<PAGE> 1
As filed with the Securities and Exchange Commission on March 1, 1996
Registration Nos. 2-81110/811-4293
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ]
Post-Effective Amendment No. 46 [ x ]
REGISTRATION STATEMENT UNDER THE [ x ]
INVESTMENT COMPANY ACT OF 1940 [ x ]
Amendment No. 48
- -------------------------------------------------------------------------------
PACIFIC HORIZON FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, OH 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (800) 332-3863
W. Bruce McConnel, III
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE> 2
Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940, as amended. The Registrant has filed its Rule 24f-2 Notice relating to
such shares for Registrant's most recent fiscal year on April 28, 1995.
================================================================================
<PAGE> 3
THIS POST-EFFECTIVE AMENDMENT IS BEING FILED SOLELY WITH RESPECT TO THE
PRIME FUND AND THE TREASURY FUND. ACCORDINGLY, THE PROSPECTUSES AND
STATEMENTS OF ADDITIONAL INFORMATION FOR THE OTHER PACIFIC HORIZON FUNDS ARE
NOT INCLUDED IN THIS FILING.
<PAGE> 4
PACIFIC HORIZON FUNDS, INC.
S Shares:
Prime Fund
and
Treasury Fund
----------
Form N-1A Item Prospectus Caption
- -------------- ------------------
Part A
- ------
1. Cover Page.......................... Cover Page
2. Synopsis............................ Summary; Expense Information
3. Condensed Financial Information..... Financial Highlights;
Performance Calculations
4. General Description of Registrant... Description of Shares; Cover
Page; Investment Objectives
and Policies
5. Management of the Fund.............. Management of the Funds;
Description of Shares
5A. Management's Discussion of
Fund Performance.................. *
6. Capital Stock and Other
Securities........................ Description of Shares;
Dividends, Distributions and
Taxes
7. Purchase of Securities Being
Offered............................ Purchases of Shares;
Management of the Funds;
Additional Shareholder
Services
8. Redemption or Repurchase............ Redemption of Shares;
Management of the Funds;
Additional Shareholder
Services
9. Pending Legal Proceedings........... *
- --------------
* Item inapplicable or answer negative.
<PAGE> 5
PROSPECTUS
___________, 1996
PRIME FUND
TREASURY FUND
(Investment Portfolios offered by Pacific Horizon Funds, Inc.)
________________________________________________________________________________
This Prospectus applies to the S Shares of two diversified investment
portfolios offered by Pacific Horizon Funds, Inc. (the "Company")--the Prime
Fund and Treasury Fund (the "Funds"). The Company is registered under the
Investment Company Act of 1940 as an open-end management investment company.
The Funds are designed to provide investors with daily liquidity.
The investment objectives of the PRIME FUND and the TREASURY FUND are to seek
high current income and stability of principal. The PRIME FUND seeks to
achieve this objective by investing substantially all of its assets in a
diversified portfolio of U.S. dollar-denominated "money market" instruments
such as bank certificates of deposit and bankers' acceptances, commercial paper
and repurchase agreements, in addition to obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. The TREASURY FUND
seeks to achieve this objective by investing solely in direct obligations
issued by the U.S. Treasury and repurchase agreements relating to such Treasury
obligations.
Currently, Class S Shares are available only to customers who purchase such
shares through a sweep account ("Sweep Account") offered by Bank of America
National Trust and Savings Association, N.A., any of its banking affiliates
("Bank of America") and certain other broker-dealers and financial service
organizations ("Service Organizations"). A Sweep Account combines a
non-interest bearing deposit account (the "Transaction Account") with a daily
sweep of balances to or from the Funds' Class S Shares. Bank of America or
Service Organizations, as applicable, are responsible for providing persons
investing in Class S Shares through a Sweep Account with a Sweep Account
agreement and disclosure statement (collectively, the "Disclosure Documents")
describing the various features and operations of the Sweep Account. The
Disclosure Documents should be reviewed in conjunction with this Prospectus.
Portfolio securities held by both Funds have remaining maturities of thirteen
months or less from the date of purchase by the Fund. Portfolio securities
which have certain put or demand features exercisable by a Fund within thirteen
months (as well as certain U.S. Government obligations with floating or
variable interest rates) and securities held as collateral for
<PAGE> 6
repurchase agreements may have longer maturities. Shares of both Funds may be
purchased or redeemed at any time without charge or penalty imposed by the
Funds.
Bank of America, San Francisco, California, acts as investment adviser to the
Company. Concord Financial Group, Inc. sponsors the Funds and acts as their
distributor and Concord Holding Corporation acts as their administrator,
neither of which is affiliated with Bank of America.
This Prospectus briefly sets forth certain information about the Funds
described herein that you should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated
__________, 1996 (as it may, from time to time be revised), is incorporated by
reference herein and discusses certain subjects in this Prospectus further as
well as other matters which may be of interest to investors. A free copy of
the Statement of Additional Information may be obtained by calling
800-332-3863.
________________________________________________________________________________
Shares of the Funds are not bank deposits or obligations of, or guaranteed or
endorsed by, Bank of America or any of its affiliates and are not federally
insured by, guaranteed by, or obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other governmental agency. Both Funds seek to maintain a net
asset value per share at $1.00 for purposes of purchases and redemptions,
although there can be no assurance that they will be able to do so on a
continuous basis. Investment in the Funds involves investment risk, including
the possible loss of principal amount invested.
________________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
________________________________________________________________________________
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus and in the
Statement of Additional Information, in connection with the offering of the
Funds' shares and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or its distributor.
This prospectus does not constitute an offer by the Funds or by the distributor
to sell, or a solicitation of any offer to buy, any of the securities offered
hereby in any jurisdiction to any
<PAGE> 7
person to whom it is unlawful for the Funds or the distributor to make such
offer in such jurisdiction.
________________________________________________________________________________
<PAGE> 8
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Expense Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Purchases of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Additional Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
- ------------------------------------------------------------------------------
DISTRIBUTOR: INVESTMENT ADVISER:
Concord Financial Group, Inc Bank of America National Trust and
3435 Stelzer Road Savings Association
Columbus, OH 43219 555 California Street
San Francisco, CA 94104
- ------------------------------------------------------------------------------
<PAGE> 9
EXPENSE SUMMARY
The following table sets forth certain information regarding the shareholder
transaction expenses imposed by the Prime Fund and Treasury Fund and the annual
operating expenses expected to be incurred by the Prime Fund and Treasury Fund
for the next twelve months with respect to its S Shares. Actual expenses may
vary. Hypothetical examples based on the table are also shown.
<TABLE>
<CAPTION>
PRIME TREASURY
FUND FUND
---- ----
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) . . . . . . . . . . . . . . None None
Sales Load Imposed on Reinvested Dividends . . . None None
Sales Load Imposed on Redemptions (1) . . . . . . None None
Redemption Fees . . . . . . . . . . . . . . . . . None None
Exchange Fees . . . . . . . . . . . . . . . . . . None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C> <C> <C> <C>
Management Fees . . . . . . . . . . . . . . . . 0.10% 0.10%
Rule 12b-1 and
Shareholder Service Fees (2) . . . . . . . . 1.00% 1.00%
All Other Expenses . . . . . . . . . . . . . . 0.14% 0.14%
Administration Fees . . . . . . . . . . . . . . 0.10% 0.10%
Other Expenses . . . . . . . . . . . . . . . . 0.04% 0.04%
Total Fund Operating Expenses (3) . . . . . . . . 1.24% 1.24%
</TABLE>
_______________________________
[FN]
(1) The Company reserves the right to impose a charge for wiring
redemption proceeds.
(2) Includes distribution fees payable at the annual rate of 0.75% of the
average daily net assets of the respective Fund's Class S Shares and
shareholder service fees payable at the annual rate of 0.25% of the
respective Fund's Class S Shares. Because of the Distribution Plan
Payment paid by the Fund as shown in the above table, long-term Class
S shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association
of Securities, Dealers, Inc.
(3) Additional fees charged by Bank of America or Service Organizations
related to the Sweep Account are not included in this table. For
additional information with respect to Sweep Account fees and charges,
including a description of the services available to Sweep Account
holders, you should refer to the Disclosure Documents.
________________________________________________________________________________
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and
(2) redemption at the end of each time period:
Prime Fund. . . . . . . . . . . . . . . . . . $13 $39
Treasury Fund . . . . . . . . . . . . . . . . $13 $39
</TABLE>
________________________________________________________________________________
-2-
<PAGE> 10
The foregoing Expense Summary and Example are intended to assist investors in S
Shares in understanding the various shareholder transaction and operating
expenses that investors bear either directly or indirectly. From time to time,
the investment adviser and administrator may prospectively waive a portion of
their respective fees and/or assume certain expenses of the Funds. For a
further description of both Funds' operating expenses, see "Management of the
Funds" in this Prospectus.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RETURN AND OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
-3-
<PAGE> 11
FINANCIAL HIGHLIGHTS
On March 30, 1984, the Company commenced its public sale of shares (Pacific
Horizon Shares) in each of the Prime Fund and Treasury Fund, which were
originally called "Money Market Portfolio" and "Government Money Market
Portfolio," respectively. On January 19, 1990, the Company began offering
Horizon Shares and Horizon Service Shares in the Prime and Treasury Funds. On
April __, 1996 the Company began offering X Shares in the Prime Fund. As of
the date of this prospectus, the Company began its public offering of Class S
Shares of the Prime and Treasury Fund. The shares of each class in a Fund
represent equal pro rata interests in such Fund, except that they bear
different expenses which reflect the difference in the range of services
provided to them. Class S Shares bear the expense of a distribution and
services plan ("Distribution and Services Plan") at an annual rate not to
exceed 1.00% of the average daily net asset value on such Fund's outstanding
Class S Shares. See "Description of Shares" below.
The tables below set forth certain information concerning the investment
results of Pacific Horizon Shares of the Prime Fund and Treasury Fund for the
periods indicated. The tables are presented for informational purposes only.
Actual investment results of the Class S Shares of the Prime and Treasury Funds
may be different. The information contained in the Financial Highlights
insofar as it pertains to each of the five fiscal years in the five year period
ended February 28, 1995 has been audited by Price Waterhouse LLP, independent
accountants for these two Funds, whose unqualified report on the financial
statements containing such information, is incorporated by reference in the
Statement of Additional Information, which may be obtained upon request. The
information contained in the Financial Highlights for each of the four years in
the period ended February 28, 1989 was audited by other independent accountants
whose report thereon dated April 20, 1989 expressed an unqualified opinion on
the statements containing such information. The Financial Highlights should be
read in conjunction with the financial statements and notes thereto and the
unqualified report of the independent accountants which are incorporated by
reference in the Statement of Additional Information. See "Description of
Shares" below for certain differences among the Pacific Horizon Shares, Horizon
Shares, Horizon Service Shares, Class S Shares and Class X Shares, including
differences relating to expenses.
-4-
<PAGE> 12
Selected Data for a Pacific Horizon Share Outstanding throughout Each of the
Periods Indicated:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Prime Fund Year Ended
---------------------
Six Months
Ended
- ----------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1995 1995+ 1994+ 1993+ 1992
-------- -------- -------- -------- --------
(Unaudited)
-----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income ................. 0.0279 0.0424 0.0287 0.0340 0.0558
Net realized gain (loss) on
securities ........................... 0.0002 (0.0227) (0.0016) 0.0000 0.0005
-------- -------- -------- -------- --------
Total income from investment
operations ............................ 0.0281 0.0197 0.0271 0.0340 0.0563
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income .. (0.0279) (0.0422) (0.0287) (0.0341) (0.0557)
Increase due to voluntary capital
contribution from investment adviser .. (0.0000) 0.0233 0.0000 0.0000 0.0000
-------- -------- -------- -------- --------
Net change in net asset value
per share ............................. 0.0002 0.0008 0.0016 (0.0001) 0.0006
-------- -------- -------- -------- --------
Net asset value per share,
end of year ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ======== ======== ========
Total return ............................ 2.82% 4.30%** 2.91% 3.45% 5.72%
----
Ratio/Supplemental Data:
Net assets, end of year (millions) ... $ 1,726 $ 1,129 $ 1,216 $ 992 $ 1,413
Ratio of expenses to average net -------
assets .......................... 0.56%*** 0.51%* 0.52%* 0.55% 0.56%
Ratio of net investment income to ----
average net assets .............. 5.53%*** 4.19%* 2.86%* 3.42% 5.51%
- --------------------- ---- ----
Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- --------
Net asset value, beginning of year ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income ................. 0.0762 0.0855 0.0738 0.0643 0.0606 0.0768
Net realized gain (loss) on
securities ........................... (0.0001) 0.0001 (0.0002) 0.0003 (0.0001) (0.0003)
Total income from investment
operations ............................ 0.0761 0.0856 0.0736 0.0646 0.0605 0.0765
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income .. (0.0762) (0.0855) (0.0738) (0.0643) (0.0606) (0.0768)
Increase due to voluntary capital
contribution from investment adviser .. 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
-------- -------- -------- -------- -------- --------
Net change in net asset value
per share ............................. (0.0001) 0.0001 (0.0002) 0.0003 (0.0001) (0.0003)
-------- -------- -------- -------- -------- --------
Net asset value per share,
end of year ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return ............................ 7.89% 8.90% 7.63%++ 6.62%++ 6.23%++ 7.96%++
Ratio/Supplemental Data:
Net assets, end of year (millions) .... $ 1,086 $ 890 $ 921 $ 957 $ 484 $ 464
Ratio of expenses to average net
assets ............................. 0.56% 0.63% 0.63% 0.58% 0.57% 0.57%
Ratio of net investment income to
average net assets ................. 7.61% 8.52% 7.38% 6.42% 6.02% 7.74%
- ---------------------
</TABLE>
[FN]
* Net of fee waivers and expense reimbursements 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 0.05% and
0.01% for the years ended February 28, 1995 and February 28, 1994,
respectively.
** Total return includes the effect of a voluntary capital contribution from
the investment adviser. Without this capital contribution, the total
return would have been lower.
*** Annualized.
+ 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.
++ Unaudited.
/\ Not Annualized.
-5-
<PAGE> 13
Selected Data for a Pacific Horizon Share Outstanding throughout Each of the
Periods Indicated:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Treasury Fund Year Ended
------------------------
Six Months
Ended
- ----------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1995 1995 1994 1993 1992
-------- -------- -------- -------- --------
(Unaudited)
-----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income ................. 0.0273 0.0405 0.0262 0.0309 0.0512
Net realized gain (loss) on
securities ........................... 0.0000 0.0001 (0.0002) 0.0000 0.0002
-------- -------- -------- -------- --------
Total income from investment
operations ............................ 0.0273 0.0406 0.0260 0.0309 0.0514
--------
Less Dividends and Distributions:
Dividends from net investment income .. (0.0273) (0.0405) (0.0262) (0.0311) (0.0513)
-------- -------- -------- -------- --------
Net change in net asset value
per share ............................. 0.0000 0.0001 (0.0002) (0.0002) 0.0001
-------- -------- -------- -------- --------
Net asset value per share,
end of year ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ======== ======== ========
Total return ............................ 2.76% /\ 4.13%** 2.65% 3.15% 5.25%
----
Ratio/Supplemental Data:
Net assets, end of year (millions) ...... $ 1,182 $ 1,132 $ 1,577 $ 1,746 $ 2,300
Ratio of expenses to average net -------
assets ................................ 0.56%+++ 0.55% 0.55%* 0.56% 0.56%
Ratio of net investment income to ----
average net assets .................... 4.72%+++ 3.99% 2.62%* 3.11% 5.07%
- --------------------- ----
Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- --------
Net asset value, beginning of year ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income ................. 0.0731 0.0833 0.0712 0.0587 0.0604 0.0745
Net realized gain (loss) on
securities ........................... 0.0006 0.0004 (0.0005) (0.0003) (0.0000) (0.0008)
-------- -------- -------- -------- -------- --------
Total income from investment
operations ............................ 0.0737 0.0837 0.0707 0.0548 0.0604 0.0737
Less Dividends and Distributions:
Dividends from net investment income .. (0.0733) (0.0830) (0.0709) (0.0857) (0.0604) (0.0745)
Net change in net asset value
per share ............................. 0.0004 0.0007 (0.0002) 0.0003 0.0000 (0.0008)
-------- -------- -------- -------- -------- --------
Net asset value per share,
end of year ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return ............................ 7.58% 8.62% 7.33%++ 6.08%++ 6.21%++ 7.91%++
Ratio/Supplemental Data:
Net assets, end of year (millions) ...... $ 1,663 $ 1,144 $ 1,048 $ 947 $ 1,317 $ 835
Ratio of expenses to average net
assets ................................ 0.55% 0.55% 0.54% 0.56% 0.55% 0.56%
Ratio of net investment income to
average net assets .................... 7.29% 8.33% 7.14% 5.90% 5.99% 7.41%
- ---------------------
</TABLE>
[FN]
+ 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.
++ Unaudited.
+++ Annualized.
/\ Not Annualized.
-6-
<PAGE> 14
INVESTMENT OBJECTIVES AND POLICIES
This section describes the investment objective and policies of each Fund.
Assets of the Funds will be invested in dollar-denominated debt securities with
remaining maturities of thirteen months or less as defined by the Securities
and Exchange Commission, and the dollar-weighted average portfolio maturity of
each Fund will not exceed 90 days. All securities acquired by the Funds will
be determined by the investment adviser, under guidelines established by the
Company's Board of Directors, to present minimal credit risks and will be U.S.
Government securities or other "First Tier Securities" (as defined by the
Securities and Exchange Commission) of the types described below. First Tier
Securities consist of instruments that are either rated at the time of purchase
in the top rating category by one (if rated by only one) or more unaffiliated
nationally recognized statistical rating organizations ("NRSROs") including
Standard and Poor's Ratings Group, Division of McGraw Hill ("Standard &
Poor's"), Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Co.
("Duff & Phelps") or Fitch Investors Service, Inc. ("Fitch") or issued by
issuers with such ratings. The Appendix to the Statement of Additional
Information includes a description of applicable NRSRO ratings. Unrated
instruments (including instruments with long-term but no short-term ratings)
purchased by a Fund will be of comparable quality as determined by the Funds'
investment adviser pursuant to guidelines approved by the Board of Directors.
PRIME FUND. The Prime Fund's investment objective is to seek high current
income and stability of principal. The Fund invests substantially all of its
assets in a diversified portfolio of U.S. dollar-denominated money market
instruments. Portfolio securities held by the Fund have remaining maturities
of thirteen months or less from the date of purchase by the Fund. (Portfolio
securities which are subject to repurchase agreements or have certain put or
demand features exercisable by the Fund within thirteen months, as well as
certain U.S. Government obligations with floating or variable interest rates,
may have longer maturities.)
In pursuing its investment objective, the Prime Fund invests in a broad range
of government, bank and commercial obligations that may be available in the
money markets. The money market instruments in which the Fund invests will
generally have neither as much risk nor as high a return as longer-term or
lower-rated instruments. In accordance with current regulations of the
Securities and Exchange Commission, the Fund intends to limit its investments
in the securities of any single issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) to not
more than 5% of the Fund's
-7-
<PAGE> 15
total assets at the time of purchase, provided that the Fund may invest up to
25% of its total assets in the securities of any one issuer for a period of up
to three business days.
The Prime Fund may purchase bank obligations such as certificates of deposit
and bankers' acceptances issued or supported by the credit of domestic banks,
foreign branches of domestic banks ("Euro CDs") or domestic branches of foreign
banks ("Yankee CDs" and "Yankee BAs"). Such banks must have total assets at
the time of purchase in excess of $2.5 billion. No more than 25% of the Prime
Fund's total assets at the time of purchase may be invested in Yankee CDs and
BAs and Euro CDs. The Fund may also make interest-bearing savings deposits in
such commercial banks in amounts not in excess of 5% of the Fund's total
assets.
The Prime Fund may be subject to additional investment risks because the Fund
may hold securities issued by foreign branches of domestic banks and domestic
branches of foreign banks (and, as described below, commercial paper issued by
foreign issuers). These risks are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. Such risks include future political and economic developments, the
possible imposition of withholding taxes on interest income payable on the
securities by the particular country in which the branch is located, the
possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on these securities. In addition, foreign branches of domestic
banks and domestic branches of foreign banks are not necessarily subject to the
same regulatory requirements that apply to domestic branches of domestic banks
(such as reserve requirements, loan limitations, examinations, accounting,
auditing and recordkeeping requirements, and public availability of
information) and the Fund may experience difficulties in obtaining or enforcing
a judgment against the issuing bank.
The Prime Fund may purchase commercial paper, short-term notes and corporate
bonds that meet the Fund's maturity limitations. Commercial paper purchased by
the Fund may include instruments issued by foreign issuers, such as Canadian
Commercial Paper ("CCP"), which is U.S. dollar-denominated commercial paper
issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and Europaper, which is U.S. dollar-denominated commercial paper
of a foreign issuer.
The Prime Fund may also invest in commercial paper issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper
is restricted as to disposition under the Federal securities laws and generally
is sold to institutional investors such as the Fund that agree that
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they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors like the
Prime Fund through or with the assistance of the issuer or investment dealers
that make a market in Section 4(2) paper. Section 4(2) paper will not be
subject to the Fund's 10% limitation on illiquid securities set forth below
where the Board of Directors or Bank of America (pursuant to guidelines adopted
by the Board) determines that a liquid trading market exists.
TREASURY FUND. The Treasury Fund's investment objective is to seek high
current income and stability of principal. The Fund invests solely in
obligations issued by the U.S. Treasury and repurchase agreements relating to
such Treasury obligations. Portfolio securities which are subject to
repurchase agreements may have remaining maturities of longer than thirteen
months.
Examples of the types of U.S. Treasury obligations that may be held by the
Treasury Fund include U.S. Treasury bills and notes. Under normal market
conditions 100% of the total assets of the Fund will be invested in direct
obligations of the U.S. Treasury and repurchase agreements relating to such
Treasury obligations. Securities issued by the U.S. Government have
historically involved little risk of loss of principal if held to maturity and,
in general, the instruments held by the Fund will have neither as much risk nor
as high a return as longer term or non- U.S. Government obligations.
INVESTMENT POLICIES OF THE PRIME FUND
- -------------------------------------
GOVERNMENT OBLIGATIONS. The Prime Fund may purchase obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of
the U.S. Government, such as the Small Business Administration, are backed by
the full faith and credit of the United States. Others are backed by the right
of the issuer to borrow from the U.S. Treasury (such as obligations of the
Federal Home Loan Bank), by the discretionary authority of the U.S. Government
to purchase the agency's obligations (such as obligations of the Federal
National Mortgage Association), or only by the credit of the agency or
instrumentality issuing the obligation (such as the Student Loan Marketing
Association). Securities issued or guaranteed by the U.S. Government and its
agencies and instrumentalities have historically involved little risk of loss
of principal if held to maturity. However, no assurance can be given that the
U.S. Government would provide financial support to any agency or
instrumentality if it is not obligated to do so by law.
