PACIFIC HORIZON FUNDS INC, N-30D, 1996-05-10

PACIFIC HORIZON FUNDS INC
N-30D, 1996-05-10

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<PAGE> 1
P
A
C PACIFIC HORIZON GROWTH FUNDS
I
F ANNUAL REPORT
I
C February 29, 1996

H
O
R
I Blue Chip Fund
Z
O
N

G Investing For All
R The Times Of Your Life
O
W
T
H

F
U
N
D
S NOT FDIC INSURED

<PAGE> 2

PACIFIC HORIZON FUNDS, INC.
3435 Stelzer Road, Columbus, OH 43219
1-800-332-3863

INVESTMENT ADVISER INDEPENDENT ACCOUNTANTS
Bank of America National Trust Price Waterhouse LLP
and Savings Association 1177 Avenue of the Americas
555 California Street New York, NY 10036
San Francisco, CA 94104

ADMINISTRATOR FUND COUNSEL
Concord Holding Corporation Drinker Biddle & Reath
3435 Stelzer Road 1345 Chestnut Street
Columbus, OH 43219 Philadelphia, PA 19107

FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.

The Pacific Horizon Funds, Inc. are sponsored and distributed by Concord
Financial Group, Inc., which is unaffiliated with Bank of America. Bank of
America serves as investment adviser and receives fees for such services. From
time to time, Bank of America may provide other services to the Funds for
additional fees, as disclosed in the Funds' prospectuses.
This material must be preceded or accompanied by a current prospectus.

<TABLE>
<S> <C>
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
INVESTMENTS IN PACIFIC HORIZON FUNDS, INC. ARE NOT BANK
DEPOSITS AND ARE NOT OBLIGATIONS OF OR GUARANTEED BY BANK NOT
OF AMERICA OR ANY AFFILIATES. AN INVESTMENT IN MUTUAL FDIC
FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE INSURED
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------
</TABLE>

-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 3

Contents

<TABLE>
<S> <C>
PACIFIC HORIZON FUND FACTS 2-3
UNDERSTANDING YOUR SHAREHOLDER REPORT 4-6
ECONOMIC REVIEW FROM THE INVESTMENT
ADVISER 7
INTERVIEW WITH YOUR
INVESTMENT MANAGER 8-11
PACIFIC HORIZON BLUE CHIP FUND
Statement of Assets
and Liabilities 12
Statement of Operations 13
Statements of Changes
in Net Assets 14
Notes to Financial
Statements 15-18
Financial Highlights 19
Report of Independent Accountants 20
MASTER INVESTMENT TRUST, SERIES
I -- BLUE CHIP PORTFOLIO
Portfolio of Investments 21-25
Statement of Assets
and Liabilities 26
Statement of Operations 27
Statements of Changes
in Net Assets 28
Notes to Financial
Statements 29-31
Supplementary Data 32
Report of Independent Accountants 33
</TABLE>

.....................................
<PAGE> 4

PACIFIC HORIZON FUND FACTS

<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ----------------------------------------------------------------------------------
<S> <C>
Aggressive Growth Maximum Capital Appreciation
.....................................................................................
Blue Chip Long-Term Capital Appreciation
.....................................................................................
Capital Income Total Investment Return
.....................................................................................
Asset Allocation Long-Term Growth
.....................................................................................
Corporate Bond High Current Income
.....................................................................................
Flexible Bond Income and Capital Appreciation
.....................................................................................
U.S. Government Securities High Level of Current Income
.....................................................................................
National Municipal Bond* High Level of Federal Tax-Free
Current Income
.....................................................................................
California Tax-Exempt Bond* High Level of Federal and California
Tax-Free Current Income
.....................................................................................
Money Market Funds+ High Current Income Plus Principal
- Prime Stability
- Treasury
- Government
- Treasury Only
.....................................................................................
Tax-Exempt Money Market Funds*+
- Tax-Exempt Money High Level of Federal Tax-Free Current
Income Plus Principal Stability
- California Tax-Exempt Money Market High Level of Federal and California
Tax-Free Current Income Plus Principal
Stability
</TABLE>

- --------------------------------------------------------------------------------
* Certain investors may be subject to the federal alternative minimum tax and to
certain state and local taxes.

+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.

2
<PAGE> 5

<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Small Capitalization Stocks Higher than average long-term growth potential with
higher than average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stock of well established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double-tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>

- --------------------------------------------------------------------------------

3
<PAGE> 6

UNDERSTANDING YOUR SHAREHOLDER REPORT

As a mutual fund shareholder, you receive two financial reports a year that
contain important information about your investment. The financial statements
and financial highlights included in annual reports are audited by an
independent public accounting firm and cover the activity for the past fiscal
year. The independent public accountant provides an opinion letter in each
audited report. A semi-annual report is a six-month interim report that includes
financial statements that are generally not audited by an independent public
accounting firm.

This guide will help you extract the information from
the report.
The TABLE OF CONTENTS helps
you locate the information you
want.

The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the
financial markets.
[GRAPHIC]
The INTERVIEW WITH YOUR
INVESTMENT MANAGER enables you
to gain insight into the Fund
investments and learn more
about the Fund manager's
strategies.

Because a picture or chart can
help clarify the text, the
investment manager may have
illustrated the most important
features of the Fund. The
illustrations may represent the portfolio composition,
the largest holdings or a simplification of the
investment manager's investment style.
[GRAPHIC]
In annual reports, mutual funds, which are not "money
market" funds, are required by the Securities and
Exchange Commission (SEC) to provide shareholders with
a comparison of a hypothetical $10,000 investment in
the Fund to a benchmark of the broader market. The
performance of the benchmark index depicts the
aggregate performance of investments similar to those
in the Fund for the same time period. While the
benchmark index provides a general representation of
the market, there are two
reasons
why
it should be used only as a
guide. First, the Fund, in its
prospectus, must clearly define
which investments can be made by
the Fund. The index does not [GRAPHIC]
necessarily have the same
limitations. Second, the index
does not reflect any expenses
that accompany a real investment,
such as

4
<PAGE> 7

sales charges, management fees, portfolio transaction costs or the cash reserves
required to provide daily liquidity. The performance of the Fund must show these
costs as well as any front-end or deferred sales charges.

The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:

The PORTFOLIO OF INVESTMENTS lists each investment holding in the Fund as of the
date of the report. Investments may be grouped by category (by industry or
security type, for example). The percentage of the Fund's net assets represented
by these groupings is also disclosed.

TYPE OF SECURITY

INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
[GRAPHIC] NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)

ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE

The STATEMENT OF ASSETS AND LIABILITIES lists all the assets and liabilities of
the Fund as of the date of the statement. This is an individual fund's "balance
sheet." Also disclosed in this statement are the Fund's net asset value per
share and its maximum offering price per share as of the date of the statement.
The statement also lists the accounts that comprise the Fund's
net assets (capital stock, undistributed
income, etc.).

SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[GRAPHIC]
SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND

NET RESULTS OF ASSETS LESS LIABILITIES

THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING

THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY

5
<PAGE> 8

The STATEMENT OF OPERATIONS shows the amount of dividend and interest income
earned from the Fund's investments, the expenses incurred by the Fund from its
operations and any
gains or losses realized and not yet realized
by the Fund from holding and/or selling any
investments.

ANY INCOME EARNED FROM THE FUND'S INVESTMENTS
[GRAPHIC]
OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD

GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD

NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS

The STATEMENT OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:

OPERATIONS: SEE STATEMENT OF OPERATIONS

DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
[GRAPHIC]
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS

FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE
PERIODS

The NOTES TO FINANCIAL STATEMENTS are footnotes to the statements listed above.
These notes include information on accounting methods used by the Fund,
contractual arrangements between the Fund and its service providers, certain
transactions effected by the Fund and other general information about the Fund.

The FINANCIAL HIGHLIGHTS show, for a single share outstanding throughout each
period presented, the net investment income, the realized and unrealized gains
and losses and the dividends and distributions of the Fund. It also shows key
data and ratios (such as the total investment return for each period), the
portfolio turnover rate for Funds other than money market mutual funds, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets.

6
<PAGE> 9

ECONOMIC REVIEW
FROM THE INVESTMENT ADVISER

The 12 months ended February 29, 1996, witnessed a year of surprising strength
in the financial markets. Stock prices rose sharply, with the Dow Jones
Industrial Average surging 38% and other stock market indices posting very
strong gains. The bond market also turned in healthy results, particularly in
the long-term sector, with the bellwether 30-year Treasury bond registering an
18.45% total return.

The stock and bond markets were propelled largely by the Federal Reserve Board's
apparent success at slowing the economy to a sustainable annual growth rate of
around 2% and, at the same time, keeping inflation under control.

FUNDAMENTAL ECONOMIC
STRENGTHS

This favorable combination of modest economic growth and a low-inflation
environment allowed long-term interest rates to decline through most of the
period, spurring gains for both stocks and bonds. In fact, with mounting
evidence of slower economic growth, the Federal Reserve began lowering
short-term rates last summer to help prevent the economy from slowing down too
much.

Meanwhile, corporate profits continued to grow at a solid clip. The major
factors driving earnings included productivity gains and rising exports. In
addition, the U.S. dollar generally was weak, so the overseas profits that many
American companies earned in foreign currencies became more valuable in dollar
terms.

ASSET ALLOCATION KEY
TO PERFORMANCE

For investors, the key investment decision during the period was asset
allocation. The best-performing stock market sectors included financial services
and technology (despite a weak fourth quarter) -- but many other groups also
delivered strong gains.

LOOKING AHEAD

We expect the market environment in 1996 to favor our approach, as investors
look for companies that can produce consistent earnings gains in an economy
growing at a relatively modest 2%-to-3% annual rate. Corporate profits should
continue to grow as companies continue to reap the benefits of productivity
gains made during the past decade. However, earnings aren't likely to rise as
quickly as they did last year.

The economy's pace probably will be slow enough to prevent a sharp rebound in
interest rates, which is good news for both stock and bond investors. But it's
also unlikely that rates will decline sharply from their current levels, which
are high relative to inflation. Thus, stock and bond investors might expect more
modest returns during the coming year than they received in 1995. Still, that
leaves plenty of room for respectable performance.

7
<PAGE> 10

PACIFIC HORIZON
BLUE CHIP FUND

- ----------------------

[PHOTO]

- ----------------------

JAMES D. MILLER, CFA
Chief Investment Officer
Bank of America Illinois
Investment Advisors Division

Mr. Miller is a leading member of the investment management team for the Blue
Chip Fund.

GOAL:

The Pacific Horizon Blue Chip Fund seeks long-term capital appreciation.

INVESTMENTS:

The Fund invests primarily in a diversified group of "blue chip" common stocks,
which are included in either the Dow Jones Industrial Average or the Standard &
Poor's 500 Index.

APPROPRIATE FOR:

Investors who want to participate in the growth potential of some of America's
major companies. The Fund is a diversified equity product that can be used as
part of many investment strategies.

INCEPTION:

January 13, 1994

SIZE OF FUND AS OF
FEBRUARY 29, 1996:

Over $66 million

Q HOW DID YOU MANAGE THE FUND DURING THE RECENT PERIOD?

A We continued to manage the Fund in our very disciplined quantitative style
and concentrated heavily on risk management. We start by neutralizing most of
the divergent risk factors to the benchmark S&P 500. This includes sector and
size risk, among others. By this, we mean that the portfolio's holdings are
designed to mirror the sector allocations of the Standard & Poor's 500 Stock
Index. Likewise, the portfolio's average weighted size should approximate that
of the index.

The result is that our Fund is designed not to suffer or benefit any more than
the index when a particular sector performs well or badly. Likewise, the Fund is
designed not to decline more or less than the index when small- or
large-capitalization stocks have an especially good or bad year. Since we keep
risks in line with those in the benchmark, we attempt to add value through stock
selection.

For the 12 months ended February 29, 1996, the Fund performed more or less in
line with the index with a total return of 33.39% (without the sales charge),
compared to 34.60% for the S&P 500.+

Q HOW IS THE FUND DIFFERENT FROM AN INDEX FUND?

A As I said before, unlike an index fund, we attempt to add value through
individual security selection. Our goal is to buy the best stocks in each
sector -- by which we mean the stocks that add the most potential reward to our
portfolio for the least risk.

Q HOW DID YOU CHOOSE STOCKS DURING THE RECENT PERIOD?

A We looked at a number of different factors that can affect a stock's per-

8
<PAGE> 11

formance and weighted most heavily those having the most impact during the
period. Then we used that information to select stocks that we believed
would do well.

For example, during the past year one of the most important factors
determining stock prices included something we call "earnings certainty." We
found that people were buying shares of companies that had similar earnings
estimates from different analysts.

