<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEAFIRST RETIREMENT FUNDS
ASSET ALLOCATION FUND
BLUE CHIP FUND
BOND FUND
PACIFIC HORIZON FUNDS, INC.
PRIME FUND
Semi-Annual Report
August 31, 1996
------------------------------
- -
NOT FDIC Insured
-----------------------------
-------------------------------------------------------------
--------------------
Concord Financial Group, Inc., Distributor
<PAGE> 2
SEAFIRST RETIREMENT FUNDS
PACIFIC HORIZON PRIME FUND
1-800-323-9919
Speech or hearing impaired TTY/TDD users may call 1-800-232-6299
INVESTMENT ADVISER
Bank of America National Trust
and Savings Association
555 California Street
San Francisco, CA 94104
DISTRIBUTOR
Concord Financial Group, Inc.
3435 Stelzer Road
Columbus, OH 43219
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
FUND COUNSEL
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
SEAFIRST RETIREMENT FUNDS ADMINISTRATOR
Seattle-First National Bank
701 Fifth Avenue
Seattle, WA 98104
PACIFIC HORIZON PRIME FUND ADMINISTRATOR
Concord Holding Corporation
3435 Stelzer Road
Columbus, OH 43219
For further information about retirement accounts, contact a Personal Banker
at any Seafirst branch or call Monday through Friday 8 a.m. to 6 p.m.
or Saturday 9 a.m. to 1 p.m. (Pacific time)
FUND SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR
OTHERWISE ENDORSED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENTAL AGENCY.
The Seafirst Retirement Funds and the Pacific Horizon Prime Fund are sponsored
and distributed by Concord Financial Group, Inc., which is unaffiliated with
Bank of America or Seafirst Bank. Bank of America serves as investment adviser
and receives fees for such services. From time to time, Bank of America may
provide other services to the Funds for additional fees, as disclosed in the
Funds' prospectuses.
There can be no assurance that the Pacific Horizon Prime Fund will be able to
maintain a net asset value of $1.00 per share and Fund shares are not insured or
guaranteed by the U.S. Government or its agencies.
This material must be preceded or accompanied by a current prospectus.
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 3
...........................................
Contents
<TABLE>
<S> <C>
ECONOMIC REVIEW 2-3
INTERVIEWS WITH YOUR
INVESTMENT MANAGERS 4-14
SEAFIRST RETIREMENT FUNDS
Statements of Assets
and Liabilities 15
Statements of Operations 16
Statements of Changes
in Net Assets 17-19
Notes to Financial
Statements 20-23
Financial Highlights 24-26
MASTER INVESTMENT TRUST -- SERIES I
Portfolios of Investments 27-39
Statements of Assets
and Liabilities 40
Statements of Operations 41
Statements of Changes
in Net Assets 42-44
Notes to Financial
Statements 45-49
Supplementary Data 50-52
PACIFIC HORIZON PRIME FUND
Portfolio of Investments 53-61
Statement of Assets
and Liabilities 62
Statement of Operations 63
Statements of Changes
in Net Assets 64
Notes to Financial
Statements 65-72
Financial Highlights 73-76
</TABLE>
<PAGE> 4
ECONOMIC REVIEW
FROM THE INVESTMENT ADVISER
The financial markets were volatile during the six-month period ended August 31,
1996, due to uncertainty about the economy, interest rates and corporate
earnings. As the period began, strong corporate earnings encouraged investors to
expect higher stock prices. But during the summer investors were confronted with
relatively poor early announced earnings reports as compared to the same quarter
the previous year.
At the same time, there were signs that the economy was growing much faster than
expected. Some factors that restrained economic growth during the early part of
1996 were behind us -- in particular, the General Motors and Boeing strikes, the
government shutdown and bad weather -- and the economy grew at a surprisingly
strong rate of 4.7% during the second quarter. As a result, investors worried
that the Federal Reserve would increase short-term interest rates to slow growth
and keep a tight rein on inflation.
MIXED SIGNALS
IN THE MARKETS
Meanwhile, other economic indicators, including a high level of inventory
buildup and relatively weak retail sales figures, suggested that the economy
might be losing steam. The result: Stocks and bonds declined sharply in July,
but rebounded somewhat in August. For the period, the Standard & Poor's 500
Stock Index gained 2.96%. Also, the bellwether 30-year Treasury bond was down
5.12%.
The best-performing stock market sectors during the recent period were capital
goods and selected technology issues, both of which gained more than 13%. More
defensive sectors of the market also performed well. These included stocks in
the consumer staples sector and the financial services sector, where stocks
gained roughly 10% during the period.
We expect corporate earnings to grow at a rate of about 7% for 1996 -- slower
than the double-digit growth of last year, but still strong in absolute terms.
That said, profit growth at many firms will look modest compared to their gains
of a year ago. As a result, many companies may pre-announce any disappointing
third-quarter earnings expectations to prevent their stock prices from stumbling
too much when they announce the actual numbers.
Although inflation does not appear too threatening -- apart from some concerns
about rising wages -- we expect the Federal Reserve to debate the question of
whether to raise rates through year end. We expect the economy to slow down a
bit, returning to a more sustainable growth rate of around 2% to 2.5% as
calendar year 1996 nears its close. Some reasons for the projected slower growth
include increased corporate downsizing, rising consumer debt from credit cards
and loans, a general buildup of company inventories and some slower than
expected growth in overseas economics.
GOOD VALUES IN
SELECTED SECTORS
Looking ahead, we are slightly more bullish about stocks than bonds over the
next six months. Some specific equity sectors that we like include capital
goods, health care, and select areas of technology. We believe that all of these
sectors represent good value and have reasonable earnings outlooks over the next
six months.
Our fixed-income outlook is also positive. We believe the yield curve may
flatten, with short-term rates rising more than long-term rates.
Therefore, we expect our bond funds to take a barbell approach to investing,
with portfolios that concentrate heavily on both short- and long-term issues.
This will provide us the potential to pick up extra yield on both long- and
short-term bonds, while positioning the Funds to pick up some capital gains when
long-term rates ease. We will
2
<PAGE> 5
also emphasize high-quality, highly liquid fixed-income issues.
A wild card in the outlook for the financial markets are the Congressional and
Presidential elections in November. Most investors expect the Republican party
to remain in control of Congress. If they are proven wrong, we may see fiscal
policy changes that might lead to increased volatility in the markets.
Sincerely,
Keith Wirtz
Drew Brahos
Bank of America NT&SA,
Investment Advisers
to the Seafirst Retirement Funds
and the Pacific Horizon Funds
3
<PAGE> 6
SEAFIRST
ASSET ALLOCATION FUND
- ----------------------
- ----------------------
ROBERT PYLES, CFA
Director of Equity
Bank of America NT&SA
Mr. Pyles manages the equity portion of the Asset Allocation Fund.
GOAL:
The Seafirst Asset Allocation Fund seeks long-term growth from capital
appreciation and dividend and interest income.
INVESTMENTS:
The Fund uses a balanced approach by investing in stocks, bonds and cash-
equivalent securities.
APPROPRIATE FOR:
Investors seeking growth and income through a diversified portfolio of stocks
and bonds.
INCEPTION:
March 9, 1988
SIZE OF FUND AS OF
AUGUST 31, 1996:
Over $155 million
- ----------------------
- ----------------------
STEVEN L. VIELHABER
Director of Taxable Fixed Income
Bank of America NT&SA
Mr. Vielhaber is a leading member of the investment management team for the
fixed-income portion of the Asset Allocation Fund.
Q
DID YOU CHANGE THE FUND'S ALLOCATION OF ASSETS AMONG STOCKS, BONDS AND CASH
DURING THE RECENT PERIOD?
A
Not a great deal. The Fund's stock weighting remained at around 56% to 57%.
However, in March, we moved 2% of the portfolio from cash to bonds. Our current
target allocation is 56% stocks, 39% bonds and 5% cash. For the six months ended
August 31, 1996, the Fund had a total return of 1.70%. The Fund's benchmarks,
the Standard & Poor's 500
AVERAGE ANNUAL TOTAL RETURN
AS OF AUGUST 31, 1996
- ---------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION
FUND
- ---------------------------------------
<S> <C>
6 months+ 1.70%
...........................................
1 year 10.82%
...........................................
5 years 10.24%
...........................................
Since Inception
(3/9/88) 11.10%
- ---------------------------------------
</TABLE>
+ Performance quoted is not annualized.
Return figures for the Fund include change in share price, reinvestment of
dividends and capital gains distributions.
4
<PAGE> 7
Stock Index and the Lehman Brothers Aggregate Bond Index returned 2.96% and
- -0.03%, respectively, for the period.*
Q
WHAT FACTORS DETERMINED THE FUND'S WEIGHTING OF STOCKS VERSUS BONDS AND
CASH?
A
During the early part of the year, investors gained confidence that economic
growth was picking up from the slow pace of 1995. This caused stocks to
outperform bonds as equity investors looked forward to higher earnings, and bond
investors worried about higher inflation. Despite the difference in performance,
stocks remained fairly valued relative to bonds. Thus, we maintained a roughly
neutral position -- in other words, a slightly higher emphasis on stocks -- with
respect to weightings of the major asset categories.
Q
HOW DID YOU MANAGE THE FUND'S INVESTMENT IN STOCKS?
A
As economic growth accelerated in the first quarter of the year, we
increased the Fund's portfolio exposure to shares of companies whose
fortunes are linked directly to the economy. We raised the Fund's investment in
basic industries to a market weighting, that is, in line with the S&P 500, and
increased our overweighting in retail and technology stocks. Stocks such as
Microsoft (1.2% of net assets as of 8/31/96), Intel (1.6%), Household
International (0.7%), Citicorp (0.8%) and Coca-Cola (1.0%) were strong
performers for the Fund.**
Q
WHAT NEW STOCKS DID YOU ADD TO THE FUND'S PORTFOLIO?
A
Some of the stocks we purchased included Monsanto (0.8% of net assets), a
chemical, agricultural and pharmaceutical supplies company; Willamette
Industries (0.3%), which produces forest products; and 3ComCorp. (0.5%), which
supplies computer network equipment. Another new addition to the Fund was NorAm
Energy (0.5%), a natural gas company, that has subsequently received a takeover
bid from Houston Industries.**
Q
HOW DID YOU MANAGE THE BONDS IN THE PORTFOLIO?
A
As always, we maintained a duration close to the average for the Lehman
Brothers Aggregate Bond Index. (Duration is a measure of the sensitivity of a
fund to changes in interest rates.) Our duration varied from 4.5 to 4.8 years
tracking closely to the index's duration. The Fund also was broadly diversified
among high-quality securities, including Treasuries, mortgage-backed issues and
investment-grade corporate bonds.
At the same time, we attempted to add value by investing in specific sectors,
securities and maturity levels that we believed offered good value. For example,
we overweighted the Fund's bond holdings in shorter-duration corporate
securities and in 15- and 30-year mortgage-backed issues.
Q
WHAT DO YOU SEE AHEAD FOR THE ECONOMY AND THE FUND?
A
Looking ahead, it seems likely that the economy's growth will slow to around
a 2% to 2.5% annual rate. At the same time, we believe that interest rates are
likely to remain relatively stable for now. These factors appear to offer a
favorable environment for financial assets, and we plan on maintaining a roughly
neutral mix of stocks, bonds and cash.
- ---------------
* The S&P 500 Stock Index and the Lehman Brothers Aggregate Bond Index are
unmanaged indices generally representative of the equity and the bond
markets, respectively, and cannot be invested in directly.
** The composition of the Fund's holdings is subject to change.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
5
<PAGE> 8
SEAFIRST
ASSET ALLOCATION FUND
(AS OF AUGUST 31, 1996)
PORTFOLIO COMPOSITION*
A Market-Driven Process
The Fund's adviser seeks to
determine relative values among
stocks, bonds and cash equivalents
and weights the portfolio
accordingly.
The Fund's adviser looks for the
following characteristics within
each asset class. The Fund's stock
holdings must display what the
adviser believes to be above-average
growth potential and reasonable
valuation. The diversified bond
portfolio may contain
mortgage-backed securities as well
as fixed-income obligations that are
undervalued in the opinion of the
Fund's adviser. The Fund's cash
holdings can be viewed as a
defensive position in changing
markets.
ASSET ALLOCATION
<TABLE>
<S> <C>
COMMON STOCKS 56.75%
CASH & EQUIVALENTS 4.13%
BONDS 39.12%
</TABLE>
- --------------------
* The composition of the Fund's
holdings is subject to change.
- --------------------------------------------------------------------------------
SHIFTING THE ASSET MIX
[graph]
A BALANCED INVESTMENT
APPROACH
Allocation Among Asset Classes
The Fund may be appropriate for
investors seeking long-term growth
from capital appreciation as well as
dividend and interest income through
a balanced approach to investing
using bonds, stocks and cash
equivalents. Investors can make one
simple investment and their money
will be spread over a variety of
asset classes. The Fund's adviser
seeks a total return greater than
bonds or cash with less volatility
than an investment in stocks.
Through strategically allocating
assets among various investments,
the Fund's adviser will shift the
asset mix as market conditions
change, thereby seeking to profit
from market opportunities in any
economic environment.
6
<PAGE> 9
SEAFIRST
BLUE CHIP FUND
- ----------------------
- ----------------------
JAMES D. MILLER, CFA
Chief Investment Officer
Bank of America Illinois
Investment Advisors Division
Mr. Miller is a leading member of the investment management team for the Blue
Chip Fund.
GOAL:
The Seafirst Blue Chip Fund seeks long-term capital appreciation.
INVESTMENTS:
The Fund invests primarily in a diversified portfolio of "blue chip" common
stocks, which are included in either the Dow Jones Industrial Average or the
Standard & Poor's 500 Index.
APPROPRIATE FOR:
Investors who want to participate in the growth potential of some of America's
major companies. The Fund is a diversified equity product that can be used as
part of many investment strategies.
INCEPTION:
March 9, 1988
SIZE OF FUND AS OF
AUGUST 31, 1996:
Over $221 million
Q
HOW DID MARKET CONDITIONS AFFECT THE FUND'S PERFORMANCE DURING THE PAST SIX
MONTHS?
A
The stock market was quite volatile. Stock prices were up in March, April
and May. But the market began to lose momentum in June and tumbled in July, when
the S&P 500 Stock Index was down 4.5% -- its worst month in five years. With
that said, large-cap stocks are generally a good place to be in a volatile
market. Although small-company and mid-size company shares outperformed blue
chips early in the recent period and then again in August, large-company shares
delivered more consistent returns.
For the six months ended August 31, 1996, the Fund delivered a total return of
3.02%, compared to 2.96% for the benchmark S&P 500.*
Q
HOW DID YOU MANAGE RISK IN THAT ENVIRONMENT?
A
We strive to manage risk by keeping the Fund's portfolio in line with its
benchmark, the Standard & Poor's 500, so that the Fund's holdings are not
overweighted in any single industry or sector. The market capitalizations of the
companies whose shares the Fund buys are in line with the average for the S&P
500 -- typically around $32 billion.
AVERAGE ANNUAL TOTAL RETURN
AS OF AUGUST 31, 1996
- ---------------------------------------
<TABLE>
<CAPTION>
BLUE CHIP
FUND
---------------------------------------
<S> <C>
6 months+ 3.02%
.............................................
1 year 18.24%
.............................................
5 years 13.38%
.............................................
Since Inception
(3/9/88) 14.24%
- ---------------------------------------
</TABLE>
+ Performance quoted is not annualized.
Return figures for the Fund include change in share price, reinvestment of
dividends and capital gains distributions.
7
<PAGE> 10
Q
HOW DOES THE FUND'S PORTFOLIO DIFFER FROM THE S&P 500?
A
We add value to the Fund through our selection of specific stocks. We have a
disciplined, quantitative model that we use when constructing the portfolio.
Rather than trying to make bets on sectors and industries, we look for stocks
that meet three basic criteria. First, we look for stocks of companies that
appear to be undervalued relative to their peers. Beyond that, we look for
stocks of companies with positive earnings momentum, or a recent positive
earnings surprise -- in other words, a company that performs better than
analysts' expectations.
Finally, we look for earnings certainty. That is, we examine how widely
analysts' earnings estimates for a company vary, looking for numbers that are
relatively close to one another. When analysts have a high degree of confidence
in a company's earnings, the market seems to reward the stock.
Q
WHAT ARE SOME OF THE STOCKS THAT MET YOUR CRITERIA?
A
We hold Microsoft (1.7% of net assets as of August 31, 1996) and Oracle
(0.9%). Their stock prices have recovered from any losses they sustained when
the market -- and particularly technology stocks -- suffered a downturn during
July. Another stock that performed well was Hospitality Franchise Systems
(0.4%), which has very strong earnings momentum. The company also recently
joined the S&P 500 Stock Index, so the stock should receive support from index
funds.**
Q
LOOKING AHEAD, DO YOU SEE ANY IMPORTANT CHANGES YOU INTEND TO MAKE TO THE
FUND?
A
No. As always, we will make no attempt to forecast short-term movements of
the stock market or individual sectors. As long-term investors, we intend to
maintain a broadly diversified portfolio that reflects the sector weightings of
the S&P 500, while looking for individual stocks that have a reasonable
probability of providing excess returns.
- ---------------
* The S&P 500 is an unmanaged index generally representative of the equity
market as a whole and cannot be invested in directly.
** The composition of the Fund's holdings is subject to change.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
8
<PAGE> 11
SEAFIRST
BLUE CHIP FUND
(AS OF AUGUST 31, 1996)
PORTFOLIO COMPOSITION
FUND QUALITY
A Strategy for Long-Term Capital
Appreciation
The Fund maintains a "quality"
investment orientation by placing an
emphasis on the securities of
well-known established companies.
This "blue chip" approach may be
appropriate for investors seeking
long-term growth of capital. At
least 80% of the Fund's assets are
normally invested in blue chip
stocks. To meet the criteria set by
the Fund's investment objectives,
these stocks must be components of
the Dow Jones Industrial Average or
the Standard & Poor's 500 Index.
<TABLE>
<CAPTION>
TOP TEN HOLDINGS*
------------------------------------------------------
PERCENT OF
COMPANY NET ASSETS
------------------------------------------------------
<S> <C>
Coca-Cola Co. 2.63%
......................................................
General Electric Co. 2.50%
......................................................
Merck & Co., Inc. 2.43%
......................................................
Intel Corp. 2.23%
......................................................
Citicorp 2.02%
......................................................
Johnson & Johnson 1.97%
......................................................
Philip Morris Cos., Inc 1.84%
......................................................
Microsoft Corp. 1.73%
......................................................
E.I. Du Pont De Nemours & Co. 1.70%
......................................................
Sprint Corp. 1.63%
------------------------------------------------------
TOTAL 20.68%
------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
A RESEARCH-DRIVEN APPROACH*
<TABLE>
<S> <C>
Utilities 10.79%
Finance 13.34%
Consumer Staples 10.98%
U.S. T. Bills 5.41%
Computers 7.31%
Chemicals 4.51%
Other 6.58%
Technology 11.35%
Capital Goods 10.72%
Energy 8.64%
Basics 6.31%
Transportation 4.06%
</TABLE>
The Fund adviser's research
orientation seeks to
identify individual stocks,
within the sector
allocations mirroring those
of the S&P 500, with the
greatest potential for
long-term growth. The Fund's
primary emphasis is on
stocks that, in the opinion
of the Fund's adviser, have
the greatest potential of
superior performance with
the least amount of risk.
* The composition of the Fund's holdings is subject to change.
9
<PAGE> 12
SEAFIRST BOND FUND
- ----------------------
- ----------------------
STEVEN L. VIELHABER
Director of Taxable Fixed Income
Bank of America NT&SA
Mr. Vielhaber is a leading member of the investment management team for the Bond
Fund.