Certain securities issued or guaranteed by all governmental agencies may be
prepaid by the issuer without penalty. Thus,
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when prevailing interest rates decline, the value of these securities is not
likely to rise on a comparable basis with other debt securities that are not so
prepayable. The proceeds of prepayments and scheduled payments of principal of
these securities will be reinvested by a Fund at then-prevailing interest
rates, which may be lower than the rate of interest on the securities on which
these payments were received.
COMMON INVESTMENT POLICIES
- --------------------------
"STRIPPED" SECURITIES. Each Fund may invest in "stripped" securities,
which are U.S. Treasury bonds and notes the unmatured interest coupons of which
have been separated from the underlying obligation. Stripped securities are
zero coupon obligations that are normally issued at a discount to their "face
value," and may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors. The Treasury Fund may only invest in stripped securities issued by
the U.S. Treasury and recorded in the Federal Reserve book-entry record-keeping
system.
REPURCHASE AGREEMENTS. Each Fund may agree to purchase securities
from financial institutions such as banks and broker-dealers, as are deemed
creditworthy by the Company's investment adviser under guidelines approved by
the Board of Directors, subject to the seller's agreement to repurchase them at
an agreed upon time and price ("repurchase agreements"). Although the
securities subject to a repurchase agreement may bear maturities exceeding
thirteen months, each Fund intends only to enter into repurchase agreements
having maturities not exceeding 60 days. Securities subject to repurchase
agreements are held either by the Company's custodian or sub-custodian, or in
the Federal Reserve/Treasury Book-Entry System. The seller under a repurchase
agreement will be required to maintain the value of the securities subject to
the agreement at not less than the repurchase price, and such value will be
continuously monitored by the investment adviser on an ongoing basis. Default
by the seller would, however, expose a Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. Repurchase agreements are considered to be loans under the
Investment Company Act of 1940.
REVERSE REPURCHASE AGREEMENTS. Each Fund may borrow monies for
temporary purposes by entering into reverse repurchase agreements in accordance
with the investment restrictions described below. Pursuant to such agreements,
a Fund would sell portfolio securities to banks and other financial
institutions, and agree to repurchase them at an agreed upon date and price.
At the time a Fund enters into a reverse repurchase agreement, it will place in
a segregated custodian account liquid assets or high grade debt securities
having a value equal to or greater than the repurchase price, and the Company's
investment adviser
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will continuously monitor the account to insure that the value is maintained.
A Fund would only enter into reverse repurchase agreements to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions.
Reverse repurchase agreements involve the risk that the market value of the
portfolio securities sold by a Fund may decline below the price of the
securities such Fund is obligated to repurchase. Interest paid by a Fund in
connection with a reverse repurchase agreement will reduce the net investment
income of such Fund. Reverse repurchase agreements are considered to be
borrowings under the Investment Company Act of 1940.
VARIABLE AND FLOATING RATE INSTRUMENTS. Securities purchased by the
Funds may include variable and floating rate instruments, which may have a
stated maturity in excess of the Funds' maturity limitations but which will,
except for certain U.S. Government obligations, permit a Fund to demand payment
of the principal of the instrument at least once every thirteen months upon not
more than thirty days' notice. Variable and floating rate instruments may
include variable amount master demand notes that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. There may be no active secondary market with respect to a
particular variable or floating rate instrument. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to a Fund
will approximate their par value. Illiquid variable and floating rate
instruments (instruments which are not payable upon seven days notice and do
not have an active trading market) that are acquired by the Funds are subject
to a Fund's percentage limitations regarding securities that are illiquid or
not readily marketable. The Funds' investment adviser will continuously
monitor the creditworthiness of issuers of variable and floating rate
instruments in which the Funds invest, and their ability to repay principal and
interest.
Variable and floating rate instruments purchased by a Fund may include
participation certificates issued by trusts or financial institutions in
variable and floating rate obligations owned by such issuers or affiliated
organizations. A participation certificate gives a Fund a specified undivided
interest (up to 100%) in the underlying obligation and the right to demand
payment of the unpaid principal balance plus accrued interest on the
participation interest from the institution upon a specified number of days'
notice. If the credit of the obligor is of minimal credit risk, no credit
support from a bank or other financial institution will be necessary. In other
circumstances, the participation certificate will be backed by an irrevocable
letter of credit or guarantee of a bank, or will be insured by an insurer, that
the Funds' investment adviser has determined meets the quality standards for
the Fund involved. If an interest is backed by an irrevocable letter of credit
or guarantee of a bank or is insured as described above, a Fund will usually
have the
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<PAGE> 19
right to sell the interest back to the institution or draw on the letter of
credit or insurance policy on demand after a specified notice period, for all
or any part of the principal amount of the interest plus accrued interest.
Although a participation interest may be sold by a Fund, under normal
circumstances they will be held until maturity.
A Fund may also invest in obligations which provide for a variable or floating
interest rate which is determined through a periodic "auction process." From
time to time, holders of the obligations have the right to tender any such
obligations to a remarketing agent which then remarkets the obligations which
have been tendered and thereby determines a new interest rate for the following
period.
WHEN-ISSUED PURCHASES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS.
Each Fund may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" or "delayed settlement" basis.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield. When-issued and forward
commitment transactions, which involve a commitment by a Fund to purchase or
sell particular securities with payment and delivery taking place at a future
date (perhaps one or two months later), permit the Fund to lock in a price or
yield on a security it owns or intends to purchase or sell, regardless of
changes in interest rates. Delayed settlement describes a securities
transaction in a secondary market for which settlement will occur sometime in
the future. When-issued, forward commitment and delayed settlement
transactions involve the risk, however, that the yield or price obtained in a
transaction may be less favorable than the yield or price available in the
market when the securities delivery takes place. The Funds' forward
commitments, when-issued purchases and delayed settlements are not expected to
exceed 25% of the value of the total assets of a particular Fund absent unusual
market conditions. A Fund's liquidity and the ability of its investment
adviser to manage its portfolio may be adversely affected in the event a Fund's
forward commitments, commitments to purchase when-issued securities and delayed
settlements ever exceed 25% of the value of its total assets. Neither Fund
intends to engage in these transactions for speculative purposes but only in
furtherance of their investment objectives.
INVESTMENT LIMITATIONS. The investment objectives of each Fund are fundamental
policies that may not be changed without a vote of the holders of a majority of
the particular Fund's outstanding shares (as defined in the Investment Company
Act of 1940). A Fund's policies may be changed by the Company's Board of
Directors without the affirmative vote of the holders of a majority of such
Fund's outstanding shares, except that the investment limitations set forth
below may not be changed without
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<PAGE> 20
such a vote of shareholders. A description of certain other fundamental
investment limitations is contained in the Statement of Additional Information.
PRIME FUND. The Prime Fund may not:
1. Purchase any securities which would cause 25% or more of the Fund's
total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities or domestic bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by
instruments of domestic branches of U.S. banks or obligations of the
U.S. Government, its agencies or instrumentalities; (b) wholly-owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the
activities of the parents; and (c) the industry classification of
utilities will be determined according to their service. For example,
gas, gas transmission, electric and gas, electric and telephone will
each be considered a separate industry.
PRIME FUND AND TREASURY FUND. Neither the Prime Fund nor the Treasury
Fund may:
1. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements to meet
redemptions or for other temporary purposes in amounts up to 10% of
its total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amount
borrowed or 10% of its total assets at the time of such borrowing; or
purchase securities at any time after such borrowings (including
reverse repurchase agreements) have been entered into and before they
are repaid.
2. Purchase securities without available market quotations which cannot
be sold without registration or the filing of a notification under
federal or state securities laws, enter into repurchase agreements
providing for settlement more than seven days after notice, or
purchase any other securities deemed illiquid by the Directors if, as
a result, such securities and repurchase agreements would exceed 10%
of the Fund's total assets.
The Prime Fund intends that, except as stated above under "Common Investment
Policies--Variable and Floating Rate Instruments," variable amount master
demand notes with maturities of nine
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<PAGE> 21
months or less, as well as investments in securities that are not registered
under the Securities Act of 1933 but that may be purchased by institutional
buyers under Rule 144A and for which a liquid trading market exists as
determined by the Board of Directors or Bank of America (pursuant to guidelines
adopted by the Board) will not be subject to the 10% limitation on illiquid
securities set forth in Investment Limitation No. 2 above.
INVESTMENT DECISIONS. Investment decisions for each Fund are made
independently from those for other portfolios of the Company and other
investment companies and common trust funds managed by Bank of America and its
affiliated entities. Such other investment companies and common trust funds
may also invest in the same securities as a Fund. When a purchase or sale of
the same security is made at substantially the same time on behalf of a Fund
and another portfolio, investment company or common trust fund, available
investments or opportunities for sales will be allocated in a manner which Bank
of America believes to be equitable. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained or sold by a Fund.
In addition, in allocating purchase and sale orders for portfolio securities
(involving the payment of brokerage commissions or dealer concessions), Bank of
America may take into account the sale of shares of a Fund by broker-dealers
and other financial institutions (including affiliates of Bank of America and
the Distributor), provided Bank of America believes that the quality of the
transaction and the amount of the commission are not less favorable than what
they would be with any other unaffiliated qualified firm.
MANAGEMENT OF THE FUNDS
BOARD OF DIRECTORS. The business of the Company is managed under the direction
of its Board of Directors. Information about the Directors and Officers of the
Company is included in the Statement of Additional Information.
INVESTMENT ADVISER. Bank of America serves as the Funds' investment adviser.
Bank of America, which has principal offices at 555 California Street, San
Francisco, California 94104, is a national banking association formed in 1904
which provides commercial banking and trust business through an extensive
system of branches across the western United States. Bank of America's
principal banking affiliates operate branches in ten U.S. states as well as
corporate banking, business credit and thrift offices in major U.S. cities and
branches, corporate offices and representative offices in 37 countries. Bank
of America is the successor by merger to Security Pacific National Bank
("Security
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<PAGE> 22
Pacific"), which previously served as investment adviser to the Company since
it commenced operations in 1984. Bank of America and its affiliates have over
$50 billion under management, including over $10 billion in mutual funds. Bank
of America is a subsidiary of BankAmerica Corporation, a registered bank
holding company.
As investment adviser Bank of America manages the investments of the Funds and
is responsible for all purchases and sales of the Funds' portfolio securities.
For its investment advisory services, Bank of America is entitled to receive a
fee accrued daily and payable monthly at the following annual rates: .10% of
the first $3 billion of each Fund's net assets, plus .09% of the next $2
billion of each Fund's net assets, plus .08% of each Fund's net assets over $5
billion. For the fiscal year ended February 28, 1995, the Prime Fund and
Treasury Fund paid Bank of America advisory fees at the effective annual rates
of .07% and .10% of such Fund's respective net assets, and Bank of America
waived advisory fees at the effective annual rate of .03% and .00% of such
Fund's respective net assets.
In addition, Bank of America or Service Organizations may receive fees charged
directly to its customers' accounts in connection with investments in Fund
shares.
ADMINISTRATOR. Concord Holding Corporation (the "Administrator") serves as the
Company's administrator and assists generally in supervising the Funds'
operations. The Administrator is a wholly-owned subsidiary of The BISYS Group,
Inc. Its offices are located at 3435 Stelzer Road, Columbus, OH 43219.
Under its Basic Administrative Services Agreement for the Funds, the
Administrator has agreed to provide facilities, equipment and personnel to
carry out administrative services that are for the benefit of all series of
shares in the Funds, including coordination of reports to shareholders and the
Securities and Exchange Commission; calculation of the net asset value of Fund
shares and dividends and capital gains distributions to shareholders; payment
of the costs of maintaining the Funds' offices; preparation of tax returns;
provision of internal legal and accounting compliance services; maintenance (or
oversight of the maintenance by others approved by the Board of Directors) of
the Funds' books and records; and the provision of various services for
shareholders who have made a minimum initial investment of at least $500,000,
including the provision of a facility to receive purchase and redemption orders
for the accounts of such shareholders.
For these administrative services the Administrator is entitled to receive an
administration fee computed daily and payable monthly at the following annual
rates: .10% of the first $7 billion of each Fund's net assets, plus .09% of
the next $3
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billion of each Fund's net assets, plus .08% of each Fund's net assets over $10
billion. For the fiscal year ended February 28, 1995, the Prime Fund and
Treasury Fund paid the Administrator administration fees at the effective
annual rates of .07% and .10% of such Fund's respective net assets, and the
Administrator waived administration fees at the effective annual rate of .03%
and .00% of such Fund's respective net assets.
Pursuant to the authority granted in its agreement with the Company, the
Administrator has entered into an agreement with The Bank of New York under
which the bank performs certain of the services listed above--e.g. calculating
the net asset value of Fund shares and dividends to shareholders and
maintaining the Funds' books and records. Both Funds bear all fees and
expenses charged by the bank for these services.
DISTRIBUTOR. Concord Financial Group, Inc. (the "Distributor") is the
principal underwriter and distributor of shares of the Funds. The Distributor
is a wholly-owned subsidiary of the Administrator organized to distribute
shares of mutual funds to institutional and retail investors. Its offices are
located at 3435 Stelzer Road, Columbus, OH 43219.
The Distributor makes a continuous offering of the Funds' shares and bears the
costs and expenses of printing and distributing to selected dealers and
prospective investors copies of any prospectuses, statements of additional
information and annual and interim reports of the Funds (after such items have
been prepared and set in type by the Funds) that are used in connection with
the offering of shares, and the costs and expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it
for use by selected dealers in connection with the offering of the Funds'
shares for sale to the public.
CUSTODIAN AND TRANSFER AGENT. The Bank of New York, located at 90 Washington
Street, New York, New York 10286, serves as custodian for the Funds and Bank of
America serves as the Prime and Treasury Funds' sub-custodian. BISYS Fund
Services, Inc., 3435 Stelzer Road, Columbus, OH 43219-3035 (the "Transfer
Agent"), serves as the Funds' transfer agent and dividend disbursing agent.
The Company has also entered into a Cash Management and Related Services
Agreement with The Bank of New York pursuant to which The Bank of New York
receives and disburses funds in connection with the purchase and redemption of
and the payment of dividends and other distributions with respect to the Funds'
shares. Other services are provided for in the Cash Management Agreement with
United Missouri Bank of Kansas City, N.A.
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<PAGE> 24
DISTRIBUTION AND SERVICES PLAN
- ------------------------------
Under the Distribution and Services Plan, each Fund pays the Distributor for
distribution expenses primarily intended to result in the sale of such Fund's
Class S shares and for shareholder servicing expenses. Such distribution
expenses include expenses incurred in connection with advertising and marketing
each Fund's Class S shares; payments to Service Organizations for assistance in
connection with the distribution of Class S shares; and expenses incurred in
connection with preparing, printing and distributing prospectuses for the Funds
(except those used for regulatory purposes or for distribution to existing
shareholders of the Funds) and in implementing and operating the Distribution
and Services Plan. Shareholder servicing expenses include expenses incurred in
connection with shareholder services provided by the Distributor and payments
to Service Organizations for the provision of support services with respect to
the beneficial owners of Class S shares, such as establishing and maintaining
accounts and records relating to their clients who invest in Class S shares,
assisting clients in processing exchange and redemption requests, developing,
maintaining and supporting systems necessary to support Sweep Accounts and in
changing dividend options and account descriptions and responding to client
inquiries concerning their investments.
Under the Distribution and Services Plan, payments by a Fund for distribution
expenses may not exceed 0.75% (annualized) of the average daily net assets of
such Fund's Class S shares and payments for shareholder servicing expenses may
not exceed 0.25% (annualized) of the average daily net assets of such Fund's
Class S shares. These amounts may be reduced pursuant to undertakings by the
Distributor. Payments for distribution expenses under the Distribution and
Services Plan are subject to Rule 12b-1 under the 1940 Act.
The Company will obtain a representation from the Service Organizations (and
from Bank of America and the Distributor) that they are or will be licensed as
dealers as required by applicable law or will not engage in activities which
would require them to be so licensed.
FEE WAIVERS. Except as noted in this Prospectus and the Statement of
Additional Information, the Funds' service contractors bear all expenses in
connection with the performance of their services and the Funds bear the
expenses incurred in their operations. From time to time during the course of
the Funds' fiscal year, the Administrator and/or Bank of America may
prospectively waive payment of fees and/or assume certain expenses of a Fund as
a result of competitive pressures and in order to protect the business and
reputation of the Administrator and Bank of America. This will have the effect
of increasing
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<PAGE> 25
yield to investors at the time such fees are not received or amounts are
assumed and decreasing yield when such fees or amounts are reimbursed.
PURCHASES OF SHARES
OPENING AN ACCOUNT. Class S Shares of the Funds are offered by this Prospectus
to customers of Bank of America or Service Organizations that establish a Sweep
Account with Bank of America or a Service Organization. Each Sweep Account
combines a Transaction Account with a periodic sweep of balances to or from the
Funds. Investors may open a Sweep Account by completing and signing the
Disclosure Documents. The Disclosure Documents contain important information
about the various features and operations of the Sweep Account and should be
reviewed in conjunction with this Prospectus.
Class S Shares may be purchased by making a deposit into your Transaction
Account. On each day that both the Fund's custodian and the New York Stock
Exchange (the "Exchange") are open for business (a "Business Day") and Bank of
America or a Service Organization is open for business, Bank of America or a
Service Organization computes the net amount of all deposits, withdrawals,
charges and credits made to and from a Transaction Account in accordance with
their Sweep Account procedures (the "Net Sweep Amount"). If deposits and
credits exceed withdrawals and charges, you authorize Bank of America or a
Service Organization, on your behalf, to transmit a purchase order to the Fund
designated in your Sweep Account in the amount of that day's Net Sweep Amount
in accordance with the Sweep Account procedures of Bank of America or a Service
Organization. Your purchase order will be made effective and full and
fractional Shares will be purchased at the net asset value per share next
determined after receipt by the Transfer Agent. It is the responsibility of
Bank of America or a Service Organization to transmit orders for the purchases
of shares by its customers to the Transfer Agent and deliver required funds on
a timely basis, in accordance with the procedures stated above. Share
purchases and redemptions executed through Bank of America or a Service
Organization are executed only on Business Days that Bank of America or a
Service Organization, respectively, is open for business. Contact Bank of
America or your Service Organization for additional information about Bank of
America's or the Service Organization's Sweep Account procedures.
SHARE PRICE. The net asset value per share of the Prime Fund and Treasury Fund
is the value of all securities and other assets owned by the Fund that are
allocable to S Shares, less the liabilities charged to S Shares, by the number
of outstanding Class S Shares.
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<PAGE> 26
Shares of the Funds may be purchased on any Business Day that Bank of America
or the particular Service Organization, as applicable, is open for business.
The net asset value of the Prime and Treasury Fund is determined on each
Business Day as of 2:30 p.m. Eastern time and the close of regular trading
hours on the Exchange (or 4:00 p.m. Eastern time if the Exchange is closed).
All transaction orders are processed by the Company at the net asset value next
determined after the order is received. In computing net asset value, each
Fund uses the amortized cost method of valuation as described in the Statement
of Additional Information under "Additional Purchase and Redemption
Information--Valuation." The net asset value per share for purposes of pricing
purchase and redemption orders for each Fund is determined independently of
that for other portfolios of the Company. For voice recorded price and yield
information call (800) 227-1545.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening or reopening an account. See the Fund's
Sweep Account application for further information about this requirement.
REDEMPTION OF SHARES
If, on any Business Day Bank of America or the particular Service Organization,
as applicable, is open for business, withdrawals and charges to your Sweep
Account, including without limitation check transactions, exceed deposits and
credits, Bank of America or the particular Service Organization, as applicable,
will transmit a redemption order on your behalf to the Fund in the dollar
amount of that day's Net Sweep Amount. If your Sweep Account with Bank of
America or the particular Service Organization, as applicable, is closed as
described in the Disclosure Documents, Bank of America or the particular
Service Organization, as applicable, transmits a redemption request on your
behalf to the Fund for the balance of the Class S Shares of the Fund held
through your Sweep Account. Redemptions are effected by the Company on a
Business Day at the net asset value per share next determined after receipt of
the redemption order by the Transfer Agent. The Funds will make payment for
all shares redeemed after receipt by the Transfer Agent of a request in proper
form, except as provided by the rules of the Securities and Exchange
Commission. During the period prior to the time the shares are redeemed,
dividends on such shares will accrue and be payable, and an investor will be
entitled to exercise all other rights of beneficial ownership. The Funds
impose no charge when shares are redeemed. It is the responsibility of Bank of
America or the particular Service Organization to
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<PAGE> 27
transmit the redemption order and credit its customer's Transaction Account
with the redemption proceeds on a timely basis. Bank of America or the Service
Organization may withhold redemption proceeds pending check collection or
processing or for other reasons all as set forth more fully in the Disclosure
Documents.
ADDITIONAL SHAREHOLDER SERVICES
Certain optional services available to persons who invest directly in Pacific
Horizon, Horizon, and Horizon Service Shares of the Funds, including but not
limited to certain exchange privileges which allow shareholders to exchange
their Fund shares for shares of other funds in the Company; an automatic
investment program; automatic withdrawal program; and direct deposit program;
are not available to persons who invest in Class S Shares of the Prime Fund and
Treasury Fund. Class B Shares of a Pacific Horizon or Time Horizon Fund may be
exchanged for Class S Shares of the Prime Fund without payment of a contingent
deferred sales charge at the time the exchange is made.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. The shareholders of a Fund are entitled to
dividends and distributions arising from the net income and realized gains, if
any, earned on investments held by the Fund involved. Each Fund's net income
is declared daily as a dividend. Shares begin accruing dividends on the day
the purchase order for the shares is executed and continue to accrue dividends
through and including the day before the redemption order for the shares is
executed. Dividends are paid within five business days after the end of each
month. Although the Funds do not expect to realize net long-term capital
gains, any such capital gains as may be realized will be distributed no more
than twice a year after reduction for any available capital loss carryforward.
Dividends are paid in the form of additional full and fractional shares of the
same series as the shares on which the dividends are declared at the net asset
value of such shares on the payment date.
FEDERAL TAXES. Management of the Company believes that each Fund qualified
separately for its last taxable year as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code") and it is intended
that each Fund will continue to qualify as a regulated investment company in
future years as long as such qualification is in the best interest of its
shareholders. Such qualification generally relieves a Fund of liability for
federal income taxes to the extent its earnings are distributed in accordance
with the Code.
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In connection with such tax qualification, each Fund contemplates declaring as
dividends at least 90% of its investment company taxable income for each
taxable year. An investor of any Fund who receives a dividend derived from net
investment company taxable income (including any excess of net short-term
capital gain over net long-term capital loss) treats it as ordinary income in
the computation of his gross income, whether such dividend is paid in the form
of cash or additional shares of a Fund. Because all of the net investment
income of the Funds is expected to be derived from earned interest, it is
anticipated that all dividends paid by the Funds will be taxable as ordinary
income to shareholders who are not exempt from federal income taxes and that no
part of any distribution paid by the Funds will be eligible for the dividends
received deduction for corporations.