Likewise, investors liked stocks of companies that had experienced the
biggest increases in analysts' earnings estimates -- our "rising earnings
expectations" model. And we discovered that investors were looking for
companies whose shares were selling at a low multiple of earnings.
Consequently, we purchased lower P/E stocks that demonstrated a clearer,
brighter future earnings potential.

Q WHAT ARE SOME STOCKS YOU BOUGHT BASED ON THOSE THREE FACTORS?

A A number of our picks were large, well-known companies such as Chrysler
(1.14% of net assets as of February 29, 1996) and Merck (1.56%), both of which
scored well based on all three factors. Pepsico (2.43%) was particularly
attractive as well, largely on the basis of rising earnings expectations and
earnings certainty.++

Q ARE YOU PLANNING ANY IMPORTANT STRATEGIC CHANGES FOR THE COMING PERIOD?

A No. As always, we will make no attempt to forecast the direction of stock
prices in general or specific market sectors. Instead, we will continue to keep
track of the factors that are most likely to affect the returns of specific
stocks. Then we will invest in stocks with the appropriate characteristics.

- ---------------
+ Fund performance with the 4.50% maximum sales charge was 27.39% for the
period.

++ The composition of the Fund's holdings is subject to change.

9
<PAGE> 12

PACIFIC HORIZON
BLUE CHIP FUND
(AS OF FEBRUARY 29, 1996)

GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)

<TABLE>
<CAPTION>
MEASUREMENT PERIOD LIPPER GROWTH
(FISCAL YEAR COVERED) FUND FUNDS AVERAGE S&P 500
<S> <C> <C> <C>
01/31/94 9550.00 10000.00 10000.00
02/28/94 9374.66 9667.00 9730.00
03/31/94 8989.56 9201.69 9303.96
04/30/94 9064.89 9232.36 9424.26
05/31/94 9177.88 9271.20 9579.29
06/30/94 8971.89 8960.00 9342.29
07/31/94 9306.05 9196.19 9651.24
08/31/94 9709.57 9620.33 10043.95
09/30/94 9448.58 9442.53 9801.79
10/31/94 9676.87 9591.79 10025.96
11/30/94 9353.46 9235.37 9657.91
12/31/94 9455.20 9320.91 9798.82
01/31/95 9646.60 9395.20 10053.49
02/28/95 10086.82 9749.98 10443.56
02/29/96 13679.00 12806.00 14058.00
</TABLE>

HOW PERFORMANCE COMPARES
The chart compares the Pacific Horizon Blue
Chip Fund to the S&P 500, which is an un-
managed index often used as a performance
benchmark for equity investments. The
hypothetical investment in the S&P 500 does
not
reflect any sales or management fees that would be incurred if an investor were
to actually purchase individual securities or mutual funds, while the
performance of the Fund reflects all expenses and management fees and the effect
of the maximum sales charge.

The Fund fared well compared to other growth funds. The average of growth funds
as tracked by Lipper Analytical Services, Inc. measures the performance of other
funds with investment objectives and policies similar to those of the Pacific
Horizon Blue Chip Fund. An initial $10,000 investment in the Fund made on
January 31, 1994 would now be worth $13,679, while the same investment made in
the Lipper Growth Funds Average would be worth only $12,806.

SEE INVESTMENT MANAGER INTERVIEW FOR FACTORS AFFECTING FUND PERFORMANCE.

The adviser and administrator are voluntarily waiving advisory and
administrative fees for the Fund and administrative and advisory fees for the
Master Investment Trust, in which the Fund is wholly invested. The administrator
is also reimbursing expenses for the Fund. If the adviser and administrator had
not waived fees and reimbursed expenses, total return would have been lower.
This voluntary waiver of fees and reimbursement of expenses may be modified or
terminated at any time, which would reduce the Fund's performance.

Investment return and principal value are historical and will vary with market
conditions, so an investor's shares, when redeemed, may be worth more or less
than their original cost.

Return figures for the Fund include change in share price, reinvestment of
dividends and capital gains distributions, if any, and the effect of the maximum
4.50% sales charge.

S&P 500 is a registered trademark of Standard & Poor's Corporation. Lipper
Analytical Services, Inc. is an independent mutual fund-monitoring organization.

Neither the S&P 500 nor the Lipper Growth Funds Average may be invested in
directly.

<TABLE>
<CAPTION>
--------------------------
AVERAGE ANNUAL RETURN
<S> <C>
1 year: 27.39%
.............................
Since inception
(1/13/94): 15.92%
----------------------------

</TABLE>

10
<PAGE> 13

PACIFIC HORIZON
BLUE CHIP FUND
(AS OF FEBRUARY 29, 1996)

PORTFOLIO COMPOSITION
FUND QUALITY

A Strategy for Long-Term Capital
Appreciation
The Fund maintains a "quality"
investment orientation by placing an
emphasis on the securities of
well-known established companies.
This "blue chip" approach may be
appropriate for investors seeking
long-term growth of capital. At
least 80% of the Fund's assets are
normally invested in blue chip
stocks. To meet the criteria set by
the Fund's investment objectives,
these stocks must be components of
the Dow Jones Industrial Average or
the Standard & Poor's 500 Index.

<TABLE>
<CAPTION>
TOP TEN HOLDINGS*
----------------------------------------
PERCENT OF
COMPANY NET ASSETS
<S> <C>
----------------------------------------
Mobil Corp. 2.5%
......................................................
PepsiCo. 2.4%
......................................................
Citicorp 2.2%
......................................................
Philip Morris Cos. 2.1%
......................................................
General Electric 2.0%
......................................................
International Business Machines 1.8%
......................................................
Bell South 1.7%
......................................................
United Technologies Corp. 1.7%
......................................................
Sears Roebuck & Co. 1.7%
......................................................
Exxon Corp. 1.7%
------------------------------------------------------
TOTAL 19.8%
------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------

The Fund adviser's research
orientation seeks to
identify individual stocks,
within the sector
allocations mirroring those
of the S&P 500, with the
greatest potential for
long-term growth. The Fund's
primary emphasis is on
stocks that, in the opinion
of the Fund's adviser, have
the greatest potential of
superior performance with
the least amount of risk.

A RESEARCH-DRIVEN APPROACH*
<TABLE>
<S> <C>
Utilities 12.8
Finance 13.1
Consumer Staples 11.9
Health Care 10.7
Technology 11.3
Capital Goods 9.7
Energy 8.6
Basics 6.2
Transportation 1.7
Consumer Cyclical 14.0
</TABLE>

* The composition of the Fund's holdings is subject to change.

11
<PAGE> 14

PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities
February 29, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investment in Master Investment Trust, Series I --
Blue Chip Portfolio, at value...................................... $66,901,094
Receivable from Administrator........................................ 13,816
Deferred organization costs and prepaid expenses..................... 57,555
-----------
Total assets........................................................... 66,972,465
-----------
LIABILITIES:
Accrued reports to shareholders expense.............................. 14,532
Accrued legal fees................................................... 11,122
Accrued fund accounting fees and expenses............................ 5,947
Accrued audit fees................................................... 5,948
Other accrued expenses............................................... 1,462
-----------
Total liabilities...................................................... 39,011
-----------
NET ASSETS............................................................. $66,933,454
===========
Shares Outstanding ($0.001 par value, 100 million shares authorized)... 3,259,781
===========
CALCULATION OF MAXIMUM OFFERING PRICE:
Net asset value per share............................................ $20.53
Sales charge -- 4.50% of public offering price....................... 0.97
-----
Maximum Offering Price............................................... $21.50
-----
-----
COMPOSITION OF NET ASSETS:
Capital stock, at par................................................ $ 3,260
Additional paid-in capital........................................... 59,565,319
Accumulated net realized gains....................................... 740,209
Accumulated undistributed net investment income...................... 136,938
Net unrealized appreciation on investments........................... 6,487,728
-----------
NET ASSETS, FEBRUARY 29, 1996.......................................... $66,933,454
===========
</TABLE>

- ---------------
See Notes to Financial Statements.
12
<PAGE> 15

PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------

Statement of Operations
For the year ended February 29, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series
I -- Blue Chip Portfolio:
Dividends................................................ $ 675,317
Interest................................................. 63,786
----------
739,103
Expenses................................................. $ 260,140
Less: Fee waivers and expense reimbursements............. (164,170) 95,970
--------- ----------
Net Investment Income from Master Investment Trust, Series
I -- Blue Chip Portfolio................................. 643,133
EXPENSES:
Shareholder service fees................................. 74,950
Administration fees...................................... 44,971
Transfer agent fees and expenses......................... 62,458
Legal fees............................................... 47,260
Reports to shareholders expenses......................... 40,827
Fund accounting fees and expenses........................ 37,375
Amortization of organization costs....................... 28,263
Registration fees and expenses........................... 22,553
Audit fees............................................... 21,052
Directors' fees.......................................... 6,354
Other expenses........................................... 37,475
---------
423,538
Less: Fee waivers and expense reimbursements............. (270,393) 153,145
--------- ----------
Net Investment Income...................................... 489,988
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS FROM MASTER
INVESTMENT TRUST, SERIES I -- BLUE CHIP PORTFOLIO:
Net realized gain on securities transactions............. 1,358,263
Net change in unrealized appreciation on investments..... 6,093,194
----------
Net Gain on Investments from Master Investment Trust,
Series I -- Blue Chip Portfolio.......................... 7,451,457
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................................... $7,941,445
==========
</TABLE>

- ---------------
See Notes to Financial Statements.
13
<PAGE> 16

PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------

Statements of Changes in Net Assets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................ $ 489,988 $ 95,584
Net realized gain (loss) on securities
transactions....................................... 1,358,263 (46,800)
Net change in unrealized appreciation (depreciation)
of investments..................................... 6,093,194 401,993
----------- -----------
Net increase in net assets resulting from
operations......................................... 7,941,445 450,777
----------- -----------
Dividends and distribution to shareholders:
Dividends to shareholders from net investment
income............................................. (375,867 ) (74,501)
Distribution to shareholders from net realized
gains.............................................. (570,774 ) --
----------- -----------
Total dividends and distributions to shareholders...... (946,641 ) (74,501)
Fund Share Transactions:
Net proceeds from shares subscribed.................. 59,881,212 5,217,128
Net asset value of shares issued to shareholders in
reinvestment of dividends.......................... 903,918 73,034
Shares redeemed...................................... (6,848,470 ) (844,793)
----------- -----------
Net increase in net assets resulting from Fund share
transactions....................................... 53,936,660 4,445,369
----------- -----------
Total Increase......................................... 60,931,464 4,821,645
NET ASSETS:
Beginning of year.................................... 6,001,990 1,180,345
----------- -----------
End of year (including undistributed net investment
income of $136,938 and $22,817, respectively)...... $66,933,454 $6,001,990
=========== ===========
</TABLE>

- ---------------
See Notes to Financial Statements.
14
<PAGE> 17

PACIF IC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------

Notes to Financial Statements
- --------------------------------------------------------------------------------

NOTE 1 -- GENERAL

Pacific Horizon Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At February 29, 1996, the Company
operated as a series company comprising fifteen funds. The accompanying
financial statements and notes are those of the Pacific Horizon Blue Chip Fund
(the "Fund") only.

The Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Blue Chip Portfolio of Master Investment
Trust, Series I (the "Portfolio"), an open-end management company that has the
same investment objective as that of the Fund. The value of the Fund's
investment in the Portfolio included in the accompanying Statement of Assets and
Liabilities reflects the Fund's proportionate beneficial interest in the net
assets of the Portfolio (24.3% at February 29, 1996). The financial statements
of the Portfolio, including its portfolio of investments are included elsewhere
within this report and should be read in conjunction with the Fund's financial
statements.

Concord Holding Corporation ("Concord") serves as the Fund's administrator
and Concord Financial Group, Inc. (the "Distributor"), a wholly owned subsidiary
of Concord, serves as the distributor of the Fund's shares. Effective March 29,
1995, Concord became a wholly owned subsidiary of The BISYS Group, Inc.
("BISYS").

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.

A) SECURITY VALUATIONS:

The valuation of securities of the Fund's investment in the Portfolio is
discussed in Note 2 of the Portfolio's financial statements.

B) INVESTMENT INCOME, EXPENSES AND REALIZED AND UNREALIZED GAINS AND LOSSES:

The Fund records its share of the investment income, expenses and realized
and unrealized gains and losses recorded by the Portfolio on a daily basis. The
investment income, expenses and realized and unrealized gains and losses are
allocated daily to investors in the Portfolio based upon the value of their
investments in the Portfolio. Such investments are adjusted on a daily basis.