GOAL:
The Seafirst Bond Fund seeks interest income and capital appreciation.
INVESTMENTS:
The Fund invests in a diversified portfolio of investment-grade, intermediate-
and longer-term bonds, including corporate and government fixed-income
obligations, mortgage-backed securities, municipal securities and cash
equivalents.
APPROPRIATE FOR:
Investors who want interest income and capital appreciation from a diversified
portfolio of fixed-income securities.
INCEPTION:
March 9, 1988
SIZE OF FUND AS OF
AUGUST 31, 1996:
Over $41 million
Q
WHAT MAJOR ECONOMIC FACTORS AFFECTED THE BOND MARKETS DURING THE SIX MONTH
PERIOD ENDED
AUGUST 31, 1996?
A
Rising interest rates caused bond prices to fall during much of the period,
as investors became concerned that a stronger economy would reignite inflation.
At the same time, signs of a strong economy helped high-yield bonds and other
low-quality issues perform well compared to bonds with higher credit ratings.
This occurred in part because investors became convinced that the economy would
continue to deliver higher growth. A strong economy reduces the credit risk of
issues backed by companies with relatively weak finances. As lower quality
issues gained ground, their yield advantage over issues with higher credit
ratings shrank.
Q
HOW DID THIS ENVIRONMENT AFFECT THE PERFORMANCE OF THE FUND?
A
We held the Bond Fund's average maturity to a relatively low 3.7
years -- about the same maturity as its benchmark, the Lehman Brothers
Government/Corporate Intermediate Bond Index* -- and were able to protect
investors from serious losses. The Bond Fund had a total return of -0.24% over
the period, compared to a 0.49% return for the benchmark.
AVERAGE ANNUAL TOTAL RETURN
AS OF AUGUST 31, 1996
- ---------------------------------------
<TABLE>
<CAPTION>
BOND FUND
- ---------------------------------------
<S> <C>
6 months+ -0.24%
...........................................
1 year 3.27%
...........................................
5 years 5.96%
...........................................
Since Inception
(3/9/88) 7.49%
- ---------------------------------------
</TABLE>
+ Performance quoted is not annualized.
Return figures for the Fund include change in share price, reinvestment of
dividends and capital gains distributions.
10
<PAGE> 13
Q
HOW DID YOU MANAGE THE FUND'S CREDIT QUALITY?
A
Since lower-rated bonds were paying relatively low yields compared to issues
with higher credit ratings, we believed that investors were not being
sufficiently compensated for the additional risk of investing in these
lower-quality issues. As a result, we upgraded the average credit quality of the
Bond Fund's portfolio holdings to about AAA.
That said, the average credit quality of the Bond Fund remains slightly lower
than that of its benchmark index. This is because the Fund currently holds more
corporate bonds and fewer government issues than the index. However, these
corporate holdings are in the shorter maturity sector, where the resulting risk
is typically greatly reduced. (The shorter a bond's maturity, the less its price
is likely to fall if interest rates rise.)
Q
WHERE DID YOU FIND THE BEST INVESTMENT OPPORTUNITIES FOR THE BOND FUND?
A
The financial services sector was strong, as brokerage firms have
experienced rising profits due to cost cutting, increasing revenues from their
investment banking and mergers and acquisitions businesses and positive returns
from trading.
Q
WHAT ARE SOME BONDS THAT ARE REPRESENTATIVE OF THE FUND'S CURRENT HOLDINGS?
A
In the brokerage sector, the Bond Fund holds bonds issued by the Morgan
Stanley Group. It also invested in Associates Corp., and GMAC in the diversified
finance sector. We invested in issues brought to market in The Money Store home
equity loan deal.**
Q
WHAT IS YOUR OUTLOOK FOR THE BOND MARKET AND THE FUND DURING THE NEXT SIX
MONTHS?
A
Looking forward, we expect the economy to slow to a 2% to 2.5% annual growth
rate late this year or early next year. We are also concerned about increasing
pressures within the labor market that could lead to wage inflation. Therefore,
we expect the Federal Reserve to tighten monetary policy by raising both the
federal funds rate and the discount rate.
However, we believe that we are currently at or near cyclical highs in interest
rates. We feel the Fed has achieved some amount of price stability, so future
changes in monetary policy will be muted. That means interest rates probably
will be relatively stable for the near term. Longer term, we are keeping our eye
on the changing demographic landscape. Specifically, the aging of the population
could lead to more saving and less consumption. These developments could lead,
in turn, to lower interest rates -- good news for financial assets such as
bonds.
- ---------------
* The Lehman Brothers Intermediate Government/Corporate Index is an unmanaged
index generally representative of the intermediate term government and
corporate bond markets and cannot be invested in directly.
** The composition of the Fund's holdings are subject to change.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate so
than an investor's shares, when redeemed, may be worth more or less than the
original cost.
11
<PAGE> 14
SEAFIRST
BOND FUND
(AS OF AUGUST 31, 1996)
PORTFOLIO COMPOSITION
MOODY'S RATING OF PORTFOLIO
COMPOSITION QUALITY*
<TABLE>
<S> <C>
Aaa 69.1%
Aa 6.0%
A 22.2%
BBB 2.7%
</TABLE>
QUALITY
The credit research team at Bank of
America, the Fund's adviser,
monitors debt instruments and issuer
quality to identify fixed-income
securities for the Fund. With its
emphasis on quality, the Fund
invests primarily in securities that
are rated investment grade by an
independent rating service or that
are issued by the U.S. Government.
The security selection process also
depends on information about broad
economic factors that can affect the
bond markets.
- -----------------------------------------------------------
* The composition of the Fund's
holdings is subject to change.
- --------------------------------------------------------------------------------
FLEXIBILITY
Capitalizing on Changing Markets
The Fund invests in a varied
portfolio of quality bonds in an
effort to protect principal against
sharp price fluctuations and
stabilize net asset value. The
Fund's adviser has great latitude in
deciding how assets are invested
among corporate, government and
mortgage-backed obligations. That
means the Fund enjoys a high level
of flexibility to make the most of
changing market conditions.
[ART]
12
<PAGE> 15
PACIFIC HORIZON
PRIME FUND
- ---------------
- ---------------
MARIKA ECONOMOS
Portfolio Manager
Taxable Money Market Funds
Bank of America NT&SA
GOAL:
The Pacific Horizon Prime Fund seeks to provide a high level of current income,
daily liquidity and stability of principal by investing in U.S.
dollar-denominated short-term money-market instruments.
INVESTMENTS:
The Prime Fund seeks its objectives through a broad range of government, bank
and commercial obligations available in the money markets as well as repurchase
agreements relating to such obligations.
APPROPRIATE FOR:
Investors who require daily liquidity.
SIZE OF FUNDS AS OF
AUGUST 31, 1996:
Over $5.9 billion
Q
HOW WOULD YOU DESCRIBE THE GENERAL ECONOMIC ENVIRONMENT DURING THE PAST SIX
MONTHS?
A
In March, investors received news that the economy had created more jobs
than expected with no evidence of inflation. This news marked the end of a
six-month rally, and market sentiment regarding the future of short-term
interest rates changed abruptly. Throughout the following six months,
stronger-than-expected job creation, combined with historically low
unemployment, broke the nine-month-long easing cycle of the Federal Reserve
Board. This unexpected strength led many market participants to believe
short-term rates were on the rise. A pattern of volatility emerged in the
short-term markets as the intentions of the Federal Reserve remained unclear.
Yields rose on strong economic data regarding employment and the manufacturing
and housing sectors and then fell again as inflation proved to be non-existent.
Q
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
A
Before the period began, we had employed a barbell approach, which divided a
large portion of the Fund's assets between overnight to three-month issues and
one-year issues -- the opposite ends of the money-market maturity spectrum. In
March, we became concerned that interest rates might experience above-normal
fluctuation going forward, so we shifted to a "laddered" approach. This included
purchases of securities in the middle range of the maturity spectrum: three, six
and nine months. By doing so, we maintained strong current yield while, at the
same time, protecting the Fund from a sudden increase in short-term rates. We
also invested more of our assets in floating-rate
13
<PAGE> 16
notes. These securities perform very well in uncertain rate environments, as
their coupons reset to current market levels at relatively short intervals. In
this way, we were able to take advantage of market fluctuations without
extending our average maturities.
Q
WHAT WAS THE FUND'S AVERAGE MATURITIES?
A
The Fund's average maturity was relatively long at around 53 days at the
beginning of the period, because we expected rates to fall. As uncertainty about
rates increased, we shortened the average maturity to around 45 days to increase
the Fund's flexibility.
Q
WHAT IS YOUR OUTLOOK FOR TAXABLE MONEY MARKETS AND THE FUND GOING FORWARD?
A
We are still in an environment of economic uncertainty. The Federal Reserve
Board has not changed short-term interest rates since January of this year. This
shows us that the Board has thus far been happy with the nation's economic
state. We have seen strong growth without inflation and appear to be on the
right track.
If this continues, we could stay in a steady-rate environment for some time. We
will manage the short-term money funds for current yield and flexibility by
adhering to our laddered maturity structure and floating-rate note positions.
Until we see evidence of either a strengthening or weakening economy, we will
keep average maturities neutral, in the 40- to 50-day range.
CURRENT SEVEN-DAY YIELD
AS OF AUGUST 31, 1996*
- ---------------------------------------
<TABLE>
<S> <C>
Prime Fund 4.92%
</TABLE>
- ---------------------------------------
- ------------
* Past performance is no guarantee of future results. Yields will fluctuate with
the market. Investments in money market funds are neither insured nor
guaranteed by the U.S. Government, and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per share.
14
<PAGE> 17
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (in thousands)
August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET
ALLOCATION BLUE CHIP
FUND FUND BOND FUND
---------- ---------- ---------
<S> <C> <C> <C>
ASSETS:
Investment in Master Investment Trust,
Series I -- Asset Allocation Portfolio,
Blue Chip Portfolio and Investment Grade
Bond Portfolio, at value................ $ 156,044 $ 221,159 $ 42,116
Receivable from Administrator............. 6 70 --
Deferred organization costs, prepaid
expenses and other receivables.......... 23 36 21
---------- ---------- ---------
Total assets................................ 156,073 221,265 42,137
---------- ---------- ---------
LIABILITIES:
Dividends Payable......................... 454 -- 189
Accrued reports to shareholders expense... 44 52 33
Administration fees payable............... 39 55 2
Accrued shareholder service fees.......... 34 48 9
Custody fees.............................. 4 6 1
Accrued audit fees........................ 8 6 6
Accrued legal fees........................ 4 7 1
Other accrued expenses.................... 13 9 8
---------- ---------- ---------
Total liabilities........................... 600 183 249
---------- ---------- ---------
NET ASSETS.................................. $ 155,473 $ 221,082 $ 41,888
=========== ========== ===========
Shares Outstanding (no par value, unlimited
number of shares authorized).............. 10,371 10,232 3,966
---------- ---------- ---------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE................ $14.99 $21.61 $10.56
========== ========== =========
COMPOSITION OF NET ASSETS:
Paid-in capital........................... $ 137,030 $ 169,872 $ 45,018
Accumulated net realized gains (losses)... 11,520 16,460 (2,403 )
Undistributed net investment income....... -- 588 --
Net unrealized appreciation (depreciation)
on investments.......................... 6,923 34,162 (727 )
---------- ---------- ---------
NET ASSETS, AUGUST 31, 1996................. $ 155,473 $ 221,082 $ 41,888
=========== ========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
15
<PAGE> 18
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Operations (in thousands)
For the six months ended August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET
ALLOCATION BLUE CHIP
FUND FUND BOND FUND
---------- --------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME:
Investment Income from Master Investment Trust, Series
I -- Asset Allocation Portfolio, Blue Chip Portfolio and
Investment Grade Bond Portfolio, respectively:
Interest.................................................. $ 2,191 $ 215 $ 1,358
Dividends................................................. 882 2,410 --
---------- --------- ---------
3,073 2,625 1,358
---------- --------- ---------
EXPENSES..................................................... 597 1,014 147
Less: Fee waivers and expense reimbursements................ (344) (347) (99)
---------- --------- ---------
253 667 48
---------- --------- ---------
Net Investment Income from Master Investment Trust, Series
I -- Asset Allocation Portfolio, Blue Chip Portfolio and
Investment Grade Bond Portfolio, respectively............... 2,820 1,958 1,310
---------- --------- ---------
EXPENSES:
Administration fees......................................... 231 318 65
Shareholder service fees.................................... 199 274 56
Custodian fees and expenses................................. 24 33 7
Legal fees.................................................. 18 24 5
Registration fees and expenses.............................. 13 16 13
Reports to shareholders expense............................. 12 10 19
Audit fees.................................................. 9 12 4
Trustees fees............................................... 5 6 1
Amortization of organization costs.......................... 4 4 3
Other operating expenses.................................... 7 10 3
---------- --------- ---------
522 707 176
Less: Fee waivers and expense reimbursements................. (19) (333) (12)
---------- --------- ---------
503 374 164
---------- --------- ---------
Net Investment Income........................................ 2,317 1,584 1,146
---------- --------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM
MASTER INVESTMENT TRUST, SERIES I -- ASSET ALLOCATION
PORTFOLIO, BLUE CHIP PORTFOLIO AND INVESTMENT GRADE BOND
PORTFOLIO, RESPECTIVELY
Net realized gain (loss) on securities transactions......... 8,029 10,613 (415)
Net change in unrealized appreciation (depreciation) on
investments............................................... (7,702) (5,743) (870)
---------- --------- ---------
Net gain (loss) on Investments from Master Investment Trust,
Series I -- Asset Allocation Portfolio, Blue Chip Portfolio
and Investment Grade Bond Portfolio, respectively........... 327 4,870 (1,285)
---------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.................................................. $ 2,644 $ 6,454 ($ 139)
======== ======== ======
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE> 19
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
-----------------------------
FOR THE SIX
MONTHS ENDED FOR THE
AUGUST 31, YEAR ENDED
1996 FEBRUARY 29,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................. $ 2,317 $ 4,869
Net realized gain on securities transactions.......... 8,029 18,289
Net change in unrealized appreciation (depreciation)
of investments...................................... (7,702) 7,580
------------- ------------
Net increase in net assets resulting from
operations.......................................... 2,644 30,738
------------- ------------
Dividends and Distributions to Shareholders:
Dividends to shareholders from net investment
income.............................................. (2,317) (4,869)
Distributions to shareholders from net realized
gains............................................... -- (10,103)
------------- ------------
Total Dividends and Distributions to Shareholders... (2,317) (14,972)
------------- ------------
Fund Share Transactions:
Net proceeds from shares subscribed................... 7,355 14,252
Net asset value of shares issued to shareholders in
reinvestment of dividends........................... 1,863 14,972
Shares redeemed....................................... (12,557) (31,637)
------------- ------------
Net decrease in net assets resulting from Fund share
transactions........................................ (3,339) (2,413)
------------- ------------
Total Increase (Decrease)............................... (3,012) 13,353
NET ASSETS:
Beginning of period................................... 158,485 145,132
------------- ------------
End of period......................................... $ 155,473 $158,485
============ ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
17
<PAGE> 20
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (in thousands) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BLUE CHIP FUND
------------------------------
FOR THE SIX
MONTHS ENDED FOR THE
AUGUST 31, YEAR ENDED
1996 FEBRUARY 29,
(UNAUDITED) 1996
-------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................ $ 1,584 $ 2,742
Net realized gain on securities transactions......... 10,613 19,935
Net change in unrealized appreciation (depreciation)
of investments..................................... (5,743) 28,575
-------------- ------------
Net increase in net assets resulting from
operations......................................... 6,454 51,252
-------------- ------------
Dividends and Distributions to Shareholders:
Dividends to shareholders from net investment
income............................................. (1,476) (2,736)
Distributions to shareholders from net realized
gains.............................................. -- (14,510)
-------------- ------------
Total Dividends and Distributions to
Shareholders..................................... (1,476) (17,246)
-------------- ------------
Fund Share Transactions:
Net proceeds from shares subscribed.................. 23,021 34,754
Net asset value of shares issued to shareholders in
reinvestment of dividends.......................... 1,476 17,246
Shares redeemed...................................... (14,613) (31,053)
-------------- ------------
Net increase in net assets resulting from Fund share
transactions....................................... 9,884 20,947
-------------- ------------
Total Increase......................................... 14,862 54,953
NET ASSETS:
Beginning of period.................................. 206,220 151,267
-------------- ------------
End of period (including undistributed net investment
income of $587,805, and $479,371, respectively).... $221,082 $206,220
============= ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
18
<PAGE> 21
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (in thousands) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND
------------------------------
FOR THE SIX
MONTHS ENDED FOR THE
AUGUST 31, YEAR ENDED
1996 FEBRUARY 29,
(UNAUDITED) 1996
-------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................ $ 1,146 $ 2,970
Net realized gain (loss) on securities
transactions....................................... (415) 2,153
Net change in unrealized appreciation (depreciation)
of investments..................................... (870) (139)
-------------- ------------
Net increase (decrease) in net assets resulting from
operations......................................... (139) 4,984
-------------- ------------
Dividends and Distributions to Shareholders:
Dividends to shareholders from net investment
income............................................. (1,146) (2,970)
Distributions to shareholders from net realized
gains.............................................. -- --
-------------- ------------
Total Dividends and Distributions to
Shareholders..................................... (1,146) (2,970)
-------------- ------------
Fund Share Transactions:
Net proceeds from shares subscribed.................. 1,268 3,242
Net asset value of shares issued to shareholders in
reinvestment of dividends.......................... 957 2,970
Shares redeemed...................................... (6,114) (16,954)
-------------- ------------
Net decrease in net assets resulting from Fund share
transactions....................................... (3,889) (10,742)
-------------- ------------
Total Decrease......................................... (5,174) (8,728)
NET ASSETS:
Beginning of period.................................. 47,062 55,790
-------------- ------------
End of period........................................ $ 41,888 $ 47,062
============= ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
19
<PAGE> 22
SEAFIRST RETIREMENT FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Seafirst Retirement Funds (the "Company"), a Delaware business trust, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1996, the Company
consisted of three funds -- the Asset Allocation Fund, the Blue Chip Fund and
the Bond Fund (collectively, the "SRF Funds").
Each SRF Fund seeks to achieve its investment objective by investing
substantially all of its assets in the corresponding portfolio of the Master
Investment Trust, Series I, (collectively the "Portfolios"), that has the same
investment objectives as that of the SRF Fund. The value of each SRF Fund's
investment in each Portfolio included in the accompanying statements of assets
and liabilities reflects each SRF Fund's proportionate beneficial interest in
the net assets of that Portfolio. At August 31, 1996, the SRF Funds held
proportionate interests in the corresponding Portfolios in the following
amounts:
<TABLE>
<S> <C>
Asset Allocation Fund....................................................... 85.5%
Blue Chip Fund.............................................................. 65.1%
Bond Fund................................................................... 45.8%
</TABLE>
The financial statements of each Portfolio, including its portfolio of
investments, are included elsewhere within this report and should be read in
conjunction with each SRF Fund's financial statements.
Seattle-First National Bank ("Seafirst") serves as the Company's
administrator and Concord Financial Group, Inc. (the "Distributor"), a wholly
owned subsidiary of Concord Holding Corp. ("Concord"), serves as the distributor
of the Company's shares.
Effective March 29, 1995, Concord became a wholly owned subsidiary of The
BISYS Group, Inc. ("BISYS").
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the SRF Funds in the preparation of their financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements, in accordance with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A)INVESTMENT INCOME, EXPENSES AND REALIZED AND UNREALIZED GAINS AND LOSSES:
The SRF Funds record their proportionate share of the investment income,
expenses and realized and unrealized gains and losses recorded by the
corresponding Portfolio on a daily basis. The investment income, expenses and
realized and unrealized gains and losses are
20
<PAGE> 23
allocated daily to investors in each Portfolio based upon their investments in
each Portfolio. Such investments are adjusted on a daily basis. The valuation of
securities by each of the Portfolios is discussed in Note 2 to the financial
statements of the Portfolios.