Although the Funds anticipate that they will not have net long-term capital
gain, any distribution of a Fund's excess of net long-term capital gain over
its net short-term capital loss will be taxable to shareholders of that Fund as
long-term capital gain regardless of how long the shareholder has held shares
of the Fund.
Dividends declared in December of any year payable to shareholders of record on
a specified date in December will be deemed for federal tax purposes to have
been paid by the Funds and received by the shareholders on December 31, if such
dividends are paid during January of the following year.
The foregoing is only a brief summary of some of the important federal income
tax considerations generally affecting the Funds and their shareholders, and is
based on federal tax laws and regulations which are in effect as of the date of
this Prospectus. Such laws and regulations may be changed by legislative or
administrative actions. Potential investors in the Funds should consult their
tax advisers with specific reference to their own tax situation. Shareholders
will be advised at least annually as to the federal income tax consequences of
distributions made each year.
STATE AND LOCAL TAXES. Investors are advised to consult their tax advisers
concerning the application of state and local taxes, which may have different
consequences from those of the federal income tax law described above.
DESCRIPTION OF SHARES
The Company was organized on October 27, 1982 as a Maryland corporation. On
March 30, 1984, the Company commenced its public sale of shares (Pacific
Horizon Shares) in each of the Prime Fund and Treasury Fund, which were
originally called "Money Market Portfolio" and "Government Money Market
Portfolio," respectively.
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<PAGE> 29
On January 19, 1990, the Prime Fund and Treasury Fund of The Horizon Funds, a
Massachusetts business trust, were combined with the Money Market Portfolio and
Government Money Market Portfolio of the Company; the Company changed the names
of its resulting portfolios to "Prime Fund" and "Treasury Fund;" and, in
addition to continuing its offering of Pacific Horizon Shares in such Funds,
the Company began offering Horizon Shares and Horizon Service Shares in the
Prime and Treasury Funds. (Horizon Shares and Horizon Service Shares are sold
to institutions and may not be purchased by individuals directly.) On April
__, 1996, the Company began its public offering of X Shares of the Prime Fund.
(X Shares are a sweep vehicle for retail customers of BA Investment Services,
Inc. and certain Service Organizations.) As of the date of this prospectus,
the Company began its public offering of Class S Shares of the Prime and
Treasury Funds.
The Company's charter authorizes the Board of Directors to issue up to two
hundred billion full and fractional shares of capital stock, and to classify
and reclassify any authorized and unissued shares into one or more classes of
shares. The Board of Directors may similarly classify or reclassify any class
of shares into one or more series.
Pursuant to such authority, the Board of Directors has authorized the issuance
of the following series of shares representing interests in the Funds, each of
which is classified as a diversified company under the Investment Company Act
of 1940: ten billion X Shares; ten billion S Shares; fifteen billion Pacific
Horizon Shares, twenty-eight billion Horizon Shares and fifteen billion Horizon
Service Shares representing interests in the Prime Fund; and ten billion S
Shares, fifteen billion Pacific Horizon Shares, fourteen billion, four hundred
million Horizon Shares and fifteen billion Horizon Service Shares representing
interests in the Treasury Fund. X Shares, Pacific Horizon Shares, Horizon
Shares and Horizon Service Shares of the Funds are described in separate
Prospectuses available from the Distributor at the telephone number on the
cover of this Prospectus. The Board of Directors has also authorized the
issuance of additional classes of shares representing interests in other
investment portfolios of the Company, which are likewise described in separate
Prospectuses available from the Distributor. This Prospectus relates primarily
to the S Shares of the Funds and describes only the investment objectives and
policies, operations, contracts and other matters relating to such Shares.
Each S Share, X Share, Pacific Horizon Share, Horizon Share and Horizon Service
Share in a Fund has a par value of $.001, and, except as noted below, is
entitled to participate equally in the dividends and distributions declared by
the Board of Directors with respect to such Fund and in the net distributable
assets of such Fund on liquidation. Holders of a Fund's S and X Shares
-22-
<PAGE> 30
bear the fees described in this Prospectus that are paid to the Distributor and
Service Organizations by the Fund under the Company's Distribution and Services
Plan. The fees paid under the Distribution and Services Plan are for
distribution and shareholder services paid to Service Organizations in
connection with S and X Shares. Holders of a Fund's Pacific Horizon Shares
bear the fees described in the prospectus for such shares that are paid to Bank
of America, the Administrator and Service Organizations by the Fund under the
Company's Administrative Services Plan for Pacific Horizon Shares. Similarly,
holders of Horizon Service Shares bear the fees described in the prospectus for
such shares that are paid to Service Organizations by the Fund under the
Company's Shareholder Services Plan. The fees paid under the Shareholder
Services Plan are for services provided by institutional investors to their
customers in connection with Horizon Service Shares, and Service Organizations
do not receive similar fees with respect to the Funds' Horizon Shares. As a
result, at any given time, the net yield on a Fund's S Shares generally will be
approximately 0.45% lower than the yield on that Fund's X Shares (Class X
Shares are only offered by the Prime Fund); 0.68% lower than the yield on that
Fund's Pacific Horizon Shares; 0.75% lower than the yield on the same Fund's
Horizon Service Shares and 1.00% lower than the yield on the same Fund's
Horizon Shares. Standardized yield quotations will be computed separately for
each series of Shares.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held, and will vote in the aggregate and not by
class or series except as otherwise required by law or when class voting is
permitted by the Board of Directors. It is contemplated that all shareholders
of a Fund will vote together as a single class on matters relating to the
Fund's investment advisory agreement and on any change in its fundamental
investment limitations, and that only holders of Pacific Horizon Shares of a
Fund will be entitled to vote on matters submitted to a vote of shareholders
pertaining to the Fund's Administrative Services Plan; that only holders of
Horizon Service Shares will be entitled to vote on matters submitted to a vote
of Shareholders pertaining to the Funds' Shareholder Services Plan; and that
only holders of particular S and X Shares, if affected by changes to such Plan,
will be entitled to vote on matters submitted to a vote of shareholders
pertaining to a Fund's Distribution and Services Plan relating to the
particular series. Shares have no preemptive rights and only such conversion
and exchange rights as the Board may grant at its discretion. When issued for
payment as described in this Prospectus, shares will be fully paid and
non-assessable. Certificates for shares will not be issued.
The Company does not presently intend to hold annual meetings of shareholders
for the election of directors and other business
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<PAGE> 31
unless and until such time as less than a majority of the directors holding
office have been elected by the shareholders of the Company, at which time the
directors then in office will call a shareholders' meeting for the election of
directors. Under certain circumstances, however, shareholders have the right
to call a meeting of shareholders to consider the removal of one or more
directors and such meetings will be called when requested by the holders of
record of 10% or more of the Company's outstanding shares of common stock. To
the extent required by law and the Company's undertaking with the Securities
and Exchange Commission, the Company will assist in shareholder communications
in such matters. Shares have cumulative voting rights to the extent that may
be required by applicable law.
PERFORMANCE CALCULATIONS
From time to time the "yield" or "effective yield" of a Fund may be quoted in
advertisements or reports to shareholders. Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of a Fund refers to the income generated by an investment in the Fund
over a seven-day period (which period will be stated in the advertisement or
report). This income is then "annualized"--that is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
Additionally, the yields of each Fund may be compared to those of other mutual
funds with similar investment objectives and to other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
Funds' yields may be compared to Donoghue's Money Fund Averages, which are
averages compiled by Donoghue's Money Fund Report. Yield data as reported in
national financial publications, including Money, Forbes, Barron's, The Wall
Street Journal and The New York Times, or in publications of a local or
regional nature, may also be used in comparing the yields of the Funds. A
complete listing of the indices, rankings and publications discussed above is
contained in the Statement of Additional Information.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the shares of a Fund with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
yield is generally a function of the kind and quality of the instruments held
in a
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<PAGE> 32
portfolio, portfolio maturity, operating expenses and market conditions. Any
fees charged by Bank of America or other institutional investors directly to
their customers in connection with investments in shares of the Funds (which
fees may include, for example, account maintenance fees, compensating balance
requirements or fees based upon account transactions, assets or income) will
not be included in the Funds' calculations of yield.
____________________
Shareholder inquiries should be addressed to the Distributor at the address or
telephone numbers stated on the inside cover of this Prospectus.
-25-
<PAGE> 33
S SHARES
OF THE
PRIME FUND AND
TREASURY FUND
PROSPECTUS
____________, 1996
NOT FDIC INSURED
-26-
<PAGE> 34
PACIFIC HORIZON FUNDS, INC.
S Shares of the Prime Fund and Treasury Fund
Cross Reference Sheet
--------------------------------
Part B
Item No. Heading
- -------- -------
10. Cover Page.......................................... Cover Page
11. Table of Contents................................... Table of
Contents
12. General Information and History..................... The Company
13. Investment Objectives and Policies.................. Investment
Objectives
and Policies
14. Management of the Fund.............................. Management of
the Funds
15. Control Persons and Principal Holders of Securities Management of
the Funds;
Miscellaneous
16. Investment Advisory and Other Services ............. Management of
the Funds;
Investment
Adviser;
Adminis-
trator;
Distributor;
Custodian and
Transfer Agent
17. Brokerage Allocation and Other Practices............ Portfolio
Transactions
18. Capital Stock and Other Securities.................. General
Information;
Description of
Shares
19. Purchase, Redemption and Pricing of Securities Additional
Being Offered Purchase and
Redemption
Information
20. Tax Status......................................... Additional
Information
Concerning Taxes
21. Underwriters........................................ Management of the
Funds; Distributor
<PAGE> 35
22. Calculation of Performance Data................ Additional
Performance
Information
PART C
Information to be included in Part C is set forth under the appropriate Item, so
numbered in Part C to this Registration Statement.
<PAGE> 36
PACIFIC HORIZON FUNDS, INC.
S SHARES
OF THE
PRIME FUND AND TREASURY FUND
(INVESTMENT PORTFOLIOS OF
PACIFIC HORIZON FUNDS, INC.)
STATEMENT OF ADDITIONAL INFORMATION
______________, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . 2
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . 13
ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . . . . . 16
MANAGEMENT OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . 19
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 37
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
This Statement of Additional Information, which applies to the
S Shares of the Prime Fund and Treasury Fund (individually, a "Fund" and
collectively, the "Funds") of Pacific Horizon Funds, Inc. ("Pacific Horizon" or
the "Company"), is meant to be read in conjunction with the prospectus dated
_______________, 1996 with respect to the Funds, as may from time to time be
revised, describing the particular Fund of the Company in which the investor is
interested and is incorporated by reference in its entirety into such
Prospectus. Because the Statement of Additional Information is not itself a
prospectus, no investment in shares of any Fund should be made solely upon the
information contained herein. Copies of the Prospectus relating to the
Company's S Shares may be obtained by calling Concord Financial Group, Inc. at
800-332-3863. Capitalized terms used but not defined herein have the same
meaning as in the Prospectus.
<PAGE> 37
THE COMPANY
The Company was organized on October 27, 1982 as a Maryland
corporation. On March 30, 1984, the Company commenced its public sale of
shares (Pacific Horizon Shares) in each of the Prime Fund and Treasury Fund,
which were originally called "Money Market Portfolio" and "Government Money
Market Portfolio," respectively. On January 19, 1990, the Prime Fund and
Treasury Fund of The Horizon Funds, a Massachusetts business trust (sometimes
called the "Predecessor Prime Fund" and "Predecessor Treasury Fund"), were
combined with the Money Market Portfolio and Government Money Market Portfolio,
respectively, of the Company; the Company changed the names of its resulting
portfolios to "Prime Fund" and "Treasury Fund"; and, in addition to continuing
its offering of Pacific Horizon Shares in such Funds, the Company began
offering Horizon Shares and Horizon Service Shares in the Prime and Treasury
Funds. On April __, 1996 the Company began its public offering of Class X
Shares of the Prime Fund and as of the date of this Statement of Additional
Information the Company began its public offering of the Class S Shares of the
Prime and Treasury Funds.
The Company offers other classes and series of shares,
including Pacific Horizon Funds, Horizon Shares and Horizon Service Shares, in
the aforementioned funds and in other investment portfolios which are described
in separate Prospectuses and Statements of Additional Information. For
information concerning these other shares, contact the Distributor at the
telephone number stated on the cover page of this statement of additional
information.
INVESTMENT OBJECTIVES AND POLICIES
The Prospectus for the Prime Fund and Treasury Fund describes
the investment objective of the Fund to which it applies. The following
information supplements and should be read in conjunction with the descriptions
of the investment objective and policies in the Prospectus for such Funds.
PORTFOLIO TRANSACTIONS
- ----------------------
Subject to the general control of the Company's Board of
Directors, Bank of America National Trust and Savings Association ("Bank of
America") is responsible for, makes decisions with respect to and places orders
for all purchases and sales of portfolio securities for each Fund. Securities
purchased and sold by each Fund are generally traded in the over-the-counter
market on a net basis (I.E., without commission) through dealers, or otherwise
involve transactions directly with the issuer of an instrument. During their
last three fiscal periods, the Funds did not pay any brokerage commissions.
The
-2-
<PAGE> 38
cost of securities purchased by the Funds from underwriters generally include
an underwriting commission or concession, and the prices at which securities
are purchased from and sold to dealers include a dealer's mark-up or mark-down.
In executing portfolio transactions and selecting brokers or
dealers, it is the Company's policy to seek the best overall terms available.
The investment advisory agreement between the Company and Bank of America
provides that, in assessing the best overall terms available for any
transaction, Bank of America shall consider factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any, for the specific transaction and
on a continuing basis. In addition, the investment advisory agreement
authorizes Bank of America, subject to the approval of the Company's Board of
Directors, to cause the Company to pay a broker-dealer which furnishes
brokerage and research services a higher commission than that which might be
charged by another broker-dealer for effecting the same transaction, provided
that such commission is deemed reasonable in terms of either that particular
transaction or the overall responsibilities of Bank of America to the
particular Fund and the Company. Brokerage and research services may include:
(1) advice as to the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or
purchasers or sellers of securities and (2) analyses and reports concerning
industries, securities, economic factors and trends, portfolio strategy and the
performance of accounts.
The Directors will periodically review the commissions paid by
the Company to consider whether the commissions, if any, paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Company. It is possible that certain of the brokerage
or research services received will primarily benefit one or more other
investment companies or other accounts for which investment discretion is
exercised. Conversely, the Company or any given Fund may be the primary
beneficiary of the brokerage or research services received as a result of
portfolio transactions effected for such other accounts or investment
companies.
Brokerage or research services so received are in addition to
and not in lieu of services required to be performed by Bank of America and do
not reduce the advisory fee payable to Bank of America by the Company. Such
services may be useful to Bank of America in serving both the Company and other
clients and, conversely, services obtained by the placement of business of
other clients may be useful to Bank of America in carrying out its obligations
to the Company. The Company will not acquire
-3-
<PAGE> 39
certificates of deposit or other securities issued by Bank of America or its
affiliates, and will give no preference to certificates of deposit or other
securities issued by Service Organizations. In addition, portfolio securities
in general will be purchased from and sold to Bank of America, Concord
Financial Group, Inc. (the "Distributor") and their affiliates acting as
principal underwriter, syndicate member, market-maker, dealer, broker or in
any other similar capacity during the life of the syndicate, provided such
purchase, sale or dealing is permitted under the Investment Company Act of 1940
and the rules thereunder.
A Fund's annual portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the Fund's portfolio securities. The
calculation excludes all securities the maturities of which at the time of
acquisition were thirteen months or less. The annual portfolio turnover rate
is expected to be zero for regulatory reporting purposes for all Funds.
A Fund may participate, if and when practicable, in bidding
for the purchase of securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
Any such Fund will engage in this practice only when Bank of America, in its
sole discretion, subject to guidelines adopted by the Board of Directors,
believes such practice to be in the Fund's interest.
Subsequent to its purchase by a Fund, an issue of securities
may cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Fund. The Board of Directors or Bank of America,
pursuant to guidelines established by the Board, will promptly consider such an
event in determining whether the Fund involved should continue to hold the
obligation but will continue to hold the obligation only if retention is in
accordance with the interests of the Fund and applicable regulations of the
Securities and Exchange Commission. In addition, it is possible that
unregistered securities purchased by a Fund in reliance upon Rule 144A under
the Securities Act of 1933 could have the effect of increasing the level of the
Fund's illiquidity to the extent that qualified institutional buyers become,
for a period, uninterested in purchasing these securities.
To the extent permitted by law, Bank of America may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for other investment companies or common trust funds in order to
obtain best execution.
-4-
<PAGE> 40
The Company is required to identify any securities of its
regular brokers or dealers (as defined in Rule 10b-1 under the Investment
Company Act of 1940) or their parents held by the Company as of the close of
its most recent fiscal year. As of February 28, 1995: (a) the Treasury Fund
held the following securities, Repurchase Agreement with Goldman, Sachs & Co.
in the principal amount of $95,000,000; Repurchase Agreement with Merrill Lynch
Government Securities, Inc. in the principal amount of $95,000,000; and (b) the
Prime Fund held the following securities, Merrill Lynch & Co., Inc., commercial
paper in the principal amount of $100,000,000; Goldman, Sachs Group L.P., Daily
Variable Rate Master Note in the principal amount of $120,000,000; Morgan
Stanley Group, Inc., Daily Variable Rate Master Note in the principal amount of
$120,000,000; Bear Stearns Co., Inc., Series B, Monthly Variable Rate Note in
the principal amount of $100,000,000; Repurchase Agreement with Goldman, Sachs
& Co. in the principal amount of $120,000,000.
PORTFOLIO INSTRUMENTS
- ---------------------
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES, COMMERCIAL
PAPER AND SHORT-TERM NOTES. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specific return. Bankers' acceptances are
negotiable deposits or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank
(meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument at maturity). Certificates of deposit and bankers'
acceptances acquired by a Fund will be dollar-denominated obligations of
domestic or foreign banks having total assets at the time of purchase in excess
of $2.5 billion (including assets of both domestic and foreign branches).
Commercial paper consists of unsecured promissory notes issued by corporations.
Short-term notes acquired by a Fund may be issued by commercial or investment
banking firms, financing companies or industrial or manufacturing concerns.
Commercial paper and short-term notes, except for variable and floating rate
instruments, will normally have maturities of nine months or less, although
such instruments may have maturities of up to thirteen months. Commercial
paper and short-term notes will consist of issues which are "First Tier
Securities" as defined by the Securities and Exchange Commission. First Tier
Securities consist of instruments that are either rated at the time of purchase
in the top rating category by one (if rated by only one) or more unaffiliated
nationally recognized statistical rating organizations ("NRSROs") or issued by
issuers with such ratings. See the Appendix to this Statement of Additional
Information for a description of the applicable NRSRO ratings. Unrated
instruments (including instruments with long-term but no short-term ratings)
purchased by a Fund will be of comparable
-5-
<PAGE> 41
quality as determined by Bank of America pursuant to guidelines approved by the
Board of Directors and Bank of America.
A Fund holding Euro CDs, Yankee CDs, Yankee BAs or commercial
paper of foreign issuers may be subject to investment risks that are different
in some respects from those incurred by a Fund which invests only in
obligations of domestic branches of U.S. banks. Such risks include future
political and economic developments, the possible imposition of withholding
taxes by the particular country in which the issuer is located on interest
income payable on the securities, the possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on these securities.
Domestic banks and foreign banks are subject to different
governmental regulations with respect to the amount and types of loans which
may be made and interest rates which may be charged. In addition, the
profitability of the banking industry is dependent largely upon the
availability and cost of funds for the purpose of financing lending operations
under prevailing money market conditions. General economic conditions as well
as exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in the operations of the banking industry.
As a result of federal and state laws and regulations,
domestic banks are, among other things, required to maintain specified levels
of reserves, limited in the amount which they can loan to a single borrower and
subject to other regulations designed to promote financial soundness. However,
such laws and regulations do not necessarily apply to the Euro CDs, Yankee CDs
and Yankee BAs that a Fund may acquire.
U.S. GOVERNMENT OBLIGATIONS. Obligations of the U.S.
Government and its agencies and instrumentalities include Treasury bills,
certificates of indebtedness, notes and bonds, Treasury Strips, and issues of
such entities as the Federal Home Loan Banks, Federal Land Banks, Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Resolution Funding Corporation,
Maritime Administration, Tennessee Valley Authority and Federal National
Mortgage Association. The Prime Fund and Treasury Fund will not acquire
obligations issued by the International Bank for Reconstruction and
Development, the Asian Development Bank or the Inter-American Development Bank.
-6-
<PAGE> 42
Government National Mortgage Association ("GNMA") certificates
are U.S. Government agency mortgage-backed securities representing part
ownership of a pool of mortgage loans. These loans, issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations, are
either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal
on each mortgage is guaranteed by GNMA and backed by the full faith and credit
of the U.S. Government. GNMA certificates differ from bonds in that principal
is paid back monthly by the borrower over the term of the loan rather than
returned in a lump sum at maturity. GNMA certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the certificate.
In addition to GNMA certificates, mortgage-backed securities issued by the
Federal National Mortgage Association ("FNMA") and by the Federal Home Loan
Mortgage Corporation ("FHLMC") may also be acquired. Securities issued and
guaranteed by FNMA and FHLMC are not backed by the full faith and credit of the
United States. If either fixed or variable rate pass-through securities issued
by the U.S. Government or its agencies or instrumentalities are developed in
the future, the Prime Fund reserves the right to invest in them, after making
appropriate disclosure to investors. Certain securities issued by all
governmental agencies may be prepaid. Prepayment of mortgages underlying most
mortgage-backed securities may reduce their current yield and total return.
During periods of declining interest rates, such prepayments can be expected to
accelerate and the Fund would be required to reinvest the proceeds at the lower
interest rates then available.
COMMON PORTFOLIO INSTRUMENTS
- ----------------------------
VARIABLE AND FLOATING RATE INSTRUMENTS. Each Fund may acquire
variable and floating rate instruments as described in the Prospectus.
Variable and floating rate instruments are frequently not rated by credit
rating agencies; however, unrated variable and floating rate instruments
purchased by a Fund will be determined by the investment adviser under
guidelines established by the Company's Board of Directors to be of comparable
quality at the time of purchase to rated instruments eligible for purchase by
such Fund. In making such determinations, the investment adviser will consider
the earning power, cash flows and other liquidity ratios of the issuers of such
instruments (such issuers include financial, merchandising, bank holding and
other companies) and will continuously monitor their financial condition.