15
<PAGE> 18

C) DIVIDENDS AND DISTRIBUTIONS:

The Fund declares and pays dividends from net investment income, if any, at
least quarterly. Distributions of net realized gains, if any, will be paid at
least annually. However, to the extent that net realized gains of the Fund can
be offset by capital loss carryovers, such gains will not be distributed.
Dividends and distributions are recorded on the ex-dividend date.

The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
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
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or net
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.

D) FEDERAL INCOME TAXES:

It is the policy of the Fund to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.

E) OTHER:

The Fund incurred certain costs in connection with its organization. Such
costs have been deferred and are being amortized on a straight line basis over
five years.

Expenses directly attributable to the Fund are charged directly to the Fund,
while Company expenses attributable to more than one Fund of the Company are
allocated among the respective funds.

NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES

The Fund has an Administration Agreement with Concord and a Distribution
Agreement with the Distributor.

As Administrator, Concord assists in supervising the operations of the Fund.
For its services, Concord is entitled to a fee, which is accrued daily and
payable monthly, at an annual rate of 0.15%, of the Fund's average net assets.
For the year ended February 29, 1996, Concord agreed to waive its entire fee as
administrator.

For the same period, Concord reimbursed the Fund $150,472 in operating
expenses.

For the year ended February 29, 1996, the Distributor advised the Fund that
it retained $255,167 from commissions earned on sales of the Fund's shares. For
the same period, Bank of America and its affiliates advised the Fund that they
retained $1,875,240 from commissions earned on sales of the Fund's shares.

16
<PAGE> 19

Effective December 11, 1995, BISYS Fund Services, Inc., also a wholly owned
subsidiary, served the Fund as transfer agent and dividend disbursing agent. In
this capacity, BISYS Fund Services, Inc., earned $23,505 for the period from
December 11, 1995 through February 1996. Prior to December 11, 1995 an unrelated
party provided these services.

For the year ended February 29, 1996, the Fund incurred legal charges
totalling $47,260, which were earned by a law firm, a partner of which serves as
Secretary of the Company. Certain officers of the Company are "affiliated
persons" (as defined in the Act) of BISYS.

NOTE 4 -- DIRECTORS' COMPENSATION

Each director of the Company is entitled to an annual retainer of $25,000,
plus $1,000 for each day the director participates in all or part of a Board or
Committee meeting and the Chairman of each Committee receives an annual retainer
of $1,000 for services as Chairman of the Committee. In addition, the Company's
President is entitled to an annual salary of $20,000 for services as President.
The former president and chairman of the Company receives an additional $40,000
per year through February 28, 1997, in consideration of his years of service.

The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Company during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. In addition, the amount
payable each year to a Director who dies or resigns shall be increased by $1,000
for each year of service that the Director served as Chairman of the Board. Each
Director may receive any benefits payable under the Retirement Plan, at his or
her election, either in one lump sum payment or ten annual install-

17
<PAGE> 20

ments. A Director's years of service for the purpose of calculating the payments
described above shall be based upon service as a Director or Chairman after
February 28, 1994. Aggregate costs to the Fund pursuant to the Retirement Plan
amounted to $69, for the year ended February 29, 1996.

NOTE 5 -- CAPITAL SHARE TRANSACTIONS

At February 29, 1996, there were 200 billion shares of the Company's $0.001
par value capital stock authorized, of which 100 million shares were classified
as Class N Common Stock (Blue Chip Fund).

Transactions in shares of common stock of the Fund are summarized below (000
omitted):

<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Shares sold.......... 3,204 353
Shares issued in
reinvestment of
dividends........... 47 5
Shares redeemed...... (371) (57)
----- ---
Net increase......... 2,880 301
===== ===
</TABLE>

NOTE 6 -- FEDERAL INCOME TAX STATUS

During the year ended February 29, 1996 the company utilized its net capital
loss carryover of approximately $47,000.

18
<PAGE> 21

PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------

Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED PERIOD
---------------------- ENDED
FEBRUARY FEBRUARY FEBRUARY
29, 28, 28,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net asset value per share, beginning of
period....................................... $ 15.81 $14.97 $15.00
-------- -------- --------
Income from Investment Operations:
Net investment income........................ 0.26 0.31 0.02
Net realized and unrealized gain on
securities................................. 4.96 0.80 (0.05)
-------- -------- --------
Total gain from investment operations........ 5.22 1.11 (0.03)
-------- -------- --------
Less Dividends and Distributions:
Dividends to shareholders from net investment
income..................................... (0.28) (0.27) --
Distributions to shareholders from net
realized gains on securities............... (0.22) -- --
-------- -------- --------
Total dividends and distributions.............. (0.50) (0.27) --
-------- -------- --------
Net change in net asset value.................. 4.72 0.84 (0.03)
-------- -------- --------
Net asset value per share, end of period....... $ 20.53 $15.81 $14.97
======== ======== ========
Total return++................................. 33.39% 7.60% (0.20)%
Ratios/Supplemental Data:
Net assets, end of period (000).............. $66,933 $6,002 $1,180
Ratio of expenses to average net assets**.... 0.83% 0.00% 0.00%+
Ratio of net investment income to average net
assets**................................... 1.63% 2.46% 2.92%+
</TABLE>

- ---------------

* For the period January 13, 1994 (commencement of operations) through February
28, 1994.

** Reflects the Fund's proportionate share of the Portfolio's expenses, the
Portfolio's fee waivers and expense reimbursements by the Portfolio's
Investment Adviser and Administrator and fee waivers and expense
reimbursements by the Fund's Administrator and Distributor. Such fee waivers
and expense reimbursements had the effect of reducing the ratio of expenses
to average net assets and increasing the ratio of net investment income to
average net assets by 1.45%, 6.32% and 55.00% (annualized) for the periods
ended February 29, 1996, February 28, 1995 and February 28, 1994,
respectively.

+ Annualized.

++ The total returns listed are not annualized for the period ended February 28,
1994 and do not include the effect of the maximum 4.50% sales charge.

See Notes to Financial Statements.
19
<PAGE> 22

PACIFIC HORIZON BLUE CHIP FUND
- --------------------------------------------------------------------------------

Report of Independent Accountants
- --------------------------------------------------------------------------------

To the Board of Directors
and Shareholders of
Pacific Horizon Funds, Inc.

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Pacific Horizon Blue Chip Fund (one of the portfolios constituting Pacific
Horizon Funds, Inc., hereafter referred to as the "Funds") at February 29, 1996,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

1177 Avenue of the Americas
New York, New York
April 25, 1996

- --------------------------------------------------------------------------------
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)

-------------------------------------------------------------
For the year ended February 29, 1996, the Fund paid to shareholders
$0.1958 per share from long-term capital gains.
- --------------------------------------------------------------------------------

20
<PAGE> 23

MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------

Portfolio of Investments
February 29, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COMMON STOCKS
AEROSPACE/DEFENSE -- 2.5%
Lockheed Martin Corp. .............................................. 38,500 $ 2,935,625
General Dynamics Corp. ............................................. 28,700 1,711,238
Rockwell Intl., Corp. .............................................. 38,600 2,200,200
------------
6,847,063
------------
AIRLINES & FREIGHT -- 0.4%
AMR Corp. .......................................................... 11,800 1,035,450
------------
APPAREL/TEXTILE -- 0.5%
Nike, Inc. ......................................................... 19,800 1,284,525
------------
AUTOMOTIVE -- 2.7%
Chrysler Corp. ..................................................... 55,600 3,134,450
Goodyear Tire & Rubber Co. ......................................... 53,500 2,541,250
Johnson Controls, Inc. ............................................. 23,500 1,686,125
------------
7,361,825
------------
BANKS -- 7.6%
Citicorp............................................................ 78,900 6,154,200
First Interstate Bancorp............................................ 18,500 3,022,438
First Union Corp. .................................................. 47,000 2,843,500
Bank Of Boston Inc. ................................................ 78,400 3,812,200
Bank Of New York Inc. .............................................. 65,400 3,392,625
Nations Bank Corporation............................................ 23,200 1,711,000
------------
20,935,963
------------
BUILDING RELATED/APPLIANCE -- 0.5%
Fleetwood Enterprises............................................... 46,700 1,255,063
------------
BUSINESS EQUIPMENT/SERVICES -- 2.6%
Cisco Systems....................................................... 69,900 3,320,250
Hewlett Packard Co. ................................................ 37,400 3,768,050
------------
7,088,300
------------
CHEMICALS -- 3.2%
Eastman Chemical Co. ............................................... 35,700 2,570,400
Morton International,Inc. .......................................... 31,600 1,196,850
E.I. Du Pont De Nemours & Co. ...................................... 29,500 2,256,750
Monsanto Corp. ..................................................... 20,000 2,692,500
------------
8,716,500
------------
CONSUMER STAPLES -- 7.8%
Coca-Cola Co. ...................................................... 54,400 4,392,800
Conagra Inc. ....................................................... 54,800 2,308,450
Pepsico Inc. ....................................................... 105,700 6,685,525
Philip Morris Cos, Inc. ............................................ 57,900 5,732,100
Sara Lee Corp. ..................................................... 70,300 2,275,963
------------
21,394,838
------------
</TABLE>

- ---------------
See Notes to Financial Statements.
21
<PAGE> 24

<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COSMETICS & HOUSEHOLD PRODUCTS -- 4.6%
Johnson & Johnson................................................... 42,700 $ 3,992,450
Newell Co. ......................................................... 59,200 1,642,800
Bay Networks........................................................ 25,300 1,027,813
Clorox Co. ......................................................... 21,200 1,796,700
Avon Products Inc. ................................................. 26,300 2,113,863
Premark Intl., Inc. ................................................ 38,500 2,016,437
------------
12,590,063
------------
DIVERSIFIED MANUFACTURING -- 3.7%
General Electric Co. ............................................... 72,300 5,458,650
United Technologies Corp. .......................................... 44,600 4,794,500
------------
10,253,150
------------
DRUGS BIOTECHNOLOGY -- 5.5%
Medronic Inc. ...................................................... 47,200 2,708,100
Bristol-Meyers...................................................... 52,800 4,494,600
Schering Plough Corp. .............................................. 63,400 3,558,325
Pfizer, Inc. ....................................................... 64,600 4,255,525
------------
15,016,550
------------
ELECTRIC UTILITIES -- 3.5%
Unicom Corp. ....................................................... 75,300 2,409,600
FPL Group, Inc. .................................................... 41,300 1,843,013
General Public Utilities Corp. ..................................... 80,800 2,696,700
DTE Energy Co. ..................................................... 78,400 2,793,000
------------
9,742,313
------------
ELECTRICAL & OTHER ELEC EQUIPMENT -- 0.5%
Applied Materials, Inc. ............................................ 35,100 1,254,825
------------
ELECTRONIC COMPUTERS -- 3.3%
Intel Corp. ........................................................ 37,600 2,211,350
Compaq Computer Corp. .............................................. 42,600 2,156,625
Oracle Corp. ....................................................... 57,900 3,010,800
Sun Microsystems Inc. .............................................. 29,500 1,548,750
------------
8,927,525
------------
ENERGY RELATED -- 0.9%
Halliburton Co. .................................................... 44,200 2,425,475
------------
ENTERTAINMENT -- 0.4%
King World Productions, Inc. Ltd.................................... 26,500 1,109,688
------------
FINANCIAL SERVICES -- 1.1%
Travelers Group..................................................... 44,800 2,996,000
------------
FOODS -- 1.2%
Campbell Soup Co. .................................................. 53,200 3,285,100
------------
FOREST PRODUCTS -- 1.5%
Bemis Co. Inc. ..................................................... 37,800 1,157,625
Kimberly-Clark Corp. ............................................... 40,400 3,085,550
------------
4,243,175
------------
GAS UTILITIES -- 0.9%
Pacific Enterprises, Inc. .......................................... 93,800 2,509,150
------------
</TABLE>