B) FEDERAL INCOME TAXES:
It is the policy of the SRF Funds to meet the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies and to
distribute substantially all of their taxable income to shareholders. Therefore,
no federal income tax provision is required.
C) DIVIDENDS AND DISTRIBUTIONS:
The SRF Funds declare dividends to shareholders of record on the day of
declaration from net investment income. Such dividends are paid quarterly by the
Blue Chip Fund and monthly by the Asset Allocation Fund and the Bond Fund. Net
realized gains, if any, will be distributed at least annually. However, to the
extent that net realized gains of an SRF Fund can be reduced by capital loss
carryovers, such gains will not be distributed. Dividends and distributions are
recorded on the ex-dividend date.
Dividends from net investment income and distributions from net realized
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the composition of net assets based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions to shareholders which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess of net investment income or net
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
D) OTHER:
The SRF Funds incurred certain costs in connection with their organization.
Such costs have been deferred and are being amortized on a straight-line basis
over five years.
Expenses directly attributable to each SRF Fund are charged to that SRF
Fund, while Company expenses attributed to more than one SRF Fund of the Company
are allocated among the respective SRF Funds.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The SRF Funds have an Administration Agreement with Seafirst and a
Distribution Agreement with the Distributor. In addition, Seafirst has entered
into a Sub-Administration Agreement with Concord.
As Administrator, Seafirst assists in supervising the operations of the SRF
Funds. For its services, Seafirst is entitled to a fee, accrued daily and
payable monthly, at an annual rate of
21
<PAGE> 24
0.29% of each SRF Fund's average daily net assets. As Sub-Administrator, Concord
has agreed to provide officers and certain administrative and compliance
monitoring services to the SRF Funds. For its services, Concord is entitled to a
fee, from Seafirst, at an annual rate of 0.06% of each SRF Fund's average daily
net assets. The Distributor is not entitled to a fee under the Distribution
Agreement.
Seafirst has agreed to waive fees payable to it to the extent any SRF Fund's
expenses exceed an annual rate of 0.95% of average daily net assets. For the
period ended August 31, 1996, Seafirst waived the following fees so that the
Funds could meet this expense limitation:
<TABLE>
<S> <C>
Asset Allocation Fund.................................................... $ 18,594
Blue Chip Fund........................................................... 332,655
Bond Fund................................................................ 11,584
</TABLE>
The SRF Funds have adopted a Shareholder Service Plan (the "Plan") under
which the SRF Funds pay for non-distribution shareholder servicing expenses
incurred in connection with shares of the SRF Funds. Under the Plan, payments by
the SRF Funds may not exceed an annual rate of 0.25% of each Fund's average
daily net assets. For the period ended August 31, 1996, the SRF Funds paid the
following amounts to Seafirst in connection with the Plan:
<TABLE>
<S> <C>
Asset Allocation Fund.................................................... $ 199,465
Blue Chip Fund........................................................... 273,775
Bond Fund................................................................ 55,683
</TABLE>
For services provided to all three of the SRF Funds constituting the
Company, each Trustee receives an annual fee of $4,000. For the period ended
August 31, 1996 the SRF Funds incurred the following legal charges which were
earned by a law firm, a partner of which serves as Secretary of the Company:
<TABLE>
<S> <C>
Asset Allocation Fund..................................................... $ 18,146
Blue Chip Fund............................................................ 23,661
Bond Fund................................................................. 5,378
</TABLE>
Certain officers of the Company are "affiliated persons" (as defined in the
Act) of BISYS.
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
Transactions in shares of the SRF Funds for the period ended August 31, 1996
are summarized below:
<TABLE>
<CAPTION>
ASSET
ALLOCATION BLUE CHIP BOND
---------- --------- --------
<S> <C> <C> <C>
Shares subscribed............................... 489,708 1,067,035 118,393
Shares issued to shareholders in reinvestment of
dividends..................................... 123,605 68,172 89,885
Shares redeemed................................. (834,031) (682,094 ) (572,283)
---------- --------- --------
Net increase (decrease)......................... (220,718) 453,113 (364,005)
========= ========= ========
</TABLE>
22
<PAGE> 25
Transactions in shares of the SRF Funds for the year ended February 29, 1996
are summarized below:
<TABLE>
<CAPTION>
ASSET
ALLOCATION BLUE CHIP BOND
---------- ---------- ----------
<S> <C> <C> <C>
Shares subscribed............................ 977,718 1,773,483 300,687
Shares issued to shareholders in reinvestment
of dividends............................... 1,016,950 862,906 275,066
Shares redeemed.............................. (2,171,336) (1,575,254) (1,570,679)
---------- ---------- ----------
Net increase (decrease)...................... (176,668) 1,061,135 (994,926)
========== ========== ==========
</TABLE>
NOTE 5 -- FEDERAL INCOME TAX STATUS
At February 29, 1996, the Bond Fund had $1,966,470 of capital loss
carryovers which may be used to offset future realized gains on securities
transactions to the extent provided for in the Code. Any such unused capital
loss carryovers will expire as follows:
2001..................................................................$1,996,470
It is anticipated that no distributions of future net realized gains on
investments will be made to shareholders until the capital loss carryovers are
offset by net realized gains or expire.
23
<PAGE> 26
SEAFIRST RETIREMENT FUNDS -- ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
PERIOD DEC. 6, JAN. 1,
ENDED YEAR YEAR 1993 1993
AUG. 31, ENDED ENDED THROUGH THROUGH YEAR ENDED DECEMBER 31,
1996 FEB. 29, FEB. 28, FEB. 28, DEC. 5, ------------------------------
(UNAUDITED) 1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1)
------------ -------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value per
share, beginning of
period............. $ 14.96 $ 13.48 $ 13.94 $ 13.86 $ 12.99 $ 12.75 $11.30 $11.47
------------ -------- -------- -------- -------- -------- ------- -------
Income from
Operations:
Net investment
income........... 0.24 0.47 0.46 0.05 0.43 0.46 0.56 0.62
Net realized and
unrealized gain
(loss) on
investments...... 0.03 2.49 0.12 0.08 0.87 0.24 1.45 (0.17 )
------------ -------- -------- -------- -------- -------- ------- -------
Total income from
investment
operations......... 0.27 2.96 0.58 0.13 1.30 0.70 2.01 0.45
------------ -------- -------- -------- -------- -------- ------- -------
Less Dividends and
Distributions:
Dividends to
shareholders from
net investment
income........... (0.24) (0.47) (0.46) (0.05) (0.43) (0.46) (0.56 ) (0.62 )
Distributions to
shareholders from
capital gains.... -- (1.01) (0.58) -- -- -- -- --
------------ -------- -------- -------- -------- -------- ------- -------
Total dividends and
distributions...... (0.24) (1.48) (1.04) (0.05) (0.43) (0.46) (0.56 ) (0.62 )
------------ -------- -------- -------- -------- -------- ------- -------
Net asset value per
share, end of
period............. $ 14.99 $ 14.96 $ 13.48 $ 13.94 $ 13.86 $ 12.99 $12.75 $11.30
=========== ======== ======== ======== ======== ======== ======== ========
Total Return........ 1.70%** 22.44% 4.49% 0.94%** 10.15%** 5.62% 18.11 % 4.21 %
Ratios/Supplemental
Data:
Net assets, end of
period (000)..... $155,473 $158,485 $145,132 $156,955 $149,719 $106,822 $47,825 $23,608
Ratio of expenses
to average net
assets........... 0.95%*+ 0.94%* 0.78%* 0.95%+* 0.95%+ 0.95% 0.95 % 0.58 %
Ratio of net
investment income
to average net
assets........... 2.90%*+ 3.19%* 3.40%* 2.64%+* 3.47%+ 3.68% 4.72 % 5.58 %
Portfolio turnover
rate............... NA NA NA NA 79% 171% 124 % 121 %
</TABLE>
- ---------------
* Reflects the Fund's proportionate share of the corresponding Portfolio's
expenses and fee waivers and expense reimbursements by the Portfolio's
Investment Adviser and Administrator and the Fund's Administrator and
Distributor. Such fee waivers and expense reimbursements had the effect of
reducing the ratio of expenses to average net assets and increasing the ratio
of net investment income to average net assets by 0.46%, 0.48%, 0.60%, and
0.69% (annualized) for the periods ended August 31, 1996, February 29, 1996,
February 28, 1995 and February 28, 1994, respectively.
** For the period indicated, not annualized.
+ Annualized.
(1) Represents activity of the Fund prior to its reorganization from the Asset
Allocation Fund of Collective Investment Trust for Seafirst Retirement
Accounts. Since the operation and organization of the Fund was changed upon
reorganization, this activity may not be reflective of activity after the
reorganization.
NA -- Not applicable.
See Notes to Financial Statements.
24
<PAGE> 27
SEAFIRST RETIREMENT FUNDS -- BLUE CHIP FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
PERIOD DEC. 6, JAN. 1,
ENDED YEAR YEAR 1993 1993
AUG. 31, ENDED ENDED THROUGH THROUGH YEAR ENDED DECEMBER 31,
1996 FEB. 29, FEB. 28, FEB. 28, DEC. 5, ------------------------------
(UNAUDITED) 1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1)
----------- -------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value per
share, beginning of
period.............. $ 21.09 $ 17.35 $ 17.75 $ 17.34 $ 15.65 $ 15.17 $12.68 $13.35
----------- -------- -------- -------- -------- -------- ------- -------
Income from
Operations:
Net investment
income............ 0.15 0.31 0.28 0.05 0.29 0.30 0.33 0.44
Net realized and
unrealized gain
(loss) on
investments....... 0.52 5.35 0.88 0.37 1.69 0.48 2.49 (0.67 )
----------- -------- -------- -------- -------- -------- ------- -------
Total income from
investment
operations.......... 0.67 5.66 1.16 0.42 1.98 0.78 2.82 (0.23 )
----------- -------- -------- -------- -------- -------- ------- -------
Less Dividends and
Distributions:
Dividends to
shareholders from
net investment
income............ (0.15) (0.31) (0.26) (0.01) (0.29) (0.30) (0.33 ) (0.44 )
Distributions to
shareholders from
capital gains..... -- (1.61) (1.30) -- -- -- -- --
----------- -------- -------- -------- -------- -------- ------- -------
Total dividends and
distributions....... (0.15) (1.92) (1.56) (0.01) (0.29) (0.30) (0.33 ) (0.44 )
----------- -------- -------- -------- -------- -------- ------- -------
Net asset value per
share, end of
period.............. 21.61 $ 21.09 $ 17.35 $ 17.75 $ 17.34 $ 15.65 $15.17 $12.68
=========== ======== ======== ======== ======== ======== ======== ========
Total Return......... 3.02%** 33.37% 6.95% 2.42%** 12.74%** 5.16% 22.52 % -1.79 %
Ratios/Supplemental
Data:
Net assets, end of
period (000)...... $ 221,082 $206,220 $151,267 $132,916 $123,257 $ 96,206 $49,838 $24,727
Ratio of expenses to
average net
assets............ 0.95%*+ 0.95%* 0.82%* 0.95%+* 0.95%+ 0.95% 0.95 % 0.57 %
Ratio of net
investment income
to average net
assets............ 1.45%*+ 1.53%* 1.64%* 1.28%+* 1.91%+ 2.08% 2.37 % 3.40 %
Portfolio turnover
rate................ NA NA NA NA 4% 27% 16 % 22 %
</TABLE>
- ---------------
* Reflects the Fund's proportionate share of the corresponding Portfolio's
expenses and fee waivers and expense reimbursements by the Portfolio's
Investment Adviser and Administrator and the Fund's Administrator and
Distributor. Such fee waivers and expense reimbursements had the effect of
reducing the ratio of expenses to average net assets and increasing the ratio
of net investment income to average net assets by 0.62%, 0.59%, 0.80%, and
0.93% (annualized) for the periods ended August 31, 1996, February 29, 1996,
February 28, 1995 and February 28, 1994, respectively.
** For the period indicated, not annualized.
+ Annualized.
(1) Represents activity of the Fund prior to its reorganization from the Blue
Chip Fund of Collective Investment Trust for Seafirst Retirement Accounts.
Since the operation and organization of the Fund was changed upon
reorganization, this activity may not be reflective of activity after the
reorganization.
NA -- Not applicable.
See Notes to Financial Statements.
25
<PAGE> 28
SEAFIRST RETIREMENT FUNDS -- BOND FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
PERIOD DEC. 6, JAN. 1,
ENDED YEAR YEAR 1993 1993
AUG. 31, ENDED ENDED THROUGH THROUGH YEAR ENDED DECEMBER 31,
1996 FEB. 29, FEB. 28, FEB. 28, DEC. 5, -----------------------------
(UNAUDITED) 1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1)
----------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value per
share, beginning of
period.................. $ 10.87 $ 10.48 $ 11.00 $ 11.14 $ 10.99 $11.01 $10.40 $10.30
----------- -------- -------- -------- -------- ------- ------- -------
Income from Investment
Operations:
Net investment income... 0.29 0.64 0.61 0.12 0.58 0.67 0.72 0.82
Net realized and
unrealized gain (loss)
on securities......... (0.31) 0.39 (0.46) (0.14) 0.15 (0.02 ) 0.61 0.10
----------- -------- -------- -------- -------- ------- ------- -------
Total income (loss) from
investment operations... (0.02) 1.03 0.15 (0.02) 0.73 0.65 1.33 0.92
----------- -------- -------- -------- -------- ------- ------- -------
Less Dividends and
Distributions:
Dividends to
shareholders from net
investment income..... (0.29) (0.64) (0.61) (0.12) (0.58) (0.67 ) (0.72 ) (0.82 )
Distributions to
shareholders from
capital gains........... -- -- (0.06) -- -- -- -- --
Total dividends and
distributions........... (0.29) (0.64) (0.67) (0.12) (0.58) (0.67 ) (0.72 ) (0.82 )
----------- -------- -------- -------- -------- ------- ------- -------
Net asset value per
share, end of period.... $ 10.56 $ 10.87 $ 10.48 $ 11.00 $ 11.14 $10.99 $11.01 $10.40
=========== ======= ======= ======= ======= ======== ======== ========
Total Return............. (0.24%)** 9.90% 1.57% (0.23)%** 6.80%** 6.04 % 13.28 % 9.43 %
Ratios/Supplemental Data:
Net assets, end of
period (000).......... $41,888 $ 47,062 $ 55,791 $ 76,773 $ 82,970 $73,826 $53,469 $9,445
Ratio of expenses to
average net assets.... 0.95%*+ 0.95%* 0.83%* 0.95%+* 0.95%+ 0.95 % 0.66 % 0.00 %
Ratio of net investment
income to average net
assets................ 5.14%*+ 5.74%* 5.64%* 4.38%+* 5.60%+ 6.15 % 7.13 % 8.31 %
Portfolio turnover
rate.................... NA NA NA NA 95% 154 % 197 % 113 %
</TABLE>
- ---------------
* Reflects the Fund's proportionate share of the corresponding Portfolio's
expenses and fee waivers and expense reimbursements by the Portfolio's
Investment Adviser and Administrator and the Fund's Administrator and
Distributor. Such fee waivers and expense reimbursements had the effect of
reducing the ratio of expenses to average net assets and increasing the ratio
of net investment income to average net assets by 0.49%, 0.61%, 0.58% and
0.84%(annualized) for the periods ended August 31, 1996, February 29, 1996,
February 28, 1995 and February 28, 1994, respectively.
** For the period indicated, not annualized.
+ Annualized.
(1) Represents activity of the Fund prior to its reorganization from the Bond
Fund of Collective Investment Trust for Seafirst Retirement Accounts. Since
the operation and organization of the Fund was changed upon reorganization,
this activity may not be reflective of activity after the reorganization.
NA -- Not applicable.
See Notes to Financial Statements.
