. The officers are responsible
for the Fund's and the Portfolio's day-to-day operations. The Trustees' and
officers' names, addresses, years of birth, positions held with the Trust, and
length of service as a Meeder Advisor Funds Trustee are listed below. Also
included is each Board member's principal occupation during, at least, the past
five years. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. Except as otherwise
shown, all persons named as Trustees also serve in similar capacities for all
other mutual funds advised by MAM, including Meeder Advisor Funds, The
Flex-funds, and the corresponding portfolios of Meeder Advisor Funds and The
Flex-funds (collectively, the "Fund Complex"). Those Trustees who are
"interested persons", as defined in the 1940 Act, by virtue of their
affiliation with the Fund Complex are indicated by an asterisk (*).
Name, Address(1), and Principal Occupation During
Year of Birth Position and Length of Service(2) Past Five Years
- ------------- --------------------------------- ---------------------------------------
Robert S. Meeder, Sr.* Trustee and President Chairman of Meeder Asset
Year of Birth: 1929 Management, Inc., an investment
advisor; Chairman and Director of
Mutual Funds Service Co., the Fund
Complex's transfer agent; Director of
Adviser Dealer Services, Inc., the
Fund Complex's Distributor.
Milton S. Bartholomew Trustee Retired; formerly a practicing attorney
Year of Birth: 1929 in Columbus, Ohio; member of the
Fund Complex's Audit Committee.
Roger D. Blackwell Trustee Professor of Marketing and Consumer
Year of Birth: 1940 Behavior, The Ohio State University;
President of Blackwell Associates,
Inc., a strategic consulting firm.
Robert S. Meeder, Jr.* Trustee and Vice President President of Meeder Asset
Year of Birth: 1961 Management, Inc.
Walter L. Ogle Trustee Retired; formerly Executive Vice
Year of Birth: 1937 President of Aon Consulting, an
employee benefits consulting group;
member of the Fund Complex's Audit
Committee.
Charles A. Donabedian Trustee President, Winston Financial, Inc.,
Year of Birth: 1943 which provides a variety of marketing
consulting services to investment
management companies; CEO,
Winston Advisors, Inc., an investment
advisor; member of the Fund
Complex's Audit Committee.
James W. Didion Trustee Retired; formerly Executive Vice
Year of Birth: 1930 President of Core Source, Inc., an
employee benefit and Workers'
Compensation administration and
consulting firm (1991 - 1997).
Jack W. Nicklaus Trustee Designer, Nicklaus Design, a golf
Year of Birth: 1961 course design firm and division of The
Nicklaus Companies.
(1) The address of each Trustee is 6125 Memorial Drive, Dublin, OH 43017.
(2) Each Trustee serves for an indefinite term, until his or her resignation,
death, or removal.
* Robert S. Meeder, Sr. is deemed an "interested person" of the Trust by
virtue of his position as Chairman of Meeder Asset Management, Inc., the
Advisor of the Portfolio. Robert S. Meeder, Jr. is deemed an "interested
person" of the Trust by virtue of his position as President of Meeder Asset
Management, Inc., the Advisor of the Portfolio.
20
Manager and Investment Advisor:
Meeder Asset Management, Inc
6125 Memorial Drive
P.O. Box 7177
Dublin, Ohio 43017
Board of Trustees
Milton S. Bartholomew
Dr. Roger D. Blackwell
James Didion
Charles Donabedian
Robert S. Meeder, Sr.
Robert S. Meeder, Jr.
Jack Nicklaus II
Walter L. Ogle
Custodian
The Huntington National Bank
Columbus, Ohio 43215
Transfer Agent Dividend Disbursing Agent
Mutual Funds Service Co.
6125 Memorial Drive
Dublin, Ohio 43017
Auditors
KPMG LLP
Columbus, Ohio 43215
Meeder
Advisor Funds
Managed by Meeder Asset Management, Inc.
6125 Memorial Drive, Dublin Ohio, 43017
Call Toll Free 800-325-3539 | 614-760-2159
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, comptroller or
principal accounting officer, and any person who performs a similar function.