- ---------------
See Notes to Financial Statements.
22
<PAGE> 25

<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
HEALTH CARE -- 1.6%
Merck & Co., Inc. .................................................. 64,700 $ 4,286,375
------------
HOSPITAL MANAGEMENT -- 1.2%
Columbia Healthcare Corp. .......................................... 24,400 1,335,900
United Healthcare Corp. ............................................ 30,000 1,957,500
------------
3,293,400
------------
HOSPITAL SUPPLY -- 0.8%
Becton Dickinson & Co. ............................................. 28,400 2,328,800
------------
INDUSTRIAL SERVICES -- 0.6%
Fluor Corp. ........................................................ 26,600 1,785,525
------------
INSURANCE -- 1.6%
Aetna Life & Casualty Co. .......................................... 8,100 612,562
Allstate............................................................ 64,497 2,765,309
ITT Hartford Group Inc. ............................................ 21,400 1,102,100
------------
4,479,971
------------
INTERNATIONAL OIL -- 3.3%
Atlantic Richfield Co. ............................................. 20,300 2,222,850
Mobil Corp. ........................................................ 61,700 6,763,863
------------
8,986,713
------------
LEISURE -- 0.9%
Walt Disney Co. .................................................... 38,400 2,515,200
------------
MACHINERY -- 0.7%
Ingersoll Rand Co. ................................................. 49,400 2,019,225
------------
MEDIA -- 1.6%
Capital Cities/ABC, Inc. ........................................... 23,900 3,029,325
Gannett, Inc. ...................................................... 22,400 1,523,200
------------
4,552,525
------------
METALS -- 1.4%
Nucor Corp. ........................................................ 36,600 1,971,825
Phelps Dodge Corp. ................................................. 30,800 1,882,650
------------
3,854,475
------------
MULTI INDUSTRY -- 2.0%
Textron............................................................. 25,300 1,992,375
Honeywell Inc. ..................................................... 65,900 3,492,700
------------
5,485,075
------------
MULTI INSURANCE -- 1.1%
Providian Corp. .................................................... 69,100 3,195,875
------------
OIL - DOMESTIC & CRUDE -- 3.0%
Exxon Corp. ........................................................ 57,600 4,579,200
Amoco Corp. ........................................................ 53,200 3,697,400
------------
8,276,600
------------
PETROLEUM REFINING -- 1.4%
Royal Dutch Petroleum Co. .......................................... 27,600 3,801,900
------------
</TABLE>

- ---------------
See Notes to Financial Statements.
23
<PAGE> 26

<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
PROPERTY CASUALTY INSURANCE -- 0.6%
Safeco. Corp. ...................................................... 50,500 $ 1,830,625
------------
PUBLISHING -- 0.6%
New York Times Co. ................................................. 63,800 1,754,500
------------
RAIL/TRUCKING FREIGHT -- 1.3%
Norfolk Southern Corp. ............................................. 42,800 3,488,200
------------
RESTAURANTS/LODGING -- 1.7%
McDonald's Corp. ................................................... 38,500 1,925,000
Marriott International Inc. ........................................ 30,900 1,517,963
ITT Corp. .......................................................... 21,400 1,292,025
------------
4,734,988
------------
RETAIL -- 3.9%
Home Depot, Inc. ................................................... 52,400 2,266,300
Sears Roebuck & Co. ................................................ 104,700 4,750,762
Gap, Inc. .......................................................... 67,500 3,619,688
------------
10,636,750
------------
RETAIL FOOD & DRUG -- 1.0%
American Stores Co. ................................................ 98,500 2,868,813
------------
SECURITIES, BROKERS & DEALERS -- 1.0%
Dean Witter......................................................... 52,500 2,821,875
------------
SOFTWARE SERVICES -- 1.6%
Microsoft Inc. ..................................................... 45,900 4,529,756
------------
TECHNOLOGY -- 2.8%
International Business Machines..................................... 39,900 4,892,738
National Semiconductor Corp. ....................................... 56,400 881,250
Harris Corp. ....................................................... 16,800 1,117,200
Texas Instruments Inc. ............................................. 18,600 927,675
------------
7,818,863
------------
TELEPHONE -- 7.0%
AT & T.............................................................. 67,900 4,320,138
Bellsouth Corp. .................................................... 120,200 4,792,975
GTE Corp. .......................................................... 76,400 3,275,650
Nynex Corp. ........................................................ 59,800 3,079,700
Ameritech Corp. .................................................... 65,600 3,780,200
------------
19,248,663
------------
TELEPHONE & TELEGRAPH APPARATUS -- 1.2%
Sprint Corp. ....................................................... 75,700 3,255,100
------------
Total Common Stocks -- 98.8%
(cost $225,698,360 )................................................ 272,122,328
------------
</TABLE>

- ---------------
See Notes to Financial Statements.
24
<PAGE> 27

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
DESCRIPTION (000) (NOTE 2)
- ---------------------------------------------------------------------- --------- ------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 3.0%
U.S. Treasury Bill 4.62%............................................. 2,230 $ 2,222,273
U.S. Treasury Bill 4.57%............................................. 805 802,241
U.S. Treasury Bill 4.57%............................................. 795 792,275
U.S. Treasury Bill 4.73%............................................. 306 304,633
U.S. Treasury Bill 4.74%............................................. 370 366,840
U.S. Treasury Bill 4.80%............................................. 460 456,072
U.S. Treasury Bill 4.86%............................................. 1,503 1,490,164
U.S. Treasury Bill 4.87%............................................. 347 344,037
U.S. Treasury Bill 4.88%............................................. 349 346,020
U.S. Treasury Bill 4.79%............................................. 1,211 1,200,657
------------
Total U.S. Government Obligations
(cost $8,326,185).................................................... 8,325,212
------------
TOTAL INVESTMENTS -- 101.8% $280,447,540
(COST $234,024,545)
Other Liabilities In Excess Of Assets -- (1.8)% (4,925,266)
------------
NET ASSETS -- 100%.................................................... $275,522,274
==============
</TABLE>

- ---------------
See Notes to Financial Statements.
25
<PAGE> 28

MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities
February 29, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments in securities at value (cost $234,024,545).............. $280,447,540
Cash................................................................ 36,086
Contribution receivable............................................. 1,441,870
Dividends receivable................................................ 603,862
Deferred organization costs and prepaid expenses.................... 42,390
------------
Total assets.......................................................... 282,571,748
------------
LIABILITIES:
Withdrawal payable.................................................. 147,114
Payable for investment securities purchased......................... 6,761,140
Advisor fees payable................................................ 75,382
Administration fees payable......................................... 5,024
Accrued accounting fees............................................. 17,633
Accrued audit fees.................................................. 15,958
Accrued custody fees................................................ 6,624
Accrued legal fees.................................................. 6,707
Other accrued expenses.............................................. 13,892
------------
Total liabilities..................................................... 7,049,474
------------
NET ASSETS............................................................ $275,522,274
============
</TABLE>

- ---------------
See Notes to Financial Statements.
26
<PAGE> 29

MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------

Statement of Operations
For the year ended February 29, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................... $ 427,131
Dividends.............................................. 4,764,288
-----------
5,191,419
-----------
EXPENSES:
Advisory fees.......................................... 1,574,388
Administration fees.................................... 104,889
Fund accounting fees and expenses...................... 134,230
Custodian fees and expenses............................ 38,672
Audit fees............................................. 18,423
Legal fees............................................. 12,848
Amortization of organization costs..................... 13,615
Insurance expense...................................... 4,704
Trustees fees.......................................... 3,500
-----------
1,905,269
Less: Fee waivers and expense reimbursements........... (1,242,250) 663,019
----------- -----------
Net Investment Income.................................... 4,528,400
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on securities transactions........... 21,310,546
Net change in unrealized appreciation on investments... 34,689,746
-----------
Net Gain on Investments.................................. 56,000,292
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $60,528,692
===========
</TABLE>

- ---------------
See Notes to Financial Statements.
27
<PAGE> 30

MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------

Statements of Changes in Net Assets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BLUE CHIP PORTFOLIO
---------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 4,528,400 $ 3,333,204
Net realized gain on securities transactions........... 21,310,546 373,340
Net change in unrealized appreciation/depreciation on
investments.......................................... 34,689,746 7,922,681
------------ ------------
Net increase in net assets resulting from operations... 60,528,692 11,629,225
------------ ------------
Trust Share Transactions:
Contributions.......................................... 96,776,148 33,341,186
Withdrawals............................................ (39,120,232) (21,900,310)
------------ ------------
Net increase in net assets resulting from Trust share
transactions......................................... 57,655,916 11,440,876
------------ ------------
Total Increase........................................... 118,184,608 23,070,101
NET ASSETS
Beginning of year...................................... 157,337,666 134,267,565
------------ ------------
End of year............................................ $275,522,274 $157,337,666
============ ============
</TABLE>

- ---------------
See Notes to Financial Statements.
28
<PAGE> 31

MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------

Notes to Financial Statements
- --------------------------------------------------------------------------------

NOTE 1 -- GENERAL

Master Investment Trust, Series I (the "Trust"), a Delaware business trust,
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as an open-end management investment company. At February 29, 1996, the Trust
consisted of four portfolios. The accompanying financial statements and notes
are those of the Blue Chip Portfolio (the "Portfolio") only.

The investment objective of the Portfolio is long term capital appreciation
through investments in blue chip stocks.

Bank of America National Trust and Savings Association ("Bank of America"),
a wholly owned subsidiary of BankAmerica Corporation, serves as the Portfolio's
investment adviser. Concord Holding Corporation ("Concord") serves as the
Portfolio's administrator through BISYS Fund Services (Ireland) Ltd., a wholly
owned subsidiary of Concord. Effective March 29, 1995, Concord became a wholly
owned subsidiary of The BISYS Group, Inc. ("BISYS").

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.

A) SECURITY VALUATIONS:

Portfolio securities for which market quotations are readily available
(other than debt securities with remaining maturities of 60 days or less) are
valued at the last reported sales price on the date of valuation or, if none is
available, at the mean between the current quoted bid and asked prices on the
date of valuation. Securities that are primarily traded on the NASDAQ national
securities market are valued at the last reported sales price on the date of
valuation or, if none is available, at the last quoted bid price on the date of
valuation. The Portfolio may use an independent pricing service, approved by the
Board of Trustees, to value certain of its securities. Such prices reflect
market values which may be established through the use of electronic data
processing techniques and matrix systems. Restricted securities and securities
for which market quotations are not readily available, if any, are valued at
fair value using methods approved by the Board of Trustees. Debt securities with
remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value. The amortized cost

29
<PAGE> 32

method involves valuing a security at its cost on the date of purchase or, in
the case of securities purchased with more than 60 days until maturity, at their
market value each day until the 61st day prior to maturity, and thereafter
assuming a constant amortization to maturity of the difference between the
principal amount due at maturity and such valuation.

B)SECURITIES TRANSACTIONS AND INVESTMENT INCOME:

Securities transactions are accounted for on a trade date basis. Realized
gains and losses on securities transactions are determined on the identified
cost basis. Interest income, including accretion of discount and amortization of
premium, is accrued daily. Dividend income is recorded on the ex-dividend date.

C) EXPENSES:

Expenses directly attributable to the Portfolio are charged to the Portfolio
while Trust expenses attributable to more than one portfolio of the Trust and
general Trust expenses are allocated among the respective portfolios of the
Trust.

D) 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 taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
Portfolio will be managed in such a way that an investor will be able to satisfy
the requirements of the Internal Revenue Code applicable to regulated investment
companies.

NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

The Portfolio has an Investment Advisory Agreement with Bank of America and
an Administration Agreement with Concord.

As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolio. For its services, Bank of America is entitled to a
fee, accrued daily and paid monthly, at an annual rate of 0.75% of the average
daily net assets of the Portfolio. For the year ended February 29, 1996, Bank of
America waived $1,164,328 in fees as Adviser of the Portfolio.

As Administrator, Concord assists in supervising the operations of the
Portfolio. For its services, Concord is entitled to a fee, accrued daily and
payable monthly, at an annual rate of 0.05% of the Portfolio's average daily net
assets. For the year ended February 29, 1996, Concord waived $77,922 in fees as
Administrator of the Portfolio.

For services provided to all four of the portfolios constituting the Trust,
each Trustee receives an annual fee of $1,500 and a meeting fee of $500. For the
year ended February 29, 1996, the Portfolio incurred legal expenses of $12,848
which were earned by a law firm, a partner of which serves as Secretary of the
Trust. Certain officers of the Trust are "affiliated persons" (as defined in the
Act) of BISYS.

30
<PAGE> 33

NOTE 4 -- SECURITIES TRANSACTIONS

During the year ended February 29, 1996, the Portfolio purchased and sold
portfolio securities, excluding short-term securities, in the amount of
$283,161,200 and $219,320,666, respectively.

At February 29, 1996, the cost of the securities of the Portfolio for
federal income tax purposes was substantially the same as for financial
reporting purposes. Accordingly net unrealized appreciation of investments
amounted to $46,422,995 consisting of gross unrealized appreciation of
$48,183,393 and gross unrealized depreciation of $1,760,397.

31
<PAGE> 34

MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------

Supplementary Data
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE YEAR PERIOD
YEAR ENDED ENDED ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
Ratio of expenses to average net
assets**................................. 0.31% 0.17% 0.27%***
Ratio of net investment income to average
net assets**............................. 2.16% 2.30% 1.97%***
Portfolio Turnover......................... 108% 44% 86%
</TABLE>

- ---------------

* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.