26
<PAGE> 29
MASTER INVESTMENT TRUST, SERIES I --
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COMMON STOCKS
AEROSPACE/DEFENSE -- 0.9%
Boeing Co. ......................................................... 17,500 $ 1,583,750
------------
AIRLINES -- 0.2%
AMR Corp. .......................................................... 4,500 369,000
------------
ALUMINUM -- 0.3%
Aluminum Co of America.............................................. 9,400 583,975
------------
AUTOMOBILES -- 0.9%
Ford Motor.......................................................... 10,000 335,000
General Motors Corp. ............................................... 28,200 1,402,950
------------
1,737,950
------------
AUTOMOBILE PARTS -- 1.0%
Cooper Tire & Rubber................................................ 16,500 321,750
------------
BANKS -- 3.6%
BankOne Corp. ...................................................... 47,000 1,803,625
Chase Manhattan Corp. .............................................. 19,800 1,472,625
CitiCorp............................................................ 16,700 1,390,275
Wells Fargo Company................................................. 7,533 1,873,834
------------
6,540,359
------------
BEVERAGES -- ALCOHOLIC -- 0.6%
Anheuser-Busch Companies............................................ 14,900 1,128,675
------------
BEVERAGES -- SOFT DRINKS -- 1.7%
Coca-Cola Co. ...................................................... 38,700 1,935,000
Pepsico............................................................. 37,400 1,075,250
------------
3,010,250
------------
CHEMICALS -- 2.1%
Corning, Inc. ...................................................... 12,400 461,900
Dow Chemical Co. ................................................... 10,600 845,350
E.I. Du Pont De Nemours & Co. ...................................... 13,000 1,067,625
Monsanto Corp. ..................................................... 46,000 1,477,750
------------
3,852,625
------------
COMMERCIAL SERVICES -- 0.1%
Dun & Bradstreet Corp. ............................................. 3,300 190,163
------------
COMPUTER SOFTWARE -- 2.0%
Automatic Data Processing Inc. ..................................... 16,800 699,300
Microsoft Corp. .................................................... 18,400 2,254,000
Silicon Graphics. .................................................. 29,700 690,525
------------
3,643,825
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
27
<PAGE> 30
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COMPUTER HARDWARE -- 2.8%
Cisco Systems....................................................... 24,600 $ 1,297,650
Hewlett Packard Co. ................................................ 24,000 1,050,000
IBM................................................................. 14,500 1,658,438
Seagate Technology.................................................. 23,700 1,137,600
------------
5,143,688
------------
ELECTRICAL PRODUCTS -- 2.8%
Emerson Electric Co. ............................................... 15,900 1,331,625
General Electric Co. ............................................... 44,700 3,715,688
------------
5,047,313
------------
FINANCIAL SERVICES -- 2.7%
American Express.................................................... 44,500 1,946,875
Dean Witter Discover Co. ........................................... 32,800 1,640,000
Household International, Inc. ...................................... 16,800 1,331,400
------------
4,918,275
------------
FOOD -- 1.4%
Conagra Inc. ....................................................... 20,000 842,500
Ralston Purina Co. ................................................. 15,300 956,250
Sara Lee Corp. ..................................................... 23,000 724,500
------------
2,523,250
------------
HEALTHCARE PRODUCTS -- 0.8%
Baxter International................................................ 21,200 946,050
Medtronic Inc. ..................................................... 8,100 421,200
------------
1,367,250
------------
HOUSEHOLD/GENERAL PRODUCTS -- 1.9%
Colgate-Palmolive Co. .............................................. 4,600 373,750
Gillette Co. ....................................................... 14,800 943,500
Newell Co. ......................................................... 18,000 560,250
Proctor & Gamble.................................................... 18,700 1,661,963
------------
3,539,463
------------
INSURANCE -- LIFE -- 0.5%
Providian Corp. .................................................... 21,800 901,975
------------
INSURANCE -- PROPERTY AND CASUALTY -- 1.0%
American Intl Group, Inc. .......................................... 12,750 1,211,250
Chubb Corp. ........................................................ 13,800 612,375
------------
1,823,625
------------
LEISURE -- 0.7%
Disney Walt Co. .................................................... 15,497 883,329
Hilton Hotels Corp.................................................. 3,900 416,813
------------
1,300,142
------------
MACHINERY -- 1.0%
General Signal Corp. ............................................... 17,500 702,188
Illinois Tool Works Inc. ........................................... 17,100 1,182,038
------------
1,884,226
------------
MANUFACTURING -- BUILDING MATERIALS -- 0.4%
Armstrong World Ind. ............................................... 10,200 631,125
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
28
<PAGE> 31
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
MEDIA, PUBLISHING -- 0.8%
Gannett, Inc. ...................................................... 4,100 $ 274,700
McGraw Hill Companies............................................... 9,400 385,400
Time Warner, Inc. .................................................. 9,600 320,400
Tribune Co. ........................................................ 6,300 452,813
------------
1,433,313
------------
MEDIA -- BROADCASTING -- 0.1%
TeleCommunications, Inc. ........................................... 8,300 123,463
------------
METALS -- 0.3%
Newmont Mining Corp. ............................................... 10,500 555,188
------------
MULTI INDUSTRIES -- 3.0%
Alco Standard Corp. ................................................ 36,900 1,609,763
Tenneco Inc. ....................................................... 18,800 935,300
TRW Inc. ........................................................... 15,400 1,424,500
Tyco International.................................................. 34,600 1,461,850
------------
5,431,413
------------
OIL & GAS INTERNATIONAL -- 2.3%
Chevron Corp. ...................................................... 12,300 724,163
Exxon Corp. ........................................................ 19,600 1,594,950
Mobil Oil........................................................... 9,200 1,037,300
Texaco Inc. ........................................................ 9,000 798,750
------------
4,155,163
------------
OIL & GAS PRODUCTION/SERVICES -- 2.3%
Coastal Corp. ...................................................... 20,100 796,463
Panenergy Corp. .................................................... 20,500 679,063
Halliburton Co. .................................................... 12,700 668,338
Schlumberger Ltd. .................................................. 6,900 582,188
Williams Co. ....................................................... 17,700 882,788
USX Marathon Group.................................................. 24,100 503,088
------------
4,111,928
------------
PAPER PRODUCTS -- 1.2%
Champion International.............................................. 27,100 1,165,300
International Paper Co. ............................................ 11,300 452,000
Willamette Industries............................................... 8,200 506,350
------------
2,123,650
------------
PHARMACEUTICALS -- 5.4%
Abbot Laboratories.................................................. 39,000 1,759,875
American Home Products.............................................. 21,000 1,244,250
Amgen Inc. ......................................................... 10,000 582,500
Bristol-Meyers...................................................... 15,800 1,386,450
Johnson & Johnson................................................... 8,000 394,000
Lilly Eli & Co. .................................................... 19,800 1,133,550
Merck & Co., Inc. .................................................. 18,200 1,194,375
Pfizer, Inc. ....................................................... 16,600 1,178,600
Schering Plough Corp. .............................................. 10,400 581,100
Warner Lambert Co. ................................................. 5,400 321,300
------------
9,776,000
------------
PHOTOGRAPHY -- 0.3%
Eastman Kodak Co. .................................................. 6,900 500,250
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
29
<PAGE> 32
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
RAILROAD -- 0.8%
Burlington Northern Santa Fe........................................ 8,400 $ 672,000
Union Pacific Corp. ................................................ 9,600 699,600
------------
1,371,600
------------
RETAIL -- 3.3%
Home Depot.......................................................... 28,300 1,503,438
May Dept Stores..................................................... 24,000 1,092,000
Nordstrom, Inc. .................................................... 18,100 705,900
Price/Costco Inc. .................................................. 29,500 586,313
Wal-Mart Stores, Inc. .............................................. 80,400 2,130,600
------------
6,018,251
------------
SEMICONDUCTORS -- 2.4%
Intel Corp. ........................................................ 36,000 2,873,250
Motorola, Inc. ..................................................... 12,700 677,863
National Semiconductor.............................................. 44,700 821,363
------------
4,372,476
------------
TELECOMMUNICATIONS EQUIPMENT -- 0.5%
3 Com Corp.......................................................... 18,000 841,500
------------
TELECOMMUNICATIONS SERVICES -- 3.1%
Airtouch Communications............................................. 13,000 357,500
AT&T................................................................ 25,900 1,359,750
GTE................................................................. 36,100 1,421,438
MCI Communications Corp. ........................................... 45,100 1,133,138
Pacific Telesis Group............................................... 13,700 443,524
Worldcom Inc. ...................................................... 44,200 928,200
------------
5,643,550
------------
TOBACCO -- 1.6%
Philip Morris Cos., Inc. ........................................... 20,900 1,875,775
UST, Inc. .......................................................... 33,400 1,002,000
------------
2,877,775
------------
TOYS -- 0.1%
Mattel, Inc. ....................................................... 7,000 184,625
------------
UTILITIES/ELECTRIC -- 0.8%
Central & South West Corp. ......................................... 24,200 638,275
Duke Power Co. ..................................................... 15,900 743,325
------------
1,381,600
------------
UTILITIES -- GAS -- 0.8%
Noram Energy........................................................ 65,700 960,863
Pacific Enterprises................................................. 13,800 412,275
------------
1,373,138
------------
Total Common Stocks -- 57.2%
(Cost $95,101,290).................................................. 104,317,537
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
30
<PAGE> 33
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE)
- ------------------------------------------------- ----- --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
U.S. TREASURY BONDS -- 7.5%
U.S. Treasury Bonds............................. 10.38% 11/15/12 $ 8,800 $ 10,954,680
U.S. Treasury Bonds............................. 8.13% 08/15/21 2,500 2,739,675
------------
13,694,355
------------
U.S. TREASURY NOTES -- 2.0%
U.S. Treasury Notes............................. 5.00% 02/15/99 2,250 2,176,560
U.S. Treasury Notes............................. 6.63% 06/30/01 1,500 1,493,085
------------
3,669,645
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS -- 9.5%
(Cost $18,085,133).............................. 17,364,000
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 13.4%
*Federal Home Loan Mortgage Corporation
Pool #G10304.................................. 6.50% 04/01/09 887 851,594
*Federal Home Loan Mortgage Corporation
Pool #E60891.................................. 6.50% 07/01/10 3,066 2,942,527
*Federal Home Loan Mortgage Corporation
Pool #297505.................................. 8.00% 06/01/17 12 12,216
*Federal Home Loan Mortgage Corporation
Pool #533301.................................. 10.50% 04/01/19 32 35,199
*Federal Home Loan Mortgage Corporation
Pool #544066.................................. 8.00% 12/01/19 13 13,416
FNCI Pool #325602............................... 6.50% 10/01/10 578 554,414
FNCI Pool #329451............................... 6.50% 03/01/11 992 951,578
FNCI Pool #338029............................... 6.50% 03/01/11 421 403,518
FNCI Pool #338572............................... 6.50% 03/01/11 673 644,942
FNCI Pool #340676............................... 6.50% 03/01/11 999 958,542
FNCI Pool #340686............................... 6.50% 03/01/11 1,270 1,218,180
*Government National Mortgage Association
Pool #146301.................................. 10.00% 02/15/16 90 97,715
GNSF Pool #318567............................... 8.00% 01/15/22 15 15,442
GNSF Pool #317275............................... 8.00% 02/15/22 16 15,713
GNSF Pool #321799............................... 8.00% 04/15/22 487 487,542
GNSF Pool #323085............................... 8.00% 05/15/22 976 976,437
GNSF Pool #342065............................... 8.00% 11/15/22 434 434,379
FGLMC Pool #D66935.............................. 7.50% 01/01/26 409 399,871
FGLMC Pool #D66969.............................. 7.50% 01/01/26 876 856,854
FGLMC Pool #D68671.............................. 7.50% 02/01/26 599 585,388
FGLMC Pool #D69671.............................. 7.50% 03/01/26 33 32,571
FGLMC Pool #D70402.............................. 7.50% 03/01/26 107 104,693
FGLMC Pool #D69839.............................. 7.50% 04/01/26 540 528,441
FGLMC Pool #D69930.............................. 7.50% 04/01/26 468 457,378
FGLMC Pool #D70086.............................. 7.50% 04/01/26 577 564,455
FGLMC Pool #D71116.............................. 7.50% 05/01/26 98 95,773
FGLMC Pool #D71404.............................. 7.50% 05/01/26 1,270 1,242,049
FGLMC TBA....................................... 8.00% 08/01/26 9,000 9,056,250
------------
Total U.S. Government Agency Obligations
(Cost $24,942,940).............................. 24,537,077
------------
TAXABLE MUNICIPAL BONDS -- 0.4%
ILLINOIS -- 0.4%
Cook County, General Obligation Bond............ 5.00% 11/15/23 800 685,000
------------
EURO BONDS -- 1.4%
Republic of Italy Zero Coupon................... 0.00% 01/10/01 3,500 2,559,374
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
31
<PAGE> 34
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE)
- ------------------------------------------------- ----- --------- --------- ------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 4.2%
AT&T**.......................................... 5.32% 09/10/96 $ 3,800 $ 3,796,069
Nestle Capital Corp**........................... 5.32% 09/10/96 3,800 3,798,344
------------
7,594,413
------------
CORPORATE OBLIGATIONS -- 14.7%
CORPORATE BONDS -- 1.9%
Lehman Brothers................................. 5.75% 11/15/98 1,000 975,000
Hertz Corporation............................... 7.00% 07/15/03 2,500 2,421,875
------------
3,396,875
------------
MEDIUM TERM NOTES -- 12.8%
Morgan Stanley Group MTN........................ 5.63% 03/01/99 1,500 1,456,875
Province of Quebec MTN.......................... 7.98% 04/01/99 3,000 3,075,000
General Motors Accept Corp...................... 7.38% 05/26/99 2,000 2,022,500
Bank of Nova Scotia............................. 9.00% 10/01/99 1,400 1,477,000
GMAC............................................ 8.40% 10/15/99 1,345 1,398,800
Ford Motor...................................... 8.38% 01/15/00 3,000 3,112,500
International Lease Finance..................... 5.71% 02/01/00 1,600 1,536,000
Chrysler Financial Corp......................... 5.63% 02/16/01 2,500 2,346,875
NationsBank Credit Card Master.................. 6.45% 04/15/03 3,500 3,455,168
The Money Storetrust 1996-B..................... 7.38% 05/15/17 3,500 3,494,112
------------
23,374,830
------------
Total Corporate Obligations
(Cost $38,264,533) 26,771,705
------------
TOTAL INVESTMENTS -- 100.7%
(Cost $176,393,070)............................. 183,829,106
Other Liabilities in Excess of
Assets -- (0.7%)................................ (1,317,231)
------------
NET ASSETS -- 100%............................... $182,511,875
==============
</TABLE>
- ---------------
* Mortgage-backed pass-through obligations
** Discount Security
See Notes to Financial Statements.
32
<PAGE> 35
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COMMON STOCKS
AEROSPACE/DEFENSE -- 3.6%
Lockheed Martin Corp. .............................................. 43,100 $ 3,625,788
Rockwell International.............................................. 60,900 3,166,800
United Technologies Corp............................................ 46,500 5,242,875
------------
12,035,463
------------
AIRLINES -- 0.4%
AMR Corp. .......................................................... 15,900 1,303,800
------------
APPAREL -- 0.9%
Nike Inc. .......................................................... 26,700 2,883,600
------------
AUTOMOBILES -- 2.0%
Chrysler Corp. ..................................................... 115,800 3,372,675
Ford ............................................................... 103,700 3,473,950
------------
6,846,625
------------
AUTOMOBILE PARTS -- 0.5%
Goodyear ........................................................... 38,200 1,742,875
------------
BANKS -- 7.2%
Bank of Boston Corp. ............................................... 89,600 4,726,400
Citicorp ........................................................... 82,200 6,843,150
Comerica ........................................................... 77,200 3,763,500
First Union Corp. .................................................. 73,200 4,675,650
NationsBank Corp. .................................................. 52,200 4,443,525
------------
24,452,225
------------
BEVERAGES -- SOFT DRINKS -- 3.8%
Coca-Cola Co. ...................................................... 178,600 8,930,000
Pepsico ............................................................ 133,600 3,841,000
------------
12,771,000
------------
CHEMICALS -- 3.5%
E.I. Du Pont de Nemours ............................................ 70,200 5,765,175
Monsanto ........................................................... 146,400 4,703,100
Morton International ............................................... 32,900 1,221,413
------------
11,689,688
------------
COMPUTER HARDWARE -- 2.1%
Compaq Computer Corp. .............................................. 50,700 2,870,888
Sun Microsystems Inc. .............................................. 36,100 1,962,938
Xerox Corporation .................................................. 40,900 2,244,388
------------
7,078,214
------------
COMPUTER SOFTWARE -- 5.2%
Computer Associates ................................................ 49,350 2,590,875
Cisco Systems ...................................................... 90,500 4,773,875
Cabletron Systems .................................................. 20,700 1,262,700
Microsoft Corp. .................................................... 47,800 5,855,500
Oracle ............................................................. 90,450 3,188,363
------------
17,671,313
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
33
<PAGE> 36
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
COSMETICS/TOILETRIES -- 1.3%
Avon Products ...................................................... 91,900 $ 4,399,713
------------
ELECTRICAL EQUIPMENT -- 2.5%
General Electric Co. ............................................... 102,100 8,487,063
------------
FINANCIAL SERVICES -- 2.9%
Merrill Lynch ...................................................... 56,500 3,460,625
Morgan (J.P.) & Co., Inc. .......................................... 37,300 3,268,413
Morgan Stanley ..................................................... 65,800 3,141,950
------------
9,870,988
------------
FOODS -- 2.5%
Conagra Inc. ....................................................... 71,800 3,024,575
Hershey Foods Corp. ................................................ 30,500 2,657,313
Sara Lee Corp. ..................................................... 92,100 2,901,150
------------
8,583,038
------------
FOREST PRODUCTS AND PAPER -- 1.0%
Bemis Co. .......................................................... 39,400 1,177,075
Mead Inc. .......................................................... 5,300 211,825
Temple Inland Inc. ................................................. 40,100 2,068,813
------------
3,457,713
------------
HOUSEHOLD PRODUCTS -- GENERAL -- 2.1%
Clorox ............................................................. 45,400 4,250,575
Proctor & Gamble ................................................... 33,000 2,932,875
------------
7,183,450
------------
INSURANCE -- 3.2%
Aetna Inc. ......................................................... 8,422 556,905
Allstate ........................................................... 67,197 2,998,666
American General ................................................... 92,300 3,368,950
Cigna .............................................................. 23,100 2,682,488
General re Corp. ................................................... 8,500 1,231,438
------------
10,838,447
------------
LEISURE -- 1.4%
Walt Disney Co. .................................................... 66,178 3,772,146
King World Productions Inc. ........................................ 27,600 972,900
------------
4,745,046
------------
MACHINERY & EQUIPMENT -- 1.1%
Caterpillar Inc. ................................................... 27,400 1,887,175
Ingersoll Rand Co. ................................................. 39,500 1,688,625
------------
3,575,800
------------
MANUFACTURING -- 0.5%
Armstrong World Industries ......................................... 24,700 1,528,313
------------
MEDIA -- PUBLISHING -- 1.1%
New York Times Co. ................................................. 66,500 2,078,125
Times Mirror ....................................................... 35,700 1,548,488
------------
3,626,613
------------
MEDICAL -- HOSPITAL MANAGEMENT SERVICES -- 0.8%
Columbia Healthcare Corp. (HCA) .................................... 50,400 2,841,300
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
34
<PAGE> 37
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
METALS -- 1.1%
Phelps Dodge ....................................................... 45,800 $ 2,770,900
USX -- Steel ....................................................... 36,000 775,500
------------
3,546,400
------------
MULTI-INDUSTRY -- 2.1%
Honeywell Inc. ..................................................... 74,000 4,301,250
Textron ............................................................ 33,400 2,851,525
------------
7,152,775
------------
OIL/GAS -- DOMESTIC -- 2.1%
Atlantic Richfield Co. ............................................. 20,300 2,370,025
Phillips Petroleum Co. ............................................. 59,000 2,389,500
Unocal Corp. ....................................................... 64,700 2,215,975
------------
6,975,500
------------
OIL/GAS -- INTERNATIONAL -- 5.6%
Exxon Corp. ........................................................ 67,200 5,468,400
Mobil Corp. ........................................................ 42,000 4,735,500
Royal Dutch Pete Co. ............................................... 23,800 3,555,125
Texaco Inc. ........................................................ 57,100 5,067,625
------------
18,826,650
------------
OIL/GAS -- PRODUCTION SERVICES -- 1.0%
Tidewater .......................................................... 91,500 3,511,313
------------
PHARMACEUTICALS -- 9.1%
Abbott Labs ........................................................ 83,000 3,745,375
Bristol-Meyers ..................................................... 49,200 4,317,300
Johnson & Johnson .................................................. 135,700 6,683,225
Merck & Co. Inc. ................................................... 125,700 8,249,063
Pfizer Inc. ........................................................ 67,300 4,778,300
Schering Plough Corp. .............................................. 55,400 3,095,475
------------
30,868,738
------------
PHOTOGRAPHY -- 0.8%
Eastman Kodak ...................................................... 35,400 2,566,500
------------
RAILROAD -- 1.1%
Norfolk Southern Corp. ............................................. 46,300 3,860,263
------------
RESTAURANTS/LODGING -- 1.2%
Hospitality Franchise .............................................. 25,200 1,508,850
Marriott International Inc. ........................................ 47,800 2,623,025
------------
4,131,875
------------
RETAIL -- 4.9%
American Stores Co. ................................................ 98,500 4,050,813
Dayton Hudson ...................................................... 75,900 2,618,550
Gap Inc. ........................................................... 135,000 4,725,000
Home Depot Inc. .................................................... 46,100 2,449,063
TJX Cos. Inc. ...................................................... 82,200 2,630,400
------------
16,473,826
------------
SEMICONDUCTORS -- 2.2%
Intel Corp. ........................................................ 94,800 7,566,225
------------
TELECOMMUNICATIONS EQUIPMENT -- 0.8%
Harris Corp. ....................................................... 42,600 2,619,900
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
35
<PAGE> 38
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------- --------- ------------
<S> <C> <C>
TOBACCO -- 1.8%
Philip Morris Inc. ................................................. 69,500 $ 6,237,625
------------
TOYS -- 0.5%
Hasbro Inc. ........................................................ 42,300 1,554,525
------------
UTILITIES -- ELECTRIC -- 3.1%
Edison International ............................................... 232,200 4,034,475
FPL Group Inc. ..................................................... 51,400 2,274,450
General Public Utilities ........................................... 132,400 4,170,600
------------
10,479,525
------------
UTILITIES -- GAS -- 0.9%
Pacific Enterprises ................................................ 97,700 2,918,788
------------
UTILITIES -- TELECOMMUNICATIONS -- 6.8%
Ameritech Corp. .................................................... 68,300 3,525,988
AT&T ............................................................... 70,700 3,711,750
Bellsouth Corp. .................................................... 125,200 4,538,500
GTE Corp. .......................................................... 79,600 3,134,250
Nynex Corp. ........................................................ 62,300 2,686,687
Sprint Corp. ....................................................... 136,300 5,537,188
------------
23,134,363
------------
TOTAL COMMON STOCKS -- 94.4%
(Cost $320,232,223) ................................................ 320,037,067
------------
PREFERRED STOCK -- 0.1%
Aetna Services...................................................... 2,808 195,156
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
36
<PAGE> 39
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE 2)
- ------------------------------------------------- ----- --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 5.4%
U.S. Treasury Bill.............................. 5.06%* 09/19/96 $ 368 $ 367,017
U.S. Treasury Bill.............................. 5.15%* 10/17/96 22 21,848
U.S. Treasury Bill.............................. 5.03%* 10/24/96 2,196 2,179,494
U.S. Treasury Bill.............................. 4.99%* 10/24/96 2,730 2,709,481
U.S. Treasury Bill.............................. 4.97%* 10/24/96 1,213 1,203,883
U.S. Treasury Bill.............................. 5.06%* 10/31/96 734 727,654
U.S. Treasury Bill.............................. 5.00%* 11/07/96 493 488,247
U.S. Treasury Bill.............................. 5.10%* 11/07/96 663 656,608
U.S. Treasury Bill.............................. 5.02%* 11/07/96 940 930,937
U.S. Treasury Bill.............................. 5.04%* 11/14/96 687 679,676
U.S. Treasury Bill.............................. 4.97%* 11/14/96 434 429,373
U.S. Treasury Bill.............................. 4.98%* 11/14/96 687 679,676
U.S. Treasury Bill.............................. 4.97%* 11/14/96 947 936,904
U.S. Treasury Bill.............................. 5.02%* 11/14/96 261 258,217
U.S. Treasury Bill.............................. 5.03%* 11/14/96 108 106,849
U.S. Treasury Bill.............................. 5.07%* 11/14/96 5,677 5,616,476
U.S. Treasury Bill.............................. 5.07%* 11/14/96 337 333,407
------------
18,325,745
------------
Total U.S. Government Obligations
(Cost $18,293,0401)............................. 18,325,745
------------
TOTAL INVESTMENT
(COST $298,146,861) -- 99.8%.................... 338,557,968
Other assets in excess of liabilities -- 0.2%.... 593,428
------------
NET ASSETS -- 100%............................... $339,151,396
==============
</TABLE>
- ---------------
* Effective Yield
See Notes to Financial Statements.