There may not be an active secondary market with respect to a particular
variable or floating rate instrument purchased by a Fund. The absence of such
an active
-7-
<PAGE> 43
secondary market could make it difficult for a Fund to dispose of the variable
or floating rate instrument involved. In the event the issuer of the
instrument defaulted on its payment obligations, a Fund involved could, for
this or other reasons, suffer a loss to the extent of the default. Variable
and floating rate instruments may be secured by bank letters of credit and may
have maturities of more than thirteen months. In determining a Fund's average
weighted maturity and whether a variable or floating rate instrument has a
remaining maturity of thirteen months or less, each variable rate instrument
having a demand feature that entitles the Fund to receive the principal amount
thereof at any time, or at specified intervals not exceeding thirteen months,
in each case on not more than thirty days' notice, shall be deemed by the
Company to have a maturity equal to the longer of the period remaining until
its next interest rate adjustment or the period remaining until the principal
amount can be recovered through demand; each variable rate instrument not
having such a demand feature but having a stated maturity of thirteen months or
less or issued or guaranteed by the U.S. Government or its agencies will be
deemed to have a maturity equal to the period remaining until the next interest
rate adjustment; each floating rate instrument having a demand feature that
entitles the Fund to receive the principal amount thereof at any time, or at
specified intervals not exceeding thirteen months, in each case on not more
than thirty days' notice, shall be deemed to have a maturity equal to the
period of time remaining until the principal amount owed can be recovered
through demand. Variable and floating rate instruments which are not payable
upon seven days' notice and which do not have an active trading market are
considered illiquid securities.
RATINGS AND ISSUER'S OBLIGATIONS. The ratings of Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group, Division
of McGraw Hill ("S&P"), Duff & Phelps Credit Rating Co. ("D&P"), Fitch
Investors Service, Inc. ("Fitch"), Thomson Bankwatch, Inc. ("Thomson") and IBCA
Limited and IBCA Inc. ("IBCA") represent their opinions as to the quality of
debt securities. However, ratings are general and are not absolute standards
of quality, and debt securities with the same maturity, interest rate and
rating may have different yields while debt securities of the same maturity and
interest rate with different ratings may have the same yield.
An issuer's obligations under its debt securities are subject
to the provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors, such as the Federal Bankruptcy Code and laws which
may be enacted by federal or state legislatures extending the time for payment
of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or, in the case of governmental entities, upon
the ability of such entities to levy taxes. The
-8-
<PAGE> 44
power or ability of an issuer to meet its obligations for the payment of
interest on, and principal of, its debt securities may be materially adversely
affected by litigation or other conditions.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase
agreements with respect to their portfolio securities as indicated in the
Prospectus. Pursuant to such agreements, a Fund purchases securities from
financial institutions such as banks and broker-dealers which are deemed to be
creditworthy by the investment adviser under guidelines approved by the Board
of Directors, subject to the seller's agreement to repurchase and the Fund's
agreement to resell such securities at a specified date and price. Neither
Fund will enter into repurchase agreements with Bank of America or Bank of
America's affiliates, nor will either Fund give preference to repurchase
agreements with Service Organizations. The repurchase price generally equals
the price paid by the Fund plus interest negotiated on the basis of current
short-term rates (which may be more or less than the rate on the underlying
portfolio security). Securities subject to repurchase agreements will be held
by the Funds' custodian or a sub-custodian or in the Federal Reserve/Treasury
book-entry system, and a Fund will make payment for such securities only upon
receipt of evidence of physical delivery of the securities or of such book
entry. The seller under a repurchase agreement will be required to deliver
instruments the value of which is 102% of the repurchase price (excluding
accrued interest), provided that notwithstanding such requirement, the advisor
shall require that the value of the collateral, after transaction costs
(including loss of interest reasonably expected to be incurred on a default),
shall be equal to or greater than the resale price (including interest)
provided in the agreement. If the seller defaulted on its repurchase
obligation, the Fund holding the repurchase agreement would suffer a loss to
the extent that the proceeds from a sale of the underlying securities were less
than the repurchase price under the agreement. Bankruptcy or insolvency of
such a defaulting seller may cause the particular Fund's rights with respect to
such securities to be delayed or limited. Repurchase agreements are considered
to be loans by a Fund under the Investment Company Act of 1940.
REVERSE REPURCHASE AGREEMENTS. Each Fund may also enter into
reverse repurchase agreements with respect to their securities. Whenever a
Fund enters into a reverse repurchase agreement, it will place in a segregated
account maintained with the Fund's custodian cash, U.S. Government securities
and other liquid high grade debt securities having a value equal to the
repurchase price (including accrued interest) and will
-9-
<PAGE> 45
subsequently monitor the account for maintenance of such equivalent value.
Reverse repurchase agreements are considered to be borrowings by a Fund under
the Investment Company Act of 1940.
INVESTMENT PRACTICES
- --------------------
WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED
SETTLEMENTS. Each Fund may purchase securities on a "when-issued," "forward
commitment" or "delayed settlement" basis (I.E., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
securities on a when-issued, forward commitment or delayed settlement basis,
its custodian will set aside cash or liquid portfolio securities equal to the
amount of the commitment in a separate account. Normally the custodian will
set aside portfolio securities to satisfy a purchase commitment, and in such a
case a Fund may be required subsequently to place additional assets (cash or
liquid securities) in the separate account so that the value of the account
remains equal to the amount of such Fund's commitment. The Funds do not intend
to engage in these transactions for speculative purposes but only in
furtherance of their investment objectives. Because a Fund will set aside cash
or liquid investments to satisfy its purchase commitments in the manner
described, the Fund's liquidity and the ability of the investment adviser to
manage it may be affected in the event the Fund's forward commitments,
commitments to purchase when-issued securities and delayed settlements ever
exceeded 25% of the value of its assets.
A Fund will purchase securities on a when-issued, forward
commitment or delayed settlement basis only with the intention of completing
the transaction. If deemed advisable as a matter of investment strategy,
however, a Fund may dispose of or renegotiate a commitment after it is entered
into, and may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. In these cases
the Fund may realize a taxable capital gain or loss.
When a Fund engages in when-issued, forward commitment and
delayed settlement transactions, it relies on the other party to consummate the
trade. Failure of such party to do so may result in the Fund's incurring a
loss or missing an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued
purchase, a forward commitment to purchase securities, or a delayed settlement
and any subsequent fluctuations on their market value is taken into account
when determining the market value of a Fund starting on the day the Fund agrees
to purchase the securities. The Fund does not earn interest on the
-10-
<PAGE> 46
securities it has committed to purchase until they are paid for and delivered
on the settlement date.
LOANS OF SECURITIES. The Prime Fund may lend its securities
to brokers, dealers and financial institutions, provided (1) the loan is
secured continuously by collateral consisting of U.S. Government securities or
cash or letters of credit which is marked to the market daily to ensure that
each loan is fully collateralized at all times; (2) the Fund may at any time
call the loan and obtain the return of the securities loaned within five
business days; (3) the Fund will receive any interest or dividends paid on the
securities loaned; and (4) the aggregate market value of securities loaned will
not at any time exceed 30% of the total assets of the Fund.
The Fund will earn income for lending its securities because
cash collateral pursuant to these loans will be invested in short term money
market instruments. In connection with lending securities, the Fund may pay
reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
INVESTMENT LIMITATIONS
- ----------------------
The Prospectus for both Funds sets forth certain fundamental
policies that may not be changed with respect to each Fund without the
affirmative vote of the holders of the majority of the Fund's outstanding
shares (as defined below under "General Information - Miscellaneous").
Similarly, the following enumerated additional fundamental policies may not be
changed with respect to each Fund without such a vote of shareholders.
A. The Prime Fund and Treasury Fund may not:
1. Purchase or sell real estate (however, a Fund may, to
the extent appropriate to its investment objective, purchase securities issued
by companies investing in real estate or interests therein).
2. Underwrite the securities of other issuers.
3. Purchase securities of companies for the purpose of
exercising control.
4. Purchase securities on margin, make short sales of
securities or maintain a short position.
-11-
<PAGE> 47
5. Acquire any other investment company or investment
company security except in connection with a merger, consolidation,
reorganization or acquisition of assets.
6. Make loans, except that a Fund: (i) may purchase or
hold debt instruments and enter into repurchase agreements pursuant to its
investment objective and policies, and (ii) may lend portfolio securities.
B. The Prime Fund may not:
1. Purchase securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if immediately thereafter more than 15% of its total assets
would be invested in certificates of deposit or bankers' acceptances of any one
bank, or more than 5% of its total assets would be invested in other securities
of any one bank or the securities of any other issuer (except that up to 25% of
the Fund's total assets may be invested without regard to this limitation).
* * *
INTERPRETATIONS: If a percentage restriction is satisfied at
the time of investment, a later increase or decrease in such percentage
resulting from a change in asset value will not constitute a violation of such
restriction.
For purposes of Investment Limitation No. 1 relating to the
Prime Fund, the Fund treats, in accordance with the current views of the
Securities and Exchange Commission and as a matter of non-fundamental policy
that may be changed without a vote of shareholders, all supranational
organizations as a single industry and each foreign government (and all of its
agencies) as a separate industry.
For purposes of Investment Limitation No. 1 of Paragraph B
above, a security is considered to be issued by the governmental entity (or
entities) whose assets and revenues back the security, or, with respect to a
private activity bond that is backed only by the assets and revenues of a
non-governmental user, such non-governmental user. In certain circumstances,
the guarantor of a guaranteed security may also be considered to be an issuer
in connection with such guarantee. In addition, in accordance with current
regulations of the Securities and Exchange Commission, the Prime Fund presently
intends to limit its investments in the securities of any single issuer (other
than securities issued by the U.S. Government, its agencies or
instrumentalities) to not more than 5% of the Fund's total assets
-12-
<PAGE> 48
at the time of purchase, provided that the Fund may invest up to 25% of
its total assets in the securities of any one issuer for a period that does not
exceed three business days. For purposes of Investment Limitation No. 6 of
Paragraph A, the Prime Fund may hold debt instruments whether such instruments
are part of a public offering or privately negotiated.
In order to permit the sale of shares in certain states, a
Fund may make commitments more restrictive than the investment policies and
limitations described above. To permit the sale of shares of the Funds in
Texas, the Company has agreed to the following addition restrictions:
1. Such Funds will not invest in oil, gas or mineral
leases.
2. Such Funds will not invest more than 5% of their net
assets in warrants (valued at the lower of cost or market), of which not more
than 2% may be warrants which are not listed on the New York or American Stock
Exchanges.
Should a Fund determine that these commitments or any other
commitments are no longer in the best interests of the Fund, it will revoke
such commitments by terminating sales of its shares in the state involved.
The policies and practices stated in this sub-section are not
fundamental policies of the Funds.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Information on how to purchase and redeem Company shares, and
how such shares are priced, is included in the Prospectus. Additional
information is contained below.
NET ASSET VALUE
- ---------------
IN GENERAL. Each Fund's net asset value per share is
calculated by dividing the total value of the assets belonging to the Fund,
less the value of any liabilities applicable to the Fund, by the total number
of outstanding shares of that Fund. Each Fund's net asset value is calculated
separately from each other Fund's net asset value. "Assets belonging to" a
Fund consist of the consideration received upon the issuance of shares
representing interests in the Fund together with all income, earnings, profits
and proceeds derived from the investment thereof, any proceeds from the sale,
exchange or liquidation of such investments, any funds or payments derived from
any re-investment of such proceeds, and a portion of any general assets of the
Company not belonging to a particular Fund. Each Fund is
-13-
<PAGE> 49
charged with the direct expenses of that Fund and with a share of the general
expenses of the Company. The determinations by the Board of Directors as to
direct and allocable expenses and the allocable portion of general assets with
respect to the various portfolios are conclusive. The expenses that are
charged to a Fund are borne equally by each share of the Fund except for
payments to Service Organizations and Rule 12b-1 fees that are borne solely by
S Shares of the Funds, certain payments that are borne solely by Pacific
Horizon Shares of the Funds, and payments to Service Organizations that are
borne solely by Horizon Service Shares of the Funds as described in the
Prospectuses for such Shares.
AMORTIZED COST METHOD. Each Fund uses the amortized cost
method of valuation in computing the net asset value of their shares for
purposes of sales and redemptions. Under this method a Fund values each of its
portfolio securities at cost on the date of purchase and thereafter assumes a
constant proportionate amortization of any discount or premium until maturity
of the security. As a result the value of a portfolio security for purposes of
determining net asset value normally does not change in response to fluctuating
interest rates. While the amortized cost method seems to provide certainty in
portfolio valuation it may result in periods during which values, as determined
by amortized cost, are higher or lower than the amount such Fund would receive
if it sold its portfolio securities. The market value of the securities in the
Funds can be expected to vary inversely with changes in prevailing interest
rates. Thus, if interest rates have increased from the time a security was
purchased, such security, if sold, might be sold at a price less than its
amortized cost. Similarly, if interest rates have declined from the time a
security was purchased, such security, if sold, might be sold at a price
greater than its amortized cost. In either instance, if the security is held
to maturity, no gain or loss will be realized.
In connection with their use of amortized cost valuation, the
Funds limit the dollar-weighted average maturity of their portfolios to not
more than 90 days and do not purchase any instrument with a remaining maturity
of greater than 397 calendar days. The Company's Board of Directors has also
established, pursuant to rules promulgated by the Securities and Exchange
Commission, procedures that are intended to stabilize each Fund's net asset
value per share for purposes of sales and redemptions at $1.00. Such
procedures include the determination, at such intervals as the Board deems
appropriate, of the extent, if any, to which a Fund's net asset value per share
calculated by using available market quotations deviates from $1.00 per share.
In the event such deviation exceeds 1/2 of 1% the Board will promptly consider
what action, if any, should be initiated. If the Board believes that the
amount of any deviation may result in
-14-
<PAGE> 50
material dilution or other unfair results to investors or existing
shareholders, it will take such steps as it considers appropriate to eliminate
or reduce to the extent reasonably practicable any such dilution or unfair
results. These steps may include selling portfolio instruments prior to
maturity, shortening a Fund's average portfolio maturity, withholding or
reducing dividends, reducing the number of a Fund's outstanding shares without
monetary consideration or determining net asset value per share by using
available market quotations. If a Fund reduces the number of its outstanding
shares without monetary consideration it will mail written notice to
shareholders at least three business days before the redemption and in the
notice will state the reason for the redemption and the fact that the
redemption may result in a capital loss to shareholders.
The Funds' administrator, Concord Holding Corporation (the
"Administrator"), may use a pricing service to value certain portfolio
securities where the prices provided are believed to reflect the fair value of
such securities. In valuing a Fund's securities the pricing service would
normally take into consideration such factors as yield, risk, quality,
maturity, type of issue, trading characteristics, special circumstances and
other factors it deems relevant in determining valuations for normal
institutional-sized trading units of debt securities and would not rely on
quoted prices. The methods used by the pricing service and the valuations so
established will be utilized under the general supervision of the Company's
Board of Directors. Additionally, in determining market-based net asset value
per share, all portfolio securities for which market quotations (or appropriate
substitutes that reflect current market conditions) are not readily available,
shall be valued at their fair value as determined by the valuation committee in
accordance with procedures established by the Board of Directors.
S SHARES
- --------
Persons wishing to establish a Sweep Account at Bank of
America or certain other Service Organizations should contact Bank of America
or a Service Organization directly for appropriate instructions. Depending on
the terms of the Sweep Account, Bank of America and Service Organizations also
may charge its customers fees for investment, redemption and other services
provided. Such fees may include, for example, account maintenance fees,
compensating balance requirements or fees based upon account transactions,
assets or income. Bank of America or the particular Service Organization is
responsible for providing information concerning these services and any charges
to any customers who must authorize the purchase of shares prior to such
purchase.
-15-
<PAGE> 51
MISCELLANEOUS. Certificates for shares will not be issued.
A "business day" for purposes of processing share purchases
and redemptions received by the Transfer Agent at its Columbus office is a day
on which both the Funds' custodian and the New York Stock Exchange are open for
trading, except a "business day" does not include Martin Luther King, Jr. Day,
Columbus Day or Veteran's Day. In 1996, the holidays on which the New York
Stock Exchange is closed are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The Company may suspend the right of redemption or postpone
the date of payment for shares during any period when (a) trading on the New
York Stock Exchange is restricted by applicable rules and regulations of the
Securities and Exchange Commission; (b) the New York Stock Exchange is closed
for other than customary weekend and holiday closings; (c) the Securities and
Exchange Commission has by order permitted such suspension; or (d) an emergency
exists as determined by the Securities and Exchange Commission. (The Company
may also suspend or postpone the recordation of the transfer of its shares upon
the occurrence of any of the foregoing conditions.)
The Company's Charter permits its Board of Directors to
require a shareholder to redeem involuntarily shares in a Fund if the balance
held of record by the shareholder drops below $500 and such shareholder does
not increase such balance to $500 or more upon 60 days' notice. The Company
will not require a shareholder to redeem shares of a Fund if the balance held
of record by the shareholder is less than $500 solely because of a decline in
the net asset value of the shares. The Company may also redeem shares
involuntarily if such redemption is appropriate to carry out the Company's
responsibilities under the Investment Company Act of 1940.
If the Company's Board of Directors determines that conditions
exist which make payment of redemption proceeds wholly in cash unwise or
undesirable, the Company may make payment wholly or partly in readily
marketable securities or other property. In such an event, a shareholder would
incur transaction costs in selling the securities or other property. The
Company has committed that it will pay all redemption requests by a shareholder
of record in cash, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value at
the beginning of such period.
-16-
<PAGE> 52
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional
considerations generally affecting the Funds and their shareholders that are
not described in the Prospectus for the Funds. No attempt is made to present a
detailed explanation of the tax treatment of the Funds or their shareholders,
and the discussion here and in the Prospectus is not intended as a substitute
for careful tax planning. Investors are advised to consult their tax advisers
with specific reference to their own tax situations.
FEDERAL - BOTH FUNDS
- --------------------
Each Fund will be treated as a separate corporate entity under
the Internal Revenue Code of 1986, as amended (the "Code"), and intends to
qualify as a "regulated investment company." By following this policy, each
Fund expects to eliminate or reduce to a nominal amount the federal income
taxes to which it may be subject. If for any taxable year a Fund of the
Company does not qualify for the special federal tax treatment afforded
regulated investment companies, all of the Fund's taxable income would be
subject to tax at regular corporate rates (without any deduction for
distributions to shareholders). In such event, the Fund's dividend
distributions to shareholders would be taxable as ordinary income to the extent
of the current and accumulated earnings and profits of the particular Fund and
would be eligible for the dividends received deduction in the case of corporate
shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that each Fund distribute to its shareholders an
amount equal to at least the sum of 90% of its investment company taxable
income (if any) and 90% of its tax-exempt income (if any) net of certain
deductions for each taxable year. In general, a Fund's investment company
taxable income will be its taxable income, subject to certain adjustments and
excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. A Fund will be
taxed on its undistributed investment company taxable income, if any.
A Fund will not be treated as a regulated investment company
under the Code if 30% or more of the Fund's gross income for a taxable year is
derived from gains realized on the sale or other disposition of securities and
certain other investments held for less than three months (the "short-short
test"). Interest (including original issue and accrued market discount)
received by a Fund upon maturity or disposition of a security held for less
than three months will not be treated as gross income derived from the sale or
other disposition of such
-17-
<PAGE> 53
security within the meaning of this requirement. However, any other income
that is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.
Any distribution of the excess of net long-term capital gains
over net short-term capital losses is taxable to shareholders as long-term
capital gains, regardless of how long the shareholder has held the distributing
Fund's shares and whether such gains are received in cash or additional Fund
shares. The Fund will designate such a distribution as a capital gains
dividend in a written notice mailed to shareholders after the close of the
Fund's taxable year.
Ordinary income of individuals is taxable at a maximum nominal
rate of 39.6%; however, because of limitations on itemized deductions otherwise
allowable and the phase-out of personal exemptions, the maximum nominal
effective marginal rate of tax for some taxpayers may be higher. An
individual's long-term capital gains are taxable at a maximum nominal rate of
28%. For corporations, long-term capital gains and ordinary income are both
taxable at a maximum nominal rate of 35% (or at a maximum effective marginal
rate of 39% in the case of corporations having taxable income between $100,000
and $335,000).
A 4% non-deductible excise tax is imposed on regulated
investment companies that fail to currently distribute specified percentages of
their ordinary taxable income for each calendar year and capital gain net
income (excess of capital gains over capital losses). Each Fund intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year
to avoid liability for this excise tax.
The Company will be required in certain cases to withhold and
remit to the United States Treasury 31% of taxable dividends or 31% of gross
sale proceeds paid to shareholders who (i) have failed to provide a correct tax
identification number in the manner required, (ii) who are subject to
withholding by the Internal Revenue Service for failure to properly include on
their return payments of taxable interest or dividends, or (iii) who have
failed to certify to the Company that they are not subject to backup
withholding when required to do so or that they are "exempt recipients."
At February 28, 1995, the Prime Fund and Treasury Fund had
unused capital loss carryovers of approximately $2,764,492 (of which $22,098
will expire in fiscal 1999, $1,171,786 will expire in fiscal 2002 and
$1,570,608 will expire in fiscal 2003) and $239,007 (which will expire in
fiscal 2002), respectively,
-18-
<PAGE> 54
available for federal income tax purposes to be applied against future capital
gains, if any.
OTHER INFORMATION
- -----------------
Depending upon the extent of activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise deemed to be
conducting business, a Fund may be subject to the tax laws of such states or
localities.
Exempt-interest dividends will generally be exempt from state
and local taxes as well. However, except as noted above with respect to
California state personal income tax, in some situations income distributions
may be taxable to shareholders of the Funds under state or local law as
dividend income even though all or a portion of such distributions may be
derived from interest on tax-exempt obligations or U.S. Government obligations
which, if realized directly, would be exempt from such income taxes.
Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes.
The foregoing discussion is based on tax laws and regulations
which are in effect on the date of this Statement of Additional Information.
Such laws and regulations may be changed by legislative or administrative
action.
MANAGEMENT OF THE FUNDS
DIRECTORS AND OFFICERS
- ----------------------
The directors and officers of the Company, their addresses,
ages, and principal occupations during the past five years are:
<TABLE>
<CAPTION>
Position with
Name and Address Age Company Principal Occupations
- ---------------- --- ------- ---------------------
<S> <C> <C> <C>
Thomas M. Collins 61 Director Of counsel, law firm of
McDermott & Trayner McDermott & Trayner;
225 S. Lake Avenue Partner of the law firm
Suite 410 of Musick, Peeler &
Pasadena, CA 91101-3005 Garrett (until April,
1993); Trustee, Master
Investment Trust, Series I
and Master Investment
Trust, Series II
(registered investment
companies) (since 1993);
former Director, Bunker
Hill Income Securities,
</TABLE>
-19-
<PAGE> 55
<TABLE>
<CAPTION>
Position with
Name and Address Age Company Principal Occupations
- ---------------- --- ------- ---------------------
<S> <C> <C> <C>
Inc. (registered
investment company)
through 1991.