** Net of fee waivers which had the effect of reducing the ratio of expenses to
average net assets and increasing the ratio of net investment income to
average net assets by 0.59%, 0.80% and 0.80% (annualized) for the periods
ended February 29, 1996, February 28, 1995 and February 28, 1994,
respectively.

*** Annualized.

See Notes to Financial Statements.
32
<PAGE> 35

MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------

Report of Independent Accountants
- --------------------------------------------------------------------------------

To the Trustees
and Investors of
Master Investment Trust, Series I

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of Master Investment Trust, Series I -- Blue
Chip Portfolio (the "Portfolio") at February 29, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the supplementary data for each of
the periods presented, in conformity with generally accepted accounting
principles. These financial statements and supplementary data (hereafter
referred to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 29, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP

1177 Avenue of the Americas
New York, New York
April 25, 1996

33
<PAGE> 36

For more information, complete the following form and mail it to:

Pacific Horizon Funds
1230 Columbia Street, Suite 500
San Diego, CA 92101

...............................................................................
First Name Last Name

...............................................................................
Street Address

...............................................................................
City State Zip Code

...............................................................................
Area Code and Telephone Number

PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
/ / A broker assisted me with the purchase of my Pacific Horizon Fund.

...............................................................................
Name of Broker

...............................................................................
Name of Brokerage Firm

/ / I purchased my Pacific Horizon Fund without the assistance of a broker.

Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.

PACIFIC HORIZON FUNDS

<TABLE>
<S> <C>
/ / International Equity Fund / / Corporate Bond Fund
/ / Aggressive Growth Fund / / Flexible Bond Fund
/ / Blue Chip Fund / / U.S. Government Securities Fund
/ / Capital Income Fund / / National Municipal Bond Fund
/ / Asset Allocation Fund / / California Tax-Exempt Bond Fund
M o n e y M a r k e t F u n d s
/ / Prime Fund / / Tax-Exempt Money Fund
/ / Treasury Fund / / California Tax-Exempt Money Market Fund
/ / Government Fund
/ / Treasury Only Fund
</TABLE>

Additional Comments:

...............................................................................
...............................................................................
...............................................................................
...............................................................................
...............................................................................
...............................................................................

- NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE

<PAGE> 37

[Pacific Horizon Funds Logo]

Concord Financial Group, Inc., Distributor

COPBLCP96A
<PAGE> 38
P
A
C PACIFIC HORIZON GROWTH & INCOME FUNDS
I
F ANNUAL REPORT
I
C February 29, 1996

H
O
R
I Capital Income Fund
Z
O
N

G Investing For All
R The Times Of Your Life
O
W
T
H

I
N
C
O
M
E

F
U
N
D
S NOT FDIC INSURED
<PAGE> 39

PACIFIC HORIZON FUNDS, INC.
3435 Stelzer Road, Columbus, OH 43219
1-800-332-3863

INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104

ADMINISTRATOR
Concord Holding Corporation
3435 Stelzer Road
Columbus, OH 43219

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036

FUND COUNSEL
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107

DISTRIBUTOR
Concord Financial Group, Inc.
3435 Stelzer Road
Columbus, OH 43219

FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.

This material must be preceded or accompanied by a current prospectus.

-----------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE> 40

................................

Contents

PACIFIC HORIZON FUND FACTS

- --------------------------------------------------------------------------------
* Certain investors may be subject to the federal alternative minimum tax and to
certain state and local taxes.

+ There can be no assurance that the Funds will be able to maintain a stable net
asset value of $1.00 per share. Fund shares are not insured or guaranteed by
the U.S. Government.

2
<PAGE> 42

<CAPTION>
PORTFOLIO CONSISTS PRIMARILY OF ... APPROPRIATE FOR INVESTORS WHO SEEK
- ------------------------------------------------------------------------------------
<S> <C>
Small Capitalization Stocks Higher-than-average long-term growth potential with
higher-than-average risk.
................................................................................................
Blue Chip Stocks Long-term growth potential from investments in the
stocks of well-established companies.
................................................................................................
Convertible Bonds and Convertible Combined potential for current income and capital
Preferred Stocks appreciation.
................................................................................................
Stocks, Bonds and Cash Equivalents Long-term growth potential and current income from
stocks and bonds.
................................................................................................
Investment-Grade Corporate Debt High monthly income potential with reasonable
investment risk.
................................................................................................
Investment-Grade Corporate and U.S. Regular monthly income from a diversified portfolio
Government Securities of investment-grade securities.
................................................................................................
GNMAs and Other U.S. Government High monthly income potential and low credit risk.
Securities
................................................................................................
Investment-Grade Municipal Debt Monthly tax-free income.
Securities
................................................................................................
Investment-Grade California High monthly double-tax-free income.
Municipal Securities
................................................................................................
High-Quality Corporate and/or U.S. A flexible, convenient way to manage or accumulate
Government Short-Term Obligations cash while waiting for other investment
opportunities.
................................................................................................
Short-Term Municipal Obligations A tax-free way to manage or accumulate cash while
waiting for other investment opportunities.
Short-Term California Municipal A tax-free way to manage or accumulate cash while
Obligations waiting for other investment opportunities.
</TABLE>

- --------------------------------------------------------------------------------

3
<PAGE> 43

UNDERSTANDING YOUR SHAREHOLDER REPORT

This guide will help you extract the information from
the report.

The TABLE OF CONTENTS helps
you locate the information you
want.

The ECONOMIC REVIEW FROM THE
INVESTMENT ADVISER provides a
brief overview of the economy
and how it affects the [GRAPHIC]
financial markets.

The INTERVIEW WITH YOUR
INVESTMENT MANAGER enables you
to gain insight into the Fund
investments and learn more
about the Fund manager's
strategies.

Because a picture or chart can
help clarify the text, the
investment manager may have
illustrated the most important
features of the Fund. The
illustra-
tions may represent the portfolio composition, the
largest holdings or a simplification of the investment
manager's investment style.

In annual reports, mutual funds, which are not "money
market" funds, are required by the Securities and
Exchange Commission (SEC) to provide shareholders with
a comparison of a hypothetical $10,000 investment in
[GRAPHIC] the Fund to a benchmark of the broader market. The
performance of the benchmark index depicts the
aggregate performance of investments similar to those
in the Fund for the same time period. While the
benchmark index provides a general representation of
the market, there are two
reasons
why
it should be used only as a
guide. First, the Fund, in its
prospectus, must clearly define
which investments can be made by [GRAPHIC]
the Fund. The index does not
necessarily have the same
limitations. Second, the index
does not reflect any expenses
that accompany a real investment,
such as

<PAGE> 44

The financial statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:

TYPE OF SECURITY

INDUSTRY SECTOR AND PERCENTAGE OF THE FUND'S
NET ASSETS REPRESENTED BY INVESTMENTS IN THAT
SECTOR (IF APPLICABLE)
[GRAPHIC]
ACTUAL PORTFOLIO HOLDINGS WITH SHARES AND
MARKET VALUE AS OF REPORT DATE

SUMMARY OF THE FUND'S INVESTMENTS AND ALL
OTHER ASSETS OWNED BY THE FUND, INCLUDING
AMOUNTS OWED TO THE FUND BY OUTSIDE PARTIES
[GRAPHIC]
SUMMARY OF ALL AMOUNTS OWED TO OUTSIDE PARTIES
BY THE FUND

NET RESULTS OF ASSETS LESS LIABILITIES

THE MARKET VALUE OF THE FUND'S TOTAL NET
ASSETS DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING

THE CURRENT NET ASSET VALUE PER SHARE PLUS SALES CHARGE, IF ANY

<PAGE> 45

ANY INCOME EARNED FROM THE FUND'S INVESTMENTS

OPERATING EXPENSES INCURRED BY THE FUND DURING
THE PERIOD
[GRAPHIC]
GAINS OR LOSSES REALIZED UPON THE SALE OF THE
FUND'S INVESTMENTS AND ANY CHANGE IN
UNREALIZED GAINS OR LOSSES ON FUND HOLDINGS
DURING THE PERIOD

NET CHANGE IN NET ASSETS DUE TO FUND
OPERATIONS

The STATEMENTS OF CHANGES IN NET ASSETS shows the changes in the net assets of
the Fund during each of the two most recent reporting periods. The changes in
net assets are generally
broken down into four distinct sections:

OPERATIONS: SEE STATEMENT OF OPERATIONS

DIVIDENDS TO SHAREHOLDERS: TOTAL INCOME
DIVIDENDS PAID TO SHAREHOLDERS DURING THE
PERIODS
[GRAPHIC]
DISTRIBUTIONS TO SHAREHOLDERS: TOTAL REALIZED
GAINS DISTRIBUTED TO SHAREHOLDERS DURING THE
PERIODS

FUND SHARE TRANSACTIONS: DOLLAR VALUE OF FUND
SHARES PURCHASED, REDEEMED OR REINVESTED
DURING THE
PERIODS

6
<PAGE> 46

ECONOMIC REVIEW
FROM THE INVESTMENT ADVISER

FUNDAMENTAL ECONOMIC
STRENGTHS

ASSET ALLOCATION KEY
TO PERFORMANCE

LOOKING AHEAD

7
<PAGE> 47

PACIFIC HORIZON
CAPITAL INCOME FUND

- ----------------------
[PHOTO]
- ----------------------

ED CASSENS, CFA
Investment Manager
Bank of America NT & SA

GOAL:

The Pacific Horizon Capital Income Fund seeks total investment return through a
combination of current income and capital appreciation consistent with prudent
risk.

INVESTMENTS:

The Fund invests primarily in convertible bonds and convertible preferred stocks
of domestic issuers.

APPROPRIATE FOR:

Investors seeking a competitive return over the long term comprised of current
income and capital appreciation.

INCEPTION:

September 25, 1987

SIZE OF FUND AS OF
FEBRUARY 29, 1996:

Over $246 million
Q
HOW DID CONVERTIBLE SECURITIES FARE DURING THE PAST 12 MONTHS?

A
The period provided a very favorable environment for convertible bonds
and convertible preferred stocks, which are the Fund's primary holdings.
Convertibles offer a unique combination of attributes. Typically, they pay
higher yields than common stocks; thus, like other income- oriented investments,
they benefited from falling interest rates during the past 12 months. In
addition, convertibles typically share in gains of their issuers' common stocks
to some extent, so the surge in stock prices also was good news for most
convertible investors.

Q
HOW DID THE FUND FARE IN THAT ENVIRONMENT?

A
Very well, thanks partly to some moves we made in the portfolio. For
example, early in the period we reduced our holdings of convertibles issued by
companies in the basic industry and capital goods sectors. We figured that those
sectors would suffer as the economy's growth rate slowed, and that is what
happened. As a result, the Fund had a total return of 25.96% (without the sales
charge) for the 12 months ended February 29, 1996, compared to 25.91% for its
new benchmark, the First Boston Convertible Index.+

Q
WHERE DID YOU INVEST THAT
MONEY?

A
We invested heavily in several areas, including health care and financial
services -- two industries that are experiencing consolidation in the form of
mergers and other deals. Since many health-care companies don't issue
convertibles, we bought common stock of firms such as Pharmacia & Upjohn, Inc.,
a company that was formed through the merger of the two companies, (1.36% of net
assets as of Feb-

8
<PAGE> 48

ruary 29, 1996), Schering-Plough (1.07%) and Warner-Lambert (1.04%). The other
two firms are potential merger candidates as well. Meanwhile, such companies can
provide stable earnings growth in a slow economy, which should attract
investors.

Among financial service companies, we owned shares of First Interstate Bank,
(1.66%) which was acquired by Wells Fargo after the Fund's fiscal year end. We
also held convertibles during the period issued by First Chicago (0.74%), which
combined with National Bank of Detroit.++

Q
DID YOU HOLD TECHNOLOGY
CONVERTIBLES?

A
We cut back the technology sector around the middle of 1995 because we felt
that the economic slowdown would hurt those firms' growth rates. Our action was
well-timed. The technology sector stumbled soon after we made the move.

Q
WHAT IS YOUR STRATEGY GOING FORWARD?

A
Many older convertibles have been called by their issuers. As a result, lots
of money is chasing a smaller number of convertibles and driving their prices
higher. That said, the Fund will continue to focus on finding good values among
convertibles of companies that have solid earnings prospects. We'll also look to
invest the Fund's assets in securities issued by firms that might benefit from
some corporate action such as a merger or restructuring.

- ------------
+ Fund performance with the 4.50% maximum sales charge was 20.29% for the
period.

++ The composition of the Fund's holdings is subject to change.

9
<PAGE> 49

PACIFIC HORIZON
CAPITAL INCOME FUND
(AS OF FEBRUARY 29, 1996)

GROWTH OF A $10,000 INVESTMENT
(HYPOTHETICAL -- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.)