37
<PAGE> 40
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE 2)
- ------------------------------------------------- ----- --------- --------- ------------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- CREDIT CARDS -- 5.7%
Standard Credit Card Master Tr.................. 7.85% 02/07/02 $ 2,500 $ 2,577,250
NationsBank Credit Card Master.................. 6.45% 04/15/03 2,700 2,665,415
------------
5,242,665
------------
ASSET BACKED SECURITIES -- HOME EQUITY LOANS -- 1.1%
The Money Storetrust 1996 -- B.................. 7.38% 03/15/17 1,000 998,318
------------
COMMERCIAL PAPER -- 2.4%
Nestle Capital Corp............................. 5.23% 09/06/96 2,200 2,199,041
------------
CORPORATE OBLIGATIONS -- 8.6%
General Motors.................................. 8.40% 10/15/99 1,000 1,040,000
Household International BV...................... 5.25% 10/15/98 2,000 1,945,000
Texas Instruments Inc........................... 6.88% 07/15/00 2,500 2,484,375
Hertz Corporation............................... 7.00% 07/15/03 2,500 2,421,875
------------
7,891,250
------------
EURO BONDS -- 2.6%
Republic of Italy Zero Coupon................... 0.00% 01/10/01 3,300 2,413,177
------------
MEDIUM TERM NOTES -- 19.0%
International Lease Finance MT.................. 6.27% 02/10/99 2,500 2,471,875
Sears Roebuck Co................................ 6.58% 06/15/00 2,000 1,965,000
General Motors Accept Corp...................... 7.38% 05/26/99 2,000 2,022,500
Caterpillar Finance MTN......................... 6.77% 02/01/99 2,000 1,995,000
Associates Corporation.......................... 6.35% 06/29/00 3,000 2,932,500
Morgan Stanley Group MTN........................ 6.25% 03/01/99 2,000 1,942,500
USL Capital Corp................................ 8.13% 02/15/00 4,000 4,115,000
------------
17,444,375
------------
U.S. GOVERNMENT AGENCY NOTES -- 4.4%
Federal Home Loan Mortgage Corp. Pool #303528... 6.00% 06/01/01 2,293 2,192,433
Federal Home Loan Mortgage Corp. Pool #131579... 6.50% 06/01/01 181 166,900
Federal Home Loan Mortgage Corp. Pool #286087... 8.00% 06/01/24 773 772,447
Government National Mortgage Assoc. Pool
#136688....................................... 10.00% 06/01/15 36 39,341
Government National Mortgage Assoc. Pool
#166744....................................... 10.00% 06/01/16 358 391,083
Government National Mortgage Assoc. Pool
#209480....................................... 10.00% 07/15/17 80 87,622
Government National Mortgage Assoc. Pool
#227082....................................... 10.00% 08/15/17 114 124,052
Federal Home Loan Mortgage Corp. Pool #160034... 8.50% 12/01/07 69 69,841
Federal Home Loan Mortgage Corp. Pool #549837... 8.00% 07/01/10 216 216,198
Federal Home Loan Mortgage Corp. Pool #284343... 8.00% 12/01/16 13 13,076
Federal Home Loan Mortgage Corp. Pool #297505... 8.00% 06/01/17 18 18,043
------------
4,091,036
------------
U.S TREASURY BONDS -- 5.0%
U.S. Treasury Bonds............................. 10.38% 11/15/09 3,800 4,578,848
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
38
<PAGE> 41
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION RATE DATE (000) (NOTE 2)
- ------------------------------------------------- ----- --------- --------- ------------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES -- 49.3%
U.S. Treasury Notes............................. 5.12% 11/30/98 $ 6,900 $ 6,716,804
U.S. Treasury Notes............................. 6.38% 05/15/99 12,000 11,958,958
U.S. Treasury Notes............................. 6.88% 08/31/99 2,000 2,017,400
U.S. Treasury Notes............................. 7.75% 11/30/99 7,500 7,749,075
U.S. Treasury Notes............................. 7.75% 01/21/00 2,500 2,584,775
U.S. Treasury Notes............................. 5.63% 11/30/00 1,500 1,440,720
6.63% 06/30/01 13,000 12,940,070
------------
45,407,802
------------
TOTAL INVESTMENTS -- 98.1%
(Cost $91,680,545).............................. 90,266,512
Other Assets in Excess of Liabilities -- 1.9%.... 1,755,100
------------
NET ASSETS -- 100%............................... $ 92,021,612
==============
</TABLE>
- ---------------
* Discount Security
See Notes to Financial Statements.
39
<PAGE> 42
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET INVESTMENT
ALLOCATION BLUE CHIP GRADE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities at value
(cost $176,393,070, $298,146,861
and $91,680,545 respectively)........ $183,829,106 $338,557,968 $90,266,512
Cash................................... 73,400 312 54,240
Receivable for investment securities
sold................................. 7,892,860 6,218,257 --
Contribution receivable................ 107,408 746,059 400,274
Dividends receivable................... 262,201..... 755,213 --
Interest receivable.................... 876,101 -- 1,343,225
Deferred organization costs and prepaid
expenses............................. 32,594 29,161 31,653
------------ ------------ -----------
Total assets............................. 193,073,670 346,306,970 92,095,904
------------ ------------ -----------
LIABILITIES:
Withdrawal payable..................... 15,811 75,952 13,753
Payable for investment securities
purchased 10,448,530 6,761,707 --
Advisor fees payable................... 30,460 153,367 16,510
Accrued audit fees..................... 20,068 13,990 17,705
Accrued legal fees..................... 10,992 19,951 4,363
Accrued accounting fees................ 10,161 14,060 3,410
Accrued custody fees................... 7,320 19,344 3,770
Administration fees payable............ 2,768 10,227 1,832
Other accrued expenses................. 15,685 86,976 12,949
------------ ------------ -----------
Total liabilities........................ 10,561,795 7,155,574 74,292
------------ ------------ -----------
NET ASSETS............................... $182,511,875 $339,151,396 $92,021,612
============ ============ ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
40
<PAGE> 43
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Operations
For the six months ended August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET INVESTMENT
ALLOCATION BLUE CHIP GRADE BOND
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................. $ 2,535,308 $ 302,621 $2,274,374
Dividends................................ 1,020,836 3,372,255 --
----------- ----------- ----------
3,556,144 3,674,876 2,274,374
----------- ----------- ----------
EXPENSES:
Advisory fees............................ 507,536 1,156,068 167,152
Administration fees...................... 46,140 77,071 18,572
Fund accounting fees and expenses........ 66,782 93,231 24,759
Audit fees............................... 20,491 14,552 9,922
Custodian fees and expenses.............. 15,125 33,283 7,471
Legal fees............................... 12,307 24,867 4,107
Trustees fees............................ 9,695 15,048 3,523
Amortization of organization costs....... 6,982 6,970 6,982
Other operating expenses................. 5,449 6,200 3,120
----------- ----------- ----------
690,507 1,427,290 245,608
Less: Fee waivers and expense
reimbursements......................... (396,867) (484,008) (161,500)
----------- ----------- ----------
293,640 943,282 84,108
----------- ----------- ----------
Net Investment Income...................... 3,262,504 2,731,594 2,190,266
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on securities
transactions........................... 8,726,909 12,400,049 (643,236)
Net change in unrealized appreciation
(depreciation) on investments.......... (8,382,622) (5,968,861) (1,413,251)
----------- ----------- ----------
Net Gain on Investments.................... 344,287 6,431,188 (2,056,487)
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................... $ 3,606,791 $ 9,162,782 $ 133,779
=========== =========== ==========
</TABLE>
- ---------------
See Notes to Financial Statements.
41
<PAGE> 44
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
----------------------------
FOR THE SIX
MONTHS ENDED FOR THE
AUGUST 31, YEAR ENDED
1996 FEBRUARY 29,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 3,262,504 $ 6,425,653
Net realized gain on securities transactions........... 8,726,909 19,223,012
Net change in unrealized appreciation/depreciation on
investments.......................................... (8,382,622) 8,662,241
------------- ------------
Net increase in net assets resulting from operations... 3,606,791 34,310,906
------------- ------------
Trust Share Transactions:
Contributions.......................................... 13,790,000 31,372,458
Withdrawals............................................ (15,939,330) (35,499,213)
------------- ------------
Net decrease in net assets resulting from Trust share
transactions......................................... (2,149,330) (4,126,755)
------------- ------------
Total Increase........................................... 1,457,461 30,184,151
NET ASSETS:
Beginning of year...................................... 181,054,414 150,870,263
------------- ------------
End of period.......................................... $ 182,511,875 $181,054,414
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
42
<PAGE> 45
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BLUE CHIP PORTFOLIO
----------------------------
FOR THE SIX
MONTHS ENDED FOR THE
AUGUST 31, YEAR ENDED
1996 FEBRUARY 29,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 2,731,594 $ 4,528,400
Net realized gain on securities transactions........... 12,400,049 21,310,546
Net change in unrealized appreciation/depreciation on
investments.......................................... (5,968,861) 34,689,746
------------- ------------
Net increase in net assets resulting from operations... 9,162,782 60,528,692
------------- ------------
Trust Share Transactions:
Contributions.......................................... 78,154,310 96,776,148
Withdrawals............................................ (23,687,970) (39,120,232)
------------- ------------
Net increase in net assets resulting from Trust share
transactions......................................... 54,466,340 57,655,916
------------- ------------
Total Increase........................................... 63,629,122 118,184,608
NET ASSETS
Beginning of period.................................... 275,522,274 157,337,666
------------- ------------
End of period.......................................... $ 339,151,396 $275,522,274
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
43
<PAGE> 46
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT GRADE BOND
PORTFOLIO
----------------------------
FOR THE SIX
MONTHS ENDED FOR THE
AUGUST 31, YEAR ENDED
1996 FEBRUARY 29,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................... $ 2,190,266 $ 3,879,980
Net realized gain (loss) on securities transactions..... (643,236) 2,336,008
Net change in unrealized appreciation/depreciation on
investments........................................... (1,413,251) (247,652)
------------- ------------
Net increase in net assets resulting from operations.... 133,779 5,968,336
------------- ------------
Trust Share Transactions:
Contributions........................................... 35,810,542 21,358,278
Withdrawals............................................. (10,212,284) (18,755,421)
------------- ------------
Net increase(decrease) in net assets resulting from
Trust share transactions.............................. 25,598,258 2,602,857
------------- ------------
Total Increase............................................ 25,732,037 8,571,193
NET ASSETS:
Beginning of period..................................... 66,289,575 57,718,382
------------- ------------
End of period........................................... $92,021,612 $ 66,289,575
============ ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
44
<PAGE> 47
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Master Investment Trust, Series I (the "Trust"), a Delaware business trust,
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as an open-end management investment company. At August 31, 1996 the Trust
consisted of five portfolios. The accompanying financial statements and notes
are those of the Blue Chip Portfolio (the "Blue Chip Portfolio"), Investment
Grade Bond Portfolio, (the "Bond Portfolio") and Asset Allocation Portfolio (the
"Asset Allocation Portfolio") (collectively, the "Portfolios") only.
The investment objective of the Blue Chip Portfolio is long-term capital
appreciation through investments in blue chip stocks. The investment objective
of the Investment Grade Bond Portfolio is to obtain interest income and capital
appreciation by investing in investment grade intermediate and longer term
bonds, including corporate and governmental fixed income obligations and
mortgage-backed securities. The investment objective of the Asset Allocation
Portfolio is to obtain long term growth from capital appreciation and dividend
and interest income. The Asset Allocation Portfolio seeks to achieve its
objective by actively allocating investments among the three major asset
categories: bonds, equity securities and cash equivalents.
Bank of America National Trust and Savings Association ("Bank of America"),
a wholly owned subsidiary of BankAmerica Corporation, serves as the Portfolios'
Investment Adviser. Concord Holding Corporation ("Concord") serves as the
Portfolios' Administrator through BISYS Fund Services (Ireland) Ltd., a wholly
owned subsidiary of Concord.
Effective March 29, 1995, Concord became a wholly owned subsidiary of The
BISYS Group, Inc., ("BISYS").
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolios in the preparation of their financial statements. The policies
are in conformity with generally accepted accounting principles. The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts and accounting disclosures in the financial statements. Actual
results could differ from those estimates.
A) SECURITY VALUATIONS:
Portfolio securities for which market quotations are readily available
(other than debt securities with remaining maturities of 60 days or less) are
valued at the last reported sales price on the date of valuation or, if none is
available, at the mean between the current quoted
45
<PAGE> 48
bid and asked prices on the date of valuation. Securities that are primarily
traded on the NASDAQ national securities market are valued at the last reported
sales price on the date of valuation or, if none is available, at the last
quoted bid price on the date of valuation. The Portfolio may use an independent
pricing service, approved by the Board of Trustees, to value certain of its
securities. Such prices reflect market values which may be established through
the use of electronic data processing techniques and matrix systems. Restricted
securities and securities for which market quotations are not readily available,
if any, are valued at fair value using methods approved by the Board of
Trustees. Debt securities with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. The amortized cost
method involves valuing a security at its cost on the date of purchase or, in
the case of securities purchased with more than 60 days until maturity, at their
market value each day until the 61st day prior to maturity, and thereafter
assuming a constant amortization to maturity of the difference between the
principal amount due at maturity and such valuation.
B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are accounted for on a trade date basis. Realized
gains and losses on securities transactions are determined on the identified
cost basis. Interest income, including accretion of discount and amortization of
premium, is accrued daily. Dividend income is recorded on the ex-dividend date.
C) EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while Trust expenses attributable to more than one portfolio of the Trust and
general Trust expenses are allocated among the respective portfolios of the
Trust.
D) FEDERAL INCOME TAXES:
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in the Portfolios will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
Portfolios will be managed in such a way that an investor will be able to
satisfy the requirements of the Internal Revenue Code applicable to regulated
investment companies.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolios have an Investment Advisory Agreement with Bank of America
and an Administration Agreement with Concord.
As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolios. For its services, Bank of America is entitled to a
fee, accrued daily and payable monthly, at an annual rate of 0.55%, 0.75% and
0.45% of the average daily net assets of the Asset Allocation
46
<PAGE> 49
Portfolio, Blue Chip Portfolio and Bond Portfolio, respectively. For the period
ended August 31, 1996, Bank of America waived the following fees as Adviser for
each Portfolio.
<TABLE>
<S> <C>
Asset Allocation......................................................... $ 363,775
Blue Chip................................................................ $ 453,754
Bond..................................................................... $ 145,347
</TABLE>
As Administrator, Concord assists in supervising the operations of the
Portfolios. For its services, Concord is entitled to a fee from each Portfolio
accrued daily and payable monthly, at an annual rate of 0.05% of each of the
Portfolio's average daily net assets. For the period ended August 31, 1996,
Concord waived the following fees as Administrator for each Portfolio.
<TABLE>
<S> <C>
Asset Allocation.......................................................... $ 33,092
Blue Chip................................................................. $ 30,254
Bond...................................................................... $ 16,153
</TABLE>
For services provided to all five of the portfolios constituting the Trust,
each Trustee receives an annual fee of $3,000 and a meeting fee of $500. For the
period ended August 31, 1996, the Asset Allocation Portfolio, Blue Chip
Portfolio and Bond Portfolio incurred legal expenses of $12,307, $24,867 and
$4,107, which were earned by a law firm, a partner of which serves as Secretary
of the Trust. Certain officers of the Trust are "affiliated persons" (as defined
in the Act) of BISYS.
NOTE 4 -- SECURITIES TRANSACTIONS
During the period ended August 31, 1996, each Portfolio purchased and sold
portfolio securities, excluding short-term securities, in the following amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
ASSET ALLOCATION PORTFOLIO
U.S. Government.................................. $ 6,776,406 $ 0
Other............................................ 94,121,136 97,191,208
------------ ------------
Total............................................ 100,897,542 97,191,208
============ ============
BLUE CHIP PORTFOLIO
Total Common Stocks.............................. $157,989,151 $116,133,810
============ ============
BOND PORTFOLIO
U.S. Government.................................. $ 34,247,132 $ 9,163,594
Other............................................ 15,119,716 12,925,931
------------ ------------
Total............................................ 49,366,848 22,089,525
============ ============
</TABLE>
At August 31, 1996, the cost of the securities of the Asset Allocation
Portfolio, Blue Chip Portfolio and Bond Portfolio for federal income tax
purposes was substantially the same as for financial reporting purposes.
Accordingly net unrealized appreciation (depreciation) of
47
<PAGE> 50
investments amounted to $7,436,036, $40,411,107 and ($1,414,033) respectively,
consisting of gross unrealized appreciation of $12,044,215, $42,366,519 and
$179,252, respectively, and gross unrealized depreciation of $4,608,179,
$1,955,412 and $1,593,285, respectively.