Item 3. Audit Committee Financial Expert.
Currently, the Meeder Advisor Funds (the "Funds") do not have an Audit Committee
member who possesses all of the attributes required to be an "audit committee
financial expert" as defined in instruction 2(b) of Item 3 of Form N-CSR.
However, the Board of Trustees believes that each member of the Audit Committee
has substantial experience relating to the review of financial statements and
the operations of audit committees. Accordingly, the Board of Trustees believes
that the members are qualified to evaluate the Funds' financial statements,
supervise the Funds' preparation of its financial statements, and oversee the
work of the Funds' independent auditors. The Board of Trustees also believes
that, although no single Audit Committee member possesses all of the attributes
required to be an "audit committee financial expert", the Audit Committee
members collectively as a group possess the attributes required to be an "audit
committee financial expert."
The information required by this Item is only required in an annual report of
this Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows:
2003 2002
Audit Fees $3,912 $4,663
Audit-Related Fees -- --
Tax Fees -- 911
All Other Fees 222 147
Audit fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the accountant in
connection with statutory and regulatory filings. Audit-related fees include
amounts reasonably related to the performance of the audit of the registrant's
financial statements. Tax fees include amounts related to tax compliance, tax
planning, and tax advice. All other fees include amounts related to the
registrant's annual filing of Form N1A.
(e)(1) A purpose of the Audit Committee is to approve the engagement of the
registrant's independent auditors (i) to render audit and non-audit services for
the registrant in accordance with Rule 2-01(c)(7)(i) of Regulation S-X, subject
to the waiver provisions set forth in Rule 2-01(c)(7)(i)(C) of Regulation S-X,
and (ii) to render non-audit services for the registrant's investment advisors
(other than a sub-advisor whose role is primarily portfolio management and is
subcontracted or overseen by another investment advisor) and any other entity
controlling by, or under common control with the investment advisor that
provides ongoing services to the registrant, in each case under (ii) if the
engagement relates directly to the operations and financial reporting of the
registrant, in accordance with Rule 2-01(c)(7)(ii) of Regulation S-X, subject to
waiver provisions set forth in Rule 2-01(c)(7)(ii) of Regulation S-X.
(e)(2) 100% of services included in (b) - (d) above were approved pursuant to
Rule 2-01(c)(7)(i)(C) of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's principal accountant for non-audit services
rendered to the registrant, its investment advisor, and any entity controlling,
controlled by, or under common control with the investment advisor that provides
ongoing services to the registrant were $14,000 and $21,700, respectively.
(h) Not applicable.
Items 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) Based on our evaluation conducted within 90 days of the filing date, hereof,
the design and operation of the registrant's disclosure controls and procedures
are effective to ensure that material information relating to the registrant is
made known to the certifying officers by others within the appropriate entities,
particularly during the period in which Forms N-CSR are being prepared, and the
registrant's disclosure controls and procedures allow timely preparation and
review of the information for the registrant's Form N-CSR and the officer
certifications of such Form N-CSR.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Item 10. Exhibits.
(a)(1) Code of Ethics filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive and principal
financial officer of the registrant as required by Rule 30a-2(a) under the
Act(17 CFR270.30a-2(a)). Filed herewith as EX-99.CERT.
(b) Certifications of principal executive officer and principal financial
officer, under Section 906 of the Sarbanes-Oxley Act of 2002, and 18 U.S.C.
ss.1350. Filed herewith as EX-99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Meeder Advisor Funds
By: /s/ Bruce E. McKibben
-----------------------------------
Bruce E. McKibben, Treasurer
Date: March 15, 2004
-----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Bruce E. McKibben
-----------------------------------
Bruce E. McKibben, Treasurer
Date: March 15, 2004
-----------------------------------
By: /s/ Robert S. Meeder, Sr.
-----------------------------------
Robert S. Meeder, Sr., Chairman
Date: March 15, 2004
-----------------------------------