<TABLE>
<CAPTION>
LIPPER CON-
VERTIBLE SECU-
MEASUREMENT PERIOD RITIES FUNDS
(FISCAL YEAR COVERED) FUND AVERAGE S&P 500 CS FIRST BOSTON
<S> <C> <C> <C> <C>
9/30/87 9551 10000 10000 10000
10/31/87 8244 8154 7853 8319
11/30/87 7964 7881 7207 8052
12/31/87 8389 8232 7754 8462
1/31/88 8612 8437 8092 8697
2/29/88 8988 8795 8454 9097
3/31/88 9076 8817 8196 9066
4/30/88 9168 8906 8299 9254
5/31/88 9076 8844 8352 9162
6/30/88 9502 9209 8738 9515
7/31/88 9471 9109 8717 9416
8/31/88 9315 8956 8408 9249
9/30/88 9550 9120 8768 9416
10/31/88 9550 9223 9022 9535
11/30/88 9539 9085 8879 9381
12/31/88 9669 9228 9037 9599
1/31/89 10122 9580 9707 10030
2/28/89 10219 9575 9455 10028
3/31/89 10308 9654 9681 10158
4/30/89 10787 9978 10194 10499
5/31/89 11191 10197 10582 10712
6/30/89 11517 10210 10528 10634
7/31/89 11761 10556 11487 10939
8/31/89 12048 10808 11696 11180
9/30/89 12197 10787 11652 11083
10/31/89 11940 10487 11392 10733
11/30/89 12074 10592 11613 10907
12/31/89 12368 10672 11894 10919
1/31/90 11926 10254 11111 10485
2/28/90 12224 10364 11240 10624
3/31/90 12518 10537 11546 10787
4/30/90 12155 10321 11270 10546
5/31/90 13220 10876 12338 11058
6/30/90 13276 10921 12264 11045
7/31/90 13123 10833 12235 10946
8/31/90 12233 10198 11120 10316
9/30/90 11646 9726 10587 9866
10/31/90 11115 9407 10551 9496
</TABLE>

HOW PERFORMANCE COMPARES

With this annual report, we are changing the Fund's benchmark from the S&P 500
Index to the CS First Boston Index, which is widely used as a broad measure of
the performance of convertible securities. As such, we believe it is a more
appropriate benchmark for this Fund. In order to complete the transition to the
new benchmark, we are providing a hypothetical comparison of the Fund's
performance since September 30,1987 with both its former benchmark and its new
benchmark, the CS First Boston and the S&P 500 Index do not reflect any sales or
management fees that would be incurred if an investor were to actually purchase
individual securities or mutual funds, while the performance of the Fund
reflects all expenses and management fees and the effect of the maximum sales
charge.

- --------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURN
- ---------------------------
<S> <C>
1 year: 20.29%
..............................
5 years: 16.04%
..............................
Since inception
(9/25/87): 13.80%
- --------------------------
</TABLE>
10

<PAGE> 50

The Fund fared relatively well compared to other convertible security funds. The
average of convertible security funds as tracked by Lipper Analytical Services,
Inc. measures the performance of other funds with investment objectives and
policies similar to those of the Pacific Horizon Capital Income Fund. An initial
$10,000 investment in the Fund made on September 30, 1987 would now be worth
$29,702, while the same investment made in the Lipper Convertible Securities
Funds Average would be worth only $22,026.

SEE INVESTMENT MANAGER INTERVIEW FOR FACTORS AFFECTING FUND PERFORMANCE.

Investment return and principal value are historical and will vary with market
conditions, so an investor's shares, when redeemed, may be worth more or less
than their original cost.

Return figures for the fund include change in share price, reinvestment of
dividends and capital gains distributions, if any, and the effect of the maximum
4.50% sales charge.

S&P 500 is a registered trademark of Standard & Poor's Corporation. Lipper
Analytical Services, Inc. is an independent mutual fund-monitoring organization.

Neither the S&P 500, Lipper Convertible Securities Funds Average, nor the CS
First Boston Index may be invested in directly.

11
<PAGE> 51

PACIFIC HORIZON
CAPITAL INCOME FUND
(AS OF FEBRUARY 29, 1996)
BALANCE

Two Advantages
The Pacific Horizon Capital Income
Fund provides investors with the
opportunity to receive regular
quarterly income while participating
in the upside potential of the
underlying equity securities.
[GRAPHIC] Historically, holders of convertible
securities have enjoyed about 70
percent of the appreciation of
stocks.* Investors seeking growth
and income will appreciate the
opportunities to invest in the
Pacific Horizon Capital Income Fund.
Of course, past performance is not
reflective of future results.
*Source: Investment Advisor, March
1993.

- --------------------------------------------------------------------------------

DIVERSITY
Positioned for Income and Growth
PORTFOLIO COMPOSITION
(PERCENT OF NET ASSETS)

<TABLE>
<S> <C>
CONVERTIBLE BONDS 44.9
CONVERTIBLE PREFERRED STOCKS 31.4
COMMON STOCKS 20.5
GOVERNMENT SECURITIES 1.0
CASH & CASH EQUIVALENTS 2.2
a 38.6
b 3.2
c 58.2
</TABLE>

The Pacific Horizon Capital Income
Fund is professionally managed and
maintains at least a 65 percent
position in convertible securities.
In order to maximize performance,
the Fund also invests in common and
preferred stocks, cash and cash
equivalents that the adviser
believes to be of high quality.
<TABLE>
<CAPTION>
TOP TEN HOLDINGS AS OF FEBRUARY 29,
1996*
----------------------------------------
PERCENT OF
NET ASSETS
<S> <C>
----------------------------------------
Career Horizons, Inc. 144a, 7.00%,
11/1/02 1.79%
......................................................
Cooper Ind., Inc., 7.05%, 1/1/15 1.72%
......................................................
First Interstate Bancorp 1.65%
......................................................
Freeport McMoran Co. Gold, $1.25 1.48%
......................................................
AT&T 1.42%
......................................................
Pharmacia & Upjohn Inc. 1.36%
......................................................
Unocal Corp. Cvt Pfd., $350, 144a 1.34%
......................................................
Conner Peripherals, 6.75%, 3/1/01 1.34%
......................................................
Noble Affiliates, Inc., 4.25%, 11/1/03 1.32%
......................................................
Danka Business Systems, 6.75%, 4/1/02 1.32%
----------------------------------------
TOTAL 14.74%
----------------------------------------
</TABLE>

* The composition of the Fund's
holdings is subject to change.

<PAGE> 52

PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------

Portfolio of Investments
February 29, 1996
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE 2)
- --------------------------------------------- ------ -------- ---------- -------------
<S> <C> <C> <C> <C>
CONVERTIBLE BONDS -- 44.9%
BASICS -- 1.5%
Agnico Eagle Mines, Ltd. ................... 3.50% 1/27/04 $ 2,000 $ 2,052,500
Inco, Ltd. ................................. 5.75% 7/01/04 1,200 1,528,500
-------------
3,581,000
-------------
CAPITAL GOODS -- 9.9%
Air & Water Technologies Corp. ............. 8.00% 5/15/15 1,500 1,325,625
Career Horizons, Inc. 144a.................. 7.00% 11/01/02 2,950 4,428,688
Cooper Industries, Inc. .................... 7.05% 1/01/15 4,086 4,254,547
General Signal Corp. ....................... 5.75% 6/01/02 1,450 1,508,000
Hanson America 144a......................... 2.39% 3/01/01 2,500 2,031,250
Horsham Corp. .............................. 3.00% 1/29/21 2,500 2,618,750
Laidlaw/Careline............................ 8.00% 5/01/01 2,500 2,762,500
Olsten Corp. ............................... 4.88% 5/15/03 1,800 2,358,000
U.S. Filter 144a............................ 6.00% 9/15/05 2,600 3,172,000
-------------
24,459,360
-------------
COMPUTERS -- 2.7%
3Com Corp. 144a............................. 10.25% 11/01/01 1,600 2,620,000
Conner Peripherals.......................... 6.75% 3/01/01 3,000 3,300,000
Safeguard 144a.............................. 6.00% 2/01/06 680 713,150
-------------
6,633,150
-------------
CONSUMER CYCLICALS -- 6.3%
Baby Superstore............................. 4.88% 10/01/00 2,900 2,827,500
HFS, Inc. .................................. 4.75% 3/01/03 350 365,750
Magna International......................... 5.00% 10/15/02 2,800 2,786,000
Medusa Corp. ............................... 6.00% 11/15/03 1,500 1,560,000
Pier 1 Imports, Inc. ....................... 6.88% 4/01/02 1,000 1,175,000
Price Co. .................................. 5.50% 2/28/12 2,300 2,277,000
Schuler Homes, Inc. ........................ 6.50% 1/15/03 1,500 1,230,000
Starbucks Coffee Corp. ..................... 4.25% 11/01/02 2,700 2,565,000
Time Warner, Inc. Z.C.B. ................... 0.00% 12/17/12 2,000 710,000
-------------
15,496,250
-------------
CONSUMER STAPLES -- 3.7%
Grand Metropolitan, PLC 144a................ 6.50% 1/31/00 2,400 2,709,000
McKesson Corp. ............................. 4.50% 3/01/04 2,500 2,315,625
Roche Holdings, Z.C.B. LYON 144a............ 0.00% 4/20/10 3,000 1,327,500
Sandoz 144a................................. 2.00% 10/06/02 3,000 2,880,000
-------------
9,232,125
-------------
ENERGY -- 3.7%
Chevron..................................... 4.75% 10/01/03 2,700 2,801,250
Noble Affiliates, Inc. ..................... 4.25% 11/01/03 3,250 3,266,250
Pride Pete Services......................... 6.25% 2/15/06 2,750 3,038,750
-------------
9,106,250
-------------
FINANCE -- 2.4%
ADT, Z.C.B. LYON............................ 0.00% 7/06/10 3,000 1,432,500
Fifth Third Bancorp......................... 4.25% 1/15/98 2,105 2,589,150
USF&G Corp. Z.C.B. ......................... 0.00% 3/03/09 3,500 2,003,750
-------------
6,025,400
-------------
</TABLE>

- ---------------
See Notes to Financial Statements.
13
<PAGE> 53
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE 2)
- --------------------------------------------- ------ -------- ---------- -------------
<S> <C> <C> <C> <C>
INSURANCE -- 1.8%
American Travelers Corp. ................... 6.50% 10/01/05 $ 1,750 $ 2,471,875
Fidelity National Z.C.B. LYON............... 0.00% 2/15/09 4,500 2,047,500
-------------
4,519,375
-------------
MANUFACTURING - ELECTRICAL -- 3.0%
Dovatron International Inc. 144a............ 6.00% 10/15/02 2,400 2,604,000
National Semi-Conductor 144a................ 6.50% 10/01/02 2,350 2,185,500
Park Electrochemical........................ 5.50% 3/01/06 1,000 990,000
VLSI Technologies........................... 8.25% 10/01/05 1,750 1,601,250
-------------
7,380,750
-------------
MEDICAL SERVICES & SUPPLIES -- 3.8%
Nabi 144a................................... 6.50% 2/01/03 1,000 1,080,000
PHP Health 144a............................. 6.50% 12/15/02 1,500 1,845,000
Phycor...................................... 4.50% 2/15/03 1,500 1,515,000
Tenet Healthcare............................ 6.00% 12/01/05 1,800 2,072,250
Theratx, Inc. .............................. 8.00% 2/01/02 3,000 2,745,000
-------------
9,257,250
-------------
TECHNOLOGY -- 3.3%
Danka Business Systems...................... 6.75% 4/01/02 2,000 3,262,500
First Financial Management Corp. ........... 5.00% 12/15/99 1,800 3,010,500
Motorola, Inc. Z.C.B. LYON.................. 0.00% 9/27/13 2,500 1,856,250
-------------
8,129,250
-------------
TRANSPORTATION -- 2.0%
Alaska Air Group............................ 6.50% 6/15/05 2,300 2,754,250
AMR Corp. .................................. 6.13% 11/01/24 2,000 2,270,000
-------------
5,024,250
-------------
UTILITIES -- 0.8%
Telekom Malaysia Berhad 144a................ 4.00% 10/03/04 2,000 2,080,000
-------------
Total Convertible Bonds
(cost $101,165,687)......................... 110,924,410
-------------