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Asset Allocation Portfolio had the following concentrations by industry
sector at August 31, 1996 (as a percentage of total investments):
<TABLE>
<S> <C>
U. S. Treasury Bonds............................................... 7.4%
U. S. Treasury Notes............................................... 2.0
U. S. Government Agency Obligations................................ 13.3
Taxable Municipal Bonds............................................ 0.4
Medium Term Notes.................................................. 12.7
Corporate Bonds.................................................... 1.9
Commercial Paper Discount.......................................... 4.1
Euro Bonds......................................................... 1.4
Aerospace/Defense.................................................. 0.9
Airlines........................................................... 0.2
Aluminum........................................................... 0.3
Automobiles........................................................ 1.1
Banks.............................................................. 3.6
Beverages.......................................................... 2.2
Chemicals.......................................................... 2.1
Commercial Services................................................ 0.1
Computer Hardware.................................................. 2.8
Computer Software.................................................. 2.0
Household, General Products........................................ 1.9
Electrical Products................................................ 2.8
Semiconductors..................................................... 2.4
Financial Services................................................. 2.7
Food............................................................... 1.4
Health Care Products............................................... 0.7
Insurance Life..................................................... 0.5
Insurance -- Property and Casualty................................. 1.0
Oil & Gas International............................................ 4.5
Leisure............................................................ 0.7
Manufacturing -- Building Materials................................ 0.3
Manufacturing -- Machinery......................................... 1.0
Media, Broadcasting, Publishing.................................... 0.9
Metals............................................................. 0.3
Multi Industries................................................... 2.9
Paper Products..................................................... 1.2
Pharmaceuticals.................................................... 5.3
Photography........................................................ 0.3
Railroad........................................................... 0.7
</TABLE>
48
<PAGE> 51
<TABLE>
<S> <C>
Retail............................................................. 3.3
Telecommunications Equipment....................................... 0.5
Telecommunications Services........................................ 3.1
Tobacco............................................................ 1.6
Toys............................................................... 0.1
Utilities -- Gas/Electric.......................................... 1.4
-----
100.0%
=====
</TABLE>
The Bond Portfolio had the following concentrations by security type at
August 31, 1996 (as a percentage of total investments):
<TABLE>
<S> <C>
U.S. Treasury Notes................................................ 50.3%
Medium Term Notes.................................................. 19.3
U.S. Government Treasury Bonds..................................... 5.1
Asset Backed Securities............................................ 6.9
U.S. Government Agency Notes....................................... 4.5
Commercial Paper Discount.......................................... 2.4
Corporate Obligations.............................................. 8.7
Euro Bonds......................................................... 2.8
-----
100.0%
=====
</TABLE>
49
<PAGE> 52
MASTER INVESTMENT TRUST, SERIES I --
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR YEAR
AUGUST 31, YEAR ENDED ENDED ENDED
1996 FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1996 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Ratio of expenses to
average net assets**.... 0.32%*** 0.26% 0.17% 0.24%***
Ratio of investment income
to average net
assets**................ 3.54%*** 3.87% 4.01% 3.35%***
Portfolio Turnover........ 55% 157% 142% 67%
Average commission rate
paid (a)................ $ 0.0010
</TABLE>
- ---------------
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994
** Net of fee waivers which had the effect of reducing the ratio of expenses to
average net assets and increasing the ratio of net investment income to
average net assets by 0.43%, 0.47%, 0.60%, 0.03% (annualized) for the
periods ended August 31, 1996, February 29, 1996, February 28, 1995 and
February 28, 1994, respectively.
*** Annualized
(a) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Portfolio as
a whole without distinguishing between the classes of shares issued.
Disclosure not required for prior periods.
See Notes to Financial Statements.
50
<PAGE> 53
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR YEAR
AUGUST 31, YEAR ENDED ENDED ENDED
1996 FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1996 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Ratio of expenses to
average net assets**.... 0.61%*** 0.31% 0.17% 0.27%***
Ratio of investment income
to average net
assets**................ 1.77%*** 2.16% 2.30% 1.97%***
Portfolio Turnover........ 40% 108% 44% 86%
Average commission rate
paid (a)................ $ 0.0012
</TABLE>
- ---------------
* For the period December 6, 1993 ( commencement of operations) through
February 28, 1994
** Net of fee waivers which had the effect of reducing the ratio of expenses to
average net assets and increasing the ratio of net investment income to
average net assets by 0.32%, 0.59%, 0.80%, 0.80% (annualized) for the
periods ended August 31, 1996, February 29, 1996, February 28, 1995 and
February 28, 1994, respectively.
*** Annualized
(a) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Portfolio as
a whole without distinguishing between the classes of shares issued.
Disclosure not required for prior periods.
See Notes to Financial Statements.
51
<PAGE> 54
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR YEAR
AUGUST 31, YEAR ENDED ENDED ENDED
1996 FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1996 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Ratio of expenses to
average net assets**.... 0.23%*** 0.18% 0.25% 0.41%***
Ratio of investment income
to average net
assets**................ 5.90%*** 6.47% 6.22% 4.93%***
Portfolio Turnover........ 32% 172% 240% 32%
</TABLE>
- ---------------
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994
** Net of fee waivers which had the effect of reducing the ratio of expenses to
average net assets and increasing the ratio of net investment income to
average net assets by 0.44% for the period ended August 31, 1996, and 0.50%
(annualized) for the periods ended February 29, 1996, February 28, 1995 and
February 28, 1994, respectively.
*** Annualized
See Notes to Financial Statements.
52
<PAGE> 55
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATING RATE DATE (000) (NOTE 2)
- --------------------------------- --------- ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER -- 35.6%
ASSET BACKED -- 4.4%
Asset Securitization Cooperative
Corp.*++...................... A1+/P1 5.40% 9/09/96 $ 25,000 $ 24,970,000
Asset Securitization Cooperative
Corp.*++...................... A1+/P1 5.42% 9/16/96 25,000 24,943,542
Bank One Funding Corp. ......... A1/P1 5.31% 10/11/96 28,068 27,902,398
Bank One Funding Corp. ......... A1/P1 5.32% 10/16/96 25,000 24,833,906
Ciesco, L.P.*++................. A1+/P1 5.42% 9/19/96 25,000 24,932,250
Corporate Asset Funding Co.
Inc.*++....................... A1+/P1 5.28% 9/04/96 38,100 38,083,236
Corporate Asset Funding Co.
Inc.*++....................... A1+/P1 5.40% 9/20/96 25,000 24,928,750
Fleet Funding Inc. ............. A1+/P1 5.30% 9/06/96 25,000 24,981,597
Golden Managers Acceptance
Corp. ........................ A1+/D1+ 5.31% 9/04/96 25,000 24,988,938
Golden Managers Acceptance
Corp. ........................ A1+/D1+ 5.29% 10/02/96 25,000 24,886,118
------------
265,450,735
------------
DOMESTIC -- 23.6%
AUTOMOBILES -- 5.4%
American Honda Finance
Corp. ........................ P1/F1 5.45% 9/12/96 17,000 16,971,690
American Honda Finance
Corp. ........................ P1/F1 5.33% 9/04/96 15,000 14,993,337
American Honda Finance
Corp. ........................ P1/F1 5.35% 9/30/96 40,000 39,827,611
American Honda Finance
Corp. ........................ P1/F1 5.32% 9/30/96 45,000 44,807,150
Daimler-Benz North America
Corp. ........................ A1/P1 5.35% 10/02/96 25,000 24,884,826
Daimler-Benz North America
Corp. ........................ A1/P1 5.40% 2/18/97 45,710 44,544,395
Ford Motor Credit Co. .......... A1/P1 5.48% 10/07/96 25,000 24,863,000
General Motors Acceptance
Corp. ........................ P1/D1 5.50% 10/21/96 25,000 24,809,028
General Motors Acceptance
Corp. ........................ P1/D1 5.58% 12/02/96 50,000 49,287,000
General Motors Acceptance
Corp. ........................ P1/D1 5.52% 12/10/96 20,000 19,693,333
Mitsubishi Motors Credit of
America, Inc. ................ A1/P1 5.51% 9/09/96 20,000 19,975,511
------------
324,656,881
------------
BANKING -- 4.8%
ABN-AMRO North American Finance
Inc. ......................... A1+/P1 5.10% 10/04/96 50,000 49,766,250
Bankers Trust N.Y. Corp. ....... A1+/P1 5.51% 10/09/96 25,000 24,854,597
Bankers Trust N.Y. Corp.,
Daily Variable Rate
(final maturity 2/10/97)+..... A1/P1 5.48% 9/03/96 25,000 25,000,000
B.A.T. Capital Corp. ........... A1/P1 5.28% 10/04/96 25,000 24,879,000
</TABLE>
- ---------------
See Notes to Financial Statements.
53
<PAGE> 56
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATING RATE DATE (000) (NOTE 2)
- --------------------------------- ------ ---- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
BANKING -- (CONTINUED)
B.A.T. Capital Corp. ........... A1/P1 5.32% 10/08/96 $ 25,000 $ 24,863,305
Commerzbank U.S. Finance,
Inc. ......................... A1+/P1 5.42% 9/24/96 25,000 24,913,430
CoreStates Capital Corp.,
Monthly Variable Rate (final
maturity 3/17/97)+............ A1/P1 5.39% 9/17/96 25,000 25,000,000
Government Development Bank of
Puerto Rico, Mato Rey......... A1+/PBW1 5.41% 9/10/96 29,700 29,659,831
Government Development Bank of
Puerto Rico, Mato Rey......... A1+/PBW1 5.48% 10/08/96 15,000 14,915,517
Western Financial
Savings Bank.................. A1+/P1 5.30% 9/18/96 18,000 17,954,950
Westpac Capital Corp. .......... A1/P1 5.38% 10/10/96 25,000 24,854,292
------------
286,661,172
------------
CHEMICALS -- DIVERSIFIED -- 0.8%
AKZO Nobel Inc. ................ A1/P1 5.51% 10/08/96 27,000 26,847,097
AKZO Nobel Inc. ................ A1/P1 5.47% 10/24/96 25,000 24,798,674
------------
51,645,771
------------
CONGLOMERATES -- 1.6%
BTR Dunlop Finance, Inc......... A1/P1 5.42% 9/13/96 25,000 24,954,833
BTR Dunlop Finance, Inc. ....... A1/P1 5.42% 9/26/96 50,000 49,811,805
BTR Dunlop Finance, Inc. ....... A1/P1 5.35% 11/06/96 25,000 24,754,792
------------
99,521,430
------------
CONSUMER ELECTRONICS -- 0.5%
Sharp Electronics Corp. ........ A1/P1 5.42% 9/06/96 12,000 11,990,967
Sharp Electronics Corp. ........ A1/P1 5.28% 9/20/96 20,000 19,944,267
------------
31,935,234
------------
CONSUMER GOODS -- 1.2%
American Home Products Corp.
Inc. ......................... P1/D1 5.32% 9/27/96 20,000 19,923,155
Colgate-Palmolive Co.*++........ A1/P1 4.90% 9/12/96 50,000 49,925,139
------------
69,848,294
------------
FINANCE COMPANIES -- 5.1%
C.S. First Boston Inc. ......... A1/P1 5.33% 9/09/96 25,000 24,970,389
C.S. First Boston Inc. ......... A1/P1 5.46% 10/18/96 25,000 24,821,792
C.S. First Boston Inc. ......... A1/P1 5.31% 10/17/96 25,000 24,830,375
Countrywide Home Loans Inc. .... A1/F1 5.32% 9/24/96 50,000 49,830,056
Countrywide Home Loans Inc. .... A1/F1 5.29% 10/04/96 50,000 49,757,542
Countrywide Home Loans Inc. .... A1/F1 5.35% 11/01/96 24,820 24,595,000
International Lease Finance
Corp. ........................ A1/P1 5.31% 9/09/96 25,000 24,970,500
International Lease Finance
Corp. ........................ A1/P1 5.43% 10/01/96 25,000 24,886,875
International Lease Finance
Corp. ........................ A1/P1 5.48% 10/02/96 25,000 24,882,028
International Lease Finance
Corp. ........................ A1/P1 5.32% 10/29/96 33,000 32,717,153
------------
306,261,710
------------
FOOD PRODUCTS -- 0.4%
CPC International............... A1/P1 5.42% 9/10/96 25,000 24,966,125
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
54
<PAGE> 57
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATING RATE DATE (000) (NOTE 2)
- --------------------------------- ------ ---- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
HOUSEHOLD FURNITURE &
APPLIANCES -- 2.4%
General Electric Capital
Corp. ........................ A1+/D1 5.31% 10/17/96 $ 25,000 $ 24,830,375
General Electric Capital
Corp. ........................ A1+/P1 5.51% 11/26/96 25,000 24,670,931
General Electric Capital
Services Inc. ................ A1+/P1 5.39% 9/10/96 25,000 24,966,313
Whirlpool Finance Corp. ........ A1/D1 5.28% 9/26/96 17,000 16,937,667
Whirlpool Finance Corp. ........ A1/D1 5.32% 9/27/96 50,000 49,807,889
------------
141,213,175
------------
LEASING -- 0.4%
Hertz Corp. .................... A1/P1 5.48% 10/08/96 25,000 24,859,194
------------
UTILITIES -- 0.7%
National Rural Utilities
Cooperative Finance Corp. .... A1+/P1 5.40% 9/16/96 40,000 39,910,000
------------
WASTE MANAGEMENT -- 0.3%
WMX Technologies................ A1/P1 5.52% 12/11/96 15,900 15,653,762
------------
Total Domestic................... 1,417,132,748
------------
FOREIGN -- 7.6%
AGRICULTURE -- 0.7%
Canadian Wheat Board............ A1+/P1 5.20% 9/24/96 39,000 38,870,433
------------
AUTOMOBILES -- 0.6%
Ford Credit Europe.............. A1/P1 5.42% 9/23/96 34,000 33,887,385
------------
BANKING -- 1.7%
Bradford & Bingley Building
Society....................... A1/P1 5.42% 9/26/96 25,000 24,905,903
Bradford & Bingley Building
Society....................... A1/P1 5.35% 10/30/96 50,000 49,561,597
Bradford & Bingley Building
Society....................... A1/P1 5.42% 2/20/97 30,000 29,223,133
------------
103,690,633
------------
CONTAINERS & PACKAGING -- 1.4%
Compagnie de Saint Gobain....... A1+/P1 5.02% 9/05/96 15,000 14,991,633
Compagnie de Saint Gobain....... A1+/P1 5.40% 9/11/96 20,000 19,970,000
Compagnie de Saint Gobain....... A1+/P1 5.31% 10/07/96 30,000 29,840,700
Compagnie de Saint Gobain....... A1+/P1 5.35% 11/12/96 20,000 19,786,000
------------
84,588,333
------------
PHARMACEUTICALS -- 1.0%
Glaxo Wellcome.................. A1+/P1 5.30% 10/15/96 33,000 32,786,233
Glaxo Wellcome.................. A1+/P1 5.48% 10/15/96 25,000 24,832,556
------------
57,618,789
------------
SOVEREIGN -- 2.2%
Kingdom of Sweden............... A1+/P1 5.28% 10/03/96 32,705 32,551,505
Kingdom of Sweden............... A1+/P1 5.28% 10/18/96 10,000 9,931,067
</TABLE>
- ---------------
See Notes to Financial Statements.
55
<PAGE> 58
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATING RATE DATE (000) (NOTE 2)
- --------------------------------- ------ ---- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
SOVEREIGN -- (CONTINUED)
Kingdom of Sweden............... A1+/P1 5.27% 12/16/96 $ 25,000 $ 24,612,070
Kingdom of Sweden............... A1+/P1 5.54% 12/16/96 40,000 39,347,511
Kingdom of Sweden............... A1+/P1 5.30% 12/19/96 25,000 24,598,819
------------
131,040,972
------------
Total Foreign.................... 449,696,545
------------
Total Commercial Paper
(amortized cost
$2,132,280,028)................. 2,132,280,028
------------
CORPORATE OBLIGATIONS -- 15.9%
AUTOMOBILES -- 2.1%
Ford Motor Credit Corporation... A1/P1 5.38% 12/02/96 32,000 31,998,712
General Motors Acceptance
Corporation................... P1/D1 8.13% 1/27/97 28,700 28,959,138
General Motors Acceptance
Corporation, Daily Variable
Rate (final maturity
4/21/97)...................... P1/D1 5.45% 9/03/96 40,000 39,965,565
General Motors Acceptance
Corporation, Daily Variable
Rate (final maturity 6/4/97).. P1/D1 5.38% 9/03/96 25,000 24,971,369
------------
125,894,784
------------
BROKERAGE -- 5.8%
Bear Stearns Cos., Inc., Monthly
Variable Rate, (final maturity
date 2/3/97)+................. A1/P1 5.51% 9/03/96 100,000 100,000,000
Bear Stearns Cos., Inc., Monthly
Variable Rate, (final maturity
date 5/16/97)+................ A1/P1 5.47% 9/16/96 25,000 25,000,000
C.S. First Boston, Inc., Daily
Variable Rate, (final maturity
3/25/97)+..................... A1/P1 5.41% 9/03/96 25,000 25,000,000
C.S. First Boston, Inc.,
Quarterly Variable Rate,
(final maturity 3/3/97)+...... A1/P1 5.61% 9/03/96 25,000 25,000,000
Merrill Lynch & Co., Inc........ A1+/P1 5.78% 8/12/97 25,000 24,996,928
Merrill Lynch & Co., Inc., Daily
Variable Rate, (final maturity
date 2/10/97)+................ A1+/P1 5.39% 9/03/96 50,000 50,000,000
Merrill Lynch & Co., Inc.,
Monthly Variable Rate, (final
maturity date 11/20/96)+...... A1+/P1 5.44% 9/20/96 50,000 50,000,000
Merrill Lynch & Co., Inc.,
Quarterly Variable Rate,
(final maturity date
11/12/96)+.................... A1+/P1 5.51% 11/12/96 50,000 49,999,045
------------
349,995,973
------------
FINANCE COMPANIES -- 7.5%
American Express Credit Corp. .. A1/P1 7.88% 12/01/96 10,000 10,052,883
Associates Corporation of North
America....................... A1+/P1 4.63% 11/30/96 19,250 19,201,189
Associates Corporation of North
America....................... A1+/P1 4.85% 12/02/96 20,000 19,963,018
Associates Corporation of North
America....................... A1+/P1 8.63% 6/15/97 13,975 14,265,232
</TABLE>
- ---------------
See Notes to Financial Statements.
56
<PAGE> 59
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATING RATE DATE (000) (NOTE 2)
- --------------------------------- ------ ---- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
FINANCE COMPANIES -- (CONTINUED)
Ciesco L.P., Monthly Variable
Rate, (final maturity date
8/14/97)+..................... A1+/P1 5.39% 9/06/96 $ 75,000 $ 74,992,870
CIT Group Holdings, Inc. ....... A1/P1 7.63% 12/05/96 48,030 48,267,123
CIT Group Holdings, Inc., Daily
Variable Rate (final maturity
date 5/1/97)+................. A1/P1 5.35% 9/03/96 50,000 49,960,354
Corporate Asset Funding Co.,
Monthly Variable Rate, (final
maturity date 12/2/96)+....... A1+/P1 5.42% 9/03/96 25,000 24,998,125
Dean Witter Discover & Co.,
Monthly Variable Rate, (final
maturity date 8/1/97)+........ A1/P1 5.42% 9/03/96 25,000 24,995,425
Dean Witter Discover & Co.,
Quarterly Variable Rate,
(final maturity date
11/15/96)+.................... A1/P1 5.70% 11/15/96 50,000 50,023,110
Household Finance Corp., Daily
Variable Rate, (final maturity
date 5/28/97)+................ A1/P1 5.41% 9/03/96 50,000 50,000,000
PHH Corporation, Monthly
Variable Rate, (final maturity
date 11/12/96)+............... A1/P1 5.36% 9/12/96 34,000 34,000,000
PHH Corporation, Monthly
Variable Rate, (final maturity
date 6/11/97)+................ A1/P1 5.39% 9/11/96 25,000 24,998,508
------------
445,717,837
------------
LEASING -- 0.5%
USL Capital Corp., Quarterly
Variable Rate, (final maturity
date 10/31/96)+............... A1/P1 5.66% 10/31/96 30,000 30,005,960
------------
Total Corporate Obligations
(amortized cost $951,614,554)... 951,614,554
------------
CERTIFICATES OF DEPOSIT -- 12.6%
DOMESTIC -- 1.3%
Bankers Trust N.Y., Daily
Variable Rate (final maturity
date 6/3/97)+................. A1/P1 5.45% 9/03/96 50,000 49,981,794
Bankers Trust N.Y., Daily
Variable Rate (final maturity
date 7/2/97)+................. A1/P1 5.38% 9/03/96 25,000 24,991,946
------------
74,973,740
------------
U.S. BRANCHES OF FOREIGN BANKS -- 11.3%
ABN-AMRO Bank, Chicago.......... A1+/P1 5.75% 4/10/97 25,000 24,992,753
Bank of Tokyo Mitsubishi,
New York...................... A1/P1 5.58% 9/19/96 25,000 25,000,000
Bank of Tokyo Mitsubishi,
New York...................... A1/P1 5.57% 11/20/96 25,000 25,000,000
Bank of Tokyo Mitsubishi,
New York...................... A1/P1 5.60% 12/03/96 25,000 25,000,000
Bank of Tokyo Mitsubishi,
New York...................... A1/P1 5.68% 2/12/97 25,000 25,001,107
Banque National de Paris,
New York...................... A1/P1 5.50% 3/12/97 25,000 25,002,526
Dai-Ichi Kangyo Bank, Ltd.,
New York...................... A1/P1 5.57% 9/23/96 25,000 25,000,000
</TABLE>
- ---------------
See Notes to Financial Statements.