Douglas B. Fletcher 70 Vice Chairman Chairman of the Board
Fletcher Capital of the Board and Chief Executive
Advisors Incorporated Officer, Fletcher
4 Upper Newport Plaza Capital Advisors,
Suite 100 Incorporated,
Newport Beach, CA 92660-2629 (registered investment
adviser) 1991 to date;
Partner, 1991 Newport
Partners (private venture
capital firm), 1981 to
date; Chairman of the
Board and Chief Executive
Officer, First Pacific
Advisors, Inc. (registered
investment adviser) and
seven investment companies
under its management,
prior to 1983; former
Allied Member, New York
Stock Exchange; Chairman
of the Board of FPA
Paramount Fund, Inc.
through 1984; Director,
TIS Mortgage Investment
Company (real estate
investment trust); Trustee
and former Vice Chairman
of the Board, Claremont
McKenna College; Chartered
Financial Analyst.
Robert E. Greeley 62 Director Chairman, Page Mill
Page Mill Asset Asset Management (a
Management private investment
433 California Street company) since 1991;
Suite 900 Manager, Corporate
San Francisco, CA 94104 Investments, Hewlett
Packard Company from 1979
to 1991; Trustee, Master
Investment Trust, Series I
and Master Investment
Trust, Series II (since
1993); Director, Morgan
Grenfell Small Cap Fund
(since 1986); former
Director, Bunker Hill
Income Securities, Inc.
</TABLE>
-20-
<PAGE> 56
<TABLE>
<CAPTION>
Position with
Name and Address Age Company Principal Occupations
- ---------------- --- ------- ---------------------
<S> <C> <C> <C>
(since 1989) (registered
investment companies);
former Trustee, SunAmerica
Fund Group (previously
Equitec Siebel Fund Group)
from 1984 to 1992.
Kermit O. Hanson 79 Director Vice Chairman of the
17760 14th Ave., N.W. Advisory Board, 1988 to
Seattle, WA 98177 date, Executive
Director, 1977 to 1988,
Pacific Rim Bankers
Program (a non-profit
educational institution);
Dean Emeritus, 1981 to
date, Dean, 1964-81,
Graduate School of
Business Administration,
University of Washington;
Director, Washington
Federal Savings & Loan
Association; Trustee,
Seafirst Retirement Funds
(since 1993) (registered
investment company).
Cornelius J. Pings* 66 Chairman of President, Association
Association of American the Board and of American
Universities President Universities, February
One DuPont Circle 1993 to date; Provost,
Suite 730 1982 to January
Washington, DC 20036 1993, Senior Vice
President for Academic
Affairs, 1981 to January
1993, University of
Southern California;
Trustee, Master Investment
Trust, Series I and Master
Investment Trust, Series
II (since 1995).
Kenneth L. Trefftzs 83 Director Private Investor;
11131 Briarcliff Drive formerly Distinguished
San Diego, CA 92131-1329 Emeritus Professor
of Finance and Chairman of
the Department of Finance
and Business Economics of
the Graduate School of
Business of the
</TABLE>
-21-
<PAGE> 57
<TABLE>
<CAPTION>
Position with
Name and Address Age Company Principal Occupations
- ---------------- --- ------- ---------------------
<S> <C> <C> <C>
University of Southern
California; former
Director, Metro Goldwyn
Mayer, Inc.; Director,
Fremont General
Corporation (insurance and
financial services holding
company); Director, Source
Capital, Inc. (closed-end
investment company);
Director of three open-end
investment companies
managed by First Pacific
Advisors, Inc.; formerly
Chairman of the Board of
Directors (or Trustees) of
nineteen investment
companies managed by
American Capital Asset
Management, Inc.
Richard E. Stierwalt Executive Chairman of the Board
125 W. 55th Street 40 Vice President and Chief Executive
New York, NY 10019 Officer, July 1993 to
date, prior thereto Senior
Director, Managing
Director and Chief
Executive Officer of the
Administrator and
Distributor, February 1987
to July 1993; President,
Master Investment Trust,
Series I, Master
Investment Trust, Series
II and Seafirst Retirement
Funds (since 1993); First
Vice President, Trust
Operation Administration,
Security Pacific National
Bank, 1983-1987.
William B. Blundin 57 Executive Vice Vice Chairman, July 1993
125 W. 55th Street President to date, prior thereto
New York, NY 10019 Director and President
of the Administrator and
Distributor, February 1987
to July 1993; Executive
Vice President, Master
Investment Trust, Series
II and Seafirst Retirement
Funds (since
</TABLE>
-22-
<PAGE> 58
<TABLE>
<CAPTION>
Position with
Name and Address Age Company Principal Occupations
- ---------------- --- ------- ---------------------
<S> <C> <C> <C>
1993); Senior Vice
President, Shearson Lehman
Brothers, 1978-1987.
Irimga McKay 35 Vice Senior Vice President,
1230 Columbia Street President July 1993 to date, prior
5th Floor thereto First Vice
San Diego, CA 92101 President of the
Administrator and
Distributor, November 1988
to July 1993; Vice
President, Master
Investment Trust, Series
II and Seafirst Retirement
Funds (since 1993);
Regional Vice President,
Continental Equities, June
1987 to November 1988;
Assistant Wholesaler, VMS
Realty Partners (a real
estate limited
partnership), May 1986 to
June 1987.
W. Eugene Spurbeck 39 Assistant Vice Manager of Client
BISYS Fund Services President Services of the
515 Figueroa Street Administrator (1993 to
Suite 335 date); Assistant Vice
Los Angeles, CA 92307 President, Master
Investment Trust, Series
II; Vice President,
Seafirst Retirement Funds
(since 1995); Vice
President of Retail
Lending Operations Banc
One (1989 to 1993).
Stephanie L. Blaha 36 Assistant Vice Manager of Client
BISYS Fund Services President Services of the
100 First Avenue Administrator, March
Suite 300 1995 to date, prior
Pittsburgh, PA 15222 thereto Assistant Vice
President of the
Administrator and
Distributor, October 1991
to March 1995; Assistant
Vice President, Master
Investment Trust, Series
II (since 1996); Vice
President, Seafirst
Retirement Funds (since
1996); Account Manager,
AT&T American Transtech,
</TABLE>
-23-
<PAGE> 59
<TABLE>
<CAPTION>
Position with
Name and Address Age Company Principal Occupations
- ---------------- --- ------- ---------------------
<S> <C> <C> <C>
Mutual Fund Division, July
1989 to October 1991.
Mark E. Nagle 36 Treasurer Senior Vice President,
BISYS Fund Services Fund Accounting
3435 Stelzer Road Services, The BISYS
Columbus, OH 43219 Group, Inc. September 1995
to Present; Senior Vice
President Fidelity
Institutional Retirement
Services (1993 to
September 1995; Fidelity
Accounting and Custody
Services (1981 to 1993).
Martin R. Dean 31 Assistant Manager of Fund
BISYS Fund Services Treasurer Accounting of BISYS
3435 Stelzer Road Fund Services, May 1994
Columbus, OH 43219 to Present; Treasurer,
Master Investment Trust,
Series II and Seafirst
Retirement Funds (since
1995); Senior Manager at
KPMG Peat Marwick
previously 1990-1994.
W. Bruce McConnel, III 52 Secretary Partner of the law firm
1345 Chestnut Street of Drinker Biddle &
Philadelphia National Bank Reath. Secretary,
Building, Suite 1100 Master Investment Trust,
Philadelphia, PA 19107 Series I, Master
Investment Trust, Series II and Seafirst
Retirement Funds.
George O. Martinez 35 Assistant Senior Vice President
3435 Stelzer Road Secretary and Director of Legal
Columbus, OH 43219 and Compliance Services,
of the Administrator.
since April 1995;
Assistant Secretary,
Master Investment Trust,
Series II and Seafirst
Retirement Funds (since
1995); prior thereto, Vice
President and Associate
General Counsel, Alliance
Capital Management, L.P.
- -----------------------------
<FN>
* Mr. Pings is an "interested director" of the Company as defined in the 1940 Act.
</TABLE>
-24-
<PAGE> 60
The Audit Committee of the Board is comprised of all directors
and is chaired by Dr. Trefftzs. The Board does not have an Executive
Committee.
Each director is entitled to receive an annual fee of $25,000
plus $1,000 for each day that a director participates in all or a part of a
Board meeting; the President receives an additional $20,000 per annum for his
services as President; Mr. Collins, in consideration of his years of service as
President and Chairman of the Board, receives an additional $40,000 per annum
in recognition of his years of service to the Company until February 28, 1997;
each member of a Committee of the Board is entitled to receive $1,000 for each
Committee meeting they participate in (whether or not held on the same day as a
Board meeting); and each Chairman of a Committee of the Board shall be entitled
to receive an annual retainer of $1,000 for his services as Chairman of the
Committee. The Funds, and each other Fund of the Company, pays its
proportionate share of these amounts based on relative net asset values.
For the fiscal year ended February 28, 1995, the Company paid
or accrued for the account of its directors as a group for services in all
capacities a total of $334,168; of this total amount, the following amounts of
directors' compensation were allocated to the following Funds: Treasury Fund -
$22,408 and Prime Fund - $23,318. Each director is also reimbursed for
out-of-pocket expenses incurred as a director. Drinker Biddle & Reath, of
which Mr. McConnel is a partner, receives legal fees as counsel to the Company.
As of the date of this Statement of Additional Information, the directors and
officers of the Company, as a group, own less than 1% of the outstanding shares
of each of the Company's investment portfolios.
Under a retirement plan approved by the Board of Directors,
including a majority of its directors who are not "interested persons" of the
Company, a director who dies or resigns after five years of service is entitled
to receive ten annual payments each equal to the greater of: (i) 50% of the
annual director's retainer that was payable by the Company during the year of
his/her 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 is entitled to receive
ten annual payments each equal to the greater of: (i) 100% of the annual
director's retainer that was payable by the Company during the year of his/her
death or resignation, or (ii) 100% of the annual director's retainer then in
effect for directors of the Company during the year of such payment. Further,
the amount payable each year to a director who dies or resigns is increased by
$1,000 for each year of service that the director provided as Chairman of the
Board.
-25-
<PAGE> 61
Years of service for purposes of calculating the benefit
described above are based upon service as a director or Chairman after February
28, 1994. Retirement benefits in which a director has become vested may not be
reduced by later Board action.
In lieu of receiving ten annual payments, a director may elect
to receive substantially equivalent benefits through a single-sum cash payment
of the present value of such benefits paid by the Company within 45 days of the
death or resignation of the director. The present value of such benefits is to
be calculated (i) based on the retainer that was payable by the Company during
the year of the director's death or resignation (and not on any retainer
payable to directors thereafter), and (ii) using the interest rate in effect as
of the date of the director's death or resignation by the Pension Benefit
Guaranty Corporation (or any successor thereto) for valuing immediate annuities
under terminating defined benefit pension plans. A director's election to
receive a single sum must be made in writing within the 30 calendar days after
the date the individual is first elected as a director.
In addition to the foregoing, the Board of Directors may, in
its discretion and in recognition of a director's period of service before
March 1, 1994 as a director and possibly as Chairman, authorize the Company to
pay a retirement benefit following the director's death or resignation (unless
the director has vested benefits as a result of completing nine years of
service). Any such action shall be approved by the Board and by a majority of
the directors who are not "interested persons" of the Company within 120 days
following the director's death or resignation and may be authorized as a single
sum cash payment or as not more than ten annual payments (beginning the first
anniversary of the director's date of death or resignation and continuing for
one or more anniversary date(s) thereafter).
The obligation of the Company to pay benefits to a former
director is neither secured nor funded by the Company but shall be binding upon
its successors in interest. The payment of benefits under the retirement plan
has no priority or preference over the lawful claims of the Company's creditors
or shareholders, and the right to receive such payments is not assignable or
transferable by a director (or former director) other than by will, by the laws
of descent and distribution, or by the director's written designation of a
beneficiary.
The following chart provides certain information about the
director/trustee fees of the Company as of February 28, 1995.
-26-
<PAGE> 62
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION FROM
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL REGISTRANT AND
COMPENSATION FROM AS PART OF FUND BENEFITS UPON FUND COMPLEX*
NAME OF PERSON/ POSITION THE COMPANY EXPENSES RETIREMENT PAID TO DIRECTORS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas M. Collins $100,000 $0 $0 $110,000
Director+
Douglas B. Fletcher $ 57,500 $0 $0 $ 57,500
Vice Chairman of the Board
Robert E. Greeley** $ 57,500 $0 $0 $ 65,781
Director
Kermit O. Hanson $ 57,500 $0 $0 $ 63,500
Director
Cornelius J. Pings $ 57,500 $0 $0 $ 57,500
President and Chairman of
the Board
Kenneth L. Trefftzs $ 57,500 $0 $0 $ 57,500
Director
- ------------------------------
<FN>
* The "Fund Complex" consists of the Company, Seafirst Retirement Funds, Master Investment Trust, Series I and Master
Investment Trust, Series II.
** Mr. Greeley became a director of the Company on April 25, 1994.
+ Mr. Collins was President and Chairman of the Board of the Company until August 31, 1995
</TABLE>
INVESTMENT ADVISER
- ------------------
Bank of America is the successor by merger to Security Pacific
National Bank ("Security Pacific"), which previously served as investment
adviser to each of the Funds, since the commencement of their operations. In
the investment advisory agreement, Bank of America has agreed to provide
investment advisory services as described in the Prospectus. Bank of America
has also agreed to pay all expenses incurred by it in connection with its
activities under its agreement other than the cost of securities, including
brokerage commissions, if any, purchased for the Company. In rendering its
advisory services, Bank of America may utilize Bank officers from one or more
of the departments of the Bank which are authorized to exercise the fiduciary
powers of Bank of America with respect to the investment of trust assets. In
some cases, these officers may also serve as officers, and utilize the
facilities, of wholly-
-27-
<PAGE> 63
owned subsidiaries or other affiliates of Bank of America or its parent
corporation. For the services provided and expenses assumed pursuant to the
investment advisory agreement, the Company has agreed to pay Bank of America
fees, accrued daily and payable monthly, at the following annual rates: .10%
of the first $3 billion of each Fund's net assets, plus .09% of the next $2
billion of each Fund's net assets, plus .08% of each Fund's net assets over $5
billion. From time to time, Bank of America may waive fees or reimburse the
Company for expenses voluntarily or as required by certain state securities
laws.
For the fiscal years ended February 28, 1993, February 28,
1994 and February 28, 1995, Bank of America (Security Pacific prior to April
22, 1992) was paid, pursuant to the investment advisory agreements then in
effect, advisory fees net of fee waivers by the Prime Fund of $8,106,253,
$11,293,545, and $2,330,203, respectively; and by the Treasury Fund of
$2,841,285, $2,717,321, and $2,140,125, respectively. For the fiscal years
indicated, Bank of America (Security Pacific prior to April 22, 1992) did not
effect any fee waivers or expense reimbursements with respect to the Treasury
Fund. For the fiscal years ended February 28, 1994 and February 28, 1995,
aggregate fee waivers and expense reimbursements for the Prime Fund were
$367,233 and $920,627, respectively.
The Company's investment advisory agreement for the Funds
provides that Bank of America shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company in connection with the
performance of the investment advisory agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or negligence
in the performance of its duties or from reckless disregard by it of its duties
and obligations thereunder.
THE GLASS-STEAGALL ACT AND PROPOSED LEGISLATION
- -----------------------------------------------
The Glass-Steagall Act, among other things, prohibits banks
from engaging in the business of underwriting securities, although national and
state-chartered banks generally are permitted to purchase and sell securities
upon the order and for the account of their customers. In 1971, the United
States Supreme Court held in INVESTMENT COMPANY INSTITUTE V. CAMP that the
Glass-Steagall Act prohibits a bank from operating a fund for the collective
investment of managing agency accounts. Subsequently, the Board of Governors
of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing or controlling a
-28-
<PAGE> 64
registered, open-end investment company continuously engaged in the issuance of
its shares, but do not prohibit such a holding company or affiliate from acting
as investment adviser, transfer agent and custodian to such an investment
company. In 1981, the United States Supreme Court held in BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM V. INVESTMENT COMPANY INSTITUTE that the Board
did not exceed its authority under the Holding Company Act when it adopted its
regulation and interpretation authorizing bank holding companies and their
non-bank affiliates to act as investment advisers to registered closed-end
investment companies.
Bank of America believes that if the question were properly
presented, a court should hold that Bank of America may perform the services
for the Company contemplated by the investment advisory agreement, the
Prospectuses, and this Statement of Additional Information without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. It
should be noted, however, that there have been no cases deciding whether a bank
may perform services comparable to those performed by Bank of America and
future changes in either federal or state statutes and regulations relating to
permissible activities of banks or trust companies and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations, could prevent
Bank of America from continuing to perform such services for the Company or
from continuing to purchase Company shares for the accounts of its customers.
On the other hand, as described herein, the Funds are
currently distributed by the Distributor, and the Administrator, its parent,
provides the Company with administrative services. If current restrictions
under the Glass-Steagall Act preventing a bank from sponsoring, organizing,
controlling or distributing shares of an investment company were relaxed, the
Company expects that Bank of America would consider the possibility of offering
to perform some or all of the services now provided by the Administrator or the
Distributor. From time to time, legislation modifying such restriction has
been introduced in Congress which, if enacted, would permit a bank holding
company to establish a non-bank subsidiary having the authority to organize,
sponsor and distribute shares of an investment company. If this or similar
legislation were enacted, the Company expects that Bank of America's parent
bank holding company would consider the possibility of one of its non-bank
subsidiaries offering to perform some or all of the services now provided by
the Administrator or the Distributor. It is not possible, of course, to
predict whether or in what form such legislation might be enacted or the terms
upon which Bank of America or such a non-
-29-
<PAGE> 65
bank affiliate might offer to provide services for consideration by the
Company's Board of Directors.
ADMINISTRATOR
- -------------
Concord Holding Corporation (the "Administrator"), with
principal offices at 125 West 55th Street, 11th Floor, New York, New York 10019
and 3435 Stelzer Road, Columbus, Ohio 43219, is a wholly-owned subsidiary of
The BISYS Group, Inc. The Administrator also serves as administrator to
several other investment companies.
The Administrator provides administrative services for the
Funds as described in their Prospectus pursuant to a Basic Administrative
Services Agreement. The agreement will continue in effect with respect to each
Fund until October 31, 1996 and thereafter will be extended with respect to
each Fund for successive periods of one year, provided that each such extension
is specifically approved (a) by vote of a majority of those members of the
Company's Board of Directors who are not interested persons of any party to the
agreement, cast in person at a meeting called for the purpose of voting on such
approval, and (b) the Company's Board of Directors or by vote of a majority of
the outstanding voting securities of such Fund. The agreement is terminable at
any time without penalty by the Company's Board of Directors or by a vote of a
majority of a Fund's outstanding shares upon 60 days' notice to the
Administrator, or by the Administrator upon 90 days' notice to the Company.
For its services under the Basic Administrative Services
Agreement, the Administrator is entitled to receive an administration fee,
accrued daily and payable monthly, at the following annual rates: .10% of the
first $7 billion of each Fund's net assets, plus .09% of the next $3 billion of
each Fund's net assets, plus .08% of each Fund's net assets over $10 billion.
From time to time, the Administrator may waive fees or reimburse the Company
for expenses, either voluntarily or as required by certain state securities
laws.
For the fiscal years ended February 28, 1993, February 28,
1994 and February 28, 1995, the Administrator earned, net of fees waived
pursuant to the administration agreements then in effect, administration fees
of $8,835,608, $12,158,419, and $2,366,035, respectively, from the Prime Fund;
and $2,845,014, $2,717,606, and $2,140,125, respectively, from the Treasury
Fund. For the years indicated, the Administrator did not effect any fee
waivers or expense reimbursements with respect to the Treasury Fund. For the
years ended February 28, 1994 and February 28, 1995, the Administrator waived
fees of $381,513 and $949,233, respectively, with respect to the Prime Fund.
-30-
<PAGE> 66
The Administrator will bear all expenses in connection with
the performance of its services under its Basic Administrative Services
Agreement for the Funds with the exception of fees charged by The Bank of New
York for certain fund accounting services which are borne by the Funds. See
"Custodian and Transfer Agent" below. Expenses borne by the Company include
taxes, interest, brokerage fees and commissions, if any, fees of directors who
are not officers, directors, partners, employees or holders of 5% or more of
the outstanding voting securities of Bank of America or the Administrator or
any of their affiliates, Securities and Exchange Commission fees and state
securities qualification fees, advisory fees, fees payable under the Basic
Administrative Services Agreement, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, outside auditing and legal
expenses, costs of maintaining corporate existence, costs attributable to
investor services, including without limitation telephone and personnel
expenses, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes, cost of shareholders' reports
and corporate meetings and any extraordinary expenses.
The Basic Administrative Services Agreement provides that the
Administrator shall not be liable for any error of judgment or mistake of law
or any loss suffered by any Fund in connection with the matters to which the
agreement relates, except a loss resulting from willful misfeasance, bad faith
or negligence in the performance of the Administrator's duties or from the
reckless disregard by the Administrator of its obligations and duties
thereunder.
Bank of America has received an option entitling it to
purchase approximately 4% of the Administrator's authorized common stock on or
before December 31, 1998.
FEE WAIVERS AND EXPENSE REIMBURSEMENTS
- --------------------------------------
If total expenses borne by either Fund in any fiscal year
exceed the expense limitations imposed by applicable state securities
regulations, the Company may deduct from the payments to be made with respect
to such Fund to Bank of America and the Administrator, respectively, or Bank of
America and the Administrator each will bear, the amount of such excess to the
extent required by such regulations. Such amount, if any, will be estimated
and accrued daily and paid on a monthly basis. As of the date of this
Statement of Additional Information, the most restrictive expense limitation
that may be applicable to the Company limits aggregate annual expenses with
respect to a Fund, including management and advisory fees but excluding
interest,
-31-
<PAGE> 67
taxes, brokerage commissions, and certain other expenses, to 2-1/2% of the
first $30 million of its average daily net assets, 2% of the next $70 million,
and 1-1/2% of its remaining average daily net assets. During the course of the
Company's fiscal year, the Administrator and Bank of America may prospectively
waive payment of fees and/or assume certain expenses of one or more of the
Company's Funds, as a result of competitive pressures and in order to preserve
and protect the business and reputation of the Administrator and Bank of
America. This will have the effect of increasing yield to investors at the
time such fees are not received or amounts are assumed and decreasing yield
when such fees or amounts are reimbursed.
DISTRIBUTOR
- -----------
The Distributor acts as the exclusive distributor of the
shares of both of the Funds pursuant to a distribution agreement with the
Company. Shares are sold on a continuous basis by the Distributor as agent,
although the Distributor is not obliged to sell any particular amount of
shares. The distribution agreement shall continue in effect with respect to
each Fund until October 31, 1996. Thereafter, if not terminated, the
distribution agreement shall continue automatically for successive terms of one
year, provided that such continuance is specifically approved at least annually
(a) by a vote of a majority of those members of the Board of Directors of the
Company who are not parties to the distribution agreement or "interested
persons" of any such party, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the Board of Directors of the Company or
by vote of a "majority of the outstanding voting securities" of the Funds as to
which the distribution agreement is effective; PROVIDED, HOWEVER, that the
distribution agreement may be terminated by the Company at any time, without
the payment of any penalty, by vote of a majority of the entire Board of
Directors of the Company or by a vote of a "majority of the outstanding voting
securities" of such Funds on 60 days' written notice to the Distributor, or by
the Distributor at any time, without the payment of any penalty, on 90 days'
written notice to the Company. This Agreement will automatically and
immediately terminate in the event of its "assignment."