<CAPTION>
SHARES
----------
<S> <C> <C> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 31.4%
BASICS -- 4.5%
Amax Gold, $3.50............................ 40,000 2,420,000
Cypress Amax Minerals, Series A, $4.00...... 19,950 1,157,100
Freeport McMoran Co. Gold, $1.25............ 125,000 3,656,250
James River Corp., $1.55.................... 80,000 2,080,000
USX Corp., $3.25............................ 34,000 1,657,500
-------------
10,970,850
-------------
CAPITAL GOODS -- 3.2%
Alco Standard, $5.04........................ 26,700 2,406,338
Corning Delaware, $3.00..................... 42,000 2,231,250
Elsag Baily, $2.75* 144a.................... 20,000 892,500
Federal-Mogul, $3.875 144a.................. 40,000 2,370,000
-------------
7,900,088
-------------
COMPUTERS -- 0.1%
Wang Labs, $3.25* 144a...................... 5,000 266,250
-------------
CONSUMER CYCLICALS -- 1.3%
Bally Entertainment PRIDE $.89.............. 200,000 3,150,000
-------------
</TABLE>

- ---------------
See Notes to Financial Statements.
14
<PAGE> 54

<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------- ---------- -------------
<S> <C> <C> <C> <C>
CONSUMER STAPLES -- 0.9%
AJL Trust PEPS, $1.44....................... 110,000 $ 2,255,000
-------------
ENERGY -- 4.9%
Ashland Oil, Inc., $3.125................... 45,000 2,784,375
Chieftain International, $1.8125............ 25,000 650,000
Occidental Petroleum Corp., $3.00........... 40,000 2,470,000
Reading & Bates, $1.625..................... 50,000 2,825,000
Unocal Corp., $3.50 144a.................... 60,000 3,315,000
-------------
12,044,375
-------------
FINANCE -- 12.7%
Ahmanson (H.F.) and Co., Series D, $3.00.... 46,300 2,558,075
Allstate Corp., $2.30....................... 62,000 2,557,500
American General Delaware, $3.00............ 30,000 1,665,000
Barnett Banks, Inc., Series A, $4.50........ 20,000 2,370,000
First Chicago NBD Corp., $2.88.............. 25,000 1,825,000
Great Western Financial, $4.375............. 35,000 2,073,750
Integon Corp., $3.875....................... 40,000 2,360,000
National Health Investors, $2.125........... 62,000 1,836,750
Penncorp Financial Group, Inc., $3.375...... 40,000 3,160,000
Rochester Community Savings Bank, $1.75..... 63,000 2,338,875
Sovereign Bankcorp, Inc., $3.125............ 45,000 2,790,000
St. Paul Capital, $3.00..................... 40,000 2,350,000
SunAmerica, $3.10........................... 16,000 1,156,000
Washington Mutual Inc., $6.00............... 20,000 2,400,000
-------------
31,440,950
-------------
TRANSPORTATION -- 1.0%
Delta Air Lines, $3.50...................... 40,000 2,465,000
-------------
UTILITIES -- 2.8%
Citizens Utility, $2.50..................... 50,000 2,456,250
Philippine Long Distance Telephone, Series
III, $3.50................................ 35,000 1,977,500
Sprint Corp. DEC, $2.6292................... 64,000 2,536,000
-------------
6,969,750
-------------
Total Convertible Preferred Stocks
(cost $68,279,321).......................... 77,462,263
-------------
COMMON STOCKS -- 20.5%
CONSUMER CYCLICALS -- 2.1%
General Motors.............................. 49,273 2,814,720
J.C. Penney Co., Inc. ...................... 50,000 2,375,000
-------------
5,189,720
-------------
CONSUMER STAPLES -- 5.2%
Avon Products, Inc. ........................ 25,000 2,009,375
Colgate-Palmolive Co. ...................... 30,000 2,347,500
Pharmacia & Upjohn, Inc. ................... 80,000 3,350,000
Schering-Plough............................. 47,000 2,637,875
Warner-Lambert.............................. 26,000 2,570,750
-------------
12,915,500
-------------
ENERGY -- 1.6%
Atlantic Richfield.......................... 20,000 2,190,000
Tosco Corp. ................................ 41,249 1,840,737
-------------
4,030,737
-------------
</TABLE>

- ---------------
See Notes to Financial Statements.
15
<PAGE> 55
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------- ---------- -------------
<S> <C> <C> <C> <C>
FINANCE -- 1.7%
First Interstate Bancorp.................... 25,000 $ 4,084,375
-------------
HEALTH CARE -- 2.3%
American Home Products Corp.*............... 29,000 2,856,500
Bristol Myers Squibb Co. ................... 32,000 2,724,000
-------------
5,580,500
-------------
PUBLISHING -- 1.0%
Dun & Bradstreet............................ 40,000 2,530,000
-------------
TECHNOLOGY -- 1.0%
International Business Machines............. 20,000 2,452,500
-------------
UTILITIES -- 5.6%
AT&T........................................ 55,000 3,499,375
Duke Power Co. ............................. 57,000 2,785,875
Northern States Power....................... 50,000 2,462,500
PacifiCorp.................................. 115,000 2,386,250
Southern Co. ............................... 110,000 2,626,250
-------------
13,760,250
-------------
Total Common Stocks
(cost $39,363,370).......................... 50,543,582
-------------

<CAPTION>
PRINCIPAL
MATURITY AMOUNT
RATE DATE (000)
------ -------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 1.0%
U.S. Treasury Note
(cost $2,416,923)......................... 6.38% 1/15/99 $ 2,500 2,553,902
-------------
TOTAL INVESTMENTS
(COST $211,225,301) (A) -- 97.8%............ 241,484,157
Other assets in excess of
liabilities -- 2.2%......................... 5,261,642
-------------
NET ASSETS -- 100.0%......................... $ 246,745,799
===============
</TABLE>

- ---------------

Percentages indicated are based on net assets of $246,745,799.

(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:

<TABLE>
<S> <C>
Unrealized appreciation................................... $32,918,583
Unrealized depreciation................................... (2,659,727)
-----------
Net unrealized appreciation............................... $30,258,856
=============
</TABLE>

* Non-income producing security

144a -- Security which is restricted as to resale to institutional investors

DEC -- Debt Exchangeable For Common Stock

LYON -- Liquid Yield Option Note

PEPS -- Premium Exchangeable For Common Stock

PRIDE -- Preferred Redeemable Increased Dividend Equity

Z.C.B. -- Zero Coupon Bond

See Notes to Financial Statements.
16
<PAGE> 56

PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities
February 29, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $211,225,301)............ $241,484,157
Cash............................................................... 3,246,618
Receivable for Portfolio shares sold............................... 402,064
Interest receivable................................................ 1,462,582
Receivable for investment securities sold.......................... 571,150
Dividends receivable............................................... 477,117
Prepaid expenses................................................... 110,628
------------
Total assets......................................................... 247,754,316
------------
LIABILITIES:
Payable for Portfolio shares redeemed.............................. 456,359
Payable for investment securities purchased........................ 290,759
Advisory fees payable.............................................. 87,781
Administration fees payable........................................ 39,036
Shareholder service fees payable................................... 48,795
Dividends payable.................................................. 5,791
Other accrued expenses............................................. 79,996
------------
Total liabilities.................................................... 1,008,517
------------
NET ASSETS........................................................... $246,745,799
============
Shares Outstanding ($0.001 par value, 250 million shares
authorized)........................................................ 15,027,480
============
CALCULATION OF MAXIMUM OFFERING PRICE:
Net asset value and redemption price per share..................... $16.42
Sales charge -- 4.50% of public offering price..................... 0.77
-----
Maximum Offering Price............................................. $17.19
=====
COMPOSITION OF NET ASSETS:
Shares of common stock, at par..................................... $ 15,027
Additional paid-in capital......................................... 218,544,278
Accumulated net realized losses on investment transactions......... (3,462,130)
Net unrealized appreciation of investments......................... 30,258,856
Accumulated undistributed net investment income.................... 1,389,768
------------
NET ASSETS, FEBRUARY 29, 1996........................................ $246,745,799
============
</TABLE>

- ---------------
See Notes to Financial Statements.
17
<PAGE> 57

PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------

Statement of Operations
For the year ended February 29, 1996
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................. $ 6,507,359
Dividends............................................. 5,155,980
------------
11,663,339
EXPENSES:
Advisory fees......................................... $ 992,349
Administration fees................................... 441,044
Shareholder service fees.............................. 551,305
Transfer agent fees and expenses...................... 483,034
Custodian fees and expenses........................... 85,324
Audit fees............................................ 34,344
Reports to shareholders............................... 73,078
Legal fees............................................ 50,936
Directors' fees....................................... 10,810
Insurance expense..................................... 8,865
Membership fees....................................... 5,420
Registration fees..................................... 44,473
Other expenses........................................ 6,710
----------
2,787,692
Less: Expenses paid by third parties.................... (69,758) 2,717,934
---------- ------------
Net Investment Income................................... 8,945,405
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gains on securities transactions......... 2,680,964
Net change in unrealized appreciation of
investments......................................... 38,907,177
------------
Net Gain on Investments................................. 41,588,141
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................................... $ 50,533,546
============
</TABLE>

- ---------------
See Notes to Financial Statements.
18
<PAGE> 58

PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------

Statements of Changes in Net Assets
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income................................ $ 8,945,405 $ 9,282,020
Net realized gains (losses) on securities
transactions....................................... 2,680,964 (6,025,293)
Net change in unrealized appreciation (depreciation)
of investments..................................... 38,907,177 (15,119,567)
------------ ------------
Net increase (decrease) in net assets resulting from
operations......................................... 50,533,546 (11,862,840)
------------ ------------
Dividends and Distributions:
Dividends to shareholders from net investment
income............................................. (10,020,414) (7,906,479)
Distributions to shareholders from net realized
gains.............................................. -- (5,349,179)
------------ ------------
Total dividends and distributions...................... (10,020,414) (13,255,658)
------------ ------------
Portfolio Share Transactions:
Net proceeds from shares subscribed.................. 264,083,620 74,282,303
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions........ 9,525,718 12,786,217
Cost of shares redeemed.............................. (265,627,625) (55,189,971)
------------ ------------
Net increase in net assets from Portfolio share
transactions....................................... 7,981,713 31,878,549
------------ ------------
Total Increase......................................... 48,494,845 6,760,051
NET ASSETS:
Beginning of year.................................... 198,250,954 191,490,903
------------ ------------
End of year (including undistributed net income of
$1,389,768 and $2,464,777)......................... $246,745,799 $198,250,954
============ ============
</TABLE>

- ---------------
See Notes to Financial Statements.
19
<PAGE> 59

PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------

Notes to Financial Statements
- --------------------------------------------------------------------------------

NOTE 1 -- GENERAL

Pacific Horizon Funds, Inc. (the "Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At February 29, 1996, the Fund
operated as a series company comprising fifteen portfolios. The accompanying
financial statements and notes are those of the Pacific Horizon Capital Income
Fund (the "Portfolio") only. The Portfolio seeks to provide investors with a
total investment return, comprised of current income and capital appreciation,
consistent with prudent investment risk. The Portfolio does so by investing in a
diversified portfolio consisting principally of convertible bonds and
convertible preferred stocks of domestic issuers.

Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Fund's investment
adviser. Concord Holding Corporation ("Concord") serves as the Fund's
administrator and Concord Financial Group, Inc. (the "Distributor"), a wholly
owned subsidiary of Concord, serves as the distributor of the Fund's shares.
Effective March 29, 1995, Concord became a wholly owned subsidiary of The BISYS
Group, Inc. ("BISYS").

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.

A) PORTFOLIO VALUATIONS:

Debt securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value. The amortized cost method
involves valuing a security at its cost on the date of purchase or, in the case
of securities purchased with more than 60 days to maturity, at their market
value each day until the 61st day prior to maturity, and thereafter assuming a
constant amortization to maturity of the difference between principal amount due
at maturity and such valuation.

20
<PAGE> 60

B) SECURITIES TRANSACTIONS AND
INVESTMENT INCOME:

Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income, including amortization of premiums and accretion of
discounts, is accrued daily. Dividend income is recognized on the ex-dividend
date.

C) DIVIDENDS AND DISTRIBUTIONS:

The Portfolio's net investment income is declared as a dividend, quarterly,
to shareholders of record at the close of business day on record date. Net
realized gains on portfolio securities, if any, will be distributed at least
annually. However, to the extent that net realized gains of the Portfolio can be
offset by capital loss carryovers of the Portfolio, such gains will not be
distributed. Dividends and distributions are recorded on the ex-dividend date.

The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
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
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.

D) FEDERAL INCOME TAXES:

It is the policy of the Portfolio to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.

At February 29, 1996, the portfolio had capital loss carryovers of
approximately $2,300,000 and $600,000, respectively, which will expire in fiscal
2003 and 2004, respectively. To the extent provided by regulations in the Code,
these capital loss carryovers will be used to offset future net realized gains
on security transactions. As such, it is probable that the gains so offset will
not be distributed to shareholders. Capital losses incurred after October 31,
1995 and within the fiscal year are deemed to arise on the first business day of
the following fiscal year. The Portfolio incurred and elected to defer such
losses of approximately $500,000.