57
<PAGE> 60
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATING RATE DATE (000) (NOTE 2)
- --------------------------------- ------ ---- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
U.S. BRANCHES OF FOREIGN BANKS --
(CONTINUED)
Dai-Ichi Kangyo Bank, Ltd.,
New York...................... A1/P1 5.75% 12/30/96 $ 25,000 $ 25,001,627
Industrial Bank of Japan Ltd.,
New York...................... A1/P1 5.41% 10/01/96 25,000 25,000,207
Industrial Bank of Japan Ltd.,
New York...................... A1/P1 5.70% 10/09/96 25,000 25,000,260
Rabobank Nederland,
New York...................... A1+/P1 5.94% 9/09/96 25,000 25,002,514
Royal Bank of Canada............ A1+/P1 5.13% 2/21/97 25,000 24,997,146
Royal Bank of Canada............ A1+/P1 5.73% 8/13/97 25,000 24,984,115
Sanwa Bank Ltd., New York....... A1/P1 5.40% 10/01/96 25,000 25,000,207
Sanwa Bank Ltd., New York....... A1/P1 5.72% 10/10/96 50,000 50,001,068
Sanwa Bank Ltd., New York....... A1/P1 5.46% 10/11/96 25,000 25,001,379
Sanwa Bank Ltd., New York....... A1/P1 5.55% 11/06/96 30,000 30,001,259
Societe Generale New York....... A1+/P1 5.39% 11/01/96 25,000 25,000,419
Societe Generale New York....... A1+/P1 5.72% 4/28/97 50,000 49,990,593
Societe Generale New York....... A1+/P1 5.78% 8/20/97 25,000 24,995,153
Sumitomo Bank Ltd.,
New York...................... A1/P1 5.63% 9/27/96 25,000 25,000,534
Sumitomo Bank Ltd.,
New York...................... A1/P1 5.71% 10/10/96 25,000 25,000,267
Sumitomo Bank Ltd.,
New York...................... A1/P1 5.71% 10/18/96 25,000 25,000,322
Sumitomo Bank Ltd.,
New York...................... A1/P1 5.51% 10/21/96 25,000 25,000,688
Sumitomo Bank Ltd.,
New York...................... A1/P1 5.70% 10/22/96 25,000 25,000,349
------------
679,974,493
------------
Total Certificates of Deposit
(amortized cost $754,948,233)... 754,948,233
------------
FEDERAL AGENCY NOTES -- 0.6%
Federal Farm Credit Bank Note,
Daily Variable Rate, (final
maturity date 12/6/96)+....... A1+/P1 5.22% 9/03/96 37,300 37,283,300
------------
Total Federal Agency Notes
(amortized cost $37,283,300).... 37,283,300
------------
U.S. TREASURY OBLIGATIONS -- 0.4%
U.S. Treasury Note.............. A1+/P1 6.88% 10/31/96 25,000 25,069,987
------------
Total U.S. Treasury Obligations
(amortized cost $25,069,987).... 25,069,987
------------
MASTER NOTES -- 7.5%
Goldman Sachs Group L.P. (final
maturity date 4/22/97)+....... A1+/P1 5.46% 9/03/96 250,000 250,000,000
Morgan Stanley Group, Inc.
(final maturity date
10/1/96)+..................... A1/P1 5.41% 9/03/96 200,000 200,000,000
------------
Total Master Notes
(amortized cost $450,000,000)... 450,000,000
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
58
<PAGE> 61
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATING RATE DATE (000) (NOTE 2)
- --------------------------------- --------- ----- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BANK NOTES -- 7.4%
DOMESTIC -- 6.6%
Bank One, Dayton N.A............ A1+/P1 5.56% 3/25/97 $ 25,000 $ 24,984,158
FCC National Bank............... A1/P1 5.64% 4/17/97 25,000 24,966,337
FCC National Bank............... A1/P1 5.70% 5/22/97 25,000 24,960,754
FCC National Bank............... A1/P1 5.76% 8/15/97 25,000 24,986,308
FCC National Bank............... A1/P1 5.73% 8/21/97 50,000 49,918,893
Huntington National Bank,
Columbus...................... A1/P1 5.28% 1/10/97 20,000 20,000,000
Huntington National Bank,
Columbus...................... A1/P1 6.20% 7/08/97 40,000 40,130,514
Huntington National Bank,
Columbus, Daily Variable
Rate (final maturity date
12/2/96)+..................... A1/P1 5.32% 9/03/96 76,000 75,984,846
PNC Bank N.A., Daily Variable
Rate (final maturity date
10/4/96)+..................... A1/P1 5.29% 9/03/96 60,000 59,994,587
PNC Bank, N.A., Monthly Variable
Rate (final maturity date
7/1/97)+...................... A1/P1 5.37% 9/03/96 25,000 24,979,537
Wachovia Bank of North Carolina,
Monthly Variable Rate (final
maturity date 4/25/97)+....... A1+/P1 5.28% 9/25/96 25,000 24,985,070
------------
Total Domestic................... 395,891,004
------------
FOREIGN -- 0.8%
Abbey National Treasury
Services, PLC, Monthly
Variable Rate (final maturity
date 7/17/97)+................ A1+/P1 5.40% 9/17/96 50,000 49,971,334
------------
Total Bank Notes
(amortized cost $445,862,338)... 445,862,338
------------
Total Investment in Securities
(amortized cost
$4,797,058,440)................. 4,797,058,440
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
59
<PAGE> 62
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATE DATE (000) (NOTE 2)
- --------------------------------- ----- -------- ----------- --------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS -- 20.1%
Repurchase agreement with Dean
Witter Reynolds, Inc. dated
8/30/96, with a maturity value
of $100,058,667.
(See Footnote A).............. 5.28% 9/03/96 $ 100,000 $ 100,000,000
Repurchase agreement with First
Chicago Capital Markets, Inc.,
dated 8/30/96, with a maturity
value of $100,058,667.
(See Footnote B).............. 5.28% 9/03/96 100,000 100,000,000
Repurchase agreement with Fuji
Securities, Inc., dated
8/30/96, with a maturity value
of $250,146,667.
(See Footnote C).............. 5.28% 9/03/96 250,000 250,000,000
Repurchase agreement with J.P.
Morgan Securities, Inc. dated
8/30/96, with a maturity value
of $275,161,333.
(See Footnote D).............. 5.28% 9/03/96 275,000 275,000,000
Repurchase agreement with Lehman
Brothers, dated 8/30/96, with
a maturity value of
$30,418,071.
(See Footnote E).............. 5.35% 9/03/96 30,400 30,400,000
Repurchase agreement with
Prudential Securities, Inc.
dated 8/30/96, with a maturity
value of $200,117,333.
(See Footnote F).............. 5.28% 9/03/96 200,000 200,000,000
Repurchase agreement with Smith
Barney, Inc. dated 8/30/96,
with a maturity value of
$250,146,667.
(See Footnote G).............. 5.28% 9/03/96 250,000 250,000,000
--------------
Total Repurchase Agreements
(amortized cost
$1,205,400,000)................. 1,205,400,000
--------------
TOTAL INVESTMENTS
(AMORTIZED COST
$6,002,458,440)(A) -- 100.1%.... 6,002,458,440
Liabilities in excess of other
assets -- (0.1%).............. (5,595,698)
--------------
NET ASSETS -- 100.0%............. $5,996,862,742
================
(footnotes on following page)
</TABLE>
- ---------------
See Notes to Financial Statements.
60
<PAGE> 63
(footnotes from previous page)
- ---------------
Percentages indicated are based on net assets of $5,996,862,742.
(a) Cost for federal income tax and financial reporting purpose are
substantially the same.
Note: S&P and Moody's ratings have been used, unless another service has
assigned the security a higher rating.
A1 -- Highest rating assigned by Standard & Poors and IBCA.
P1 -- Highest rating assigned by Moody's.
D1 -- Highest rating assigned by Duff.
* Illiquid Security.
+ Variable rate security. Maturity date reflects the later of the next interest
rate change date or the next put date.
++ Private Placement Security.
<TABLE>
<S> <C> <C>
Footnote A -- Collateralized by $124,687,388 various U.S. Government securities, with various
coupon rates ranging from 0.00% to 12.00% and maturities ranging from 5/1/97
through 8/1/26; with an aggregate value of $102,003,629.
Footnote B -- Collateralized by $101,410,000 U.S. Treasury Notes, with a coupon rate of 5.38% and
maturing on 11/30/97; with an aggregate value of $102,004,675.
Footnote C -- Collateralized by $258,970,000 various U.S. Government securities, with various
coupon rates ranging from 0.00% to 10.63% and maturities ranging from 9/5/96
through 8/15/22; with an aggregate value of $255,000,397.
Footnote D -- Collateralized by $1,260,538,896 Government National Mortgage Association Notes,
with various coupon rates ranging from 9.00% to 9.50%, and maturities ranging from
5/15/16 through 12/15/22; with an aggregate value of $280,503,080.
Footnote E -- Collateralized by $30,231,000 U.S. Treasury Notes, with various coupon rates
ranging from 5.50% to 8.88%, and maturities ranging from 4/15/00 through 5/31/00;
with an aggregate value of $30,997,990.
Footnote F -- Collateralized by $235,455,000 various U.S. Government securities, with various
coupon rates ranging from 0.00% to 14.00% and maturities ranging from 9/3/96
through 8/15/26; with an aggregate value of $204,000,223.
Footnote G -- Collateralized by $302,001,775 various U.S. Government securities, with various
coupon rates ranging from 0.00% to 9.50% and maturities ranging from 10/21/96
through 8/20/26; with an aggregate value of $255,000,253.
</TABLE>
- ---------------
See Notes to Financial Statements.
61
<PAGE> 64
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (amortized cost $4,797,058,440,
$1,331,917,837, $406,275,699 and $526,101,715, respectively).................. $4,797,058,440
Repurchase agreements (amortized cost $1,205,400,000, $1,702,000,000,
$120,000,000 and $0, respectively)............................................ 1,205,400,000
Cash............................................................................ --
Receivable for Portfolio shares sold............................................ 159,238,818
Interest receivable............................................................. 22,948,129
Receivable for investment securities sold....................................... 1,272,724,000
Deferred organization costs..................................................... --
Prepaid expenses................................................................ 63,228
--------------
Total assets..................................................................... 7,457,432,615
--------------
LIABILITIES:
Cash Overdraft.................................................................. 75,893
Payable for investment securities purchased..................................... 1,223,349,650
Administration fees payable..................................................... 509,571
Payable to Administrator........................................................ 235,000
Advisory fees payable........................................................... 475,601
Special management fees payable (Pacific Horizon Shares)........................ 596,169
Service organization fees payable (Horizon Service Shares)...................... 524,977
Dividends payable............................................................... 25,449,598
Payable for Portfolio shares redeemed........................................... 208,787,243
Other accrued expenses.......................................................... 566,171
--------------
Total liabilities................................................................ 1,460,569,873
--------------
NET ASSETS....................................................................... $5,996,862,742
==============
Net Assets
Pacific Horizon Shares.......................................................... $2,201,852,975
Horizon Shares.................................................................. 1,325,292,123
Horizon Service Shares.......................................................... 2,469,716,643
X Shares........................................................................ 1,001
--------------
$5,996,862,742
==============
Shares Outstanding ($0.001 par value)
Pacific Horizon Shares.......................................................... 2,202,533,869
Horizon Shares.................................................................. 1,325,925,271
Horizon Service Shares.......................................................... 2,470,181,539
X Shares........................................................................ 1,001
--------------
Total Shares Outstanding 5,998,641,680
==============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE................... $1.00
----
----
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.................................................. $ 5,998,642
Additional paid-in capital...................................................... 5,992,427,057
Accumulated net realized losses................................................. (3,789,024)
Accumulated undistributed net investment income................................. 2,226,067
--------------
NET ASSETS, AUGUST 31, 1996...................................................... $5,996,862,742
==============
</TABLE>
- ---------------
See Notes to Financial Statements.
62
<PAGE> 65
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statements of Operations
For the six months ended August 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................ $154,816,211
------------
EXPENSES:
Advisory fees....................................................... 2,681,827
Administration fees................................................. 2,848,174
Special management fees
(Pacific Horizon Shares).......................................... 3,624,310
Service organization fees
(Horizon Service Shares).......................................... 2,505,009
Custodian fees and expenses......................................... 385,015
Transfer agent fees and expenses.................................... 209,518
Insurance expense................................................... 86,186
Directors' fees..................................................... 77,099
Audit fees.......................................................... 27,966
Legal fees.......................................................... 141,845
Reports to shareholders............................................. 168,219
Registration fees................................................... 95,746
Amortization of organization costs.................................. --
Other expenses...................................................... 22,950
------------
12,873,864
Less: Fee waivers and expenses reimbursements......................... --
Expenses paid by third parties...................................... (9,066)
------------
12,864,798
------------
Net Investment Income................................................. 141,951,413
REALIZED GAINS ON
INVESTMENTS:
Net realized gains on securities transactions....................... 36,341
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $141,987,754
============
</TABLE>
- ---------------
See Notes to Financial Statements.
63
<PAGE> 66
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1996 FEBRUARY 29,
(UNAUDITED) 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................... $ 141,951,413 $ 223,096,543
Net realized gains on securities transactions........... 36,341 277,551
---------------- ----------------
Net increase in net assets resulting from operations.... 141,987,754 223,374,094
---------------- ----------------
Dividends to Shareholders from Net Investment Income:
Pacific Horizon Shares.................................. (55,042,976) (87,771,565)
Horizon Shares.......................................... (36,946,902) (66,852,421)
Horizon Service Shares.................................. (49,450,023) (67,741,940)
X Shares................................................ (6) --
---------------- ----------------
Total dividends to shareholders from net investment
income.................................................. (141,439,907) (222,365,926)
---------------- ----------------
Portfolio Share Transactions:
(at $1.00 per share) (Note 6)
Net proceeds from shares subscribed..................... 20,011,916,918 31,908,025,354
Net asset value of shares issued to shareholders in
reinvestment of dividends............................. 67,473,707 113,292,127
Cost of shares redeemed................................. (19,494,145,703) (29,226,683,074)
---------------- ----------------
Net increase (decrease) in net assets from Portfolio
share transactions...................................... 585,244,922 2,794,634,407
---------------- ----------------
Total Increase (Decrease)................................ 585,792,769 2,795,642,575
NET ASSETS:
Beginning of year....................................... 5,411,069,973 2,615,427,398
---------------- ----------------
End of year (including undistributed net investment
income of $2,226,067 and $1,714,561, respectively, for
the Prime Fund, $667,877 and $667,877, respectively,
for the Treasury Fund, and $532,656 and $463,023,
respectively, for the Government Fund)................ $ 5,996,862,742 $ 5,411,069,973
================ ================
</TABLE>
- ---------------
See Notes to Financial Statements.
64
<PAGE> 67
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Pacific Horizon Funds, Inc. (the "Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At August 31, 1996, the Fund operated
as a series company comprising seventeen portfolios. The accompanying financial
statements and notes are those of the Pacific Horizon Prime Fund (the
"Portfolio") only. The Portfolio seeks to achieve its objective through
investments in a variety of money market instruments. See "Pacific Horizon Prime
Fund" found in the "Interview with Your Investment Manager" section of this
report for a discussion of the Portfolio's investment objective.
The Portfolio issues three classes of shares (Pacific Horizon Shares,
Horizon Shares and Horizon Services Shares). Effective July 22, 1996, the
Portfolio also issues X Shares. The Portfolio is also authorized to issue S
Shares, which are not available for purchase as of the date of this report.
Pacific Horizon Shares, Horizon Shares, Horizon Service Shares, X Shares and S
Shares are substantially the same except that Pacific Horizon Shares bear the
fees payable under the Fund's Special Management Services Agreement at an annual
rate of 0.32% of the average daily net asset value of the outstanding Pacific
Horizon Shares while Horizon Service Shares bear the fees payable, under the
Shareholder Services Plan, to institutions ("Service Organizations") that
provide support services to their clients who beneficially own such shares. Such
fees are payable at an annual rate of 0.25% of the average daily net asset value
of the outstanding Horizon Service Shares. X Shares bear the expenses of the
Distribution and Services Plan under which payments made by the Portfolio for
distribution expenses and shareholder servicing expenses may not exceed the
annual rates of 0.30% and 0.25%, respectively, of the average daily net assets
of the Portfolio's X Shares. S Shares bear the expenses of the Distribution and
Services Plan under which payments made by the Portfolio for distribution
expenses and shareholder servicing expenses may not exceed the annual rates of
0.75% and 0.25%, respectively, of the average daily net assets of the
Portfolio's S Shares.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Portfolio's investment
adviser. Concord Holding Corporation ("Concord") serves as the Portfolio's
administrator and Concord Financial Group, Inc. (the "Distributor"), a wholly
owned subsidiary of Concord, serves as the distributor of the Portfolio's
shares. Effective March 29, 1995, Concord became a wholly owned subsidiary of
The BISYS Group, Inc. ("BISYS").
65
<PAGE> 68
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those of estimates.
A) PORTFOLIO VALUATIONS:
Portfolio securities are valued at amortized cost, which approximates market
value. The amortized cost method involves valuing a security at its cost on the
date of purchase and thereafter assuming a constant amortization to maturity of
the difference between the principal amount due at maturity and cost. In
addition, the Portfolio may not (a) purchase any instrument with a remaining
maturity greater than thirteen months unless such instrument is subject to a
demand feature, or (b) maintain a dollar-weighted average portfolio maturity
which exceeds 90 days.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income, including accretion of discount and amortization of
premium, is accrued daily.
C) REPURCHASE AGREEMENTS:
The Portfolio's custodian and other banks acting in a sub-custodian capacity
take possession of the collateral pledged for investments in repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to determine that the value, including accrued interest, is not less than 102%
of the repurchase price (excluding accrued interest), provided that
notwithstanding such requirement, the adviser 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. In the event of the
seller's default of the obligation to repurchase, the Portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends are declared daily to shareholders of record at the close of
business on the day of declaration and paid monthly. Distributions of net
realized gains, if any, will be paid at least annually. However, to the extent
that net realized gains of the Portfolio can be offset by capital loss
carryovers from the Portfolio, such gains will not be distributed. Dividends and
distributions are recorded by the Portfolio on the ex-dividend date.
66
<PAGE> 69
The amount of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
E) FEDERAL INCOME TAXES:
For federal income tax purposes, the Portfolio is treated as a separate
entity for the purpose of determining the Portfolio's qualification as a
regulated investment company under the Internal Revenue Code (the "Code"). It is
the policy of the Fund that the Portfolio comply with the requirements of the
Code applicable to regulated investment companies, including the requirement
that the Portfolio distribute substantially all of its taxable income to
shareholders. Therefore, no federal income tax provision is required.