THE DISTRIBUTION AND SERVICES PLAN. The Distributor is also
entitled to payment from the Company for distribution and service fees pursuant
to the Distribution and Services Plan (the "12b-1 Plan") adopted on behalf of
the Class S shares. Under the 12b-1 Plan, the Company may pay the Distributor
for: (a) direct out-of-pocket promotional expenses incurred by the Distributor
in advertising and marketing Class S shares; (b) expenses incurred in
connection with preparing, printing, mailing, and distributing or publishing
advertisements and sales literature for Class S
-32-
<PAGE> 68
shares; (c) expenses incurred in connection with printing and mailing
Prospectuses and Statements of Additional Information to other than current
Class S shareholders; (d) periodic payments or commissions to one or more
securities dealers, brokers, financial institutions or other industry
professionals, such as investment advisors, accountants, and estate planning
firms (severally, "a Distribution Organization") with respect to a Fund's Class
S shares beneficially owned by customers for whom the Distribution Organization
is the Distribution Organization of record or holder of record of such Class S
shares; (e) the direct or indirect cost of financing the payments or expenses
included in (a) and (d) above; or (f) for such other services as may be
construed, by any court or governmental agency or commission, including the
Securities and Exchange Commission, to constitute distribution services under
the 1940 Act or rules and regulations thereunder.
Pursuant to the 12b-1 Plan, the Company may also pay a
Distribution Organizations for administrative support services provided with
respect to its Clients Class S shares. Administrative services provided may
include some or all of the following: (i) processing dividend and distribution
payments from a Fund on behalf of its Clients; (ii) providing information
periodically to its Clients showing their positions in Class S shares; (iii)
arranging for bank wires; (iv) responding to routine Client inquiries
concerning their investment in Class S shares; (v) providing the information to
the Funds necessary for accounting or sub-accounting; (vi) if required by law,
forwarding shareholder communications from a Fund (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to its Clients; (vii) aggregating and processing purchase and
redemption requests from its Clients and placing net purchase and redemption
orders for its Clients; (viii) establishing and maintaining accounts and
records relating to Clients that invest in Class S shares; (ix) assisting
Clients in changing dividend options, account designations and addresses; (x)
developing, maintaining and operating systems necessary to support Sweep
Accounts; or (xi) other similar services if requested by the Company.
The 12b-1 Plan for Class S shares provides that the
Distributor is entitled to receive payments on a monthly basis at an annual
rate not exceeding 1.00% of the average daily net assets during such month of
the outstanding Class S shares to which such 12b-1 Plan relates. Not more than
0.25% of such net assets will be used to compensate Service Organizations for
personal services provided to Class S shareholders and/or the maintenance of
such shareholders' accounts and not more than 0.75% of such net assets will be
used for promotional and other primary distribution activities.
-33-
<PAGE> 69
Payments made out of or charged against the assets of a
particular class of shares of a particular Fund must be in payment for expenses
incurred on behalf of that class.
Payments for distribution expenses under the 12b-1 Plan are
subject to Rule 12b-1 (the "Rule") under the 1940 Act. The Rule defines
distribution expenses to include the cost of "any activity which is primarily
intended to result in the sale of [Company] shares." The Rule provides, among
other things, that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule. In accordance with the Rule,
the 12b-1 Plan provides that a written report of the amounts expended under the
12b-1 Plan, and the purposes for which such expenditures were incurred, will be
made to the Board of Directors for its review at least quarterly. In addition,
the Plan provides that it may not be amended to increase materially the costs
which a Fund may bear for distribution pursuant to the 12b-1 Plan without
shareholder approval and that other material amendments of the 12b-1 Plan must
be approved by a majority of the Board of Directors, and by a majority of the
directors who are neither "interested persons" (as defined in the 1940 Act) of
the Company nor have any direct or indirect financial interest in the operation
of the 12b-1 Plan, or in any agreements entered into in connection with the
12b-1 Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments (the "Non-Interested Plan Directors"). The
selection and nomination of the directors of the Company who are not
"interested persons" of the Company have been committed to the discretion of
the Non-Interested Plan Directors.
The Company's Board of Directors has concluded that there is a
reasonable likelihood that the 12b-1 Plan will benefit the Funds and their
Class S shareholders. The 12b-1 Plan is subject to annual reapproval by a
majority of the Company's Board of Directors, including a majority of the
Non-Interested Plan Directors and is terminable without penalty at any time
with respect to any Fund by a vote of a majority of the Non-Interested Plan
Directors or by vote of the holders of a majority of the outstanding Class S
shares of the Fund involved. Any agreement entered into pursuant to the 12b-1
Plan with a Service Organization is terminable with respect to any Fund without
penalty, at any time, by vote of a majority of the Non-Interested Plan
Directors, by vote of the holders of a majority of the outstanding Class S
shares of such Fund, or by the Service Organization. Each agreement will also
terminate automatically in the event of its assignment.
CUSTODIAN AND TRANSFER AGENT
- ----------------------------
The Bank of New York, 90 Washington Street, New York, New York
10286, has been appointed by the Company as custodian
-34-
<PAGE> 70
for the Funds. Additionally, BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219-3035, has been appointed as transfer and dividend
disbursing agent. The Bank of New York also provides the Company with certain
accounting, bookkeeping, pricing, and dividend and distribution calculation
services pursuant to a fund accounting services agreement with the
Administrator. The monthly fees charged by the bank under the fund accounting
agreement are borne by the Funds. The Company and The Bank of New York have
appointed Bank of America to act as sub-custodian for the Funds pursuant to a
Sub-Custodian Agreement. As sub-custodian of the Company's assets, Bank of
America (i) maintains a separate account or accounts in the name of the
Company, (ii) holds and disburses portfolio securities on account of the
Company, (iii) makes receipts and disbursements of money on behalf of the
Company, (iv) collects and receives all income and other payments and
distributions on account of the Company's portfolio securities held by Bank of
America, (v) responds to correspondence from security brokers and others
relating to its duties and (vi) makes periodic reports to the Company's Board
of Directors concerning its duties thereunder. Under the Sub-Custodian
Agreement, the Company will reimburse Bank of America for its costs and
expenses in providing services thereunder. Bank of America is the successor to
Security Pacific under the Sub-Custodian Agreement. For the fiscal years ended
February 28, 1993, February 28, 1994, and February 28, 1995, Bank of America
(and Security Pacific prior to April 22, 1992) in their capacity as
sub-custodian, did not hold any of the Company's assets and, accordingly,
received no fees.
ADDITIONAL PERFORMANCE INFORMATION
- ----------------------------------
The "yields" and "effective yields" of both Funds are
calculated according to formulas prescribed by the Securities and Exchange
Commission. The standardized seven-day yield for each Fund's series of shares
is computed separately for each series by determining the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account in the
particular Fund involved having a balance of one share at the beginning of the
period, dividing the net change in account value by the value of the account at
the beginning of the base period to obtain the base period return, and
multiplying the base period return by (365/7). The net change in the value of
an account in a Fund includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the original
share and any such additional shares, net of all fees, other than nonrecurring
account or sales charges, that are charged to all shareholder accounts in
proportion to the length of the base period and the Fund's average account
size. The capital changes to be excluded from the calculation of the net
-35-
<PAGE> 71
change in account value are realized gains and losses from the sale of
securities and unrealized appreciation and depreciation. The effective
annualized yields for each Fund are computed by compounding a particular Fund's
unannualized base period returns (calculated as above) by adding 1 to the base
period returns, raising the sums to a power equal to 365 divided by 7, and
subtracting 1 from the results. The fees which may be imposed by institutional
investors directly on their customers for cash management services are not
reflected in the Funds' calculations of yields. The current yields for both of
the Funds may be obtained by calling (800) 227-1545.
From time to time, the yields of the Funds may be quoted in
and compared to other mutual funds with similar investment objectives in
advertisements, shareholder reports or other communications to shareholders.
The Funds may also include calculations in such communications that describe
hypothetical investment results. (Such performance examples will be based on
an express set of assumptions and are not indicative of the performance of any
Fund.) Such calculations may from time to time include discussions or
illustrations of the effects of compounding in advertisements. "Compounding"
refers to the fact that, if dividends or other distributions on a Fund
investment are reinvested by being paid in additional Fund shares, any future
income of a Fund would increase the value of the Fund investment more quickly
than if dividends or other distributions had been paid in cash. The Funds may
also include discussions or illustrations of the potential investment goals of
a prospective investor (including but not limited to tax and/or retirement
planning), investment management techniques, policies or investment suitability
of a Fund, economic conditions, legislative developments (including pending
legislation), the effects of inflation and historical performance of various
asset classes. From time to time advertisements or communications to
shareholders may summarize the substance of information contained in
shareholder reports (including the investment composition of a Fund), as well
as the views of the investment adviser as to current market, economic, trade
and interest rate trends, legislative, regulatory and monetary developments,
investment strategies and related matters believed to be of relevance to a
Fund. The Funds may also include in advertisements charts, graphs or drawings
which illustrate the potential risks and rewards of investment in various
investment vehicles. In addition, advertisements or shareholder communications
may include a discussion of certain attributes or benefits to be derived by an
investment in a Fund and may include testimonials as to the investment
adviser's capabilities by clients. Such advertisements or communications may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein. With proper authorization, a
Fund may reprint articles (or excerpts) written regarding the
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Fund and provide them to prospective shareholders. Performance information
with respect to the Funds is generally available by calling (800) 346-2087.
In addition to the publications listed in the Funds'
Prospectus, yield data as reported in the following publications may be used in
comparing the yields of the Funds to those of other mutual funds with similar
investment objectives: BUSINESS WEEK, INVESTOR'S BUSINESS DAILY, KIPLINGER,
U.S. NEWS, FINANCIAL WORLD, USA TODAY, MORNINGSTAR, MUTUAL FUND MONITOR, and
AMERICAN BANKER.
GENERAL INFORMATION
DESCRIPTION OF SHARES
- ---------------------
The Company is an open-end management investment company
organized as a Maryland corporation on October 27, 1982. The Fund's Charter
authorizes the Board of Directors to issue up to two hundred billion full and
fractional shares of capital stock. The Board of Directors has authorized the
issuance of twenty-two classes of stock - Classes A through W Common Stock,
representing interests in twenty-two separate investment portfolios. Each
share of capital stock has a par value of $.001. This Statement of Additional
Information describes the S Shares of the Prime and Treasury Funds.
Shares have no preemptive rights and only such conversion or
exchange rights as the Board may grant in its discretion. When issued for
payment as described in its Prospectuses, the Company's shares will be fully
paid and non-assessable. For information concerning possible restrictions upon
the transferability of the Company's shares and redemption provisions with
respect to such shares, see "Additional Purchase and Redemption Information" in
this Statement of Additional Information.
The Funds' X Shares, Pacific Horizon, Horizon Shares and
Horizon Service Shares differ from S Shares in the following respects. Only S
Shares bear the fees payable under the 12b-1 Plan that has been adopted for S
Shares, which are payable at the rate of up to 1.00% (on an annualized basis)
of the average daily net asset value of the S Shares that are outstanding from
time to time. X Shares bear the fees payable under the distribution and
services plan that has been adopted for X Shares which are payable at the rate
of up to 0.55% (on an annualized basis) of the average daily net asset value of
the X Shares that are outstanding from time to time. Pacific Horizon Shares
bear the fees payable under the Administrative Services Plan that has been
adopted for Pacific Horizon Shares, which are
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payable at the rate of .32% (on an annualized basis) of the average daily net
asset value of the Pacific Horizon Shares that are outstanding from time to
time. Horizon Service Shares bear the fees payable under the Shareholder
Services Plan that has been adopted for Horizon Service Shares, which are
payable at the rate of up to .25% (on an annualized basis) of the average daily
net asset value of the Horizon Service Shares that are outstanding from time to
time as described in the Prospectuses for such shares. As a result, at any
given time, the net yield on a Fund's S Shares will be approximately 0.45%
lower than the yield on a Fund's X Shares (only the Prime Fund has issued Class
X Shares), 0.68% lower than the yield on a Fund's Pacific Horizon Shares; 0.75%
lower than the yield on a Fund's Horizon Service Shares and 1.00% lower than
the yield on a Fund's Horizon Shares. Standardized yield quotations will be
computed separately for each series of Shares.
Holders of the outstanding shares of a particular Fund will
vote together in the aggregate and not by class on all matters, except that
only S and X Shares (only the Prime Fund has issued Class X Shares) of a Fund
will be entitled to vote on matters submitted to a vote of shareholders
pertaining to their respective 12b-1 Plans. Pacific Horizon Shares of a Fund
will be entitled to vote on matters submitted to a vote of shareholders
pertaining to its respective Administrative Services Plan and only Horizon
Service Shares of a Fund will be entitled to vote on matters submitted to a
vote of shareholders pertaining to its respective Shareholder Services Plan.
Further, shareholders of both Funds, as well as those of any other investment
portfolio now or hereafter offered by the Company, will vote together in the
aggregate and not separately on a Fund-by-Fund basis, except as otherwise
required by law or when permitted by the Board of Directors. Rule 18f-2 under
the 1940 Act provides that any matter required to be submitted to the holders
of the outstanding voting securities of an investment company such as the
Company shall not be deemed to have been effectively acted upon unless approved
by a majority of the outstanding shares of each Fund affected by the matter. A
Fund is affected by a matter unless it is clear that the interests of each Fund
in the matter are substantially identical or that the matter does not affect
any interest of the Fund. Under the Rule, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a Fund only if approved by a majority of
the outstanding shares of such Fund. However, the Rule also provides that the
ratification of independent public accountants, the approval of principal
underwriting contracts and the election of directors may be effectively acted
upon by shareholders of the Company voting in the aggregate without regard to
particular Funds.
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<PAGE> 74
Notwithstanding any provision of Maryland law requiring a
greater vote of the Company's common stock (or of the shares of a Fund voting
separately as a class) in connection with any corporate action, unless
otherwise provided by law (for example, by Rule 18f-2 discussed above) or by
the Company's Charter, the Company may take or authorize such action upon the
favorable vote of the holders of more than 50% of the outstanding common stock
of the Company voting without regard to class.
REPORTS
- -------
Shareholders will be sent unaudited semi-annual reports
describing the Funds' investment operations and annual financial statements
together with a report of independent accountants.
COUNSEL
- -------
Drinker Biddle & Reath (of which W. Bruce McConnel, III,
Secretary of the Company, is a partner), 1345 Chestnut Street, Philadelphia
National Bank Building, Philadelphia, Pennsylvania 19107, serves as counsel to
the Company and will pass upon the legality of the shares offered hereby.
INDEPENDENT ACCOUNTANTS
- -----------------------
Price Waterhouse LLP, independent accountants, with offices at
1177 Avenue of the Americas, New York, New York 10036, has been selected as
independent accountants of the Company for the fiscal year ending February 28,
1996.
MISCELLANEOUS
- -------------
As used in the Prospectus and this Statement of Additional
Information, a "vote of a majority" of the outstanding shares of a Fund or a
particular series means, with respect to the approval of an investment advisory
agreement, a distribution plan or a change in a fundamental investment policy,
the affirmative vote of the lesser of (a) more than 50% of the outstanding
shares of the Fund or such series, or (b) 67% of the shares of the Fund or
series present at a meeting at which more than 50% of the outstanding shares of
the Fund or series are represented in person or by proxy.
At February 10, 1996, the name, address and share ownership of
the entities which held more than 5% of the outstanding Pacific Horizon Shares
of the Treasury Fund were as follows: Hare & Company, Bank of New York and
Short Term Investment Funds, Attn: Bimal Saha, One Wall Street, New York, NY
10286, 106,860,148.040 shares (9.85%); BA Investment Services, Inc., For the
Benefit of Clients, P.O. Box 7042, Attn: Unit #7852 - Bob Santilli, San
Francisco, CA 94120, 199,971,028.65
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<PAGE> 75
shares (18.43%); and Bank of America State Trust Company, 299 N. Euclid Avenue,
Pasadena, CA 91101, 663,427,955.10 shares (61.15%).
At February 10, 1996, the name, address and share ownership of
the entities which held more than 5% of the outstanding Horizon Service Shares
of the Treasury Fund were as follows: Omnibus Account Horizon for the
Shareholder Accounts Maintained By Concord Financial Services, Inc., Attn:
Linda Zerbe, First and Market Building, 100 First Avenue, Suite 300,
Pittsburgh, PA 15222, 142,805,428.42 shares (14.09%); and Omnibus Account for
the Shareholder Accounts Maintained By Concord Financial Services, Inc., Attn:
Linda Zerbe, First and Market Building, 100 First Avenue, Suite 300,
Pittsburgh, PA 15222, 291,827,859.37 shares (28.80%).
At February 10, 1996, the name, address and share ownership of
the entities which held more than 5% of the outstanding Horizon Service Shares
of the California Tax-Exempt Money Market Fund were as follows: Omnibus Account
For the Shareholder Accounts Maintained By Concord Financial Services, Inc.,
Attn: Linda Zerbe, First and Market Building, 100 First Avenue, Suite 300,
Pittsburgh, PA 15222, 28,670,044.87 shares (13.68%); and Omnibus Account For
the Shareholder Accounts Maintained By Concord Financial Services, Inc., Attn:
Linda Zerbe, First and Market Building, 100 First Avenue, Suite 300,
Pittsburgh, PA 15222, 82,951,311.59 shares (39.57%).
At February 10, 1996, the name, address and share ownership of
the entities which held more than 5% of the outstanding Pacific Horizon Shares
of the Prime Fund were as follows: Hare & Co., Bank of New York, and Short Term
Investment Funds, Attn: Bimal Saha, One Wall Street, New York, NY 10286,
175,865,801.62 shares (8.63%); and BA Investment Services, Inc., For the
Benefit of Clients, P.O. Box 7042, Attn: Unit #7852 - Bob Santilli, San
Francisco, CA 94120, 1,527,007,320.95 shares (74.90%).
At February 10, 1996, the name, address and share ownership of
the entities which held more than 5% of the outstanding Horizon Service Shares
of the Government Fund were as follows: COHU, Inc., 5755 Kearny Villa Road, San
Diego, CA 92123, 29,628,758.15 shares (13.08%); Toasty, Ltd., Leslie L.
Alexander, One Greenway Plaza, Suite 645, Houston, TX 77046, 12,958,038.58
shares (5.72%); Rocket Ball, Ltd., One Greenway Plaza, Suite 645, Houston, TX
77046, 19,720,740.540 shares (8.70%); Omnibus Account for the Shareholder
Accounts Maintained By Concord Financial Services, Inc., Attn: Linda Zerbe,
First and Market Building, 100 First Avenue, Suite 300, Pittsburgh, PA 15222,
34,049,721.71 shares (15.03%); Good Health Plan of Washington, Attn: Linda Lam
Ha, 1501 4th Avenue, Suite 500,
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<PAGE> 76
Seattle, WA 98101, 12,209,081.11 shares (5.39%); and Providence Health Care,
Attn: Linda Lam Ha, 1501 4th Avenue, Suite 500, Seattle, WA 98101-1621,
14,832,444.90 shares (6.55%).
At such dates, no other person was known by the Company to
hold of record or beneficially more than 5% of the outstanding shares of any
investment portfolio of the Company.
FINANCIAL STATEMENTS AND EXPERTS
- --------------------------------
The Annual Reports for each Fund for their fiscal year or
periods ended February 28, 1995 and the Semi-Annual Report for the period ended
August 31, 1995 (the "Annual Reports" and "Semi-Annual Reports" respectively)
accompanies this Statement of Additional Information. The financial statements
and notes thereto in each Annual Report and Semi-Annual Report are incorporated
in this Statement of Additional Information by reference. The financial
statements and notes in each Annual Report have been audited by Price
Waterhouse LLP, whose report thereon also appears in each Annual Report and is
also incorporated herein by reference. Such financial statements have been
incorporated herein in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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APPENDIX A
----------
COMMERCIAL PAPER RATINGS
- ------------------------
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."
"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial charges and high internal cash
generation; and well established access to a range of financial markets and
assured sources of alternate liquidity.
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<PAGE> 78
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other
protection factors qualify issue as investment grade. Risk
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<PAGE> 79
factors are larger and subject to more variation. Nevertheless, timely payment
is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as the "F-1+" and "F-1"
categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of credit issued by
a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one
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year or less which is issued by United States commercial banks, thrifts and
non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations supported by the highest capacity for
timely repayment.
"A1" - Obligations are supported by the highest capacity for
timely repayment.
"A2" - Obligations are supported by a satisfactory capacity
for timely repayment, although such capacity may be susceptible to adverse
changes in business, economic or financial conditions.
"A3" - Obligations are supported by a satisfactory capacity
for timely repayment. Such capacity is more susceptible to adverse changes in
business, economic or financial conditions than for obligations in higher
categories.
"B" - Obligations for which the capacity for timely repayment
is susceptible to adverse changes in business, economic or financial
conditions.
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<PAGE> 81
"C" - Obligations for which there is an inadequate capacity to
ensure timely repayment.
"D" - Obligations which have a high risk of default or which
are currently in default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------
The following summarizes the ratings used by Standard & Poor's
for corporate and municipal debt:
"AAA" - This designation represents the highest rating
assigned by Standard & Poor's to a debt obligation and indicates an extremely
strong capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in small
degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The
"BB" rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB- " rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and
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<PAGE> 82
principal repayments. Adverse business, financial or economic conditions will
likely impair capacity or willingness to pay interest and repay principal. The
"B" rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or interest return
is indexed to equities, commodities, or currencies; certain swaps and options;
and interest only and principal only mortgage securities.
The following summarizes the ratings used by Moody's for
corporate and municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They
carry the smallest degree of investment risk and are
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generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than in
"Aaa" securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the
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<PAGE> 84
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issuer ranks at the lower end of
its generic rating category.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when
due. Debt rated "B" possesses the risk that obligations will not be met when
due. Debt rated "CCC" is well below investment grade and has considerable
uncertainty as to timely payment of principal, interest or preferred dividends.
Debt rated "DD" is a defaulted debt obligation, and the rating "DP" represents
preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major
categories.
The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong
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<PAGE> 85
as bonds rated "AAA." Because bonds rated in the "AAA" and "AA" categories are
not significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For defaulted bonds, the
rating "DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standing within these major
rating categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
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<PAGE> 86
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree
of speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB"
A-10
<PAGE> 87
are, however, more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus (+)
designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit
risk and long-term risk. The following summarizes the ratings by Moody's
Investors Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the
best quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
A-11
<PAGE> 88
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be less
well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having protection commonly
regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative
quality and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-12
<PAGE> 89
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A hereof:
Financial Highlights for:
- Prime Fund
- Treasury Fund
(2) Incorporated by reference into Part B
hereof:
- The audited financial statements, related
notes thereto and the Auditor's reports
thereon included in the Registrant's
Annual Report to Pacific Horizon
Shareholders of the Prime and Treasury
Funds (the "Funds") dated February 28,
1995 are incorporated herein by
reference.