E) OTHER:

The Fund accounts separately for the assets, liabilities and operations of
each portfolio. Expenses directly attributable to the Portfolio are charged to
the Portfolio, while expenses which are attributable to more than one portfolio
of the Fund are allocated among the respective portfolios.

21
<PAGE> 61

The Portfolio maintains a cash balance with its custodian and receives a
reduction of its custody fees and expenses for the amount of interest earned on
such uninvested cash balances. For financial reporting purposes for the year
ended February 29, 1996, custodian fees and expenses and expenses paid by third
parties were increased by $69,758. There was no effect on net investment income.
The Portfolio could have invested such cash amounts in an income producing asset
if it had not agreed to a reduction of fees or expenses under the expense offset
arrangement with its custodian.

NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

The Portfolio has an Investment Advisory Agreement with Bank of America, an
Administration Agreement with Concord and a Distribution Agreement with the
Distributor. Pursuant to the terms of the Investment Advisory Agreement, Bank of
America is entitled to a fee from the Portfolio, which is accrued daily and
payable monthly, at an annual rate of 0.45% of the Portfolio's average net
assets. Pursuant to the terms of the Administration Agreement, Concord is
entitled to a fee which is accrued daily and payable monthly, at an annual rate
of 0.20% of the Portfolio's average net assets.

The Investment Advisory and Administration Agreements provide that if, in
any fiscal year, the operating expenses of the Portfolio (generally excluding
interest, taxes, brokerage commissions and extraordinary expenses) exceed the
most restrictive expense limitation of any state having jurisdiction over the
Portfolio, then Bank of America and Concord will reimburse the Portfolio for any
such excess expenses. At February 29, 1996, the most restrictive expense
limitation is believed to limit expenses to 2.5% of the first $30 million of the
Portfolio's average daily net assets, plus 2.0% of the next $70 million of such
assets, plus 1.5% of such assets in excess of $100 million. These agreements
provide that such reimbursements will be estimated and paid on a monthly basis.
No reimbursement was required for the year ended February 29, 1996.

For the year ended February 29, 1996, the Distributor advised the Portfolio
that it retained $202,102 from commissions earned on sales of the Portfolio's
shares. For the same period, Bank of America and its affiliates advised the
Portfolio that they retained $1,493,113 from commissions earned on sales of the
Portfolio's shares.

The Portfolio has a Shareholder Services Plan (the "Plan") under which the
Portfolio pays for shareholder servicing expenses related to shares of the
Portfolio. Under the Plan, payments by the Portfolio for shareholder servicing
expenses may not exceed 0.25% (annualized) of the Portfolio's average daily net
assets. For the year ended February 29, 1996, the Portfolio incurred charges of
$551,305 pursuant to the Plan. The Portfolio was advised that of this amount,
the Distributor retained $64,707 and affiliates of Bank of America retained
$483,153. The Plan provides that if, in any month, the fees paid to the
Distributor are less than the costs incurred by the Distributor, the excess
costs will be included in future computa-

22
<PAGE> 62

tions of the fee, provided that any excess cost will not be carried forward
beyond the end of the fiscal year in which such excess costs were incurred.

Effective December 11, 1995, BISYS Fund Services, Inc., also a wholly owned
subsidiary of BISYS, serves the Fund as transfer agent and dividend disbursing
agent. In this capacity, BISYS Fund Services, Inc. earned $109,656 for the
period from December 11, 1995 through February 29, 1996. Prior to December 11,
1995, an unrelated party provided these services.

For the year ended February 29, 1996, the Portfolio incurred legal charges
totaling $50,936 which were earned by a law firm, a partner which serves as
Secretary of the Fund. Certain officers of the Fund are "affiliated persons" (as
defined in the Act) of BISYS.

NOTE 4 -- DIRECTORS' COMPENSATION

Each Director of the Fund is entitled to an annual retainer of $25,000 plus
$1,000 for each day the director participates in all or part of a Board or
Committee meeting, and the Chairman of each Committee receives an annual
retainer of $1,000 for services as Chairman of the Committee. In addition, the
Fund's President is entitled to an annual salary of $20,000 for services as
President. The former President and Chairman of the Fund receives an additional
$40,000 per year through February 28, 1997 in consideration for his years of
service. Total charges for directors' fees incurred for the year ended February
29, 1996 by the Portfolio were $10,810.

The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. A Director who dies or
resigns after nine years of service as a director will be entitled to receive
ten annual payments equal to the greater of: (i) 100% of the annual Director's
retainer that was payable during the year of that Director's death or
resignation, or (ii) 100% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. In addition, the amount
payable each year to a Director who dies or resigns shall be increased by $1,000
for each year of service that the Director served as Chairman of the Board. Each
Director may receive any benefits payable under the Retirement Plan, at his or
her election, either in one lump sum payment or ten annual installments. A
Director's years of service for the purpose of calculating the payments
described above shall be based upon service as a Director or Chairman after
February 28, 1994. Aggregate costs to the Portfolio pursuant to the Retirement
Plan amounted to $1,821 for the year ended February 29, 1996.

23
<PAGE> 63

NOTE 5 -- PURCHASES AND SALES OF SECURITIES

For the year ended February 29, 1996, the cost of purchases and the proceeds
from sales of Portfolio securities (excluding short-term investments) amounted
to $143,533,203 and $124,630,058, respectively.

NOTE 6 -- CAPITAL SHARE TRANSACTIONS

At February 29, 1996, there were 200 billion shares of the Fund's $0.001 par
value capital stock authorized, of which 250 million shares were classified as
Class F Common Stock (Capital Income Fund).

Transactions in shares of the Portfolio are summarized below (000 omitted):

<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Shares sold.......... 18,026 5,120
Shares issued in
reinvestment of
distributions....... 639 920
Shares redeemed...... (18,167) (3,927)
------ ------
Net increase........ 498 2,113
====== ======
</TABLE>

NOTE 7 -- CONCENTRATION OF
CREDIT RISK

The Portfolio invests a substantial portion of its assets in a diversified
portfolio of convertible debt obligations. The Portfolio's investments at
February 29, 1996 are presented by asset class and sub-classified by industry,
in the Portfolio of Investments. The issuers' abilities to meet their
obligations may be affected by economic or regional developments in those
industries or in individual geographic areas, states or regions.

24
<PAGE> 64

PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------

Financial Highlights+
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
----------------------
FEBRUARY FEBRUARY
29, 28,
1996 1995
-------- --------
<S> <C> <C>
Net asset value per share, beginning
of year............................ $ 13.65 $ 15.42
-------- --------
Income from Investment Operations:
Net investment income.............. 0.62 0.57
Net realized and unrealized gains
(losses) on securities........... 2.84 (1.43)
-------- --------
Total income (loss) from
investment operations.......... 3.46 (0.86)
-------- --------
Less Dividends and Distributions:
Dividends from net investment
income........................... (0.69 ) (0.54)
Distributions from net realized
gains............................ -- (0.37)
-------- --------
Total dividends and distributions... (0.69 ) (0.91)
-------- --------
Net change in net asset value per
share.............................. 2.77 (1.77)
-------- --------
Net asset value per share,
end of year........................ $ 16.42 $ 13.65
======== ========
Total return (excludes sales
charge)............................ 25.96% (5.61)%
Ratios/Supplemental Data:
Net assets, end of year (000)...... $246,746 $198,251
Ratio of expenses to average net
assets (with fee waivers and/or
reimbursements).................. 1.23% 0.97%
Ratio of net investment income to
average net assets (with fee
waivers and/or reimbursements)... 4.05% 4.48%
Ratio of expenses to average net
assets (without fee waivers
and/or reimbursements)*.......... 1.26%** 1.14%
Ratio of net investment income
(loss) to average net assets
(without fee waivers and/or
reimbursements)*................. (a ) 4.31%
Portfolio turnover rate............. 57% 94%

FEBRUARY FEBRUARY FEBRUARY
28, 28, 29,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net asset value per share, beginning
of year............................ $ 13.32 $ 12.01 $ 10.23
-------- -------- --------
Income from Investment Operations:
Net investment income.............. 0.50 0.56 0.53
Net realized and unrealized gains
(losses) on securities........... 2.36 1.79 2.06
-------- -------- --------
Total income (loss) from
investment operations.......... 2.86 2.35 2.59
-------- -------- --------
Less Dividends and Distributions:
Dividends from net investment
income........................... (0.48 ) (0.60 ) (0.55)
Distributions from net realized
gains............................ (0.28 ) (0.44 ) (0.26)
-------- -------- --------
Total dividends and distributions... (0.76 ) (1.04 ) (0.81)
-------- -------- --------
Net change in net asset value per
share.............................. 2.10 1.31 1.78
-------- -------- --------
Net asset value per share,
end of year........................ $ 15.42 $ 13.32 $ 12.01
======== ======== ========
Total return (excludes sales
charge)............................ 21.85% 20.62% 26.21 %
Ratios/Supplemental Data:
Net assets, end of year (000)...... $191,491 $19,613 $ 6,032
Ratio of expenses to average net
assets (with fee waivers and/or
reimbursements).................. 0.46% 0.07% 0.00 %
Ratio of net investment income to
average net assets (with fee
waivers and/or reimbursements)... 4.19% 5.00% 5.63 %
Ratio of expenses to average net
assets (without fee waivers
and/or reimbursements)*.......... 1.20% 3.34% 6.23 %
Ratio of net investment income
(loss) to average net assets
(without fee waivers and/or
reimbursements)*................. 3.45% 1.73% (0.60)%
Portfolio turnover rate............. 103% 216% 278 %
</TABLE>

- ---------------

(a) There were no fee waivers or expense reimbursements during the period.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** During the year ended February 29, 1996 the Portfolio received credits from
its custodian for interest earned on uninvested cash balances which were
used to offset custodian fees and expenses. If such credits had not
occurred, the expense ratio would have been as indicated. The ratio of net
investment income was not affected.
+ Security Pacific National Bank served as Investment Adviser through April 21,
1992. Bank of America National Trust and Savings Association served as
Investment Adviser commencing April 22, 1992.

See Notes to Financial Statements.
25
<PAGE> 65

PACIFIC HORIZON CAPITAL INCOME FUND
- --------------------------------------------------------------------------------

Report of Independent Accountants
- --------------------------------------------------------------------------------

To the Board of Directors
and Shareholders of
Pacific Horizon Funds, Inc.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Pacific Horizon Capital Income
Fund (one of the portfolios constituting Pacific Horizon Funds, Inc., hereafter
referred to as the "Funds") at February 29, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
February 29, 1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

1177 Avenue of the Americas
New York, New York
April 22, 1996
- --------------------------------------------------------------------------------
TAX STATUS OF DIVIDENDS (UNAUDITED)

--------------------------------------------
Pacific Horizon Funds, Inc. -- Capital Income Fund has determined that all
dividends paid during the year ended February 29, 1996 were paid from net
investment income and are subject to federal income tax.
- --------------------------------------------------------------------------------

See Notes to Financial Statements.
26
<PAGE> 66

For more information, complete the following form and mail it to:

Pacific Horizon Funds
1230 Columbia Street, Suite 500
San Diego, CA 92101

................................................................................
First Name Last Name

................................................................................
Street Address

................................................................................
City State Zip Code

................................................................................
Area Code and Telephone Number

PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
/ / A broker assisted me with the purchase of my Pacific Horizon Fund.

...............................................................................
Name of Broker

...............................................................................
Name of Brokerage Firm

/ / I purchased my Pacific Horizon Fund without the assistance of a broker.

PACIFIC HORIZON FUNDS

<TABLE>
<S> <C>
/ / International Equity Fund / / Corporate Bond Fund
/ / Aggressive Growth Fund / / Flexible Bond Fund
/ / Blue Chip Fund / / U.S. Government Securities Fund
/ / Capital Income Fund / / National Municipal Bond Fund
/ / Asset Allocation Fund / / California Tax-Exempt Bond Fund
Money Market Funds
/ / Prime Fund / / Tax-Exempt Money Fund
/ / Treasury Fund / / California Tax-Exempt Money Market Fund
/ / Government Fund
/ / Treasury Only Fund
</TABLE>

Additional Comments:

- NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 67

[Pacific Horizon Funds Logo]

Concord Financial Group, Inc., Distributor

COPCAPN96A
<PAGE> 68
PACIFIC HORIZON INCOME FUNDS
ANNUAL REPORT
February 29, 1996

Corporate Bond Fund

Investing For All
The Times Of Your Life

NOT FDIC INSURED

PACIFIC HORIZON INCOME FUNDS

<PAGE> 69