At February 29, 1996, the Portfolio had the following capital loss
carryovers:
<TABLE>
<CAPTION>
CAPITAL LOSS
FUND CARRYOVER EXPIRATION DATE
- ---------------------------------------------------- ------------ ----------------
<S> <C> <C>
Prime Fund.......................................... $ 917,847 2002
2,725,176 2003
----------
$3,643,023
----------
----------
</TABLE>
To the extent these capital loss carryovers are used to offset future net
realized gains on securities transactions, the gains so offset will not be
distributed to shareholders, to the extent provided by the regulations under the
Code. Additionally, during the year ended February 29, 1996, the Portfolio
utilized $277,551 of capital loss carryovers.
F) OTHER:
The Fund accounts separately for the assets, liabilities and operations of
each Portfolio. Expenses directly attributable to each Portfolio are charged to
that Portfolio, while Fund expenses which are attributable to more than one
portfolio of the Fund are allocated among the respective portfolios. The
investment income and the expenses (other than expenses incurred under the
Special Management Services Agreements, Shareholder Services Plan and
Distribution and Services Plan) of each Portfolio are allocated to the separate
classes of shares based upon their relative shares.
The Portfolio maintains a cash balance with its custodian and receive
reductions of custody fees and expenses for the amount of interest earned on
such uninvested cash balances. For financial reporting purposes for the six
months ended August 31, 1996, custodian fees and expenses paid by third parties
were increased by $9,066 for the Portfolio. There was no effect on net
investment income. The Portfolio could have invested such cash amounts in an
income
67
<PAGE> 70
producing asset if they had not agreed to a reduction of fees or expenses under
the expense offset arrangement with its custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has an Investment Advisory Agreement with Bank of America and
a Basic Administrative Services Agreement with Concord. Bank of America is
entitled to a fee from the Portfolio, which is accrued daily and payable
monthly, at an annual rate of 0.10% of the Portfolio's first $3 billion of net
assets, plus 0.09% of the Portfolio's next $2 billion of net assets, plus 0.08%
of the Portfolio's net assets in excess of $5 billion. Concord is entitled to a
fee from the Portfolio, which is accrued daily and payable monthly, at an annual
rate of 0.10% of the Portfolio's first $7 billion of net assets, plus 0.09% of
the Portfolio's next $3 billion of net assets, plus 0.08% of the Portfolio's net
assets in excess of $10 billion.
The agreements provide that if, in any fiscal year, the aggregate expenses
of the Portfolio (generally excluding interest, taxes, brokerage commissions and
extraordinary expenses) exceed the most restrictive expense limitation of any
state having jurisdiction over the Portfolio, then Bank of America and Concord
will reimburse the Portfolio for any such excess expenses. As of August 31,
1996, the most restrictive expense limitation is believed to limit expenses to
2.5% of the first $30 million of the Portfolio's average daily net assets, plus
2.0% of the next $70 million of such assets plus 1.5% of such assets in excess
of $100 million. The agreements provide that such reimbursements will be
estimated on a monthly basis. No reimbursement was required for the six months
ended August 31, 1996.
The Portfolio has entered into a Special Management Service Agreement
("Services Agreement") pursuant to which it agrees to pay Bank of America and
Concord a fee for various services relating to Pacific Horizon Shares. The
special management services fee is accrued daily at an annual rate of 0.32% of
the average daily net asset value of the outstanding Pacific Horizon Shares of
the Portfolio, and this is borne solely by the Pacific Horizon Shares. For the
six months ended August 31, 1996, the Portfolio was advised that Concord, Bank
of America and their affiliates earned the following amounts pursuant to the
Services Agreement:
<TABLE>
<CAPTION>
AFFILIATES OF
BANK OF BANK OF
FUND AMERICA CONCORD AMERICA
- -------------------------------------------------------- ---------- ------- -------------
<S> <C> <C> <C>
Prime Fund.............................................. $2,552,139 $27,393 $ 554,439
</TABLE>
The Portfolio has also adopted a Shareholder Services Plan (the "Horizon
Service Plan") pursuant to which Service Organizations agree to provide certain
services to their clients who are beneficial owners of Horizon Service Shares in
return for payment by the Portfolio of a fee at an annual rate of 0.25% of the
average daily net asset value of the Horizon Service Shares outstanding from
time to time. These payments are borne solely by the Horizon Service Shares.
Service Organizations may include the Distributor, Bank of America and their
affiliates. For the six months ended August 31, 1996, the Portfolio was advised
that affiliates of Bank of America earned $2,420,740 pursuant to the Horizon
Service Plan.
68
<PAGE> 71
The Portfolio has adopted a Distribution and Services Plan under which the
Portfolio pays the Distributor and service organizations for the provision of
support services with respect to the beneficial owners of X Shares. Payments for
distribution expenses and shareholder servicing expenses may not exceed the
annual rate of 0.30% and 0.25%, respectively, of the average daily net assets of
the Portfolio's X Shares. For the period ended August 31, 1996, there were no
payments made under the Distribution and Services Plan.
During the period from May 6, 1994 through July 12, 1994, Bank of America
voluntarily contributed capital to the Portfolio in the aggregate amount of
approximately $77.4 million. Bank of America received no shares of common stock
or other consideration in exchange for these contributions which increased net
asset value. For tax purposes, these capital contributions were applied against
the realized losses for the year ended February 28, 1995. Accordingly, such
amounts were reclassified from additional paid-in capital against accumulated
net realized losses in the Statement of Assets and Liabilities.
For the six months ended August 31, 1996, the Portfolio incurred legal
charges totaling $141,845 which were earned by a law firm, a partner of which
serves as Secretary to the Fund. Certain officers of the Fund are "affiliated
persons" (as defined in the Act) of BISYS.
Concord Financial Services, Inc., a wholly owned subsidiary of Concord, acts
as transfer agent for the Horizon class of shares for the Portfolio. For the six
months ended August 31, 1996, Concord Financial Services Inc. earned $209,518
from the Portfolio.
Effective December 11, 1995, BISYS Fund Services Inc., also a wholly owned
subsidiary of BISYS, serves the Fund as transfer agent and dividend disbursing
agent for the Pacific Horizon Shares and Horizon Service Shares of the
Portfolio. In this capacity for the Portfolio, BISYS Fund Services, Inc. earned
$209,518 for the six months ended August 31, 1996.
NOTE 4 -- DIRECTORS' COMPENSATION
Each Director of the Fund is entitled to an annual retainer of $25,000, plus
$1,000 for each day the Director participates in all or part of a Board or
Committee meeting and the Chairman of each Committee receives a retainer of
$1,000 for services as Chairman of the Committee. In addition, the Fund's
President is entitled to an annual salary of $20,000 for services as President.
The former President and Chairman of the Fund receives an additional $40,000 per
year through February 28, 1997 in consideration for his years of service. Total
charges for Directors' fees incurred for the six months ended August 31, 1996
were $77,099 for the Portfolio.
The Board has also established a retirement plan (the "Retirement Plan") for
the Directors. The Retirement Plan provides that each Director who dies or
resigns after five years of service as a Director will be entitled to receive
ten annual payments each equal to the greater of: (i) 50% of the annual
Director's retainer that was payable during the year of that Director's death or
resignation, or (ii) 50% of the annual Director's retainer then in effect for
Directors of the Fund during the year of such payment. A Director who dies or
resigns after
69
<PAGE> 72
nine years of service as a Director will be entitled to receive ten annual
payments equal to the greater of: (i) 100% of the annual Director's retainer
that was payable during the year of that Director's death or resignation, or
(ii) 100% of the annual Director's retainer then in effect for Directors of the
Fund during the year of such payment. In addition, the amount payable each year
to a Director who dies or resigns shall be increased by $1,000 for each year of
service that the Director served as Chairman of the Board. Each Director may
receive any benefits payable under the Retirement Plan, at his or her election,
either in one lump sum payment or ten annual installments. A Director's years of
service for the purpose of calculating the payments described above shall be
based upon service as a Director or Chairman after February 28, 1994. Aggregate
costs to the Portfolio pursuant to the Retirement Plan amounted to $15,640 for
the six months ended August 31, 1996.
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Portfolio invests substantially all of its assets in a diversified
portfolio of high quality U.S. dollar-denominated money market instruments as
disclosed in the portfolio of investments by security type. The issuers'
abilities to meet their obligations may be affected by domestic and foreign
economic, regional and political developments.
70
<PAGE> 73
The Portfolio had the following concentrations by industry sector at August
31, 1996 (as a percentage of total investments):
<TABLE>
<S> <C>
Agriculture................................................................ 0.7%
Automobiles................................................................ 8.1
Banking.................................................................... 13.9
Brokerage Services......................................................... 13.3
Certificates of Deposit.................................................... 12.6
Chemicals-Diversified...................................................... 0.8
Conglomerates.............................................................. 1.6
Consumer Non-Durables...................................................... 1.2
Containers & Packaging..................................................... 1.4
Electronics................................................................ 0.5
Federal Agency............................................................. 0.6
Finance Companies.......................................................... 17.0
Food Products.............................................................. 0.4
Household Furniture and Appliances......................................... 2.4
Leasing.................................................................... 0.9
Pharmaceuticals............................................................ 1.0
Repurchase Agreements...................................................... 20.1
Sovereign.................................................................. 2.1
Utilities.................................................................. 0.7
U.S. Government Securities................................................. 0.4
Waste Management........................................................... 0.3
-----
100.0%
=====
</TABLE>
NOTE 6 -- CAPITAL SHARE TRANSACTIONS
At August 31, 1996, there were 200 billion shares of the Fund's $0.001 par
value Common Stock authorized, of which 58 billion shares were classified as
Class B Common Stock (10 billion Pacific Horizon Shares, 18 billion Horizon
Shares, 10 billion Horizon Service Shares, 10 billion S Shares and 10 billion X
Shares).
71
<PAGE> 74
Transactions in shares of the Portfolio (at $1.00 per share) for the periods
indicated are summarized below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1996
----------------
<S> <C>
PACIFIC HORIZON SHARES:
Shares sold.............................................................................. 2,653,628,393
Shares issued to shareholders in reinvestment of dividends............................... 40,242,295
Shares redeemed.......................................................................... (2,691,787,751)
---------------
Net increase in Pacific Horizon Shares.................................................... 2,082,937
---------------
HORIZON SHARES:
Shares sold.............................................................................. 6,958,474,639
Shares issued to shareholders in reinvestment of dividends............................... 8,916,463
Shares redeemed.......................................................................... (7,292,739,806)
---------------
Net decrease in Horizon Shares............................................................ (325,348,704)
---------------
HORIZON SERVICE SHARES:
Shares sold.............................................................................. 10,399,812,386
Shares issued to shareholders in reinvestment of dividends............................... 18,314,947
Shares redeemed.......................................................................... (9,509,617,646)
---------------
Net increase in Horizon Service Shares.................................................... 908,509,687
---------------
X SHARES(a):
Shares sold.............................................................................. 1,500
Shares issued to shareholders in reinvestment of dividends............................... 2
Shares redeemed.......................................................................... (500)
---------------
Net increase in X Shares.................................................................. 1,002
---------------
Total increase in Portfolio shares........................................................ 585,244,922
===============
</TABLE>
- ---------------
(a) For the period July 22, 1996 (initial issuance of X Shares) to August 31,
1996.
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 29, 1996
-----------------
<S> <C>
PACIFIC HORIZON SHARES:
Shares sold............................................................................. 6,558,828,164
Shares issued to shareholders in reinvestment of dividends.............................. 63,228,495
Shares redeemed......................................................................... (5,551,677,079)
---------------
Net increase in Pacific Horizon Shares................................................... 1,070,379,580
---------------
HORIZON SHARES:
Shares sold............................................................................. 10,005,418,206
Shares issued to shareholders in reinvestment of dividends.............................. 18,014,180
Shares issued in connection with reorganization with 231 Funds.......................... 971,168,989
Shares redeemed......................................................................... (9,966,301,034)
---------------
Net increase in Horizon Shares........................................................... 1,028,300,341
---------------
HORIZON SERVICE SHARES:
Shares sold............................................................................. 14,233,621,259
Shares issued to shareholders in reinvestment of dividends.............................. 32,049,452
Shares issued in connection with reorganization with 231 Funds.......................... 140,144,817
Shares redeemed......................................................................... (13,708,704,961)
---------------
Net increase in Horizon Service Shares................................................... 697,110,567
---------------
Total increase in Portfolio shares....................................................... 2,795,790,488
===============
</TABLE>
72
<PAGE> 75
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights++
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED
AUGUST ------------------------------------------------------
31, FEBRUARY FEBRUARY FEBRUARY FEBRUARY
1996 29, 28, 28, 28,
(UNAUDITED) 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PACIFIC HORIZON SHARES
Net asset value per share, beginning of
year................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................. 0.0246 0.0539 0.0424 0.0287 0.0340
Net realized gain (loss) on
securities........................... -- 0.0004 (0.0227 ) (0.0016 ) --
-------- -------- -------- -------- --------
Total income from investment
operations............................. 0.0246 0.0543 0.0197 0.0271 0.0340
Less dividends from net investment
income................................. (0.0245 ) (0.0539 ) (0.0422 ) (0.0287 ) (0.0341 )
Increase due to voluntary capital
contribution from Investment Adviser
(Note 3)............................... -- -- 0.0233 -- --
-------- -------- -------- -------- --------
Net change in net asset value per
share.................................. 0.0001 0.0004 0.0008 (0.0016 ) (0.0001 )
-------- -------- -------- -------- --------
Net asset value per share, end of
period................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return............................ 2.47%(b) 5.53% 4.30%+ 2.91% 3.45%
Ratios/Supplemental Data:
Net assets, end of period (millions)... $ 2,202 $ 2,200 $ 1,129 $ 1,216 $ 992
Ratio of net expenses to average net
assets............................... 0.56%(c) 0.55% 0.51% 0.52% 0.55%
Ratio of net investment income to
average net assets................... 4.89%(c) 5.37% 4.19% 2.86% 3.42%
Ratio of expenses to average net
assets*.............................. (a) 0.56% 0.56% 0.53% (a)
Ratio of net investment income to
average net assets*.................. (a) 5.36% 4.14% 2.85% (a)
</TABLE>
- ---------------
++ 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.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Adviser (see Note 3 to Financial Statements). Without this
capital contribution, the total return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
73
<PAGE> 76
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights++
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED
AUGUST ------------------------------------------------------
31, FEBRUARY FEBRUARY FEBRUARY FEBRUARY
1996 29, 28, 28, 28,
(UNAUDITED) 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
HORIZON SHARES
Net asset value per share, beginning of
year................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................. 0.0263 0.0571 0.0461 0.0319 0.0372
Net realized gain (loss) on
securities........................... (0.0002 ) 0.0004 (0.0232 ) (0.0016 ) --
-------- -------- -------- -------- --------
Total income from investment
operations............................. 0.0261 0.0575 0.0229 0.0303 0.0372
Less dividends from net investment
income................................. (0.0261 ) (0.0571 ) (0.0454 ) (0.0319 ) (0.0372 )
Increase due to voluntary capital
contribution from Investment Adviser
(Note 3)............................... -- -- 0.0233 -- --
-------- -------- -------- -------- --------
Net change in net asset value per
share.................................. (0.0000 ) 0.0004 0.0008 (0.0016 ) --
-------- -------- -------- -------- --------
Net asset value per share, end of
period................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return............................ 2.64%(b) 5.86% 4.63%+ 3.24% 3.78%
Ratios/Supplemental Data:
Net assets, end of period (millions)... $ 1,326 $ 1,651 $ 622 $ 3,840 $ 10,301
Ratio of net expenses to average net
assets............................... 0.24%(c) 0.23% 0.16% 0.20% 0.23%
Ratio of net investment income to
average net assets................... 5.21%(c) 5.69% 4.11% 3.19% 3.59%
Ratio of expenses to average net
assets*.............................. (a) 0.24% 0.23% 0.21% (a)
Ratio of net investment income to
average net assets*.................. (a) 5.68% 4.04% 3.18% (a)
</TABLE>
- ---------------
++ 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.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Adviser (see Note 3 to Financial Statements). Without this
capital contribution, the total return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
74
<PAGE> 77
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights++
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR ENDED
AUGUST ------------------------------------------------------
31, FEBRUARY FEBRUARY FEBRUARY FEBRUARY
1996 29, 28, 28, 28,
(UNAUDITED) 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
HORIZON SERVICE SHARES
Net asset value per share, beginning of
year................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................. 0.0248 0.0546 0.0431 0.0294 0.0345
Net realized gain (loss) on
securities........................... 0.0002 0.0004 (0.0227 ) (0.0016 ) --
-------- -------- -------- -------- --------
Total income from investment
operations............................. 0.0250 0.0550 0.0204 0.0278 0.0345
Less dividends from net investment
income................................. (0.0248 ) (0.0546 ) (0.0429 ) (0.0294 ) (0.0347 )
Increase due to voluntary capital
contribution from investment advisor
(Note 3)............................... -- -- 0.0233 -- --
-------- -------- -------- -------- --------
Net change in net asset value per
share.................................. 0.0002 0.0004 0.0008 (0.0016 ) (0.0002 )
-------- -------- -------- -------- --------
Net asset value per share, end of
period................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return............................ 2.51%(b) 5.60% 4.37%+ 2.98% 3.53%
Ratios/Supplemental Data:
Net assets, end of period (millions)... $ 2,470 $ 1,561 $ 864 $ 839 $ 793
Ratio of net expenses to average net
assets............................... 0.49%(c) 0.48% 0.44% 0.45% 0.48%
Ratio of net investment income to
average net assets................... 4.97%(c) 5.44% 4.31% 2.94% 3.49%
Ratio of expenses to average net
assets*.............................. (a) 0.49% 0.48% 0.46% (a)
Ratio of net investment income to
average net assets*.................. (a) 5.43% 4.27% 2.93% (a)
</TABLE>
- ---------------
++ 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.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Total return includes the effect of the voluntary capital contribution from
the Investment Adviser (see Note 3 to Financial Statements). Without this
capital contribution, the total return would have been lower.
(a) There were no fee waivers or expense reimbursements during the period.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
75
<PAGE> 78
PACIFIC HORIZON PRIME FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST
31,
1996(A)
(UNAUDITED)
---------
<S> <C>
X SHARES
Net asset value per share, beginning of year........................ $ 1.00
--------
Income from Investment Operations:
Net investment income............................................. 0.0050
Net realized gain on securities................................... 0.0002
--------
Total income from investment operations............................. 0.0052
Less dividends from net investment income........................... (0.0050)
--------
Net change in net asset value per share............................. 0.0002
--------
Net asset value per share, end of period............................ $ 1.00
========
Total return........................................................ 0.50%(c)
Ratios/Supplemental Data:
Net assets, end of period (000)................................... $ 1
Ratio of net expenses to average net assets....................... 0.79%(d)
Ratio of net investment income to average net assets.............. 4.33%(d)
Ratio of expenses to average net assets*.......................... (b)
Ratio of net investment income to average net assets*............. (b)
</TABLE>
- ---------------
(a) For the period July 22, 1996 (initial issuance of shares) through August 31,
1996.
(b) There were no fee waivers or reimbursements during the period.
(c) Not annualized. Represents total return for Pacific Horizon Shares from
March 1, 1996 to July 21, 1996 plus the total return for X Shares for the
period July 22, 1996 to August 31, 1996. Pacific Horizon Shares have a 0.32%
Special Management Services fee while X Shares have 0.30% Distribution and
0.25% Shareholder Services fees. These combined higher fees will lower the X
Shares' performance.
(d) Annualized.
See Notes to Financial Statements.
76
<PAGE> 79
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
52-9067 Rev 8/96
SEA-0008