- The unaudited financial statements and
related notes thereto included in the
Registrant's Semi-Annual Report to
Pacific Horizon Shareholders of the Prime
and Treasury Funds dated August 31, 1995
are incorporated herein by reference.
(b) Exhibits:
(1) (a) Restated Articles of Incorporation
filed November 22, 1983 are
incorporated by reference to
Exhibit 1(a) to Post-Effective
Amendment No. 45 to the
Registration Statement of the
Registrant on Form N-1A (Nos.
2-81110/811-4293) filed February
23, 1996 ("Post-Effective Amendment
No. 45").
(b) Articles Supplementary filed January
9, 1986 are incorporated by
reference to Exhibit 1(b) to
Post-Effective Amendment No. 45.
<PAGE> 90
(c) Articles Supplementary to increase
authorized capital stock filed
August 31, 1989 are incorporated by
reference to Exhibit 1(c) to Post-
Effective Amendment No. 45.
(d) Articles Supplementary classifying
shares filed August 31, 1989 are
incorporated by reference to Exhibit
1(d) to Post-Effective Amendment No.
45.
(e) Articles Supplementary classifying
shares filed June 3, 1991 are
incorporated by reference to Exhibit
1(e) to Post-Effective Amendment No.
45.
(f) Articles Supplementary classifying
and reclassifying shares filed
August 1, 1991 are incorporated by
reference to Exhibit 1(f) to
Post-Effective Amendment No. 45.
(g) Articles Supplementary to increase
authorized capital stock filed
August 16, 1991 are incorporated by
reference to Exhibit 1(g) to
Post-Effective Amendment No. 45.
(h) Articles Supplementary classifying
shares filed August 16, 1991 are
incorporated by reference to Exhibit
1(h) to Post-Effective Amendment No.
45.
(i) Articles Supplementary classifying
shares filed November 25, 1991 are
incorporated by reference to Exhibit
1(i) to Post-Effective Amendment No.
45.
(j) Articles Supplementary classifying
shares filed May 11, 1992 are
incorporated by reference to Exhibit
1(j) to Post-Effective Amendment No.
45.
(k) Articles Supplementary reclassifying
shares filed May 15, 1992 are
incorporated by reference to Exhibit
<PAGE> 91
1(k) to Post-Effective Amendment
No. 45.
(l) Articles Supplementary classifying
shares filed July 20, 1992 are
incorporated by reference to Exhibit
1(l) to Post-Effective Amendment No.
45.
(m) Articles Supplementary to increase
authorized capital stock filed
August 6, 1992 are incorporated by
reference to Exhibit 1(m) to
Post-Effective Amendment No. 45.
(n) Articles Supplementary classifying
shares filed August 6, 1992 are
incorporated by reference to Exhibit
1(n) to Post-Effective Amendment No.
45.
(o) Articles Supplementary classifying
shares filed March 3, 1993 are
incorporated by reference to Exhibit
1(o) to Post-Effective Amendment No.
45.
(p) Articles Supplementary reclassifying
shares filed May 12, 1993 are
incorporated by reference to Exhibit
1(p) to Post-Effective Amendment No.
45.
(q) Articles of Amendment eliminating
restriction on number of classes of
shares filed May 8, 1990 are
incorporated by reference to Exhibit
1(q) to Post-Effective Amendment No.
45.
(r) Articles of Amendment reclassifying
shares filed on July 9, 1993 are
incorporated by reference to Exhibit
1(r) to Post-Effective Amendment No.
45.
(s) Articles Supplementary classifying
shares filed November 18, 1993 are
incorporated by reference to Exhibit
1(s) to Post-Effective Amendment No.
45.
(t) Articles Supplementary reclassifying
shares filed November 18, 1993 are
incorporated by reference to Exhibit
<PAGE> 92
1(t) to Post-Effective Amendment No.
45.
(u) Articles Supplementary reclassifying
shares filed January 21, 1994 are
incorporated by reference to Exhibit
1(u) to Post-Effective Amendment
No. 45.
(v) Articles of Amendment cancelling
shares filed on January 26, 1996 are
incorporated by reference to Exhibit
1(v) to Post-Effective Amendment No.
45.
(w) Articles Supplementary classifying
shares filed on January 26, 1996 are
incorporated by reference to Exhibit
1(w) to Post-Effective Amendment No.
45.
(x) Articles Supplementary reclassifying
shares filed on January 26, 1996 are
incorporated by reference to Exhibit
1(x) to Post-Effective Amendment No.
45.
(2) (a) Amended By-Laws dated January 15,
1987 are incorporated by reference
to Exhibit 2(a) to Post-Effective
Amendment No. 45.
(b) Amendment to By-Laws dated July 17,
1987 is incorporated by reference to
Exhibit 2(b) to Post-Effective
Amendment No. 45.
(c) Amendment to By-Laws as approved by
the Registrant's Board of Directors
on March 30, 1989 is incorporated by
reference to Exhibit 2(c) to Post-
Effective Amendment No. 45.
(d) Amendment to By-Laws as approved by
the Registrant's Board of Directors
on January 29, 1990 is incorporated
by reference to Exhibit 2(d) to
Post-Effective Amendment No. 45.
(3) None.
(4) (a) Specimen copy of share certificate
for all Classes and Series of Shares
is incorporated by reference to
Exhibit (4)(a) to Post-Effective
Amendment No. 37 to Registration
Statement on Form N- 1A (Nos.
2-81110/811-4293) filed July
<PAGE> 93
1, 1994 ("Post-Effective Amendment
No. 37").
(5) (a) Investment Advisory Agreement dated
as of April 22, 1992 between
Registrant and Bank of America
National Trust and Savings
Association (Money Market Funds) is
incorporated by reference to Exhibit
5(a) to Post-Effective Amendment No.
45.
(b) Investment Advisory Agreement dated
as of April 22, 1992 between
Registrant and Bank of America
National Trust and Savings
Association (Non-Money Market Funds)
is incorporated by reference to
Exhibit 5(b) to Post-Effective
Amendment No. 45.
(c) Addendum to Investment Advisory
Agreement dated as of March 1, 1993
between Registrant and Bank of
America National Trust and Savings
Association (Money Market Funds -
Prime Value Fund) is incorporated by
reference to Exhibit 5(c) to
Post-Effective Amendment No. 45.
(d) Addendum to Investment Advisory
Agreement dated as of March 1, 1993
between Registrant and Bank of
America National Trust and Savings
Association (Money Market Funds -
Government and Treasury Only Funds)
is incorporated by reference to
Exhibit 5(d) to Post- Effective
Amendment No. 45.
(e) Investment Advisory Agreement dated
November 1, 1994 between Registrant
and Bank of America with respect to
the Capital Income Fund is
incorporated by reference to Exhibit
5(e) to Post-Effective Amendment No.
45.
(6) (a) Distribution Agreement between the
Registrant and Concord Financial
Group, Inc. is incorporated by
reference to Exhibit 6(a) to
Post-Effective Amendment No. 45.
(b) Agreement relating to the
Distribution Agreement between
Registrant and Concord
<PAGE> 94
Financial Group, Inc. is
incorporated by reference to Exhibit
6(b) to Post-Effective Amendment
No. 45.
(c) Form of Broker/Dealer Agreement is
incorporated by reference to Exhibit
6(c) to Post-Effective Amendment No.
45.
(d) Form of Bank Agreement is
incorporated by reference to Exhibit
6(d) to Post-Effective Amendment
No. 45.
(e) Form of Amended and Restated
Distribution Agreement is
incorporated by reference to Exhibit
(6)(e) to Post-Effective Amendment
No. 42 to the Registration Statement
of the Registrant on Form N-1A (Nos.
2-81110/811-4293) filed July 31,
1995 ("Post-Effective Amendment No.
42").
(7) Board Guidelines on Significant
Governance Issues (which includes a
description of the Board of
Director's retirement policy and
benefit) are incorporated by
reference to Exhibit 7 to
Post-Effective Amendment No. 45.
(8) (a) Custody Agreement between Registrant
and The Bank of New York dated as of
April 3, 1989 is incorporated by
reference to Exhibit 8(a) to Post-
Effective Amendment No. 45.
(b) Amendment No. 1 to Custody Agreement
between Registrant and The Bank of
New York dated as of March 30, 1990
is incorporated by reference to
Exhibit 8(b) to Post-Effective
Amendment No. 45.
(c) Custodian Services Agreement between
Registrant and PNC Bank, N.A is
incorporated by reference to Exhibit
8(c) to Post-Effective Amendment No.
45.
(d) Form of Transfer Agency Agreement
between Registrant and BISYS Fund
Services Ohio, Inc. is incorporated
by reference to Exhibit 8(d) to
Post-Effective Amendment No. 43 to
the
<PAGE> 95
Registration Statement of the
Registrant on Form N-1A (Nos.
2-81110/811-4293) filed on December
15, 1995 ("Post-Effective Amendment
No. 43").
(e) Sub-Custodian Agreement between
Registrant, The Bank of New York,
and Security Pacific National Bank
is incorporated by reference to
Exhibit 8(e) to Post-Effective
Amendment No. 45.
(f) Sub-Custodian Agreement between The
Bank of New York and Citibank, N.A.
dated May 18, 1988 is incorporated
by reference to Exhibit 8(f) to
Post- Effective Amendment No. 45.
(g) Form of Sub-Custody Agreement
between The Bank of New York and
Bank of America National Trust and
Savings Association is incorporated
by reference to Exhibit (8)(i) to
Post-Effective Amendment No. 37.
(9) (a) Basic Administrative Services
Agreement between Registrant and
Concord Holding Corporation (Money
Market Funds) dated as of November
13, 1989 is incorporated by
reference to Exhibit 9(a) to Post-
Effective Amendment No. 45.
(b) Amendment No. 1 to Basic
Administrative Services Agreement
between Registrant and Concord
Holding Corporation (Money Market
Funds) dated November 1, 1991 is
incorporated by reference to Exhibit
9(b) to Post-Effective Amendment No.
45.
(c) Amendment No. 2 to Basic
Administrative Services Agreement
dated as of March 1, 1993 between
Registrant and Concord Holding
Corporation (Money Market Funds) is
incorporated by reference to Exhibit
9(c) to Post-Effective Amendment No.
45.
(d) Amendment No. 3 to Basic
Administrative Services Agreement
dated as of March 1, 1993 between
Registrant and Concord Holding
Corporation is incorporated by
<PAGE> 96
reference to Exhibit 9(d) to Post-
Effective Amendment No. 45.
(e) Amendment No. 4 to Basic
Administrative Services Agreement
dated November 1, 1993 between
Registrant and Concord Holding
Corporation is incorporated by
reference to Exhibit 9(e) to Post-
Effective Amendment No. 45.
(f) Amendment No. 5 to Basic
Administrative Services Agreement
dated November 1, 1995.
(g) Agreement relating to the Basic
Administrative Services Agreement
between Registrant and Concord
Holding Corporation is incorporated
by reference to Exhibit 9(f) to
Post-Effective Amendment No. 45.
(h) Special Management Services
Agreement among Registrant, Concord
Holding Corporation and Bank of
America National Trust and Savings
Association (Money Market Funds)
dated as of April 22, 1992 is
incorporated by reference to Exhibit
9(g) to Post-Effective Amendment No.
45.
(i) Amendment No. 1 to Special
Management Services Agreement dated
as of March 1, 1993 between
Registrant, Concord Holding
Corporation and Bank of America
National Trust and Savings
Association (Money Market Funds) is
incorporated by reference to Exhibit
9(h) to Post-Effective Amendment
No. 45.
(j) Amendment No. 2 to Special
Management Services Agreement dated
as of March 1, 1993 among
Registrant, Concord Holding
Corporation and Bank of America
National Trust and Savings
Association (Money Market Funds) is
incorporated by reference to Exhibit
9(i) to Post-Effective Amendment
No. 45.
(k) Amendment No. 3 to Special
Management Services Agreement dated
as of April 1, 1993 among
Registrant, Concord Holding
Corporation and Bank of America
National
<PAGE> 97
Trust and Savings Association (Money
Market Funds) is incorporated by
reference to Exhibit 9(j) to Post-
Effective Amendment No. 45.
(l) Amendment No. 4 to Special
Management Services Agreement among
Registrant, Concord Holding
Corporation and Bank of America
National Trust and Savings
Association (Money Market Funds) is
incorporated by reference to Exhibit
9(k) to Post-Effective Amendment No.
45.
(m) Agreement relating to the Special
Management Services Agreement among
Registrant, Concord Holding
Corporation and Bank of America
National Trust and Savings
Association (Money Market Funds) is
incorporated by reference to Exhibit
9(l) to Post-Effective Amendment No.
45.
(n) Administration Agreement between
Registrant and Concord Holding
Corporation (Non-Money Market Funds)
dated as of November 13, 1989 is
incorporated by reference to Exhibit
9(m) to Post-Effective Amendment No.
45.
(o) Amendment No. 1 to Administration
Agreement between Registrant and
Concord Holding Corporation
(Aggressive Growth Fund, U.S.
Government Securities Fund, Capital
Income Fund and California Tax-
Exempt Bond Fund) dated as of
November 1, 1991 is incorporated by
reference to Exhibit 9(n) to
Post-Effective Amendment No. 45.
(p) Amendment No. 2 to Administration
Agreement between Registrant and
Concord Holding Corporation
(non-Money Market Funds) is
incorporated by reference to Exhibit
9(o) to Post-Effective Amendment No.
45.
(q) Amendment No. 3 to the
Administration Agreement between
Registrant and Concord Holding
Corporation (non-Money Market Funds)
is incorporated by reference to
Exhibit 9(p) to Post-Effective
Amendment No. 45.
<PAGE> 98
(r) Amendment No. 4 to the
Administration Agreement between
Registrant and Concord Holding
Corporation (non-Money Market Funds)
is incorporated by reference to
Exhibit 9(q) to Post-Effective
Amendment No. 45.
(s) Amendment No. 5 to Administration
Agreement dated November 1, 1995.
(t) Agreement relating to the
Administration Agreement between
Registrant and Concord Holding
Corporation (non-Money Market Funds)
is incorporated by reference to
Exhibit 9(r) to Post-Effective
Amendment No. 45.
(u) Cash Management and Related Services
Agreement between Registrant and The
Bank of New York (Horizon Shares and
Horizon Service Shares) dated as of
May 1, 1990 is incorporated by
reference to Exhibit 9(s) to
Post-Effective Amendment No. 45.
(v) Amendment to Cash Management and
Related Services Agreement between
Registrant and The Bank of New York
dated as of June 21, 1993 is
incorporated by reference to Exhibit
9(t) to Post-Effective Amendment No.
45.
(w) Accounting Services Agreement
between the Registrant and Provident
Financial Processing Corp is
incorporated by reference to Exhibit
9(u) to Post- Effective Amendment
No. 45.
(10)1 Opinion of counsel that shares are
validly issued, fully paid and
non-assessable.
(11) (a) Consent of Drinker Biddle & Reath.
(b) Consent of Price Waterhouse, LLP.
- ----------
1 Filed with the SEC on April 28, 1995 under Rule 24f-2 as part of
Registrant's 24f-2 Notice.
<PAGE> 99
(12) None
(13) (a) Purchase Agreement between
Registrant and The Dreyfus
Corporation is incorporated by
reference to Exhibit 13(a) to
Post-Effective Amendment No. 45.
(b) Purchase Agreement between
Registrant and Hambrecht & Quist
Group, Inc. dated March 31, 1988 is
incorporated by reference to Exhibit
13(b) to Post-Effective Amendment
No. 45.
(c) Investment Letter of Concord
Financial Group, Inc. to The Horizon
Funds is incorporated by reference
to Exhibit 13(c) to Post-Effective
Amendment No. 45.
(d) Purchase Agreement between Pacific
Horizon Tax-Exempt Money Market
Portfolio, Inc. and Hambrecht &
Quist Group, Inc. is incorporated by
reference to Exhibit 13(d) to
Post-Effective Amendment No. 45.
(e) Purchase Agreement between Pacific
Horizon Tax-Exempt Money Market
Portfolio, Inc. and Pacific Horizon
Tax- Exempt Funds, Inc. is
incorporated by reference to Exhibit
13(e) to Post- Effective Amendment
No. 45.
(f) Purchase Agreement between Pacific
Horizon Tax-Exempt Money Market
Portfolio, Inc. and The Dreyfus
Corporation is incorporated by
reference to Exhibit 13(f) to
Post-Effective Amendment No. 45.
(g) Purchase Agreement between Pacific
Horizon California Tax-Exempt Bond
Portfolio, Inc. and Hambrecht &
Quist Group, Inc. is incorporated by
reference to Exhibit 13(g) to
Post-Effective Amendment No. 45.
(h) Purchase Agreement between Pacific
Horizon California Tax-Exempt Bond
Portfolio, Inc. and The Dreyfus
Corporation is incorporated by
reference
<PAGE> 100
to Exhibit 13(h) to Post-Effective
Amendment No. 45.
(i) Purchase Agreement between Pacific
Horizon California Tax-Exempt Bond
Portfolio, Inc. and Pacific Horizon
Tax- Exempt Funds, Inc. is
incorporated by reference to Exhibit
13(i) to Post-Effective Amendment
No. 45.
(j) Investment Letter of Concord
Financial Group, Inc. to The Horizon
Capital Funds is incorporated by
reference to Exhibit 13(j) to
Post-Effective Amendment No. 45.
(14) (a) Individual Retirement Account and
accompanying Custodial Agreement,
Disclosure Statement, IRA
Application and IRA
Transfer/Rollover Request Form is
incorporated by reference to Exhibit
14(a) to Post-Effective Amendment
No. 45.
(b) Appointment of Successor Custodian
for Individual Retirement Account
dated as of August 3, 1990 is
incorporated by reference to Exhibit
14(b) to Post-Effective Amendment
No. 45.
(15) (a) Shareholder Service Plan for
Non-Money Market Funds is
incorporated by reference to Exhibit
15(a) to Post- Effective Amendment
No. 45.
(b) Shareholder Services Plan for
Horizon Service Shares as modified
by Registrant's Board of Directors
on January 29, 1993 is incorporated
by reference to Exhibit 15(b) to
Post- Effective Amendment No. 45.
(c) Revised Shareholder Servicing
Agreement is incorporated by
reference to Exhibit 15(c) to
Post-Effective Amendment No. 45.
(d) Revised Shareholder Service
Agreement as modified by
Registrant's Board of Directors on
January 29, 1993 is incorporated by
reference to Exhibit
<PAGE> 101
15(d) to Post-Effective Amendment
No. 45.
(e) Revised Shareholder Servicing
Agreement for Non-Money Market Funds
is incorporated by reference to
Exhibit 15(e) to Post-Effective
Amendment No. 45.
(f) Distribution and Services Plan and
related Distribution and
Administrative Servicing Agreement
is incorporated by reference to
Exhibit 15(f) to Post-Effective
Amendment No. 45.
(g) Administrative Services Plan and
Form of Administrative Services
Agreement is incorporated by
reference to Exhibit 15(g) to
Post-Effective Amendment No. 45.
(16) (a) Schedule for Computation of
Performance Quotations with respect
to the Prime Fund, Treasury Fund,
Tax-Exempt Money Fund, Tax-Exempt
Money Market Fund, California
Tax-Exempt Money Market Fund,
Aggressive Growth Fund, California
Tax- Exempt Bond Fund, U.S.
Government Securities Fund (formerly
known as the GNMA Extra Fund) and
Capital Income Fund (formerly known
as the Convertible Securities Fund)
is incorporated by reference to
Exhibit 16(a) to Post-Effective
Amendment No. 45.
(b) Schedule for Computation of
Performance Quotations with respect
to the Government Fund, Treasury
Only Fund and Prime Value Fund is
incorporated by reference to Exhibit
16(b) to Post-Effective Amendment
No. 45.
(c) Schedule for Computation of
Performance Quotations with respect
to the Corporate Bond Fund, Flexible
Bond Fund, Blue Chip Fund, Asset
Allocation Fund and National
Municipal Bond Fund is incorporated
by reference to Exhibit 16(c) to
Post-Effective Amendment No. 45.
(17) Financial Data Schedules.
<PAGE> 102
(18) Amended and Restated Plan Pursuant to Rule
18f-3 for Operation of a Multi-Class System
is incorporated by reference to Exhibit 18
to Post- Effective Amendment No. 45.
24(a) The audited financial statements,
related notes thereto and the Auditor's
reports included in the Annual Report
dated February 28, 1995 for the Pacific
Horizon Shares of the Prime Fund,
Treasury Fund, Government Fund, Treasury
Only Fund, Tax-Exempt Money Fund and
California Tax-Exempt Money Market Fund
are incorporated by reference to Exhibit
24(a) to Post-Effective Amendment No.
45.
24(b) The unaudited financial statements and
related notes thereto included in the
Semi-Annual Report dated August 31, 1995
for the Pacific Horizon Shares of the
Prime Fund, Treasury Fund, Government
Fund, and Treasury Only Fund are
incorporated by reference to Exhibit
24(b) to Post-Effective Amendment No.
45.
Item 25. Persons Controlled by or under
Common Control with Registrant
------------------------------
Registrant is controlled by its Board of Directors.
<PAGE> 103
Item 26. Number of Holders of Securities
-------------------------------
Number of Record
Holders as of
Title of Class February 2, 1996
--------------
Class A Common Stock 1207
Class A Common Stock - 575
Special Series 1
Class A Common Stock - 0
Special Series 2
Class B Common Stock 12,573
Class B Common Stock - 1,049
Special Series 1
Class B Common Stock - 0
Special Series 2
Class D Common Stock 14,758
Class E Common Stock 4,657
Class F Common Stock 16,282
Class G Common Stock 4,541
Class H Common Stock
Class I Common Stock 161
Class I Common Stock - 55
Special Series 1
Class I Common Stock - 0
Special Series 2
Class J Common Stock 597
Class J Common Stock - 186
Special Series 1
Class K Common Stock 750
Class K Common Stock - 125
Special Series 1
Class K Common Stock - 0
Special Series 2
Class L Common Stock 135
Class L Common Stock - 191
Special Series 1
Class L Common Stock - 0
Special Series 2
Class M Common Stock 539
Class N Common Stock 5,278
Class O Common Stock 1,677
Class Q Common Stock 340
Class R Common Stock 0
Class S Common Stock 0
Class T Common Stock 0
Class U Common Stock 0
Class V Common Stock 0
Class W Common Stock 2,549
Item 27. Indemnification
---------------
Article VII, Section 3, of Registrant's Restated Articles of
Incorporation, incorporated herein by reference as Exhibit (1)(a) hereto, and
Article VI, Section 2, of Registrant's By-Laws, incorporated herein by reference
as Exhibit (2)(a) hereto, provide for the indemnification of
<PAGE> 104
Registrant's directors and officers. Indemnification of the Fund's principal
underwriter, custodians, sub-custodians, transfer agent and sub-transfer agent
is provided for, respectively, in Article V of the Distribution Agreement,
incorporated herein by reference as Exhibit (6)(a), Article XV (and in Article V
of the amended and restated Distribution Agreement incorporated herein by
reference as Exhibit (6)(e)), Section 15 of the Custody Agreement incorporated
herein by reference as Exhibit (8)(a) hereto, Article III, Section 4 of the
Sub-Custodian Agreement, incorporated herein by reference as Exhibit (8)(f)
hereto, and Section 8 of the form of Sub-Custody Agreement incorporated herein
by reference as Exhibit (8)(g), Article VIII, Section 7, of the form of Transfer
Agency Agreement incorporated herein by reference as Exhibit (8)(d), and Article
VI, Section 3, of the Cash Management and Related Services Agreement
incorporated herein by reference as Exhibit (9)(s) hereto. Registrant has
obtained from a major insurance carrier a directors and officers' liability
policy covering certain types of errors and omissions. In no event will
Registrant indemnify any of its directors, officers, employees or agents against
any liability to which such person would otherwise be subject by reason of his
willful misfeasance, bad faith or gross negligence in the performance of his
duties or by reason of his reckless disregard of the duties involved in the
conduct of his office or under his agreement with Registrant. Registrant will
comply with Rule 484 under the Securities Act of 1933 and Release 11330 under
the Investment Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE> 105
Item 28. Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
Bank of America National Trust and Savings Association ("Bank
of America") performs investment advisory services for Registrant. Bank of
America and its predecessors have been in the business of managing the
investments of fiduciary and other accounts since 1904. In addition to its trust
business, Bank of America provides commercial and consumer banking services.
To the knowledge of Registrant, none of the directors or
officers of Bank of America, except those set forth below, is or has been, at
any time during the past two calendar years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers of Bank of America also hold various positions with, and
engage in business for, BankAmerica Corporation, which owns all the outstanding
stock of Bank of America, or other subsidiaries of BankAmerica Corporation. Set
forth below are the names and principal businesses of the directors of Bank of
America and the directors and certain of the senior executive officers of Bank
of America who are engaged in any other business, profession, vocation or
employment of a substantial nature, other than with BankAmerica Corporation.
Director.....Joseph F. Alibrandi Chairman of the Manufacturer of
Board, Whittaker Aerospace and
Corporation Biotechnology
Products
Director.....Jill Elikann Barad President and Chief Toy manufacturer
Operating Officer,
Mattel, Inc.
Director.....Peter B. Bedford Chairman and CEO, California based
Bedford Property Real Estate Dev-
Investors, Inc. elopment and In-
vestment Firm
<PAGE> 106
<TABLE>
<CAPTION>
Position with
Bank of America
National Trust
and Savings Principal Type of
Association Name Occupation Business
- ----------- ---- ---------- --------
<S> <C> <C> <C>
Director. . . . Andrew F. Brimmer President, Consulting
Brimmer & Co., Inc.
Director . . . Richard A. Retired Chairman of Utility Company
Clarke the Board, Pacific
Gas and Electric
Company
President and
Director. . . David A. Coulter Chief Executive Banking
Officer and
President, Bank
America Corporation
and Bank of
America National
Trust & Savings
Association
Director. . . . Timm F. Crull Retired Chairman of Food and Related
the Board, Products
Nestle USA, Inc.
Director. . . . Kathleen Feldstein President, Economic
Economics Consulting
Studies, Inc.
Director . . . . Donald E. Guinn Chairman Emeritus, Telecommuni-
Pacific Telesis cations and
Group Diversified
Holding Com-
pany
Director . . . . Philip M. Hawley Retired Chairman Retail
and Chief Executive Department
Officer, The Stores
Broadway
Stores, Inc.
Director . . . . Frank L. Hope, Jr. Consulting Architectural
Architect and Engineering
Consulting
Director . . . . Ignacio E. Lozano, Chairman, Newspaper
Jr. "La Opinion" Publishing
Director . . . . Walter E. Massey, President, Higher
Ph.D. Morehouse Education
College
Director. . . . John M. Richman Counsel, Wachtell, Law firm
Lipton, Rosen &
Katz
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
Position with
Bank of America
National Trust
and Savings Principal Type of
Association Name Occupation Business
- ----------- ---- ---------- --------
<S> <C> <C> <C>
Chief Executive
Officer and
Director . . . Richard M. Chairman of the Banking
Rosenberg Board, Bank
America
Corporation and
Bank of America
National Trust &
Savings
Association
Director. . . . A. Michael Spence Dean of the Higher
Graduate School of Education
Business, Stanford
University
</TABLE>
Item 29. Principal Underwriters
----------------------
(a) Principal underwriter (exclusive distributor) also acts as
principal underwriter or exclusive distributor for The Infinity Funds, Inc., The
Pilot Funds, Seafirst Retirement Funds, Time Horizon Funds and The Victory
Funds.
(b) For information as to the business, profession, vocation
or employment of a substantial nature of each of the principal underwriter, its
officers and directors, reference is made to their Form BD File No. 8-37601
filed by the principal underwriter. For information, as to the positions or
offices of each of the principal underwriter, its officers and directors,
reference is made to the section entitled "Management" in the Statements of
Additional Information. Both the principal underwriter's Form BD and the
Registrants Statements of Additional Information are incorporated herein by
reference.
(c) Not Applicable.
<PAGE> 108
Item 30. Location of Accounts and Records
--------------------------------
(1) Concord Holding Corporation, 125 West 55th Street,
New York, New York 10019 (records relating to the
administrator).
(2) Concord Financial Group, Inc., 125 West 55th
Street, New York, New York 10019 (records relating
to the distributor).
(3) Concord Management (Ireland) Limited, ITI House, 23
Earlsfort Terrace, Dublin 2, Ireland (records
relating to the administrator for the Funds it
services).
(4) Bank of America National Trust and Savings
Association, 555 California Street, San Francisco,
California 94104 (records relating to the
investment adviser).
(5) Bank of America National Trust and Savings
Association, 555 California Street, San Francisco,
California 94104 (records relating to the
Sub-Custodian for the Funds it services).
(6) The Bank of New York, 90 Washington Street, New York,
New York 10286) (records relating to the custodian
for the Funds it services).
(7) BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219 (records relating to the
transfer agent for the Funds it services).
(8) Drinker Biddle & Reath, Philadelphia National Bank
Building, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107-3496 (Registrant's Charter, By-
Laws and Minute Books).
(9) PNC Bank, N.A., Broad and Chestnut Streets,
Philadelphia, PA 19101, (records relating to the
custodian for the Funds it services).
(10) PFPC, Inc. 103 Bellevue Parkway, Wilmington, DE
19809, (records relating to the sub-administrator
for the Funds it services).
(11) Concord Financial Services, Inc. First and Market
Building, 100 First Avenue, Suite 300, Pittsburgh,
PA 15222 (records relating to the transfer agent
for the class of shares it services).
<PAGE> 109
Item 31. Management Services
-------------------
Inapplicable.
Item 32. Undertakings
------------
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940, as amended, as though such
provisions were applicable to it.
Registrant hereby undertakes to furnish its Annual Report to
Shareholders upon request and without charge to any person to whom a prospectus
is delivered.
<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia, and the
Commonwealth of Pennsylvania, on this 1st day of March, 1996.
PACIFIC HORIZON FUNDS, INC.
Registrant
*/Cornelius John Pings
----------------------
Cornelius John Pings
President
(Signature and Title)
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*/Cornelius John Pings Chairman of the March 1, 1996
- ---------------------- Board and President
Cornelius John Pings
/s/Martin R. Dean Treasurer (Chief March 1, 1996
- ---------------------- Accounting and
Martin R. Dean Financial Officer)
*/Thomas M. Collins Director March 1, 1996
- ----------------------
Thomas M. Collins
*/Douglas B. Fletcher Director March 1, 1996
- ----------------------
Douglas B. Fletcher
*/Robert E. Greeley Director March 1, 1996
- ----------------------
Robert E. Greeley
*/Kermit O. Hanson Director March 1, 1996
- ----------------------
Kermit O. Hanson
*/Kenneth L. Trefftzs Director March 1, 1996
- ----------------------
Kenneth L. Trefftzs
*By: /s/W. Bruce McConnel, III
-------------------------
W. Bruce McConnel, III
Attorney-in-fact
</TABLE>
<PAGE> 111
PACIFIC HORIZON FUNDS, INC.
Certificate of Secretary
The following resolution was duly adopted by the Board of
Directors of Pacific Horizon Funds, Inc. on January 30, 1996 and remains in
effect on the date hereof:
FURTHER RESOLVED, that the directors and officers of
Pacific Horizon who may be required to execute any amendments
to Pacific Horizon's Registration Statement be, and each
hereby is, authorized to execute a power of attorney
appointing W. Bruce McConnel, III and Cornelius J. Pings their
true and lawful attorney or attorneys, to execute in their
name, place and stead, in their capacity as director or
officer, or both, of Pacific Horizon any and all amendments to
the Registration Statement, and all instruments necessary or
incidental in connection therewith, and to file the same with
the SEC; and either of said attorneys shall have the power to
act thereunder with or without the other said attorney and
shall have full power of substitution and resubstitution; and
to do in the name and on behalf of said directors and
officers, or any or all of them, in any and all capacities,
every act whatsoever requisite or necessary to be done in the
premises, as fully and to all intents and purposes as each of
said directors or officers, or any or all of them, might or
could do in person, said acts of said attorneys, being hereby
ratified and approved.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day
of February, 1996.
PACIFIC HORIZON FUNDS, INC.
/s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Secretary
<PAGE> 112
PACIFIC HORIZON FUNDS, INC.
POWER OF ATTORNEY
-----------------
Cornelius John Pings, whose signature appears below, does hereby
constitute and appoint W. Bruce McConnel, III, his true and lawful attorney and
agent, with power of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments which said attorney and agent may
deem necessary or advisable or which may be required to enable Pacific Horizon
Funds, Inc. (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments (including post-effective amendments) to the Fund's Registration
Statement pursuant to said Acts, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director and/or officer of the Fund any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney and agent
shall do or cause to be done by virtue hereof.
s/ Cornelius John Pings
-----------------------
Cornelius John Pings
Date: December 6, 1995
<PAGE> 113
PACIFIC HORIZON FUNDS, INC.
POWER OF ATTORNEY
-----------------
Thomas M. Collins, whose signature appears below, does hereby
constitute and appoint Cornelius John Pings and W. Bruce McConnel, III, and
either of them his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable Pacific Horizon
Funds, Inc. (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments (including post-effective amendments) to the Fund's Registration
Statement pursuant to said Acts, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director and/or officer of the Fund any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
s/ Thomas M. Collins
--------------------
Thomas M. Collins
Date: December 7, 1995
<PAGE> 114
PACIFIC HORIZON FUNDS, INC.
POWER OF ATTORNEY
-----------------
Douglas, B. Fletcher, whose signature appears below, does hereby
constitute and appoint Cornelius John Pings and W. Bruce McConnel, III, and
either of them his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable Pacific Horizon
Funds, Inc. (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments (including post-effective amendments) to the Fund's Registration
Statement pursuant to said Acts, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director and/or officer of the Fund any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
s/ Douglas B. Fletcher
----------------------
Douglas B. Fletcher
Date: December 7, 1995
<PAGE> 115
PACIFIC HORIZON FUNDS, INC.
POWER OF ATTORNEY
-----------------
Robert E. Greeley, whose signature appears below, does hereby
constitute and appoint Cornelius John Pings and W. Bruce McConnel, III, and
either of them his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable Pacific Horizon
Funds, Inc. (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments (including post-effective amendments) to the Fund's Registration
Statement pursuant to said Acts, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director and/or officer of the Fund any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
s/Robert E. Greeley
-------------------
Robert E. Greeley
Date: December 7, 1995
<PAGE> 116
PACIFIC HORIZON FUNDS, INC.
POWER OF ATTORNEY
-----------------
Kermit O. Hanson, whose signature appears below, does hereby constitute
and appoint Cornelius John Pings and W. Bruce McConnel, III, and either of them
his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable Pacific Horizon Funds,
Inc. (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments (including post-effective amendments) to the Fund's Registration
Statement pursuant to said Acts, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director and/or officer of the Fund any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
s/ Kermit O. Hanson
-------------------
Kermit O. Hanson
Date: December 6, 1995
<PAGE> 117
PACIFIC HORIZON FUNDS, INC.
POWER OF ATTORNEY
-----------------
Kenneth L. Trefftzs, whose signature appears below, does hereby
constitute and appoint Cornelius John Pings and W. Bruce McConnel, III, and
either of them his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable Pacific Horizon
Funds, Inc. (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended ("Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of any and all
amendments (including post-effective amendments) to the Fund's Registration
Statement pursuant to said Acts, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director and/or officer of the Fund any and
all such amendments filed with the Securities and Exchange Commission under said
Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
s/ Kenneth L. Trefftzs
----------------------
Kenneth L. Trefftzs
Date: December 6, 1995
<PAGE> 118
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(9) (f) Amendment No. 5 to Basic Administrative Services
Agreement dated November 1, 1995.
(s) Amendment No. 5 to Administration Agreement dated
November 1, 1995.
(11) (a) Consent of Drinker Biddle & Reath
(b) Consent of Price Waterhouse, LLP.
(17) Financial Data Schedules
<PAGE> 1
EXHIBIT 9(f)
Amendment No. 5 to
Basic Administrative Services Agreement
---------------------------------------
WHEREAS, Pacific Horizon Funds, Inc., a Maryland corporation
(the "Company"), and CONCORD HOLDING CORPORATION, a Delaware corporation
("Concord"), are parties to a Basic Administrative Services Agreement dated as
of November 13, 1989, as amended (the "Agreement"), wherein Concord has agreed
to provide basic administrative services to the Company's Prime Fund, Treasury
Fund, Tax-Exempt Money Fund, California Tax-Exempt Money Market Fund, Government
Fund and Treasury Only Fund (sometimes referred to herein collectively as the
"Funds"); and
WHEREAS, the parties wish to amend the Agreement in
certain respects;
NOW THEREFORE, the parties hereby agree, intending to be
legally bound, that effective immediately the Agreement is amended to read as
follows:
1) Section IV is hereby amended and restated in its
entirety as follows: "This Agreement shall become
effective November 1, 1995 and, unless sooner
terminated as provided herein, shall continue until
October 31, 1996. Thereafter, if not terminated, this
Agreement shall continue automatically as to a
particular Fund for successive terms of one year,
provided that such continuance is specifically
approved at least annually (a) by a vote of a
majority of those members of the Board of Directors
of the Company who are not parties to this Agreement
or "interested persons" of any such party, cast in
person at a meeting called for the purpose of voting
on such approval, and (b) by the Board of Directors
of the Company or by vote of a "majority of the
outstanding voting securities" of such Fund;
provided, however, that this Agreement may be
terminated by the Company at any time with respect to
any Fund, without cause and without payment of any
penalty, by vote of a majority of the entire Board of
Directors of the Company or by a vote of a "majority
of the outstanding voting securities" of such Fund
upon 60 days' written notice to Concord, or by
Concord at any time, without payment of any penalty,
on 90 days' written notice to the Company. This
Agreement will immediately terminate in the event of
its "assignment." (As used in this Agreement, the
<PAGE> 2
terms "majority of the outstanding voting
securities," "interested person" and "assignment"
shall have the same meanings as such terms have in
the 1940 Act.)
Except as expressly amended and modified hereby, all
provisions of the Agreement shall remain in full force and effect.
This agreement may be executed in one or more counterparts and
all such counterparts will constitute one and the same instrument.
IN WITNESS WHEREOF, intending to be legally bound, hereby, the
parties have executed this Amendment No. 5 as of the 1st day of November, 1995.
PACIFIC HORIZON FUNDS, INC.
By: /s/ Cornelius J. Pings
--------------------------
Cornelius J. Pings
President
CONCORD HOLDING CORPORATION
By: /s/ J. David Huber
----------------------
Title: EVP
-2-
<PAGE> 1
EXHIBIT 9(s)
AMENDMENT NO. 5 TO ADMINISTRATION AGREEMENT
This Amendment No. 5, dated as of the 1st day of
November, 1995, is entered into between PACIFIC HORIZON FUNDS, INC.
(the "Company"), a Maryland corporation, and Concord Holding
Corporation, a Delaware corporation ("Concord").
WHEREAS, the Company and Concord have entered into an
Administration Agreement dated as of November 13, 1989, as amended (the
"Administration Agreement"), wherein Concord has agreed to provide
administrative services for the Company's Blue Chip Fund, Flexible Bond Fund,
Asset Allocation Fund, National Municipal Bond Fund, Utilities Fund, Growth and
Income Fund, Corporate Bond Fund, Short-Term Government Fund, International Bond
Fund, International Equity Fund, Aggressive Growth Fund, Capital Income Fund,
U.S. Government Securities Fund and California Tax-Exempt Bond Fund (each, a
"Fund"); and
WHEREAS, the parties wish to amend the Agreement in
certain respects;
NOW THEREFORE, the parties agree, intending to be legally
bound, that effective immediately the Agreement is amended to read as follows:
1) Section IV is hereby amended and restated in its
entirety as follows: "This Agreement shall become effective
November 1, 1995 and, unless sooner terminated as provided
herein, shall continue until October 31, 1996. Thereafter, if
not terminated, this Agreement shall continue automatically as
to a particular Fund for successive terms of one year,
provided that such continuance is specifically approved at
least annually (a) by a vote of a majority of those members of
the Board of Directors of the Company who are not parties to
this Agreement or "interested persons" of any such party, cast
in person at a meeting called for the purpose of voting on
such approval, and (b) by the Board of Directors of the
Company or by vote of a "majority of the outstanding voting
securities" of such Fund; PROVIDED, HOWEVER, that this
Agreement may be terminated by the Company at any time with
respect to any Fund, without cause and without payment of any
penalty, by vote of a majority of the entire Board of
Directors of the Company or by a vote of a "majority of the
outstanding voting securities" of such Fund on 60 days'
written notice to Concord, or by Concord at any time, without
payment of any penalty, on 90 days' written notice to the
Company. This Agreement will automatically and immediately
terminate in the event of
<PAGE> 2
its "assignment." (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested
person" and "assignment" shall have the same meanings as such
terms have in the 1940 Act.)
Except as expressly amended and modified hereby, all
provisions of the Agreement shall remain in full force and effect.
This Agreement may be executed in one or more counterparts and
all such counterparts will constitute one and the same instrument.
IN WITNESS WHEREOF, intending to be legally bound hereby, the
parties have executed this Amendment No. 5 as of the 1st day of November, 1995.
PACIFIC HORIZON FUNDS, INC.
By: /s/ Cornelius J. Pings
--------------------------
Cornelius J. Pings
President
CONCORD HOLDING CORPORATION
By: /s/ J. David Huber
----------------------
Title: EVP
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF COUNSEL
------------------
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Counsel" in the Statement of Additional
Information that is included in Post-Effective Amendment No. 46 to the
Registration Statement (No. 2-81110) on Form N-1A under the Securities Act of
1933 and the Investment Company Act of 1940, as amended, of Pacific Horizon
Funds, Inc. This consent does not constitute a consent under section 7 of the
Securities Act of 1933, and in consenting to the use of our name and the
references to our Firm under such caption we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under said section 7 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/Drinker Biddle & Reath
-------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
March 1, 1996
<PAGE> 1
EXHIBIT 11B
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No.
46 to the registration statement on Form N-1A (the "Registration Statement") of
our reports dated April 21, 1995, relating to the financial statements and
financial highlights appearing in the February 28, 1995 Annual Report to
Shareholders of the Pacific Horizon Prime Fund and Pacific Horizon Treasury
Fund (two of the portfolios constituting the Pacific Horizon Funds, Inc.),
which are also incorporated by reference into the Registration Statement. We
also consent to the references to us under the heading "Financial Highlights"
in the Prospectus and under the headings "Independent Accountants" and
"Financial Statements and Experts" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
New York, New York
February 28, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711663
<NAME> PRIME FUND PACIFIC HORIZON SHARES
<SERIES>
<NUMBER> 2
<NAME> PACIFIC HORIZON SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 4851917439
<INVESTMENTS-AT-VALUE> 4851917439
<RECEIVABLES> 9370151
<ASSETS-OTHER> 130577
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4861418167
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111476198
<TOTAL-LIABILITIES> 111476198
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4752701286
<SHARES-COMMON-STOCK> 4752917294
<SHARES-COMMON-PRIOR> 2617606297
<ACCUMULATED-NII-CURRENT> 1297567
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 4056884
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4749941969
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 95586299
<OTHER-INCOME> 0
<EXPENSES-NET> 7253168
<NET-INVESTMENT-INCOME> 88333131
<REALIZED-GAINS-CURRENT> (1110049)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 87223082
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 88019508
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12197520811
<NUMBER-OF-SHARES-REDEEMED> 10096709924
<SHARES-REINVESTED> 34500110
<NET-CHANGE-IN-ASSETS> 2134514571
<ACCUMULATED-NII-PRIOR> 983944
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2946835
<GROSS-ADVISORY-FEES> 1565958
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7253168
<AVERAGE-NET-ASSETS> 3682684684
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> .028
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<ARTICLE> 6
<CIK> 0000711663
<NAME> PACIFIC HORIZON SHARES
<SERIES>
<NUMBER> 2
<NAME> PRIME FUND PACIFIC HORIZON SHARES
<S> <C>
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<FN>
<F1>INCREASE DUE TO VOLUNTARY CAPITAL CONTRIBUTION FROM INVESTMENT ADVISOR (NOTE 1)
</FN>
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<ARTICLE> 6
<CIK> 0000711663
<NAME> PACIFIC HORIZON FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> TREASURY FUND
<S> <C>
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<FN>
<F1>PACIFIC HORIZON SHARES
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<CIK> 0000711663
<NAME> PACIFIC HORIZON FUNDS, INC.
<SERIES>
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<NAME> TREASURY FUND
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<F1> HORIZON SHARES
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<ARTICLE> 6
<CIK> 0000711663
<NAME> PACIFIC HORIZON FUNDS, INC.
<SERIES>
<NUMBER> 12
<NAME> TREASURY FUND
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<F1>HORIZON SERVICE SHARES
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<CIK> 0000711663
<NAME> PACIFIC HORIZON FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> TREASURY FUND
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<F1>PACIFIC HORIZON SHARES
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<CIK> 0000711663
<NAME> PACIFIC HORIZON FUNDS, INC.
<SERIES>
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<NAME> TREASURY FUND
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<F1>HORIZON SHARES
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<CIK> 0000711663
<NAME> PACIFIC HORIZON FUNDS, INC.
<SERIES>
<NUMBER> 22
<NAME> TREASURY FUND
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<FN>
<F1>HORIZON SERVICE SHARES
</FN>
</TABLE>
